International Finance Corporation...concessional financing under PetroCaribe under threat for a region where 40% of energy needs are met by Venezuela (incl. 12 members of Caricom)

International Finance Corporation

Carlos Leiria Pinto, Head, Andean Region

April 2015

A long term partner for the private sector

Table of Contents

2

IFC at a Glance

IFC Investments and Services

IFC in Latin America and the Caribbean

Opportunities in LAC

IFC Cities Initiative in LAC

2

IFC: A MEMBER OF THE WORLD BANK GROUP

3

Conciliation

and

arbitration of

investment

disputes

Guarantees

of foreign

direct

investment’s

non-

commercial

risks

Interest-free

loans and

grants to

governments

of poorest

countries

Loans to

middle-

income and

credit-worthy

low-income

country

governments

Solutions

in

private

sector

development

IBRD

International

Bank for

Reconstructio

n and

Development

IDA

International

Development

Association

IFC

International

Finance

Corporation

MIGA

Multilateral

Investment

and

Guarantee

Agency

ICSID

International

Centre for

Settlement of

Investment

Disputes

THE LARGEST MULTILATERAL FOR THE PRIVATE SECTOR IN DEVELOPING

WORLD

• Owned by 188 member countries.

• IFC is the main driver of private sector development in the World Bank Group.

• Collaborates with other members of the Group to eliminate extreme poverty and increase shared prosperity, including the World Bank

(IBRD and IDA), MIGA, and ICSID.

• Global-Local: Headquartered in Washington, D.C. with over 100 country and regional offices and over 4,000 staff.

• The source of financing for the private sector: IFC is rated AAA with a portfolio of about US$50bn of investments and another US$20bn

mobilized from other partners to support around 2,000 in the developing world.

Main features

4

THE POWER OF PARTNERSHIPS

5

30+ IFIs/DFIs

Host County

Governments

Sovereign

Wealth Funds/

Institutional

Investors

900 Financial

Institution Clients

Civil Society

2,000 Private

Sector Clients

20+ Bilateral Donors/

15+ Private

Foundations

IFC’S GLOBAL

NETWORK FOR

SOLUTIONS

3,000 Employees

in 86 Countries

6

IFC – A Valuable Partner with Global Solutions

Clients especially appreciate IFC’s long-term partnership and its stamp of approval on

project/company quality

• Long-term partnerships, multiple rounds of financing.

• Longer investment horizon (5-7 years): less cyclical.

• In-house syndication: over 200 banks.

• Managing 3rd Party Capital: fund management through AMC.

• Brand enhancement strengthens client reputation.

• Sector expertise: deep industry expertise.

• Broad reach: 2,000 clients in over 100 countries.

• Global benchmarking: international best practice.

• Advice on environmental and social issues.

• Political risk mitigation.

• Preferred creditor status.

Reason why clients choose IFC

IFC Value - Added What makes us different?

75%

54%

41% 40%37%

Long-term partner Stamp of approval Mobilization Global Presence Product offering

IFC’s Reach and Impact

7

Supporting Jobs and

Entrepreneurs

Generating Revenues

Infrastructure

35mn loans for $310bn for micro-,

small- & medium-sized enterprises

2.6mn direct jobs, >30% for women

$34bn in domestic purchases

$38bn in tax payments

1.7mn trade transactions financed for

$264bn

Power generation for 51mn people

Power distribution to 24mn people

Water distribution for 30mn people

Phone connections for 181mn people

Agribusiness and Social

Services

Reaching 27mn patients, 2.9mn farmers,

and 2.5mn students

* Data as of Dec. 31, 2013

Table of Contents

8

IFC at a Glance





Wholly owned

subsidiary of IFC

Private equity fund

manager

Invests third-party

capital alongside IFC

Firm-level advice

PPP transaction

advice

In partnership w/World

Bank, advice on

broader market

development and

enabling environment

for private sector

Loans

Equity

Trade finance

Syndications

Securitized finance

Risk management

Blended finance

9

IFC ASSET

MANAGEMENT

COMPANY

$6.4 bn under mgmt

(FY14)

INVESTMENT

$51.7 bn portfolio

(FY14)

ADVISORY

720 projects valued at

$1.1 bn (FY14)

IFC: INTEGRATED SOLUTIONS FOR INCREASED IMPACT

10

IFC Performance and Results, FY14

IFC (US$bn)

Total commitments: US$ 19.3bn

FY 2014 highlights IFC Commitments by Industry (FY14)

Excellent performance FM and Infrastructure account for almost 75% of total commitments

• Investments: 599 new projects in 98 countries.

