36856 - BAF Latam Trade Finance Fund

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Summary of Investment Information

Project Number

36856

Company Name

BAF LATAM TRADE FINANCE FUND

Date SPI Disclosed

Sep 8, 2015

Country

Latin America and the Caribbean Region

Region

Latin America and the Caribbean

Projected Board Date

Oct 12, 2015

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Regional Industry MAS LAC & EUR

Industry

Financial Markets

Previous Events

Approved : Oct 16, 2015
Signed : Dec 23, 2015
Invested : Mar 30, 2016

Sector

Other Non-Banking Financial Institution (NBFI)

Project Description

BAF Capital A.G. and its affiliates (BAF) is a fund manager that specializes in lending to processors and other companies who buy agricultural commodities from farmers as well as to companies that supply farmers with crop inputs. BAF has a loan portfolio of about US$700 million in the largest fund it manages, BAF Latam Trade Finance Fund, which lends from both Latam Trade Finance Fund, and BAF Latam Trade Finance Fund B.V., its only subsidiary (together referred to hereafter as, LTFF).The proposed project entails IFC making a loan of about US$70 million to LTFF to support its lending operations, which are primarily in Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, and Uruguay (the Project).

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	70.0
Equity

Development Impact

(i) Contribution to Food Security: Farmers have very little access to finance and generally rely on their suppliers and buyers of their crops to fund much of their working capital, which in turn places a high working capital requirement on the farmers'' suppliers and buyers. By lending to these suppliers and buyers, LTFF plays a role in supplying the liquidity required in the food supply chain to allow companies in the sector and the farmers linked to them to maintain production levels, even in the face of fluctuating agricultural commodity prices and challenging macroeconomic climates.
(ii) Screening and Assessment of Environmental & Social (E&S) Risks: IFC will help BAF to design and implement an Environmental & Social Management System (ESMS) to identify and manage potential environmental and social risks in its operations. E&S assessment systems are expected to make LTFF: (a) among the few funds with a strategy focused on trade finance to have a formal ESMS, which in turn, (b) helps disseminate better E&S practices among its clients in the agricultural commodity supply chain.

(i) Addressing Financing Gap in Agribusiness: Agribusiness sectors generally do not enjoy good access to finance and financing for smaller- and medium-sized companies in Emerging Market countries is especially in short supply. Through this Project, IFC is helping a firm specialized in lending into the agricultural supply chain increase the resources it can make available to the sector.
(ii) Stamp of Approval: Taking limited recourse exposure to a portfolio of agriculture-related loans in developing countries presents too complicated a risk for many lenders to assess and assume credit exposure to given a limited number of precedents. IFC is able to leverage its experience in agribusiness and in emerging markets to structure a loan appropriate to LTFF''s needs, which can serve as a precedent for other lenders and may open avenues for BAF to diversify the sources of funding for the funds it manages.

Indicator	Metrics	Comments	Calendar Year 2022	Calendar Year 2023	Calendar Year 2024
CORE - E and S Management Systems (Y/N)	Compliance/Enhancement		Not Available	Not Available	Not Available

E&S Category Rationale / Risks and Mitigation

E01974A394F24DEDA2A2835A3A317504 .par_E08D703A03AF8CBC85257EAB00697A97_20 { font-family:sans-serif; color:black; font-size:10pt; font-weight:normal; text-decoration:none; } The Project has been classified as Category FI-2 according to the IFC's Environmental and Social Review Procedure. The Fund's portfolio involves transactions that carry potential environmental and social (E&S) risks, such as impacts on biodiversity, resettlement and child labor and forced labor associated with commodity supply chains. For this project, the Fund will need to ensure that all investments are in compliance with: (i) the IFC Exclusion List; (ii) the E&S laws and regulations of the countries where they operate; (iii) and some instances the IFC performance standards.

D91715B95CAB4F2E819D635EBFB915D6 .par_E08D703A03AF8CBC85257EAB00697A97_21 { font-family:sans-serif; color:black; font-size:10pt; font-weight:normal; text-decoration:none; } The main E&S risks associated with this project are related to BAF's capacity to implement the necessary Environmental and Social Management System (ESMS) to effectively manage the E&S risk of its portfolio. BAF's portfolio fluctuates over the course of a year and at end of May 2015 includes 40% exposure to soybean-related commodities. In general the Fund's portfolio is vulnerable to E&S risks associated with agribusiness. These may include, but are not limited to child, forced and bonded labor, Occupational Health and Safety Risks to Workers and surrounding communities, as well as habitat conversion and agricultural pollution. D91715B95CAB4F2E819D635EBFB915D6 .par_E08D703A03AF8CBC85257EAB00697A97_22 { font-family:sans-serif; color:black; font-size:10pt; font-weight:normal; text-decoration:none; } These will be managed and/or mitigated by implementing a formal ESMS to the satisfaction of the IFC that will effectively identify and monitor the E&S risks. This will require of BAF to develop sufficient tools to carry out country/product E&S risk assessments to ensure that all transactions are in compliance with the E&S requirements and provide subsequent monitoring. In some cases the IFC Performance Standards may apply and it may be necessary to have a qualified third party consultant conduct the E&S assessment, especially in cases of repeat clients with large exposures and in cases of high country/product risk. Certain additional restrictions may apply in E&S sensitive regions, such as the Chaco in Paraguay and Argentina and the Amazon in Brazil. In addition, as part of this project the Fund will also; (i) Identify responsible, qualified staff to manage and implement the ESMS; (ii) ensure that the Fund's portfolio is screened against the IFC Exclusion List and national E&S laws, (iii) prohibit the fund from holding loans that would be classified as Category A Projects, (iv) Demonstrate commitment to applying the labor standards and working conditions established by PS2; (v) Submit examples of ESMS implementation (screening tools, product/country matrix etc.); (vi) Submit a periodic report to IFC in a format to be provided by IFC

Contacts

For Inquiries About the Project, Contact

Ernesto Lienhard
BAF Capital AG
Totentanz 1
4051 Basel – Switzerland
Telephone: +41 61 588 0223

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Nominate officers
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Formalize procedures
Develop guidelines
Staff Training
Enhance HR policies

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