Germany to back CAF’s financing in geothermal projects and urban transportation for Latin America with €350 million

By means of the agreement signed today in Caracas with the German Ministry of Economic Cooperation and Development through its Embassy in Venezuela for a total of €350 million, the German government has granted its approval for KfW (German development bank) to negotiate with CAF - development bank of Latin America- regarding two new concessionary credit lines during 2017.

The strategic alliance for the promotion of sustainable development in Latin America between CAF and KfW was deepened with the signing of an agreement in which better conditions will be offered for financing geothermal projects (€250 million) and for urban transportation (€100 million). The agreement's signing was lead by the institution's president, Enrique García, and the German ambassador to Venezuela, Stefan Herzberg.

"One of the objectives that we're fulfilling with alliances, such as the one we have with KfW since 1977 and German authorities in general, is to improve financing conditions for member countries and to help them to be more efficient in the distribution of resources, which are limited. These contributions allow for progressing in the development of sectors that are highly impactful for productive transformation and competitiveness, such as renewable energies and urban transportation," García explained. 

On his part, the German ambassador to Venezuela, Stefan Herzberg, highlighted: "The German government celebrates the fact that CAF has established in recent years a broad system of environmental and social management, with financial contributions from CAF, for identifying, managing and monitoring social and environmental risks. This clearly demonstrates that CAF is very receptive in terms of standards with respect to development cooperation. For the Federal Republic of Germany, CAF is the most important regional partner in Latin America."

The diplomat also underlined that the German government's cooperation in the extremely important objective of climate change has continuously increased in recent years, reaching a confirmed level of financial support of currently more than USD 1.5 billion. In 2015, a total of €350 million was approved at a very favorable rate for the projects "Facilitation for the development of geothermal energy"[Facilidad para el desarrollo de la energía geotérmica]and "System of relevant climates in the urban transportation sector in Latin America"[Sistema climas relevantes en el sector de transporte urbano en América Latina].

The first credit line of €250 million shall be allocated to lowering financing that CAF grants to geothermal projects in the region, whether for supporting excavations for measuring the potential of energy generation, or for the very construction of the geothermal plant. This credit line constitutes part of a program lead by KfW and CAF, in which other agencies also participate and which arose in 2013 in order to identify the potential of geothermal energy in Latin America. The countries with the greatest potential in South America are Colombia, Ecuador, Peru, Bolivia and Chile.

The second line of credit, for €100 million, will lower the interest rate that CAF offers to finance projects in urban transportation in the region, such as subways, buses and trains, among others. With this operation, continuity of support is given to this sector, considering that in October 2013, a first line of credit for USD 200 million was signed with KfW, with which the Panama Metro Line 1 (USD 60 million) as well as the Lima Metro Line 1 (USD 140 million) were refinanced.

In the past 5 years, CAF and the German government (BMZ) through its Embassy in Caracas have signed agreements such as this one for a total amount of €785 million in credit lines to support the regional projects that CAF is financing in sectors such as climate change, water and sanitation, energy efficiency, renewable energies and transportation, among others.