Announcement of Peru Consultative Group Meeting on April 18, 1975

I ~ • 1818 H STREET. N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 Bank News Release April 18, 1975 PERU: CONSULTATIVE GROUP M!ETING The following announcement was made yesterday by the World Bank's European Office. "A meeting of the consultative group for Peru, sponsored by the World Bank was held in Paris on April l;.6 and 17, 1975, with the purpose of coordinating ex-ternal financing of the development efforts of Peru. The meeting was chaired by Mr. Enrique Lerdau, Director of Country Programs Department, Latin America and the Carib- bean Regional Office of the Bank. The delegation of the Government of Peru was headed by • General Amilcar Vargas Gavilano, Minister of Economy and Finance, and included the Head of the Planning Office, General Jose Loayza Amezquita and several other high officials of the administration. The meeting was attended by the representatives of the Governments of Belgium, Canada, Finland, France, Federal Republic of Germany, Italy, Japan, the Netherlands, Spain, the United Kingdom and the United States. Representatives of the International Monetary Fund, the Inter-American Development Bank, the Permanent Executive Connnission of the Economic and Social Inter-American Council (CEPCIES), the United Nations Development Programme, and observers from Switzerland and the Organi.zation for Economic Cooperation and Development also attended. The group discussed the development prospects of Peru and its needs for foreign financing, on the basis of a report prepared by the World Bank. The Head of the Peruvian delegation made a comprehensive presentation setting forth the objectives of government development strategy and the policies which will be • pursued during the next several years. He emphasized the twin goals of increasing domestic food production and rural incomes, and developing at an accelerated pace basic industries, petroleum, /MORE  -2- • \ • l mining and essential infrastructure. The. Minister described the recent measures for reducing non-essential consumption and for in- creasing domestic savings, in the fields of taxation and curtail- ment of consumption subsidies. He indicated th'at the Government was considering measures to mobilize additional domestic resources in the near futu~e, including readjustment of the domestic price of petroleum products. The group agreed that Peru had made substantial progress in achieving the objectives of structural socio-economic change and laying foundations for rapid economic growth. The group noted the increase in Peru's capacity to generate development projects. It noted Peru's efforts to diversify its production and export structure and its success in expanding non-traditional exports. The group noted the progress in the implementation c,f agrarian reform, and ~ndicated its readiness to support investment programs in the rural areas, particularly in the depressed Andean highlands. The group expressed its readiness to cooperate with the Peruvian authorities in the preparation of feasibility studies in the rural sector, considered • of high priority for economic and social development. The grcup reviewed Peru's external capital requirements and agreed that to achieve the necessary disbursement levels, project loan cottmitments cf the order of US $950 million annuc=i1ly would be needed in the three-year period 1975-77, compared to an average of US $530 ~illion achieved in tte two years 1973 ar.d 1974. It was of partic.1.\lar importance to assure that the required connnitment level be reached in 1975 and 1976. The group discussed the li$t of projects prepared by the Government, amounting to US $3.5 billion for 1975-77, an amount which should enable the project loan commit- ments to reach the desirable level. The group further agreed that so111.e. local cost financing of projects was needed. The group also agreed that it ·was important that suitable technical assistance be provided. to enable the project financing to be used to maximum advantage. In addition, financing not tied to specific projects will continue • to be necessary. /MORE  -3- • The group noted that Peru was successful .in m1obilizing financing from the commercial markets, despite the deterioration in the world financial situation. It agreed, however, that the cost of this borrowing was such that it could only be relied upon as a supplementary source of finance, and emphasized the need for intensification of efforts at domestic resource mobilization. The group noted the hardening in Peru's average terms of borrowing, and reco111Dended that external financing should be provided on as favorable terms as possible including assistance on concessional terms. It w~s suggested that efforts should be made to blend government-to-government assistance with the credits made available under the export credit guarantee arrangements. The group also agreed that for several of the large projects included in the project list, co-financing would be desirable. The group noted the Government~s determination to pursue a careful debt management policy, and supported the Government's intention to ensure that borrowing decisions are • consistent with project priorities and sound financial planning • A noteworthy feature of the meeting was the lively interest expressed by group members in many of the projects included in the project list. It was agreed that the group would meet again in approx- imately eighteen months." •