The European Investment Bank is providing a EURO loan equivalent to USD 50 million (EUR 58 million) to Vega do Sul S.A. to build a cold-rolling and hot-dip galvanizing plant in São Fernando do Sul (State of Santa Catarina) in Southern Brazil. The project will result in significant transfer of technology from Europe.
Vega do Sul is a joint venture incorporated in Brazil between Arcelor (Luxembourg), Companhia Siderúrgica de Tubarão -CST- (Brazil), Dofasco (Canada) and Corporación Gestamp (Spain). It will build and operate a mill to supply the Mercosul automotive industry. Major European and North American car manufacturers have increased their local capacity and need high quality galvanised sheet. Local production of galvanised steel has significantly lagged behind demand stemming from the automotive sector. Car manufacturers have encouraged suppliers to set up new facilities in South America. Vega do Sul is expected to be one of the three large producers of coated steel in Brazil serving the South American markets.
The plant will comply fully with local environmental legislation and requirements and will apply the best EU standards when no other regulation is available. The project will contribute to the modernisation of Brazil's steel and car manufacturing industry. It will create some 350 direct jobs and about 200 jobs in outsourced activities. Employment during construction will amount to about 1300 men-year. Commercial production is scheduled for mid-2003 and full capacity is to be reached after three years.
The 12-year loan with three-year grace period can be disbursed either at fixed rates or at floating rates. A syndicate of commercial banks will guarantee the loan. 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 Asian and Latin American countries (ALA). The EIB may lend up to EUR 2.48 billion during 2000-2006 to support investment: by EU companies or joint ventures; to improve the environment; fostering regional integration. Set up in 1958 to further EU integration, the EIB lends for regional development, infrastructure, energy, industry and environment. The Bank contributes to the EU development co-operation policy with some 150 countries in Central and Eastern Europe, the Mediterranean, Africa, the Caribbean and the Pacific, Asia and Latin America. In 2000, the EIB provided loans totalling some EUR 36 billion. The Bank borrows on the capital markets the funds for it lends. Its bonds have regularly been rated "AAA" by the leading rating agencies. The EIB 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.