The Corporate Council on Africa and the United States ExportImport Banks Increasing Capital Flows to

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The Corporate Council on Africa and the United
States Export-Import BanksIncreasing Capital
Flows to Africa Conference
Sovereign Credit Rating Linked Financial
Instruments Re-examining the role of the
Multilateral Organizations

• Brian Baltimore
• Senior Associate for Emerging Markets
• Sofitel Capital Corporation USA, Inc.

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Global Capital Markets in the 21st Century

• Post-1990s Scenario
• Rapid Market Integration
• Information Communication Technology Advances
  Reduced Capital Controls
• Globalization of Financial Services
• International Debt Equity Portfolio
  Diversification
• Intensive Competition for Emerging Market Capital
  Flows
• Foreign Exchange Transactions
• Far Exceed International Trade Flows
• Greater Asset and Risk Assessment Information
• Emerging Market Sovereign Credit Ratings,
  Specialized Regional Industry Ratings Services
• Financial Product Innovation
• Credit Currency Risk Hedging Instruments
• Asset Securitization Instruments

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Sub-Saharan Africa Global Capital Market Access
General Characteristics Highly Concentrated
Sources of Capital
Internal Finance Oligopolistic Banking Sector
Industry Concentration Extractive
Industries Hydrocarbons/Minerals
External Finance Bilateral/Multilateral
Organizations
Shallow Information Markets
Limited (risk assessment and pricing) Information
Markets Limited Exposure to Policy Driving
Global Capital Markets Short-term Finance
Generalized Risk Profile
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Credit Enhancement Products
Credit Risk as a New Asset Class
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African Emerging Market Debt

• Does this scenario fit into the Africa market?

Case 1 Chad-Cameroon Pipeline 2003 (3.7Bn)
(Sponsor Consortium Export
Credit Agencies IBRD IFC) Case 2
Mozambique Aluminum Smelter 2001 (1.3Bn)
(Sponsor Consortium IDC Mozambican Gov.
IFC) Case 3 South African Development Bank
2004 (333Mn) (Synthetic Collateralized
Loan Obligation Transaction)
Focus on African Capital Markets
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Role of Multilateral Organizations

• Encourage Domestic Capital Market Development and
  Integration with Global Capital Markets
• Organize the Development of Credit Enhancement
  Products
• Facilitate Global Risk Diversifications
  Opportunities
• Encourage Agency Ratings as Devises to Assess and
  Price Risk
• Facilitate Private Sector Non-concessional means
  of Finance Through Domestic Capital Markets