IDB and EIB establish facilities to support internationalization of small and medium-sized enterprises

Loans will support trade and investment of SMEs in Latin America, the Caribbean and Europe

The Inter-American Development Bank (IDB) and the European Investment Bank (EIB) today announced the creation of two facilities that will finance the international expansion of small and medium-sized enterprises (SME) from Europe, Latin America and the Caribbean. EIB President Werner Hoyer and IDB President Luis Alberto Moreno signed a document in Cologne to formalize the agreement.

Financing for the IDB’s Internationalization of SMEs Financing Facility will consist of a $250 million loan and up to $250 million additional resources to be raised through syndication or co-financing.  The IDB funds will support eligible financial intermediaries’ on-lending to EU-based firms undertaking foreign direct investment (FDI) projects in Latin America and the Caribbean and businesses in Latin America and the Caribbean engaged in trade with the European Union, with a focus on SMEs.

A facility established by the EIB will finance an amount of up to $500 million (EUR 370.2 million) to promote the internationalization of Latin American and Caribbean SMEs via investments by their subsidiaries in Europe as well as European SMEs with trading activity or a presence in Latin America and the Caribbean.

“The creation of these facilities by the EIB and the IDB will help to strengthen the internationalization of SMEs in Latin America and the Caribbean in Europe and will spur new investment,” stated IDB President Luis Alberto Moreno. “The EIB and the IDB have always been strong partners and we look forward to working together in this important sector.”

“SMEs and midcaps are the backbone of our economies; they are the drivers of growth and employment in Latin America and the Caribbean as well as in Europe. Yet they are still facing enormous difficulties accessing adequate finance suiting their needs. Our joint initiative reinforces our support for SMEs and midcaps across the Atlantic. At the same time it represents a step forward in the cooperation between our two institutions,” said EIB President Werner Hoyer.

The IDB facility will seek to boost new FDI and inter-regional trade involving SMEs. While the EU has consistently been the main source of new FDI in Latin America and the Caribbean, accounting for 40 percent of inflows over the past ten years, the volume fell from a high of $64.8 billion in 2009 to $28 billion in 2012. Similarly, while trade between the EU and Latin America and the Caribbean has been steadily increasing, it has grown less than trade between other parts of the world.

In reciprocal fashion, the EIB facility will focus on the financing of new FDI projects in EU countries by SMEs and midcaps (companies with up to 3,000 employees) from Latin America and the Caribbean. Apart from increasing trade, the internationalization of companies and productive integration, the programme also aims to contribute to the creation of employment in the two regions.

As a complement to its financing, the IDB’s ConnectAmericas initiative will provide the knowledge and business intelligence (e.g. on regulatory controls, legal services and foreign business cultures and practices) needed to promote potential ventures by Latin American and Caribbean firms in destination countries in Europe.  Support for trade finance under the new IDB facility will focus on loans with a tenor of three years or more, thus serving as a complement to its existing and successful Trade Finance Facilitation Program, which has cumulatively supported more than $1 billion worth of export transactions from Latin America and the Caribbean to Europe since its creation in 2005.

The presidents of the two banks met on the occasion of the annual meeting of the Lateinamerika Verein e.V., the Latin America Association, focused on German businesses with an interest in Latin America. The signing was hosted by the German development bank, DEG.