Banking on Development Peter D' Cleary Director

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Banking on DevelopmentPeter D. ClearyDirector
General CounselMarch 2007
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Core Mission

• To issue political risk guarantees in cross
  border emerging market transactions

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Four Coverages

• 1. Transfer and inconvertibility
• 2. Expropriation government action which
  deprives the guarantee holder of ownership or
  control of the guaranteed investment or deprives
  the guarantee holder of a substantial benefit of
  the investment
• 3. War and civil disturbance
• 4. Breach of contract failure of the host
  government to honor an arbitral award following a
  breach of contract

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Benefits of MIGA Guarantees

• Mitigate political risk
• Accessing funding and lowering borrowing costs
• Improving ratings
• Extending tenors
• Ability to resolve / mediate disputes

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Eligibility

• Must be cross border between member countries
• Cannot participate in purely local deals
• Must be new investment, but there is
  considerable flexibility here
• Expansion or modernization of old plant
• Acquisition of existing project if there is a
  financial restructuring etc.

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Eligibility

• Coverage of
• Equity, including shareholder loans and various
  profit sharing agreements
• Loans, but only if there is an equity cover
• Loan guarantees
• could be used to cover sponsor support agreements
• Minimum term of 3 years maximum of 20

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Miscellaneous

• Rely on rights of subrogation
• Do not require counter-guarantees
• We do obtain a host country approval
• Ability to intervene to prevent claims
• SME program for investments of 5m or less

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Overview of Business
Four Strategic Pillars - FY06 Guarantees Issued,
M

• Infrastructure projects
• Frontier markets
• Conflict-affected countries
• South-South investments

469m (14 projects)
481m (23)
165m (10)
389m (15)
By Sector FY06
By Region FY06

• 16bn of guarantees issued since 1989
• Current portfolio of 5bn

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MIGA support to US companies
Guarantees Issued to US Companies, By Region
Guarantees Issued to US Companies, By Sector
Agribusiness Mfg, 20
Africa, 1
Asia, 17
Financial, 31
ECA, 26
Oil, Gas and Mining, 18
LAC, 51
Tourism Services, 10
MENA, 5
Infrastructure, 21
MIGA has issued 2.2bn in guarantees to US
investors since inception USA represents MIGAs
3rd largest host country exposure
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• For more information
• Peter D. ClearyDirector General
  Counselpcleary_at_worldbank.org
• www.miga.org