Announcement of 11 Million Dollar Loan for the San Lorenzo Project in Peru on April 20, 1965

INTERNATIONAL BANK FOR • RECONSTRUCTION AND DEVELOPMENT 1818 H STREET, N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 Bank Press Release No. 65/18 Subject: $11 million loan for the San April 20,. 1965 Lorenzo project in Peru The World Bank has approved a loan of $11 million to Peru in support of the Government's program to increase the amount of arable land available for settlement and farm production. The loan will benefit the San Lorenzo project for the irriga- tion and settlement of once arid land on the coast of northern Peru -- an area which may eventually involve about 125,000 acres. The project brings together irrigation, farm credit and a wide range of technical services for the purpose of increasing the output of food and cash crops, both for domestic consumption and export. Besides raising farm income and improving standards of living in its own area, the San • Lorenzo project is serving as a model for the development of irrigation, land settle- ment, agricultural education and social services in other parts of Peru. Seven United States banks are participating in the loan, without the World Bank's guarantee, to the extent of $825,000 representing the first three maturities and a portion of the fourth which fall due between April 1969 and October 1970. The banks participating are: First National City Bank, New York; Irving Trust Company, New York; Meadow Brook National Bank, New York; The Citizens & Southern National Bank, Atlanta; The Marine Trust Company of Western New York, Buffalo; Crocker- Citizens National Bank, San Francisco; and Grace l~ational Bank of New York. The San Lorenzo project is located about 600 miles north of Lima, near the Ecuador border. The works have been carried out in stages: the first stage, which was financed by the Peruvian Government and completed in 1953, consisted of diver- sion works, canals and tunnels to supplement water from the Piura River for the irrigation of la~ds in the Piura Valley. The second stage, which was assisted by a World Bank loan of $18 million and completed in 1959, consisted of enlarging the  - 2 - facilities of the first stage and the construction of a dam and reservoir and of a canal and lateral system for the irrigation, development and settlement of the San Lorenzo project area. f~nce then atout 35,600 acres in the San Lorenzo project area have been developed and settled. The third stage, to be assisted by the current • Bank loan, consists of the development and settlement during 1965-67 of some 44,000 acres and the further improvement of the area already settled. The San Lorenzo facilities also supply water to farmers in the Piura and Ghipillico Valleys for the irrigation of approximately 82,500 acres as well as to the project area. The authority responsible for all works at San Lorenzo is the Management con- sisting of a Director General~ his deputy, four staff offices -- Legal, Planning, Social Welfare and Public Relations -- and five operating divisions -- Administra- tion, Agriculture, Engineering, Economics and Housing. Land is sold to farmers on suitable terms and settlers are provided with credit and other assistance to enable them to bring the newly irrigated land into cultivation efficiently and without de- lay. At the time the settler receives title to his land he agrees to keep the farm • and to cultivate it in a manner satisfactory to the Management for a period of eight years. The social welfare program is devoted mainly to fundamental educatio n, 1 health ~nd social assistance. The part devoted to health is based on a well organ- ized physical, medical and nutritional structure. Development and settlement at San Lorenzo did not at first take place as quickly as had been expected; it has greatly accelerated in the past few years, however, and the project is emerging as a successful one financially, economically aod socially. There is now a great demand for land at San Lorenzo: as land has come into production and the favorable yields have become known, applications exceed many times the land available under each sale. The range of possible cropping patterns is large because of the year-round growing season and favorable soil types. Land • thus far settled is being farmed principally in cotton, maize, root crops, fruit and other tree crops, vegetables and forage crops. A diversified cropping pattern, including livestock, is being encouraged.to spread water use, work and income more () evenly throughout the year.  - 3 - • Under the third stage of the San Loren.zo project, funds from the Bank loan will be made available for medium and long-term credit~ to farmers for on.-farm investments which include land development, housing, machinery, breeding livestock, and tree crops. Sho~t-term credits for annual recurring production costs will be provided entirely by the Sau Lorenzo Agency of the Banco de Fomento Agropecuari.o from its own resources. In. addition, heavy mechanical equipment will be purchased for the operation and maintenance of irrigati.on facilities and ser- \Jtce roads and for the leveliug and ditching of land; a comprehensive drainage ar.d salinity survey of the e11tire project area will be undertaken and, if deter- mined. to be necessary, a system of dra~nage works will be constr~cted to service the most critical areas; e~riment stations in the proje~t are.a will .be imp~oved; a traitdng p1.-ogram for the mainte·oance of e<1uipt11ent will be in.'>tituted; a study of •• m.~tketing pt·obl{!!DS -·wil 1 be undertaken;.. and services alld equipnent will be pro- vided· for vocational-and artisan schools. The Bank loan will cover the foreign exchange cos ts- o·f- these works. equipment and set'Vices. The total cost ·of the third stage, to be·· completed by the end of 1967 >· is-- estimated- at....the .equivaleat of. $29. 8 million. These fina!lcial require- men:ts will -be ,met from ·the following sources: $10.4 million from the Bank loan; $6-. 7 million by·· settlers· on the project area through. water payments. their initial shc,re- of· ~... £.arm -de,relopment.. costs~ and sub-loan payments of earlier settlers, .and by farmers -0£ the.Piura.and·Chipilli~ Valleys through water payments; $3.3 mil- lion .from--the-balance- of a ·loan .from the Uuited States Agency for Interuational Development.; ..and. $9 .4 .million from.. the .Peruvian -Government. The Bank .loan. for· the third stage will be administe!red by thQ Project --M.lnagement under --authority delegated to· the Director· General by the President of • Pent and the .Minis.ter--of-Agi;.iculture.. The. San..J,oren.zo .A.gency of· the .Banco de  - 4 - Foa:ento Agropecuario del Peru will administer the agricultural cretlit portion of the loan, $6.8 million, on behalf of the Hanageltlent, but with the Management participating in the determinations of sub-loans. The Bank loan wiH~1so asst.st in financing a study looking toward • steps for the further develq,pment of water and related resources in the north- western reglon of Peru. It will include a survey of these resources and the formulation of plans for their developn1ent. A firm of consultants experienced in water resources development studies will be er4gaf:ed to assist the Government 0£ Peru in this task. The Bank loan is for a term of 20 years and bears interest at the rate of 5\% per annum. Amortization will comnence April 15, 1969. • • ,. ) '