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Interview
02 February 2024

Sanchez sworn to reform

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In:
Finance and other
Region:
Americas
Cabei’s new president doesn’t believe in coincidence and believes her private sector career has readied her to lead central America’s development bank. The timing of her appointment also comes as MDBs face increasing scrutiny and calls for reform. It’s a pressure she tells Uxolo she’s more than ready for.

Cabei’s new president, Gisela Sanchez, has an ambitious set of targets for her five-year term. Sanchez intends to reform the development bank’s internal operations – revamping its own standards and those by which the bank measures its success – as well as delivering better cost efficiency for its central American sovereign clients. 

And the strategy of the work itself is also being refocused: the bank will hugely increase the proportion of its credit portfolio that goes to climate-focused work, deepen relationships with other MDBs that operate in the region and find new ways to partner with private sector capital to improve Cabei’s ‘multiplier’ effect.

There is clearly a lot to do. Sanchez – the first woman to lead Cabei – is keen to bring sweeping reforms to the development bank and she does little to play down the allegations of wasteful expenditures that dogged the previous administration of President Dante Mossi. In May 2023 the bank’s board rejected Mossi’s request for a second five-year term and instead unanimously voted to elect a new leader.

Sanchez’s first task is internal reform of the bank, which closed 2023 with a balance sheet of $17.1 billion: “Operational Excellence will be our main priority,” Sanchez tells Uxolo. “We can be more efficient in terms of the structure that we have the cost of operating this bank, so that will be one of our main priorities, and we’re looking to digital transformation, the way we handle our internal capital, our people. So there is a huge agenda regarding how we can make Cabei stronger and more efficient.”

This initiative is still in its early stages but there have already been practical changes. For example, Sanchez has cancelled contracts with a number of consultants whose services were agreed with the previous administration. Sanchez is also ushering a new internal “austerity” with budgets for internal events being cut – with staff encouraged to have local office events rather than travel to the bank’s Honduran headquarters.

MDB reform

It is unsurprising, therefore, given Sanchez’s focus on reform that she agrees with the G20’s recent comments that MDBs need to embrace reform if they are going to be able to deliver the amount capital required to meet the world’s huge sustainable goals. She takes a positive view of the criticism by pointing out that world organisations are increasingly realising that development banks hold the key to channeling financing to the areas of most need. This increasing focus is one of the reasons she thinks appointments such as hers, with leaders of MDBs increasingly being recruited from the private sector, is not “just a short-term trend.”

“I think this is something that will stay with us because the challenges that we're facing with the planet, with climate change, and the challenges that we're facing as societies, with poverty and inequality, cannot be solved only by the governments of our countries,” she says.

“The G20 has been trying to define the role of multilateral development banks and it's leading to a lot of pressure, which I think is a positive pressure on us, to develop the right financial solutions - the development tools that we can implement, that could have a bigger impact in the countries that we serve.”

Sanchez says that Cabei has responded to this pressure by creating a taskforce – headed by CFO Carlos Sanchez (no relation) to develop a new set of financial solution that Cabei can offer – such as offering guarantees for private sector investors to encourage their participation - as well as analyzing other obstacles to getting private sector involvement.

“And there are different ways to do that,” she says. “We are trying to design the new role of Cabei, actually we are as we speak, working on our new strategy for the next five years. So it is the perfect timing to make us answer this question because I think that G20 is it's a signal of things that have to be improved, and we're ready to do so.”

Sanchez will also develop a “triple line” strategy for Cabei’s investment committee, which will increase the prominence of climate-focused work. She says that today only 8% of Cabei’s credit portfolio is directly linked to climate projects and that’s going to increase.

“I’ve been working in sustainability for quite a long time and my philosophy has always been to have a triple bottom line strategy, where the social and the environmental are as important as the economic,” she says. “Cabei is the perfect place to create this ‘triple line strategy’ for the bank, because our main objective is to create social and environmental value, of course, and on top of the economic one. So when we look at the current portfolio, there is a significant opportunity to diversify the portfolio.”

