Uruguay to Accelerate Transition to Low-Carbon Energy with IDB Support

The Inter-American Development Bank (IDB) has approved a $150 million conditional credit line to help Uruguay meet the targets of its nationally determined contribution under the Paris Agreement.

The credit line kicks off with an initial $40 million operation to strengthen the country’s inclusive and low-carbon energy transition by making its energy sector more economically, socially, and institutionally sustainable. It will also promote investments in sustainable energy services such as electric transportation and energy efficiency, and it will position renewable energy as a strategy for reducing gaps in access to electricity.

By boosting efficient energy use in different sectors, the environmentally-oriented credit line seeks to lower greenhouse gas emissions and help e-mobility gain momentum in the race to replace the fossil fuels the transportation sector relies on so heavily.

Digital transformation is another focus of the operation, in step with the future of the energy sector and the move towards smart grids. By enabling the installation of smart meters, the operation will put consumers in control of their electricity use and help energy suppliers better manage commercial aspects of the service.

The credit line will also finance and effort to bridge gaps in universal access to electricity and address disparities in service quality by installing autonomous renewable energy systems and batteries in power distribution networks. While Uruguay has one of the highest levels of access to electricity in Latin America and the Caribbean, approximately 2,500 households are not connected to the electrical grid. Most of these people belong to vulnerable populations and many use inefficient, polluting fuels like kerosene and wood.

The operation will enable Uruguay's energy sector to tackle challenges in a number of dimensions in order to sustainably meet demand. It will also promote greater diversity and the inclusion of people with disabilities and women in senior positions. Through the performance-based credit line, the country will be poised to become the first in the region to provide electricity to every single one of its households.

The credit line’s first individual operation will have a disbursement period of four years, with a 25-year repayment term, a 5.5-year grace period, and a SOFR-based interest rate.