Announcement of World Bank and IDA Support Second Agricultural Credit Project in Honduras on April 21, 1980

FOR IMMEDIATE RELEASE tWVorld Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.• Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 80/80 Apr i 1 21 , 1980 IDA NEWS RELEASE NO. 80/41 WORLD BANK AND IDA SUPPORT SECOND AGRfCULTURAL CREDIT PROJECT IN HONDURAS The World Bank has approved a financial package of $25 mill ion to support a second agricultural credit project in Honduras. The operation includes a· $20 million World Bank loan and a $5 million credit by the Inter- national Development Association (IDA), the Bank's soft-loan affiliate. Total project cost is estimated at $38.5 mill ion. The Central Bank of Honduras will be the principal executing agency. The Central Bank will make medium- and long-term subloans for agricultural development through public and private participating intermediaries. Public corporations will carry out the banana, plantain, and forestry components. Agriculture is the most important economic activity In Honduras. • It contributes about one third of gross domestic product and generates about 81% oj export earnings. Honduras is the fourth largest banana exporter in the world, contributing 10% to the international trade in this product. The project aims at expanding domestic food production and consump- tion, increasing exports and import substitution, generating employment, improving incomes and strengthening institutions for agricultural planning and development and for natural resource conservation. Almost 90% of the expected 12,800 direct beneficiaries have annual incomes below the estimated average rural poverty income level of $170 for Honduras. The project is expected to help raise their annual incomes substantially. It will also help increase the value of agricultural output by about $21.5 mill ion annually. Project production will consist principally of sugarcane, rice, milk, beef, bananas, plantains, timber and firewood. The $20 mill ion Bank loan to the Republic of Honduras has a term of 20 years, including 5 years of grace, with interest at 8.25% annually. The $5 million IDA credit, also to the Republic of Honduras, is for a term of 50 years, including a 10-year grace period. It bears no interest, but carries a service charge of 3/4 of 1% a year to cover administrative expenses. • NOTE: Money figures are expressed in U.S. dollar equivalents . FORM NO. 1121 (5-76) T EC HN I CA L DAT A PROJECT: COUNTRY: TOTAL· COST: Second Agricultural Credit Honduras $38.5 million • BANK FINANCING: $20 mill ion for a term of 20 years, including 5 years of grace, with interest at 8.25% annually IDA F'INANCING: $5 million on standard IDA terms OTHER FINANCING: Central Bank of Honduras, $3. 1 million; Government of Honduras, $1.2 million; Honduran Forestry Development Corpor~tion (COHDEFOR) and Honduran Banana Corporation (COHBANA), $2 million; Financial Intermediaries, $3.9 million; and Sub-borrowers, $3.3 million IMPLEMENTING ORGANIZATION: Banco Central de Honduras Av. Juan Ram;n Molina Sa Calle Tegucigalpa, Honduras, C.A. Cable: BANTRAL The project comprises (i) a 1 ine of credit for investme~ in crops, livestock, agricultural machinery and municip~ slaughterhouses; (2) flood control and drainage works for banana and plantain develop- ment; (3) a pilot reforestation program in western Honduras; (4) studies of groundwater resources, COHBANA's organization, and use of waste bananas and plantains for animal feed; and (5) incremental project unit expenditures and related training and technical assistance. PROCUREMENT: On-farm investment items to be financed by subloans will be varied and not suitable for procurement through inter- national competitive bidding. Sub-borrowers will purchase their requirements through regu 1a r commerc i a 1 channe 1s. Whenever an ind iv i dua 1 order for goods, works, or services exceeded $50,000, price quotations will be obtained from at least three suppliers, and approval will be required from the respective financial intermediary. Civil works amounting to about $1 .6 mill ion for banana, plantain, and forestry development will be carried out through force account by COHBANA, the Ministry of Natural Resources, and COHDEFOR and/or through locally advertised competitive bidding procedures acceptable to the Bank. Vehicles and equipment will be procured by the project unit and COHDEFOR, through local competitive procedures. CONSULTANTS: About 133 man-months of internationally recruited con- sultant services in animal production, pasture management, farm economics, crop specialists, forestry development, and management studies will be provided under the project. Also about 56 man-months o~ training for COHBANA, COHDEFOR • and the project unit staff will be required~ ECONOMIC RATE OF RETURN: 55% EST IMATED COMP LET I ON DATE: 1984 - 0 -