REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT on the implementation and rate of use of loans granted by the European Investment Bank for projects of mutual interest in countries of Latin America and Asia with which the Community has concluded cooperation agreements (1995-96)
Date: 1996-09-09
Institutions: European Commission
Subjects: Asia, EIB loan, Latin America, cooperation policy, use of aid

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

Brussels,  09 09.1996 
COM(96)  429  Final 

REPORT  FROM  THE  COMMISSION  TO THE  COUNCIL 
AND  THE  EUROPEAN  PARLIAMENT 

on the implementation and rate of use of loans granted by the 
European Investment  Bank  for projects of mutual interest in countries 
of Latin America and Asia with which the Community has 
concluded cooperation  agreements 
(1995-96) 

CONTENTS 

1.  Introduction 

2.  Legal  framework 

3.  The European  Investment  Bank's mandate  in Latin America  and  Asia  in relation  to  its 

activities outside the Community 

4.  Results of the third year of activity 

5.  General  comments  on  operations  and  assessment  of  the  European  Investment  Bank's 

action under its mandate in Latin America and Asia 

Annex  1 

Annex 2 

Annex 3 

Annex 4 

Lists  of  countries  in  Latin America  and  Asia  which  have  concluded 
cooperation  agreements  with  the  Community  and  framework  agreements 
with the European Investment Bank 

Summary 
Latin America 
(23.2.1993-22.2.1996) 

table  of  the  European  Investment  Bank's  operations  in 
its  mandate 

and  Asia  during 

the  period 

of 

Summary  table  providing  a  sectoral  and  geographical  breakdown  of  all 
commitments 

Summary table showing the contributions of the various funding  sources to 
the projects financed by the European Investment Bank. 

1  Introduction 

This  annual  report  on  the  activities  of  the  European  Investment  Bank  (LIB)  in a 
number  of Latin American  and  Asian  countries  has been  drawn  up in accordance  with 
Council Decision 93/115/EEC of  15 February  1993 (OJ No L 45 of 23 February  1993). 
It relates to the third  and final year  of implementation  of the Bank's first  mandate and 
covers  the  period  from  23 February  1995  to  22 February  1996.  The  report  on  the 
second  year  was  sent  to  the  Council  and  the  European Parliament  in  October  1995 
(COM(95) 507 final of 30 October  1995). 

As well as giving a factual  account  of operations  during the third  year of activity, this 
report assesses experience gained from the beginning.  The assessment relates to a total 
commitment  of  ECU 750 million  (as  against  ECU 500 million  for  1993  and  1994)  in 
respect of 21 projects (13 in  1993/94) in 13 different  countries (10 in 1993/94). 

2.  Legal framework 

The legal and institutional framework  of the Bank's mandate in Latin America and Asia 
is laid down in the following decisions and documents: 

-  Council  Decision  of  19 May 1992  calling  on  the  Bank  to  take  action  in  those 
countries  of  Latin America  and  Asia  which,  on  the  date  of  that  decision,  had 
concluded  cooperation  agreements  with  the  Community1.  This  decision  covers  a 
period  of  three years  and  provides  for  an  annual  budget  of  ECU 250 million. 
It 
specifies  that  the  loans will be used  for  projects  of mutual  interest  that  satisfy  the 
Bank's usual criteria; 

-  Council  Decision  93/115/EEC of  IS February 1993  (published  in  the  Official 
Journal  of  23 February  1993)  granting  a  Community  guarantee  to  operations 
financed  in this context; 

-  Decision by the EIB Board of Governors of 22 February 1993 authorizing the 

Bank to undertake these activities up to an aggregate amount of ECU 250 million 
per year for a period of three years on condition that the loans granted are fully 
guaranteed by the Community; 

There are 30 such countries (17 in Latin America and  13 in Asia).  See lists in Annex  1.  Since the 
Council Decision of 19 May 1992, a further  cooperation agreement has been signed with Vietnam. 

-  Contract  of  guarantee  signal  by  the  Community  and 

;IIKI 
17 November  1993.  This  document  refers  to  the  above  texts  and  stipulates  that  the 
guarantee  will apply for  a period  of three years ending  on 23  February  1996. 

lilli  on 

the 

I 

In  addition  to  these  texts  constituting  the  legal  basis  for  its  mandate,  the  Bank,  in 
accordance  with  the  practice  adopted  for  other  geographical  areas,  signs  with  the 
countries  in which  it  operates  a  "framework  agreement"  laying  down  the  legal,  tax  and 
financial  framework  for  its activities in the country  in  question. 

