Market study on local authorities’ financing in Latin America and feasibility study of new financing tools
Context
Present in ten Latin American countries, the French Development Agency (AFD) has observed that local authorities do not have sufficient access to the financing market. This stops them from carrying out necessary investment projects in a continent that suffers from a chronic deficit of urban infrastructure.
AFD is already a partner of the European Commission in the implementation of the first European Fund for Sustainable Development (EFSD), which focuses on Africa and countries bordering the European Union. AFD would like to take advantage of the Fund's extension to Latin America as part of the EFSD+, to implement guarantee schemes that would give local authorities in the region easier access to financing, and under favorable conditions.
Objective
The general objective of the mission is to identify, within the 10 countries concerned by the study (Mexico, Cuba, Costa Rica, Colombia, Ecuador, Brazil, Peru, Bolivia, Paraguay, Argentina), the ways in which the AFD could increase its action alongside local authorities, leveraging the EFSD+ and the guarantee mechanism that could result from it.
In order to carry out this mission, AFD recruited a consultant to carry out a feasibility study of a guarantee programme supporting non-sovereign financing to local governments in Latin America.
Our contribution
Together with AFD and public actors in the ten countries concerned, we are carrying out the following activities:
- Market study:
- Identification of key players in the local government financing market in each country: ministries, central banks, development banks, private banks, local governments, local public enterprises, rating agencies, law firms
- Conducted approximately 120 interviews to identify existing financing schemes, barriers to financing and potential levers to improve access to bank financing.
- Coordination of a network of some twenty local experts on financial and legal issues.
- Carrying out a country diagnosis, a specialized diagnosis on the theme of national development banks, and a synthesis diagnosis at regional level.
- Identification and implementation of appropriate financial products for each country:
- Project management of the second phase of the study carried out by our partner IFCL (Canada).
- Coordination of the comitology with the European Commission and the response to the EFSD+.
The mission is currently underway, at the end of phase 1, with phase 2 scheduled for completion in the first quarter of 2022.
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