Announcement of Eight and a Half Million Dollar Loan to Ecuador for a Highway Construction Program on February 10, 1954

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT FOR THE PRESS FOR IMMF.J)IATE RELEASE PRESS RELEASE NO. 352 February 10, 1954, The Internation~l Bank for Reconstruction and Development today made a loan of $8,500,000 for a high'rray construction program in Ecuador. The program is designed to stimulate the development of agricultural production in the Province of Guayas and neighboring parts of the coastal region. This is the B~nk•s first loan in Ecuador. It was made to the Comite Ejecutivo ,de Vialidad de la Provincia del Guayas, an au~ononmus local authority, charged with responsibility for developing a road system for the Province of' Guaya.s and port facilities for Guayaquil. The loan is for a term of 10 years and bears interest 0£' 4-5/8% per annum, including the 1% commission which will • be allocated to the Bank's Special Reserve-. Amortization will begin on Ma.rch 1, 1958·. The loan is guaranteed by the Government of EcUq.dor. ·"\:, The coastal region lying in Guayas and neighboring provinces produce~ most .,-;,t, ! . of Ecuado:x-•~ cotton, rice and sugar, as well as the bulk or the chief' export crops ~\\.b~anas., cacao and coffee. The region comprises about 17 mi:;l.lion acres or land. tt is extr~mely ferttle but only about 1.~5 million acres are under cultivatio~. 1he chief obstacle to further cultivation is the difficulty or traIU:1portation tn the area. Existing roads are for the most' part unpaved and become impassable in the five-month wet season, with t,he :-es ult that perishable produce is wasted. Transportation costs of expo~t crop~ from production centers to the ,ports., even in dry we~ther, are ext~emely high, in some instances as much as 200% or the value. oi' p:roducts at thei:r source. ' Under the highway !:onstruction. program., eight of the ex:istin~ roads radiating 1':rom a:uayaquil., EcQado:r's largest c:i.ty a.nd its most important port, will lJ·e converted to all~w·eatller highways. Th~ individual roads to be built •' •· under the program. will have a total :length of about 365 miles. The roa.ds are to be.integrated lrdth a national highway network being planned QY the National Government and ·will contribute ,,toward making yea.r-romid transportation possible between Guayaquil and Quito., Ecuador·• s two chief cities.. The program also includes (a) the construction of a central maintenance shop f'or the repair and overhaul of construction equipment; (b) the building of a suspension bridge over the Daule River which will be the first susp ensiop. bridge as well as the longest bridge in ieuador; ~ '(c) the acquisition (>:t ~:!lr f'errie~ f·or use between Guayaquil and Duran. The inauguration of f~rry service will for the first time make possible the transportation of trucks, automobiles and possibly railroad cars between these two cities. Dl.ll"an is across the Guayas River from ,. Guayaquil and is the ternrl,.nus of the rai'lroad from Quito., the capital, and of many important road~-~ Ths new highways can be expected to open new lands tQ culti va.tion a.ild to permit the more effective use o! lands now under cultivation. Past eJ\.-perimce in Guayas Province shows tha.t, land in the vicinity of new highways ia innnediatelJr cleared for culti vat:l.on and that the construction of feeder roads quickly leads to the development of new lands. It is estimated that by the ti.me the project is completed, production of Ecuador's export crops will have increased by ~bout SO% over :recent, levels and that the :resulting increases in foreign exchange earnings will be substantially more than will be needecl to service the Bank ts loan .• The program is expected to take about four years to comp.l;:~te. It will cost a total of 179 million sucre$ (equivalmt to $1L,8 million) inclu,ding the foreign exeh8.n·~ component being financed by th·e Bank. The Bank's loan will pay • -fo:r the :iJnport of :road""building equipment and materials, f e:r:ryboats., r~~pair ·shop ancl niain,temmc~ equipment, Funds are also ~eluded for engineering services. •• - 3 - The borrow,.:ti·j:·~the Comite Ejecutivo de Vial:i.dad cle la Provincia,;. del Guayas, was established by law in 1945 and consists of officials and prominent private citizens in Guayas Province. To carry out the road program, the Cono,.te is authorized unde~ special laws to receive the proceeds of taxes on petroleum ); 11 11 products and certain other taxes collected in Gua.yas Province. When t,he Comit~ // was established, there were no paved roads in t,he Province. Since then it has built some new roads and improved others. Since the program for !