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Ecuador

Surpapel Group Project

$109.25 million
Manufacturing
Summary of Proposed Guarantee
Proposed

Project description

The Surpapel Group is a corporate group consisting of three integrated businesses: (i) Repaper Reciclaje del Ecuador S.A. (“Repapers”), which collects and sells all of its recycled cardboard to Surpapelcorp S.A. (Surpapel) for pulp production; (ii) Surpapel, a 140,000 metric tons per annum (“tpa”) paper mill producing recycled paper, approximately 80% of which it sells to Productora Cartonera S.A. (“Procarsa”); and (iii) Procarsa, a 168,000 tpa corrugated cardboard box plant and combined 220,000 tpa printing presses, that produces corrugated boxes and other packaging products predominantly for Ecuador’s export market. Except for Repapers’ six warehouses and collection centers, the entire business is located in the Duran industrial complex 14 kilometers east of Guayaquil, Ecuador’s second largest city.

The raw materials required by the Project are sourced locally and regionally. Approximately 40% of the fiber is sourced from recycled paper and about 60%from virgin fiber imported from the United States. 

Surpapel Group has strengthened productivity and resource efficiency of the companies by implementing process automation and modernizing the water treatment plant at Surpapel to allow reuse of processed water. Surpapel has also expanded its lines of dryers to increase drying capacity and expanded installed production capacity.  Procarsa purchased three new industrial scale printers and gluers, and corrugated systems which have increased productivity and quality.

The proposed up to US $109 million MIGA Guarantee is to support up to US$82.5 million (in addition to the interest expenses) 7-year non-shareholder loan to Surpapel and Procarsa (together, the “Project Enterprise”) to refinance existing loans and to optimize capital structure for an existing operation. The MIGA guarantee is expected to have a tenor up to 7 years, providing coverage against the risks of Expropriation and Transfer Restriction.

Environmental Categorization

The project is a category B under MIGA’s Policy on Environmental and Social Sustainability. Click here  to view the Environmental and Social Review Summary.

Development Impact

The main development impact of the Project will derive from supporting the financial resilience and sustainability of Surpapel Group. Prior to the COVID-19 crisis, local companies struggled to access long-term financing from domestic banks; this has likely exacerbated due to the current economic conditions. By providing long term financing to Surpapel the Project reduces the company’s liquidity concerns, and allows for the company to implement its expansion plans in a sustainable manner, while supporting the company’s large workforce during a time of unprecedented economic stress. Ecuador has historically presented a significant deficit in its production of corrugated paper. The expansion of the corrugated paper production of Surpapel Group will help meet the country’s demand and reduce its dependence on imports. Moreover, by supporting the expansion of the production capacity of cardboard boxes of the Project Enterprise, the Project will also support the export of Ecuador’s main agricultural commodities (bananas, flowers and shrimps, among others).  

The proposed Project is consistent with the most recent World Bank Group (WBG) Country Partnership Framework (CPF) FY2019-2023 for Ecuador. It is aligned with  its objective of improving conditions for private sector development, part of the CPF focus area of supporting fundamentals for inclusive growth. The Project is also aligned with the government’s national development plan (Plan de Prosperidad), acknowledging that economic growth cannot rely solely upon the public sector, but has to be driven by the private sector participation in different productive sectors of the economy.