Operations to benefit productive sectors approved

(Caracas, July 24, 1993? ). -- The representatives of CAF series A and B shares meeting in Caracas, Venezuela, on July 20 and 23, approved a total of 18 operations in their 79th Board meeting.

The total amount of US$376 million will benefit productive sectors in the five member countries: Bolivia, Colombia, Ecuador, Peru and Venezuela.

Some of these operations consist of long-term loans for the transport, energy, communications, industry sectors and multi-sector loans. Others will finance trade while two include CAF equity participation. In general they will benefit private-sector companies.

BOLIVIA Central Bank A US$60 million loan with a 10-year term was granted to the Republic of Bolivia for a multi-sector credit program. The executing agency is the Central Bank of Bolivia (BCB) which will channel these funds into private banks through the mechanism of fund auctions.

The program - to be implemented in 1993-94 - totals US$254 million. Its objective is to finance investment and working capital projects which increase productive activities in the agriculture, agro-industrial, industrial, and mining sectors, and small business in the tourism and services sectors.

With these operations, CAF is contributing to the development of the productive sectors of the country, especially the private sector.

Airport modernization A US$9.3 million line of credit was granted to the Republic of Bolivia, with BCB acting as agent, for an airport safety project which ASANA (National Airports Administration and Services) is implementing

The total project also includes modernization of El Alto airport and acquisition and installation of essential equipment for complying with international air safety and airport standards.

COLOMBIA La Loma/Santa Marta Railway A US$60 million long-term loan was granted to Empresa Colombiana de Vías Férreas (FERROVIAS) to implement a project to rebuild 270 km of railway (La Loma/Santa Marta section) with the signaling and interconnection systems.

This project – whose total cost is US$127 million -- is part of the National Railway Recovery Plan. One of the basic objectives of the Colombian government is to convert railways into an efficient transport alternative, given the current context of opening international markets.

The La Loma/Santa Marta rail section is priority because of the plans to exploit the mining potential of Cesar department, where there are a large number of coalmines, particularly the Drummond company mining project.

FERROVIAS, set up in 1989, is attached to the Ministry of Public Works and is responsible for traffic, maintenance and expansion of the rail network.

Nylon plant The company Química Industrial y Textil SA (QUINTEX) -- one of the leading producers of synthetic fiber and filaments in Colombia -- will receive a US$4.7 million loan for a project to expand its nylon plant, and increase electricity generating capacity for its polyester and acetate plants.

This project, which will be executed in the Yumbo plants (near Cali) and Sabaneta (in Medellín), covers modernization of processing equipment, increasing production capacity of the nylon filament line by 53%, and generating almost all the electricity required by the plants.

Recently CAF granted this company a US$4.4 million loan to expand the polyester production capacity of the Yumbo plant.

Trade: Banco Exterior de Colombia A medium- and long-term commercial line of credit for US$40 million was granted to Banco Exterior de Colombia (Bancoldex) to finance credit operations for the country's export sector.

The line will be used to offer finance to foreign buyers to facilitate negotiation of exports of Colombian capital goods and services on external markets.

This financial institution – set up in 1991 to promote exports -- has received other credit facilities from CAF in the past.

Corporación Financiera del Valle Again in the context of trade promotion, CAF extended its line of credit in favor of Corporación Financiera del Valle (CFV) by US$15 million, which brings the loans granted to this institution to a total of US$45 million.

The line will finance -- on an eight year term -- pre-and post-shipment operations, and imports of raw material and capital goods.

CFV is a private equity company dedicated to financial intermediation by means of operations related to commercial credit and promotion of productive activities.

ECUADOR Oil field development A US$25.6 million loan was granted to Empresa Estatal Petróleos del Ecuador (PETROECUADOR) to increase oil production.

The project with a total cost of US$50 million covers development of the Libertador, Bermejo (North and South), and Pucuna oil fields, artificial lifting of the Coca-Payamino field, and drilling of exploratory wells in the Pañacocha-Tiputini field, located in the northeast area of the country.

The PETROECUADOR investment plan for the 1993-97 period which totals US$1.20 billion has been assigned high priority by the Ecuadorian State because oil revenue finances a large proportion of the national budget and generates most of the country’s foreign currency.

The CAF loan represents 52% of the total cost of the project and will be basically used to finance inputs of machinery and equipment for mining activity.

Social sectors An operation which will bring great benefits to the population of Quito and Guayaquil, especially low income sectors, was the increase of a CAF line of credit for the Ministry of Finance.

The Board meeting agreed to extend Ecuador’s US$40 million quota by US$20 million, which is used to finance acquisition of goods and equipment for various government programs.

The line of credit also covers development of the following projects:

• Regional Program of Esmeraldas Drinking Water Supply System: replacement of pipes and accessories were replaced.
• Quito Environmental Cleanup and Road Maintenance: acquisition of solid waste collection equipment.
• Guayaquil Hydraulic filling program under the Maritime Services Department. This project is being implemented in densely populated areas to improve the living conditions of large numbers of inhabitants of the city’s marginal barrios, by upgrading their sanitary conditions with the possibility of installation of basic services.
• Program to equip technical colleges with modern training systems.