• US$ 22.0 billion in total investments, including $17.3 billion for

IFC’s own account

• US$ 67.0 billion committed portfolio.

• Record $8.5 billion in financing to the poorest countries, almost

25% of IFC projects overall

• Advisory services: US$ 234mn in program expenditures, with 66%

of funds in the poorest countries.

Trade Finance; 36%

Financial markets; 21%

Infrastructure; 17%

Agribusiness & Forestry; 7%

Manufacturing; 6%

Consumer & Social Services;

5%

Oil, Gas & Mining; 3%

Funds; 3% Telecom & IT; 3%

6,8 8,2

11,0 10,5

12,7 12,2

15,5

18,3 17,3

1,4

3,8 5,0

3,5

5,3 6,5

4,9

6,5 5,1

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14

IFC's own account Mobilization

Table of Contents

11

IFC at a Glance





19% 19% 21% 24% 25%

81% 81% 79% 76%75%

-

2,0

4,0

6,0

8,0

10,0

12,0

FY 10 FY 11 FY 12 FY 13 FY 14

Equity Loans

12

Latin America & Caribbean – IFC’s Largest Market

IFC commitment

destination in LAC

FY10-

FY14%

Brazil $8.5bn 38%

Mexico $3.2bn 14%

Central America $3.2bn 14%

Colombia $1.5bn 7%

Peru $1.2bn 5%

Argentina $1.1bn 5%

Chile $1.0bn 4%

Other South

America

$1.2bn 5%

Caribbean Region $0.8bn 3%

Other countries $0.8bn 4%

Total commitments FY10–FY14

Total commitments: US$ 89.1bn

Commitments by country & industry

13.9 15.6 17.2 20.2 22.2

Trade Finance; 33%

Financial markets; 22%

Infrastructure; 20%

Consumer & Services; 10%

Manufacturing; 5%

Agribusiness & Forestry;

3%

Telecom & IT; 3%

Oil, Gas & Mining; 2%

Funds; 2%

Commitments distribution by industry (FY10-FY14)

Committed equity portfolio - $bn Committed loan portfolio - $bn

1,8 1,9

2,1

2,5

2,8

FY 10 FY 11 FY 12 FY 13 FY 14

7,5

8,0

7,8 7,9

8,3

FY 10 FY 11 FY 12 FY 13 FY 14

Portfolio distribution

9.3 9.9 9.9 10.4 11.1

12%

CAGR

since

FY10

3,4 4,4 4,4 5,4 5,1

10,5

11,2 12,8

14,8 17,1

FY 10 FY 11 FY 12 FY 13 FY 14

LACOther

13

A Diverse Portfolio Across The Region

Mexico

Total portfolio (FY14): USD2,157m

Total commitments (FY10-FY14): USD3,167m

Commitment destination by sector:

i. Health, Education, Retail (35%)

ii. Manufacturing (30%)

iii.Financial Markets (14%)

IDA country

Brazil


Total commitments (FY10-FY14):

USD8,509m


i. Trade Finance (43%)

ii. Financial Markets (27%)

iii. Infrastructure (17%)Andean Region: Bolivia, Colombia, Ecuador,

Peru and Venezuela




i. Infrastructure (47%)


iii.Trade Finance (10%)

Southern Cone: Argentina, Chile, Paraguay &

Uruguay





ii. Infrastructure (19%)

iii.Financial Markets (12%)

Caribbean

Total portfolio (FY14): USD842m

Total commitments (FY10-FY14): USD788m


i. Infrastructure (38%)


iii.Services (13%)

Central America






iii. Infrastructure (11%)

Table of Contents

14

IFC at a Glance





15

LAC: slowing growth, but still strong and stable…

• China slowdown results in declining global commodity prices for the

majority of countries in LAC region.

• Metal and mineral exports to China account for about 20% of Peru’s

and Chile’s exports.

• Oil prices (WTI) at ~$50/brl, one half the amount in July, negatively

affecting oil exporters; Petrocaribe beneficiary nations under threat

(see analysis next slide). But prices likely to increase later this year.

