Announcement of Twelve Million Seven Hundred Thousand Dollar Loan to Uruguay on March 30, 1965

'.. INTE:.RNAT!ONAL BAf\1K FOR • RECONSTRUCT! N AND DEVELOPMENT 1818 H STREET, N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 Bank Pr.ess Release No. 65/15 Subject: $12.7 million loan For Release 5:00 p.m. to Uruguay Tuesday, March 30, 1965 The World Bank has approved a loan equivalent to $12.7 million to Uruguay which will continue the Bank's support of a program to increase livestock pro- duction, the country's most import;ant economic activity. The loan will enable the Government to continue on a wider basis an already very successful livestock de- velopment program for which a good administrative mechanism exists. It will pro- vide funds for the technical and financial assistance necessary to i.ncrease the • production of livestock through better management and the improvement of nearly a million acres of pasture. Since most of the increased output of beef and wool which will result from the program is intendefi. :for export, it is extpec.ted to yield a net annual increase of $10 million in Uruguay's foreign exchange earnings. The First Pennsylvania Banking and Trust Company, Philadelphia and the Marine Midland Trust Company of New York are participating in the loan, without th,e World Bank's guarantee, for a total of $100,000 representing part of the first matur·ity which falls due in June 1970. Uruguay's chief natural resource is its extensive area of nati,11e grassland which is used for the production of cattle and sheep. Wool, meat, 1nilk and by- ·products represent about three-qu•r·ters of the total value of agricultural out- put and provide most of the country's export earnings. Because of the importance of livestock to the Uruguayan economy, the Bank made a loan of $7 million to • Uruguay in December 1959 for a pilot project to increase production by demonstrat • ing the advantages of inodern techniques of pasture improvement end management.  .. 2 - ' The results c,f this pilot project have been even more impressive than had • been expected. Farmers who have participated number about 1,400 compared with the original targe-t of 600, increasing the number of demonstration farms through- out the country; the area of improved pastu1~·,~s on their farms totals about 360,000 acres. In addition, it is estimated that farmers who cooperated with the program, but arranged their own financing, improved an additional 170,000 acres of grass- land. The three to four-fold increase in livestock production from the improved grasslands over that of native pastures has attracted the attention of farmers everywhere in the country. Under the second stage of the program, individually supervised livestock development loans will provide 650,000 acres of improved pastures on 2,600 mediwn- sized farms. In addition, about 1,000 operators of larger fanns are expected to • participate on a cash basis to improve about 310,000 acres. This, together with the achievements during the first stage, will result in a total of 1% million acres of improved grassland. As there are 37 million acres of native grassland capable of similar improvem~nt, the program points the way to profound economic and social consequences for the nation as a whole. The second stage is restricted in size only because a further period of closely supervised development is desir- able to extend and consolidate the necessary know-how among farmers. Also, the project is designed to improve only part of a large number of farms and not the total area of a few so that in three years' time about a quarter of the grassland farmers of Uruguay will have the required experience to continue the development of their own properties and to extend advice to neighbors. The second stage will closely follow the lines of the first~ It provides for the improvement of pasture and soil fertility by fertilizing and seeding; the subdivision of farms by additional fencing to increase the efficiency of pasture use; the provision of additional water points in subdivided pastures; the • !" .. . • 3 - ~ conservation of forage for supplemental feeding; and better eontrol of livestock diseases. The main new features of the. second stage are that assistance will be confined to producers of meat and wool since other sources of finance are now available to dairy farmers, and development loans to farmers will include funds for the purchase of livestock, which will assist materially in making better use of the improved pastures. F.;.wision is also made to reduce the reliance of Uruguay on imported pasture seeds. The program is administered by the Honorary Comnission for the Livestock Plan, a quasi-autonomous body in the Ministry of Livestock and Agriculture. On the recommendation of the Commission, the Bank of the Repub!i¢ extends credits to farmers participating in the program. The Bank of the Republic will contribute from its own resources the additional funds required for the lending operations; • in the pilot project, this was an obligation of the National Treasury. Direct provision of funds by the Bank of the Republic will permit the National Treasury to allocate greater resources to the non-lending aspects of the program, such as the distribution of seeds and fertilizers, the many and increasing ancillary ser- vices required, and the operation of ·the a~no1·ary Commission. The second stage of the program is expected to require a total investment equivalent to $35 million over a four-year period. Farmers will themselves pro- vide $11,~80,000; the Bank of the Republic will provide $4,000,000 and the Govern- ment will provide $6,720,000. The World Bank loan of $12,700,000 will cover the foreign exchange requirements; equipment and materials will be imported through normal trade channels. The Bank loan is for a term of 15 years and bears interest at the rate of 5\1 pe·r annum. Amortization will begin in June 1970.