A $55 million loan will provide electricity to some of Guatemala’s poorest communities

The Inter-American Development Bank (IDB) approved a $55 million loan for Guatemala to improve and expand coverage of the national electricity service, thereby creating conditions for lower-income population groups to improve their quality of life and raise their productivity and income levels. The specific objective is to finance incentives or contributions provided by the government to promote rural electrification and the strengthening of sector management capacities. 

Since the late 1990s, the Guatemalan government has been promoting investments in electrification through the Rural Electrification Plan (PER), with the aim of expanding national electricity coverage and providing safe and reliable electric service to rural communities. To support the PER, the IDB has been collaborating with the Guatemalan government in rural electrification investments through the Multiphase Rural Electrification Program approved in 2008, which was designed to be executed by the Guatemalan government in two phases. Phase I provided $55 million in financing to the PER Trust Fund, setting targets and objectives, the fulfillment of which was defined as a requirement for Phase II of the program to be submitted for consideration by the IDB’s Board of Executive Directors. 

This second phase of IDB’s Multiphase Rural Electrification Program for Guatemala, will finance government incentives to promote rural electrification through power grid connection projects. It will also help promote and develop electrification projects in isolated systems employing renewable energy. 

Phase II of the program is expected to help the country raise its electrification coverage rate to roughly 92.9 percent  in 2019, through investments in grid connections and the installation of isolated systems using renewable energy sources, which will make it possible to connect 6.6 percent of the population identified by the government as lacking electric power access. The aim is to provide power to 34,446 households, of which 26,549 would be connected to the grid and 7,897 to isolated systems. As a result, it is expected to directly benefit 172,230 people in poor rural zones, mostly belonging to Xinca and Mayan indigenous peoples. 

The $55 million IDB loan is payable in 25 years, with a 5.5-year grace period, and an interest rate based on LIBOR. The executing agency is Guatemala’s National Electrification Institute (INDE).