Announcement of Two Loans Granted to Nicaragua on June 8, 1951

, IN.I'EP.NAT!01'TAL BAN;[{ FOR ~CONSTaUC~:CON AND PEV'ELOPMElfr • FOR TEE :e~ss ;FC13 i.E:J'.1£ASE A!M •. · i1EWSI'Al:E;RS, FBID~Y Press Reiease No. 248 J\lho . 8, l95l The International Bat\k fol:' Reconetruction and Development today mrJde two loans totalins $4,700,000 to aid 1n the develop~ent of the Republic of Nicarasua -- one of $3,500, OGO to the Goverrnnent, f o;r the !)\U"Chaae o:f' equipment and m.e.chinery for hish- way conat~ction; the othe:r o:f' $1,200,000, to tJ;,.e Banco l'Tacional Q.e racaragua for the p"U.rChase of ag~icultUJ."al machinery. The a~icul.tu-ral :riiachinel:'y loan ie guar~nteed by the · Govemnent of !'J:tc·arasu~. The lo~n for htghway con~truqtion wili enable the Government to impoi~ equip- :;ent and me.ter:t&.l~ to be usecl in. eight :road-building projects. The GoverpJ!.ent .:J:ies selected tAQse p~jects moat urgently neede4 to tmprove communioations between maJ_or centers of production, consl.llnPtion ~nd export, an~ to o~en u~ ~ew lands for the cultivation of coffee, cot.ton, cor?\,·and ot~er c~ops. The ~oad~ tote con- • structed totai 162 m!le~ and will be as:phait ~aved, pe~tt1ng 4eavy a.pd !nt~naive traffic th.routJhout the year; they will be b~lt ove~ a three and a half year period. Tbe most il~rtant arteey in the proposed systelll will be between Managµa, capital of Nicaragua, and Leon, the eo1U1try's second largest city, w4iph at :present are not connected by ~e>ac;l:. This new h;!.gp.v~y will foll.ow a roµte which. will open '\.'lP cu,lt:i'vation t!J+OU81;l mechan1,zation. Com.erce between the two citie~, now can-ied on by rail only, wiU undoubtecUy inc;re~se 1,.lpon comp:J.etion of the ne'W highw~y. The other :pr<;>poeed roads w11i also open up new a~icultural l~nd, and crop production is e~eeted t.o !ncrease with the completion of new fac1lit1ee for transport to the centers of conaµniption a~d expo:rt. The a~1cultural. machin~r.y ioan will finanee the p~chaae of equ1pme~t and spare parts to proVide the farmers of Nicare8U,~ with ~c~-needed machineeyft 'l:here a;re now • only about 300 tractO;t;"ij in the ent:tre countn. The Interna.tionali. Bank, thl;'O\lsh its loan, will t:;tnanoe purohae.es of eci'":t1t:gient ,;-an131ng f~m s:naU tr~,cto;rs to heevy l.and--  - 2 - • cleerins mac~jneey. '11ra1.ri1ns al\d se»vte·tns iac1lities, wi:th repair and maintenance · equip~ent ,. wiU aiso be finance(\ o°"t of th~ loaJl,.. At present Nioaraglla' s two prin- c1p~l cash c~o:ps, coffee an~ cotton, 0QJJ;m1and high :i,rices in the exi,~rt ma1. .ket; and. .