VZCZCXYZ1145
PP RUEHWEB

DE RUEHAC #0977/01 3312000
ZNR UUUUU ZZH
P 272000Z NOV 07
FM AMEMBASSY ASUNCION
TO RUEHC/SECSTATE WASHDC PRIORITY 6381
INFO RUCNMER/MERCOSUR COLLECTIVE

UNCLAS ASUNCION 000977 
 
SIPDIS 
 
PASS TO: OPIC, TREASURY, WHA/BSC (KREAD, CCROFT) 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ECPS PREL PGOV PA
SUBJECT: OPIC CEO MOSBACHER VISITS PARAGUAY 
 
 
¶1. (SBU) SUMMARY: Robert Mosbacher Jr., CEO of the Overseas Private 
Investment Corporation (OPIC), visited Asuncion October 31 to 
November 1 and met with officials from Banco Regional and Citibank 
to discuss an ongoing credit guarantee transaction.  The parties 
agreed to close the deal in coming months.  Mosbacher met with 
Minister of Finance Barreto.   Minister of Finance Barreto 
encouraged OPIC to explore housing and access to credit transactions 
with Paraguay's state-owned bank, Financial Development Agency 
(AFD).  Officials from the Inter-American Development Bank (IDB) 
separately discussed with Mosbacher a concrete proposal in the area 
of access to finance.   Two separate events, a reception and a 
working lunch, offered local companies the opportunity to learn 
about OPIC.  The private sector expressed a strong interest in 
OPIC's products and services and the Paraguayan-American Chamber of 
Commerce is planning to host a series of informational sessions on 
OPIC. END SUMMARY. 
 
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A NEW CREDIT GUARANTEE 
---------------------- 
 
2.(SBU) Robert Mosbacher Jr., CEO of the Overseas Private Investment 
Corporation (OPIC), met October 31 with Citibank officials Ignacio 
Morello, Jersnimo Nasser, and Hugo Martinez and with Banco Regional 
officials Nicols Trociuk, Francisco Yanagida and Gustavo Matiauda 
to discuss an ongoing credit guarantee transaction. The meeting 
focused on the requirements for qualifying loans covered under an 
OPIC credit guarantee.  Banco Regional described the market sectors 
(agriculture, cattle, and value added light manufacturing) and 
likely borrower profile (small and medium enterprises) for borrowers 
under the guarantee.  The parties agreed to complete the transaction 
in a month and make the official announcement after completion. 
 
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MINISTER OF FINANCE WELCOMES OPIC SUPPORT 
----------------------------------------- 
 
3.(SBU) Mosbacher met November 1 with Minister of Finance Barreto 
and selected members of the Economic Cabinet: Hector Giardina, CEO 
of Paraguay's state-owned bank, Financial Development Agency (AFD); 
Enrique Yebran, Board Member, AFD; Victor Vazquez, Economic Advisor 
to the Minister of Commerce and Trade; and Celio Tunholi, President, 
Paraguayan Banks Association.   Mosbacher introduced OPIC's mission, 
products and priority areas.  He stressed OPIC's role in economic 
development, the requirement of 25% US equity participation, and its 
priorities to promote low and medium income housing and access to 
credit.  As examples, Mosbacher mentioned OPIC's $100 million credit 
line with Citibank and its ongoing transaction with Banco Regional. 
 
 
¶4. (SBU) Mosbacher highlighted how OPIC products encourage financing 
with longer terms and lower interest rates.  With regard to housing, 
Mosbacher provided details of products and transactions that OPIC 
can offer and support.  He explained how OPIC succeeded in promoting 
15-to-20 year fixed rate mortgages in other countries in Latin 
America.   Mosbacher described a leasing-like structure for low and 
medium income housing where borrowers are able to "lease" the 
property and pay with direct salary deductions.  He explained how 
this mechanism increased the availability of housing for maquila 
workers in Central America. 
 
¶5. (SBU) Minister Barreto explained that the Government of Paraguay 
(GOP) is trying to promote housing finance through AFD.  He 
described how OPIC's focus on low and medium income housing and 
increased access to finance complements GOP goals.   In the housing 
sector, he indicated that supply exceeds demand and the GOP needs to 
build mechanisms to facilitate access to housing, including 
subsidies.  He spoke about the GOP's interest in exploring a trust 
fund structure through AFD to encourage lower interest rates.   For 
small and medium enterprise (SME) financing, Minister Barreto 
explained that AFD provides direct financing and is exploring 
options to create a fund to support microfinance.  Minister Barreto 
asked President of Paraguayan Banks Association, Tuhnoli, about 
coordination between AFD and the banks.  Tuhnoli confirmed AFD's 
productive relationship with Paraguayan banks. 
 
