CAF approved a USD 1 billion senior debt fund for infrastracture in Colombia

CAF, Development Bank of Latin America, approved the investment of USD 50 million in a private capital fund which will grant a senior debt to infrastructure projects in Colombia. The target size of this Fund is USD 1 billion in its equivalent in Pesos and the professional managers will be CAF and Ashmore Group. 

In order to overcome the lags in infrastructre and increase competitiveness, the Governement of Colombia has developed a strategy for the sector's development. In this respect, the Government has strengthened the institutional framework and structured a series of projects, particularly in the roadways sector; it has adapted the legislation for the development of public-private associations, and modified the regulations to facilitate the contributions of institutional investors in this type of vehicle. 

With this Fund, CAF seeks to facilitate the channeling of resources from institutional investors to the country's infrastructure through the senior debt instrument, a novel financial product and a sector in which CAF has an ample trajectory and successful experience. 

In this respect, Enrique Garcia, Executive President of CAF, pointed out that Colombia is one of the countries with significant challenges to develop regarding infrastructure. In this regard, he assured that the Fund is a tool to support companies and projects with very long term financial resources, with adequate terms and conditions. He added that this Fund is the first vehicle in which CAF invests within the modernization strategy for its financial products. Executive President Garcia pointed out that the creation and entry into operation of the Fund will provide benefits not only for Colombia but also for the region, as this experience could be copied in other countries, "Colombia is in the forefront with this type of financing vehicle. This is the first exclusive senior debt Fund for infrastructure in Latin America." 

CAF's Executive President pointed out that, "the Fund has been designed to correct a market failure; that is, the absence of conditions so that institutional investors may finance the development of infrastructure in the country. The new instrument generates trust for investors through the professional and specialized management of the resources in the infrastructure sector." Garcia finalized by stating that, "the development and creation of this Fund supports Colombia by deepening its capital markets, as it helps to connect institutional investors, including pension funds, to the country's infrastructure. These institutions which are provided with resources at very long terms, seek assets with similar terms and adequate yields and risks. Despite a significant development of pension funds, the long term financing alternatives are limited, so this type of vehicle will become an attractive source for these types of investors." 

The approved operation will facilitate a greater participation of private initiative in the Colombian infrastructure, with important economic and social benefits, as the development of projects in the sector increase competitiveness and economic growth, in addition to being an important source of employment.