Announcement of Eight Million Five Hundred Thousand US Dollars Loan for an Agricultural Credit Project in Nicaragua on November 15, 1973

1818 H STREET, N.W., WASHINGTON b. C. 20433 TELEPHONE: EXECUTIVE 3-6360 Bank Press Release No. 73/73 Subject: $8.5 million loan for an November 15, 1973 agricultural credit p~@ject in Nicaragua The World Bank has approved a loan of $8.5 million to help finance a project that will help to expand and diversify, through on-farm development credits, Nicaragua's livestock and agricultural production and exports. The project is designed to j.ncrease the flow of medium and long-term credit into agriculture, particularly to smaller and medium-sized producers, as well as to encourage private banks to make medium-tem loans for agriculture. Tech- nical and supporting services to producers will· \be provided. The loan is being made to the Central Bank of Nicaragua, which manages the Govemment 's Special Developme.nt Fund (FONOO). A Project Unit will be • established within FONOO to carry out the project. Through participating banks under the proje~t, on-farm development credits will be made available to five types of production units: rainfed dairy farms, irrigated dairy farms, rainfed breeding and fattening ranches, irrigated pastures and beef fattening fams, and irrigated crop farms. The project is structured to encourage participation of producers smaller than those normally served by the banking system. At least $1.5 mil- lion of the proceeds of the World Bank loan has been reserved for smaller beneficiaries. These smaller beneficiaries will need to contribute only 10% of medium and long-term investments for farm or ranch development; larger sub-borrowers, on the other hand, will be required to contribute 20%. Interest on loans to smaller beneficiaries will be lower than that charged larger sub- borrowers. No sub-loan will be made ·by a participating bank to a sub-borrower for more than $100,000. The sub-loans to producers will finance items such as land preparation and planting, structures and buildings, machinery and equipment, irrigation facilities and water supply, breeding stock and fencing. Four sub-loans • Note :i .Money figures are expressed in US dollar equivalents. /more  • Bank P.R. No. 73/73 -- Nicaragua -- agricultural credit - 2 - will be made for supporting services; two of these will be made to cattlemen's associr: '",ions or cooperatives to enable them to provide joint services to ranchers and fanners, and the other two will be made to con- tractors for the purchase of medium-heavy earthmoving and ancillary equip- ment to be used to assist ranchers and farmers in carrying out farm development plans. Technical services to be financed under the project include extension services, a beef marketing study, and the establislunent of two simple marketing centers for buying and selling cattle, a pasture seed multiplication scheme, and an artifical insemination center. These services are expected to increase the efficiency of Nicaragua's livestock industry. By increasing the production of beef, milk and some irr:i..gated crops, the project is expected to help feed Nicaragua's growing population and improve its balance of payments. substitution. At full development of the project, incremental exports of beef, milk and sugar are expected to earn $9 million, $2 million and $800,000, respect·''.vely. The project will also further import It is expected that N:karagua, a net importer of onions, • plantains and vegetables, will be able to meet its estimated requirements of these crops for domestic consumption increasingly from local production. The project is estimated to cost $15.8 million. The World Bank loan represents 54% of this amount which is almost equal to estimated foreign exchange costs. The remainder of the project costs will be contributed by FONDO, by the participating banks, and by the sub-borrowers. The World Bank loan will have the guarantee of the Republic of Nicaragua. It will be for a term of 16 years, including five years of grace, with interest at 7~% per ann\Dll. The proceeds of the loan will be relent by the Central Bank, through FONDO, to participating banks which will, in turn, make sub-loans to ranchers and farmers for up to 12 years, including not more than four years of grace. • - 0 -