IIC: Helping to fill LatAm's financing gap

Friday, June 9, 2017

The coffers of most Latin American countries are lighter than there were not too many years ago which means governments have sharpened their focus on PPPs to get projects built. The head of the Inter-American Investment Corporation (IIC), James Scriven, talks to BNamericas about this and more.

BNamericas: IIC, which recently opened an office in São Paulo, expects portfolio growth in Brazil. What trends do you envisage in terms of projects?

Scriven: We currently have in our portfolio about US$1.2bn of our own balance sheet and another US$1.9bn under management that adds up to 36 projects and about US$3bn under management in Brazil as we speak. Those are across sectors like the financial sector, water and sanitation, agribusiness, transportation and energy.

In 2017 we've seen a keen interest from partner clients to expand our presence in Brazil, meaning that given the uncertainty of what's happening in Brazil [there's] a keen interest for a bigger role of a development organization like ourselves. That has meant that we are increasing our physical presence in Brazil and adding to an extremely strong pipeline of new projects across two big sectors that we would call infrastructure and corporate.

Today we have about US$1.5bn of new projects that we're looking to approve [in infrastructure, energy, corporate, technology, media and telecommunications.]

BNamericas: You wrote recently that PPPs have become more relevant than ever in Latin America. Why have they?

Scriven: Latin America has a long history of working in the PPP space. There's an increasing gap of financing in these sectors. Given the fiscal constraints that governments are facing today, we see a bigger role for the private sector to fill. In addition to that, the private sector has seen an increased appetite to invest in development assets, mainly infrastructure and energy projects. When all of these things come together, we see an increased appetite of governments to understand and regulate the sector and the private sector to participate in the sector. So that's when we started structuring ourselves around how to address our countries and our clients' needs to better serve them in this sector.

BNamericas: What are the main challenges in getting PPP projects off the ground?

Scriven: Governments are concerned about if the private sector can build and manage a project in a sustainable way. The private sector will always have an interest in whether rules change over a period of time and whether the project is profitable.

In general, we look at these projects, also from the private sector, and we see a keen interest from our clients to invest once certain risks, mainly legal and regulatory, project preparation and construction, and forex, have been mitigated.

BNamericas: With growth in PPPs forecast, what opportunities are there for international or regional banks?

Scriven: As a development organization, our mission is to crowd in investment for private sector financing. We've got different forms of doing so. We use instruments, we use our balance sheet, we use our name, our knowledge to crowd the private sector into the region. While we invest about US$3bn a year in the region we aim to crowd in another US$2bn in addition to our own capacity.

BNamericas: Can you tell us how much you're planning to lend in the whole region this year?

Scriven: Last year we did US$2.3bn and mobilized almost US$1bn. This year we'll be doing US$3bn and mobilizing another US$2bn. All in all we're seeing numbers increase significantly from year to year [across all sectors, not just PPPs].

BNamericas: What are the potential downsides of PPPs?

Scriven: There have been good and bad experiences, and the bad experiences do relate to when the government changes over time and changes the rules for the private sector. On the flipside of that, governments tend to always look at how much revenue the private sector generates and the potential for integrity risks.

About the company

Washington, DC-based IIC finances sustainable enterprises and projects and provides advisory services. It has a current portfolio of US$11bn under management and 350 clients in 21 countries in Latin America and the Caribbean. The corporation is the private sector arm of the IDB Group,