US$42 million granted to Venezuelan petrochemical sector

(Caracas, November 26, 1990).- A US$42 million loan to develop the Venezuelan petrochemical industry was granted by CAF to the private joint venture Productora de Alcoholes Hidratados, CA (PRALCA).

The agreement was signed on November 26 in the CAF headquarters in Caracas by CAF Acting President & CEO Pedro Sorensen and the president and director of PRALCA, Carlos Rico. The operation will contribute to the construction and start up of an ethylene oxide and ethylene glycol plant in the industrial area of Santa Rita, Zulia state. The plant’s production will supply ethylene oxide to the domestic and Colombian markets, and ethylene glycol (organic alcohol) to all the Andean region, substituting the current imports.

Ethylene oxide is used in production of polyols and ethoxylates. Polyols produce the polyurethane foam widely used in production of mattresses, and seats and instrument panels for automobiles. Ethoxylates are used to produce the active ingredients of detergents, shampoos, and in the oil industry to reduce the viscosity of extraheavy crudes."

These two chemical products - polyols and ethoxylates - are currently produced in the country by the ETOXYL company, which has to import the ethylene oxide. This company, part of the Corimon Group, has also received loans from CAF for US$9.3 million to finance construction of its plant.

The agreement is part is one of CAF’s priority fields of action, which is to grant medium- and long-term loans for priority projects in domestic industry.

PRALCA The Venezuelan petrochemical industry began in 1953 to transform natural gas - existing in appreciable quantities - into a wider range of products such as plastics, tires, synthetic fiber, fertilizers, detergent, solvents and medicines, among others. Currently, the national petrochemical sector has a large number of potential projects with investment opportunities for the private sector.

PRALCA was formed in 1987 by initiative of PEQUIVEN (largest shareholder with an equity interest of 49%), Corimon Group (16%) and Olin Corporation of the United States (25%). The International Financial Corporation (IFC), World Bank affiliate, will subscribe to the remaining 10% and also contribute to the construction of the plant with a US$32 million loan.

The plant is scheduled to start up in the second half of 1992. The total cost of the project is estimated at US$142.5 million. The CAF loan will be used to finance acquisition of goods and services from Italy (machinery, equipment, materials, accessories, spare parts, freight and transport insurance, engineering services).

The plant will have a production capacity of monoethylene glycol of 76,000 tons a year and ethylene oxide 68,400 tons. This is the largest loan granted by CAF to the private sector of one of its member countries.