Andrade

completed

AG group has requested that IFC provide a financial package for Andrade Gutierrez S.A., the central holding of the group, with the intent of strengthening the group''s financial structure by lengthening the maturity of its financing. Part of the loan proceeds will be applied to new investments of the group, most likely to occur in Brazil''s infrastructure sector, in which case it would do so through AG Concessoes. The World Bank Group''s primary objective in assisting Brazil, is the achievement of sustainable, private-sector led, broadly shared growth. Priorities are: creation of new, formal employment opportunities in internationally competitive private firms, broadened financial access for the commercial system, and delivery of improvements in areas of basic needs and/or visible impact on standards of living: housing, water, health, education, urban transport. Specifically, IFC''s strategy, consistent with this objective, is: backing companies that will create growth, supporting activities which demonstrate tangible benefits of liberalization (such as water, health, education, and urban and inter-modal transport), investing in financial and physical infrastructure to improve the prospects for sustained growth; and broad support for business leading to development in the Northeast. IFC finds supporting AG''s operations consistent with its strategy for the following reasons. AG group owns an array of businesses that contribute to the objectives stated above. First, AG Telecom has brought much needed improvements to the telephone system in the Northeast of Brazil. Second, it is AG Concessoes'' strategy to participate in privatizations of public infrastructure and it is likely to benefit from part of this financing to increase its business. Third, CAG participates significantly in important large infrastructure projects that benefit Brazil''s economic growth. CAG seeks to be an efficient company and financial efficiency is an important element that translates into lower cost of construction and thus benefits the economy of Brazil. Lastly, AG group is rapidly modernizing, bringing modern management concepts and creating jobs for skilled professionals including in information technology. This gives young Brazilians a chance to apply their skills at one of Brazil''s most influential firms. Currently companies in Brazil have limited access to capital markets as a result of global economic and political conditions. The upcoming elections are compounded by this problem and Brazil is affected, to some degree, by the Argentine crisis. This means that even for large companies financing is gradually becoming more difficult to access and tenors, historically short, may decrease even further in the near future. In addition, it is AG''s intention to maintain its ability to invest over the next 24 months and this requires the group to have a stable financial structure. This requires a tenor not currently available in the local market. Finally, the group has shown interest in improving further its corporate governance and furtherance of sound environmental and practices.