\' the· pte$e~t :Period of pi·osper:t ty appears to be a favorable t:tme to bEJS1n a farm mechau1,~ation :progr$.,. Tlle hi3hwa~ constrt~Qtion loan is for a term of ten years and carries an interest rate of 4 l/S% 'pel.· ann~, includina tl'le USl.lal l% 0~~$ion cha~ge which, in ac-· eo~nce witll the ~ank 1:f.J Artjeles o:f' AareeD+ent; ts allocated to its spec:t.~l re·~e:rve fund. Atnortj,zatl,on paymente, calo~ated to ret!.X'e the loan by maturity; wfll.,: start' on. ~a1~6n 15, 1954.: The tai,n macl:linery loan ta for a te~ of eeven. years ancl carrie~ an in-hereat r~te of 4% pei· am.um, inc;J.ud!PS th~i.i 1% com,blission for alioeation to the ·I apeo.:ie.i reseX'Ve fund, funortizat!on paj'lltents w;(U sta~t March l5, 1954. A. :,!ank ltlissi'Cn ~eited N~earagua early 1n 195;1, ancl loan ne6ottatiQns Witll a • N1.ce.raguan ci."elesation were ste.rted iri W$eh;ingto~ op May 14, 1951. Af'ter app;rova;t by the l3e.nk's Executive D;t~ctors, tll;e· 1oan ~sre~mante were 1:;1igned on June 7';; ~951, by the l'rica:r?.SUan Ch~rge d t.Affa1.ref:I, ;!);-. Rene Schick, c;>n behalf of the Ret:~blic of N$ca:i."a~, by Dr. Leon DeBayle, Gep.eral. Manase:r of the Be.neo No.cionaJ. de Nica_~a.g~a, on bellait of th$ Bab.co Nt~ciona1 de IiiQaraSll~, and by Eut3ene R. Black, Prestd~nt,. on beh~lf of the Int~rnationa~ ]ank for Reco~ructiQn and Develol'J]1.eht. The suarantee ap•er.-t for th~ ~sricult~l ~cll:I.n~l'f loan wae ·eiene<t by the Ntc~suan Charge cl'~fa:!.re on behal.1 of N:tcar~sua a:r:id by l'lr. Blaolt on bebalf of the Bank •.. • . ' f) S'Ol?:Pl.P,MEl,."TAI,, :STA1'~~ 0~ i' 'l'BE L0ANS TO NX,CAMGUA ·:rconomic Situation o:f' Micarasqa 0 ,, . . . Like ·many non•1ndustr1al1zed countries, Nicarasua 11ie predoitd,nantly agricul·tura;t and paetora1, with ?llOst of'., its relatively small populat[ion ense~~d. in raisins coffee,, field crops flnd uv,~~ock. 0 Unlike many tatin Amer~ce.p. \ 1~~lll,ltr1es, _N1caraau,a }las a reJ~at!vely diyers1r~ea. asr,:c~ltural ecouomy. Its exporfts :f!nclude not (}!lW coffee, 1ts p:-tn~_ipal crop, b11t cotton, . ae~eme seed., r!ce, cattle, .sol<l and l~'ber. (0 Betw~en 19·42 and 1949, the soven,pient b~aet had. a deftcit, but to~ the ~"ea~ ending June 1950, the budeet ~owea.,a '9?11811 surp~~s. With the custoin.s x-ecc1pts · fr~ the p;resent hiah level· of import~ the buij.set· for" the C'qrrent fiecal year ellould also balance. N1oe~agt.1a•sz:fci;reisn debt is sinall, ai,tQ\lnting to only , $4., 000, 000 ~ . ), ( (\ .In ~ecent years, the eitpply of inoiiey in circulation bas Jtisen steadily, with mQS~ ot the tnoreaee in. tlle"fo~ of bank cl.epo$1te. At~~ end of\)Februa;ryl9:Sl, the s~pply ~e l 7% al)Qve the p1"ev1oue yea~ and almt,et 10J hisher than at the e~d of_ 1945. This ~rend Qriginated i"'rom buclaetaey d~f1c1ts arid credit eX!)a~aion