Monday,
March 29, 2010
World Bank Supports Modernization of Mexico's Urban Transportation System
WASHINGTON,
March 26th, 2010 – The World Bank approved today a US$ 350 million loan to support an initiative aimed at improving
Mexico’s public transportation system, which includes expanding its service network with little impact on the environment.
The
Urban Transportation Transformation Project will be rolled out in several Mexican with the goal of “greening”
Mexico’s transportation sector, currently responsible for the emission of almost a fifth (or 18%) of the greenhouse
gases produced by Mexico, in turn one of the biggest emitters of CO2 in the region.
The
initiative’s objective is to reduce emissions by 2 million tons by 2017, as it increases the number of integrated mass
transit corridors, therefore expanding public transportation and its role in urban mobility.
Afflicted
by a growing rate of vehicle penetration, an urban structure unfavorable to public transportation as well as aging and energy-inefficient
fleets, the transportation sector sits high on the government’s and the private sector’s agenda. It is estimated
that the project will attract US$ 2.3 billion in public and private investment, which amounts to 87 percent of its total cost.
The
project’s financing includes a classic US$ 150 million World Bank loan and a US$ 200 million concessional loan from
the Clean Technology Fund (CTF). The CTF loan includes concessional conditions
–very low financial costs– and is the first one approved in Latin America and the first one for the transportation
sector worldwide. Its objective is to establish incentives to speed up the transition to a low carbon economy.
“The
power of this program rests in the combination of local urban transportation agendas, the national poverty reduction agenda
and the global climate change agenda,” said Gloria Grandolini, World Bank Director for Colombia and Mexico.“Moreover,
helping middle income countries -such as Mexico- access concessional financing and also become partners in managing financial
risks in view of volatile capital markets, is an important contribution by the Bank,” she added.
The
loan is an integral part of the Bank’s support to Mexico’s efforts on climate change and broadens the transformations
initiated by a US$ 1.5 billion loan (approved by the WB in October 2009) to support public policies that boost the economy
and reinforce the framework for long-term sustainable growth.
Mexico
created the Federal Mass Transit Support Program (PROTRAM, in Spanish) within the National Infrastructure Fund (FONADIN, in
Spanish) to improve the efficiency of its urban transportation sector and put it on a low-carbon growth path.
The
World Bank-financed project seeks to complement PROTRAM’s efforts and emphasizes mass transit systems and measures such
as integral planning, investments designed to increase public transportation use, investments in pedestrian and bicycle transportation
and buses with low-emission technology.
Growth
rate of Mexico’s automotive fleet is approximately 10 percent annually, while private transportation represents 80 percent
of the total fleet but is used by just 20 percent of the population. On top of that, most cities face institutional and regulatory
weaknesses with regards to their policy frameworks and transportation planning, as well as limited maintenance and operational
budgets – barriers that this project intends to eliminate.
The
project consists of three parts:
· Strengthening institutional
capacities through technical assistance and training for various cities in the country in order to develop or reinforce local
urban transportation programs.
· Development of Integrated Transportation
Systems to reduce CO2 emissions, by way of mass transit corridors and the implementation of technological solutions to reduce
GHG emissions.
· Project administration, including
the implementation of a technical monitoring system and the oversight of participating entities.
The
organization responsible for implementing this loan is the National Public Works and Services Bank (Banco Nacional de Obras
y Servicios Públicos, BANOBRAS), which, during the technical implementation phase, will act in coordination with the FONADIN,
a trust fund managed by the PROTAM.
The
total cost of this project is US$ 2.69 billion, of which US$150 million will be financed by the WB; US$200 million by the
CTF (a WB-administered fund); US$ 767.5 million by the FONADIN; US$ 737.5 million by local governments; and US$ 839 million
by the private sector.
The
co-financing scheme between the WB and the CTF delivers very competitive financing costs, which facilitates project implementation.
Additionally, the operation is considered to be financially innovative as it includes flexible terms and risk management options
that will allow Mexico to cover interest rate, currency and repayment risks. This is an investment-specific loan, denominated
in US dollars, with the option of converting it to Mexican pesos, to be disbursed over seven years, with a maturity period
of 13 years starting after the disbursement date.
About the Clean Technology Fund
The Clean Technology Fund is a recently established financial mechanism with US$ 5.2 billion in multilateral
funding, managed by the World Bank and other development banks. The governments of Australia, France, Germany, Japan, Spain,
Sweden, the United Kingdom and the United States have contributed to this fund. It was created with the intention of granting
low-interest funding to expand the use of low carbon-intensity technologies and reducing greenhouse gas emissions until a
new global agreement on climate change is negotiated and implemented.
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The World Bank.
For more information on the World Bank’s work in Mexico, visit: http://www.bancomundial.org.mx
