Almost every week, a new infrastructure project is announced in Latin America. Roads, wind farms, hydroelectric dams, rapid transit systems, water and sanitation plants, you name it. How many of these become a reality? Sadly, only a few. The reason: while the region’s ambitions and needs are vast, government budgets are tight (falling commodity prices such as soy and oil don’t help) and the private sector is not playing an important enough role in these projects.
Latin America invests roughly 2 to 3 per cent of its gross domestic product in infrastructure. We need at least double that to reach the region’s infrastructure goals. Part of the solution lies in finding new and better ways to promote private sector participation. There are vast sources of private funding to be leveraged, not to mention technical and managerial expertise. By some accounts, pension funds, an essential source of domestic savings in Latin America, are investing only 1 per cent of their portfolios in infrastructure around the world. Similarly, only 2 per cent of global insurers’ assets are allocated toward infrastructure. Read more
By Matt Gamser and Paul Lee
A new wave of financing innovations is democratising access to capital, especially for those most vulnerable among small, medium and micro-enterprises (SMMEs). Are governments and large financial institutions ready to embrace these innovations and enable the necessary regulatory reforms to support the growth of entrepreneurs across Asia?
Raising capital has always been one of the greatest challenges for the growth and sustainability of SMMEs. The International Finance Corporation estimates that the total unmet need for credit by SMMEs globally ranges from US$2.1tn to US$2.5tn. In East Asia alone, the credit gap is a massive US$900bn to US$1.1tn. Read more
The World Bank’s private sector lending arm has been very publicly rapped over the knuckles for its handling of an investment in Honduran palm oil company Corporación Dinant, which human rights groups allege has links with death squads and the killing and torture of peasant farmers who claim the land where it operates.
But if the shaming of the IFC in an independent audit by the Office of the Compliance Advisor/Ombudsman (CAO) were not bad enough, Peter Chowla, co-ordinator of the UK-based Bretton Woods Project, says: “Some of the most damaging findings from this case are yet to come.” Read more
Sometimes you get lucky – the International Finance Corporation certainly did when it picked Thursday to launch its first local currency bond in Zambia.
As the US Federal Reserve confounded analysts by announcing that it will keep its quantitative easing programme steady at $85bn a month, prompting a rally in emerging market assets, the private sector arm of the World Bank issued a $150m ($28.5m) kwacha-denominated note at 15 per cent. The four-year “Zambezi” bond is the first issued by a foreign organisation in Zambia’s domestic market, and will raise money for IFC’s local operations, officials told beyondbrics. Read more
Why change a winning formula? The International Finance Corporation was successful when it launched its first naira-denominated bond earlier this year, raising $76.3m after orders came in for more than double the original $50m offering. Now it’s back for seconds. And thirds.
The private sector arm of the World Bank will launch a series of bonds totaling $1bn in a bid to create more liquid capital markets in Africa’s second biggest economy, officials told beyondbrics. Read more
By Jingdong Hua of the IFC
China’s economic growth has been extraordinary, averaging about 10 per cent a year for the past three decades. Despite the recent economic slowdown the country added 7.25m jobs in the first half of this year. The capital markets have been a driver of China’s economy, and their continued development is essential for sustained growth. Read more
Nigeria’s capital markets received a filip in October when the country was admitted to JP Morgan’s emerging market Government Bond Index, a move that that could potentially attract $1.5bn of new capital inflow into the country. Now there’s some more good news for sub-Saharan Africa’s second biggest economy, and this time it is the thinly-traded corporate debt market which stands to benefit.
The International Finance Corporation, the World Bank’s investment banking arm, is getting ready to launch a five-year naira-denominated bond, aimed to develop local capital markets. Read more
By Jin-Yong Cai of the International Finance Corporation
Four years after the global financial crisis struck, the world still faces major economic challenges. Shocks from Europe, Asia or the US could undermine recoveries in many developing countries, hurting the poor the most. Read more
“Don’t forget, revolutions are expensive”, says Dimitris Tsitsiragos. He should know: his responsibilities as a vice president at the International Finance Corporation include north Africa and the Middle East, not least the countries hit by the Arab Spring.
The IFC, the World Bank’s private sector arm, has, in the last five years, boosted its annual commitments to the region by nearly 50 per cent to over $2bn. But, Tsitsiragos says it’s not enough: without more private sector involvement, the region cannot generate the investments required to produce faster economic growth and more jobs. Read more
While the eurozone makes headlines with its travails, the worst impact of the crisis is far away from Europe – in the world’s poorest countries.
So says Lars Thunnel, the chief executive of the International Finance Corporation, the World Bank’s private sector arm. Echoing last week’s remarks by Christine Lagarde, the IMF managing director, Thunnel told beyondbrics: “We are concerned the poorest people and the poorest countries are hurt worst in a crisis.” Read more
Africa’s huge lack of infrastructure is the inescapable topic when discussing the continent’s growth prospects. And it is easy to see why. Chronic power problems affect 30 African states; less than 5 per cent of African agricultural land is irrigated; only one in three Africans in rural areas has access to an all-season road and transport costs in sub-Saharan Africa are the highest in the world.
One way to tackle the shortfall is a rise in public private partnerships (PPPs) and an increased role from the private sector in building roads, railways and power stations. And Lars Thunell, chief executive of the International Finance Corporation, the investment arm of the World Bank, hopes the tide is beginning to turn. Read more