and, IJJ.9:re recently, fi-..om 'liisber, export pric~e. . ·- :. . . . . In\:Novembe:i:- 1950, the Gove~en~ of Nic~ragua established new fore1~ exchange controls wbich :proY.ided for a:n effect,-ve :r0ite, ot 7 co;rq.obae to the dolle.x-. ·'; I,n ad• dit1on, it iinposed S'!.U'Charsee of up to 3 corc(obas to the doµar on e.U imports ~- exeept.eesent1alfs, and l'equired prior local currency d~poe~te by importers eQ_ual ·to ioo% of the value of me:t'chandlse fo:r which a J.icense 'is ~quested.. Fore:tsn ex- change :reeerves., which h~4 faUen to $3 1 340.,000 (ztllr October 1950, h~d 1~9reas~<l to $6,660,0001,y FebJ;Uary l95l. :tt :te too soo:q to"datem!ne to w:h,at e,xtent tllie in- .eree.ee i'P due .to the new reglUat~ona, 'beca-qee a ,pe.~ is attributable to seaso~,u. factor$. However, the n~w regu1at1ons account for some of tl'le 1ncrease and further 11 goo4 1 estats can b~ e~ecte<1. 1 tuth 0the exception ot 1949~) wllen the ooffee crop was 't.ll\USUally poor, N:1.c~:r~guan eXP~""'1is 1n ~eeent yea~s have -shown a st~accy inorease 1n valu,e.. I:p. 1945, they " . ~ou11:t,d to onJ.y $6,900, ooo.; in ~950 they had 1nc:reaeE)d to alJout · $2,, 000, 000 w~~c~~ level is eX:Pected to be matnt~ined 1n 1951. Between ;o and 60 pe~ cent of N1cara~· 1 e eX!)orta are 1;1old to the united States ~an<l ,QUbetan'l;t.al.ly all ot the rest 1 <,~s aold fo~ 'doUare or· other convert!ble c~ellcies. O~pC>rt~tiee tt!>~ e~an41ns "'e~~s·ap~Qar to be good,. The e~ort of bane~E.1, whioh had decli~ed b,oause of the sp~acl c:tf b~a d!sea$e, has besun ·to :t.:Q.c:reaee ~gat!\. ~e ·caj.t1vet1on of N1can.((W.en. cetton, wh1eh has foun~: a .reacly ll18r~et· tn ~1.an~, has l>een e~andins in the ·last -th..~e years. nice encl se~~t\ .aeed ~~ .~J.+-eady majo;r- e:x:pon 1t8!!1$; and, witl\ improve€£. metAods of pro4'1Ct1Qn, an .inQx-ease in the e~ort ot coff$e ~Y be ex• ·~eeted. ln ad<U.t1on., a reQent ·-lil;>el:'~l t:racleetreaty bf>tween N1cara6',\a and !l Salvad9r sho~d ~e~ult in a nesw J1!Etrket for N;tca~su~ exports.. , , fhe outl9ok for imp1."0Vements in Nica~~~a'e internal ano. e~eni~l f1nanQ1al po8,1t1on ia SQO(\. '!'lie budget ·1s balanced and. tlle !-J'tcar~S"~n Gove~ent ts ;makins · 1ncrea'1ed efforts to ourb th~ expe?lSion <>t. l!loney !n eiJ:'C,a.ation and to 1in:p:rove ite balanc~ of pa~nte·pos:Lt;ton. • 0 ,I) Ct_ 11 A~ Pt~~ent ,1th.ex-e ere fl.PJ;>~~t.el.11,Jf~O ·JJd.,lt" qf ·i-oe4s of -e~ ty;pe~ 1n ;, Nica~gu.a. Noet ot the:Ql a:re di.rt t:r~1ls, e~table onJ.1 f P~ QD~anq.· pa.clt 0 D, 0 • :;::. i/ ~ 0 ~n~ls. ~as 'it,h@ 540 miles e.r~ $'\lltable tor. ~1-weathar tratfiQ end ,'only 140 ;miles ere paved. ' . N1ca;ragua 1 an essentia.~Y agr1eul:,tural !JOunt~, 1f3 potentially .