US$179 million in loans for approved for Ecuador

CAF today approved three loan operations in favor of the Republic of Ecuador for US$179.3 million. Of this total, US$49.1 million will be used to finance the Daule-Peripa hydroelectric project; US$89 million for the Global Program for Urban Infrastructure and Services for low-income sectors (PROINSUR); and US$41.2 million for investment projects through cofinancing with multilateral organizations.

CAF President & CEO Enrique García said these amounts involved major productive and physical infrastructure projects which support the economic development of the country, and include a high social and environmental component which directly benefits low-income urban and rural sectors and contributes to preserving the environment with the inclusion of plans to mitigate negative effects caused by execution of the works.

Hydroelectric project (US$49.1 million) One of the loans – at ten years plus three years of grace – will be used for execution of the final stage of the Daule-Peripa hydroelectric project which consists of installation of a hydroelectric plant and execution of a set of works to guarantee correct management of the basin at the confluence of the Daule and Peripa rivers, north of the Guayas region, 150 km from the city of Guayaquil.

Work on the Daule-Peripa hydroelectric plant began in 1995 when CAF granted the project a first loan of US$76.8 million; a second was granted in 1996 for US$62.5 million.

The plant will have an installed capacity of 213 MW and a total cost of US$289.2 million, of which CAF is contributing 65% or US$188.4 million, including the loan approved today. The remaining 35% will be financed by the governments of Ecuador and Italy. The plant is scheduled to begin operations in 1999.

The executing body is the Commission of Studies for Development of the River Guayas Basin (CEDEGE), public institution with legal status, its own capital and administrative autonomy, which is legally authorized to undertake works and execute programs and projects which contribute to the integrated development of the Guayas river basin and the Santa Elena Peninsula, in the province of the same name.

Infrastructure works (US$89 million) Another of the loans approved today – at ten years plus three years of grace – will meet national financing needs through projects to upgrade infrastructure and services in low-income urban and rural areas. The executing body is Banco del Estado (BEDE).

This loan is part of CAF support for the Global Program of Urban Infrastructure Services (PROINSUR) through BEDE, which channels external funds for projects in coordination with the municipalities and in line with the operating procedures of the Municipal Development Program (PMD), which is financed by the Inter-American Development Bank (IDB) and the International Bank for Reconstruction and Development (IBRD).

The objectives of PROINSUR include developing works of infrastructure and drinking water supply, sewage systems, rain drainage, urban roads and sanitary control in low-income sectors around the country.

In recent years Ecuador has experienced rapid population growth which has created heavy demand for public services and urban infrastructure, causing a deficit in sewage collection systems, drinking water supply, paved roads, and markets.

This situation has motivated the government, through BEDE and with CAF support, to launch a plan to finance specific projects such as construction of markets, channels, pedestrian ways, sewage plans, rain drainage, among others, for neglected urban centers and settlements.

Cofinancing with multilaterals (US$41.2 million) The objective of the third loan – with an eight-year term plus one of grace – is to cofinance investment projects with multilateral organizations in the areas of basic infrastructure and services, and contribute to the government’s Emergency Plan to mitigate disasters caused by El Niño; consequently part of the funds will be used for rehabilitation of roads, flood control and basic infrastructure in rural areas. The executing body is the Ecuadorian Ministry of Finance.

The El Niño meteorological phenomenon is characterized by torrential rains and destruction on the coasts of Ecuador and Peru (eastern Pacific) which impoverish nutrients and fish, while on the western edge of the Pacific it causes droughts, fires, death of livestock and loss of harvests.

Environmental viability of the project The three projects approved for the Republic of Ecuador were preceded by studies to identify their impact on the natural environment and the communities involved.

In the case of the Daule-Peripa hydroelectric plant project, in 1995 and 1996 environmental impacts were detected caused by stagnation of the waters of the reservoir; for this reason part of the funds approved today by CAF will be used for an environmental program to reverse the negative effects.

In this respect, the project covers conservation plans for the basin including reforestation and control of discharges, among others, along with training and environmental education programs for the inhabitants of neighboring localities.

The environmental and social impact of the other two projects is generally positive because they will improve the sanitary conditions of their areas, and include the beneficiary population in their execution.