Multilateral action is heating up in Latin America. Just a couple of weeks following news that the Inter-American Develop -ment Bank (IDB) would likely provide a liquidity facility in a Mexican RMBS (see ASR 4/19, p. 1), a unit of the same bank group is advancing on another front. The Multilateral Investment Fund (MIF) intends to become a first-loss investor as a way to enhance deals backed by diversified payment rights (DPR), which are a common sight in the cross-border arena.

"We would take a subordinated tranche, being the first in line not to get paid in the unlikely event of total stoppage of remittance flows," said Nathaniel Jackson, a representative from the Investment Division of the Fund.

As part of the IDB group, the MIF has a triple-A rating from Moody's Investors Service and Standard & Poor's.

While DPR transactions are most pervasive among Brazil's leading homegrown banks, the MIF would likely focus where foreign remittances dominate in the mix of securitized flows. Recently, that's meant Central America. A major goal of the entity has been the cut the cost of remittances, according to Takatoshi Kamezawa, an investment officer at the Fund. Only last week, the MIF set up a US$7.6 million joint program with the U.N. to promote savings and investments in struggling regions of Latin America and the Caribbean that receive remittances from emigrants.

Alliances are also on the drawing board for DPR deals. Jackson said they would work with other multilaterals to take portions of the subordinated tranche.

Apart from stimulating the remittance industry, by its DPR participation the MIF aims to foster small and medium enterprises (SMEs), another one of the entity's mandates. The fund is looking to have the originating banks use a chunk of the bond proceeds for loans to SMEs.

Outside of Brazil, only two Central American banks - Banco Agricola and Banco Cuscatlan - have issued deals backed by diversified payment rights in the last year and a half. Wachovia Securities is understood to be currently handling a US$100 million deal for Banco Salvadoreno.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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