~u1ted to the . growing of a wide Va~ety of C~l)S • ThOU~nds· t:>f acres Ot rich Soil are now lUld8¥f?. yeJoped"· chiefly DftC8'tlSe hd roads are available to cpen ll:P new larid or to p~ov:tde · 1 tran$portation from the i~~~or to the c.9~.at fo~ oce·an shipment~ The coru:1tl·uctiqn of:; ~ b.:lgllway . systelll to perm! t ea$y /WQ~Jl.1ty beween .zones of production. aJid zones of conSillPPt!on 1Q of the h~,shest :pr;to:r1ty in promot1Df t}le eeono1'!1e develo~7:1t of the eoi.m.tty. . ., " ·. · · · Au ·th~ new roads, wll:tCh· the ·:eank'ffloan will he.lp tQ, finanQJe, will be .23 feet fraii shoul(jder to shoulder and coll$truct:ea: of '.QydJ:'auJ~i\:P macadam eove:red ·.·by. an a.e:Phalt , :pavexn~nt 15 feet wide. ~aintenanee of the hie}lways will oe und~r the, J~;tsd.ict1on .of tI1-e h1!nist~ of ,{1lbl1c Wo~ks and Dev~loJ>inent. · · · 0 The· his}lwa:, ~Q,~-eruet!on projects ~ove,: t~ee ~,s1o~al areae; No~D East-watt., and Weete:rn. . , · · . · , ~rth G:rou:e: A road. of 24 Ill1lei;1 wi11 be conetl'Q.cted ~etween Matae~lpa. ·a;nd. t.be~~a Bive.r. Tb1a- i'Oec\ willo~en up new l~nd weU suited, for coffee p~odµ,ct:ton. in this sehe~l area., coffee j.a al~e~dy being pr.oduced at the rate of over 121 000.,009 :pounds :pe~ year .. ·The new roa~ wJll expedite the marketing of coffee and the,;-eby cut i?he los; due to ~poila,se, n~ eaJ1.niated to be about 30~ o:r · tlle entire Q.rol). · ,, Also 1n the Norl.h Group, a road ;of 21 miles wtll b·e constx,icted from Matagalpa to Jinotega. In ad¢1tton to makins p0S$~~~e a~,inoreae$ in the produc~1on of c~ffee •• in thts area, th!e road will ~erve t~e town of 'Jinotesa (6.,700 inhabitants), which 1s· the gateway to a. h!sl1, rolUns, :f'ert11e plate.au .suital>J.e for the, S];'ow,.ns of wheat and the ri1$jtt$ Of ]4V8$tOck. F.ast~weat Groun: A ·~oad of . 19 miles will be constructed from Manam,ia th~·~ugh Santo Dominso to Masaya. It will ~ass t~~oµsh a rich agrieulttu:-el area, now ~~od~cins cereals, tobacc9i, fruits, veseteblea, seeatrle, cotton end livestock. It will .serve a rural area with a populat;f.on of 6appro~tel.y 30 1 000 whose only m.eana of transport at.l)resent are ozcarte and pack animals over dirt roe.di,. Anotllc,r now road of 19 Jn1les will Jo1n San Joi,se witll San Juap: <lel SUr .whieh · ~ at present. .1~Jne4, by a railroad. San JorG*' is a 1'1te port and San Juan del $ur hae the only sood natural harbor in the sou-thern p&rt of Nicaragua. Since, ca;rgo hae to be reloaded at Rivas tor re-s~1:pinent, tue use cPf S~ Juan del Sur as a major po~t is lim11ted, It is pro:pqsed tQ al:>encl,on the railroa~, and transfer the railroad ElJ.U:tl)ll18.1\t elsewhere• 'I'4e e,cistins roadbed w1U be used .:t~'· the coJ1..stx-uction of · the ~~g11.way. Weetern.. Grou,.n: The lonf$eSt road • 48 mil.ea.