Sanchez is also going to change how Cabei measures its effectiveness on the social scoring of projects: “The KPI that we use to measure the impact of these specific projects [is being reviewed] and coming from the private sector I think we can improve in this area. We’re also looking at the way we can maximize the dollars that that we're using to support each of the countries. There is a tremendous opportunity for improvement.”

Sanchez believes that maximising the impact of Cabei’s dollars will hinge on developing financing consortia that also includes other MDBs that operate in central America. “I'm a strong believer in strategic alliances. I don't think it's a good idea for Cabei to be by itself. We have other multilateral banks, like IDB, of course, and the World Bank. We all have different sets of skills and I prefer to work along them,” she says.

“The challenges that we're facing are too many,” she says. “When you look at [UN’s] Sustainable Development Goals, it will be almost impossible [to achieve these goals] without these alliances and without the support of the private sector, because the financial resources that are needed to meet these goals are significantly higher than that we can get just from the governments of our countries or the multilateral banks.”

Sanchez’s policy of MDB collaboration will be helped by her recent first foray into official work for the IDB which, she believes, was a fateful first step to the Cabei presidency. “Actually, it's interesting that before I joined Cabei I was appointed as part of the strategic sounding board for IDB to evaluate the new the future strategy for IDB. It was an amazing opportunity to understand IDB better, and now to find better ways to collaborate,” she says. “I don't believe in coincidence; I strongly believe that things happen for a reason.”

A 30-year journey

Sanchez’s path to the presidency of central American development Cabei first crossed with the organisation 30 years ago.

“I was working in a competitiveness and sustainable agenda for Central America and Cabei was one of the main donors and supporters of this project that was developed by the presidents of Central America, along with Michael Porter from Harvard Business School, and Jeffrey Sachs from the economic school at Harvard University,” she tells Uxolo. “So from there, I know Cabei I've been involved more from the private sector perspective. Let me give you just one example. I was in Panama last week with Multibank, which is a private bank in Panama, that has a credit line with Cabei, and actually that is part of Grupo Aval, which I was part of [when at BAC Credomatic.”

Sanchez’s visit in the mid 1990s was as part of the project team that was developed by the presidents of Central America, along with Michael Porter from Harvard Business School, and Jeffrey Sachs from the economic school at Harvard University. “So my first visit to Cabei’s offices was in 1996 or 1997 to present the strategy [of that project] to Cabei’s board and I never thought that 30 years after I will come back as a president of the of the bank.”

Sanchez’s career took her into private sector with stints at Citi in Latin America before ultimately becoming chief of corporate affairs and sustainability officer for central America’s leading regional bank BAC Credomatic. Then followed entrepreneurism, when she created Nutravida – a company working to alleviate malnutrition in the region – before, in December 2023 – she took over the reins at Cabei.

“I remember when I came in December, I saw the buildings and I thought ‘Oh, my God’, I seriously never thought that I would come back in a different role,” she says.

Sanchez clearly has a long to-do list but the bank’s recent fundraising – Cabei printed its largest ever debt financing when it raised $1.35 billion in the international debt capital markets in January – shows that the bank will be building from a position of strength.

Sanchez says the bond transaction has pre-funded its 2024 debt obligations in a single transaction. “The huge oversubscription – we had an orderbook of $5.2 billion – meant that we upsized the deal and closed it at $1.35 billion, which is our biggest ever transaction. The deal still priced in line with expectations in terms of after-swap costs, despite pushing on size.” 

Sanchez says the three-year transaction reaffirms the bank’s status as a leading SSA, with more than 150 accounts from 38 countries participating.

“We will be tapping the global market on a more regular basis, and I would say for larger amounts,” says Sanchez. “But we have that great group of very sophisticated investors who know our name and really value all the financial discipline we would bring to the table.”

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