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Washington DC, October 24, 2001
—The International Finance Corporation, the private sector arm of the World Bank Group, will invest US$6.5 million to support the expansion of Combustibles Ecológicos Mexicanos, a Mexico City-based company that specializes in converting vehicles to the use of cleaner, more environmentally friendly fuels. This investment fits in with government efforts to improve air quality in Mexico City, one of the largest urban areas in the world.
Ecomex is a Mexican-owned company founded in 1997 as the first compressed natural gas (CNG) engine conversion and dispensing business in Mexico City. It has converted more than 600 microbuses from gasoline to CNG, which is a lead-free fuel and emits far less pollutants than gasoline or diesel-powered vehicles. Currently, Ecomex is the only supplier of CNG for vehicle use in the valley of Mexico, and runs two CNG dispensing stations and a workshop offering services for the conversion of vehicles to CNG.
The IFC investment will support a $27.8 million project to construct 5 additional CNG dispensing stations in the metropolitan area of Mexico City, helping Ecomex’s long-term strategy to average 2,400 vehicles conversions per year by expanding and further developing its target market to include taxis, buses and official vehicles.
Bernard Pasquier, IFC’s Director for Latin America and the Caribbean said that “this investment represents a notable example of IFC’s efforts to support private sector initiatives with strong sustainable development impact and a good business case.” Mr. Pasquier added that “this project will strengthen the use of CNG as an alternative fuel for vehicles in the highly polluted areas of Mexico City and the surrounding state of Mexico, therefore generating important environmental and health benefits.”
Gavin Murray, Director of IFC’s Environment and Social Development Department said that “in a city where the intensive use of vehicles produces at least 98 percent of toxic carbon monoxide and nearly 41 percent of particulate matter pollution, Ecomex provides a viable commercial alternative that will also contribute to improved public health.” Mr. Murray added that “IFC will help to establish a replicable model of how the private sector can address air pollution and other environmental problems in developing countries.”
IFC’s investment will also support Ecomex plans to provide financial resources to small-scale transport business. Due to the high cost of engine conversion and the limited means of most microbus owners, Ecomex finances the entire cost of conversion and then recovers this cost by requiring microbus owners to commit to a take-or-pay contract for the purchase of specified quantities of CNG on a monthly basis for a 36-month period.
The innovative financing scheme associated with conversions also provides for forced savings by vehicle owners which will then be used to replace Mexico City’s fleet of old microbuses with a new fleet of larger, more efficient, CNG-run buses. An additional $3.5 million “A” loan investment approved by IFC’s Board is expected to be signed in the near future.
“We are very excited about partnering with the IFC, and look forward to working with them to secure additional long-term financing on new projects as we continue to expand in the future,” said Mr. Sergio García Palacio, CEO of Ecomex.
IFC's mission (www.ifc.org) is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses.
Since its founding in 1956, IFC has committed more than $31 billion of its own funds and arranged $20 billion in syndications for 2,636 companies in 140 developing countries. IFC's committed portfolio at the end of FY01 was $14.3 billion.
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