SAN SALVADOR, May 19—The International Finance Corporation (IFC) signed an agreement for an investment in Cemento de El Salvador, S.A. (CESSA) on April 30, 1997. The investment comprises a loan of up to US$44 million (US$20 million for IFC's account and US$24 million for the account of participants) and equity of up to US$2 million for a subscription of up to 2.63% of the share capital of CESSA. The agreement was signed in San Salvador by Mr. Hugh Henry-May, Manager, Central America and Caribbean Division, Latin America and Caribbean Department, for IFC and by Mr. Roberto Mathies, President of CESSA. Dr. Armando Calderon Sol, President of the Republic of El Salvador, participated in the signing ceremony.
IFC's support will assist CESSA with the company's expansion and modernization project, which will increase overall capacity by 55%. The project consists of :
(i) a new cement line at its primary plant at Metapan Department, with a clinker production capacity of 2,200 metric tons per day, estimated at a cost of US$82.9 million; and
(ii) upgrading the company's existing facilities. The latter include environmental improvements and the closure of two existing cement lines with less efficient technology.
According to Mr. Helmut Paul, Director, Latin America and Caribbean Department, "The CESSA transaction is particularly important for El Salvador as:
First, it will help finance a substantial increase in the production of a basic commodity which is vital to the country's ever increasing reconstruction needs;
Second, it involves the issue to the general public of a significant number of shares in CESSA, a company which is one of the most successful companies in El Salvador. We hope that the share issue will be an important catalyst for the eventual growth of a dynamic stock market;
Third, IFC will syndicate a substantial proportion of the CESSA loan among the international commercial banking community, the first time that a loan to a wholly owned Salvadorian company is syndicated in this way."
IFC's investment reflects the objective of supporting outward-oriented private sector-led growth in El Salvador, the focus of Executive Vice President Jannik Lindbaek's visit to the country in December 1996. An adequate supply of competitively priced cement, in particular, is considered critical to reconstruction following the extensive damage to physical infrastructure inflicted during the civil conflict and to the high economic growth rates required by El Salvador in coming years.
IFC is a member of the World Bank Group and is the largest multilateral source of equity and loan financing for private sector projects in developing countries.
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