The International Finance Corporation (IFC) has extended a credit line of around US$50mn to Banco Galicia to support energy efficiency in Argentina.
The funds will be used mainly in the agribusiness industry, helping the bank lend to companies to improve their competitiveness and efficiency.
The IFC will help Banco Galicia develop a programme to this end, including assistance in conducting market research, gauging needs and designing proposals to promote sustainability best practices. Banco Galicia will also use the financing to strengthen its technical capacity.
Speaking to GTR on the sidelines of the Felaban conference in Buenos Aires, Marco Poncini, credit manager at the bank, explained how important this type of credit is for Argentina’s recent opening to global markets.
“Getting these long-term international credit lines at market prices allows us to offer all the products Argentina needs to catch up with the rest of the world in terms of infrastructure, energy, power plants, etc. So we need to secure funds from abroad, then turn around and start to provide longer-term loans to Argentinean companies in these sectors,” he said.
Agribusiness is one of the largest sectors in Latin America, and large-scale industries in agriculture and cattle ranching account for 11% of Argentina’s GDP.
“The financial sector must play a crucial role as an engine of green and inclusive growth and our partnership with Banco Galicia will serve to promote the implementation in Argentina of international best-practices in this area,” says David Tinel, the IFC’s country manager in Argentina. “Our work with financial institutions such as Banco Galicia, a leader in Argentina’s banking sector, is essential to IFC’s efforts to promote sustainable growth in the country.”
Banco Galicia received a US$130mn loan from the IFC earlier in 2016 to expand its long-term lending to small and medium-sized enterprises (SMEs) as well as support climate finance projects.
Argentina has committed to sourcing 20% of its energy needs from clean sources by 2025 (compared to 2% today), and has launched a comprehensive bidding process for renewable projects.
The IFC has provided more than US$2.1bn to sustainable private sector projects in the country over the past 15 months, including a recent US$50mn financing package to Adeco Agropecuaria and Pilaga, the Argentine subsidiaries of regional agribusiness firm Adecoagro, to support resource-efficient farming and food processing technologies.
That loan consists of US$25mn from the IFC’s own account and US$25mn raised by the organisation from Rabobank and Banco Itau BBA.
It will help the companies to develop water-efficient practices in their rice fields and convert water pumps from diesel power to electric power, amongst other efficiency initiatives.