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Argentina gets $120 million to finance road works

The Board of Executive Directors of the Inter-American Development Bank (IDB) approved today a $120 million loan to Argentina to finance road improvements and maintenance works in various provinces including La Pampa, Entre Ríos, Córdoba and <?xml:namespace prefix = st2 />Formosa.

In addition, the loan will finance the implementation of a diagnostic assessment to improve road network management, including better highway safety, maintenance and weight control.

The loan is the first part of a $2.5 billion conditional credit line for Argentina that will support investments to improve, expand, and rehabilitate the provincial road network throughout the country.

The new credit line seeks to help South America’s second biggest nation overcome one of the primary obstacles to economic growth. Despite the international boom and the growing demand for agricultural inputs, which benefit the Argentine economy, the poor condition of the country’s secondary and tertiary road networks increases costs, making its products more expensive. About 80 percent of the total volume of <?xml:namespace prefix = st3 />cargo is transported over the country’s roads.

“The increase in agricultural production in recent years, as well as the rise in exports, has translated into growing pressure on the provincial transportation system in Argentina, which has not been accompanied by the necessary investment in terms of road infrastructure,’’ said Rafael M. Acevedo-Daunas, the IDB project team leader. “The IDB credit line will help the country finance works to reduce this gap.”

It is estimated that more than US$1.5 billion in annual investment on Argentina’s road system would be required in the coming years in order to maintain existing roads and eliminate the backlog of expansion and improvement projects, Acevedo-Daunas said.

The IDB’s conditional credit line, known as CCLIP, will finance projects that will increase road access in the provinces and reduce vehicle operation costs, including the number of days roads are closed due to traffic or are placed under severe restrictions.  For instance, at the end of the project, RP 26 in Formosa will be open to traffic all year round and not subject to closures during 150 days a year.

The conditional credit line is effective for 20 years and its loans are denominated in U.S. dollars, with interest rates linked to the London Interbank Offered Rate (LIBOR). The first loan has a grace period of 4.5 years and an amortization period of 25 years.

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