¶6. (SBU) Mosbacher emphasized that OPIC works to address market 
imperfections and will not work to undermine the competitiveness of 
the market or crowd-out the private sector.   Minister Barreto said 
that likewise, AFD will not create market disruptions through 
subsidies and indicated that OPIC and the AFD should work together 
to improve access to credit and promote housing lending.   Minister 
Barreto noted that the greatest challenge is how to promote a 
housing market of $10,000 per unit for individuals earning $300 per 
month.  He also indicated that the GOP is exploring options to this 
end, including mechanisms to encourage lending, but the plan will 
require several steps with further market segmentations.  Minister 
Barreto again emphasized that the GOP is not planning to distort the 
market but will address imperfections to improve the enabling 
environment and facilitate access.  The GOP's plan, Barreto said, is 
to reach a market segment of individuals with at least $1.7 millions 
guaranis ($343 USD) per month (medium low income housing) for 50,000 
to 100,000 houses.  He indicated that below this segment, the lower 
income households account for at least 150,000 houses.  He 
emphasized that before reaching those lower income segments 
improvements in the operational mechanisms to facilitate access are 
needed. 
 
¶7. (SBU) Giardina, CEO of AFD, indicated that the current phase of 
the housing plan is targeting people with a median income of $800 
per month.   He indicated that the initial target of a median income 
of $800 per month is for housing units of $20,000 per unit.   He 
described that in collaboration with 8 local banks, 20 year 
financing is now available for this market segment and, so far, 150 
housing unit have been provided.   Giardina explained that the two 
key constraints are: i) what type of mechanism to offer in order to 
increase access to mortgage finance to market segments in lower 
income groups, and ii) how to encourage the construction industry to 
build houses for these segments.  Barreto again requested OPIC 
support and suggested that OPIC explore options with AFD to make 
housing available for additional market segments. 
 
8.(SBU) Mosbacher emphasized that local banks need to recognize that 
low and medium income borrowers are good clients that usually have 
low default rates.  He offered two suggestions to AFD: i) rather 
than using AFD funds as direct subsidies, AFD can promote lending 
using funding structures to cover the down payment for new housing 
units, which has worked in other countries in Latin America; and ii) 
explore options to use funds to support risk sharing agreements in 
the same manner as OPIC, encouraging lending at reasonable terms and 
to market segments that otherwise would not be considered; AFD can 
use its funding to support risk sharing agreements with local banks 
and promote lending with lower interest rates and longer tenors. 
 
¶9. (SBU) Regarding access to finance for SMEs, Giardina explained 
that banks have a higher perception of risk than otherwise warranted 
and the current product offering is not only limited but has 
inadequate tenor and rates for the market.  Giardina indicated that 
products such as leasing and financing on discounted account 
receivables (factoring) are needed.  He mentioned that next year he 
will try to offer factoring products in a structure similar to the 
one used in Mexico with the company FINSA, and asked if OPIC could 
support such an initiative.   Mosbacher explained that OPIC is 
working in collaboration with US Treasury and the IDB to address 
constraints to SME financing and indicated that in these efforts 
there are many opportunities to engage with AFD. 
 
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PROPOSAL FROM IDB 
----------------- 
 
¶10. (SBU) Mosbacher met November 1 with IDB's Country 
Representative, Vladimir Radovic, Senior Financial Specialist, 
Felipe Gomez-Acebo, and Financial Institution Specialist, Joaquin 
Jorge Dominguez.   Mosbacher made a brief presentation which 
included OPIC's initiative to collaborate with Treasury and IDB to 
address lending constraints to SMEs.  Gomez-Acebo offered a 
presentation of the areas in the financial sector where the IDB and 
OPIC can collaborate, and proposed a financing structure to increase 
credit access with the establishment of an independent investment 
vehicle funded by AFD, IDB, OPIC and the private sector.   The 
proposal was briefly discussed and the IDB will email a more 
detailed version to OPIC for future discussion. 
 
 
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Private Sector Learns About OPIC 
-------------------------------- 
 
¶11. (SB) Two separate events, a reception and a working lunch, 
offered local companies the opportunity to learn about OPIC.  The 
reception included key representatives from the main trade and 
industrial associations in Paraguay as well as officials from the 
GOP.  The Paraguayan-American Chamber of Commerce hosted a working 
lunch with local companies and members where Mosbacher explained in 
greater detail OPIC's products and services. 
 
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COMMENT 
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¶12. (SBU) The visit generated strong interest from the GOP and the 
private sector community.  Minister Barreto stressed common 
objectives and repeatedly recommended that OPIC works with AFD on 
housing and access to finance transactions.  The private sector 
expressed a strong interest in OPIC's products and services and the 
Paraguayan-American Chamber of Commerce is planning to host a series 
of informational sessions on OPIC.  END COMMENT. 
 
OPIC CEO Mosbacher cleared this message.