Loan granted to Venezuelan tourism sector

(Caracas, December 14, 1990).- A global credit program for tourism development – with a total cost of US$150 million – will be partially financed by CAF as approved by the 66th Board meeting held in Caracas on December 13.

Another important agreement approved by the meeting - which was chaired by Bolivian Planning and Coordination Minister Enrique García - was authorization for seven private banks from the subregion to subscribe to series “B” shares, including Banco Mercantil of Venezuela.

These financial institutions join five banks from Peru and Bolivia which were the first institutions authorized to subscribe this type of share last October. It is hoped this process of bringing commercial banks from the Andean countries into the integrationist process will facilitate joint investments and promote trade.

The financial institutions now authorized to subscribe CAF shares are: Bolivia. Banco de Santa Cruz, Banco Mercantil and Banco Industral; Ecuador: Banco de Guayaquil, Filanbanco and Banco Continental; Peru: Banco de Crédito, Banco de Lima, Banco Popular, Banco del Sur and Banco Wiese; and Venezuela: Banco Mercantil.

Loan for tourism CAF is granting a US$25 million loan for Venezuelan tourism development. The Venezuelan Investment Fund (FIV) - executing agency for the program – will set up a trust fund, jointly with contributions from the Inter-American Development Bank (IDB) and the national government. FIV will then select qualified intermediaries from the private financial system interested in participating in the project to transfer these funds to the final beneficiaries of the program.

The program consists of granting credits to private companies to finance construction, remodeling and equipping of hotels of all categories, along with tourism services related to the project. These operations will generate foreign currency and jobs, stimulate subregional economies and lead to a more balanced development in the country.

By expanding hotel facilities, the program will immediately generate jobs in the construction sector and in operating and maintenance activities. In the longer term, jobs will be created in various sectors of economic activity, such as food preparation, crafts and transport.

The tourism sector is one of CAF’s priority fields of action as a potential generator of foreign currency and employment for its member countries.

In the case of Venezuela, despite its excellent location and significant tourism resources, the sector has not been adequately developed. Until the mid-1980s, the hotel sector was mainly used to meet urban demand (Caracas), and concentrated in only a couple of states - Margarita Island (Nueva Esparta state) and the Barcelona/Puerto La Cruz corridor (Anzoátegui state) - which absorb most of the investment in tourism. Apart from optimizing the tourism potential of this area, the program will stimulate the sector in other states.

CAF recently granted Venezuela a US$42 million loan to the petrochemical industry - another priority sector - for construction of a modern plant to produce ethylene oxide and ethylene glycol in Santa Rita, Zulia state.

Technical cooperation for Bolivia The Board also approved a technical cooperation operation for utilization of the special fund for Bolivia. The funds will be used to cooperate with the country’s privatization program, specifically for technical studies on the capital increase and privatization of Lloyd Aéreo Bolivia. With the US$500,000 operation, the Bolivian Planning and Coordination Ministry will hire international consultants to make studies to determine the value market value of the Lloyd shares, financial projections, market strategy, technological position, analysis of competitiveness and administrative structure, along with the design of a strategy for selling shares to the private sector including identification of potential investors, definition of criteria for bid evaluation and selection and the financial engineering scheme, which must be implemented for the operation.