Announcement of Loan Granted to Peru on January 23, 1952

, I} \) ....•. ~ , •. ......· INTERNATIONAL BANK FOR RmONSTRUCTION AND DEVELOPMENT Washington, D.c. FOR THE PRESS FOR IMMEDIATE RELEASE Presa Release No. 27S Jan~ 23, 19S2 The . International Bank for Reconstruction and Development today made a loan ofr.$2,Soo,ooo ___) ; to Peru to improve the country's main port .. the . Port of . Callao, located 5 miles west of Lima - by providing modern facilities for handling general cargo and tor the unloading and storage of bulk grain. Eore efficient ha.~dling or the~e cargoes, which accou.pt for 8~ of the cargo ~oving through the port, will, speed up the turn~around time of ships, eliminate losses ,:1 uof grain from rspillage and eff E;·ct si1eable savings .in foreign exchange. ' I . ... , . The proc~eds of the ~nk loan will be used· to import the equipment needed ~. for the port :improvement prr3ject, th~ total cost of which is estimated at the equivale:it of about $4,00C\000., Peruvian currency costs ou_t of its own resources. 'I'he Peruvian Government will finance ·the The general cargo-handling facilities will be designed to expedite the movel't\ent of cargo to and from shipside, to sta~k it in warehouses or storege yarde, and to transrer·: it to and from· trucks and railroad cars. The equipment will consist of fork-lift t:rucks, pallets, p2:llet racks, s1;,raddle trucks, truck- mounted cranes, tractors and tractor~trailers, spare parts and tools for re- pair an:a maintenance. With this equipment .in iuse, pier congestion will be elimit7iated as ra:j,.lway cars, and trucks, as a rule, will not be on the piers while ships are loading or unloading. 'Vertical stacking'.' of cargo will be 1 . (' _great,?,,Y facilitated by mechaniz~ equipment and wil\\ provide additional storage' space without any increase in ground area. The grain-handling facilities will be designed to unload' ·bulk grain from .• ships at the rate or about 400 tons per hour, and to store it in elevators  :~ 2· - . ,·' •• with, a capac~ty of 20,000 tQns~ ?he equipmerit .wiU c·onstst or two movable \\ . unloading 'towers. wit~ the· necessary· eonveyo~s, distributio~ ·p111ing, machin817 a.nd ~ccessories for delive1~ing l)ulk grain as· unloaded f'rcm ships to the elevators. These '1E!]( facilities will malte u.se ·or wharf ~pace now idleJ will . 0 o. release bertlling space needed. for general car~ now occupied about 2SO days . a,. year. by grain ships J and will' speed up the turn-around time of ships by · reducing the w,.loading time rrom 8 or 10 days to l or 2 ~ys. :tn order to. assure more effici~nt operation or the port, the Govern.. ment. or Peru will ·create an aqtonomous Port Authority whi~h will be placed .. # l! ! . ~ \, undel' the direction of a qualified and experienced Port .A'dminis~ator. · Th~~ l~)an is f'or a term of 15 years. and bears. interest. at the rate of 4~ 'per ann.urnJ includin~ the 1%' commission which, in accol"dance wifttt' the . • )) > Bank's Articles of Agreement, is allocated to a special reserve. Amortiia- tion payments will begin on January 11 i954. The Peruvb.n economic si tt..ation hai~t. improved over the past two years and gives promise of continued growth·and. opportunity for ·rurther develop- • ment. Although Peru• s foreign debt 'is still in partial defa,.iJ.t, substaptial P?-"Ogrf!ss has been mg.de towa·rds settl~ment, In November 19Sl the Peruvian Government -:. announced.the· terms of a new debt readjustment plan negotiated with the Foreign\r,londholders Protective Council. . in r!ew · Yo;rk, and stated that •' the plan would be submitted i.n. the. near futw;-e to the Peruvian Congreee tor approval, Progress has also been made on n91otiatione with the Council "Of Fore'ign Bondholders ·in London regarding two sterling ies~es •. After approval by tbe Bank1 s Executive Directors, tne Loan Agreement was signed by senor Don Fel'nando· Berck~eyer, Peruvian Amba111ador to the Unit,!