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

• INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMF~NT ASSOCIATION. 1818 H STREET, N.W. WASHINGTON D. C. 20433 TE:LEPHONE 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 International 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 capital, with Sa.n Pedro Sula, the country's most 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 tra~scontinental 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 Teguci.galpa 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 2,125 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 four-year plan (1965-1969). - 2 Transportation is by far the largest sector in the 1965- ' . f" 1966 program, accounting for OX>re than one-third of total investment. Highways account tor about 90 percent of the transport sector. The highway projects included in the plan are generally those recommended by the Stanford Research Institute under • a study financed by an earlier IDA credit. The Stanford study :found that "the most important of the projects considered is the North Road from Tegucigalpa to the north coast because it is the principal artery of Honduras and is the key route in the development of a hishway network.'' The road io also among those accorded highest priority in the Regional Program of Central American Highways adopted on September 1, 1963, by the Ministers of Economy and Public Works of the five Central American Republics. The project calls for the construction 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 Tegucigalpa, 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 a.nd un- economic to reconstruct this road to satisfactory standards since the mountainous terrain would involve many sections with long and steep grades and numerous sharp curves. After the construction of the new road, the old one will have to be main- tained only for 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; Comayagua, one of the most productive agricultural areas; and Cortes, in which the largest port, Puerto Cortes, and the country's largest industrial city, San Pedro 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- approxiaately 915,000 acres, or nearly one quarter of the country's total. Most of • the cation's manufacturing and processing facilities are in this 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 ie estimated at $23.6 million; of which about &J~ represents expenditure in forei~.: exchange. Today's Bank loan and IDA credit will provide $9.5.million. An application for a loan of an approximately equal aax>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. ti 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 assist in the awarding of contracts and to supervise the execution of the project. All contracts for construction will be awarded on the basis of international competi- tive bidding. The World Bank loan is for a term of 25 years, including a six-year grace pericxl, and bears interest at the rate of~% per annum. Amortization will begin on April 1, 1971. The IDA credit is for a term of 50 years. Repayment of principal will begin :rrom April 1, 1975, a:rter a 10-year period of grace. Thereafter 1% of the principal will be repayable annually for 10 years and 3i will be repayable annually for the • final 30 years. The credit is tree of interest, but a service charge of 3/4 of ii per annum on the amount withdrawn and outstanding Will be made to meet IDA's admini- 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 for road construction and maintenance as _well as a highway planning survey.  I rf! I l ~:./ p;:;;=-"" I I ~~.1__,fs: aP.5 A 11 ! e a E (; ~ . ,r'. -; ~ou" If,/ I -.; . of il 0 ~'J s i ~/ 6\)1.,.f ,._2)i:?"'1~ . ,n?ffejh__~·-.. . -----"\ <t!'" . /' / /,ti t,f.,:.~ i~ a;' l ' ~- ..~-~ ......-,· ~ -~~.s ~~~ '1,,,.- 1 ~ ,.,~ ,1 ...1,r ~' ( r t orad9 't-' ~ I! ~ "',\-~}~;;:;< .. 7 0Gucqil111.a t 'if- // ,:::, '.f P, . "-~~{)~70-J .::;--·, /'-. ~--....._ "),.r · . \, ~'f- // ~ l ...., . ~ \ ""' ~ _/,, ~ if",-·-·../ _,.,. .4..,.,..;"'·t· . '> (j \ f,r·~···" r , i'·--1 !~ \Co••• r-N:; \.--.. ·- ;r--J-·"' . f \. ·--' ~l t.c UJ'lictlr ,;f:tc' ,c.,.,.••• / oc,,,..,r, \ G"'"°' I • I ~ " . l ffe. ""\ •.r·"".J . 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