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IFC provides financing to first road project in Mexico under new public-private partnership framework


In IFC:
Adriana Gómez
Phone: (202) 458 5204
E-mail:
agomez@ifc.org

In ICA
:
Paloma Grediaga
Phone: (5255) 5272 9991 x. 3664
E-mail:
paloma.grediaga@ica.com.mx


Washington DC/ Mexico City, September 21, 2006—The International Finance Corporation, the private sector arm of the World Bank Group, will provide a partial credit guarantee of up to 130.5 million Mexican Pesos to support the expansion, upgrading, operation and maintenance of a 74.3 km road between the cities of Irapuato and La Piedad in central Mexico.  IFC will grant the guarantee to Banco Santander, S.A. who will be joined by other banks in a syndicated financing  to provide up to 580 Million Pesos to Concesionaria Irapuato La Piedad, S.A. de C.V., a wholly-owned subsidiary of Empresas ICA, S.A.B. de C.V.

This operation is the first project in Mexico offered in concession to the private sector under an innovative program for public private partnerships (PPP) developed by the Government in the last three years. The program’s main objectives are: developing critical public infrastructure in Mexico; increasing the quality and efficiency in the rendering of public services; creating new financing sources from the private sector in the development of productive infrastructure; and achieving an efficient risk allocation of resources between the Government and the private sector.  

IFC has played a critical role supporting the Government of Mexico developing its public-private partnership program by funding a technical assistance program that helped develop the new framework.

Atul Mehta, IFC’s Director for Latin America and the Caribbean, said: “This financing is part of IFC’s integrated strategy for Mexico in the infrastructure sector, which included helping develop the necessary framework for the PPP program, and providing financing for the first project to be launched under the program. IFC expects that this project would set a positive precedent that will encourage further private sector participation in the transport sector in Mexico.”

The modernization of the Irapuato-Piedad road is being done in accordance with a competitively tendered 20-year concession and a 20-year services contract entered into by the Mexican Ministry of Communications and Transportation (SCT) and the company on October 2005.  Unlike traditional toll road concessions, under this agreement the Ministry will make quarterly payments to the company for the services effectively rendered based on its performance as well as on the number of vehicles that use the road.

Francisco A. Tourreilles, IFC’s Director of the Infrastructure Department, also noted: “IFC is pleased to be working with ICA and Banco Santander in this path breaking PPP transaction in Mexico, which will have an important demonstration effect for PPP infrastructure projects in that country and, more broadly, in Latin America.  We believe that the successful development of effective private-public partnership models such as this one will play an important role in helping attract critically needed private investments in infrastructure in the region.”

“IFC’s participation in this project confirms PPPs structure’s strength and viability.  The Mexican government has been developing the PPP mechanism for the past three years, and ICA has participated actively in the process,” said Alonso Quintana, ICA’s Administration and Finance Director.

Octaviano Couttolenc, Santander’s Head of Structured Finance Mexico, said “Santander has a full commitment for financing infrastructure in Mexico, we are grateful to ICA for their confidence in selecting us as Advisor and Bookrunner for the first PPP transaction in Mexico.  IFC’s participation contributed to the success of this transaction, and we look forward to working together on other transactions in the future.”

IFC in Mexico

Since 1956, IFC has invested $5.6 billion, including $2.2 billion in syndications, in sectors ranging from infrastructure and manufacturing to agribusiness and the financial sector in Mexico, making it the third-largest recipient of IFC financing in dollar value, after Brazil and Argentina. IFC committed $260 million in FY06 in new financing in Mexico, and it held a total portfolio of $1.1 billion, including syndications, as of July 31, 2006.

IFC’s strategy for Mexico focuses on enhancing the competitiveness of the private sector; further deepening the financial sector with the introduction of specialized products and markets; promoting investments in areas newly opened to private sector participation; and promoting sustainable environmental and social development and good corporate governance.  

About IFC

The International Finance Corporation, the private sector arm of the World Bank Group, is the largest multilateral provider of financing for private enterprise in developing countries. IFC finances private sector investments, mobilizes capital in international financial markets, facilitates trade, helps clients improve social and environmental sustainability, and provides technical assistance and advice to businesses and governments. From its founding in 1956 through FY06, IFC has committed more than $56 billion of its own funds for private sector investments in the developing world and mobilized an additional $25 billion in syndications for 3,531 companies in 140 developing countries. With the support of funding from donors, it has also provided more than $1 billion in technical assistance and advisory services. For more information, visit
www.ifc.org.