The project sponsor is Promotora Ambiental S.A.B. de C.V. (PASA), a publicly listed, leading Mexican environmental services business with operations in 42 cities and 2005 revenues of $193 million. PASA has a 55% shareholding in Petstar. The remaining 45% of the business is owned by Petstar’s management and their extended family (33%) and by IMG Investments LLC (12%), a privately owned U.S. investment company.

The total project cost is estimated at $33.48 million. IFC will provide a $8.5 million A Loan and a $5 million subordinated C Loan for IFC’s own account, and will support the sponsor in mobilizing an additional $11.0 million parallel loan of senior and subordinated debt.

13.50 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	13.50
Equity

* These investment figures are indicative

The Petstar facility will be constructed in the industrial park of Parque Industrial San Cayetano, outside the city of Toluca, in the State of Mexico.

The project is expected to generate 63 locally filled jobs at the recycling facility and additional jobs will be created in Avangard’s operations as its collection activities expand. The project will also indirectly support Avangard’s supply chain which the company estimates provides an income to approximately 25,000 people. Avangard sources waste PET bottles from over 1,300 suppliers nationally and supply sites include waste separation centers, deposit centers, rural communities, schools and waste disposal sites. At waste disposal sites individual garbage sorting and recycling workers (known in Mexico as “pepenadores”) labor in poor working conditions, very often as family units. Petstar is developing a programmatic social engagement plan directly targeted at addressing this systemic issue, thereby reducing the incidence of harmful informal child labor within its supply chain. By converting waste drinking bottles into a usable, valuable manufacturing input, the project will support improved waste management in Mexico. PET bottles are non-biodegradable, high-volume items that are causing an increasingly unsightly waste disposal problem throughout Mexico. By reducing the volume of waste entering landfills, PET recycling increases the life of existing sanitary landfills, supporting Mexico’s limited waste management infrastructure. The project involves technology transfer of PET recycling equipment that is currently mainly used in developed countries and will provide a demonstration of a successful private sector recycling business in Mexico. As well as meeting market demand for a locally produced product, the recycling project will result in displacement of petroleum-based virgin raw materials that can be made available for other productive uses. The project will also contribute to government tax revenues.

IFC’s proposed $13.5 million financing will provide the project with long-tenor, flexible, limited-recourse financing that is otherwise difficult to secure for waste management and recycling projects in Mexico. IFC is also mobilizing other suitable international lenders for the additional lending required to fully finance the project. IFC is supporting Petstar in its response to social issues identified within its supply chain. IFC has provided technical assistance in the form of an expert appraisal of Avangard’s supply chain and a review of best practice responses. IFC is also developing an assistance plan for the implementation stage of Pestar’s social engagement plan.

This is a Category B project because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. Petstar will manage its environmental and social performance in accordance with applicable Mexican laws and regulations and international standards, including the applicable IFC Performance Standards on Social and Environmental Sustainability.