The Inter-American Investment Corporation (IIC), a member of the Inter-American Development Bank, promotes private sector development in Latin America and the Caribbean with a focus on small and medium-sized enterprises.
Recent deals include a $6 million loan to International Greenhouse Producer, a Mexican fruit and vegetable company, and $6 million of a $40 million loan to an Argentinian fertiliser company, Profertil.
Investment officer Carlos Martínez Gama Zazueta explains the IIC’s focuses and what it looks for in an investee.
Why do you focus on Latin America and the Caribbean?
The IIC is a multilateral institution with three decades of experience. Our shareholders are our 45 member countries, 26 of which are from Latin America and the Caribbean. In accordance with its mandate to support the development of the region through the private sector, the IIC only invests in companies from these regional member countries, with a special emphasis on small and medium-sized enterprises (SMEs).
Our funding comes primarily from the equity our non-regional member countries from North America, Asia and Europe have invested in the IIC and from our ongoing relationship with financial institutions and the financial markets.
The IIC cooperates with many banks in the countries in which we work and some transactions are funded under syndication agreements with these banks. Depending on the needs of our clients, we can either lead a syndication process ourselves, or participate in a syndicated loan arranged by a third bank.
What sectors and types of companies do you target?
We invest in any sector, provided the company meets our criteria for financial and development impact.
The companies we invest in are financially sustainable, creditworthy, and profitable, with a proven business model and sufficient cashflow. They also need to comply with international standards in management as well as social and environmental safeguards, and have a positive impact on the economic development of the region in which they operate.
In addition, they strive to meet international best practices in relation to labour relationships, corporate social responsibility, and environmental resource management.
Do you have any preferred industries for investment?
A large share of our portfolio is with financial institutions of all sizes that lend to SMEs. In addition to financial institutions, we operate in a broad range of industries, including agriculture, transport and retail. Since the inception of the IIC in 1985, we have approved over 920 loans for a total of US$5.63 billion. Agricultural projects accounts for roughly 10 percent of all deals.
To enhance the impact of our financial activities, we also provide non-refundable resources to increase the competitiveness and productivity of our clients, improve their operations, boost their sustainability, and build management skills. The IIC may hire external consultants to carry out these activities.
We place a special focus on improving corporate governance, energy efficiency and environmental and social standards. The amount of non-refundable resources vary from project to project and our clients do not have to pay them back. However, completing these programmes is part of the client’s obligations as part of our loan agreement.
Do you do follow-on investments?
In certain cases the IIC does follow-ons, depending on the needs of our clients and what we can bring to them. We would not participate in follow-on transactions if it they are only for the purpose of refinancing or reducing the cost of operation. There has to be some level of development impact coming out of a follow-on investment. Such impact may include improving the sustainability and competitiveness of the business model of the company, providing financing that is not available in the local market or supporting new projects.s.
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