The Multilateral Investment Guarantee Agency (MIGA) of the World Bank has announced its support to the Sao Paulo Sustainable Transport Project (Brazil) that will help make the State of São Paulo's transport system more reliable, safe, and resilient to natural disasters.
The São Paulo Sustainable Transport project combines the public and private financial instruments of the World Bank Group, working in close collaboration with the government, to provide a solution to Brazil's investment needs-while addressing country-specific lending limits of both the World Bank and commercial lenders.
Last year, the State of São Paulo and the World Bank committed US$129 million and US$300 million respectively to this priority project. The project was expanded, leaving a US$300-million financing gap. To address this, São Paulo bid out the project to commercial banks with a requirement that their loans be backed by MIGA's credit enhancement instrument. This approach resulted in a more efficient use of funds for São Paulo, as MIGA's involvement resulted in a longer tenor and more competitive pricing for the commercial loan than otherwise would have been available.
Keiko Honda, MIGA's Executive Vice President and CEO commented:
"This project shows the incredible potential of collaboration between the public and private sector to address the infrastructure gap that so many countries are facing around the world. I see this approach as groundbreaking and replicable in other states or countries with similar borrowing constraints and limited resources."
MIGA is providing guarantees to Banco Santander on a US$300-million loan, covering the risk of non-honoring of sovereign financial obligations for a term of 12 years.
Octaviano Couttolenc Mestre, Global Head of Export & Agency Finance for Banco Santander stated:
"Banco Santander is proud to participate in this project, together with World Bank and MIGA's support, that will contribute to improving the State of Sao Paulo's transport and logistics efficiency, safety, and disaster risk management. The deal highlights Santander's commitment to the Brazilian economy, as well as our confidence in the region, our close relationship with the World Bank Group, and our expertise in export and agency financing."
Together, the MIGA-backed and World Bank loans will finance the rehabilitation and upgrading of 650 kilometers of roads and the reconstruction of two bridges for inland waterway transport on the Tiete River. These improvements will reduce logistics costs to benefit local and regional industry. The state also expects the project to increase employment and wages across a wider geographic area.