Peru: World Bank Approves $200 Million for Guarantee Facility in Peru

Contacts:

In Washington:

Alejandra Viveros (202) 473-4306

Aviveros@worldbank.org

In Lima:

Sandra Arzubiaga (511) 615-0660

Sarzubiaga@worldbank.org

WASHINGTON, April 28, 2005 – The World Bank’s Board of Directors today approved a $200 million guarantee facility to support future public-private partnerships in infrastructure projects in Peru.

“The pioneering of public-private partnerships for infrastructure projects supports the Government of Peru’s commitment to the reduction of poverty and inequality,” said Marcelo Giugale, World Bank director for Bolivia, Ecuador, Peru and Venezuela. “The guarantee will enable new infrastructure investments in all sectors and regions, improving the country’s competitiveness by reducing logistical costs, and contributing to regional development.”

The Guarantee Facility Project will assist Peru’s government in raising the necessary private sector funding for its infrastructure investment needs by mitigating critical risks that constrain investors’ interest.Through the guarantee facility, the World Bank (the guarantor) will agree to issue guarantees of loans from private investors for public-private partnerships that have been satisfactorily appraised, against defaults caused by failure of the Peruvian government to comply with its financial obligations.

Specifically, the project will:

·                     Increase private sector participation and financing in infrastructure projects;

·                     Provide access to local capital market project finance;

·                     Develop Peru’s local capital market; and

·                     Decrease the cost and provide longer terms of project finance debt.

“Public-private investments will combine the benefits of private sector management and funding with public sector contributions, allowing small-scale -but socially and economically desirable- projects in less developed regions of the country to become financially viable on their own,” said Sophie Sirtaine, World Bank co-task manager for the project.

The Government of Peru, through the Private Investment Promotion Agency (ProInversión), has identified a pipeline of about 15 potentially eligible projects to the Guarantee Facility in the road, airport, port, gas, water, sanitation and telecommunication sectors. All of these projects are local or regional, and outside of the capital city of Lima.

The $200 Guarantee Facility Project will be implemented over a period of five years and has a repayment period of 15 years.