Announcement of World Bank Loans for Guatemala Earthquake Reconstruction on July 16, 1976

.t· eworldBank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. • Telephone: (202) 393-6360 BANK NEWS RELEASE NO. 77/8 JULY 16, 1976 WORLD BANK LOANS FOR GUATEMALA EARTHQUAKE RECONSTRUCTION The World Bank will provide Guatemala with $26.5 million in loans for national reconstruction, following the massive earthquake of February 4, 1976, which left death and destruction in its wake. The earthquake spread ruin across 3,500 square miles of the most heavily populated part of Guatemala, killing at least 22,000 people, injuring nearly 75,000 and leaving one-fifth of the nation's population, or one mill ion people, without shelter. Most of the damage occurred in the highland area, north and west of Guatemala City and in the eastward strip, running along the Motagua River valley towards the Atlantic coast. Thirteen towns were almost totaly destroyed; in another seventeen towns more than 70% of homes were obliterated. The Government of Guatemala has been making considerable efforts to over- • come the devastating effects of the earthquake and has estimated reconstruction costs, over the next four years, to be a staggering $750 million. The Government has estab- lished a National Reconstruction Committee to coordinate the activities of a recon- struction program, has arranged for an obligatory domestic bond sale of $122 million and has mobilized funds from public, private and external sources. The World Bank, as well as the Inter-American Development Bank (IDB), the Central American Bank for Economic Integration (CABEI), the Agency for International Development (AID) and the Government of Venezuela have agreed to participate in the reconstruction effort. The World Bank loans will help finance the reconstruction and rehabilitation of housing, schools and ports--sectors which suffered the heaviest damage in the earth- quake and which are therefore considered to be of high priority in the Government's reconstruction program. Housing The housing sector suffered 65% of total damages. Of the 258,000 dwellings damaged by the earthquake, 58,000 were destroyed in Guatemala City, 12,000 in provincial capitals and the rest in small towns and vi 1 lages. The Government of Guatemala has ~ asked the World Bank to participate, on an approximately 50-50 cost sharing basis, in the housing reconstruction program. I ... NOTE: Money figures are expressed in U.S. dollar equivalents.  -2- area. The $20 million World Bank loan for housing will help construct 10,000 new housing units by 1979, or 17% of damaged housing in the Guatemala City metropolitan Even prior to the earthquake, Guatemala City provided inadequate housing for • its poor--the people hardest hit by the disaster. With the loss of their meager habitations, thousands of homeless families staked out their plots in the middle of the metropolitan city area and created squalid squatter settlements of 2,000 to 3,000 f am i 1i es. The World Bank loan wi 11 provide 10,000 low-income families in Guatemala City with housing, infrastructure (water, sewerage and drainage systems, paved streets public lighting) and services (community centers, schools and markets), as wel 1 as with structures to house small-scale commercial and manufacturing industries. Each family with an income of Jess than $150 a month wi 11 pay the Government about $ 12 to $ 19 r110 n th 1y for ho us i n g and p ro j e ct be ne f i ts . The World Bank loan wi 11 also help another 8,000 low-income families living In ten provincial capitals of Guatemala to rebuild their homes throu~h the provision of a credits program for the purchase of building materials and to cover labor costs. The credits program wi 11 benefit 70% of households seriously affected by the earth- • quake In the towns (with populations of 4,000 to 28,000) of Chimaltenango, El Progreso, Salama, Solola, Quiche, Totonicapan, Jalapa> Zacapa, Puerto Barrios and Antigua. Under the Bank project, small- and medium-sized manufacturers of building materials wi 11 be provided with easy-term loans, ranging from $5,000 to $15s000, to meet the requirements of the housing sector and to generate employment opportunities for semi-skilled workers. Education In Guatemala City 1 about 13 public primary schools, serving almost 8,000 students were dest~oyed, as were three public secondary schools serving 4,400 students. Outside Guatemala City, primary schools in urban centers accommodating 9,000 students at1d R secondary schools with a total enrollment of 2,500 were destroyed. The $4.2 million World Bank loan will help construct 27 new primary schools in Guatemala City to service 15,360 students and five new secondary schools in Guatemala City and other provincial cities to accommodate 5,280 students. Ports As a result of the earthquake, the port of Puerto Barrios, on the Atlantic Coast) was heavily damaged. The $2.3 million World Bank loan will rehabilitate Puerto • Barrios to provide sufficient port capacity on the Atlantic for the next three to four years, until a major capacity-increasing facility can be built and operated. The port I ...  -3- • rehabilitation project will also provide jobs for a large number of port workers who lost their jobs as a result of the earthquake. Of the $26.S million World Bank loan to Guatemala, the equivalent of $20 million wi 11 be lent for housing reconstruction, on Third Window terms, for 25 years, including 7 years of grace, with interest at 4.85%. An additional 4% wi 11 be paid to the Bank by the Interest Subsidy Fund, representing the difference between the Bank's standard rate and the charge to Guatemala. The Government of Guatemala wi 11 on-lend the proceeds of the housing loan to the Banco Nacional de la Vivienda, on the same terms. The equivalent of $6.S million will be lent for school and port reconstruction for 22 years, including 4 years of grace, at 8.85% interest per annum. So far the World Bank has lent its funds and expertise to major disaster areas for the purposes of reconstruction; it has participated in reconstruction projects in, for example, earthquake torn Nicaragua (1973); cyclone-devastated Bangladesh (1970); and in the .drought-scorched Sahel region of Africa (1973-present). To date, Guatemala has received World Bank loans totaling $107 million . • • - 0 - FOAM NO. 1121 (5-76) T E C HN I CA L D A T A PROJECT: COUNTRY: Earthquake Reconstruction Guatemala $52 million • TOTAL COST: BANK FINANCING: $20 millon on standard Third Window terms, $£..5 mi 11 ion for 22 years, with 4 years of grace, at 8.85% interest. OTHER FINANCING: Government of Guatemala IMPLEMENTING ORGANIZATION: Housing - National Housing Bank, 6th Ave. 1-22, Zone 4, Guatemala City, Guatemala Education and Ports - Ministry of Communication and Public Works, Palacio Natiu;1al, Guatemala City, Guatemala PROJECT DESCRIPTION: Housing: (i) Sites and services and materials credits for about 10,000 housing units to be developed in three loca- tions in the Guatemala City metropolitan area; (ii} Materials credits program for ten de- partmental capitals severely affected by the earthquake that will help about 8,000 fam- ilies rebuild homes: (iii} Small business development program that wili provide credit to producers of building materials for housing. construction, and also provide commercial a,,d industrial outlets to be leased to entrepreneurs in the three sites that will be d e - . veloped in Guatemala City metropolitan area. Education: Construction of about 13 primar schools to replace destroyed primary schools, of 14 primary schools to be included in the sites and services component of the project, and of 5 lower secondary schools to replace destroyed schools. Ports: (i) Limited rehabilitation of Puerto Barrios by converting the existing 350m long access bridge into a two-berth pier, dredging ab\.lut 2iJo,ooom3 along- side the pier, and provision of cargo handling equipment; and (ii) A port organization study to help improve the port institutions and planning in Guatemala, and a feasibility study for construction of a dry bulk terminal. PROCUREMENT: Housing: Contracts for civil works will be awarded to pre- qualified bidders on the basis of international competitive bidding carried out in accordance with Bank guidelines. While works will be grouped to the extent possible to encourage competitive bidding, contracts are not expected to be large enough to attract interest from foreign firms. Procurement of vehicles for the Project Unit will also be in accordance with international competitive bidding. For this component, as well as.for the education and port components and in accordance with the Central American Agreement on Fiscal Incentives, manufacturers from Guatemala and other Central American Common Market (CACM) member countries wi 11 receive a preferential margin of 15 percent of the c.i.f. base price or 50 percent of the import taxes applicable to non-CACM manufacturers, whichever is lower. Education: Construction contracts will be grouped in packages of $300,000 - $400,000 in order to attract contractors with ade- quate management expertise and equipment. Because of the small size of the contracts, however, and as in the recently approved Second Education Project, contracts for civil works will be awarded to pre-qualified bidders on the basis of competitive bidding ad- vertised locally and in accordance with local procedures. Ports: The main contract comprising marine works and paving will be awarded on the basis of competitive bidding • in accordance with local procedures. International competitive bidding will not be used in order to expedite the process. I . .. • Page 2 CONSULTANTS: Housing: Local or foreign consultants will be con- tracted to provide specialist services in the fields of engineering, architecture, urban planning, business development, and com- munity organization and training, for a total of about 108 man-months. Ports: Local or foreign consultants will be contracted to conduct a port organizatioh study and to carry out a feasibility study for a dry bulk terminal. ESTIMATED COMPLETION DATE: 1979 - 0 - • •