News banner image

News

IDB backs large infrastructure and natural resource projects in Latin America and the Caribbean

$5.4 billion in financing mobilized in the past four years for the region

The Inter-American Development Bank (IDB) has provided $2.6 billion in loans to finance key private sector infrastructure and natural resource projects in Latin America and the Caribbean over the past four years and it has mobilized another $2.8 billion in financing for the region through its syndication program.

Since the global financial crisis, the IDB has played a key counter-cyclical role in the region. The loans provided by the IDB have allowed countries and companies to proceed with their investments in large infrastructure and natural resource projects at a time when global liquidity was limited. The Bank’s participation in such projects not only helped catalyze investment from other financial institutions but it has also ensured that these projects were designed and implemented to achieve the best development outcome, both socially and environmentally.

The IDB, working with other development agencies, has been instrumental for the Dominican Republic to carry out a 123-kilometer toll road construction project linking the capital Santo Domingo with the country’s key tourist destination, the Samaná Peninsula. The project will cut travel time between the two regions by more than half and improve the supply of goods and services to the tourism industry.

The IDB provided a loan of $44.8 million while the European Investment Bank, the Corporación Andina de Fomento and Proparco, the French Government’s agency for economic cooperation and promotion (Proparco) provided another $102.4 million for the project.

The financing provided by the IDB and its partners covered more than 80 percent of the project cost. The IDB loan, approved in September 2009, was the Bank’s first loan to a private sector infrastructure project in the Dominican Republic.

Renewable Energy

The Bank is also supporting innovative renewable energy projects in the region through its non-sovereign financing. As lead arranger, the IDB provided $45 million of its own resources to finance the construction of the Eurus Wind Project, a 250 MW wind farm in Mexico. The Bank also structured a $30 million loan from the Clean Technology Fund of the Climate Investment Funds (CIF), marking the first use of CIF resources in the region. Moreover, the Bank and the International Finance Corporation (IFC) mobilized another $259 million for the project from a group of eight development finance institutions and commercial banks.

Eurus is the second largest project in terms of emission reductions under the clean development mechanisms established by the United Nations. The project is one of the cornerstones of Mexico’s strategy to diversify its energy matrix while reducing greenhouse gas emissions by half by 2050. The IDB has also helped ensure that environmental and social issues were properly addressed in the project and supported the implementation of a consultation and land leasing process with the local community to ensure they could voice any concerns and that issues were addressed.

Enhancing the development impact

The IDB is also supporting Peru’s landmark project to exploit its extensive natural gas reserves in the Camisea fields.

The Bank has provided a $400 million loan and mobilized an additional $400 from seven different financial institutions to finance the construction and operation of a natural gas liquefaction plant, a marine terminal and a 408-kilometer, 34-inch pipeline connecting the liquefaction plant to an existing gas pipeline. Peru LNG, as the project is known, will manufacture liquefied natural gas from the natural gas extracted from Blocks 56 and 88 of the Camisea gas fields.

With a total cost of approximately $ 3.9billion, Peru LNG represents the largest foreign direct investment ever made in Peru and it is expected to generate roughly $1 billion of export revenues annually, increasing the country’s total exports by an estimated 4.2 percent.

Besides the financing, the IDB has played an important role in supporting measures that will ensure the project provides environmental and social benefits to local communities.

Peru LNG has put in place programs that are providing technical assistance, training, business advice as well as access to credit for small scale farmers. It is also promoting better sanitary practices to reduce disease in cattle. This program has benefitted over 2,500 families, vaccinated over 194,000 animals and provided training to 540 breeders.

The project has invested in health and educational programs for the local communities. Over 60,000 medical appointments have been registered, benefitting more than 30,000 people. The project has provided training to 271 teachers, benefitting an estimated 20,000 students in the region. Educational materials have been donated to rural schools through partnerships, including computers, books and 20,000 school kits and winter clothing packages for children.

The IDB has also supported measures that have allowed the community to monitor the project’s compliance with social commitments and related environmental impacts. The program involves 82 local monitors, who are selected by the communities. The project is also supporting a plan to restore vegetation in areas along the pipeline to restore the biodiversity that existed before the project was executed.

Most of the IDB’s non-sovereign operations are carried out by Bank’s Structured and Corporate Finance Department (SCF).