La Internacional to boost production with IDB assistance

24 Dec '10

2 min read

The Inter-American Development Bank approved loans totaling $25 million to help Ecuador's denim maker La Internacional S.A. enhance production, modernize its equipment, and acquire and install a new turbine at its small hydroelectric plant.

The two technical studies needed for the plant improvement were financed and fully executed with technical cooperation funds from the Bank's Sustainable Environment and Climate Change Initiative (SECCI). Additionally, the factory will obtain carbon credits for the small hydroelectric plant's upgrade.

Of this total, $5.4 million will help La Internacional, primarily owned by Brazil's Vicunha Textil S.A., refinance its short-term debt and increase its working capital financing.

The funds –a $10 million loan from the IDB's ordinary capital complemented by $15 million to be supplied by commercial banks or other financial institutions–, will help the 90-year-old company to boost production, from 11 million to 18 million meters of denim a year.

The resources will finance the acquisition and installation of a 3 MW turbine for the factory's own hydroelectric plant, the purchase of 84 weaving looms and related equipment, and services related to energy efficiency improvements in the existing facilities.

Benefits expected from this investment include: cost reduction through the production volume increase; better efficiency and less energy consumption; increased production of clean energy to meet the capacity growth; improvement of the product mix; and better access to more sophisticated markets through enhanced quality control.

Additionally, the IDB financing will promote regional economic integration as the company, based in San Antonio de Pichincha, will export a large part of its production, particularly through preferential access to other Andean region markets, and boost technology and know-how transfer from Brazil's Vicunha Textil.

The A loan, for $10 million, is for an eight-year term, and the B loan, for $15 million, is for a six-year term. Their interest rates will be determined by market conditions.

Inter-American Development Bank