\ Sta.tea/:: o~ b"ehalf; ot the· Government of Pezii, and 0 by Eugene R. Black, President, on beha.lf of the International Bank for Rectnstruction and Dc.7elop- • ment. t. l • - 3- ' . /" SUPPIEMENTAL STATEMENT ON LOI\N TO PERU FOR. THE PORT OF CALIA10 • {i The Economic Situation r \\ Peru, a country of S ,m1111~n _ people is well er,dowed with manpower, raw materials, land and pc,wer resources. While ita induatrial progress has been swift in rec'ent ye&rs, it is still pr~ril7 dependent upon agriculture and mi~ing for its. major ;--exports • . A favorable factor 1n Peru•e b~lance of payments prospects is the flexi- bility in its forei,gn trade. Markets tor export goode, principally sugar., cot ton and minerals, are likc.~ly to expand. While the increase in p9pula tion . •, '.( ,, " \1 would make it difficult for Peru to contract imports·of foodstu!ts, most other impor~s can be reduced in times of exchange shortages. Peru has already , ' the limits of exchange availabilities shown an al:;J.i.ty to. keep its imports within and. over tb~ last decade, it did not e:<peri,ence any serious loss of reserves. • Necessary adjustments of balance of trade were brought about through exchange controls and import prohibitiohe or through devalue.tion. A S3·stem qf fluctuating exchange rates· wa·s established in 1949. It permits two free rates - one for negotiable exchange certificates and the other for drafts. This reform was accepted by the International Monetary Fund as a tempor~ry measure. Since 1949, both rates have f'luctuated arowid 15 soles per US dollar as compared with the par value of 6.S soles per dollar, The outbreak o! war in Korea,'. brought about an increase in world demand for Peruvian products. In 1950 the value of total exports reached $194 million and exceeded that or total imports ($187 million) !or the first time since 1946. This export surplus generated inflationary preseures. Since May 1951, there has been a small decline in foreign exchange reserves due primarily to lower prices tor cotton and suga:t·• The expansion of bank credit was restrained ••  G tr \\ -4- (I ~/ by the establishment or higher reserve requirements, internal prices have been relatively unchanged. . . ~ . . Should the foreign trad- situation become more.difficult in the near Money supply and • future, importe could be reduced. Present reserves a·1,o give some leeway. In the long run, demands for imports could bG subetantialJ.1 eased by an increase 1n domestic · ,J food suppq which the Peruvian Government le attempting to promote through irrigation and. transportation projects. Peru•e external publio debt (including loans gt.1r1mte~ by Peru), as u ,:, or October 1951, amounted to $81.1' million, 47.4 million Argentine pesoe and 1.2.68 miUion. There are also two non-guar•nteed Export-Import Bank ' .. . c:. loans amounting 'to· ~21.4.milllon. Part of the old debt, consistinl ot dollar and sterling bonda, te in default t)n both int$1'eet and amortiaation. Unt11· the .- terms or settlement are known, 1t is impossible to give an accurate Tahle or the total debt, expressed in dollar~, but it would be of ordll' ot flJO million, The Argentine debt ii pa)"IDlt t:l.thtl' 1n p1101 •med 01 Peruvian· apOl't,1 to ih1 Ar1eniln•, or in dollar,, or po\llld1 trie general at.tl'JJ.ns ,, • unr11li1tio r1t11 ot exohln11, Tht b~lk of th, ,terlinl bond, oontas.n • ' aonvtl'1ion olau.11 undll' whioh th, bondholder, have the option to 111 paid in clollal'I at, I fixed l'lilt l>11ozal2t10~ ~: thp Pro,11ot, TI\I P•t ot Callao, looatld about 5 lld.111 ,,,,t of :tJ.ma, 11 ihl Misl pon ot Pin,· A~t, l/) ot the total combined import, and export, ot ,_PIN (inolv.diftl 7QS ot· PIN', expona ot 1111t,al1) mOT1 t,hl'o111h Callao •.