Announcement of Thirteen Million Two Hundred and Fifty Thousand Million US Dollars Railway Loan in Peru on March 14, 1963

,, WORLD IJANK • INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 1818 H STREET. N.W., WASHINGTON 25 1 D. C. TELEPHONE: EXECUTIVE 3-6360 B~ni{ Press ReleasE~ No. 63/ 6 Subject: $13,250,000 million Ma:..'ch 14, 1963 railway loan in Peru The World Bank has made a loan equivalent to $13,250 ,OOO to helT · f'inance a program to rehabilitate and modernize the two principal railway systems in Peru, the Central and Southern Railways. The Railways are an important element in Peru's tr·ancportation system, particularly for the movement of minerals, petroleum and bult merchandise, and their eff'icient operation is essential to the country's eco- nomic growth. Under the program, motive power will be dieselized, carrying capacity increased and tracks improved, thereby enabling the Railways to reduce transporta- tion costs and to provide more efficient service . • Four commercial banks are p,9.J:•ticipating in the loan, 'Without the World Bank's gua::c1.ntee, for a total a.mount of $497,000, representing parts of the first three maturi.ties ·which fall due between December 1967 and December 1968. The partici- pants are The Pennsylvania Banking and Trust Company, Philadelphia; Girard Trust corn. Exchange Bank, Philadelphia; Manuf'acturers Hanover Trust Company, New York; and The Royal Bank of Canada, New York Agency. The loan was made to The Peruvian Corporation Limited, a private company whi'ch owns and operates the Railways. The Corporation is incorporated in the United King- dom and its affairs are directed by a Board which meets regularly in Lima. The Central and Southern Railways are two distinct and separate systems. The Central Railway links the capital, Lima, and nearby Callao, Peru's chief' port, with the Sierra -- the Plateau of the Andes. Its most important function is earrying re- • f'ined metals·, ores and concentrates f'rom the Sierra to Callao for export, and bring- ing back supplies, such as f'uel and cement, to the mining companies. About hal:f Peru's earnings f'rom foreign trade are derived from e:;rports of minerals ar..d the gr~ater pa.rt of these exports a.re carried by the central. Its other trai'f:'.c c~ists mainly of agricultural produce brought from the Sierra to Lima a.nd petrn- l~urn products, ma.nuf'actured goods and. foodstuffB destined for the Sierra.. The Southern Railway links the populated southern highlands of Peru, includ- • ing t;he second largest city, Arequipa, and Cuzco, the principal city of the Sierr~, with the ports of Mollendo and Matarani. The southern is also important to land- • locked Bolivia for, as a major link between the capital, La Paz, and the Pacific ports, it carries part of Bolivia's international trade. The Railwa;y runs to the port of Puno on Lake Titicaca where it connects with steamers which cross to the Bolivian port of Gu.a.qui and thence by a short railway line to La Paz. Both the steamers a.nd the Guaqui-La Paz railway are mmeo. and operated by the Peruvian corporation. Traffic on the Southern Railway ·within Peru consists largely of general merchandise. The program of rehabilitation and modernization is designed to meet the ecsential minimum requirements of the Central and Southern Railways. It calls • ~u~ the purchase of 47 new diesel locomotives and related spare parts, 171 freight e~s of various types, structural steel and equipment for certain workshops, about ~9.coo tons of 80-pound rails with fittings for re~laying the tracks of the Rail- w.ys, and miscellaneous equipment. The total cost of the program, 'Which is acheduled for completion in 1965, is estimated at the equivalent of $21.3 million, cf vhich $19. 5 million is in :foreign exchange. The Bank loan will cover pa.rt of· the foreign exchange requirements. The Peruvian Corporation is obtaining the remaining funds from the Export-Import Bank of Washington an.d from its OW!l re- sources. The world Bank loan is for a term of 16 years and bears interest at the rate of 5-1/'2!/o per annum including the 1% commission which is allocated to the Bank's • Special Reserve. Amortization will begin in December 1967. The loan is guaranteed by the Republic of Peru.