Guatemala - Livestock Development Project

RESTRICTED Report No. P-~887 This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF GUATEMALA FOR A LIVESTOCK DEVELOPMENT PROJECT December 21, 1970   INTERNATIONAL BANK FOR RECOISTRUCTION AND DEVELOPMENT REPORT AND RECOIvWENDATION OF THE PRESIDET TO THE EXBCUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF GUATEMIALA FOR A LIVESTOCK DEVELOPMINT PROJECT 1. I subrnit the following report and recommendation on a proposed loan in an amount in various currencies equivalent to US$4..0 million to the Republic of Guatemala. PART I - HISTORICAL 2. The proposed project would be the Bank Group's first agricul- tural operation in Guatemala. It is based on the "Beef Cattle Program for the South Coast" prepared by the staff of the Bank of Guatemala. The project was prepared with the help of a FAO/IBRD Cooperative Program mission that visited the country in March 1969 and was appraised by subsequent Bank missions in October-November 1969 and January 1970. Because of national elections and a review of economic priorities by the new Government which took office in July 1970, negotiations on the proposed project were delayed until after economic policy discussions had taken place between the Bank and the new administration. Negotia- tions took place in 'Washington from November 24 through 27, 1970. The Borrowter was represented by Messrs. Mario Martinez, Vice-Iiinister of Agriculture, Julio Lorenzo, Deputy Manager of Bank of Guatemala, and Federico Fahsen and Arturo Padilla from the National Planning Council. 3. The proposed loan, the fifth to Guatemala, would increase the Bank's total lending from US$46.5 million to US$50.5 million. The following is a summary statement of Bank loans to Guatemala as of Novexrber 30, 1970. Loan Amount (US$mi)J'ion) Number Year Borrower Purpose Total Undisbursed Loan 124 1955 Government Roads 18.2 Loan 487 1967 INDE Power 15.0 2.7 Loan 545 1968 INDE Power 7.0 5.8 Loan 576 1968 Government Education 6.3 6.3 Total (less cancellations) 46.5 of which has been repaid to the Bank and others 18.2 Carried forward 28.3 14.8   -2- continued Loan Arnou tUS$million) Number Year Borrower Purpose Total Undisbursed Brought forward 28.3 1h.8 Total now outstanding 28.3 Amount sold: 2.8 of which has been repaid 2.7 0.1 Total now held by Bank 28.2 Total undisbursed 1h.8 4. Disbursements under the Second Power Loan (5h5-GU) made a slow start because of flooding caused by heavy rains in late 1969, which made it necessary to shift the site of the two existing gas turbines and the new thermal plant. The Education Project, which was signed in Dec- ember 1968, is approximately one year behind schedule, and no funds have been disbursed to date. A series of difficulties has arisen over this project, in part because of the change of government, and the prepara- tion of the IMiaster Plan and of an anpropriate curriculum for the second- ary schools has been delayed. A Bank mission visited Guatemala in September 1970 and agreed on s-teps to be taken to speed up implementa- tion of the project. Construction is now scheduled to start during the first quarter of 1971. 5. In December 1969 the IFC approved an irvestment of up to US$0.9 million to finance construction and operation of a hotel in Guatemala City. However, the investment contract has not yet been signed, pending, among other issues, a decision by the Government on whether to give the project the benefits of the Tourist Incentives Law and agreement among the participants on various legal and financial miatters. IFC is also discus- sing with the Guatemalan Government and private sponsors possibilities for its participation in the financing of a large nickel project (EXI'1IBAL) which has been under consideration for several years. 6. A number of projects are being prepared for consideration by the Bank, including projects in telecommunications, highways and power. The telecommunication project should be ready for presentation to the Executive Directors before the end of the current fiscal year. PART II - DESCRIPTION OF THE PROPOSED LOAN 7. Borrower: Republic of Guatemala.   -3- Amount: US$4.0 million. Purpose: To provide financial and technical assistance to about 300 beef breeding and fattening ranches to increase production through efficient modern techniques. Amortization: In 16 years including a five-year period of grace, through semi-annual installments beginning June 15, 1976 and ending December 15, 1986. Interest Rate: 7