IDB backs ag credit in seven LatAm countries with $45m loan

Paola Bazan of IDB Invest tells Agri Investor that foreign insurance companies and pension funds are increasingly willing to provide long-term financing to export-focused agribusinesses in Latin America.

IDB Invest, the private sector arm of the Inter-American Development Bank, has extended  $45 million in credit to the Latin American Agribusiness Development Corporation (LAAD) that will support loans to small and medium-sized agribusinesses in seven countries.

Offered on a seven-year term, the facility will support LAAD’s loans to micro, small and medium-sized agricultural enterprises in Peru, Chile, Colombia, Costa Rica, Guatemala, the Dominican Republic and Nicaragua.

LAAD is a private company founded in 1970 by a group of multinational financial and agribusiness organizations in order to support projects contributing to rural development in Latin America. It provides loans ranging from $200,000 to $3 million on terms of five to seven years to small and medium-sized business throughout the region. LAAD is financed through commercial banks, DFIs and other multi-lateral institutions and its current loan book is valued at about $800 million.

Plans call for LAAD to use the $45 million provided by IDB Invest to originate between 50 and 65 loans, averaging about $750,000 each.

IDB and LAAD executives declined to provide more detail about the interest rate offered on the loan to LAAD itself. They also declined to provide more detail on the interest rates for loans offered through LAAD, other than that the interest rates would vary among the seven countries that are the effort’s focus.

LAAD will prioritize investments in permanent crops as well as agricultural machinery and infrastructure, with an additional focus on sustainable increases in food production, storage, technology and rural employment as well as diversification of export revenues.

Paola Bazan, investment management officer at the corporates division of IDB Invest, told Agri Investor that agribusinesses in countries such as Peru, Chile and Colombia have recently benefited from an increased willingness on the part of foreign insurance companies and pension funds to offer long-term credit in the region.

Bazan said that IDB policy precluded her from providing specific examples, but added that businesses with an export focus have especially benefited from the change she has witnessed over the past few years. As a development bank, Bazan said, the IDB does not compete with commercial institutions, and sees any increased willingness to lend to Latuine American agribusinesses as a positive development.

“The potential that the region has – given the soil, the weather and the land – is very important,” Bazan said. “Having these institutions come into the market actually helps make more progress in moving forward.”

LAAD chief financial officer Rafael Cestti told Agri Investor that recent years have also seen improvements in the market know-how required to absorb foreign investment into the region. That maturity is reflected, according to Cestti, both by the growing number of investments by local entrepreneurs that invest throughout the region and through increased demand from foreign investors, who he said have been encouraged by the adoption of more business-friendly policies.

“The Latin America of today is much more prepared to bring more foreign investment to the region,” Cestti said. “Each market can have two or three key characteristics for two or three different products. For example, in the avocado industry, you are seeing a lot of investments in Latin America, because of the demand for avocados.”