Letter from the CEO
During 2020 Latin America and the Caribbean were at the epicenter of the global crisis caused by the COVID-19 pandemic. Adding to a devastating toll of lives and livelihoods lost, no other region in the world suffered a sharper drop in its GDP, a setback that risks wiping out the social and economic gains LAC had made over the previous 10 years.
As a development institution, the IDB Group must help its borrowing member countries avoid another lost decade. At a time when governments are battling the pandemic and operating with fiscal constraints, the private sector will have to play a leading role in driving the recovery. The challenge ahead is formidable, but IDB Invest is ready to do its part in working with LAC companies to build back better and deliver outstanding economic, social and environmental results.
This report lays out how IDB Invest responded to this unprecedented emergency and how it plans to work going ahead. Last year’s results should give member countries every confidence that the institution they renovated and strengthened five years ago to boost development through the private sector is meeting their expectations.
We surpassed all our goals. We quadrupled our long-term financing, from US$834 million in 2016 to US$3.5 billion in 2020. We more than doubled short-term financing and reached a US$16.1 billion portfolio of development related asset. We also expanded three times our direct mobilization efforts: from US$861 million in 2016 to US$2.3 billion in 2020. To continue adding value beyond financing, we maintained our commitment to supporting projects with a high level of development impact and strong additionality.
As vaccinations proceeds around the world, a new scenario is emerging. The prospect of a recovery will allow us to focus on accelerating development through the private sector.
Under the new president of the Inter-American Development Bank and ex officio chairman of our Board of Executive Directors we calibrated our operational program to reflect the new administration’s priorities, in full alignment with the IDB Group’s institutional strategy. We remain committed to being LAC’s private sector’s partner of choice.
COVID-19 crisis response
As the pandemic unfolded, with the support of its Board of Executive Directors, last April IDB Invest launched a COVID-19 crisis response guided by two broad criteria: to protect and alleviate; and to help reignite a recovery.
The actions included increasing IDB Invest’s financing capacity from US$4.5 billion to up to US$7 billion to support new and existing clients, with an emphasis on alleviating healthcare constraints, maintaining jobs, restoring trade supply chains, and sustaining sources of income, especially for micro, small, and medium-size enterprises. In addition, a US$500 million Crisis Management Facility was established to provide streamlined support to existing clients.
I am pleased to report that IDB Invest met all operational goals defined in its strategic response to the crisis, with approvals totaling US$9.1 billion including mobilization efforts. IDB Invest commitments reached US$6.2 billion while core mobilization reached US$2.3 billion, despite changing risk appetite in global and regional markets.
Delivering on Core Priorities
While many of our efforts focused on the emergency response to the pandemic, IDB Invest also delivered on its core business targets and institutional priorities.
Financing for micro, small, and medium- sized enterprises exceeded the 2020 target of 30%, reaching 37.4% of total commitments, with US$2 billion. The target for gender and diversity financing (25% of long-term projects) was surpassed, reaching 29.9% of operations approved in 2020. For the first time since its establishment, IDB Invest incorporated criteria regarding the inclusion of Afro-descendants and Indigenous people to identify sustainable projects in the region.
No less than 37% of our long-term financing went to projects to mitigate or adapt to climate change. We also expanded our support to Small and Islands Countries: in 2020 those countries accounted for 8.5% of IDB Invest’s total commitments, with an increase in the volume of operations of 71% over 2019.
Other institutional milestones
To fund its lending program, IDB Invest strengthened its presence in international and local capital markets. We issued bonds for US$2.3 billion in 2020, a 230% increase over 2019. In addition, Fitch Ratings reaffirmed IDB Invest’s credit rating as “AAA”, a testament to our robust asset performance and financial management. In February 2021, Fitch Ratings affirmed the Long-Term Issuer Default Rating of IDB Invest at AAA, with reference to its “excellent capitalization and low risk profile” and revised the rating outlook from stable to negative, reflecting the challenging macroeconomic environment in LAC and the rise in leverage of IDB Invest driven by the portfolio growth following IDB Invest’s pandemic response.”
We are also very proud that our new environmental and social sustainability policy came into effect last December, replacing the 2013 policy. The new guidelines, which benefited from an inclusive and transparent public consultation process, feature an increased focus on human rights, stakeholder engagement, and gender. They also reflect greater protection for Indigenous peoples, particularly those in voluntary isolation, and include a new section on disaster risk management.
Finally, we could not have achieved these results without the commitment of our staff, who continued to deliver even after work- from-home became the norm in Washington, DC and throughout the region.
The pandemic has exacerbated Latin America and the Caribbean’s many development challenges. Besides overcoming the present crisis, the region also needs to tackle long- standing structural factors that foster low productivity and high inequality, as well as make it more vulnerable to catastrophes.
IDB Invest is prepared to help LAC on the road to recovery and take on many of its pending problems. Over the past five years we have built an organization that is recognized today as the top private sector development finance player in the region.
IDB Invest is committed to lead a private sector-driven recovery, focusing on priorities such as promoting job creation, stimulating innovation, narrowing the small business credit gap, tackling infrastructure needs, increasing climate financing and gender and diversity, prompting digitalization, catalyzing regional value chains deals, and strengthening food security and rural development.
In these unprecedented times, IDB Invest is rising to the occasion—continuing to support the private sector in the region and be mindful to the fact that there are no economic “miracles”, only smart investments that yield effective results.
JAMES P. SCRIVEN
CEO, IDB Invest