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Diversifying products and sources of funding

Juan José Juste

CEO/CIFI

Published  Friday, October 16, 2009

Costa Rica's Corporación Interamericana para el Financiamiento de Infraestructura (CIFI) is a private financial institution created in 2001 to finance infrastructure related companies and projects in the Latin American and Caribbean region.

On April 24 this year, CIFI appointed Juan José Juste as its new CEO. BNamericas spoke to Juste to learn more about his new business strategy for the entity and his plans to channel European investment to the region.

BNamericas: Do you have any particular goals you want to achieve as CEO of CIFI?

Juste: I am here to harness its potential with a more aggressive business strategy. This involves diversifying the products we offer and our sources of funding.

CIFI is still a very small organization compared to other entities in the region, with US$220mn in assets and a loan book of US$210mn as of this quarter. However, you cannot be guided by the size of the balance sheet. For shareholders, CIFI is very important from a strategic point of view. It's bigger than its balance sheet.

BNamericas: Why was there a need for an institution like CIFI?

Juste: Companies like [Spanish bank] Caja Madrid don't have that much knowledge of Latin America. Caja Madrid decided to cover all the big transactions in the region through a branch in Miami, which is just for major corporate finance transactions.

CIFI was created as a specialized vehicle with the [Inter-American Investment Corporation] IIC and other multilaterals, as well as local and international banks, to cover small and medium-sized transactions in Latin American and the Caribbean. Other multilaterals include the Caribbean Development Bank [CDB], the Central American Bank for Economic Integration and the International Finance Corporation, which joined last year.

These transactions were not being covered by the majors because they are too small. A US$60mn loan is just not efficient for them. Also, they did not have sufficient knowledge about the region.

BNamericas: What size transactions has CIFI traditionally been involved in?

Juste: At the beginning we were very conservative, a pure asset taker. We didn't consider transactions of more than US$100mn and CIFI's participation did not exceed US$10mn per transaction.

The other thing that was important from the beginning was the notion of being a hybrid organization. Nearly half of the shareholders were to be multilateral entities and the other half financial institutions. Although Caja Madrid leads the private banks with a 20% stake, it's important that other banks participate and collaborate because they have resources and experience in the region.

BNamericas: What changes have taken place in the institution over the years?

Juste: We have started structuring transactions and advising for structuring, even leading the transactions. We are also exceeding US$100mn per transaction. We have advanced quite a lot in nine years.

Since I joined, we have tried to strengthen the management of the company, be more analytical, more ambitious and develop new products. We decided to start subordinated loans last year, for example.

Also, given that obtaining funding is more difficult since the onset of the global financial crisis, we have started to issue credit guarantees, which is a new product.

BNamericas: How does CIFI act as a fund manager?

Juste: We are trying to play a role in a niche that is important for the completion of infrastructure transactions by creating a vehicle to invest in the subordinated debt tranches of infrastructure projects.

In the past, for every good project you could get financing structures to raise 70-75% of debt. But from late 2008 on, due to the problems faced by international banks, you can only raise 50-60%. That means some very good projects cannot be completed because it's not profitable enough for the equity players. Including in these small projects a subordinated tranche of up to 10% of project costs would maintain the sponsor's profitability while still being subordinated to senior lenders.

This fund will specialize in Central America and is a vehicle through which we invest, together with other investors, but only in the subordinated debt tranche.

BNamericas: Where and how are you looking to attract investors?

Juste: CIFI is not well known in Europe and we have started an aggressive marketing approach there. There are a lot of investors that want to come to Latin America. However, while they might know about countries such as Brazil, Mexico and Chile, they know very little about investing in Guatemala, Nicaragua or the Caribbean islands, for example.

One of our major tasks up to 2012, which is the timeline of our strategic plan, is to channel some of these investments to CIFI.

Up to now, the only advice available on certain countries was from the public sector or chambers of commerce. CIFI can fill this gap by being an investor-friendly organization that has strong connections with regional banks.

We see ourselves as a complementary institution. So, while we can show investors how and help them to complete their investments, we also need help from local banks. We are currently trying to reach agreements with these banks and institutions so that what CIFI cannot do, they can.

On the other hand, we have to balance a lot of things while carrying out our transactions. Our lenders sometimes want us to use the facilities they give us in specific countries. For example, they might want all the proceeds to be invested in the Caribbean.

BNamericas: What added value can CIFI offer to investors?

Juste: We have experience combined with flexibility. We also have the ability to respond quickly to customers. Once a customer provides the necessary information, we can be extremely quick. CIFI is still a small organization. For example, I'm the CEO, but I'm also one of the five members of the credit committee and chairman of the board, so we can act fast.

We're also supported by shareholders that are fully committed to the project, and not just from the financial point of view.

BNamericas: What are some of your most recent transactions?

Juste: CIFI recently signed a US$25mn loan with the CDB to help expand its lending program in CDB member countries.

The institution also recently signed a US$15mn loan agreement with the OPEC Fund for International Development [OFID]. These resources will be used by CIFI for on-lending to small and medium scale private sector infrastructure projects, primarily to companies in Central America and the Caribbean. In addition, CIFI will work with OFID to develop opportunities for joint financings of transactions in the region.

The fact that we are getting funding from them [OFID] means European organizations are interested in the development of Latin American economies. We know that there are several European development institutions, and also Chinese, that are going to support these kinds of projects.

BNamericas: What kinds of projects and transactions has the entity been involved in?

Juste: CIFI's US$210mn loan portfolio covers sectors such as power, renewable energy, transportation, telecommunications, alternative fuels, water and sanitation, and other infrastructure related sectors. Advisory services are also offered to the same sectors, but they aren't part of the loan portfolio.

Transactions in which CIFI was involved include the Belcogen power plant in Belize; the La Romana airport in the Dominican Republic; a desalination plant in Trinidad & Tobago; the TGI International oil and gas project in Colombia; telecommunications projects in St Lucia and Chile; and the Ferrovías Central Andina railroad in Peru.

We fund the projects and also, from time to time, we lend to corporates. Our concept is to work directly or indirectly in infrastructure projects.

ABOUT THE COMPANY:

The Corporación Interamericana para el Financiamiento de Infraestructura or CIFI is a private financial institution created in 2001 to finance infrastructure related companies and projects in the Latin American and Caribbean region.

To date the corporation has provided around US$500mn to companies in 79 loan transactions with total project costs of US$10.4bn. CIFI also provides financial advisory and structuring and syndication services. The institution has its operating headquarters in Washington, DC.

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