The European Investment Bank is providing an EUR 55 million loan to Tele Leste Celular Participações (TLC) for the development of a cellular telecommunication network in the Brazilian Northeastern States of Bahia and Sergipe.

The loan is extended to Telebahia Celular S.A. and Telergipe Celular S.A., the two operating companies controlled by Tele Leste Celular. Iberdrola and Telefonica groups control the latter. The 8-year loan to be repaid in a single bullet instalment, is disbursed in USD, carries a variable interest rate and is capped LIBOR + 15 basis points. Banque Sudameris, a subsidiary of Banca Commerciale Italiana, guarantees the loan.

This is the first EIB loan for the underdeveloped North-Eastern Brazil. The project will help to improve the economic performance of the region. TLC's investment is integrated in the process of liberalisation and privatisation of the Brazilian telecom sector. It will contribute to improve efficiency, reduce prices and promote innovation in telecommunication services.

Fixed telephone services in the region are weak. Cellular telephony penetration in the region is currently of 5.7 lines per 100 inhabitants, far below the 9% Brazilian average. The project aims at enabling TLC to accommodate 1,000,000 subscribers by end-2000 (up from 330,000 in end-1998). This will be mainly achieved by the installation of digital technology. The two North-Eastern States have a population of 14.6 million, about 9% of the total Brazilian population. Their average per capita GDP is some 60% of the Brazilian average and 14% of the European Union average.

The loan is provided in the context of the EU co-operation policy with third countries. In Asia and Latin America (ALA), the EIB may lend up to EUR 2.48 billion during 2000-2006 to support capital investment projects implemented by subsidiaries of EU companies or joint-ventures between EU and ALA firms, or investment that results in environmental improvements or fosters regional integration.

The EIB was set up in 1958 to finance investment furthering EU integration. It lends for regional development, infrastructure, energy, industry and environment. Outside the EU, the Bank contributes to the European development co-operation policy in some 130 countries in Central and Eastern Europe, the Mediterranean region, Africa, the Caribbean and the Pacific, Asia and Latin America.

In 1999, the EIB provided loans totalling some EUR 32 billion, of which EUR 4 billion for projects outside the EU. The Bank borrows on the capital markets the funds for its lending. Its bonds have regularly been rated "AAA" by the leading rating agencies. The EIB works on a non-profit basis and can pass on to project promoters the excellent conditions it obtains on the markets. The EIB may finance up to 50 percent of project cost. On average it provides one third of the funding and co-finances investments with other institutions.

(1) 1 EUR = 0.971400 USD.