Latin Finance - July/August 2009 - 33

trade finance commercial banks. IFC provides guarantees for trade-related transactions conducted by local banks. Small and medium size businesses account for 85% of the Latin American and Caribbean deals under its trade finance program. The LatAm portion of the IFC’s Global Trade Finance Program – covering 15 countries – is expected to reach $780 million in the fiscal year closing July 1. It was $485 million in the previous year, and just $221 million in fiscal 2007, according to IFC data. LatAm is 35% of the global program. In mid June, Citi and the IFC announced a memorandum of understanding with IFC to develop of a $1.25 billion funding facility. Citi will provide $750 million, and IFC and other development agencies will purchase participations for the other $500 million in aggregate, for trade assets averaging a tenor of 180 days. The two aim to support trade flows of up to $7.5 billion over three years. Governments are also getting directly involved. This is most striking in Brazil, where development bank BNDES has for some time been coming to the rescue of corporates who would have to pay more at commercial banks. Brazil’s Stretching for Tenor Tarja Kylänpää, NIB’s head of Asia, LatAm, central bank has Africa and Middle East says there has been started to offer trade advances, a clear shift, with multilaterals and ECAsays Kaoru Furuya, backed financings very attractive, even for strong companies in the more resilient regional head for the Americas in countries. She says five-year and longer loans are the most difficult to receive from Sumitomo Mitsui’s sources other than international financial global trade finance department. He says institutions and ECAs, except for extra other governments, stimulus support provided through local such as Chile, have governments. also extended “Our volume is higher than we were resources, but the expecting,” says Antonio Alves, head of trade finance for LatAm and the Caribbean effects are mostly seen in a large at the IFC. “We had some reduction of transactions in the largest Latin American market like Brazil. Commercial economies such as Brazil and Argentina banks could offer due to the global recession. However, in spite of the global economic crisis we keep Libor plus 200-250 basis points for a sixgrowing our support to trade finance in month facility, where the developing countries.” He says IFC lending is focused on small Brazil’s central bank could offer one year countries in Central America and the at Libor plus 85-100 Caribbean – places not well covered by versus all other options, says the borrower. Unlike many LatAm corporates, high grade América Móvil is cash rich and still has access to a wide array of financing options. América Móvil also secured $1.5 billion in ECA financing to build out 3G and GSM networks in LatAm. The package includes a €500 million loan insured by Finnish ECA Finnvera signed in November and two facilities insured by Exportkreditnamnden (EKN), the Swedish export credit agency, consisting of a €300 million floating rate loan agreed in December and a $471.5 million fixed-rate loan through AB Svensk Exportkredit. All three loans are long term credits, with final maturity in 2016 or later. In addition, DekaBank Girozentrale also participated in the financing, according to Citi, which arranged the package. Fellow telecom Embratel secured in March a $200 million A/B loan from Finland’s Nordic Investment Bank (NIB) and group of commercial banks. The deal was launched privately last year to a club that includes BBVA, Calyon, Société Générale, Santander, Nordea and Natixis. NIB is extending a $50 million fiveyear piece, while the club provides $150 million, also in five-year money. The all in rate for the loan is Libor plus 280, low versus the few LatAm comps available. basis points as of May, he says. This has meant more locals have started to rely on the central bank. Gallo expects short-term funding to flow back into the system sooner than longerterm financing, for which the market will continue to be selective. Banks might be less willing to use balance sheet for medium and long-term lending than in the past. As a result, LatAm corporates will have to rely more on capital markets for medium and long-term debt financing. “Nowadays we see a lot of club-based transactions,” Furuya says. Banks do not want to shoulder all the risks associated with transactions, even for $100-$200 million. Large transactions that could in the past have been handled alone might now have up to five MLAs. The pool of eligible lenders may have shrunk too, he adds. “If the market improves, the commercial banks will again become more aggressive,” BBVA’s Michel says, though it is difficult to know if the current trends will hold up. “If banks support anything it will be trade finance first,” Michel says. LF July/August 2009 LatinFinance 33

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Latin Finance - July/August 2009

Table of Contents for the Digital Edition of Latin Finance - July/August 2009