Announcement of Fifteen Million Loan for Railways in Peru on April 3, 1958

FOR IMMEDIATE RELEASE . . WORLD ' • INTERNATlOl'JAL BA K RECONSTRUCTION ND EV LC)P 1818 H STREET, N.W., WASHINGTON 25, D. C. TELEPHONE: EXECUTIVE 3-6360 PRESS RELEASE NO. 525 SUBJECT: $15 million loan for April 3, 1958. railways in Peru. The World Bank today made a loan equivalent to $15 million for the rehabilitation and modernization cf Peru's most important railway systems, the Central Railway and the Southern Railway. The New York Trust Compo.ny and Grace National Bank of New York are I" participating in the loan, without the World Bank's guarantee, to the extent of $400,000 representing parts of the first two maturities which fall due on February 15 and August 15, 1961. • The loan was made to the Peruvian Corporation Limited. incorporated in the United Kingdom and, as a result of a reorganization in 1956, became a wholly-owned subsidiary of the Peruvian Transport Corporation Limited, This company is a1new, privately-owned Canadian company. Subsequently the Peruvian Cor1,'1,ration \I~ undertook a three-year program to improve the services of the Central and Southern Railways which it owns and operates. The Central and Southern Railways form the backbone of Peru's rail network. Their 830 route miles constitute about two-thirds of all the railroads in Peru. The remainder consists mainly of extension and branch lines, largely o·wned by mining companies, an.d of short, feeder lines. Because of the difficult moun- tainous\ terrain, there are few good roads connecting the highlands with..~the ·' 'I coast, (and t~e railways are essential for the transport of bulk merchandise and ji • such c~Jmmoc'.i ;! ties as ores, concentrates and metals . . I .JAe Central Railway serves Lima, the capital, and adjoining Callao, Peru's main port. It is an important link between these two cities on the dry coastal  - 2 - plain and the agricultural and mining areas of the sierra, the high mountain • plateau. It carries most of Peru's mineral exports, which account for about of the col.Ultry's foreign exchange earnings. The Southern Railway, physically separate from the Central, links the 40% fertile southern highlands, including Arequipa, Peru's second largest city, with the ports of Mollendo and Matarani. The Southern is important not only to Peru but to Bolivia as well; as one link in the transportation route connecting La Paz to Pacific ports, it carries much of Bolivia's international trade. The railway meets a steamer service which crosses Lake Titicaca to Bolivia and connects with another railway line to La Paz; both the steamer and railway services in B~livia are operated by the Peruvian Corpor~tion. Because the railroads cross the Western Andes, operating conditions are unique as well as difficult. The Central Railway climbs to nearly 16,000 feet., • the highest point reached by any standard-gauge railway in the world. On the western slopes of the Andes the valleys are so narrow and steep that the line has to zigzag up the side by means of reversing stations; on this stretch alone there a.re more than 70 tunnels. In the rainy season, because of the constant threat of landslides, trains travel only in daylight. Conditions on the Southern Railway are similar, though less severe. In recent years the railways have been handicapped in their operations by obsolete and largely worn-out equipment. Emergency imports of grain provided in 1956 to stave off the threat of famine in the south could only be handled with the help of new diesel electric units hastily provided for the purpose. Under the program now being undertaken with the assistance of Bank funds, there will be a gradual replacement of over-age steam locomotives by diesel- electric locomotives which will give better service at lower cost. The program .; also provides for pc;msiderable replacement of rails and cross-ties, the instal- lation of centralized traffic control facilities, construction or improvement  - 3 of workshops and miscellaneous equipment for handling of freight. The goods to be financed by the Bank's loan include 34 diesel-electric locomotives, six diesel-electric shunters, 36 passenger cars, 275 freight cars and other imported equipment and services. Orders for all equipment and materials will be placed on the basis of international competitive bidding. The program is scheduled to be finished in 1960 and will cost a total equivalent to $20 million, of which $19 million will be in forej_gn exchange. The Bank's loan will cover three quarters of the total cost and the Corporation will finance the remainder from its own resources. The loan is for a term of 15 years and bears interest of 5±% per annum, including the 1% cowmission which is allocated to the Bank's Special Reserve. Amortization will begin February 15, 1961. The loan is guaranteed by the Government of Peru. The Government is entering into agreements with the Bank • and with the Corporation regarding adjustments of railway tariffs and is also setting up an independent railway tariff commission which will keep it informed, and make recommendations, on matters affecting tariffs. This is the Bank's ninth loan in Peru and brings the total lent there to $56 million. The other loans were for improvements at the Port of Callao, agricultural development, irrigation, highway maintenance, and for the con- struction of a cement plant. After having been approved by the Bank's Executive Directors, the loan documents were signed today by His Excellency Don Fernando Berckemeyer, Ambassador f'or Peru in the United States, on behalf of the Government nf Peru, by Mr. William H. 'White, Chairman, on behalf of the Peruvian Corporation, and by Mr. J. Burke Knapp, Vice President, on behalf of the World Bank.