22505 - Embraer

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Summary of Proposed Investment

Project Number

22505

Company Name

Embraer S/A.

Date SPI Disclosed

Dec 16, 2004

Country

Brazil

Industry

Manufacturing

Projected Board Date

Feb 3, 2005

Status

Completed

Sector

Aerospace Product and Parts

Department

Gbl Ind, Manufact, Agribus & Services

Environmental Category

B - Limited

Previous Events

Approved : Feb 3, 2005
Signed : Jun 13, 2005
Invested : Aug 5, 2005

Project Description

Embraer - Empresa Brasileira de Aeronáutica S.A. (Embraer, or the company) is one of the world’s leading commercial aircraft manufacturers, and is the largest manufacturer located in a developing country. Embraer is currently engaged in a strategically important extension of its product line and consolidation of its position as a global player. The IFC project would help Embraer achieve this goal by providing financing, on commercial terms, for the launch of its program for the new Embraer 170/190 Family of aircraft. The Family comprises four models that seat between 70 and 118 passengers. The company has already delivered some of the first model – the Embraer 170– and expects to receive certification of the other models in the coming years.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	35.0
Equity

Development Impact

- Human Capital Development.

Through well designed development programs and investments in human capital ($80 million during 1998-2002), Embraer has cultivated a staff of the best trained engineers and technicians in Brazil and is recognized as a world-class center of excellence. The company not only directly contributes to Brazil’s industrialization in a high-technology field, but also has a catalytic impact on various companies that form part of its supply chain. Preparation for the project and the technical and managerial experience gained from its execution will build the knowledge base that will help it successfully plan and implement future strategic initiatives.

- Corporate Citizenship and Macroeconomic Contributions.

Embraer has consistently been a good corporate citizen and continues to invest in local communities by supporting a host of community and civic initiatives. The company has already committed to using part of the future revenues from the project to Fome Zero (‘No Hunger’), a public-private initiative aimed at alleviating hunger and poverty in Brazil’s poorest communities. As part of its efforts to improve efficiencies and reduce costs, Embraer is working with its major suppliers to set up plants in Brazil which will have a positive impact on job creation, technology transfer and overall development. On the macroeconomic side, the project is also expected to make positive contributions to Brazil’s trade balance and its tax base.

- Mobilization of Appropriate Tenor Debt on Commercial Terms.

In the aircraft manufacturing industry, the time between initial concept and the peak of serial production is nearly ten years, which in turn necessitates long-term financing. Although Embraer is well known to most commercial banks, the company is not able to access the long-term funds that it needs for the development of its project- even the best Brazilian corporate credits do not have access to tenors significantly longer than five years. The IFC Financing will be comprised primarily of funds mobilized by IFC from the syndicated debt market and through this process, IFC expects to lengthen maturities available to the company and help diversify Embraer’s funding sources.

- Support Adoption of Best Practices.

As part of the relationship with the company, IFC will work with the company, encouraging it to continually improve its internal processes, to introduce benchmarking and adopt international best practices in areas such as supplier linkages, environmental performance, social aspects, and governance so that the company can continue to maintain its leadership position.

This is a category B project according to IFC’s environmental and social review procedure. The key environmental and social issues associated with this Project include: air emissions, liquid effluents, handling and disposal of chemical materials, handling and disposal of solid wastes, workers’ exposure to work related impacts, employee health and safety training, power and water supply, and fire protection, environmental management capacity of its operations.
Location of environmental documents In locally affected community
The Environmental Review Summary for this project was filed with/posted at the following organizations/locations.

1)Prefeitura Municipal de São José dos Campos
Rua José de Alencar, 123 - 6o. Andar - Sala 1
12209-530 São José dos Campos - SP

2)UNIVAP - Universidade do Vale do Paraíba
Av. Shishima Hifumi, 2911 - Urbanova
12244-000 São José dos Campos

3)UNIP - Universidade Paulista
Rod. Presidente Dutra, km 157,5, s/n - Limoeiro
12240-420 São José dos Campos - SP

4)Prefeitura Municipal de Taubaté
Av. Tiradentes, 520 - Centro
12030-180 Taubaté - SP

5)Prefeitura Municipal de Jacareí
Praça dos Três Poderes, 73 - Centro
12327-170 Jacareí - SP

6)Prefeitura Municipal de Caçapava
Rua Capitão Carlos de Moura, 243 - Vila Panteleão
12280-050 Caçapava - SP

7)Prefeitura Municipal de Botucatu
Praça Prof. Pedro Torres, nr. 100 - Centro
18600-900 Botucatu - SP

8)UNESP - Faculdade de Medicina
Distrito de Rubião Jr., s/ nr.
18618-970 Botucatú - SP

9)UNESP - Faculdade de Ciências Agronômicas
Fazenda Experimental Lajeado
Caixa Postal 237
18603-970 Botucatú - SP

10)Prefeitura Municipal de Araraquara
Rua São Bento, 840 - Centro
14801-301 Araraquara - SP

11)UNIP
Av. Alberto Benassi, s/nr. - Parque das Laranjeiras
14804-300 Araraquara - SP

12)UNESP - Faculdade de Ciências e Letras
Rodovia Araraquara/Jaú, km 1
14800-901 Araraquara - SP

13)Prefeitura Municipal de Gavião Peixoto
Alameda Fratuci, nr. 100 - Centro
14813-000 Gavião Peixoto - SP

Contacts

For Inquiries About the Project, Contact

Adam Struve, Investment Officer
International Finance Corporation
2121 Pennsylvania Avenue, NW
Washington D.C. 20433
Facsimile +1.202.974.4394

This Summary of Project Information (SPI) is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC's activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC's Disclosure of Information Policy that went into effect September 1998.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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