Announcement of a Loan to Peru for the Import of Agricultural Machinery on April 12, 1954

INTERNATIONAL BAMK FOR RECONSTROOTION AND_ DEVEIOPMENr • FOR ·rHE PRESS FOR IMMEDIATE RELF.ASE PRESS REI&SE NO. 359 April 12., 1954 The International Bank for Reconstruction and Development today made a loan of $1., 700,000 to Peru. The loan will pay for the import of agricultural machinery needed to reclaim ·ld and open new lands to cultivation and to improve methods of production. Increased production made possible by the new equipment will help reduce Peru's need for food imports and will increase her foreign exchange earnings. The National City Bank of New York has agreed to_ participate in the loan., without the International Bank's guarantee., to the extent of $250.,000 of the first five maturities of today's loan., falling due semi-annually from JuJ.y 15, 1956 through Jtll:, 1,, l9S8. • This is the Bank's second loan to Peru for the purchase of agricultural machinery; the other., for $1.,300.,ooo., was made in July 19.52. As in the case o:r the earlier loan., the machinery financed with today's loan will be operated by SCIP.A. (Servicio Cooperativo Interamericano de Produccion de Alimentos), an agency of the Ministry of Agriculture. One of SCI~A•s most important activities is the operation of agricultural machinery pools. Equipment fran the pools., operated by SCIPA personnel., is provided to farmers on a contraqt basis. Two general types of work are done by the poolss cultivation and land preI&,ration. Cultivation includes,. such services as plowing., harrm,.ring1 dusting and harvesting. Land preparation includes land clearing, cleaning of canals and ditchas-, leveling., te?Tacing., drainage and the improvement and building of farm roads. There is a rapidly increasing -c;lemand for land clearing and land preparation • in Peru, On the coastal plain shout 370',0QO acres of lan(;l formerly in production  ., ·.,v . ~- - 2 - • ha:5 been abandoned because ot deterioration of i?Tigation ditches., poor drainage a.nd failure to level for satisfactory water usage. Other lands still under cultivation need to be leveled to permit mpre ;effective use of water arxi the use of mechanized methoos of cultivation. On the eastem slopes of the Andes large areas of land can be cleared at relatively lcw cost. It is estimated that during the life of the machinery financed by todny•s loan, SCIPA will be able to rehabilitate about 37 ,ooo acres of land and clear about another 12,500 acres each year. The cumulative effect or five y~s of full operation of the nachinery should result in an increase ~f annual production valued at $36 million, of which a.bout $17 million would be exported, making a substantial ilnprovement in Peru I s balance of :payments. The gr-eater pa.rt 0£ the proceeds of today's loan will be spent !or the purchase of heavy equipment to increase &:IPA fs land clearing and land preparation • activities. A lesser portion r-."ill be spent on cultivation and transpo1"tat,ion eq.iipment, spare parts and shop tool,,. Specifically., the loan will pay for the impor·t of crawler tractors, heavy earth-moving equipment, scrapers, graders, borderers, plows., cultivators, sub-soilers, threshers, trailers, trucks and pickups. The loan is for a term of seven ye.,rs and bears interest of 4-1/1$ per annum including the' statutory 1% commiss\ion which w:t.11 be allocated to the Bank's Special Reserve. Amortization payments will be~n July 15, 1956. SCIPA was established ,in 194.3 by- the'> Peruvian Govenl?llent and the Institute of Inter-American Affairs of the United States. In addition to operating agricultural machinery pools, SCIPA furnishes .free tecJ:mical a@listance to farmers through an extension service program. !n the eleven yea.rs of its existence, SCIPA~has contributed substantially to the mo~ernization and expansion • of Peruvian agriculture. It has an efficient and experienced stai'i' capable oi'  - 3- • mafa:tni~1ing and operating modern agricultural equipment. SCIPA has nade good usa ot the machinery financed with .the previous Bank loan and has met its targets for cultivating farm lands and for reclaiming addititmal lands for cultivation. The Government has now ·negotiated settlements for resuming service on all government /or government-guaranteed debt which has been in de.f'ault. Follc~;ir.g the settlement of Peru's dollar debt early in 1953., the Government, in December 195.3, reached an agreement with the Co1.mcil of Foreign Bondholders of London on the terms of settlemait to be offered to holders of detaulted sterling bonds. These terms were approved by the PeruVian Congress in February 1954. After having been approved by the Bank's Executive Directors, the loan agreement was signed today by His Excellency, Don Fernando Berckemeyer, Peruvian Ambassador in Washington, on behalf of the Government of Peru, and by • Mr. Eugene R. Black., President., on behalf of the International Banlt • I •