Announcement of IFC Investment in Fabritex, Textiles Fabricato de Nicaragua, S.A. on March 1, 1968

,. HOLD FOR RELEASE /~ INTERNATIONAL FINANCE C.ORPORATION H STREE·T, N.W., WASHINGTON D. C.c20433 TELEPHONE: EXECUTIVE 3-6360 IFC News Release No. 68/2 SUBJECT: IFC Inve,stment in Fabritex For use in Afternoon Papers of (Textiles Fabricato de March 1, 1968 Nicaragua, S .A.) Nicaragua ) IFC INVESTS IN NICARAGUAN TEXTILE MILL " Managua, March 1 -- The International Finance Corporation agreed here today to join with Nicaraguan, Central American Common Market and Colombian organiza- tions to finance a $9.2 million textile mill in Nicaragua. ~The new m:1.11, t9 be known as Fabritex, will supply a major part of the fine quality <(!otton and polyester blend fabrics now imported in Central America. Con- struction of the new textile plant in Managua is scheduled to begin early in 1968. Production is expected to commence about the middle of 1969. At Jull capacity the • plant is expected to use some 1,800 tons of Nicaraguan cotton a year, and to give employment to over 400 skilled and semi-skilled workers. The International Finance Corporation (IFC) is providing $2.1 million of the capital for Fabritex. Bamerical International Financial Corporation, investment affiliate of the Bank of America, will participate in the IFC investment. The balance, or $7.1 million, of the financing is being provided by the Corporacion Nicaraguense de Inversiones (CNI), a private investment bank at Managua; Instituto de Fomento Nacional (INFONAC), the development bank of the Nicaraguan Government; the Central American Bank for Economic Integration (CABEI), and Fabrica de Hilados y Tejidos de Hato, S.A. of Colombia (Fabricato). The International Finance Corporation is the affiliate of the World Bank that finances private enterprises in less developed member countries. With the investment in Nicaragua, IFC has made conmitments amounting to $251 million, in 38 countries. (more) • - 2 - The new Nicaraguan textile producer, Textiles Fabricato de Nicaragua, s.A., will "'be a fully integrated mill with 20,160 spindles and 370 looms, capable of producing approximately 10.2 mill!on yards a year of cotton and polyester cotton blend fabrics, with dyeing ~rd finishing facilities for all of its outi:ut. ,I One of the principal featur,es of the new enterprise is the fact that one of Latin America's most experi~riced textile makers -- Fabri~ato, of Colombia will provide a substantial part of the equity and will act as the new c~pany's technical sponsor and manager. :tnvestment This is the first instance of an IF'C: -~: in a Latin American industrial venture where the technical $,pons or is a firm from another Latin American country. In addition to Fabr'icato's role, the investment also breaks other new ground: it is IFC's first undertaking in Nicaragua; • it is IFC's first investment together with the Centrb:l American Bank for Economic Integration; and -- it is IFC's largest investment in Central America. Initially, most of Fabritex• needs for engineers and plant supervisors will alf~cT 1be supplied by Fabricate. Fabricato will train Nicaraguan supervisory personnel at Medellin, Colombia, and later at Managua, to assume management of Fabritex. The $9.2 million cost of Fabritex includes start-up operating capital. The money will be provided as follows: Equity: Fabritex' capital stock of $4,284,000 equivalent :will be subscribed in four equal lots of $1,071,000 each by the Corporacion Nicaraguense de 1nversiones, Instituto de Fomento Nacional, Fabrica de Hilados y Tejidos de Hato, SoA., and the International Finance Corporation. Bamerical will participate in the IFC equity purchase. '{more) ,·, . • • - 3 - Loan: The Central American Ba~~ for Economic Integration (CABEI) - $3,550,000; The International,,,Finance Corporation $1,000,000, in which Bamerical will . participate. I' \\ Short term credits of approximately $350,000 will .be provided by Nicaraguaa commercial banks. In the interests of stimulating development of the capital market in Nicaragua and Central America, IFC, CNI and Ih'"FONAC will jointly make a porttion of their ,. share holdings available to local private investors at the earliest appropriate time. Fabricato will retain its equity holding for a least six years during which it will manage Fabritex. 'i Fabritex·will for the most part produce finer fabrics</such as those cur- • .-:.::::--,..>~, rently imported into the Central American Commq1:1 Market free trade area consist- ing of Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica. This substi- . tution for textile imports will make possible substantial foreign exchange sav- icgs for Nicaragua and also improve the Central American Common Market trade balance with the outside world.,, Fabritex expects to sell 60 per cent.of its output in Nicaragua and the remainder in the other parts of Central America. ihe Central American Common \l . \ Market area provides a market of 13 million people, with per capita GNP of approximately $290. * * * •