3  The  Bank's  mandate  in Latin America  and Asia  in  relation  to  its  activities  outside 

the  Community 

The  mandate  given  to  the  Bank  in  Latin America  and  Asia  confers  on  it  special 
responsibility  for  supporting  the  Community's  cooperation  policy.  Most  of  the 
Latin  American  and  Asian  countries  concerned  by  the  Bank's  mandate  have  historical, 
cultural  and  economic 
These 
long-standing  ties  are  reflected  in  a  cooperation  policy  which  was  established  by  the 
Community  in  1976  with  a number  of these  countries  and  broadened  over  the  years  up 
to the  1992 and  1993 decisions  concerning  action by the Bank  itself. 

the  countries  of  the  European  Union 

ties  with 

The  Bank's  activities  in Latin America  and  Asia  continued  to  attract  increasing  interest 
among  the  countries  concerned  (Latin  American,  Asian  and  European  Union  countries) 
and  among  European  firms  and  economic  operators  during  the third  year  of  operations. 
The  complementary  role  which  the  Bank  can  play  in  these  regions  is  increasingly 
confirmed  by experience.  The international  financial  community  also  continues  to  view 
the  EIB's  action  as  a useful  adjunct  to  its own  operations.  After  three years  and  at  the 
end  of its initial mandate, the Bank  has thus clearly established  its position  as a lender in 
Latin  American  and  Asian  countries.  These  points  are  developed  in  detail  in  section  5 
below. 

4.  Results  of the  third year of activity 

During  the  third  year  of  activity  ending  on  22  February  1996,  the  Bank's  Board  of 
Directors  approved  the  following  seven  operations  totalling  ECU  250  million.  A 
further  ECU  12  million  operation  was  undertaken  under  the  global  authorization  of 
ECU  20 million granted  in the first year. 

A summary table giving more details about  project  commitments  and  signings up to  the 
end  of the third  year of activity  is set  out  in Annex 2. 

Country 

Sector 

Amount  committed2 
( E CU  m) 

Mutual  interest 

LATIN AMERICA 

Argentina 

water treatment 

70 

waste treatment 

Colombia 

transport 

38 

Paraguay 

water treatment 

17 

ASIA 

China 

energy 

Pakistan 

energy 

(Pakistan-*) 

(energy) 

Thailand 

transport 

55 

24 

(12) 

IS 

relating 

the 
project 
Argentine-European 
management  of  a  public  service  concession  and 
involving  public  service  companies  from  three  EU 
countries;  guarantee  provided  by  a  consortium  of 
EU  commercial  banks; 
the 
environment 

improvement  of 

to 

EU 

Argentine-European borrower;  joint  financing  with 
an 
institution; 
finance 
development 
transfer  of 
improvement  of  the  environment; 
European technology 

concession  granted  to  a  consortium  led  by  EU 
enterprises;  contribution  to  regional  cooperation 
and  integration  (declared  aims  of  the  cooperation 
agreement  between  the  EU  and  the  Andean Pact 
countries) 

improvement  of  the  environment;  preparation  of 
the project by a European consultant 

protection  of  live  environment; 
participation  of 
European  consultants  in  the  preparation  of  the 
project; 
joint  financing  with  a  European  public 
enterprise 

transfer  of  European  technology;  participation  of 
European  consultants;  widespread  participation  of 
European civil engineering companies 

(joint  venture  with 
company; 
improvement  of  the  environment;  preparation  by 
European consultants) 

a  European 

of 

the 

environment 

improvement 
natural 
gasthrough  the  use  of  gas  as  a  replacement  for 
petroleum products;  contrifeutton to a  sector/project 
with  a  substantial  European  involvement  in  gas 
exploration and use 

ECU 22 million of the loan for the gas transmission and distribution project  in Indonesia - approved by the  Bank's 
Board of Directors on 31 January  1995 - are included in the third year's accounts (see the Commission's  half-yearly 
report (COM(96) 72 final  of 1  March  1996) to the Council and the European Parliament  covering the period  from 
23 February  1995 to 22 August 1995). 

This Pakistani private project was provided for under the global authorization set in place in the first year. 

b 

5  General  comments  on  operations  and  assessment  of  the  Bank's  action  under  its 

mandate  in Latin  America  and  Asia 

5.1  Like  the  previous  year,  demand  substantially  exceeded  the  funds  available  in  the 
third  year.  As  in  the  first  two  years  of  the  mandate,  therefore,  funds  up  to  the 
annual  ceiling  of  ECU  250  million  were  committed.  Owing  to 
the  high 
absorption  capacity  of the  eligible  countries,  the  ECU  750  million  of  the  mandate 
have  been  completely  committed  (see Annex 2). 

