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idb private sector department term local currency hedging. In the bigger countries, the IDB will hedge itself. “This will get us even more demand, especially in countries like Colombia and Peru,” says Schulz. Subject to market availability, the IDB will be able to lend in any currency, as well as offer domestic guarantees. However, this is unlikely to extend to a B loan, though a parallel A loan in local currency could be possible. “In theory we can go 30 years, but it’s got to be justified by the project, and infrastructure concessions you may need 20-25 or even 30 years,” says Schulz. Building the Team Schulz oversaw something of a shakeup at the IDB, which he says is nearing its end. “We are a team now, we know what we are doing and it’s working like a machine,” says Schulz. “We’re definitely increasing our risk exposure here and we’ve got to be careful, prudent, we need the top people we can get.” The bank has recruited 20 in the last six months. The second round will place 10-15 people on the ground in LatAm, for which the IDB seeks structuring experts with 10-15 years of experience. “We’re on track to by the end of this year have 18 people in countries, probably 10 or 12 countries,” he adds. Schulz stresses that the bank does not compete with investment banks. “We can learn from them, but we should be the ones helping them do their jobs better,” says the banker. The IDB is actually looking to strengthen relationships with investment banks on the bond side, building on ties forged through the B loan program. “We need to be more creative and become more relevant in using our risk mitigation programs internationally with institutional placements, not with the B loans,” he says. “IDB is interested in building stronger relationships with the investment banking community, not to out-bank them, but to work with them and develop a more catalytic use of our guarantee instruments,” says Schulz. Schulz is relatively sanguine about the outlook for the region, especially if there is not a global recession that sparks a major adjustment in commodities. “The financial system is very solid. You also have a structural element in place that you didn’t have 20 years ago and that is the pension funds,” says Schulz. “You also have the reforms of the social security systems that led to the emergence of large pools of domestic long term savings that can be recycled and invested. That offers alternatives for funding to governments and companies during crisis periods that they haven’t even begun to tap,” he adds. Among Schulz’ worries is a lack of insurance. “One thing I always felt is not happening in Latin America is hedging. There’s a lot of speculation but there’s not much hedging,” he says. Of particular worry is exposure to a reversal in the dollar’s decline. LF GUIDES The Guide to Loans in Latin America Published in May ‘07 Published in May ‘07 Published in June ‘07 Published in Sep.‘07 To p a r t n e r w i t h L a t i n F i n a n c e o n t h e s e o r future guides, please contact: Coming in June 2008 The Guide to Treasury and Cash Management in Latin America James Norton Director, Special Projects +1 305 357 4227 jnorton@latinfinance.com May 2008 LATINFINANCE 103

Latin Finance - May 2008

Table of Contents for the Digital Edition of Latin Finance - May 2008