U.S. Agency Approves $570 Million for New Projects in Mexico
OPIC funding will support goals of U.S.-Mexico Partnership for Prosperity
The Overseas Private Investment Corporation (OPIC) has approved $570 million in financing for four new projects in Mexico–increasing OPIC’s support for U.S. investment in Mexico more than ten-fold over previously existing levels, according to a press release issued February 22 by OPIC.
The funds will help support “even more U.S. investment under the auspices of the U.S.-Mexico Partnership for Prosperity,” said OPIC. The Partnership for Prosperity is a joint effort of the public and private sectors initiated by President Bush and Mexican President Vincente Fox in September 2001 to spur economic growth and development in remote regions of Mexico.
The OPIC funding will enable the four new projects in Mexico to “specifically target sectors that drive the Mexican economy — the nascent purchasing power of its youngest generation, and energy infrastructure,” said OPIC President and Chief Executive Officer Peter Watson. He predicted that the success of these projects “will encourage even greater levels of American investment” in Mexico.
OPIC was established as a development agency of the U.S. government in 1971. It helps U.S. businesses invest overseas, fosters economic development in new and emerging markets, complements the private sector in managing the risks associated with foreign direct investment, and supports U.S. foreign policy.
Following is the text of the OPIC press release, with further details:
OVERSEAS PRIVATE INVESTMENT CORPORATION
Washington, D.C.
FOR IMMEDIATE RELEASE
Tuesday, February 22, 2005
$570 MILLION IN NEW INVESTMENT SIGNIFICANTLY INCREASES OPIC SUPPORT IN MEXICO
(Mobilizing private-sector investment supports goals of the U.S.-Mexico Partnership for Prosperity)
WASHINGTON, D.C. — The Overseas Private Investment Corporation (OPIC) increased its support for U.S. investment in Mexico more than ten-fold when its board of directors approved $570 million in OPIC financing for four new projects in the country, setting the stage for even more U.S. investment under the auspices of the U.S.-Mexico Partnership for Prosperity.
Under the auspices of the U.S.-Mexico Partnership for Prosperity, the U.S. and Mexico signed an agreement in 2003, which, for the first time, enabled OPIC to provide investment support for private-sector projects. The Mexican Senate ratified the agreement in April 2004.
The board first approved a $200 million guaranty framework agreement by which OPIC will share credit risk with Citigroup subsidiary Banamex, S.A. in downstream project loans in Mexico. Specifically, the facility will focus on middle market lending, corporate lending and the microfinance sector. This is the first OPIC credit risk-sharing program in Mexico.
Next, the board approved up to $250 million in OPIC financing for the Mexican affiliate of a U.S. company to finance its working capital needs and issue letters of credit when it builds energy infrastructure projects in Mexico.
The OPIC financing will guaranty a credit facility that will be provided by commercial banks to ICA-Fluor. ICA-Fluor is a Mexican joint-venture company that provides engineering, procurement and construction services in the energy sector.
Finally, the board approved up to $120 million in OPIC financing for two new private equity investment funds intended to support sectors of the Mexican economy vital to its continued growth: power generation with a focus on renewable energy, and those benefiting from the country’s growing purchasing power.
The board approved up to $60 million in OPIC financing for the establishment of the Baring Mexico Private Equity Fund II, with a target capitalization between $150 and $200 million. The fund will invest in a diversified portfolio of medium-sized companies operating in Mexico, particularly in sectors expected to benefit from the increasing domestic purchasing power and relatively young Mexican population, including consumer goods, financial services, housing, healthcare and entertainment.
OPIC selected Baring Latin America Partners LLC (BLAP) as investment manager of the fund. BLAP is currently serving as manager of two other OPIC-supported funds, one in Latin America and one in Africa.
The board also approved up to $60 million in OPIC financing for Conduit Capital Partner LLC’s third Latin American fund. The fund will invest in independent power projects (IPPs) in Latin America and the Caribbean, with a focus on renewable energy and Mexico. The IPPs will consist primarily of electric power-generating facilities and follow one of three strategies: greenfield construction, development equity or acquisitions requiring expansion capital. The fund has a target capitalization of $200 million.
“Board approval of these four projects in Mexico represents an exponential leap in OPIC support for U.S. investment in the country, reflecting both rapidly growing investor interest in Mexico and a milestone for the Partnership for Prosperity undertaken by Presidents Bush and Fox in 2001,” said OPIC President and CEO Dr. Peter Watson, who noted that as of the end of the last fiscal year, OPIC had provided $41 million in financing to 11 projects in Mexico. “It also represents remarkable progress made by OPIC in Mexico since a bilateral agreement between the two countries opened OPIC programs there in 2003.”
“These new projects specifically target sectors that drive the Mexican economy — the nascent purchasing power of its youngest generation, and energy infrastructure — and with their success will encourage even greater levels of American investment in the country,” he added.
The U.S.-Mexico Partnership for Prosperity (P4P) is a unique public-private partnership initiated by President George Bush and President Vincente Fox in September 2001 to spur economic growth and bring development to those regions which have benefited less from NAFTA. P4P uses existing resources to engage the business community, state and local governments and academia in new cooperative ventures. P4P initiatives include projects which reduce the cost of remittances, expand Mexico’s housing pool, extend credit to small and medium-sized enterprises, establish university linkages, offer marketing opportunities for indigenous handicrafts and provide training and expertise.
OPIC was established as an agency of the U.S. government in 1971. It helps U.S. businesses invest overseas, fosters economic development in new and emerging markets, complements the private sector in managing risks associated with foreign direct investment, and supports U.S. foreign policy. Because OPIC charges market-based fees for its products, it operates on a self-sustaining basis at no net cost to taxpayers.
OPIC’s political risk insurance and financing help U.S. businesses of all sizes invest in more than 150 emerging markets and developing nations worldwide. Over the agency’s 33-year history, OPIC has supported $164 billion worth of investments that have helped developing countries to generate more than 732,000 host-country jobs and $13 billion in host-government revenues. OPIC projects have also generated $69 billion in U.S. exports and created more than 264,000 American jobs.