Announcement of Eight Million US Dollars Loan for Industry in Ecuador on December 17, 1970

.c INTERNATIONAL BAt,NK FOR , . RECONSTRUCTION AND DEVELOPM 1818 H STREET, N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 Bank Press Release No. 70/69 Subject: $8 million loan for industry December 17, 1970 in Ecuador Two development finance companies in Ecuador will benefit from a World Bank loan of $8 million to\' the Republic of Ecuador. The proceeds will help the com- panies to finance the cost of imported goods and services required for industrial projects carried out by their clients over the next two years. Increased avail- ability of long-term capital for investment should give further impetus to the growth of Ecuadorian industry and provide more employment, an important factor in view of Ecuador's fast growing labor force. Although Ecuador's industrial sector is still at an early stage of develop- ment, it has grown rapidly over the past decade, averaging about 6-1/2% a year. There is room for considerable expansion and opportunities exist for industrial investment in the processing of industrial raw materials and livestock products and in textiles, fisheries and tourism. Furthermore, Ecuador's participation in the Andean Group subregional arrangement opens up a market nine times as large as Ecuador itself. This offers additional opportunities for efficient producers, while inducing others to rationalize to meet the competition of their neighbors. The proceeds of the Bank loan will be made available to the Comision de Valores-Corporacion Financiera Nacional (CFN), a government-owned company, and to Ecuatoriana de Desarrollo S.A. Compania Financiera (COFIEC), which is pri- vately owned. The two companies are virtually the only institutions in Ecuador which provid~ long-term financing. About four-fifths of industrial financing • /more  Bank P.R. No. 70/69 - Ecuador-Industry - 2 - is provided by cormnercial banks in the form of short-term renewable loans. importance of CFN and COFIEC is indicated by the fact that their share in The • industrial financing since the mid:1960s has risen steadily and reached 21% of the total in 1968. Both companies have been associated with the World Bank Group -- the Bank, IDA and IFC -- in earlier operations, and both have received financial assistance from other international and foreign sources. CFN is the financial intermediary under a $5.3 million World Bank loan to the Govermnent of Ecuador for the develop- ment of fisheries. It has also received loans from the Inter-American Develop- ment Bank, the U.S. Agency for International Development, Kreditanstalt £Ur Wiederaufbau, and European banks. COFIEC is one of the participating financial intermediaries on Bank and IDA financing of $15.5 million to the Government for livestock development. IFC, with an equity investment equivalent to $250,000, • has been COFIEC's second largest shareholder since March 1969, and is represented on its Board of Directors. COFIEC has received loans from the U.S. AID and Export-Import Bank, and lines of credit from a number of foreign coonnercial banks. The $8 million World Bank loan to the Republic of Ecuador will bear interest I of 7-1/4%. The Central Bank, as fiscal agent for the Government, will re-lend the proceeds at the same rate, plus a 1% commission, to CFN and COFIEC. Repayments by the Government to the World Bank will be based on repayments from CFN 1 s and COFIEC's borrowers who may obtain financing from Bank funds for terms of up to 15 years. - 0 - •