Brazil: EIB increases support for climate action projects and businesses

(Source: European Investment Bank)

  • Priority investment to support climate action projects and small businesses
  • EIB loan to support additional entrepreneurs in Minas Gerais
  • Press announcement took place during COP 26 in Glasgow

During the UN Climate Change Conference COP 26, the annual meeting of global leaders and climate action experts, the European Investment Bank (EIB) and Banco de Desenvolvimento de Minas Gerais (BDMG) announced additional finance for small and medium enterprises (SMEs) in Brazil.

The EUR 20m top-up agreement, complements previous agreements with BDMG, which allowed both institutions to widen eligibility criteria of the current EUR 100m BDMG CLIMATE ACTION Framework Loan II. This new loan will accelerate access to finance for SMEs and in particular micro-enterprises in Minas Gerais.

The EIB and BDMG are partnering to support a series of climate action projects in Brazil, including solar PV, small-scale hydropower and other renewable sources. In the COVID-19 context, the partnership has been adapted to help respond to specific needs of SMEs in this new challenging situation, by allowing faster loan disbursements to businesses.

EIB Vice-President, Ricardo Mourinho Félix responsible for Latin America said: “Fostering entrepreneurship is crucial for sustainable economic and inclusive growth, in particular during the challenging times we are facing. We are pleased to announce today the additional financial support to small businesses impacted by COVID-19 in Brazil. The EIB COVID-19 fast response has helped to accelerate the uptake and deployment of funds by BDMG to Brazilian businesses. This new agreement will bring additional finance to entrepreneurs. This agreement highlights EIB priorities in Latin America, supporting a sustainable and inclusive economic growth by boosting productive investment.”

Sergio Gusmão Suchodolski, President of BDMG, said: “This extension of the limit signals the EIB’s confidence in the efficient allocation of resources through the BDMG. In just over two years of partnership, we have already disbursed around 60% of the balance of the current contract. Now, we are strengthening this partnership and taking a step further to increase liquidity vectors both for investments in renewable energy and for the maintenance of small businesses, a segment that accounts for most of the generation of jobs in Minas Gerais. In this way, we will increase opportunities for economic recovery on a more sustainable and inclusive basis in the state.”

EU Ambassador to Brazil, Ambassador Ignacio Ybáñez Rubio, said: “Supporting sustainable recovery within the current COVID-19 pandemic context is a major objective within the EU and its Member States. We are also convinced that the role of private sector, especially SMEs, is key for assuring a smooth and effective transition towards the recovery path. For this reason, it is of utmost importance to align efforts to assure a sustainable recovery of businesses so as to reduce as much as possible the implicit negative socio-economic consequences derived from a slowdown of economic activity.  We congratulate BDMG for the impressive positive results delivered, in just over two years, to increase liquidity vectors both for investments in renewable energy and for the maintenance of small businesses in the State of Minas Gerais. We also applaud the decision of keeping supporting BDMG’s activities, which the EU is supporting through its guarantee’s scheme with the EIB, that are fully aligned with the EU Green Deal approach.”

EIB global response to COVID-19 and Team Europe

The dedicated EIB support for COVID-19 economic resilience in Brazil is part of the EIB’s EUR 20 billion global response to reduce the economic impact of the pandemic. The loan is an example of joint EU efforts under “Team Europe” and highlights our priorities in Latin America: contributing to sustainable and inclusive growth and promoting Climate Action.

EU guarantee and the SDGs

The EU bank is providing this finance, which will cover up to 75% of the final project investment cost, in the framework of the 2014-2020 lending mandate for Latin America. This agreement is therefore covered by the EU guarantee. By supporting this project, the EIB is contributing to achievement of the United Nations’ Sustainable Development Goals, ensuring access to affordable, reliable, sustainable and modern energy while fighting climate change.

The EIB in Latin America

Since the EIB began operating in Latin America in 1993, it has provided total financing of EUR 10.9 billion to support 142 projects in 15 countries in the region.

The EIB operates in Latin America primarily under the “External Lending Mandate (ELM)” which benefits from an EU guarantee to support EIB financing operations for projects outside the Union. The EU guarantee covers risks of sovereign or sub-sovereign nature and defines three high-level objectives in Latin America: local private sector development, development of social and economic infrastructure, and climate change mitigation and adaptation.

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