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The initiative, in Arraiján district, Panamá Oeste province, involves the construction of a wastewater collection and treatment system that will benefit around 83,000 people.
The 16-year loan was approved by CAF last year, according to a notice in the country's official gazette.
According to authorities, some US$250mn of the total required investment will be financed by loans from multilaterals such as the Inter-American Development Bank (IDB), the European Investment Bank and the Central American Bank for Economic Integration.
The signing of a US$150mn loan agreement with the IDB to fund other projects that are part of the program was approved by Panama's national economic council last week.
More than 300,000 people are set to benefit from the overall initiative, which complements a US$2bn program to improve sanitation and reduce water pollution in the Panama bay area, which was launched by the government in 2007.