Ecuador will increase financing available for private sector investment in electric vehicles with a $43 million Conditional Credit Line for Investment Projects and an initial credit under this arrangement for $33 million approved by the Inter-American Development Bank (IDB).
The aim of the credit line is to reduce fossil fuel consumption and greenhouse gas (GHG) emissions by encouraging investment in electric vehicles.
The first operation of this credit line will promote financing of private investment in electric vehicles and encourage the replacement of internal combustion vehicles. The project will include concessional resources from the Clean Technology Fund (CTF) as well as IDB resources to enable offering long-term credit to finance the acquisition of electric vehicles. In addition, the operation has a gender inclusive orientation that will benefit women entrepreneurs in the taxi sector. The credits will be channeled through the Corporación Financiera Nacional (CFN, National Financial Corporation), the public development bank that supports private activities in the country.
This first operation will also help provide scrappage certificates or bonds to those who in addition to purchasing an electric vehicle agree to withdraw their internal combustion cars from circulation, significantly enhancing the project’s environmental benefits. The scrappage bonds management will be coordinated by the Ministry of Transportation and Public Works.
With these actions, the program takes an integral approach to the promotion of electric vehicles. On the one hand, it tackles the issue of financing costs and terms by offering more affordable and longer-term credit to reflect the longer amortization period of electric vehicles. On the other hand, it will foster the retrieval of more polluting vehicles from circulation, stimulating the renewal of Ecuador’s automobile fleet.
The project expects to finance the purchase of approximately 80 buses and 370 taxis in the country, which will provide a clean public transportation service.
In addition, the program has an accompanying non-reimbursable technical cooperation component of approximately $1 million to help fund the technical, financial, and legal structuring of the projects in support of national and municipal government agencies and transport operators.
The first credit of the IDB’s Conditional Credit Line for Investment Projects consists of a $10 million tranche from the Bank’s ordinary capital for a 25-year term, a 6-year grace period, and an interest rate based on LIBOR. The $33 million concessional component from the CTF will have a 40-year amortization period and a 10.5-year period of grace.
The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social, and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.