PERU Cervecería Backus A US$31 million loan -- with an eight year term -- was granted to Cervecería Backus and Johnson, SA (CBJ) to support investments aimed at expanding the activities of this private company in the brewery sector.

The projects to be implemented under this plan -- which totals US$204 million -- have the additional objective of developing new companies and services in the Backus Group, along with an increase in capacity and equipment renewal.

CAF also assigned a US$5 million equity participation to this industrial conglomerate to cover structural working capital needs in some of the group companies.

Founded in 1879, the activities of CBJ today extend to many companies: soft drinks, packaging, food and services. The leading brand of beer is "Cristal."

Compañía de Teléfonos A second loan for US$25 million, plus US$5 million for equity participation, was granted to Compañía Peruana de Teléfonos SA (CPTSA).

The project to be executed with these funds will expand and replace 100,000 phone lines in four exchanges located in the Lima and El Callao metropolitan area.

Sixty percent of these telephone lines will replace the old rotary technology which will improve the quality of service. The remaining 40% will be used to increase lines in the area of influence of these exchanges, raising telephone density from 11 to 15 subscribers per 100 inhabitants in 1995, when the installation will be concluded.

CPTSA, private company with diverse shareholders, serves a population of almost seven million in an area of 3,850 km².

The loan and the CAF equity participation, along with a US$50 million line of credit granted to CPTSA in 1992, will finance 47% of this project.

Banco de Crédito Banco de Crédito del Peru (BCP) received a global multi-sector loan for US$15 million with an eight year term to develop the country’s productive sectors by providing finance for private sector investment projects.

The loan will be used to establish, renew and expand productive companies through subloans, lease operations and underwriting, permitting the companies to issue shares and debt instruments to the public.

The total cost of the project is US$25 million, of which US$10 million will be contributed by BCP and the beneficiaries, with the rest from CAF.

Previously, the Corporation had granted BCP a commercial line of credit and another multi-sector loan similar to the one now approved.

Banco Interandino A global multi-sector credit was approved for Banco Interandino (BIA), Andean multinational company formed with Peruvian and Venezuelan capital based in Lima.

The US$6 million with an eight year term will be used to set up and renew agricultural, fisheries, mining, industrial, tourism and transport companies.

The total cost of the program is US$10 million, of which CAF will finance 60%, with the rest by BIA and the beneficiaries.

Banco Interandino will channel the funds to final borrowers through subloans, lease operations and underwriting.

Copper industry Another of the loans, for US$5 million, was granted to the private company INDECO, one of the leading producers of electric and communication cables.

This company, set up in 1952, is in a stage of restructuring and attracting investments to strengthen its leadership in the local market and its export position in the markets of Latin America and the United States.

The project financed by CAF covers installation of a furnace to produce copper wire by continuous casting process. The furnace - the first of its kind in the country - will achieve production levels of 40,000 tons annually of excellent quality.

The Foam Skin cable, which INDECO will produce exclusively, will supply the CPTSA 100,000-line expansion project, giving Peru a wide marketing margin.

Ice cream plant The Gloria SA industrial consortium, one of the ten largest private companies in Peru, receives a US$5.5 million loan for installation of a plant with capacity to produce over 14 million liters of ice cream a year.

Founded in 1941, Gloria SA is the country’s leading producer of evaporated milk. The consortium is formed by several leading companies in production of consumer goods in the areas of chocolate, confectionery, ice cream and pharmaceutical products, together with institutions involved in finance and transport.

The estimated cost of the plant to be located in Arequipa is US$8.4 million.

AFP Horizonte Another of the operations approved by the Board was expansion of CAF equity participation in the Peruvian pension fund manager AFP Horizonte SA.

The objective of this pension fund manager is to generate the highest possible medium- and long-term return with minimum management costs. About 300,000 people are expected to join the fund. At present, AFP Horizonte has two branches (Arequipa and Trujillo) plus its head office in Lima.

The CAF contribution will be US$700,000 (7% of capital), a similar amount to that of the International Financial Corporation, a World Bank subsidiary.

The private pension system (SPP) is a new activity Peru and is likely to have a great impact on domestic savings, investment and development of the country's capital market.

VENEZUELA Refractory glass plant With a US$3.7 million loan to the private company Rex-O-Glass CA, CAF is partially financing the installation of a plant to produce 2,400 tons annually of refractory glass products.

The plant will produce glass products which are currently imported: for domestic use (Pyrex-type glass containers to store food), and commercial use (glass for street lighting and covers for electric meters).

The plant will also exploit important comparative advantages based on the country’s excellent quality reserves of silicon sands and relatively low energy costs.

This modern plant will be installed in Barcelona, Anzoátegui state, and will give direct employment to 73 workers. Operations are planned to begin in three months.

CAF will finance 51% of the project with the rest coming from company shareholders.

Line of credit for BARIVEN In the field of trade promotion, a line of credit granted to BARIVEN, subsidiary of Petróleos de Venezuela, was increased by US$40 million. BARIVAN is responsible for making all the imports of materials and equipment for the normal operations of PDVSA and its subsidiaries.