Sao Paulo Alpargatas Northeast Expansion

completed

SPASA is one of Brazil''s leading footwear manufacturers specializing in the production of low-cost sandals and athletic footwear. The project consists of an investment program that will: (i) increase SPASA''s production capacity to meet the expected growth in demand for its products in Brazil; (ii) provide lower cost and high quality products; (iii) maintain its leading position in the domestic market; (iv) improve its profitability through operating efficiencies; and (v) export to competitive markets. IFC Role and Developmental Impact:By supporting SPASA in its ivestment program IFC will assist one of the few successful domestic companies in the footwear sector build on its strategy of lowering cost, improving production efficiency and increasing capacity. The Brazilian footwear sector is fragmented and is increasingly facing competition from lower cost imports from Asia; SPASA is one of the few companies that has successfully managed to restructure its business activities and modify its operations to lower cost and improve product quality and maintain its market position. However, despite its improved financial performance, the company has very limited access to long-term finance as international commercial banks are unwilling to lend long-term. In addition to local development banks, IFC remains the only viable source of long-term finance for the company. The project will have a significant development impact as the majority of the investment program will take place in the Northeast of Brazil, one of the least developed regions of the country. By financing this project IFC will help meet the Brazilian government’s objective of reducing poverty and stimulating development in this region of the country. In addition to creating additional employment and generating tax revenues, the project includes important investments in employee training and education, which will bring additional benefits to the region. Through this investment program, the company will also upgrade its environmental facilities.