The Asian Infrastructure Investment Bank (AIIB) approved its first credit operation for Brazil, in the amount of $100 million for the Minas Gerais Development Bank (BDMG). This comes four months after Brazil became an effective partner in this China-led, Beijing-based multilateral development bank.
The funds are expected to be available to BDMG in three tranches between 2022 and 2024, to create lines of credit for companies. There is no size limitation for tapping the line. However, due to the characteristics of the operation, the funds are expected to be allocated especially in medium and large companies.
BDMG’s CEO Sérgio Gusmão Suchodolski celebrated the fact that the institution was AIIB’s first partner. “We believe that this pioneering operation will be strategic to accelerate the efficient mobilization and allocation of funds to finance sustainable development projects, using the broad bases of the BDMG, which is a last-mile development bank.”
“This partnership strengthens the role of Brazil, which has joined the other members of the Asian Bank in designing a new international financial architecture that will be key to meeting the challenges of development in emerging economies, in order to build a more sustainable world in this century,” the executive added.
AIIB’s credit operation is the first with Brazil and the second in Latin America (there was a previous operation with Ecuador). It is also the first operation in Latin America with a non-sovereign entity.
The first contacts between BDMG and AIIB to carry out this loan were made in December 2020. However, since 2019, Mr. Suchodolski, who leads the Brazilian Development Association (ABDE), which brings together 31 firms in the sector, had been carrying out efforts to make sure that Brazil would be a founding member and partner of the AIIB, noting that this opened up opportunities for access to a new source of multilateral funds.
The accession agreement was finally enacted in September 2021 by the Brazilian government. The country contributed $1 million to the bank’s capital. On the other hand, the expectation in government circles is that Brazil will have access to up to $350 million in financing.
There are two general eligibility criteria for allocation of the funds approved on Thursday. First, investments in global public goods (like renewable power) are eligible. It means that coal-related projects, including coal mining, coal transport or coal-fired power plants, as well as infrastructure services dedicated solely to supporting any of these activities, cannot be financed. Large dams cannot be financed either.
Second, the funds could be used for operations that foster trade and connectivity with Asia. In the case of connectivity, it is understood as operations in which the parent company (or economic group) is of Asian origin (that is, some regional member of the AIIB) or operations that contribute to activities that encourage trade in products between regions Minas Gerais-Asia, with a direct or infrastructure-related relationship.
In addition to the $100 million credit, a $1 million donation was approved for BDMG by the Multilateral Cooperation Center for Financing for Development, a mechanism that aims to foster high-quality infrastructure investments and connectivity in developing countries through partnerships.
Source: Valor international