Mauricio Claver-Carone intends to mobilize capital to transfer production from Asia to Brazil
President of the Inter-American Development Bank (IDB) since October 2020, American Mauricio Claver-Carone believes that Brazil and other Latin American countries have a unique opportunity to reposition themselves in global trade. According to him, there is a tendency for multinationals to transfer part of their production to countries closer to the West, to avoid problems in sourcing parts and inputs from Asia.
In an interview Claver-Carone states that it wants to finance projects that replace part of the production currently carried out outside the region. To that end, she spearheaded a reform of IDB Invest – the private sector-focused investment arm of IDB – and a capital increase, which has already been approved by member countries. Amid the global turmoil, says the IDB president, “the world sees Latin America and the Caribbean as a certain sea of tranquility”.
What is the purpose of IDB Invest’s recently announced capital increase?
One of my criticisms before joining the IDB was that for every dollar invested by IDB Invest, only 40 cents were mobilized by the private sector. One of my goals was to find at least a one-to-one relationship. What we are presenting to our governors (as the regional government representatives on the IDB board are called) is a new model of doing business, which is IDB Invest 2.0. It is turning IDB Invest into a mobilization bank.
How would it work?
We originate (the financing), we reduce the risk by offering guarantees – which is fundamental above all for a country like Brazil – and we distribute the investment portfolios. We are one of the only AAA risk-rated institutions in the world to have privileged creditor status. We can use our preferred creditor status to mobilize even more resources. This is where the multiplier effect is achieved. The idea was widely supported and well received, including by private investors.
Do you also intend to collaborate with local banks?
Yes, absolutely. And, of course, we want to involve institutional investors. These investors are closer to the country. They know where the gaps are.
What will be the amount of the IDB capital increase?
The aim is to balance the share of public and private capital in our balance sheet. As for public capital, we earn between $ 14 and $ 15 billion (in investments), depending on the year and interest rates. Last year it was $ 14 billion. If we can attract another $ 14 billion from the private sector, we could become a nearly $ 30 billion institution.
What are the priority areas for investments?
Digital infrastructure, renewable energy and health infrastructure are essential. I would add another, which is nearshoring (outsourcing of production to neighboring or neighboring countries). We will never see another opportunity as we see it today. The shutdown of key industries in China and now challenges to energy and food supplies following the Russian invasion of Ukraine have prompted a reassessment of risks. Last year, we invested $ 4 billion in nearshoring projects.
What projects are these?
Of all kinds. Of the $ 4 billion, $ 2 billion went to government-side projects. In support of the improvement of logistics. Another $ 2 billion went to private sector projects, including renewable energy.
Is there demand for these projects and investments?
Amidst the turmoil due to the closure of supply chains in China, Asia and due to the Russian invasion of Ukraine, Europe, the world sees Latin America and the Caribbean as a certain sea of tranquility. Sure, there are elections and political risks, which there always have been, but investors are re-evaluating that risk. Any political risk now in Latin America and the Caribbean is considered minor.