Manufacturas Del Trópico, S. A.

For inquiries and comments to IIC, contact:
IIC’s Communications Group
E-mail: divulgacionpublica@iadb.org

For project inquiries, including environmental and social questions related to an IIC investment, please contact the client or the IIC using the contact information provided above. In addition, project affected communities have access to the IIC Independent Consultation and Investigation Mechanism.
Tel:+1 (202) 623-3952
Fax: +1 (202) 312-4057
Address: 1300 New York Ave. NW Washington, DC. USA. 20577
E-mail: mecanismo@iadb.org or MICI@iadb.org

Project Number: 
HO1033A-01
Expected Consideration Date by the Board: 
12/01/2000
Date Posted: 
10/20/2000
Company: 
Manufacturas Del Trópico, S. A.
Financing Requested: 
Sector: 
General Manufacturing
Location: 
San Pedro Sula
Country: 
Scope Objective: 
Project Description: Manufacturas Del Trópico is a manufacturer of outdoor furniture, also known as casual furniture, which is presently sold in the U.S. under the Weathercraft brand name and distributed by Lane Venture, a U.S. furniture company that produces and distributes high quality furniture to the high-end segment of the market. The Company's manufacturing and administrative facilities are located in the town of Choloma, near the city of San Pedro Sula, Hondura's industrial center.

The proposed project involves the expansion of Del Trópico's production facilities by moving some of its processes to new production facilities and expanding its production capacity. The project involves building 8,050 square meters of additional industrial space, buying and installing production equipment, enhancing the plant's environmental and labor conditions, improving its MIS systems by replacing hardware and acquiring new integrated software, as well as supplying the required working capital to support the increased production and sales stemming from the expansion.

The increased production capacity stemming from the proposed expansion will be utilized to increase sales to Lane Venture as well as to diversify the Company's client base by developing the European and Latin American markets.

Through the project, the following objectives will be achieved:

Promote Technology Transfer.
Del Trópico presently operates under a strategic alliance with Lane Venture, a major U.S. casual furniture manufacturer and distributor. Under this agreement, Del Trópico has not only been able to secure a stable market for its products in the U.S., but also to gain significant knowledge and absorb modern techniques applicable to the manufacturing of casual furniture. By providing funding for Del Trópico's modernization and expansion project, the Company will be able not only to expand its sales with Lane Venture, but also to develop new markets on its own. The knowledge acquired through years of association with Lane Venture and its main suppliers has allowed the Company to develop new production techniques, as well as design new lines of products aimed at lower price market niches. These factors are increasing the Company's competitiveness and market diversification, helping it move a step further in its consolidation as a world class furniture manufacturer.

Support a Key Industry, Foreign Exchange/High Employment Generator. Through the proposed loan, the IIC will support the modernization and expansion of a manufacturing business that is already responsible for the employment of 426 Honduran workers and for the generation of a significant amount of foreign exchange due to its export oriented activities. Through the proposed expansion and modernization project, the Company will generate an additional 600 jobs and help the Honduran balance of payments by providing additional foreign exchange for the country. A total of approximately US$68 million of additional foreign exchange are expected to be generated by 2008 as a result of the project. This role is of particular importance at a time when Honduras is struggling to recover from the dramatic effects of Hurricane Mitch.

Improve Environmental and Labor Conditions. The expansion project subject to the IIC's financing includes a series of investments that will enhance the already careful approach the Company takes with regard to the environment and to the safety of workers.

Scarce Long-Term Financing. The IIC will provide long-term financing in appropriate conditions to help finance the expansion and modernization of a successful Honduran exporter. Long-term financing, particularly in the amounts required by this project, is difficult to obtain locally. By providing long-term funding, the IIC will allow Del Trópico to strengthen its financial structure, improve its competitive position, and develop new markets for its products, thus allowing it to better cope with the demanding conditions of the international markets where the Company sells its products.

Quasi-equity Financing. By providing a sub-loan, the IIC is helping to strengthen the Company's capital structure and to turn the financial plan for the project into a viable proposition. Equity is the most scarce form of capital financing in the Honduran financial market. By providing quasi-equity, the IIC is strengthening and stabilizing the Company's balance sheet. By providing a longer grace period and the flexibility to defer principal payments when necessary, the sub-loan would permit the Company to implement its expansion and consolidate its new markets without having to face the additional pressure on its cash flow that senior debt would impose.