5.2 

In  accordance  with  the  Bank's  mandate,  projects  financed  will  benefit  both  the 
In  line 
Latin American  and  Asian  countries  concerned  and  the  European  Union. 
with this  specific  concept  of mutual  interest,  operations  in the third  year  continued 
to  satisfy  one or  more  of the following  criteria:  regional  integration,  improvement  of 
the  environment,  transfer  of  European  technology,  joint  ventures  bringing  together 
European  and  local  firms,  the  granting  of  concessions  to  private  enterprises  for 
investing in and  running public services, and  the  preparation  of projects  by  European 
consultants  (see point 4 above). 

5.3  The  most  interesting  aspect  is  the  build-up  of  projects  involving  European 
private  partners:  during the third  year,  the percentage  of private  projects  approved 
by the Bank increased  to  50% (compared  with 42% in  1994 and  20% in  1993).  This 
proportion  could  increase further  if consideration  is given  to  those  projects  that  have 
already  been  proposed  and  that  could  be  submitted  under  the  new  mandate.  This 
trend  is  important  and  places  the  Bank's  mandate  in  Latin American  and  Asian 
countries in a special context.  It is clear that: 

• 

• 

through  this  type  of  financing  the  EIB  can  support  European  enterprises  in  their 
investment  in  the  "emerging  countries",  which  make  up  the  majority  of  the 
Latin American  and  Asian  countries.  For  these  enterprises,  the  markets  of  the 
"emerging countries"  offer  potential  for  substantial  growth; 

this type of assistance  is particularly  valued  by those  same  enterprises  since,  while 
still within the market  framework,  it is well  suited  to  funding  the  privatized  public 
services  projects  which  are  proliferating  in  these  areas  and  in  which  European 
enterprises  are very actively involved  (energy,  telecommunications,  water,  etc.). 

5.4  The  average  size  of  operations  fell  from  ECU  36 million  in  the  second  year  to 
ECU  33  million  in the  third  year4.  The  average  size  of  all  operations  undertaken  in 
the  three  years  of  the  Bank's  first  mandate  is  ECU  36 million  (if  operations  funded 
under  the  ECU  20 million  globai  authorization  are  included)  or  ECU  38 million  (if 
loans  under  the  global  authorization  are  excluded).  Loan  sizes  of  this  order  of 
magnitude 
the 
ECU  750  million  ceiling  and  are  compatible  with  the Bank's  objective  of keeping  the 
cost  of its operations within  reasonable limits. 

geographical 

satisfactory 

distribution 

ensured 

have 

of 

Average  contributions 
the  global  authorization  of 
two  projects  financed  under 
ECU 20 million,  which  is  intended  more  for  small  and  medium-sized  investment  projects,  is 
disregarded. 

the 

if 

6 

S 5  The  sectoral  breakdown  of  operations  in  the  Ihird  year  shows  activity  lo  he 
concentrated  in  the  energy  and  environmental  sectors.  This  is consistent  with  the 
objectives  of  the  cooperation  agreements  signed  between  the  Latin American  and 
Asian  countries  and  the  European Union,  which  frequently  stress  the  specific 
importance of cooperation in the energy and environmental protection  fields. 

energy 

transport 

telecommunications 

environment 

industry 

third year 

48% 

15% 

-

(second year) 

(24%) 

(21%) 

(30%) 

37% 

(16%) 

-

(9%) 

The sectoral breakdown of the total commitments of ECU 750 million under the  first 
mandate is set out in Annex 3. 

5.6  As  far  as  the  geographical  breakdown  is  concerned,  the  Bank  has  kept  up  its 
endeavours to  maintain,  wherever  possible,  a fair  balance between  the two  regions 
concerned  and between individual countries.  The geographical  breakdown  between 
the two  regions  thus varied  only  slightly  in the final year  of the  mandate:  52% for 
Latin America  (57%)  and  48%  for  Asia  (43%).  Three  of  the  seven  operations 
undertaken  in the third  year concerned  countries which had  not  received  EIB loans 
in  the  previous  years  (China,  Colombia  and  Paraguay).  Operations  focused  on  a 
limited  number  of  countries5,  with  preference  being  given  to  those  countries  for 
which  the  type  of  finance  proposed  best  meets  the  needs  of  borrowers.  Some 
priority was also given to  areas or countries which  are strengthening  their ties with 
the Community (Mercosur, Chile, ASEAN group, southern Asia, etc.). 

The  geographical  breakdown  of the  commitments  totalling  ECU 750 million  made 
under the mandate is set out in Annex 3. 

