Panama will receive Inter-American Development Bank financing for a total of US$55.5 million to promote sustainable development in its central provinces and modernize its electric transmission company.
Program for Central Provinces
A US$43 million IDB loan will help the mostly rural central provinces join in the accelerated growth taking place in Panama by improving their competitiveness, especially in the context of the implementation of free trade agreements, while at the same time enhancing their social and environmental conditions.
The central region includes the provinces of Cocle, Herrera, Los Santos and Veraguas. The Panamanian government has developed a sustainable development strategy for each of the provinces.
The program will help increase the productivity and income of small agricultural producers through technological innovation and to improve access to efficient water and sanitation services. In addition, the program will provide environmental protection for critical watersheds and coastal areas and strengthen coordination mechanisms and institutional capacities at the local level.
The loan was granted for a 20-year term, with a four-year grace period, at a variable interest rate. Local counterpart funds will total US$9.7 million.
Power Transmission Services
A US$12.5 million IDB loan will support an investment and corporate transformation program for the public transmission company Empresa de Transmision Electrica (ETESA).
Panama has one of the fastest-growing economies in the region with an expected 5.7% to 6% increase on demand for electric power in 2007-2010. This means it will need to double generating and transmission capacity in less than 15 years. To ensure a quality and competitive transmission service, a complete corporate overhaul in the management of the transmission utility will also be necessary.
The IDB-financed program will ensure sufficiency, reliability and quality of the power transmission services and contribute to the sustainable and efficient development of Panama’a electric power sector, where both public and private sectors compete.
This program was prepared on a two-phase basis. The now approved first stage will finance infrastructure and ETESA transformation. The loan will be for a 25-year term, with a 4.5-year grace period, at an adjustable interest rate. Local counterpart funds will match the loan.
A second US$20 million loan is expected to be approved when a significant progress has been made in the corporate transformation action plan. Depending on such progress, phase II could be financed with a nonsovereign guaranteed loan, whose financial, eligibility and due diligence conditions will be determined when the operation is considered by the IDB.
The programs reflect the IDB strategy agreed with Panama to promote competitiveness in order to attain sustainable development.