This summary covers an application made byBanco Nacional de Fomento (BNF)to cover a proposed lending facility to be provided to BNF by Citibank N.A. and other financial institutions yet-to-be identified.MIGA's coverage has been sought in relation to a Non-Honoring of Sovereign Financial Obligations by a State-Owned Enterprise (NHFO-SOE) guarantee for a US dollar debt financing structure of up to US$ 133 million with a tenor of up to 7 years.
The MIGA guaranteed facility will be used by BNFto finance the Economic Recovery Plan (ERP), recently announced by the Government of Paraguay (GoP). The proceeds of the MIGA-covered loan(s) will allow BNF to provide long term funding in USD to export-oriented companies operating in the productive sectors of the country (agriculture, livestock, commercial, industrial, services), as outlined by the ERP. The expected final use of the proceeds will enable export-oriented companies to finance their investment needs and liability management to recover from the negative impacts of the COVID-19 crisis.
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 theBNF 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.
The Project will aim to support the economic reactivation of Paraguay by allowing BNF to provide long-term USD liquidity to corporates with the purpose of preserving jobs and stimulating agricultural, commercial and industrial activity nationwide. The Project will enable access to financing for investment and liability management for export-oriented companies that have been impacted by the crisis.In a market where loans for up to 7 years in USD is not readily available, the Project could demonstrate the viability of that market segment for export-oriented firms, while triggering competition in the sector.
The Project is aligned with the US$14 billion WBG Fast Track COVID-19 Facility to assist member countries in addressing the current global pandemic and its impact. Project is well aligned with the WBG FY19-23 Country Partnership Framework for Paraguay under its focus area of "Reducing volatility, strengthening natural capital management and the rural economy", as the Project will aim to increase the international competitiveness of Paraguayan export sector.
Guarantee for a US dollar debt financing structure of up to US$ 133 million
No contact information provided at the time of disclosure.
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ACCOUNTABILITY MECHANISM OF IFC/MIGA
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