Chile to Bolster Competitiveness, Sustainable and Inclusive Growth with IDB Support

Chile will advance its competitiveness by promoting sustainable and inclusive growth with help from two loans totaling $400 million approved by the Inter-American Development Bank (IDB).

A $100 million programmatic policy-based loan (PBP) and a $300 million results-based loan (PBR) will finance a program to speed up the digital transformation of public services and digital connectivity.  

The program will also encourage a transition towards circular production and consumption models, and foster the recovery and formalization of jobs by supporting micro and small enterprises (MSEs) and incentivizing hiring and labor intermediation, with a particular emphasis on women.  

The PBP is structured as two individual operations that are technically linked and will focus on supporting macroeconomic stability, accelerating the country’s digital connectivity and transformation of public services, and promoting a transition to more circular production and consumption models. In addition, the loan will provide liquidity to micro and small enterprises (MSEs) – particularly those led by women – and support the recovery of formal employment as well as employability through service improvements to the labor intermediation system. 

The PBR will foster digital transformation by boosting connectivity and will promote the circular economy through an increase in the number of municipalities or municipality associations benefiting from the Recycling Fund, among other initiatives.

The loan will also support MSEs benefiting from the Bono Alivio MYPE (MSE relief bond) that report sales and workers accessing formal employment thanks to a strengthening of the scheme of subsidies and who remain in their jobs for at least two months.

The program will benefit Chile’s population at large through gross domestic product and productivity growth as well as a decline in poverty and carbon emissions. The population will also benefit from a broader deployment of digital infrastructure with policies facilitating a transition towards a circular economy and reforms that promote job generation and sustainability of the productive sectors.

Nearly 1.3 million people will benefit from the results-based loan through access to quality internet services, along with residents of municipalities that procure project funding from the Recycling Fund,  550,000 businesses benefiting from the Bono Alivio MYPE, and 144,000 workers benefiting from the household subsidy known as the Ingreso Familiar de Emergencia Laboral (Labor Emergency Family Income).

This operation is aligned with the Vision 2025 – Reinvesting in the Americas: A Decade of Opportunities, created by the IDB to achieve sustainable recovery and inclusive growth in Latin America and the Caribbean in the areas of digital economy; economic integration; micro, small and medium-sized enterprises; gender and inclusion; and climate change.

By means of a strategic and complementary approach, the Bank seeks to combine into a single program short and medium-term policy reforms with results-based investments that improve competitiveness indicators sustainably and inclusively. The combination of PBP and PBR financial instruments makes it possible to work simultaneously on public policy and investment initiatives that have a social and productive impact that maximizes the program’s benefits. 

The $100 million PBP is for a 15.5-year term with a 5.5-year grace period, and the $300 million PBR is for a 20-year term with an 8-year grace period. Both operations have an interest rate based on LIBOR.