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World Bank building

MIGA’s goal is to promote foreign direct investment into developing countries to support economic growth and more.

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Hands husking peas into a basket full of peas

Learn about the progress MIGA is making in its mission to support economic growth, reduce poverty and improve people’s lives.

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Young woman bending down to tending to her outside chores

Explore different types of political risk insurance guarantees provided to investors and lenders.

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Explore global projects that support economic growth, reduce poverty and improves people’s lives.

Paraguay

Banco Nacional de Fomento de Paraguay

$100 million
Financial Markets
Project Brief
Active
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Project Summary

On December 30, 2020, The Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, issued a guarantee of up to 7.5 years to Citibank N.A., from the United States and Commerzbank AG from Germany to cover the risk of Non-Honoring of Financial Obligations of a State-Owned Enterprise, covering loan facilities of up to US$100 million in principal to Banco Nacional de Fomento (BNF) from Paraguay.

The COVID-19 pandemic has affected the Paraguayan economy at a critical moment. The economy had been recovering from a recession due to the weak economic performance of its main trading partners and adverse climatic conditions.

BNF will use the funds as part the Government of Paraguay’s (GoP) Economic Recovery Plan (ERP) by providing medium and long-term loans to key sectors of the economy affected by the COVID-19 pandemic. The MIGA-guaranteed loan facilities will enable BNF to provide medium to long-term US dollar financing to cooperatives of producers and medium and large corporates operating in export-oriented sectors of the economy as part of the GoP’s COVID-19 ERP. MIGA’s support will allow BNF to secure its first US dollar funding from international financial markets at a reasonable cost that it could not otherwise obtain, given the market disruptions caused by the COVID-19 crisis. 

Environmental Categorization

This Project is a Category FI-2 project according to MIGA’s Policy on Environmental and Social Sustainability (2013). BNF is a state-owned bank providing universal banking services to corporations and individuals across 80 branches in Paraguay.

MIGA analyzed BNF’s portfolio for types of transactions, tenor, size, industry sectors, and exposure to MIGA’s Exclusion List. As of September 1, 2020, retail banking accounts for approximately 59% of BNF’s total portfolio, corporate finance is about 8%, and the SME portfolio is about 33%.  Corporate finance includes among others exposure to sectors such as agribusiness, manufacturing, retail & trade, and services. BNF does not have exposure to sectors on the MIGA Exclusion List, coal-related activities, extractives sectors or activities related to palm-oil. The use of proceeds of the Loan Facility will exclude high-risk activities that may include (a) involuntary resettlement; (b) potential adverse impacts on Indigenous Peoples; (c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage; or (d) significant occupational health and safety risks.

The main environmental and social (E&S) risks of this project are associated with BNF’s lending activities and its capacity to manage these risks. The applicable E&S requirements are the MIGA’s Exclusion List; applicable national environmental and social laws and regulations; sector risk-screens as applicable; and the MIGA’s Performance Standards.

BNF has appointed an Environmental and Social Risk Officer and has an Environmental and Social Management System in place which includes risk categorization, screening against a list of prohibited activities, and a set of sector guidelines and requirements, applicable to client activities related to for example agriculture and construction. A summary of the ESMS is publicly available on the BNF website.

There is a strategy and commitment to Corporate Social Responsibility (CSR) and BNF supports various related initiatives and associations in the field of education, health, sport, culture, and ecology. In addition, BNF has a process to receive and respond to external communication regarding BNF’s operations and business activities.

BNF has a set of policies related to human resources reflecting national requirements, including conditions of employment and compensation, working time, benefits and performance management, talent management, redundancy policy (which covers retrenchment), non- discrimination, grievance redress, provisions for the employees’ organizations and a worker’s grievance mechanism.

BNF has a Business Continuity Plan and an Emergency Response and Evacuation Plan in place. These documents cover emergency response procedures, crisis management and business recovery protocols for the critical business processes, internal/external notification, requirements for training and drills and the requirements for auditing of the business continuity plans.

BNF has a framework for managing security, including alarms and surveillance equipment, training, and code of conduct applicable to both BNF staff and any third-party security provider.

Based on MIGA’s review and applicable performance requirements, an environmental and social action plan (ESAP) will be agreed with BNF prior to entering into a MIGA guarantee and will be implemented within an agreed timeframe. The ESAP would be expected to contain the following items:

1. Revise the ESMS in line with the requirements of MIGA Performance Standard 1. The ESMS will include, but will not be limited to: E&S Policy; internal organizational capacity and competency; E&S due diligence processes/procedures to identify risks and impacts of borrowers’ activities against applicable requirements; monitoring and review of portfolio; and reporting

2. Develop and implement a training program for staff on the revised ESMS.

3. Update emergency response and security management plans in accordance with the requirements of Performance Standards 1.

4. Update the procedure for external communications in line with requirements of Performance Standards 1.

5. Update the Human Resources (HR) policies and procedures in line with the Performance Standards 2 requirements.

BNF will report periodically to MIGA on the development and implementation of the ESMS and related procedures.

Development Impact

The main development impacts derive from: (i) increasing access to finance to corporates and cooperatives, and (ii) expanding and diversifying the product offering in the Paraguayan banking sector. The financing will allow BNF to provide medium to long-term US dollar liquidity to export-oriented corporates with the purpose of preserving jobs and stimulating agricultural, services, commercial and industrial activity nationwide. The financing will allow BNF to provide long-term financing with tenors between five to seven years, that would otherwise not be available in the Paraguayan financial market and have the potential to be replicated by commercial banks.

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