Announcement of Twenty-Five Million Loan for an Agricultural Credit Project in Peru on August 17, 1973

• 1818 H STREET, N.W., WASHINGTON Bank Press Release No. 73/63 D. C. 20433 TELEPHONE: Subject: EXECUTIVE 3-63E;i0 $25 million loan for an agricul- August 17, 1973 tural credit project in Peru The World Bank has approved a $25 million loan to assist an agricultural credit project to be carried out by Banco de Fomento Agropecuario del Peru (BFA), the main source of medium and long-term financing for agriculture in Peru. The Bank loan will support a three-year lending program to exten.d invest- ment credits, ranging from 5 to 15 years, to medium and small-size individual farmers and to cooperatives. It will help to finance investments in livestock farming, mixed farming, perennial crops and agro-industries. To meet the increasing demanl of long-term financing by the cooperatives, half of the Bank loan will be earmarked for them. The remaining half will be earmarked for similar long-term investment by medium and small-size fanners. It is expected that the resulting increase in production will help to improve Peru's balance of payments position, mainly by substituting imports of meat, dairy products and grains. At the project's full development, net annual foreign exchange savings are estimated to reach $11 million a year. • Agriculture accounts for 14% of Peru's gross domestic product, and provides the livelihood for about half the population. Exports of agricultural products are currently higher than imports but production may become insufficient in view of rapidly increasing demand and a rather high population growth rate. The Government has adopted a series of measures to prevent imbalances in production and distribution. It has given high priority to the implementation of the 1969 agrarian reform law, which aims at putting into production idle and abandoned lands, lands under public ownership, and areas reclaimed or improved under irrigation and drainage projects. Also, small holdings are being consoli- dated_into cooperatives to establish more viable agricultural units. The $25 million Bank loan will cover 60% of total investment costs under the project. BFA will finance 20% of the cost. The remaining 20% will be covered by contributions by the beneficiaries. Procurement under the Bank loan will be through local commercial channels in view of the diversity of items and the small size of individual purchases. The project is the eighth Bank operation for agriculture in Peru and the fifth agricultural credit to be provided through BFA. The new Bank loan will complement an earlier Inter-American Development Bank (IDB) loan of $12 million to BFA to help 70 newly established cooperatives. In order to broaden the coverage of the IDB and World Bank credit projects, on-lending under the(latter's project will not be made to cooperatives assisted by the IDB loan. The Ba..~k loan is being made to BFA, with the guarantee of the Republic • of Peru, for a term of 18 years, including five years of grace, at 7!j/, interest per annum. Note: Money figures are expressed in US dollar equivalents.