Financing Business Opportunities in Latin America and the Caribbean Ministry for Foreign Affairs of Finland BAHAMAS CUBA MEXICO DOMINICAN HAITI REPUBLIC ANTIGUA AND BARBUDA BELIZE JAMAICA SAINT KITTS AND NEVIS DOMINICA GUATEMALA HONDURAS SANTA LUCIA EL SALVADOR SAINT VINCENT AND THE GRENADINES NICARAGUA GRENADA BARBADOS TRINIDAD AND TOBAGO COSTA RICA VENEZUELA PANAMA GUYANA SURINAME COLOMBIA ECUADOR BRAZIL PERU List of Countries: BOLIVIA Antigua and Barbuda PARAGUAY Argentina Bahamas Barbados URUGUAY Belize CHILE Bolivia ARGENTINA Brazil Subregional groups: Chile Colombia ALADI Costa Rica Argentina, Bolivia, Brazil, Chile, Cuba Colombia, Cuba, Ecuador, Dominica Mexico, Paraguay, Peru, Uruguay, Dominican Republic Venezuela Ecuador El Salvador Andean Community Grenada Bolivia, Colombia, Ecuador, Peru, Guatemala Venezuela Guyana Haiti CACM Honduras Costa Rica, El Salvador, Jamaica Guatemala, Honduras, Nicaragua Mexico Nicaragua CARICOM Panama Bahamas, Barbados, Belize, Paraguay Guyana, Jamaica, Suriname, Peru Trinidad and Tobago Saint Kitts and Nevis Santa Lucia G-3 Saint Vincent and the Grenadines Colombia, Mexico, Venezuela Suriname Trinidad and Tobago Mercosur Uruguay Argentina, Brazil, Paraguay, Venezuela Uruguay; Chile and Bolivia as external members Financing Business Opportunities in Latin America and the Caribbean MINISTRY FOR FOREIGN AFFAIRS OF FINLAND LIST OF ABBREVIATIONS: ACP African-Caribbean-Pacific IDA International Development countries Association ALADI Latin American Integration IDB Inter-American Development Association Bank CABEI Central American Bank for IFC International Finance Corporation Economic Integration IIC Inter-American Investment CACM Central American Common Corporation Market LAC Latin America and the Caribbean CAETF Central American Emergency LDMC Least Developed Member Trust Fund Countries CAF Andean Development Corporation LIB Limited International Bidding CAN Andean Community LMIC Low-Income or Lower Middle- CARICOM Caribbean Community Income Countries CAS Country Assistance Strategy MERCOSUR Southern Common Market CBF Capacity Building Facility MIF Multilateral Investment Fund CDB Caribbean Development Bank MIGA Multilateral Investment Guarantee Agency CDE Centre for the Development of Enterprises MDGs Millennium Development Goals CIRR Commercial Interest Reference NCB National Competitive Bidding Rate NDF Nordic Development Fund CSP Country Strategy Paper NEFCO Nordic Environment Finance CTF Consultant Trust Fund Corporation DAC Development Assistance NIB Nordic Investment Bank Committee NIP National Indicative Programme EC European Community NOPEF Nordic Project Fund ECA Export Credit Agency OCT Overseas Countries and Territories EDF European Development Fund PAHO Pan-American Health EIB European Investment Bank Organisation EPA Economic Partnership Agreement PIL Project Investment Loans EU European Union PDF Project Development Facility FIDE Finnish Export Finance PRSP Poverty Reduction Strategy Paper Development RFP Request For Proposals FSL Fixed-spread Loans RIP Regional Indicative Programme FSO Fund for Special Operations RSP Regional Strategy Paper FY Financial Year SME Small and Medium-Size GEF Global Environmental Facility Enterprise HIPC Heavily Indebted Poor Countries SSP Sector Strategy Paper IBRD International Bank for TATF Technical Assistance Trust Funds Reconstruction and Development VSCLs Variable-Rate Single Currency ICB International Competitive Bidding Loans FOREWORD Latin America and the Caribbean (LAC) constitute an interesting market area for Finnish com- panies, and the opportunities available are worth exploring. Trade between Finland and the LAC region is approximately 2-3 % of Finnish annual aggregate trade, although these figures repre- sent direct trade only. When indirect exports, such as exports from Finnish companies located in Asia or the USA, are taken into account, the LAC’s share of Finnish foreign trade increases. Finnish business investment is relatively low compared to that of other European countries and companies investing in the LAC region, but due to the rapid development of some of the Latin American economies, investments have recently increased. In addition to trade and investments, sales of Finnish services to the LAC region also have potential for growth. Increasing Finnish business interest in the LAC region has prompted Finpro and the Ministry for Foreign Affairs to compile this guide. The purpose of this guide is to be a concise introduction to finding business and investment opportunities in the LAC region through different international institutions. The guide offers basic information about the banks, funds and other institutions that are actively involved in the area, as well as more extensive information about how Finnish