-ihich the 0 Bank's loan was made will greatly increase the scope of its highway operations, the Comite will engage the services of a general manager, a technical consultant, ar,d an experienced engineering firm which will supply;/ key persormel to direct the construction work and train Ecuadorian personnel in modern methods of construction and road maintananoe. After having been approved by the Bank's Executive Directors, the loan • ;/ documents were .signed today by His Excellency, Dr. Jose R. Chiriboga V·~ ( !/ ~,..!, ::;. Ambassador for Ecuador in Washington, on behalf of the Government of Ecuador; Dr. Antonio Ma.ta Martinez.,. Director Principal, on behalf' of the Comite Ejecutivo· de Vialidad de la Provinc~a del Guayas; and Robert L. Garner, Vice President, on behalf of the International Bank • •  -4- SUPPLEMENTAL STATEMENT ON. LOAN .. IN. ECUA:OOR Generq;l Ecuador lies across the Equator between the Pacific Ocean to the west am the Amazon jungle to the east; it is bounded on the north by Colombia and on the ~outh by Peru. In total area it i~ slightly smaller than the ·state or '.I, Ca.l:i,.romia. It has a population or \p.bout 3.4 million. The country is split into three separate zones by the high ranges of the Andes. Its climate ranges ·from the temperate on the.high plateaus to the tropical on the low altitude of the coastal region~ making it a country of snarp contrasts., both physical and human. Three eastern provinces knolm as El Oriente are sparsely inhabited a~d have not yet entered into the country's economy. In the highlands between the eastern and western ranges or the Andes lies a lo!ty region known as the Sierr~.• Several valleys cut through this pl.a tea.ti a.nd constitute the habit~,t of two-thirds • of the population of Ecuador. Except for the floors of the valleys, land is eroded and often bar:ren. In sharp contrast with the 5:i.e.rra., the tropical region lmown as the Pesta ex;tends as an irreg1.1lar band 'of fertile lowlands at the base or the Western Andes. The Econom:y In both the Sie1Ta J'.na the Costa., ag:riculture' is the dominant aqtivity. The Sierra produces for domestic consumption a. variety or products <;ommon to the \.I (·, temperate zone. Some valleys are f~rtile a.nd are devoted 't,o the production ot cereals, ~eg~tabl~s., frl.dt and to'dairy cattle. On the high plateaus and in the dry valleys cultivation is :tneff.icient and y:i.elds are low., though m\lCh \ could be done to improve this situation through the dissemination of better lmowledge. • rice. The Costa produces tropical products for export: Cotton is also grown for the domestic market. bananas, cacao., coffee,and Much of the land there remains W1touched because of the difficulty of comm\lllieations, but as soon as  -s '9 ,' ,::····· '"'· roads are opened the possit)ilities for exi7ansior1 will be good. Mining and ind~stry still play a min/b:r role in the economy. Coal., sulphur and kaolin., clay used in makh1g cement., are being produced on a sma.11 sea.le in the Sierra. A thriving pharmaceutical industry has started in Quito. Petroleum is exploited on the coast., but increasing fuel consumption will turn Ecuador intQ a net impQrter unless production Qan be expanded. The once flourishing industry of the manufacture of' Panama hats ie on the declipe. Electric 'power., lacking in many regions, will have to be expan.cled to cope with the growing de;mand. In recent years icuador•s economy has strengthened substantially. output and income have in~reased markedly, stimulated.by the high prices for Eciuadori~ products in world markets and by the sound fiscal and monetary polici~$ of.: the govenunent. Prior to 1948 there were periods of inflation fed by chronic budget deficits.- Since then prices have remained relatively stable. This was to a ~ large extent the result of the cautious credit policy of the Central Bank which has kept money ~upply witnin the limits required !or monet~;ry, stability and economic growth. Since the start of the Kore8rll war, both e~o:rts and import~ have increased steadily., leaving however a positive trade ha.lance, :l.n part off's et by increasing payments on account of' invisibles. Capital movements have played only a minor role. This eXB~nsiQn of trade is contin~ing and prospects tor e:xport earni~gs are good. The develo!)l'nent of the coastal region., to which the road· project will contribute, wi 11 improve them. Ecuador has ceased to be a one""'crop exporter (cacao).,. and has shown unusual ability in diversifying its economy. Today producti,011 and exports are well""'balanced between the three leading crops: cacJo,,; • coffee and bananas. These commodities account for 75% of the total value or exports, and a su.b.stantial increase j,n their productton can. be expected with the open:i,.ng , p ot new land.