The European Investment Bank is providing a USD 80 million (some EUR 91million ) (1) loan to Volkswagen do Brasil Ltda. (VWB) to modernise two production plants in Brazil.

The project will enable VWB to produce a new range of small passenger cars, based on a platform used internationally by the VW Group, to supply the Latin American market. The new vehicles comply with Brazilian and European environmental and safety requirements. They will help to improve the quality of the Brazilian vehicle fleet. Its new engines will contribute to a reduction in pollution and fuel consumption. Similarly, the production facilities will be compatible with Brazilian and European standards. The transfers of technology from Europe will improve both Brazil's manufacturing industry and its balance of payments and will help to maintain jobs. The project will not result in additional production capacity.

Volkswagen do Brasil Ltda. is a fully owned subsidiary of the Volkswagen A.G. Group, established in 1953. It is the country's main private company and the largest vehicle manufacturer in Brazil and Latin America.

The 8-year loan (including a 3-year grace period) will be disbursed in USD and will carry a variable interest rate caped at LIBOR + 15 basis points. A syndicate of banks, arranged by ING Barings and BHF-Bank, guarantees the EIB loan. It includes as participants BHF-Bank, ING-Bank N.V., Norddeutsche Landesbank-Girozentrale, Landesbank Hessen-Thüringen-Girozentrale and BNP-Paribas.

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 = 1.63109 BRL , 0.596700 GBP.