companies can take advantage of their financing and other instruments. A contact and address list to help in contacting experts from Finpro, the Ministry for Foreign Affairs and financing institutions is included at the end of the guide. Readers are encouraged to make further use of the sources and the contact information pro- vided. Companies wishing to do business in the LAC region are also encouraged to introduce themselves to the financing institutions and to maintain constant contacts with key staff. The Ministry for Foreign Affairs and Finpro lend their full support to Finnish companies seeking to benefit from the LAC market. We look forward to expanding this foundation into a solid LAC business opportunities network. Päivi Luostarinen Ministry for Foreign Affairs Pentti Kotiranta Finpro, Project Advisory Services TABLE OF CONTENTS INTRODUCTION 7 1. THE WORLD BANK GROUP 10 THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT, IBRD 13 THE INTERNATIONAL DEVELOPMENT ASSOCIATION, IDA 15 THE INTERNATIONAL FINANCE CORPORATION, IFC 20 THE MULTILATERAL INVESTMENT GUARANTEE AGENCY, MIGA 24 WORLD BANK TRUST FUNDS 26 2. FINANCIAL MECHANISMS OF THE EUROPEAN UNION 30 THE EUROPEAID COOPERATION OFFICE 31 THE ASIA AND LATIN AMERICAN PARTNERSHIP: THE ALA PROGRAMME 32 FINANCIAL AND TECHNICAL COOPERATION 32 EUROPEAN DEVELOPMENT FUND, EDF 35 EUROPEAN INVESTMENT BANK, EIB 39 3. INTER-AMERICAN DEVELOPMENT BANK IDB GROUP 44 THE INTER-AMERICAN DEVELOPMENT BANK, IDB 44 THE INTER-AMERICAN INVESTMENT CORPORATION, IIC 48 THE MULTILATERAL INVESTMENT FUND, MIF 50 TRUST FUNDS 51 4. REGIONAL FINANCING INSTITUTIONS 54 CENTRAL AMERICAN BANK FOR ECONOMIC INTEGRATION, CABEI 54 THE ANDEAN DEVELOPMENT CORPORATION, CAF 56 CARIBBEAN DEVELOPMENT BANK, CDB 57 PAN-AMERICAN HEALTH ORGANISATION, PAHO 59 5. THE NORDIC FINANCE GROUP 62 NORDIC DEVELOPMENT FUND, NDF 62 NORDIC INVESTMENT BANK, NIB 65 NORDIC PROJECT FUND, NOPEF 68 6. FINNISH FINANCING INSTRUMENTS 72 FINNISH FUND FOR INDUSTRIAL COOPERATION LTD, FINNFUND 72 FINNVERA 76 FIDE LTD. FINNISH EXPORT FINANCE DEVELOPMENT 78 EIT APPROPRIATION 79 CONCESSIONAL LOAN SCHEME 81 7. COMMERCIAL BANK FINANCING FOR THE LAC REGION 88 LIST OF CONTACTS 91 INTRODUCTION Latin America and the Caribbean (LAC) is a very diverse region with 510 million people speak- ing Spanish, Portuguese, English, French and some 400 indigenous languages. The LAC region is also the most urbanised region in the developing world, with three-quarters of its population living in and around cities. Natural resources and agriculture are important for many of its economies. The average per capita income is almost USD 4,000 per annum. Despite its immense resources and dynamic societies, deep inequalities of wealth persist in most LAC coun- tries, with almost one third of the region's people living in poverty. Out of a total population of 510 million, 168 million people live in poverty (defined as living on less than two dollars a day) and 77 million in extreme poverty (living on less than one dollar a day). Despite such poverty, the region offers significant economic and business opportunities. Above all, business and the development of the private SME sector is crucial for the overall development of the LAC societies, enhancing their social and economic structures and conse- quently reducing poverty. During the last decade, there have been important changes in the relations between Finland and the LAC region. As the economies of the region have stabilised and developed, economic relations have increasingly shifted towards business cooperation, instead of being built on devel- opment assistance only. Trade has shifted from importing and exporting raw materials and commodities to trading industrialised goods. As for investments, there are more Finnish com- panies actively investing in local industry than earlier. Countries with large economies like Brazil and Mexico are receiving most of the foreign direct investment. Trade Between Finland and the Finnish Direct Investment to the LAC Region LAC Region m EUR in 1994-2002 m EUR in 1994-2001 1000 1000 900 900 800 800 700 700 600 600 500 500 400 400 300 300 200 200 100 100 0 0 1994 1995 1996 1997 1998 1999 1994 1995 1996 1997 1998 1999 2000 2001 Import, m EUR Export, m EUR Source: Bank of Finland Source: Customs Department Introduction 7 In addition to the primary private sector financing provided by commercial banks, Finnish com- panies are encouraged to utilise the financing instruments for trade and investments in the LAC region that are available through national, international and EU instruments and programmes. One purpose of this guide is to present an overview of the opportunities available for selling Finnish services, know-how and technology to projects financed by international finance