IFC committed $2.852 billion in new projects, including mobilization for investments in Public-Private Partnerships (PPPs)
The International Finance Corporation (IFC) committed a record $2.852 billion in the Fiscal Year 2021 to support private sector investments in Brazil, as well as to help tackle the effects of the pandemic in the country and assist companies to preserve jobs and stay in business. The commitment marks IFC’s biggest investment year in Brazil since operating in the country, in 1957. This volume of resources, which corresponds to the period from July 2020 to June 2021, highlights IFC’s relevant role in providing liquidity to small and medium-sized enterprises (SMEs), bringing long-term financing, and stimulating the creation of new markets. With this result, Brazil represents IFC’s largest investment portfolio in Latin America and the Caribbean and is among the top 4 in the world.
Of the $2.852 billion, $1.108 billion are from IFC’s own account and $1.745 billion were mobilized from other financial institutions, fulfilling IFC’s goal to attract capital and new investors to the country. IFC’s work with Public-Private Partnerships (PPPs) contributed to $960 million of this mobilization, supporting key infrastructure projects in Brazilian cities, such as public lighting, road concessions, and the metropolitan rail system. IFC works with the private sector through loans, equity investments, and advisory services.
“IFC undertook an in-depth review of its strategy for Brazil as we saw the need for a countercyclical action. At a time when there are obstacles to financing the private sector, an institution like IFC must play a demonstrative role,” says Carlos Leiria Pinto, IFC’s Country Manager in Brazil.
Highlights – IFC’s portfolio prioritized key sectors of the Brazilian economy, such as water and sanitation, agribusiness, renewable energy, green finance, and credit for SMEs, including women-owned businesses. IFC also provided advisory services, offering a portfolio of projects to improve the business environment and the investment policy in the country. These services were characterized by an innovative approach, such as the project with Corsan, a water and sanitation services provider wholly owned by the State of Rio Grande do Sul in Brazil. IFC is supporting Corsan through the Utilities for Climate (U4C) initiative, which combines advisory and investment to help water utilities tackle their most pressing needs and establish stronger, long term relationships. The project focuses on reducing water losses in the distribution system and boosting energy efficiency, avoiding waste and bringing positive environmental impacts. The financing to Corsan is IFC’s first sustainability-linked loan in infrastructure in Latin America.
In the Fiscal Year 2021, IFC signed its first advisory service to stimulate the green construction market in the country, with EDGE certification. The initiative with Itaú BBA involves technical training for the bank’s property developer clients and advisory services to identify opportunities in the green building market.
IFC’s strategic priorities in Brazil also included helping the country align its economic growth with the challenges of environmental goals. Projects with climate components represented 60.7 percent ($672 million) of IFC’s own account investments in the country. Among them, the highlight is the $120 million green loan to Sicredi, representing the first transaction of a Brazilian cooperative financial institution to receive the certification issued by the Climate Bonds Initiative (CBI). “We hope that this operation will encourage other financial institutions in the country to explore the Green Loan Principles as an alternative tool to growth their green portfolios, thus ensuring inclusive and sustainable development in Brazil,” adds Carlos Leiria Pinto.
In February 2021, IFC signed a memorandum of understanding with the Brazilian Federation of Banks (FEBRABAN) in a joint effort to promote sustainable finance and further align the banking sector with the commitments assumed by Brazil in the Paris Agreement. The partnership will encourage the dissemination of good climate risk management practices in the banks’ portfolios, in addition to training and fostering new businesses in energy efficiency, sustainable agriculture, distributed solar power, green buildings, and mobility, among other areas.
To encourage female entrepreneurship in Brazil, IFC signed its fourth partnership with Banco Itaú. This new partnership aims to strengthen women-owned and particularly afro-descendent companies in the country, through the development of an online entrepreneurship platform that will offer training and networking tools to support digital capabilities and business management. In addition, IFC led a large syndicated transaction to Banco Daycoval to encourage financing for female entrepreneurs and SMEs, mainly in Brazil’s underprivileged regions. The mobilization involved a group of ten financial institutions.
Since the pandemic hit, IFC has focused its efforts on helping the private sector mitigate COVID-19’s economic fallout. In March 2021, IFC announced an $8 billion package of fast-track financing to help companies affected by the pandemic around the world and, since then, more than $3.8 billion of IFC’s own account (and around $1.6 billion mobilized) has been earmarked worldwide. In Latin America and the Caribbean, IFC has been supporting its existing clients, providing much-needed liquidity for businesses, especially for SMEs. In Brazil, 4 projects were approved within this scope, which reached a total of $260 million.