GENERAL OPERATIONAL POLICIES
In accordance with the provisions of the Articles of Agreement of the Inter-American Development Bank, Article III, Operations, the Bank may make or guarantee loans to any member country, to any of its political subdivisions or government bodies, autonomous entities, joint ventures and private companies in the territory of a member country, regional organizations made up of member countries and the Caribbean Development Bank.
Included within the political subdivisions of a country are the states, provinces, and municipalities, as well as decentralized state entities such as state banks, development corporations, public service companies, universities, etc., that have legal capacity to sign loan contracts with the Bank. When the ownership of the company corresponds more than 50% to public sector entities, the Bank considers them as belonging to said sector.
The Bank can grant loans to private companies, whatever their form of constitution, when they have the legal capacity to sign loan contracts with the Bank. Among the possible private sector companies eligible to be borrowers of the Bank, are corporations, other mercantile companies, cooperatives, foundations, etc.
The following is a list of general minimum criteria that allow judging when a credit subject is eligible to be a direct borrower of the Bank and when, on the contrary, the proposed subject can only be an executor and the main and general obligation must be assumed by the respective member country.
1. The member countries, which are bound under their general responsibility, as well as the political subdivisions, such as states, provinces, municipalities, etc., that require a guarantee from the member country before the loan proposal is submitted to Consideration of the Executive Board, they must demonstrate that they meet the following requirements:
Faculty to contract credits abroad. Specifically, that the Executive Power of the member country or the pertinent authorities of the other organisms have the necessary authorization to negotiate the loan;
Absence of impediments to submit to the arbitration procedure established in the loan contracts;
Faculty to contract and fulfill the financial obligations that emanate from loan contracts, especially those to receive, maintain and manage funds in foreign currency, arrange payments, carry out the loan service that includes interest and commissions, in foreign currency;
Power to assume the obligations to make stipulated in the Bank’s loan contracts;
Legal capacity to carry out organizational and structure modifications that may be required for the project or program; Y
Legal capacity to establish rates in relation to public services. In the case of political subdivisions or decentralized organizations that do not have the legal capacity to establish the respective rates, the guarantee of the member country must be required, for this purpose, as a direct obligation of the same.
2. In addition to the requirements mentioned in the previous paragraph, political subdivisions and decentralized state entities of public law must demonstrate that they meet the following requirements:
Legal personality; Y
3. Private sector entities constituted in accordance with rules of private law, must demonstrate that they meet the following requirements:
To have been legally constituted, with the pertinent legal formalities and to be duly registered;
Domicile in the respective member country;
Faculty to contract loans abroad;
Power to submit to the Bank’s arbitration procedure. They must also demonstrate that the judgments or awards issued as a consequence of the foregoing are enforceable in the country of the entity’s domicile;
Demonstrate that the capital stock and the administration of the company comply with the provisions of national legislation and / or international agreements in force for that country in terms of qualifying it as a national entity;
Power to contract and fulfill the financial conditions required in the Bank’s loan contracts, including those related to receiving, maintaining and managing funds in foreign currency, arranging payments and servicing the loan, which includes interest and commissions, in foreign currency;
Ability to fulfill the obligations to do stipulated in the Bank’s loan contracts; Y
Demonstration that the government of the respective member country does not object to the financing.
4. International entities must meet the following requirements:
International legal personality;
Domicile in a member country;
Faculty to contract international loans;
Ability to contract obligations to do in accordance with the texts of the Bank’s loan contracts;
Power to contract and fulfill the financial conditions required by the Bank’s loan contracts, including those related to receiving, maintaining and managing foreign currency, arranging payments and servicing the loan, which includes interest and commissions, in foreign currency;
Power to establish procurement procedures compatible with Bank regulations;
Power to submit to the arbitration procedure established in the Bank loan contracts;
Legal capacity to carry out organizational and structure modifications that may be required for the project or program.
The general organization, both of the borrower and the executor, must be appropriate for the purposes pursued.
With the exception of member countries and Central Banks, all potential borrowers must demonstrate that:
1. It has adequate wealth and financial situation, a conclusion that must be supported by financial analysis;
2. It has an adequate local counterpart to execute the project or program in question, in the amounts and opportunities foreseen; Y
3. It has the indispensable payment capacity to promptly service the debts contracted, especially those related to the eventual IDB loan. Financial analysis must corroborate this assumption.