The Inter-American Development Bank (IDB) might extend the November 28 deadline for the government of El Salvador to approve a US$40mn loan required to finance Central America's US$320mn regional power grid interconnection project known as Siepac, an IDB source close to the project told BNamericas.

The deadline expires automatically one year after the IDB's board of directors first authorized funding, the source explained. Although the project could theoretically move ahead without El Salvador's participation, the IDB would have to review all technical and economic studies, and the bank is therefore more likely to allow more time to secure congressional approval.

The Siepac project aims to link the power grids of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama through a 1,830km, 220kV transmission line.

The project is to be funded through six separate US$40mn IDB loans agreed with each of the member countries, plus US$5.8mn in equity from the state power companies of the respective countries and a US$45.8mn equity stake by Spanish energy company Endesa.

El Salvador is the only country so far not to have signed the IDB loan contract. The bank has now taken the unusual step of holding a forum in El Salvador's capital San Salvador on Monday and Tuesday during which it will set out arguments in favor of the project and try to persuade opposition members of El Salvador's congress to approve the loan, local daily El Diario de Hoy reported.

The opposition members are reported to be holding out on approving the IDB loan contract because they hope to extract promises from the government on domestic market regulation and energy rates.

Although the IDB does not intend to get involved in El Salvador's internal politics, an IDB official Marcelo Antinori encouraged the assembly not to mix domestic regulatory issues with the broader integration project.