IDB seeks to tap shareholders, sovereign wealth funds to boost lending

By Daniel Flynn

SAO PAULO (Reuters) – The Inter-American Development Bank is seeking capital from shareholders and sovereign wealth funds to boost lending by its private sector arm, IDB Invest, bank president Luis Alberto Moreno said in an interview.

Moreno said the multilateral, which unified its three private lending arms this month into IDB Invest, had already stepped up credit to the private sector following a capital increase three years ago, with a focus on infrastructure, agribusiness and technology.

The IDB currently lends around $2 billion a year to the private sector from its annual total of just over $11 billion, but Moreno said that Latin America still faced a shortfall of investment in the order of 4 percent to 5 percent of its gross domestic product (GDP).   

“Even though we had a capital increase in IDB Invest, we probably need more capital so we are looking at ways to raise it with sovereign wealth funds and our own shareholders,” Moreno told Reuters at the weekend.

In Argentina, the IDB has dramatically increased its private sector lending from almost zero following the election of President Mauricio Macri in 2015, whose reform agenda had transformed the business environment, Moreno said.

“Last year, we went to a little bit more than $400 million and we will do a similar amount this year, just with the private sector in Argentina,” Moreno said.

The IDB president said a ratings increase this month by credit ratings agency S&P Global Ratings, which lifted Argentina to B+ from B with a stable outlook, combined with an emphatic victory for Macri at mid-term elections demonstrated his reforms were having an impact and enjoyed popular support.

Moreno said the IDB would contribute loans and capital guarantees of $500 million to a fund being started by Macri to invest in infrastructure, after the government announced it was launching a $22 billion program of public private partnerships.

IDB invest will leverage that with another $100 million, Moreno said. The fund will invest in public private partnerships focused on renewable energy, roads and electricity transmission.

Moreno said IDB Invest was finalizing a strategy for equity investment and aimed to ramp up that area of its activities by end-2018, much of it in early stage companies.  

IDB recently approved an equity investment of $5 million in a $120 million fund raised by NXTP Labs focused on tech start ups, much of it in Argentina, Paraguay and Uruguay.

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