5.7  Excellent  cooperation  continued  with  multilateral  and  bilateral  financial 
institutions  in  the  Latin American  and  Asian  countries.  Four  of  the  seven 
operations  undertaken  in the third  year  are being  financed  jointly  with  one  or  two 
multilateral  institutions  (Asian Development  Bank,  World  Bank)  or  with  a bilateral 
financial  institution  (see  Annex 2).  The  activities  of  the  Bank  and  the  other 
multilateral  institutions  complement  each other  at  project  level (public  projects  and 
also  private  projects,  in  which  these  bodies  are  becoming  increasingly  involved). 
The  studies  produced  by  the  above  institutions  furthermore  constitute  a  valuable 
source of general, geographical and sectoral  information. 

Over the three years, operations were approved  in  13 of the 30 countries theoretically  eligible (see 
Annexes 2 and 3).  Mexico is a special case: a project was identified  and finance  approved by the 
Board of Directors, but approval was withdrawn following  Mexico's decision not to go ahead  with 
the project. 

The summary  table showing the contributions  of the various funding  sources  to  the 
projects financed  by the EIB is set out in Annex 4. 

5.8  The Bank's  cooperation  with  the  European  banking  sector  has been  reinforced 
in respect  of both guarantees and direct joint financing.  The EIB  and the European 
commercial  banks  complement  each other  in that  the latter  rarely  provide the same 
type  of  resource  as  the  EEB, particularly  as  regards  duration  and  period  of grace. 
The  combination  of  complementary  financial  instruments  constitutes  an  added 
benefit. 

5° 

In the  third  year,  new  framework  agreements  establishing  the  general  legal  bases 
for  carrying  our  projects  in both  the  public  and  the  private  sector  were  concluded 
between  the  EIB  and  six countries  (Bolivia,  China,  Colombia,  Mexico,  Indonesia 
and Uruguay).  A hall list of the  16 framework  agreements  concluded  up to the end 
of the third year is given in Annex 1. 

Annex 

LATIN AMERICA  AND  ASIA 

List  of  countries  which  had  concluded  a  cooperation  agreement  with  the 
European  Community  when  the  EIB  was  given  its  Latin American  and  Asian 
mandate.  A new agreement  has since been signed with  Vietnam. 

ASIA 

LATIN  AMERICA 

ASEAN  group (Brunei,  Indonesia, 
Malaysia,  Philippines,  Singapore, 
Thailand) 
Bangladesh 
China 
India 
Macao 
Mongolia 
Pakistan 
Sri Lanka 

Andean  group (Bolivia,  Colombia, 
Ecuador,  Peru,  Venezuela) 
Central American  countries 
(Costa Rica, Guatemala,  Honduras, 
Nicaragua, Panama,  Salvador) 
Argentina 
Brazil 
Chile 
Mexico 
Paraguay 
Uruguay 

List  of  countries  which  have  concluded  a  framework  agreement  with  the  EIB 
(situation  at  22  February  1996) 

ASIA 

China 
India 
Indonesia 
Pakistan 
Philippines 
Thailand 

06.12.95 
17/25.11.93 
20.06.95 
25/28.02.94 
15.09.94 
10/17.01.94 

LATIN  AMERICA 

Argentina 
Brazil 
Bolivia 
Chile 
Colombia 
Costa  Rica 
Mexico 
Paraguay 
Peru 
Uruguay 

03.10.94 
19.12.94 
12.10.95 
07.10.94 
13.03.95 
30.11.93 
09.03.95 
19.09.94 
02.10.94 
21.04.95 

Framework  agreements under negotiation:  Panama,  Sri  Lanka. 

Annex 2 

SUMMARY  TABLE  OF THE  EEB'S OPERATIONS  IN LATIN AMERICA  AND  ASIA 
between  23 February  1993  and  22 February  1996 (Council  Decision  93/115/EEC) 

1. 

LATIN  AMERICA 

Country 

Project 

Sector 

Argentina 

Mercosur highway 

Transport  (public) 

EEB loan 
amount 
(in ECU 
million) 
45(*) 

Total cost 
ofprojea 
(in ECU 
million) 
134 

Comments 

Joint financing with the Inter-American 
Development Bank (IDB) 

BAN natural gas 

Aguas Argentinas 

AJLINCO 

CESAN 

CTC - Compania de 
Teléfonos de Chile 

Brazil 

Chile 

Distribution of natural gas 
(private) 

Treatment of water (private) 

Treatment of waste 
Sanitation (public) 

Telecommunications  (private) 

Colombia 

Bogota 

Costa Rica 

ICE Costa Rica 

Transport (private) 

Energy (public) 

Paraguay 

Asuncion sewerage 

Treatment of water (public) 

Peru 

Pan American Highway 

Transport  (public) 

46 

70 

6 

40C) 

75 

38(*) 

44 

17 

27 

152.8 

Private project  - public service concession 

197 

13 

113 

731 

97 

354 

60 

154 

Private project  - public service concession 

Joint financing with a European development 
institution 
Joint financing  with the World Bank (IBRD) 

Private project - public service concession 

Guarantees from European banks 

Joint financing  with the IDB 

Joint financing with the IBRD 

Joint financing  with the IBRD 

TOTAL for Latin America 

408 (54%) 

2 005.8 

(*) not yet signed. 

