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The Overseas Private Investment Corporation (Opic) increased its support for US investment in Mexico more than 10-fold when its board of directors approved US$570mn in Opic financing for four new projects in the country, setting the stage for even more US investment under the auspices of the US-Mexico Partnership for Prosperity.

Under the auspices of the US-Mexico Partnership for Prosperity, the US 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 US$200mn guaranty framework agreement by which Opic will share credit risk with Citigroup subsidiary Banamex 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 programme in Mexico.

Next, the board approved up to US$250mn in Opic financing for the Mexican affiliate of a US 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 US$120mn 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 US$60mn in Opic financing for the establishment of the Baring Mexico Private Equity Fund II, with a target capitalisation between US$150 million and US$200mn. 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 (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 US$60mn in financing for Conduit Capital Partner’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 capitalisation of US$200mn.

“Board approval of these four projects in Mexico represents an exponential leap in Opic support for US 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,” says Opic president and CEO Peter Watson, who notes that as of the end of the last fiscal year, Opic had provided US$41mn 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 programmes 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 adds.

The US-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.