IDB Approves $30 Million Loan to Boost Chile’s Sustainable Wood Construction Sector

The initiative aims to enhance productivity, innovation, and environmental sustainability while supporting inclusive economic growth and climate-smart development.

The Inter-American Development Bank (IDB) has approved a US$30 million loan to the Government of Chile to strengthen the country’s construction sector through the promotion of industrialized, sustainable, and wood-based building methods. The initiative aims to enhance productivity, innovation, and environmental sustainability while supporting inclusive economic growth and climate-smart development.

The operation, titled the “Sustainable Construction Support Program,” marks the fourth project under Chile’s Conditional Credit Line for Investment Projects (CCLIP), which was first approved in 2022 to foster productivity and sustainable development. The program will be implemented by the Production Development Corporation (CORFO), one of Chile’s leading public agencies for innovation and industrial promotion.

Building a Sustainable and Competitive Construction Sector

The new IDB-backed program is part of Chile’s broader strategy to modernize its construction industry by integrating industrialized production systems, digitization, and sustainable materials — particularly the use of engineered wood, which has become a cornerstone of green building innovation.

By focusing on wood construction, the initiative leverages Chile’s strong forestry base while supporting low-carbon building methods that reduce emissions, enhance energy efficiency, and align with the country’s Nationally Determined Contributions (NDCs) under the Paris Agreement.

“This program will help Chile transition to a more efficient, inclusive, and sustainable construction model, using renewable materials and industrialized processes to improve productivity while reducing the sector’s environmental footprint,” said an IDB representative.

Targeting Regional Development and Inclusiveness

The program’s impact will extend across at least seven regions — Valparaíso, O’Higgins, Maule, Ñuble, Biobío, Araucanía, Los Ríos, and Los Lagos — encompassing key areas of Chile’s forestry and construction industries. It will directly benefit small and medium-sized enterprises (SMEs) in the wood construction value chain, along with training institutions, research centers, and financial entities.

In addition to stimulating investment, the initiative prioritizes social inclusion and gender equality, providing targeted support for women-led businesses and promoting diverse and equitable workforces.

Expanding Access to Finance and Innovation

A core component of the program is its focus on improving access to financing for companies in the wood construction value chain. Many SMEs in the sector face credit constraints due to information asymmetries and high perceived risks from lenders. To address these barriers, the program will establish public guarantee mechanisms that encourage banks and financial institutions to provide credit for innovation and expansion.

The project will also fund the creation of technical standards, digital tools, and innovation platforms to strengthen collaboration between public and private stakeholders. Investments in training and technology adoption will enhance the sector’s operational efficiency, ensuring Chile’s construction industry remains competitive in a rapidly evolving global market.

“We’re supporting not just individual companies, but the entire ecosystem that makes sustainable construction possible,” the IDB noted. “That means helping firms access finance, develop new technologies, and adopt international best practices in design, manufacturing, and environmental management.”

Promoting Climate Action and Sustainable Development

The construction sector is a key driver of Chile’s economy but also one of its largest sources of carbon emissions. By encouraging the use of wood — a renewable and carbon-storing material — and promoting industrialized construction processes, the program will significantly contribute to Chile’s climate mitigation and adaptation efforts.

The initiative also complements national policies such as the National Strategy for Sustainable Construction, which emphasizes circular economy principles, energy efficiency, and the use of local materials to foster greener urban development.

The IDB’s loan is structured under a specific investment modality with a 23.5-year repayment term, a seven-year grace period, and an interest rate based on the Secured Overnight Financing Rate (SOFR). This long-term financing arrangement reflects the IDB’s commitment to sustainable infrastructure and inclusive economic transformation in Latin America and the Caribbean.

Strengthening the Wood Construction Ecosystem

Chile is emerging as a regional leader in engineered wood and sustainable construction, with growing international recognition for its mass timber architecture and forest-based innovation clusters. The IDB program will help scale up these successes, creating an enabling environment for green industrialization and low-carbon growth.

Through this initiative, Chile aims to:

• Enhance the competitiveness of the construction sector through technology and innovation.

• Encourage public-private collaboration to promote climate-smart investments.

• Generate quality jobs and strengthen skills for the future of sustainable building.

• Reduce carbon emissions by shifting toward renewable construction materials.

A Step Toward a Green, Inclusive Future

As climate change intensifies and urbanization accelerates, sustainable construction is becoming a defining challenge for developing economies. The IDB’s support for Chile’s Sustainable Construction Support Program demonstrates how targeted financing and innovation can transform industries — making them more resilient, inclusive, and environmentally responsible.

By combining industrial efficiency, financial innovation, and green technology, the program will help Chile build not only sustainable cities but also a sustainable future — one that aligns economic growth with environmental stewardship and social equity.

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