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Inter-American Development Bank Loans $1.2 Billion To Mexico’s Industrial And Economic Development

Source: Inter-American Development Bank (IADB)
Posted on: 18th November 2009

A first operation of US$301 million to support small and medium enterprises in the oil industry and projects to reduce greenhouse gas emissions in the oil sector

Mexico will make its small- and mid-sized enterprises (SMEs) in the oil industry’s value chain more competitive by channeling medium- and long-term financing with a $301 million loan from the Inter-American Development Bank. This is the first operation under a US$1.2 billion conditional credit line for investment projects (CCLIP) which seeks to fund productive investment by the private sector.

The initial loan approved by the Bank’s Board of Directors was extended to Nacional Financiera (NAFIN), a credit institution established in 1934 to promote savings and investment and channel financial and technical support for Mexico’s industrial and economic development.

The operation seeks to leverage the critical importance of the oil sector in Mexico, its largest industry representing nearly 5% of GDP. The aim is to promote SMEs development and investment, as a public policy response to the requirements of the new Petróleos Mexicanos (PEMEX) Act of November 29, 2008. It also complements the Government’s strategies and commitments to promote linkages among suppliers and larger companies as a means to develop SMEs.

The Bank’s funds come at a time when the international financial crisis and the consequences of the influenza outbreak have dealt a major blow to credit access, especially for SMEs, which generate over 50 percent of Mexico’s gross domestic product and provide nearly 75 percent of all jobs.

In addition to helping small suppliers and contractors in the oil industry’s value chain, NAFIN will also finance private projects to increase energy efficiency and reduce greenhouse gas (GHG) emissions associated with fossil fuels production, under the National Strategy on Climate Change.

Expected results by end 2012 include: support an increase in the domestic content of oil industry suppliers from 35 to 37 percent; 150 new medium- and long-term annual loans approved using NAFIN lines to oil sector SMEs; $125 million in medium- and long-term annual loans approved for SMEs; and GHG emissions reductions of 100,000 tons of carbon dioxide equivalent.

The loan is for a 25-year term, including a five-year grace period, and carries a variable interest rate based on Libor. Subsequent operations under the CCLIP will be available for both NAFIN and BANCOMEXT, the national development bank that supports SME’s involved in the export sector.

Topics: CCLIP, Economy, emissions, funing, Greenhouse, industry, Inter-American Development Bank, libor, medium business, Mexico, small business