· In 1'50, the, total vattio ot th• Port ,~ood at appl'oximlt•lr 1,3 ffliU..on ton,,, or thi1, 7S•80J 1111 tor1S.p wade ~nd the remainder coa1twi11 vattio, • b -s- ApproXimately 60-6SJ of ·the cargo now moving ~ough the Port consists () .of general cargo (materials s1ipped in bags, bales, barrels and boxes, etc.)-. .Bulk grain imports, which 1n the la.st two years have exceeded 200 1 000 ton~ .,. , i. C, (('.;, - per armua, currently account'.j for ·about 2c,J. Although Callao is a modern port ii ti . ineotar •• docks and warehou2ies are concerned, the lack or modern eq\lipment limits the methods ot handiing both general"°'"cargo and bulk grain to· those which are slow and wastetul c()JUJ)Ued with modern methods. Except tor the lilting ot,cargo into or O\lt of. a ship (which ie do~e by ship's tackle) general cergo is currently handled largely by"band, one piece at a time. During moat ot the time a ·ship 1a 1n the Port, it is waiting for cargo to be moved on to or ott ot a loading platform and on te or ott ot the dock. Much of ,;:this time can be saved by recently deweloJ*l methods in CJ ·which items of cargo are loa~ed on to pallets (small wood~ plat.tor.me designed • to be handled by t'ork•lift trucks). Thereat\er all ot_~~;~argo on each pallet ·can be handled a1 an individual package which is rac:1U7 loaded, unloaded and stacked by f'ork-litt trucks and transpoiated on traetor..drawn trailers. When- ever used, these methods baTe sll:~ly reduced the tiae req~ed to load; unlott.d and handle general c~go. Because or undue delays experienced t,y its shipa 1n the Port ot Callao, the Europu.'l, South Pacit!c and Magellan Conference on April l, 19Sl . oi-~ered a 2$% aurcharge,applied on all rates between European ports and the P~ ot Callao. By removing the JU.j,~ cau,ea of the delays, the new tacUities and <)" i{ .,~, improved administration eJ11ould result ill the remnal ot the nroharge. Under present manual method, ot unloading bulk grains, \lllloading time for an e,ooo ton cargo runa !~en 8 tft lO daye, and so,ne of the grain 1' lo~ 'i:? /< in the pi-ocue. Tbe n• tac1UtS. ~ vUl:';,el,_hd.aate the 1011 of ;'grain &pd iteduee .\\ \~ /;  0 -6- the.unloading tim.e of an 8,000 ton vessel to l or 2 days. The resultant . ~'?! savings· to Peru or foreign !exchange should be "the equivalent or about a halt mi~lion dollars per year. •• The amount o! bulk grains handled by the Port of Callao has been increasing <7 and will continue to increase. Although local production or wheat, the principal grain involved, has been expanding (at the rate o! 3,·SOO tons per year) c~nswnption has been increasing at a faster rate (~3 1 000 tons per year). In Peru ~heat can be raised only in the high sierra, where the amount of cultivable lan~ is strictly limited. ',Jhile improved methods can bring about increased yields, local production is not expected to increase a1· rapi~ as consumption. Wheat brought to the Lima area .< the principal area of con- sumption) i'rom the northern and southern departments ot Peru, would be transported by coastal vessel to Callao. The project can make its ma..~um contribution to Peru only if concurrent 4t steps ,~re taken to improve the administration o! the Poi-t '0! Callao. 0 The Peruvian Government,. therefore, intends to establish an autonomous Port Authority to .administer the Port and to appoint a port e..~ert as ite Managing Director. Completion of tnis project, which the tank• s ~oan will help to fina~ce, · accompanied by ifflpx-oved administration, lfOuld eliminate the Pert of Cal4o•e most serious snortc,omings in~ relatively short tinie. C 0 ••