Announcement of Peru Consultative Group Meeting on May 28, 1981

II) 5 . FOR ·~MEDIATE RELEASE .. 8\ )J§-' -World Bank 1818 H Street, N.W., wa~h1ngton, D.C. 20433, U.S.A.• Telephone: (202) 477-1234 BANK NEWS RELEASE May 28, 1981 PERU CONSULTATIVE GROUP MEETING The following announcement was issued at the World Bank's European Office in Paris: A meeting of the Consultative Group for Per~, sponsored by the World BankJ was held in Paris on May 25 and 26, 1981 for the purpose of coordinating official development assistance for the country's development effort. The last previous Consultative Group meeting for Pera was held in 1975. The meeting was chaired by Mr. Nicolas Ardito Barletta, Vice-President of the Latin America and the Caribbean Regional Office of the World Bank. The Delegation of the Government of Peru was headed by Mr. Manuel Ulloa, President of the Council of Ministers and Minister of Economy, Finance, and Commerce and included a number of other Ministers and high administration officials, including Ambassador Schwalb, Minister Kuczynski (Energy and Mines), Minister Velarde (Housing and Construction), Mr. Orrego (Mayor of Lima), Senator Mariategui, Mr. Pestana (Chief, National Planning Institute) and • Mr. Webb (President, Central Reserve Bank). Members of Congress and representatives of the Peruvian private sector were also in the Peruvian delegation. The meeting was attended by representatives of the Governments of Argentina, Belgium, Brazil, Canada, France, the Federal Republic of Germany, Israel, Italy, Japan, the Republic of Korea, Spain, the United Kingdom,and the United States. Representatives of the Andean Development Corporation, European Economic Community, Inter-American Development Bank, International Finance Corporation, International Fund for Agricultural Development, International Monetary Fund, United Nations Development Programme, and observers from Finland, Switzerland, Yugoslavia, and the Organization for Economic Cooperation and Development also attended. The group discussed Per6 1 s current economic situation, its development prospects and its requirements for external financing based on an economic report prepared by the World Bank, and on a review of PerG's public investment programme for the 1981-1985 period prepared by the Peruvian government. Prime Minister Ulloa made a statement outlining Per6'1 s economic poJicies and its development strategy and philosophy. He highlighted the progress made thus far by Per~'s first democratic government in twelve years (in office for less than a year) but recognized that difficult economic and social problems still confronted the country. The government was committed to reduce unemployment and improve living conditions for the urban and rural poor. Moreover, to make the public administra- tion more responsive to local needs, the government was committed to a prograrrvne of decentralization. Prime Minister Ulloa also pointed out that while the rrte of • economic growth had increased over the past year and Per6's balance-of-payments outlook was good, inflation was still high. To help reduce inflation and help mobilize domestic resources for investment, the government had adopted a comprehen- sive programme of fiscal monetary restraint, trade liberalization and measures to encourage savings. The government had also set up a tripartite commission--made up of representatives of industry, labour, and the government--to help achieve a consensus on economic policy and on ways of tackling inflation. I • ••  -2- Prime Minister Ulloa stated that the government hoped that the private sector would play a large role in promoting economic growth and employment cre- ation. To this end, the government had already adopted measures to stimulate private investment--both domestic and foreign--and the increased use of labour by the private sector. At the same time, the government would carry out a sub- stantial public investment programme in the 1981-1985 period--totalling US$14.5 • billion at current prices--to support and complement private investment. This programme substantially increased the resources devoted to meeting basic needs through health, education, potable water, and urban and rural development projects. It also emphasized the development of agriculture and the improvement and expan- sion of Peru's infrastructure base, particularly in electric power and transpor- tation, where serious problems had developed after years of under-investment. Finally, the public investment programme included projects in directly produc- tive sectors such as mining, petroleum and agriculture to promote growth and strengthen the balance of payments. The government also welcomed private sector investment in these areas. The Prime Minister also emphasized the need to max1m1se the amount of official assistance in support of the 1981-1985 public investment programme. The participants at the meeting congratulated the government for Per~'s economic recovery in recent years, which had been particularly remarkable given difficult world conditions. They also stated their support for the government's strategy and its courageous pursuit of a solid set of policies that aim at sus- tained long-term growth within a stable financial framework even if this implied • short-term sacrifices. They commended the government for its accomplishments to date, particularly in such crucial areas as trade liberalization and the avoidance of price and interest rate subsidies that would exacerbate inflation and create distortions in the economy. Participants also expressed support for the government's open attitude towards private investment and its willingness to create a favourable climate to attract such investment. The Minister of Energy and Mines made a presentation on the major changes recently made in petroleum mining legislation designed to encourage a renewal of investment in these areas. The group strongly endorsed the government's objective, namely that Peru should avoid becoming an importer of energy. To this end, petro- leum and mining constituted key elements in the future development of the economy and the growth of exports. The donor countri~s indicated their intention to continue their financial and technical cooperation in support of Peru's development, including the provision of export credit and concessional aid. Group participants also noted that while the public investment programme proposed was large, it was well conceived and addressed Peru's principal development problems. It was agreed that if Peru continued the economic policies it was now following and received a reasonable mix of official and commercial financing, the levels of external debt necessary to finance the investment programme would be consistent with Peru's improved debt servicing capacity. In this context various delegations expressed interest in co-financing arrangements with the World Bank and the Inter- American Development Bank. • I ...  -3- • The government's expressed intention to und~rtake only economically and tech- nically justified projects as well as the measures it was taking to mobilize domes- tic resources provided further assurance of the financial soundness of its invest- ment strategy. Finaliy, the meeting noted the steps being taken by Peru to im- prove its capacity to prepare and execute projects and emphasized the need for additional efforts in this regard if the ambitious investment programme was to be successfully carried out. Participants indicated a Ylillingness to actively support these efforts through technical cooperation. The group expressed support for the list of 88 investment projects and studies presented to the group by the Peruvian government. Representatives of several delegations indicated that direct bilateral discussions on specific projects would take place in the near future as a follow·-up to the Consultative Group meetin~. These projects would require external financing commitments of US$4.9 billfon over the next three years. There was particular interest in the social sector invest- ment programme and agriculture, particularly government efforts to develop the potentially rich, but underpopulated jungle highlands through coordinated transpor- tation and rural development projects. There was also significant interest in (1) the government's proposals for mining and petroleum development, (2) its investment plan in the transport field, particularly for road improvement, rehabili- tation and maintenance, and (3) Peru's efforts to substantially increase utiliza- tion of its extensive hydroelectric resources. The Consultative Group meeting will be followed on May 27 by a meeting sponsored • by the Peruvian government with private investors and financial institutions . It was agreed that the group would meet again in approximately 18 to 24 months. -0- •