10 

2. 

ASIA 

Country 

Project 

Sector 

China 

Ping Hu oil and gas 
development 

Energy  (public) 

India 

Powergrid 

Energy (public) 

Indonesia 

Gas transmission  (Sumatra) 

Gas transmission  (public) 

EIB loan 
amount 
(in ECU 
million) 
55 

55 

46 

Total cost 
of project 
(in ECU 
million) 
770.2 

Comments 

Joint financing with the Asian  Development 
Bank (AsDB) and the French Government 

173.8 

Joint financing with the IBRD 

474 

Joint financing with the AsDB 

Private project - European-Indonesian  —•: 
venture 
Joint financing with the AsDB 

Joint financing with the IBRD, the AsDB and 
a European development institution 

Private project -joint venture with a Eurrpean 
company 
Joint financing with the AsDB 

Private project - industrial joint venture 
Joint financing with the EBRD and the  AiDB 

CLIP AN 

Financial sector (private) 

8<*> 

Pakistan 

KESC 

Energy (public) 

Ghazi-Barotha Hydropower 

Energy (public) 

36 

24 

480 

1 668.5 

Sai Hydro 

Energy (private) 

12(*) 

26 

86 

107.7 
547.8 

97.7 

25 

23 
40 

18 

342 (46%) 

750 (100%) 

4 431.7 

6 437.5 

Philippines 

Davao Airport 

Transport  (public) 

Thailand 

DUCC Cement 
Erawan gas pipeline 

Erawan parallel gas pipeline -
Phase II 

TOTAL FOR ASIA 

GRAND TOTAL (Latin America and Asia) 

Industry (private) 
Natural gas transmission 
(public) 

Natural gas transmission 
(public) 

(*) not yet signed. 

11 

SUMMARY TABLE PROVIDING A SECTORAL AND GEOGRAPHICAL BREAKDOWN OF COMMITMENTS 

Annex 3 

Country 

Number of 
projects 

Sector 

Energy 

Transport 

Telecommunications 

Environment 

Industry 

Financial 

75 

75 

76 
40 

17 

133 

8 

TOTAL 

(in ECU 
million) 

167 (22.3%) 
40  (5.3%) 
75  (10.0%) 
38  (5.1%) 
44  (5.8%) 
17  (2.3%) 
27  (3.6%) 

408 (54.4%) 

55  (7.3%) 
55  (7.3%) 
54  (7.2%) 
72  (9.6%) 
48  (6.4%) 
58  (7.8%) 

23 

23 

8 

342 (45.6%) 

Argentina 
Brazil 
Chile 
Colombia 
Costa Rica 
Paraguay 
Peru 

TOTAL 
FOR LATIN  AMERICA 

China 
India 
Indonesia 
Pakistan 
Phihppines 
Thailand 

TOTAL FOR ASIA 

TOTAL 

4 
1 
1 
1 
1 
1 
1 

10 

1 
1 
2 
3 
2 
2 

11 

21 

46 

44 

90 

55 
55 
46 
72 

58 

286 

45 

38 

27 

110 

25 

25 

376(50.1%) 

135 (18%) 

75 (10%) 

133 (17.7%) 

23(3.1%) 

8(1.1%) 

750 (100%) 

12 

Annex 4 

SUMMARY TABLE SHOWING THE CONTRIBUTIONS OF THE VARIOUS FUNDING 
SOURCES TO THE PROJECTS FINANCED BY THE EIB 

EB 

750 

11.7% 

Multilateral financial institutions 

IBRD 

539 

8.4% 

IDB 

377 

5.8% 

AsDB 

800 

12.4% 

(in ECU million) 

Total 

6 438 

100% 

Other (1) 

3 972 

61.7% 

1  Governments, public organizations and other financial  sources,  including own funds  of borrower  and/or  promoter. 

13 

COM(96) 429  final 

DOCUMENTS 

EN 

09  11 

Catalogue number  :  CB-CO-96-429-EN-C 

ISBN 92-78-08019-5 

Office for Official  Publications of the European Communities 

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