Announcement of 33 Million Dollars Loan to Peru for Highways on September 1, 1965

/( J. )_ INTERNATIONAL BANK FOR • RECONSTRUCTION AND DEVELOPMENT 1818 H STREET, N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 Rank t.ra::·:?s Release No. 65/40 Subject: $33 million loan to September 1, 1965 Peru for highways The World Bank has approved a loan equivaler.t to $33 million to Peru for a highway project. This is the third loan to Peru in recent months and will bring total Bank lending this year in support of Peru's economic development program tc $59 million. The current loan will assist in financing the construction of a 302-mile road from La Oroya to Aguaytia which forms part of the trans-Andean Central Highway connecting the area of Lima, the capital, and Callao, the chie.f • po:-t, to the headwaters of the Amazon River. The road will provide all-we~ther service at substantially lower costs; this will facilitate settlement and culti- vation of land east of the Andes, easing population pressures in other parts of P~ru and providing a better living for the people. Seven commercial banks have agreed to participate in the loan for a total anount of $980,000 representing the first two maturities which fall due between Aueust 15, 1971 and February 15, 1972. The partici.pants are Irving Trust Com- pany, New York; Bank of America National Trust and Savings Association 1 San Francisco; Crocker-Citizens National Bank, San Francisco; Meadow Brook National Bank, New York; First National Bank of :Memphis; The First Pennsylvania Banking and Trust Company, Philadelphia; and Marine Midland Grace Trust Company of New Ycrk. Be.cause of the Andes Peru has three distinct zones: the coastal strip to • the west, the vast undeveloped tropical jungle to the east, and the high mountain  -~· - 2 - plateaus of the Sierra in between. More than half the population lives in the • Sierra, most of them under difficult economic conditions. Along the eastern foothills is a narrow band of ferti!e land called the "Ceja de Montana" where the climate and soil are generally suitable for agricultural production. A main problem of the Peruvian economy is how to increase agricultural produ.c- tion and to relieve the population pressure in the Sierra. The opening up 0£ new lands in the jungle and the Ceja de Montana would considerably he:p to case this problem. Conditions a~e favorable for the establishment of settlements and for the cultivation of a large variety of crops and the production of live- stock. A prerequisite to such developments is the provision of good transport facilities to bring about the economic integration of eastern and western Peru. The Central Highway is the mo.st advanced of three major penetration roads which • th~ Government intends to build to achieve this end. Reconstruction of the eastern and weste:i"-!'J. ends of the Central Highway is &lready under way. The Government is improving the 118-mile section from Lima tv La Oroya, and the eastern section extending 106 miles from Aguaytia to Pucallpa on the Amazon River sys tern is be·ing partly financed by a Bank loan of ~L5.5 million made in 1960. Development of the Pucallpa area has already been substantial, with the Government providing health services, schools, agricul- tural technical assistance, and other incentives to settlement. Cor.1pletion of the road section now being assisted by the Bank loan will generate further growth in the area. Peru's highway system, although still in a relatively early stage of d~velopment, constitutes the principal mode of transportation for both freight au,;l passengers. Railways, inland waterways and coastal shipping are important •  - 3 - fm several regions of the country. Between 1953 and 1963, the number of motc,r ve- ~ hicles more than doubled from 90)000 to 210,000, nearly half of which are trucks a1ld buses. Most of the passenger cars are found in Lima and other coastal cities. Although the road network consists of about 25,460 miles of highways, roads and trails, only about a tenth is paved and more than half of that is accounted for by the Par1-American Highway which extends 1, 750 miles along the coast. Peru's e.~penditures for highway construction have increased markedly in the last few years, from $7 million in 1960 to $26 million budge~ed for 1965. Further- more, the Government intends to launch a nationwide program of road improvement and construction, and the World Bank, the U.S. Agency for International Development and the Inter-American Development Bank are assisting in financing studies on whkh the program can be based. To that end the Bank has made available about $1 million f~~m loan and technical assistance funds. • In addition to its earlier loan for the Aguaytia-Pucallpa road, the Bank has m~de two other loans totaling $15 million for highway improver.1ents in Peru. w~re for the organization and development of highway maintenance operations through- They out the country. As a result of the effective utilization of the loans by Peru, the highway maintenance organization has been materially strengthened and traffic engineering and planning is being successfully carried out. Construction of the La Oroya-Aguaytia road, scheduled for completion in 1970 will be the responsibility of the Ministry of Development and Public Works assisted by consultants. Construction contracts will be awarded on the basis of inter- r,ational competitive bidding. The Bank loan of $33 million includes $2 .4 milHmi f~r the continuation of advisory services to the Highway Department, for a study of read users charges, and for engineeriug studies of other highway projects. The total ~ost of the project is estimated at the equivalent of $55.6 million, of whic~ ~ the Government will provide $22.6 million. The Bank loan will be for a te:.m .of 25 y~ar3 cud beai:.- interest at the rate of 5-1/2% per. ~.,11;,um. Amortization will begin August 15, 1971.