IIC Approves Its First Local-Currency Operation In Argentina For Financing Small And Medium-Size Enterprises
08/06/2007This is the first investment made by a multilateral organization in the capital of a mutual guarantee company
Washington, D.C. - On August 7, 2007, the Inter-American Investment Corporation (IIC) approved a program that will provide up to ARG$30 million (approximately US$10 million) in local-currency IIC loans to small and medium-size enterprises in Argentina. The loans will be funded by IIC borrowing on the local market and backed by a corporate guarantee from Garantizar SGR. Garantizar is a mutual guarantee company (sociedad de garantía recíproca or SGR) that provides loan guarantees to its participating shareholders, principally small and medium-size private enterprises.
This operation will enable small and medium-size companies to access financing at interest rates and terms that would otherwise be unavailable to them—financing that they need for working capital, fixed asset purchases, investment projects, and general corporate purposes.
The program also involves an IIC equity investment of up to ARG$800,000 (approximately US$260,000) in the capital stock of Garantizar, equal to a holding of approximately 11% if other sponsoring and participating shareholder subscriptions are taken into account. Fifty-one percent of Garantizar´s capital stock is held by its participating shareholders. This is the first time that a multilateral organization participates in the share capital of a mutual guarantee company in Argentina.
As a sponsoring shareholder, the IIC will also contribute ARG$1,200,000 (approximately US$390,000) to Garantizar's risk fund. The risk fund, which is part of Garantizar´s equity, is used to pay the guarantees granted to the participating shareholders, in case of payment default by the latter.
"Other mutual guarantee companies and other small and medium-size companies that are part of a supply chain could replicate this operation, either with the IIC or with other financial institutions," explained Carlos Roa, IIC Financial Institutions and Structured Finance Coordinator.
The Inter-American Investment Corporation is a multilateral financial institution that is a member of the Inter-American Development Bank (IDB) Group. It provides financing (in the form of equity investments, loans, guarantees, and other instruments) and advisory services to private enterprises in Latin America and the Caribbean. The IIC's mission is to promote the economic development of its regional member countries by encouraging the establishment, expansion, and modernization of private enterprises, particularly those that are small and medium in size. For more information on the IIC's activities, please visit www.iic.int.
Contact: Carlos Roa/Santiago Cat (in Uruguay)
Telephone: (202) 623-3955