MULTILATERAL INVESTMENT FUNDMIFPromoting Private Sector Development in Latin America and the Caribbean

MIF - A Unique InstrumentConceived in early 1990s to support wave of privatization and economic reform sweeping through Latin America and the CaribbeanCreated to help bridge gap between theory and realities of transition to market economyBuilt to test new ideas and catalyze reform

Broad and flexible mandate to:

Support market reformsBuild workforce capabilities and skills standardsBroaden economic participation of smaller enterprises

Structured to InnovateWide range of grant, investment and other financial instrumentsActs directly with private sector as well as governmentsPilots new development approaches and then shares lessons across the region

$830 million in over 520 projectsCo-financing from partners brings total to $1.3 billion at workresources have been primarily directed to less developed countries

Chart1

1774636630.2407733728

1912501040.2594780915

1597865800.2167900355

2085565000.2829585002

APPROVED PER EACH ACTIVITY

SmallEnterpriseDevelopment23%

Small Enterprise Investments28%

Human Resources 25%

Private Sector Environment24%

Sheet1

Facility

I177,463,66324%

II191,250,10426%

III-a159,786,58022%

III-b208,556,50028%

737,056,847100%

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MONTOS DEL FOMIN APROBADOS PRO AREA DE ACTIVIDAD (En millones de US dlares)

Entorno para el Desarrollo Sector Privado $177.4(24%)

Desarrollo en Recursos Humanos $191.2(26%)

Inversiones en Pequeas Empresas$208.5(28%)

Desarrollo en Pequeas Empresas$159.7(22%)

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MIF focuses on Core Activity AreasSmall businesses - Streamlining regulations- Innovative business relationships- Eco-efficiency- Quality management- Financing options- Information technologies- Skills standards and credentialing

Market functioning- Regulatory framework- Facilitation of trade and investment- Labour market modernization

Microenterprise- Innovation partnerships program- Regulatory and supervisory framework- Strengthening microfinance institutions

Financial sector and capital markets

- Capital market development- Market transparency measures- Regulatory reform and supervision

InstrumentsNon-reimbursable Grants54 operations in financial and capital marketsUS $ 71million approvedFinancial Investments$234 mm approved56 dealsSmall EnterpriseInvestment Facility*

Technical Assistance Grants to governments, local NGOs, business associationsTo help fund programs that pilot new approaches to improve private sectorAlways funding a local partnershipSustainable, with demonstration effectMIF resources must be critical to outcomeFocus on sharing lessons learnedAverage grant size $1-1.5 million

Financial Sector ReformMarket Transparency Measures Accounting and Auditing StandardsRegulatory training and consolidation of financial sector supervision Capital Market DevelopmentHarmonizationClearance and SettlementRemoval of Barriers

Investments Use of loans, guarantees and equity for microfinance and SME support Has enabled NGOs to become regulated financial sector institutions and grow beyond donated fundsMIF now has 14 such investments in its portfolio plus equity participation in five leading funds: Profund, Lacif and Solidus, Accion Investments and the Emergency Liquidity FacilityFinanced majority of microfinance activity in Latin America and the Caribbeantotal aggregate portfolio - $167mm 650,000 clients

InvestmentsMIF is also the leading investor in creating new formal risk capital vehicles for small business in the region 35 funds

27 funds fully organized and partially disbursed. A total of 290 entrepreneurs are supported through MIF funds; about one quarter of these companies are startups.

Funds target small business and start-ups that otherwise cannot access long-term risk capital

Credit Enhancement forSecuritized Bonds

Principales Recipientes de Remesas de Amrica Latina y El Caribe 2002 (en millones de US$)Remittances in selected LATAM countries 2003 (millions $US)JamaicaHonduras2,316788Guatemala2,106Mxico13,266Repblica Dominicana2,217HaitPer5,200Brasil1,295Ecuador1,6563,067ColombiaCuba1,194Bolivia3401,425862NicaraguaEl Salvador977Argentina225137GuyanaVenezuela247Costa Rica306Trinidad y Tobago88

REMITTANCES

LATAM2002

Country

Remittances in 2002

(US$ millions)

Mexico

$13,266

Brazil

$5,200

Colombia

$3,067

El Salvador

$2,316

Dominican Republic

$2,217

Guatemala

$2,106

Ecuador

$1,656

Jamaica

$1,425

Peru

$1,295

Cuba

$1,194

Haiti

$977

Honduras

$862

Nicaragua

$788

Venezuela

$247

Argentina

$225

Costa Rica

$306

Guyana

$137

Bolivia

$340

Trinidad and Tobago

$88

Uruguay

$42

TOTAL

37,666

Benefits of Securitized Remittances Banks can access longer term financing with remittance securitization

Significant savings in interest rates estimated more than 150bp from an increase in the credit rating of B to BBB

Improve the asset liability management of local banks through access to longer term/lower rate funding sources.

Banks can pass on savings from remittance securitization to its customers and clients (e.g., longer-term loans or new products such as mortgage loans). Very low past defaults in future flow transactions Latin America.

Remittances Securitization: Flow of Funds USA/EuropeLATAMCollecting BankCollecting BankCollecting BankMaster AccountUS$ Deposits (remittances)TrustPaying Bank(local)Securitized BondsPartial Credit Guarantee and/ or Subordinated DebtInstitutional InvestorsTransfers (remittances)

Remittances Securitization: Transaction StructureUSA/EuropeLATAMCollecting BankMaster AccountUS$ RemittancesSecuritized BondsFinancial TestsCashflowCollateralDebt Service Reserve accounts

Debt Payment AccountReserve accountsProvisions AccountsAcceleration Accounts

TrustIDB PCG or Sub DebtFull Corporate Guarantee byLocal BankA cash shortfall in the trust, will be fund by the Bank through the guarantee.Local Bank(originator)Collections paid to aMaster accountReimbursement to guarantor from collateral poolExcess cash afterfunding structure accountsRemittancesBeneficiariesInvestorsPaying BankinMXN