The CAF in Ecuador, solid and permanent presence

Ecuador has always been able to count on the CAF, even in times of crisis. This permanent and unconditional support was demonstrated in the last few years when Ecuador went through the worst economic crisis in its history. The figures speak for themselves: 57% of total approvals from multilateral organizations for Ecuador in 2003 were granted by the CAF, 30% by the IDB and 13% by the World Bank. Similarly, 53% of disbursements in 2003 were from the CAF, 24% from the IDB and 23% from the WB.

The figures

In the 1999-2003 period, the CAF approved total operations for Ecuador of US$1.87 billion (US$373 million per year), while disbursements totaled US$1.40 billion, equivalent to 14% of the Corporation’s total lending. On this basis, the CAF is the multilateral organization that has granted most funds to the country with a share of 68%. Currently, the total CAF portfolio in favor of Ecuador is US$1.22 billion (May 2004), representing 16% of the total CAF portfolio. These figures are important because 96% of the portfolio represents operations for financing medium- and long-term investment programs and projects.

A sectoral breakdown of the portfolio shows that 62% relates to infrastructure, 24% to financial intermediation and 15% to other economic sectors; overall 93% relates to the public sector and 7% to private credit facilities.

Road Plan Ecuador

The CAF is the country’s main partner in the execution of the Master Road Plan for the State Network, formed by 8,683 kilometers of roads. The national strategic objectives are to consolidate the national road network; supply road safety equipment; maintain and pave the state network; improve, optimize and expand the operating conditions of the network; monitor the performance of the network; and promote the technological development of the road system.

The total cost of the program is US$438 million to be executed over 48 months. The financing consists of a CAF loan for up to US$259.7 million. The program includes the execution, rehabilitation or paving of 1,031 kilometers of roads in the primary and secondary road network. Currently, the road projects being executed are the Panamá lateral pass of Ambato, Baeza-Tena, Puyo-Macas and the south road corridors.

Guayaquil

The approvals for the 2003-2006 period for Guayaquil (the country’s largest city and main economic center, located on the Pacific coast) cover road infrastructure, energy and telecommunications, and potable water and sewage for a total of US$575 million.

Urban regeneration initiated in the early 1990s has converted Guayaquil into an example of a well-managed city and an increasingly attractive tourist destination.

The City Government designed a long-term road plan, divided into three phases: first, recovery, expansion and construction of streets and avenues, for which the CAF granted a US$70-million loan. For the second phase, US$56 million was granted for construction of two tunnels (on the Santa Ana and El Carmen Hills) and new avenues. A US$57-million loan was granted for the third phase consisting of a second tunnel and traffic planning. The CAF also gave decisive support with a US$13-million loan for recovery of Estero Salado, which cleans up the environment in an important sector of the city, and improves the quality of life of the community. Two other projects approved for the city are the construction of the San Eduardo tunnel for US$35 million, and improvement and modernization of the land terminal at a cost of US$14.1 million.

The CAF’s permanent support for Guayas province has helped solve its serious infrastructure problems. Finance was provided through CEDEGE to finance the building of the Daule Peripa hydroelectricity plant (Phases I, II and III) for US$94 million. Other projects supported were the hydraulic and potable water plan for Santa Elena and Pascuales, and an extensive prevention program for the El Niño phenomenon.

Quito and the private sector

To solve the traffic problems of the Ecuadorian capital, among others, the CAF signed a US$50-million loan agreement with the Quito City Government to finance the first stage of the City Road Plan, with an investment timetable to 2005 for a total amount of US$75 million.

Support for the country's productive sector was also fundamental. The CAF granted loans to leading companies in Quito and Guayaquil, which contribute to the development of the country by creating important sources of employment, technological renewal with an entrepreneurial and competitive approach.

One of these companies, Favorita Fruti Company, which exports bananas and tropical fruit to the world market, received a US$15-million loan for expansion of the Fertisa port, Cartonera Andina and renewal of infrastructure in Rey Banpac.

Another export company, Nirsa, received a US$6-million loan, while Pronaca, leader in the food sector (meat, agroindustrial and aquaculture), received a second loan for US$10 million to expand its Durán and Bucal industrial plants.

Lines of credit up to US$70 million were granted to the Guayaquil, Solidaridad, Produbanco, Pichincha and Internacional banks to finance plant expansion and acquisition of technology and fixed assets by export SMEs.

Fondo País Ecuador

In view of the Ecuadorian productive sector’s need for viable alternatives for capitalization and long-term financing, the CAF decided to promote the formation of a capital fund for SMEs. This initiative, which received a favorable response from Corporación Financiera Nacional (CFN) and the Banco de Guayaquil Group, resulted in the setting up of Fondo País Ecuador (Ecuador Country Fund). The Fund invests in capital contributions (purchase of bonds convertible into shares) in selected companies that offer expectations of high returns in sectors defined by the Fund. The initial capital of US$8 million consists of US$5 million from the CFN, US$2 million from the CAF, and US$1 million from Banco de Guayaquil. The management company is Administradora de Fondos de Inversión y Fideicomisos BG SA with technical advice from MerchantBansa SA.

Social and community development

Jointly with the Ecuadorian Canadian Fund, the CAF, through its culture and community development department, is promoting the “Randinpak” project (“Lend a Hand” in Quechua), which benefits indigenous and campesino women in the Chimborazo province. The CAF contributed US$200,000 to support this initiative, which promotes the production of Andean organic grains by the Chimborazo Federation of Indigenous and Campesino Women. The project is executed in the human, social, productive, educational, health and environmental dimension by 4,000 women who are directly involved in the project, which benefits 20,000 people in 87 communities in Chimborazo, one of the poorest provinces in the country.

The Corporation is also involved in strengthening Community Tourism Initiatives, a joint project with the ESQUEL Foundation, aimed at developing sustainable community tourism, preserving cultural identity and protecting the environment.

The Plan Esperanza is another example of the CAF’s strong links with social development. Its execution was entrusted to the Ecuadorian Episcopal Conference in a very successful alliance. In the first stage, 145 projects were executed, instead of the 49 initially planned, involving community development, education, health, sanitation, housing and multiple development. The CAF contributed US$29.4 million. For the second stage now under way, the CAF approved a US$25-million loan for projects in almost all the provinces of the country.

Technical cooperation

Using technical cooperation funds from FAT, Fondeshu and Special Fund for Ecuador, operations for US$2 million were approved in 2003 for the areas of governance, competitiveness, integration, cultural development, microfinance and environment, as well as the institutional strengthening of Petroecuador.

The Andean Competitiveness Program (PAC) is playing an important role in projects that have improved competitiveness in the public and private sectors and opened access to new technologies for traditionally marginal sectors. For example, 750 students and professors from the communities of the Peninsula of Santa Elena and San Pablo de Guaranda, were given training in the integration of educational computing into the learning process, through mobile laboratories (Community Learning Centers), in an agreement with the Litoral Polytechnic School.