Support for private initiative for rehabilitating major roads

CAF approved a US$12.6 million loan for a private Spanish-Ecuadorian consortium. The funds will be used for rehabilitation, maintenance and management of an important group of coastal highways, which is the first financing under the private-sector concession facility which CAF has granted to the country.

The loan – at 12 years with two years of grace – will be go to Concesionaria DHM, consortium formed by two companies: the Spanish Dragados y Construcciones and the Ecuadorian Herán de Construcciones CA.

Concesionaria DHM will be responsible for the rehabilitation works of the bypass corridor of Santo Domingo/Santo Domingo/Quevado/Babahoyo/Juján in Pichincha and Los Rios provinces, and the Naranjal/ El Guabo Toll corridor in Guayas and El Oro provinces.

The total cost of the project is estimated at US$53 million; in addition to CAF, the participants in its finance are Corporación Financiera Internacional (CFI) and the Spanish Official Credit Institute.

CAF President & CEO Enrique García said the project was economically important because it would improve road communications between the cities of Quito and Guayaquil. He added that the project was an effort by the Ecuadorian state to promote private investment in upgrading and provision of infrastructure.

"CAF has a special interest in supporting projects which expand private participation in economic activity, including concession agreements which governments are granting to the business sector to operate in areas traditionally reserved for the state, such as construction, maintenance, management and operation of productive infrastructure," the CAF chief added.

In the last five years the Corporation has financed over 80 physical infrastructure and border integration projects for approximately US$3.50 billion, of which about a quarter relate to the private area.

Importance of the project Ecuador has been severely affected by the El Niño climate phenomenon particularly in its coastal region, with a negative impact on agricultural activity as damaged highways have interrupted movement of products from one area to another.

The project is important because rehabilitating road communications between Guayaquil and Quito will increase the efficiency of transport of agricultural products between the two centers. The upgraded roads will also result in significant savings in costs of trips due to reduced wear on vehicles and fuel consumption, as well as higher speeds in traveling from one place to another.

In the area of sustainable development, remodeling of existing highways, as in this case, has minimal environmental impact; however, both the concession holder and CAF have prepared studies to comply with the programmed mitigation measures, the environmental legislation of the country, and the policies established by the World Bank.