Announcement of Road Loan to Argentina on June 30, 1961

.. FOR IMMEDIATE RELEASE WO ii L 1_818 H STREET, N.W., WASHINGTON 25, D. C. TELEPHONE: EXECUTIVE 3-6360 (/ • ====::~-; Press Release No. 6c)8 SUBJECT! Road Loan to Argentina June 30, 1961 The World Bank today made its first loan to Argentina. The loan amounts to $48.5 million, and will assist in carrying out a much-needed highway program. The funds will help to finance improvements on about l,6oo {uiles of some of the coun- try's most important highways, and will pay-·for equipment required for the main- tenance of roads throughout Argentina. The works to be undertaken will overcome some of' the most critical deficiencies in the highway system. F1.v..e private banks are participating in the loan, without the world Bank•s • guarantee, for a total a.mount of $625,000 representing part of the first maturity which falls due J\lly 15, 1965. The participating banks are the National Bank of' Washington (Washipgton, n.c. ), the New York Agency of The:·Royal Bank of Canada, The Philadelphia National :Sank, The First Pennsylvania. Banking and Trust Company and Grace National Bank of New York. Economic conditions in .Argentina have ~mproved greatly since December 1958 when a vigorous program of financial stabilization was introduced. With increased foreign exchange reserves, with stability in the forei~ exchange rate and in domestic prices, and with public po+icy directed to consolidating these improvements and to encouraging foreign and domestic investment, the growth prospects of the economy have much improved. In contrast to 1959 when national. pro@.uction fell as a f)) result of' the di:fff~ult adjustments,, accompanying the early phase of stabilization, 196o was a year of expansion: total output increased by over 41, and industrial out- • \), put by over 91,. Prospects appear favorable for continued expeusion and. for an increase in exports. A continuing obstacle to economic growth, however, :ls the inadequacy of Argentina's t?'ansport system. Nee:rly four-fifths of the tota.l land area of  - 2 - • one million square miles is used for the production of agricultural crops, "r forestry produqt~ a,nd the raising of liV,es~ock, and there is a large measure of regional specialization in production. This calls for an intensive inter- change of goods within the country and also for the efficient transport of export products over great distances to the country's main ports • Furthermor,, industry, which was until recently concentrated in the Buenos Aires area, is now spreading to different parts of the country, creating an even greater demand for efficient transport. The railroads have traditionally been Argentina's chief means of transport and served the needs of the country well for many years, but organizational, financial and physical deterioration in the past 15 yea.rs has made it impossible for them to accommodate the growing traffic. As a result there has been a • sharp rise in the demand for road transport when neither the roads nor the vehicle fleet was adequate to handle it. More than half the country's net- work of 35,000 miles of national roads are earth roads or trails, and. only about a third provide all-weather traffic service. Few of the country's main roads are paved over their entire length, severely limiting their capacity and causing excessive wear and tear on motor vehicles. As part of its effort to remedy the transport situation, the Argentine Government requested financial assistance from the'United Nattops Special Fund . l_:) for a comprehensive transport survey. The World Bank is Executing Agency for this survey which was begun in July 1960 and . should be finished by the end. of 1961. Even though the recommendations of the Survey Group may alter Argentina's 10-year highway development program in some respects, the measures now being taken t.o improve the roads will not be affected since the works consist largely \. of the reconditioning and upgrading of standards on existing roads where the 11,.,  - 3 - • • volume of traffic and the location justify immediate action. TKa works neces- J/ /~ sarily va:r:j greatly and comprise a large numbe!'" of r.elatively short sections of road l~cated in different parts of the country f'rom Patagonia to the northerri- \\ most pa.rt \~if' Argentina. Argentina has a suitable road maintenance organization, but the c9ndition of the equipment is poor and tp.e workshops are undere~fi~ped. The equipment tQ ·11 be financed by the Bank loan will replace some of the old, worn-out equipment now in use. This should result in a marked improvement in the efficiency of maintenance operations and reduce the excessive cost of repair e.nd maintenance. The Diteccion Nacional de Vialida4, a..~ autonomous government agency, is responsible for the road improvement program which has already begtl!l. The works a.re being or will be executed by contractors under unit-price contracts • to be awarded a~er international competition • The total cost of the road construction included in the project is estimated at the equivalent of about $95 million. The Bank loan of $48.5 million, aside from providing some $15 million to cover the cost of imported maintenance equip- ment, will contribute about $33. 5 million toward this construction; the local currency requirements will be met by the Argentine Government. The loan is for a term of 16 years and bears interest of 5-3/4% including the 1% commission which is allocated to the Bank's Special Reserve. Amorti- zation will begin July 15, 1965 . •