1. Inter-American Development Bank June 4, 2004 1 Inter-American Development Bank Private Sector Department Kevin Corrigan Head-Syndications Tel.: 202-623-1594 E-mail: kevinc@iadb.org Capital Markets for Development June, 2004

2. Inter-American Development Bank June 4, 2004 2 Private Sector Department Preferred Creditor Status Financial Instruments Sector Experience Operating Results Contents

3. Inter-American Development Bank June 4, 2004 3 Began Operations 1/1/95 Promote private investment in basic infrastructure and public utility services (greenfield projects, rehabilitation and expansion programs) Supports project debt Limited recourse (project finance) or corporate finance basis Targets up to 10% of IDB’s total loans Catalytic role: each $1 of IDB financing mobilizes over $5 of overall investment IDB – Private Sector Mandate

4. Inter-American Development Bank June 4, 2004 4 Broader mandate to support development of local capital markets through use of partial guarantees to: Extend maturities Bring new players to market Devise new financing instruments Local Capital Markets

5. Inter-American Development Bank June 4, 2004 5 Investment Eligibility Energy Telecommunications Transportation Water & Sanitation Financial Institutions

6. Inter-American Development Bank June 4, 2004 6 What it means: IDB enjoys certain privileges in its member countries: De jure: exemption from withholding taxes De facto: preferred creditor status Preferred access to foreign exchange in the event of country foreign exchange shortage IDB Loans have never been included in a general country debt rescheduling as part of the London Club IDB has never been subjected to mandatory new money obligations under a general debt rescheduling There have been no write-offs of any IDB loans during its entire 40-year operating history due to political risk events Bank regulators provide exemption from automatic country risk provisioning, when applicable IDB’s preferred creditor status is an important element in IDB’s AAA credit rating IDB’s Preferred Creditor Status

7. Inter-American Development Bank June 4, 2004 7 A-Loans (IDB´s account): up to US$75 million or 25% of total project costs up to 20 years (typically in 10-15 year range) market based pricing B-Loans (market participation): maximize market-based leverage of A-Loan co-financing with banks & institutional investors through sale of participations IDB is Lead Lender and Lender of Record typically work with Arranger/Placement Agent Financial Instruments: A-B Loans

8. Inter-American Development Bank June 4, 2004 8 Political Risk Guarantees: convertibility & transfer as stand-alone product  streamlined approval process (3-4 months) selected non-commercial risks  sovereign breach of contract limited to 50% of project cost or US$150 million Financial Instruments: Political Risk Guarantees

9. Inter-American Development Bank June 4, 2004 9 For use in local capital markets development Extend maturities Develop new instruments Examples:  Local currency bond issues  Asset securitizations (mortgage loans, receivables) Up to 25% of total project cost (or total bond issuance) to a maximum of US$75 million Financial Instruments: Partial Credit Guarantees

10. Inter-American Development Bank June 4, 2004 10 Started with the International Trade Finance Reactivation Program, a two-year program to address liquidity shortfalls in the Region Efficient means to channel funds to local banking system for trade operations or on-lending for infrastructure projects PRI can use full range of existing products to mitigate country risk in trade finance Financial Institutions

11. Inter-American Development Bank June 4, 2004 11 Water and sanitation projects, privatizations, B.O.T.s Transaction examples: Aguas Argentinas, in Argentina Aguas del Illimani, in Bolivia Rio Bogotá, in Colombia Water and Sanitation Experience

12. Inter-American Development Bank June 4, 2004 12 Greenfield B.O.T. projects, rehabilitation and expansion projects Transaction examples: Port of Mejillones, Chile Port of M’Bopicua, Uruguay Anhangüera - Bandeirantes Highway System, Brazil Transportation Experience

13. Inter-American Development Bank June 4, 2004 13 Energy generation, transmission & distribution, and gas transportation projects Transaction examples: Bandeirante Energia, power distribution company in Brazil Redesur, electricity transmission in Peru Yucatan Pipeline, gas transportation in Mexico Termopernambuco, power generation plant in Brazil Energy Experience

14. Inter-American Development Bank June 4, 2004 14 Transaction examples: Colpatria mortgage backed security, Colombia Santiago-Valparaíso-Viña del Mar infrastructure bonds, Chile Graña & Montero securitization of receivables, Peru Costanera Norte infrastructure bonds, Chile Capital Markets Development Experience

15. Inter-American Development Bank June 4, 2004 15 Bradesco Trade Finance Facility US$120 mm 2 year loan Joint deal with IFC Unibanco Infrastructure Facility US$150 mm A/B Loan for on lending to infrastructure projects Financial Institutions Experience

16. Inter-American Development Bank June 4, 2004 16 Operations Summary 1995- December 2003 Participants in B-Loans: 81 Financial Institutions from 15 countries In US$ millions

17. Inter-American Development Bank June 4, 2004 17 Participants – B Loans

18. Inter-American Development Bank June 4, 2004 18 Operations Summary – Closed Transactions

19. Inter-American Development Bank June 4, 2004 19 Transactions Closed – A/B Loans (1995-2003)

20. Inter-American Development Bank June 4, 2004 20 Private Sector Department 1300 New Yok Avenue N.W. Washington, DC 20577 USA www.iadb.org/pri Teléfono: (1) 202 623 1000 Fax: (1) 202 623 3639