Summary of Proposed Investment
Project Number
8627
Company Name
Operadora de Tiendas, S.A. (La Fragua, S.A.)
Date SPI Disclosed
Feb 9, 1998
Country
Guatemala
Industry
Tourism, Retail and Property
Status
Completed
Sector
Retail (Including Supermarkets, Grocery Stores, etc.)
Department
Regional Industry MAS LAC & EUR
Environmental Category
B - Limited
Previous Events
Approved : May 8, 1998
Signed : Jul 1, 1998
Invested : Jul 9, 1998
Project Description
Summary Of Project Information (SPI)
| Project Name | Guatemala-La Fragua, S.A. (“La Fragua” or “the Company”) |
RegionLatin America and Caribbean
Sector
Project No008627
Projected Board DateApril 1, 1998
Company NameLa Fragua, S.A.
Technical Partner and/or Major Shareholders
La Fragua’s shares are presently 80% owned by the Company’s original founders, the Paiz family. The remaining 20% are mainly in the hands of the public (original supporters of the founder), and retired and existing employees. The Company plans to become public by listing new shares in Guatemala’s, Mexico’s or New York’s stock exchanges.
Project Cost Including Proposed IFC Investment
The total project cost is estimated at about US$124 million. IFC’s proposed investment is expected to be in the form of up to US$20 million in an A Loan and a Convertible Subordinated C loan of up to US$5 million.
Location of Project and Description of Site
The project will be located throughout Guatemala and El Salvador, covering the main cities, the interior and the more rural areas of the two countries.
Description of Company and Purpose of Project
(include IFC’s Role and Development Impact)
La Fragua is Guatemala’s largest retail supermarket chain, with 49 stores located in Guatemala City, and 19 in the interior of the country. La Fragua’s three-year Project will involve the following components: (a)opening about 48 new stores in Guatemala and 32 in El Salvador; (b) modernizing and refurbishing existing facilities and operations; (c) opening a state-of-the-art distribution center; and (d) modernizing and improving information and technology systems. The Company expects to benefit from higher margins (as a result of lower fixed costs, improved efficiencies and economies of scale), to streamline and run more technologically-efficient operations, and improve its competitive position, while at the same time preempting local and foreign competitors wishing to enter the market. IFC’s financing provides La Fragua with long-term funding which would otherwise be limited and expensive through other sources for companies in Guatemala. In addition, as La Fragua’s first foreign lender, IFC could serve as a catalyst to encourage greater foreign investment in the Company. IFC’s participation would also improve the Company’s corporate governance through improved reporting and better management practices, while acting as an agent of change in its expansion plans. La Fragua’s Project is expected to have the following developmental impacts: (i) the Company’s expansion plans would assist in distributing to the less able population groups a wider variety of food and other basic necessity items (at lower or competitive prices) under cleaner and more hygienic conditions. By delivering products in the interior at the same price as in the capital cities, the Project would foster a more competitive environment, while reducing traveling time and distances for the more remote communities. The Project would also improve the distribution of food and non-food items in Guatemala and El Salvador, by introducing best practice and modern retailing methods, and by bringing about technological improvements in logistics and distribution systems; and (ii) the Project will create about 1,800 jobs, primarily for women, contributing to social and economic growth in the more rural areas of the two countries. In addition, the Project would also provide uncommon employee-benefit packages and higher than average compensation rates. The expansion plans would also foster better academical standards and training, and create career opportunities for the Company’s employees and management, thereby improving the standards of living in the region in which it will operate.
Environmental Category and Issues
This is an environmental review category B project. Issues include land use and site location, liquid effluents treatment and discharge, solid waste management, use of non-CFC refrigerants, fire protection, safety and emergency response and general worker health and safety. The sponsor will implement actions to address these issues and demonstrate that the Project will comply with applicable Guatemalan and Salvadorian requirements and World Bank guidelines. Liquid effluents will be treated and properly disposed. Solid residues will be either recycled or properly disposed according to local regulations. Non-CFC refrigerants will be used. The sponsor will audit their current safety and emergency response practices and implement actions satisfactory to IFC. Employees will be trained on occupational health and industrial safety issues.
The is March 2, 1998 from the Public Information Center.
| Host country location of environmental documents | Guatemala and El Salvador |
Date SPI sent to InfoShop February 9, 1998
“This Summary of Project Information is prepared and distributed to the public in advance of consideration of the proposed transaction by the Corporation’s Board of Directors. It is provided for the purpose of enhancing the transparency of IFC’s activities and should not be construed as presuming the outcome of IFC Board consideration.”
For Additional Information contact: Corporate Relations Unit -
telephone: (202) 473-7711
facsimile: (202) 974-4384
Environmental documents for this project are available at http://www.ifc.org and from the World Bank InfoShop (http://www.worldbank.org/html/pic/aboutinfo.html).
Sponsor / Cost / Location
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