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IDB approves $37.5 million loan to Guatemala to finance Plan Puebla Panama energy project

The Inter-American Development Bank today announced the approval of a $37.5 million loan for Guatemala to help finance the construction of an electricity transmission line that will link the Guatemalan and Mexican power grids.

The project is part of the Plan Puebla Panama’s energy integration initiative and will complement the SIEPAC project to build a 1,830-km transmission line connecting the electricity systems of Panama, Costa Rica, Nicaragua, Honduras, El Salvador and Guatemala.

These projects seek to help reduce energy costs in the Mesoamerican region, expand the number of energy sources available to participating countries and improve the quality of electricity services by providing a more robust and reliable infrastructure.

A 103-km, 400-kilovolt, single circuit transmission line will link the Mexican city of Tapachula with Los Brillantes in western Guatemala. The line’s initial capacity has been estimated at 200 megawatts from Mexico to Guatemala and 70 megawatts in the opposite direction.

The IDB resources will help Guatemala’s Instituto Nacional de Electrificación finance the construction of 71 km of the power line on its side of the border, as well as the expansion of the Los Brillantes substation. Mexico’s Comisión Federal de Electricidad will use its own budget resources to finance its 32-km part of the line and the expansion of a substation in Tapachula.

Both countries have agreed on a legal framework to ensure coordination during the construction phase and for the operation of the power transmission line, as well as to promote electricity transactions.

As part of the project, an environmental and social impact study and a strategic environmental assessment were carried out to analyze the project’s potential direct and indirect consequences. Also, participative workshops were held to inform stakeholders about the project.

Based on the studies, an environmental and social management plan was prepared in order to ensure the project’s viability and to adopt prevention and mitigation measures. As a result of these efforts, the line’s path was altered to avoid an archeological site. The project will not involve any population resettlements.

The interconnection of the Mexican and Guatemalan grids is expected to help reduce the region’s energy costs and expand the coverage of electricity services, especially in rural areas. The project will also strengthen regional integration, fostering a more diversified trade in goods and services between Mesoamerican countries.

The IDB loan was granted for a 25-year term, with a 4-year grace period, at a variable interest rate, currently at 5.80 percent a year. Guatemala will invest $5.9 million in counterpart funds. The total cost of the project is estimated at $55.8 million.

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