The European Investment Bank (EIB) is lending USD 40 million(1) to Pirelli Pneus S.A. for investments in tyre manufacturing plants in Brazil.

Pirelli Pneus S.A., a subsidiary of Pirelli SpA, a leading European tyre producer, will invest to expand production capacity and improve productivity in three existing plants: Campinas, Gravataí and Santo André. The EIB loan supports the modernisation of industrial sites to improve supply in the growing Brazilian and Mercosul market for car, truck, light vehicles and motorcycle tyres. The implementation of the scheme is to be completed by year 2003.

The EIB loan provides for bullet repayment of the various tranches seven year after disbursement. The USD-denominated loan will carry a variable interest rate, capped at LIBOR + 15 basis points. Banca Commerciale Italiana guarantees the non-political risks involved in this transaction. Risks of currency non-transfer, expropriation, war and civil disturbance are covered by the European Union (EU) budget guarantee.

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 900 million during 1997-99 to support private 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 1998, the EIB provided loans totalling some EUR 29.5 billion, of which EUR 4.4 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 = 1.06650 USD, 1.98820 BRL.