Announcement of World Bank Loan and IDA Credit for Road Project in Honduras on February 2, 1965

INTERNATIONAL BANK FO~~ ()\','I/ELOp,lf~,1,1- REOONSTRUCTIQN AND DEVELOPMENT ([Im]) INTERNATIONAL DEVELOPMENT ASSOCIATION 1818 H STREET, N.W. WASHINGTON D. C. 20433 TELE~HONE: EXECUTIVE 3-6360 Bank Press Release No. 65/5 Subject: World Bank loan and IDA credit IDA Press Release No. 65/1 for road project in Honduras February 2, 1965 The World Bank and its affiliate, the Internationa~ Development Association (IDA), today joined in providing the equivalent of $9.5 million to assist the Government of Honduras in financing the construction of a road to link Tegucigalpa, the capita~, with San Pedro Sula, the country's mos~ important commercial center. The Bank will lend $6 million for the project and IDA will extend a credit of $3.5 million. The road, named the North Road, has been given the highest priority •• in the national and Central American Regional Highway investment programs. It Will be part of the transcontinental route running across the Central American Isthmus from Puerto Cortes on the Atlantic Ocean to the Inter-American Highway at the Golfo de Fonseca on the Pacific; the links in the north from San Pedro Sula to Puerto Cortes, and in the south from Tegucigalpa to the Inter-American Highway were built or improved with the assistance of an earlier World Bank loan. Bank of America National Trust and Savings Association is participating in the World Bank loan, without the Bank's guarantee, to the extent of $90,000 repre- senting the first maturity which falls due in April 1971. Significant development of the highway network in Honduras, the second largest of the five Central American Republics, did not begin until the 1950's. The system consists of about 2,i25 miles of roads, the shortest in Central America. Only about 250 miles, or about 12%, of the network is paved. The Government has recently pre- • pared a detailed program for economic development during 1965-1966 as part of a  - 2 four-year plan (1965-1969). Transportation is by far the largest sector in the 1965- 1966 program, accounting tor, more than one-third of total investment , Highways • ~ccount for about 90 percent of the transport sector. The highway projects included in the plan are ienerally those recommended by t~e Stanford Research Institute under a study financed by an earlier IDA credit. The Stanford study found, that "the most important of the projec~s considered is the North·Road from'l'egucigalpa ·to the nQrth coast because it is the principal artery of Honduras and is the key route i~ the development of a his}:lway network." Th~- road is also among those accorded highest priority in the Regional Program of Central American Highways adopted on September 1, 1963, by the Ministers of Econopiy and Public· Works of the five Central American Republics. The project calls for the cm1struction of a 125-mile two-lane, bituminous sur- faced road betwe~n Rio del Hombre and Potrerillos, a large bridge over the Ulua River and the provision of associated engineering services. Several improvements are being made on sections of the road adjoining each end of the project. With its own re- • , sources the Government is financing the reconstruction or improvement of the existing roads from Rio del Hombre south to Teguci~l_pa, and from Potrerillos north to San Pedro Sula. The existing North Road between the Rio del Hombre and Potrerillos is a narrow winding gravel road with sharp curves and gradients. It would be difficult and un- economic to reconstruct this road to sa1,/isfactory standards since the mountainous terrain would involve many sections with long and steep grades and num~rous s~rp I curves. /~ar the construction of the new road, the old one Will have to be main- tained only tor local traffic. The new North Road Will pass through three of Honduras' most populated depart- ments: Francisco Morazan,. 'in which the capital city of Tegucigalpa is'::·\!located; \1 in •• I· )Comayagua, one: of the most product·!ve agricultural areas; and Cort~s, which the largest port, Puerto Cortes, and the country's largest industrial city, San Pe~ '\ Sula, are located<~About a third of the country's population live in these de- partments. The total farm area in the zone of influence of the new road is  -;•."" - 3 - approxiuately 915,000 acres, or nearly one quarter of the country's total. Most of the nation's manufacturing and processing facilities are in thi's zone. The project will sharply reduce transport costs, which is particularly important to the economy of Honduras since a very large proportion of highway transport costs are in foreign exchange. In addition, the new road will provide access to the Humuya Valley, which has some excellent agricultural land, and also will serve other areas where exploitation of lumber is possible. 'It will also make an important contribu- tion to political and administrative integration of the country's northern and southern regions which now are virtually isolated from each other. The total cost of the project is estimated at $23.6 million, of which about f.:l:J1, I" represents expenditure in foreign exchange. Today's Bank loan and IDA credit will provide $9.5.million. An application for a loan of an approximately equal a.m::>unt is under consideration by the Inter-American Development Bank. The remainder of the cost in local currency will be provided by the Government from budgetary resources. ~ Execution of the project will be the responsibility of the Ministry of Communi- cations and Public Works of Honduras. As the project will impose a very heavy work- load on the Ministry, outside consultants will be retained to complete plans, to assJst in the a.warding of contracts and to supervise the execution of the project. All contracts for construction Will be awarded on the basis ot international competi- tive bidding. The World Bank loan is for a term of 25 years, including a six-year grace period, and bears interest at the rate of ~- per ann~;,r Amortization will begin on April 1-, 1971. The IDA credit is for a term of 50 years. Repayment of principal will.\begin ) \, from.April 1, 1975, after a 10-year period of grace. Thereafter 11, of the principal will be" ·repayable annually for 10 years and 31' Will be repayable annually for the final 3Q, years. The credit is free of interest, but a service charge ·of 3/4 of 11 per ann~ on the amount withdrawn and outstanding Will be made to meet IDA's admini- t"T-.('. strative costs. Today's loan is the fifth by the Bank in Honduras and will increase Bank lending. to that country to $25. 9 million. In May 1961, IDA extended a credit· equivalent· to ,9 million tor road construction and maint.eaance as _well as a highway planning survey.  " Jl ' I df:f!if~if!i Al R ! 8 B £ (; ~ ' o'.~~j ~ s ~ -1? ~~,!i) El Dorado ~ •"\. ~ l..r ' ·~1"'\r·r(.;· ,.·,:·.:. .::·).·,' '$ l •. ('j r"\ __)"'·-~··' r .) • ·-· .,...,,·..r ·"-.J A ~/:: ,¥~) ~ ;I ~ i I _;, r·/ / - ·--·--' " <(:' ( --:-/', ,.,.f" ~ ~ / ·,.~.j HONDURAS l ..I ~ dq . .-·-'-·-· J THE NORTHERN HIGHWAY PROJECT j IP- i ly ROADS: \ Asphalt paved ;if ;;J ~~/ b)- Orotulnoo .·_· .£,. Others ---- Roads previously financed by Bank '!'jit;,'\,,,J.{~:f;t;J" ~put Colf:.J Q ; 5fi}}b~ftt Morco~a :::{!"8'1°- Projected Northern Highway Railways L ? ~ El Trlu:';J• o ~ ~7 ·- ~-·"1. SEPTEMdER 1964 4~ !' W:J_,~ 20 30 50 Km. (liRU-1419 • • I