• Falling oil prices (for oil exporters) and US monetary tightening

signals leading to local currency depreciations (2013-14: Arg -24%,

Co -23%, Mx -13%, Br -12%), which in turn is increasing inflation ìn

most countries.

• Fiscal deficits expected to limit growth in Br, Mx & Co; Chile & Peru

can support fiscal expansion (bottom chart to the right)

• Growth performance to stay strong, with Peru, Colombia, and

Mexico performing above average, Brazil below average.

• Most countries benefit from high reserves & strong macro policies,

resulting in strong domestic sources of growth.

• Important exceptions: Argentina and especially Venezuela.

Source: Economist Intelligence Unit (top), Capital

Economics (bottom)

LAC GDP growth (select economies, 2013 – 2018F)Current overview

The end of the commodities super-cycle…and the oil plunge

However, analysts expect

Expecting continued strong growth performance at corporate level, with good investment opportunities

1,4 1,4

3,7 4,0

2,9 3,5

4,9

(1,5)

-8

-6

-4

-2

0

2

4

6

8

Argentina Brazil Chile Colombia LAC avg Mexico Peru Venezuelay-o

-y %

2013 2014 2015 2016 2017 2018 2015-18 avg

2015-18 average rates displayed

Likely effects of oil plunge on affected countries

Latin America Economic Outlook Q12015, Capital Economics (top), Economist (bottom)

Analysis

Winners and losers (for losers, outside Venezuela, it’s not terribly bad! For

winners, not tremendously great!)

• Venezuela: Sharp, negative effects across the board, including

growth (-7.5% in 2015), inflation (~120% in 2015), & FX (70%

devaluation in 2015); could spell trouble for unpopular GoV

• Ecuador: Fiscal deficit likely to rise to record 6% in 2015, current

account to be in deficit in 2015, and greater financing needs to

elevate debt levels. Growth (EIU) should still avg. 3.3% in 2015-16.

• Colombia: Growth to fall from 4.9% in 2014 to 2.5% in 2015. At

$60/b, oil export revenues to fall by ~$17bn and gov’t receipts by

2.5%/GDP. But 4% avg. growth in 2015-18 from rising investment &

incomes.

• Mexico: Oil prices may damper interest in oil, but round 1 auctions to

start this year. Gov’t has one of the largest sovereign oil-hedging

programs worldwide, limiting losses to 0.4%/.5% of GDP (vs. original

budget assumption of US$81/bl).

• Oil-importers-Lat Am: Oil prices easing inflation & reducing import

bills, but currency depreciations limiting consumer benefit. Lower

prices could render Brazilian pre-salt production less attractive.

• Caribbean—no boon: Despite recent GoV vows stating otherwise,

concessional financing under PetroCaribe under threat for a region

where 40% of energy needs are met by Venezuela (incl. 12 members

of Caricom). Program at least 4% of GDP for Jamaica, Haiti &

Guyana.

Exporter/Importer

X

X

X

X

M

M

17

Longer-term, a growing middle class driving consumption

• By 2030, the middle income class will represent 42% of the region’s

population (compared to 29% in 2009).

• Latin America will become the 2nd largest middle class region

worldwide,

• Rising incomes mean changing consumption patterns:

• In most countries, consumption in transport, education, ICT and health

will expand rapidly.

• Household spending on water, energy and food, on the other hand, will

grow more slowly.Source: IFC

Emerging business opportunities in the domestic consumer markets

Significant M&A activities with firms trying to position themselves in the region

