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The Inter-American Development Bank (IDB) has approved a $600 million multisectoral loan to Banco do Brasil to improve the efficiency of road, water, energy and public services infrastructure in small and medium-sized cities.
Although small cities - defined as those with a population of up to 500,000 -- are home to about 70% of the Brazilian population, they do not enjoy the same credit opportunities as medium-sized cities. Banco do Brasil will grant loans to municipalities that fit into this category and have credit capacity.
About 80% of the road network in Brazil is under the responsibility of municipal governments, and maintenance costs are high. Public works that can be financed in the transport area under the operation include the maintenance and paving of existing roads and the purchase and installation of road maintenance machinery and equipment.
Another high cost item is energy consumption, which is second only to wages. Resources will be available to those municipalities wishing to increase the energy efficiency of municipal public buildings and public lighting, including replacing equipment with more efficient ones, installing control systems and distributed generation.
The loan will finance steps to reduce losses in water supply systems, which in Brazil average 38 percent. Municipalities will receive funds to develop projects and purchase and install equipment and management systems.
These resources should contribute to assist 215 municipalities by 2023, decreasing energy consumption from public lighting by up to 50 percent, reducing water losses in municipal supply systems by up to 40 percent, and lowering the operational cost of road infrastructure from $303 per kilometer per year to $248.
To leverage the project, calls for technological impact solutions will be launched throughout Brazil to support each of the planned intervention areas. The initial focus is the identification of measures and actions to promote efficiency and benefits in infrastructure projects, especially in the areas covered by the project.
The IDB loan to Banco do Brasil has a 25-year term, a 5.5-year grace period and an interest rate based on LIBOR.