IDB, BANOBRAS partner to expand financing for Mexican States and Cities

US$1.2 billion line of credit for investments in infrastructure and public services.

A US$1.2 billion credit line from the Inter-American Development Bank will help Mexico expand state and municipal governments’ access to financing for priority investments in infrastructure, public services and institutional strengthening.

Under the 10-year credit line, the IDB’s Board of Executive Directors today approved a first loan of US$350 million for the program, which will be executed by Mexico’s BANOBRAS national development bank.

The partnership between the IDB and BANOBRAS shares the goals of Mexico’s National Infrastructure Program, which calls for a greater role for state and municipal governments in financing basic infrastructure services such as water, sanitation and irrigation.

BANOBRAS will use the IDB funding to supply medium- and long-term loans and credit guarantees as well as technical assistance to state and municipal governments and to public services providers.

BANOBRAS will be able to advance funds to its borrowers as well as to disburse funds as projects progress. Technical assistance resources from the IDB loan and IDB-managed trust funds, such as the Japan Special Fund, may be used to finance feasibility studies and project design and evaluations.

Additionally, in order to finance small-scale projects such as potable water systems, street lighting or road paving in rural municipalities, BANOBRAS will be able to rediscount its own portfolio using funds from the IDB loan.

The first loan from the credit line is for 20 years, with a five-year grace period and a LIBOR-based interest rate.

Separately, this week the IDB announced the approval of a US$200 million loan to Mexico for a program that will strengthen state governments’ ability to implement plans to reduce their vulnerability to the effects of climate change.