Environmental Review: 
This is a category III project according to the IIC's environmental review procedure because specific impacts may result, which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines and design criteria. Environmental and social issues related to this project include workers' health and safety, fire safety and emergency response, liquid effluents, solid waste disposal and labor issues.

Worker Health and Safety: Workers are provided with the appropriate protective equipment, health insurance and first aid. In addition, occupational health & safety training seminars are organized for personnel periodically in conjunction with the local fire department and Texaco, the company's gas supplier. All work related accidents are recorded and analyzed continuously.

Fire Safety and Emergency Response: Del Trópico's facility is equipped with fire extinguishers, and the company will be installing fire hydrants to provide firewater to the facility. The company coordinates with the local fire departments and periodically performs fire drills. In addition, the LPG (liquefied petroleum gas) tank on site was installed in accordance with international standards, NFPA-58 and NFPA-54. Texaco, the provider of the LPG, is responsible for the maintenance of the tank and gas lines, and periodically inspects them for potential leaks. The tank has several safety features, including valves that personnel can access to cut off the flow of gas from the storage tank, in case of a leak or rupture. Texaco experts in conjunction with the local fire department will continue to provide personnel from Del Trópico with training regarding fire safety and emergency response procedures.

Liquid Effluent: The liquid effluent from the project consists of process wastewater from the powder paint coat system, as well as domestic sewage. The process wastewater consists of a mixture of water and chemicals used to pre-treat the metal prior to painting. The Company pre-treats the process wastewater chemically to ensure safe disposal. Wastewater treatment of metal finishing chemicals is accomplished with a system that neutralizes non-recyclable wastewater for safe disposal, and reclaims sludge for future disposal. (The company will prepare a sludge disposal plan to ensure the safe disposal of the sludge collected from the process wastewater treatment system; the sludge is currently being stored on-site in 50 gallon drums until the plan is developed to ensure safe off-site disposal.) In addition, the company plans to treat the domestic wastewater prior to disposal. (Currently, the domestic sewage is discharged to the municipal sewage collection system that does not treat the wastewater prior to being discharged.)

Solid Waste: The metal manufacturing department generates aluminum scrap, a waste product sold to local foundries that recycle it into components and accessories, which are then purchased by Del Trópico to be assembled on finished products for export (i.e. wheels on one of the lines of chairs). A minimal amount of powder paint is a solid waste product of the finishing department, since the powder paint coat system is engineered to be able to recycle up to 98% of all powder paint for reuse on the product; the remaining 2% is oven cured into solid bricks for safe disposal. PVC vinyl scrap is a waste byproduct of the weaving process, which is sold locally to be recycled into a variety of PVC products. However, with the future purchase of vinyl extruding equipment, Del Trópico will be able to recycle all of its vinyl waste to manufacture the cord that is used in its weaving process.

Labor: Honduras is a signatory to the UN and ILO conventions on child labor, as well as to the core standards for worker rights. The company complies with the standards regarding freedom of association and the right to collective bargaining, and the prohibition of compulsory labor and of child labor. Del Trópico does not permit the employment of anyone under age 18. Company employees are not currently unionized; however, they are free to do so. The salary of workers employed by the Company is significantly higher than the wages received by workers in other sectors in Honduras. In addition, the Company promotes career advancement and there is evidence of upward mobility within it.

Monitoring and Annual Reporting: The Sponsor will develop an Environmental Management Plan (EMP), which will include a schedule for the implementation of environmental projects and a monitoring and reporting program to ensure that the facilities are complying with Honduran laws and IIC's environmental guidelines. The EMP will also include an Environmental Management System (EMS) based on the ISO 14000 standards. The EMS will describe who will be responsible for monitoring the implementation of environmental activities. The Sponsors will submit an annual report summarizing the monitoring data related to occupational health and safety, fire safety, accident reports, wastewater discharge, solid waste disposal, and labor related issues.