April 3, 2002

IDB APPROVES $42.4 MILLION CREDIT PROGRAM FOR EL SALVADOR PRIVATE SECTOR

Resources to increase competitiveness and productivity of private firms

The Inter-American Development Bank today announced the approval of a $42.4 million loan to the Multisector Investment Bank of El Salvador to provide long-term credit to the private sector to increase its competitiveness and productivity.

The Multisector Bank (BMI) will onlend resources to intermediary financial institutions that, in turn, will provide credit to both urban and rural firms, both start-ups and existing companies, in all economic sectors ­ manufacturing, trade and services.

The resources will be invested in procurement of fixed assets; working capital for the expansion, restructuring or modernization of production facilities; and the hiring of technical and managerial services to support investments in fixed assets.

A technical assistance component of the program will support the strengthening of the institutional capacity of BMI* to access domestic and international capital markets; the strengthening of the ability of intermediary financial institutions to conduct credit risk analysis; and the expansion of financial services in rural areas.

The loan will support the BMI and the financial sector as they make the transition toward greater integration with international financial markets under the provisions of the recently enacted Monetary Integration Act, which introduced a dual currency system under which the U.S. dollar serves as a means of payment and an official unit of account.

The operation is aligned with the IDB strategy of facilitating the reactivation of economic growth and boosting competitiveness by supporting the production capacity of the private sector, a part of the country’s ongoing process of industrial modernization and restructuring.

The total cost of the program is $47.1 million. The current IDB loan to the BMI, from the Bank’s Dollar Window, is for a 20-year term, with a five-year grace period, at a variable interest rate based on Libor. Local counterpart funds total $4.7 million.

In three previous global credit programs financed by the IDB and carried out by the BMI, more than $200 million in loans were extended to over 40,000 firms, including small- and medium-sized businesses and microenterprise.