•. to be const:ruote.d 'will"conn~t Mafi1JSU9 and teon, Nica~sua I a $econd ~:rsest c1ty. ~e~e c1. ties are· now Joined onl:.y by a . rai'lroEt;~. CQdl>letiop of this road is ezpected to 1ncteaee cOmiJlerce · 'between the· -two citiue.-~; · · . (f .. · · · . ,:-,. 1\7~ other ~oacle of ji;mt)~s and 1€> ~lea wiil be oonst~cted b~twe~n Leon and ,. ~ellc~ 1 and between Tel1ca and Qhinand~UJ~ • Theft roadp 1,. WfJlell in ettect· will· be cont1~u,oua., ~U se;rve app~atelf 70,000 !nh~~b!tanta ·and ~1l;,;1p~$$ tl'J.rQusb r1ch fa~ng ~ree.$. · · ,~ ·· · · . \, \: () C  0 •. ... :5,·c:..· • • v Fa1,n ME,chanization Pro ~~ct. ~ . - \) () " , G; " One of the best w~ys t.o improve the econamy d:f' Nicaragua 1.s to iµcreaae the· pi-oduction,'.' of exportable cropei. Mic1arag\.la has large ;a8,l;1.c1,ll.tural reso~es ·and the. t~s .~ :prop1t:foi1s for· deve1°*'3·them.. The pijopJ..e· are· 1neren,;,1ngly . ~echan~ · 0 ~,t ically -minded and _t.eady to_}nOdern1ze ·e~1cul~al \~eelmt~~s. Indt.'Ji:dual.l~iid owne~e ~ave shown :this mo~mizat1on. 1e not only,-posslbl9,'b~~hishlY profit"" able.·, ·~e.e1d~s i-edttc~ cos.ts and 1noreas1rts outpllt; ;tbe use of agr!eultun.1.· m~ch!zwry WiU lead. to 1mprovellleut ot the· soo·1a1 and . econ.~io conditions of ·a. l ~ree '-b ~ttor of the !JopUleti<;>n.· · · · · · · 1 :;; .. ·- ~~,,{ ' . 0 ' Tne International :Sank'.~ ·toan of $l,20Q.,OOO ·w1U,be used by the l\fational. Bank . of :ri1c~rasua to pro!id~. dollai-s ·astl1n$t ··Wllich loan~, W.iU. be made '1n cor<!obas (Nican~~n currency) to fru.ue11~ for tll$ purcJia.se of ·xnaclll:nery. :With these . , co:rd,ol~Jta; .'the fa~~e Will, orde:r ~ch1:nel'Y f;rOIQ. the, (!,eaJ.~;r, who, .~u ·.a.eposit the cordl)!ft'le~jdth 1;1:uf Nat1,°Qnal llank: and. 19eeive d.0Uars w.ith whl,c~ to pay tJie foi"fli~ lll2n~a,Qtmier·. , . Fo:(9 tlle prese~t~ traetol' ~n.its W1U(be p:r;,ineipall;r· imported •. :-·A ~it tiU. consist fo~ tQ.,3 l!lost part of a tr~ctor and a ElUite.ble d:f.~k plow, disk P..f:lrrt)W , .. ~d eultfvato~. ·,. Sue;h a tractor uni.t will clo all th$ field work e:x:cQpt harvest:t'ng. on 300 aQr~e pf ·ou]}b1Vated~ c;rop.a. It 1s est*ted th.at the· 1.noorne fraxn incn,ased crop pro~uct1o:xr Wi.:<J.l pay for the tractors and acce~so;ries within a five•ye~r j>eriod,. the ex:pected te~ of t:tie loe:r;i from th.e 1'1at:tonal :Bank to the tamer •.., ~~ of. the l3aP,k' a loan providie for ·spfire l'art.e, :rep~ir ant\. ~1nt~nance • u equ.t~ent, ,~ount!ng to 20~ or· t,he value of tp.e· :rriacll!neey, ·· In adclttion, trti;tptns, seM1.ctns · and maintenance f'acUit1e$ will be :~stabl!allecl.. . ,,· - \)