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					 INTER-AMERICAN DEVELOPMENT BANK




Conversion of Adjustable Rate Loans
            October 30, 2008
                Inter-American Development Bank
            Conversion of Adjustable Rate Loans


Agenda:

1.   Business Case

2.   IDB Financial Lending Products

3.   Description of Conversion Offer

4.   Cost Components

5.   Implementation/Legal Issues

6.   Timeline




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                              Inter-American Development Bank
                           Conversion of Adjustable Rate Loans

Business Case:


     •   Borrowers have expressed strong interest in getting away from pool
         based financial products towards market based instruments.
     •   Borrowers place high value to flexible financial instruments that can
         be hedged in the market place and provide more value added
         features.
     •   Borrowers see strong benefits in being able to blend IDB’s funding
         sources with other financing sources to achieve desired asset/liability
         management strategies.
     •   Borrowers prefer instruments that promote price transparency and
         are consistent with market practices.
     •   World Bank and other MDBs moved to market based financial
         products since 2000. IDB is lagging in this respect.
     •   Preliminary feedback from various borrowers is very positive to a
         potential one time offer by the IDB to convert OLBs of pool based
         loans to market based rates.

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                                 Inter-American Development Bank
                              Conversion of Adjustable Rate Loans

IDB Financial Lending Products

Legacy Products                     Current Products
- closed for new approvals:         - open for new approvals:       - through Conversion:

    CPS Fixed at Disb                                                        LCF

         CPS ADJ                              ELF

     DW Fixed/Float                           PSL

                                          SCF LIBOR

                                                                          SCF Fixed

                                            SCF ADJ                 New Proposal:
                                                                           LIBOR 1
                                                                           Fixed 1

                                                                           LIBOR 2
                                                                           Fixed 2
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                             Inter-American Development Bank
                          Conversion of Adjustable Rate Loans

Description of Conversion Offer:

 1.   Conversion is voluntary since it requires loan contract modification.
 2.   Conversion will be offered from CPS ADJ and SCF ADJ into USD LIBOR
      and USD Fixed Rate or any combination thereof.
 3.   This a one-time offer, but will have two execution dates to
      accommodate different types of borrowers.
 4.   Borrowers decide on loan conversion at the loan level.
 5.   Conversions will be executed at market rates ensuring equally fair
      treatment of borrowers leaving the pool to borrowers staying in it.
 6.   Converted loans will be subject to cost reimbursement in case of pre-
      payments.
 7.   Undisbursed balances of converted loans will also carry the post-
      conversion interest rate (once disbursed).
 8.   Following the desired TELR, 38% equity funding will be included in the
      pricing of conversions
 9.   SCF ADJ will be closed for new approvals.

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                                                                          Inter-American Development Bank
                                                                  Conversion of Adjustable Rate Loans

Cost Components: SCF
                                                                                     SCF - Projected Balances
                 24,000


                 22,000
                                                                                                                                                     Equity (max. 38%)

                 20,000                                                                                                                              New Debt

                                                                                                                                                     Existing Debt (Floating Rate)
                 18,000
                                                                                                                                                     Existing Debt (Fixed Rate)
                 16,000                                                                                                                              OLB (from Disb+Undisb)

                 14,000
   US$ million




                 12,000


                 10,000


                  8,000


                  6,000


                  4,000


                  2,000


                     0
                      Jun-   Jun-   Jun-   Jun-   Jun-   Jun-   Jun-   Jun-   Jun-    Jun-   Jun-   Jun-   Jun-   Jun-   Jun-   Jun-   Jun-   Jun-   Jun-   Jun-   Jun-   Jun-   Jun-   Jun-   Jun-
                       08     09     10     11     12     13     14     15     16      17     18     19     20     21     22     23     24     25     26     27     28     29     30     31     32
                                                                                                                                                                                                      6
                                                           Inter-American Development Bank
                                                     Conversion of Adjustable Rate Loans

Cost Components: CPS
                                                                CPS - Projected Balances
                14,000

                13,000
                                                                                                               Equity (max. 38%)
                12,000
                                                                                                               New Debt

                11,000                                                                                         Existing Debt (Floating Rate)

                10,000                                                                                         Existing Debt (Fixed Rate)

                                                                                                               OLB (from Disb+Undisb)
                 9,000

                 8,000
  US$ million




                 7,000

                 6,000

                 5,000

                 4,000

                 3,000

                 2,000

                 1,000

                    0
                     Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun-
                      08   09   10   11   12   13   14   15   16   17   18   19   20   21   22   23   24   25   26   27   28   29   30   31   32
                                                                                                                                                    7
                                             Inter-American Development Bank
                                        Conversion of Adjustable Rate Loans

Timeline:
                                                  Technical                 Conversion           Conversion
                                                   Briefing                   Date                 Date
                                                  to Board                      1                    2


                                         Doc.              Doc.         Deadline             Deadline
                                         Sub-            Approval          for                  for
                                        mission                         Sign-up              Sign-up




                                                                              2009               2010
    9/5   9/12 9/19 9/26 10/3 10/10 10/17 10/24 10/31 11/7 11/14           6/30 7/31           6/30 7/31



              Document Preparation

                                             EXD Consideration

                                                                     Promotion of Offer

                                                                    Contract Modifications




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