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 Published Friday, June 5, 2020
of new $500 million-plus loan
By the A.M. Costa Rica staff
On Wednesday, the Government presented to the deputies of Congress the agreement of a new loan of $504 million with the International Monetary Fund, IMF, for their due study and eventual approval.
The credit is to meet the crisis caused by the restriction measures ordered by the government since March to contain the expansion of the covid-19.
The loan is agreed at an interest rate of 1.55% per year. The term is five years, with quarterly payments from the third year of disbursement, the government announced.
"This loan is important in the effort that the Government has followed to change expensive debt for cheaper debt, which helps throughout the process of fiscal consolidation," said Elian Villegas, Minister of Finance. "Furthermore, it is a sign of confidence of the IMF on the route taken by the Government.”
It is expected Congress will announce within the next few days the approval or rejection of this new loan request made by the government to an international bank.
On May 18, the Congress approved a $379 million loan agreement between the government with two international banks, the Inter-American Development Bank, IDB, and the French Development Agency, or AFD for its French initials.
According to Congress, the loan with AFD was originally asked to finance Costa Rica's decarbonization plan, but will now be used to support the crisis due to the pandemic.
The IDB, offered $230 million and about $149.5 million was offered by the AFD, announced the government.
The loans offered on favorable terms will be used to finance the Protect Plan, according to the government. There is a repayment term of 20 years and a grace period of 5.5 years. The IDB interest rate is 3-month LIBOR plus 0.92%, and the AFD interest rate is 6-month Euribor plus a 1.3% margin.
As part of the government Plan Proteger (the Protection Plan in English), the so-called “Bono Proteger” which is a monetary aid for people affected at their place of employment by the suspension of commercial operations imposed by the government since March, is part of the precautionary measures to contain the expansion of covid-19.
Also in May, the Government requested for Congress’ approval of another agreement of a $550 million loan with the Central American Bank for Economic Integration, CABEI, to finance the construction of the infrastructure for the first electric train in the country.
The loan is for a 25-year term, with no commitment fee, a 5-years grace, and a counterpart for $1 billion of foreign investment as it is a concession project.
The concession is a legal figure that allows the government to contract private companies to develop infrastructure, health, and education projects, among others.
According to President Carlos Alvarado, "this (referring to the electric train) and the other infrastructure projects will be essential and irreplaceable for the recovery and employment that our country needs."
According to the government, the train infrastructure construction and maintenance project will generate about 2,670 jobs.
The train has been budgeted at more than $1.5 billion. Part of this budget is the $550 million loan that is pending approval by the deputies. However, in a statement provided by the bank in November, "the project's investment in infrastructure and equipment represents $1.3 billion."
The loan, if approved, will be used to build the required infrastructure of the train terminal.
The loan has an indicative annual interest rate of 4.95 percent. Due to the positive impacts of this operation, the bank is making significant efforts with other sources of cooperation to maximize these conditions with the expectation of extending the term to up to 40 years and lowering the annual interest rate to 1.55%, said CABEI in its statement.
"The project involves the construction, equipment and startup of an electric rail passenger system in the greater metropolitan area," said the bank.
The greater metro area, mainly the Central Valley, consists of parts of the provinces of San José, Cartago, Alajuela, and Heredia.
"The main expected impacts include direct benefits for 4.5 million inhabitants of GAM; hiring of 1,000 temporary employees for construction; generation of 461 fixed jobs for the project's operational stage, generation of 189 direct temporary jobs, reduction of carbon dioxide emission, alleviation of road congestion and reduction of road accidents," said the bank in its statement.
"The Electric Passenger Train in the Greater Metropolitan Area is a transformative project that will change the lives of thousands of people in Costa Rica, providing benefits in terms of transportation times, reduction of costs to people and the country, improvements in health and air quality and a reduction in the country's carbon emissions to decarbonize the economy," said Alvarado. "Also, the project is a milestone that lets us dream about other initiatives, such as a Central American train. It is one of the best investments that the country can make and we are pleased that the Central American Bank for Economic Integration is a key part of this significant project.”
Train motors now run on diesel and this train would be different. It would be an eco-friendly train.
Bank executive president, Dante Mossi, said "this project marks the beginning of environmentally-friendly railway projects in the region since it is being carried out in a country where most of the electric power is renewable. Likewise, it will serve as a benchmark for the other similar regional projects."
On Thursday, this loan agreement approval request is still under analysis by deputies.
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