Announcement of Three Million Five Hundred Thousand Dollars Loan in Costa Rica on February 11, 1959

WORLD . } IN·TERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 1818 H STREET, N.W., WASHINGTON 25, D. C. TELEPHONE: EXECUTIVE3-6360 PRESS RELEASE NO. 576 SUBJECT: $3.5 million loan in February 11, 1959 Costa Rica. The World Bank today made a loan of $3.5 ·million to the Central Bank of Costa Rica. to assist in a lend.ing program which has been operating for several yea.rs to promote the development of agriculture and light industry. Eight private .American banks are participating in the loan, without the World Bank's guarantee, for a total a.mount of $1,510,000. This represents all of the first four maturities and portions of 'the next three maturities, which fall due between October 196o and October 1963. The participating banks are . ~ Continental Illinois National Bank and Trust Company of Chicago, Bankers Trust Company, Chemical Corn Exchange Bank, The Philadelphia National. Bank, The First National City Bank of New York, Girard Trust Corn Exchange Bank, Brown Brothers Harriman & Co. and Grace National Bank of New York. Under the program, loan.s are extended to individuals and private·enter- prises by Costa Rica's commercial banks, which in turn receive credits for this purpose from the Central Bank. Since the beginning of the program in 1952, there has been a significant increase in agricultural output both for export and for domestic markets, and in the development . of' associated light industries. In September 1956 the World Bank ·made a $3 million loan to the Central Bank to cover the foreign exchange requirements of the program over a two-year period. The new loan Will assist in the continuation of the program until about September 196o. • The loan is for a term of six yea.rs and bears interest of 5-3/4'1, including the l~ commission which is allocated to the Bank's Special Reserve. Will begin in October 196o. Amortization The loan is guaranteed by the Government of Costa :Rica.  ... 2 - Agriculture is of paramount importance to the Costa Rican economy; it contributes nearly half the national income, accounts for almost all export earnings and directly employs over half the population. The conditions for asriculture in Costa Rica are particularly favorable and the standard of research • and extension services is exceptionally high. As a result, important technologi- cal improvements leading to greater output and lower unit costs of production have been demonstrated and farmers are keen to adopt them. In most cases this involves investment in equipment, materials or property development and many farmers have been able to take advantage of credits under the program for this purpose. Costa Rica's most important exports are coffee, bananas, cacao and beef cattle. In view of the market outlook for some of these commodities the Costa Ricans recognize that they must turn out products of high quality at fully competitive prices and that this can best be accomplished through the adoption of modern techniques and equipment. More facilities for storing and processing agricultural products are also required if market opportunitj.es are to be widened. • Agricultural equipment and materials imported under the previous Bank loan consisted of tractors, cultivation and harvesting implements, irrigation and spraying equipment, fert:ilizers., pesticides and weedicides, and some farm building materials. The tractors and farm implements have been used mostly for the clearinf and preparation of land for pastures and for the cultivation of various crops tor domestic consumption. There has been a marked increase in food products tor home consumption with rapidly expanding production of rice, meat., corn and beans. Home consuuiption of meat increased by 45i during the last eight years, due partly to relatively low production costs and consumer prices, and partly to an increase in the number of cattle raised. This increase also permitted a rise in cattle exports from 3,700 head in 1954 to 17,000 head in 1957.58. • The spraying and irrigation equipment, together with the fertilizers, pesticides and weedicides, have been used to intensify and improve production on " • - 3 - existing coffee and cacao plantations and for new banana plantings. In coffee, the average yield for the three year~ 1954-57 was 500 pounds per acre, .compared with 365 pounds for the five years 1949-54; on some plantations ~ecent, ,yields were as high as 1,220 pounds per acre. The coffee is of good quality-and is largely sold to specialty tr.a.rkets in Europe. Industrial development in Costa Rica is slowly 100ving from a system of home industries toward the usual type of light industrial enterprises. The volume of industrial credit granted during 1956 and 1957, mainly for working capital, was $16 million equivalent. Of this amount approximately $76o ,000 was provided by the previous Bank loan for industrial projects which included textile machinery, a small power plant, a cement tube plant, a milk pasteurization plant, an ice· plan1 for fisheries, a cotton gin, processing equipment for animal feeds, a biscuit • plant, dry cleaning equipment and printing equipment. It is expected that the greater part of the new World Bank loan will be used for the import of agricultural machinery, equipment and materials, while about $1 million will be allocated to imports for storage and processing plants and light industries. After having been approved by the Bank's Executive Directors, the loan documents were signed by His Excellency Manuel G. Escalante, Costa Rican Ambassa- dor in Washington, for the Government of Costa Rica, a.nd by.Mr. Guillermo Gonzalez, Director of Economic Research, for the Central Bank •. •