Based on household surveys + economic and demographic trends

Projected annual growth rate of household spending by sector

Secto r / C o untry B razil M exico C o lo mbia P eru Guatemala H o nduras

Transport 4.2% 4.3% 5.4% 9.4% 4.5% 3.7%

ICT 3.4% 3.7% 5.0% 6.1% 4.4% 3.5%

Housing 3.6% 3.4% 4.6% 6.0% 3.8% 3.1%

Water 2.1% 2.8% 4.1% 5.2% 3.8% NA

Education 4.4% 3.9% 4.9% 5.0% 4.5% NA

Clothing and Footwear 3.0% 3.4% 5.1% 4.8% 3.2% 3.1%

Health 3.5% 4.2% 4.8% 4.7% 3.7% 3.7%

Energy 2.2% 2.6% 3.5% 4.6% 3.0% NA

Food and Beverages 2.7% 2.7% 3.8% 3.8% 2.8% 2.5%

A vg. gro wth rate 2010-2020 3.6% 3.4% 4.6% 6.2% 3.5% 3.1%

Comments

Current overview

18

Pacific Alliance Leads the Pack

Economic Alliance between Chile, Colombia, Peru and Mexico formed

in 2011

• Members represent 36% of population, 45% of GDP and about

50% of trade in the region

• Agreement on Feb. 14, 2014 to eliminate tariffs on 92% of

products

• Costa Rica, Guatemala and Panama are considering to join

Source: IIF

US$11.6bn in intra-regional M&A deals with firms

expanding market reach

Deals across all sectors, including retail and

consumer goods, financial services, pharmaceuticals

and energy

0

0,5

1

1,5

2

2,5

3

3,5

2012 2013 2014f 2015f

Pacific Alliance Brazil Arg, Ecu, Ven

0

2

4

6

8

10

12

0

1

2

3

4

5

6

7

8

9

2006 2007 2008 2009 2010 2011 2012

%

US

$b Intra-Pacific Alliance FDI (left) Share of total FDI inflows (right)

Intra-Pacific Alliance FDI

… with substantial investment activityThe most dynamic economies…

Contributions to regional GDP growth

Economic alliance between Chile, Peru, Mexico and Colombia

19

Infrastructure – The Region’s Achilles’ Heel

Source: World Economic Forum

• Financial and fiscal crises led to steady decline in infrastructure

investments in the region.

• Only 2% of GDP invested in infrastructure annually (compared to

13% p.a. in China).

• Investments of 4% of GDP needed to sustain a 4.5% growth rate in

the region or US$500bn each year.

• Up to US$135bn in private infrastructure investments planned in

2014 alone.

• Ambitious PPP programs in a number of countries:

- Brazil: US$150bn in infrastructure auctions planned in roads,

rail, ports and airports

- Mexico: US$50bn over the next 6 years in transportation

infrastructure alone

- Colombia: US$24bn toll road program launched (4G Program)

• IFC involved across the Region participating in infrastructure

investments ($1.2bn committed in FY14).

Chile

Mexico

PeruBrazil

Colombia

Argentina

0

20

40

60

80

100

120

140

2006 2007 2008 2009 2010 2011 2012 2013

Ranking of Quality of Infrastructure

(1=best, 144=worst performer)

Systematic Under-investment in the Region

Table of Contents

20

IFC at a Glance





IFC LAC Cities Program

The Cities Initiative in Latin America and the Caribbean aims at increasing the efficiency and sustainability of a city through work with the municipality at all levels, from regulatory reforms to private sector capacity building and financing to private firms.

The LAC Cities Initiative is one of IFC’s transformational projects at a global level. IFC, in coordination with the World Bank, offers a combination of investment and advisory services across six key areas to support city sustainability and innovation:

Energy

Water management

Green building

Waste management and waste to energy

Telecom

Transport.

Why Cities in LAC?

LAC is the most urbanized developing region in the world. Nearly 80% of its population lives in urban areas; proportion that will increase up to 90% by 2025 (UNDESA, 2012)

Cities in LAC contribute over 60% of the regional GDP (Mckinsey Global Institute). Half of this output is produced within the ten largest cities.

Although significant improvements (less than 10% of urban poor people in LAC were extremely); still, by head count, the majority of extreme poor in LAC live in urban areas. (WBG, 2013)

Cities are responsible for 70% of global greenhouse gas (GHG) emissions and lack the regulation and expertise to address the issue.

Overall: Cities in LAC are critical for sustainable economic growth and poverty reduction; hence, they are directly interlinked to the WBG twin goals.

Cities in LAC generate a significant proportion of the economic activity; therefore, theirinfrastructure defines key parameters for productivity, jobs creation, citizens wellbeing,and environmental and climate change impacts

Competitiveness and sustainability of cities increasingly determines the wealth andpoverty of nations, regions and the world. Hence, what makes cities successful must beone of the most important questions of 21st-century political economy.

Documents

International Finance Corporation...concessional financing under PetroCaribe under threat for a region where 40% of energy needs are met by Venezuela (incl. 12 members of Caricom)