Funds approved to modernize the Peruvian State and develop vital infrastructure works

With the approval of three financial operations totaling $353 million, the Andean Development Corporation (CAF) contributes to the modernization of the Peruvian State and the development of vital infrastructure works, CAF Executive President Enrique García announced today in Caracas.

This decision was taken by the CXV Board Meeting, which approved operations for $788 million. In addition to the funds for Peru, finance was also approved for Bolivia ($75 million), Ecuador ($260 million) and Venezuela ($100 million).

Garcia said that the operations approved for Peru – Camisea Gas Transport System; Support for Competitiveness, Governance and Social Investment; and the Guarantee for the Yuncán Hydroelectric Plant Project - are part of the institution´s strategic program to support shareholder countries´ plans for institutional strengthening, promotion of competitiveness and infrastructure development, among others.

Camisea Transport System

Based on a full evaluation of the Camisea Project – comprising three components: production, transport and distribution - which deepened the project´s environmental and social variables, the CAF approved an operation for $75 million over 12 years with two years´ grace. The funds will be used by the company Transportadora de Gas del Perú (TGP), which is the executing agency of the transport component, to build a two-pipeline system for transport of gas and liquids from the Camisea fields to the cities of Lima and El Callao.

The Camisea project, with a total value of $1.50 billion, is one of the most important investments in Peruvian history given its broad impact on the economy. The substitution of coal and the imported oil products with gas from Camisea will reduce environmental pollution, cut electricity costs, improve the balance of payments, generate important tax revenue and, in general, strengthen the country´s economic competitiveness.

CAF´s participation, along with other international financial organizations, in the Camisea project, guarantees the implementation of a rigorous environmental and social management plan in all components. In another operation approved today, $5 million was allocated to cover the Peruvian government´s commitments to guarantee the social environmental management of the project.

Competitiveness, governance and social investment

The second financial operation approved for $220 million, at 12 ½ years with a two-year grace period, is destined for the Program to Support Competitiveness, Governance and Social Investment whose objective is to aid the country´s competitive integration into the world economy.

The competitiveness component of the program promotes an agenda that favors business and labor productivity with a view to generating wealth and jobs.

For governance, the program strengthens activities related to State modernization, decentralization, strengthening local government and training human resources.

Health and education programs are planned for the social investment component, as well as infrastructure and basic services projects such as sanitation, agriculture, power, women, social development and environment, especially with the support of the environmental management program and the Camisea project.

Yuncán Hydroelectric Plant

The third operation approved was the granting of a $50-million guarantee to Peru for the construction of a hydroelectric plant with 130 MW operating capacity in the Paucartambo and Huachón rivers basins in Pasco province, 340 kilometers northeast of Lima.

The guarantee covers the Republic´s commitments to the company that wins the contract to complete and operate the Yuncán Hydroelectric Plant. The Peruvian government is implementing the project through an innovative scheme to promote private investment and relieve pressure on State finances.

The successful company will operate the Yuncán plant – currently under construction - for 30 years, while ownership remains in state hands. The plant is scheduled to start up at the end of July 2005.