EL SALVADOR, Nov. 10—The International Finance Corporation (IFC) today signed investment agreements providing financing of US$2 million to handtool manufacturer, Implementos Agricolas Centroamericanos S.A. de C.V. (IMACASA).
IMACASA is one of the largest manufacturers of handtools in Central America with leading market shares for products such as machetes, axes, picks, and shovels. IFC's financing will support IMACASA's US$4.4 million investment program, which is designed to strengthen its competitive position by modernizing and expanding manufacturing facilities, increasing working capital and diversifying its sale base by seeking international alliances and new markets. The project ensures that IMACASA's main buyers in Central America and Mexico _the middle and low-income farmers ("campesinos")_have access to moderately priced agricultural tools, customized to meet traditional needs.
"We hope that the project will help develop El Salvador's private sector and that IFC's financing will be regarded as a positive signal to other investors and financial institutions," said IFC Vice President, Carol Lee. "The IMACASA project is in line with the objectives of Extending IFC's Reach Initiative," Ms. Lee added.
Extending IFC's Reach Initiative, a program established in late 1996, seeks to expand the geographic range of IFC's activities to smaller countries. It promotes private sector development in countries where IFC's activity has been constrained as a result of challenging country conditions. Sixteen countries or clusters of countries have been selected for this program, including El Salvador, which is making strong efforts to rebuild its economy.
The Initiative is being implemented as a three-year pilot program and has two basic elements. First, IFC will expand the presence of investment staff in the field to provide an extended IFC presence in the country. Second, IFC has created a Small Enterprise Fund (SEF) to support small-scale investments in addition to IFC's regular investments in pilot program countries. The SEF will invest in projects with total costs between US$250,000 to US$5 million with IFC's own investments covering approximately 40 percent of each project's total cost. The SEF will primarily provide long-term debt financing but will also have the flexibility to make equity and quasi-equity investments. IMACASA is the initiative's first project in Latin America.
Mr. Karl Voltaire, Director of IFC's Latin America Department, added: "The project fits IFC's strategy of increasing its presence in Central America and supporting general manufacturing export companies. To date, our investments in Central American countries amount to over US$700 million, which includes over US$270 million for the account of international commercial banks. IFC expects to become more active in the region."
IFC, a member of the World Bank Group, is the largest multilateral source of equity and loan financing for private sector projects in developing countries.
