The Inter-American Development Bank approved today a $100 million conditional credit line to the State of Minas Gerais in Brazil to improve road access to small municipalities. An initial $50 million loan will be charged to the line of credit.
Economic activities in Minas Gerais, located in southeastern Brazil, are concentrated in the central and southeastern parts of the state, which is seeking to balance development by investing in essential public services and productive infrastructure in the rest of its territory.
The conditional credit line for investment projects (CCLIP) will promote the socioeconomic development of relatively poorer municipalities by improving conditions for the transportation of freight and passengers on roads that give access to the primary highway system.
The first $50 million loan of the credit line will facilitate access to social services and income-generating activities for 22 municipalities by providing a more efficient land transportation system. Benefits will include shorter travel times, lower transportation costs and greater safety and more reliability. Roads impassable part of the year will become open year-round.
This pioneering CCLIP program will finance paving 595 kilometers of access roads in 22 of the 224 small municipalities that lack paved links to the primary road system and will cover administration costs and technical and environmental supervision.
The municipalities were identified by an innovative multicriteria methodology that combines social benefits with economic returns on investments. Those selected are mainly in the northeastern and northern regions of Minas Gerais.
The line of credit will be disbursed over 10 years, and the programs will be executed by the Roads Department of the State of Minas Gerais. The IDB financed five previous operations for transportation in Minas Gerais, most recently the Fernão Dias federal highway co-executed with the São Paulo Roads Department.
The new program follows the IDB’s strategy in Brazil of boosting productivity by reducing transportation costs and linking beneficiary municipalities to the state road system, increasing social inclusion and reducing inequity and poverty by facilitating access to regional markets for products. Health care, education and jobs will become more accessible.
The loan is for a 25-year term, with a 4-year grace period at an adjustable interest rate based on LIBOR. Local counterpart funds total $67 million.