Development bank Fonplata's plans to expand its role

South American development bank Fonplata seeks to expand its presence in the region. The multilateral fund set up by Argentina, Bolivia, Brazil, Paraguay and Uruguay, is in talks to add Colombia, among others, as a member. 

Henrique Pissaia, the general coordinator of strategic alliances at Fonplata and chief of staff of the executive presidency, talked with BNamericas about the bank’s strategies.

BNamericas: How is Fonplata organized and what is its operating strategy?

Pissaia: The development bank Fonplata started its strategic restructuring in 2012, which gained momentum in 2012 after the election of [the bank’s] president Juan Notaro.

Fonplata has a strategy of positioning itself as an agile and flexible development bank in the financing of projects in its member countries, Argentina, Bolivia, Brazil, Paraguay and Uruguay.

The focus of action is on sustainable infrastructure projects, social investment and job creation with a focus on the less favored social strata and especially on post-COVID recovery, gender policies, and adaptation and mitigation of the effects of climate change.

BNamericas: What is the volume of financing and disbursements at Fonplata currently, in the countries where you operate?

Pissaia: Fonplata has been growing its operations, we have average growth in approvals of over 20% per year.

Currently, [financing] approvals exceed U$500mn annually.

During the most critical phase of the pandemic, Fonplata provided concessional and fast-disbursing resources to its member countries to help combat the effects of COVID-19.

Now, with the end of the worst phase [of the pandemic], we’re focusing on projects for rapid recovery and job creation, as well as urban and integration infrastructure.

The distribution of resources aims to be as equitable as possible among our countries, meeting the demands of governments and their populations. In 2022, we surpassed the mark of US$3bn in approvals accumulated in our portfolio, a milestone for the consolidation of Fonplata as an important development bank for the region.

BNamericas: Do you have plans to increase or decrease this volume of funding in the coming years? Are there any specific countries where you have plans to increase or decrease this exposure? Why?

Pissaia: The needs of our countries for financing in integration and development are growing and Fonplata follows these needs and seeks increasingly agile and competitive financial mechanisms to increase the volume of financing in the coming years.

Fonplata has a cooperative mentality, to promote the harmonious development of its member countries and reduce regional and local asymmetries. Faced with the challenges of the region, we must always seek to reinvent ourselves, increase and make available resources that are more flexible.

BNamericas: What are the types of projects, financial volume and profile that Fonplata is interested in financing?

Pissaia: In the current stage of Fonplata, we provide loans to the public sector of its member countries, whether for sovereign guaranteed or non-sovereign guaranteed loans.

Projects can be at the municipal, state and federal government level, or state-run companies. Loans are typically in the range of US$30mn to US$70mn.

For example, in Argentina and Bolivia, we have emblematic infrastructure projects involving job creation. In Brazil, we generally work in small and medium-sized municipalities in multiple urban infrastructure projects. 

In Paraguay, we work with large logistics infrastructure projects such as the interoceanic corridor. In Uruguay, we work with infrastructure projects and support for micro and small companies. Also, at the non-sovereign level, we have projects with development banks and other state-run companies.

BNamericas: We have seen interest rate increases worldwide. In the case of Fonplata financing, what is the average interest rate on operations?

Pissaia: The increase in interest rates has been impacting the recovery capacity of countries in the post-pandemic period. Due to its role in promoting development and providing resources for economic and countercyclical recovery, Fonplata offers very attractive interest rates, between three and four times lower than those seen in the financing market.

The resources also have amortization and grace periods two to three times longer than commercial banks and other national development institutions.

BNamericas: Can the funding available from Fonplata be accessed by the public and private sectors, or are there any restrictions? How should interested parties proceed to obtain funding from Fonplata?

Pissaia: Currently, Fonplata offers resources through sovereign and quasi-sovereign loans.

In Brazil, sovereign guaranteed loans are mainly focused on municipalities between 100,000 and 500,000 residents, states and state-run companies. Due to restrictions on the federal guarantee, the national treasury only authorizes operations by entities that have a [high] credit rating and payment capacity.

In other countries, we work at all levels of government. For non-sovereign or quasi-sovereign guaranteed loans, borrowers are public or mixed capital companies, which receive a credit analysis from Fonplata itself.

To obtain financing, our project managers advise interested parties in the preparation and design of operations, whether they are operations with or without a sovereign guarantee from the federal government.

BNamericas: Are there specific segments where you would like to fund more projects? 

Pissaia: Fonplata does not have specific restrictions on economic segments. Today, due to the needs of our countries, the focus is on the recovery from the COVID-19 pandemic, with programs to generate employment and income, focusing on the most affected populations, mainly women and young people, and micro and small enterprises.

Another important focus is on projects and programs aimed at mitigating and adapting to the effects of climate change. For these two lines of action, Fonplata offers even more attractive resources to its member countries.

BNamericas: Is there anything else you'd like to highlight?

Pissaia: The challenges of development are many and with the most varied nuances. Fonplata aims to meet the needs of its member countries, in an agile and flexible way.

For every dollar contributed by our member countries, they obtain an approximate return of five times that amount. 

We’re also in the process of expanding membership, with ongoing conversations with Colombia and other regional and extra-regional countries. 

With its growth strategy, Fonplata is getting stronger and aims at greater integration with Mercosur, and could be an important financial instrument for the bloc.