The Inter-American Development Bank and the ExIm Bank of China have partnered on an investment programme to pump capital into regional businesses.
The partners have selected three managers to oversee three equity funds that the IDB said Wednesday could mobilise as much as US$1.8 billion of capital collectively.
The platform, which was first agreed in 2011 as a new source of funding for the IDB's 26 regional borrowing members, will pool funds from a 'geographically diverse' set of investors, including Chinese investors, which will then be invested as equity capital in companies and projects.
The selected investment targets must be in sectors seen as vital for regional development, said the IDB, which pinpointed infrastructure, midsize companies and natural resources, including agribusiness, energy and mining in the pre-production stage, as areas in which the US$1.8 billion would likely be deployed.
The so-called LAC-China Platform comprises three funds: LAC-China Infrastructure Fund, to be managed by Macquarie Infrastructure and Real Assets, a division of Macquarie Group of Australia which operates in 28 countries and has US$339 billion under management; the LAC-China Mid Cap Corporate Fund targeting midsize companies, to be managed by Darby Private Equity, which specialises in emerging markets; and the LAC-China Natural Resources Fund, to be managed by SinoLatin Investment Advisors, a joint venture between SinoLatin Capital and EMP Global.
The IDB plans to invest US$150 million as loans to fund the establishment of the three funds, pending approval from the bank's board of executive directors.
IDB President Alberto Moreno said the investment platform would provide long-term financing in transportation and logistics, production of raw materials, food production and business competitiveness.
"This is another step toward strengthening trade and investment between two of the fastest-growing regions of the world to support job creation and poverty reduction," Morena said, in an IDB statement announcing the managers of the funds.
The IDB said a 'consultative body' would be created to track and publish information on the effectiveness of the investments, but did not disclose its composition.
"Given Latin America's rich endowment of natural resources and sensitive biodiversity, it is paramount that investments flowing to the region are carried out in an environmentally and socially responsible manner and that the highest standards of corporate governance are applied," said Hans Schulz, general manager of the IDB Structured and Corporate Finance Department.
China joined the IDB as a donor member in 2009.
State-run China Exim Bank is in the process of getting final approval internally on its participation in the programme.