Announcement of Four Million Two Hundred Thousand Dollar Loan to Honduras for a Highway Maintenance Organization on December 22, 1955

·•. c-> " FOR IMMEPIATE RELEASE INTERNATIONAL BANK FOR •EcoNsTRucTrON AND DEVELOPMENT (WORLD BANK) 1818 H STREET, N.W,,'';"y\'ASHINGTON 25, 0.C. ·TELEPHONE: EXECUTIVE 3-6360 r----------------------~- -----~-------------------1<: '""!'I. PRESS RELEASE NO • 4.32 SUBJECT: $4.2 million loan in Hondui"'as December 22, 1955 ) The v.rorld Bank today made a loan of $4.2 million to Honduras to enable a highvvay maintenance organization to be set up and to begin operations. The • loan will also fin~li.~e preliminary engineering studies for the improvement and new construction o:r various sections of two important trunk roads in Hondura.s, the Northern and Western Highways. The Bank of America of San Francisco, the American Security and Trust Company of Washington, D.C. and the Whitney National B_ank of New Orleans are participating in the loan, without the World Bank's guarantee, to the extent of $872,000 of the f~r,~t five maturities, falling due from December 1, 1957 through Decembe:r l / 7''£9.59. The lack of an adequate transport system seriously hampers the economic development of Honduras. Se veral areas have important possibilities, especially 1 in agriculture, livestock and timber but, in the absence of transport and of suffi<Jient population, these areas are practically undeveloped at prese~t. t: .; Of the 1,600 miles of roads in Honduras only 20 miles are paved. The ,basic netwo:fk consists o:f five trunk hig};Iways, all in need of improvement.,  7' - _________________:..._________________________________~~----------,:1 I CARIBBEAN SEA N T I DA ', __________________ , ,C 0 L 0 N T ' j', ,Q,___ / _______ .,_ ····- ·--,,,,': ,,j s u M 0 Q A I (------, ) 0 L A N H 0 : l. \ : ",._,\ ./ I :~-\.. I I I ' ._.;r....·-' ,·_,,,.,,,_.,..,-../" ~ ... '~ f'· ) ---~-J i ~ (. REPUBLIC OF HONDURAS 8 4 (. .. v~ ~ t>- G \) t>- ALL WEATl4ER ROADS PIWED UNPIWED DRY WEATHER ROIIDS - 4 :() 0 ~ \ u t>- ROADS PIIDJECTED DR UNDER CXINSTRUCTKIN RAILROADS INTER·OEPIUmllENTAL ~ES INTERNATIONAL l!IDUNIIIRIES - '9 OI020~40~ P-----1:-;1 li-;l------al •--=="""------:-------:------,-----.::~...-..,--"",----:------::-----_;_-~o:nl:ry:.o:s~il:lu:str::a:l.i:llf!:·~=~-------~::._______________________ .lov,_..,ER. l900 -pA CIFIC OCEAN ._ - IIME' Thi, mop;,,.,.,.,.,.,.. IBRD-2~ J "" • • •• ... • i) ......... ' l • and in some cases relocation, to make possible their conversion into first- class paved highways. The two trunk roads recognized as having priority are the Northern Highway which runs 230 miles from Tegucigalpa, capital of Honduras, northt~ard to San Pedro Sula and Puerto Cortes on the Caribbean; and the Western Higm~ray which runs 106 miles from San Pedro Sula westward toward El Salvador. The latter road requires an extension of 100 kms. (62 miles) to reach the border between the two countries. The remainder of the road system consists of secondary roads and trails, many passable only in dry weather. In spite of this and of the rl}su.lting high costs of transport, the number of motor vehicles in Honduras has doubled since 1950, and in 1955 there were 7,000 in operation. The construction and maintenance of the road system of Honduras are the • responsibility of the Hi~hway Department (Direccion General de Caminos), which was established five years ago as a part of the Ministry of Dev~lopment. Little road construction or maintenance equipment is at pr~sent available to the Department, and such as exists is in poor condition. TI1e Highway Department also lacks adequate offices, warehouses a.nd workshop facilities. The Government. of Honduras has decided to embark on a comprehensive program to improve the country' s highwa.ys. The first need is to reorganize the Highway Department. Its technical and administrative staff for design, engineering and field work must be strengthened to enable it to carry out its various tasks. A new maintenance division is to be set up within the Department, and equipped with the necessary road maintenance equipment and spare parts, workshop construction materials and tools. In addition, the Highway Department will require advice from outside the country on modern highway maintenance  - 3 - techniques, a~d consulting engineers will be hired to furnish this advice and to carry out the necessary engineering studies for. the improvement and com- ple:tion of the Northern ar.d Western High1:,1ays. It has also been decided to • provide funds to enable the new ~aintenance division to carry out maintenance work in selected zones for an in,itial period of two years. It is estimated that these measures will cost the equivalent of about $8 million. $4~2 million of this will be needed in foreign exchange, to pay for the imported equipment, materials and consultants 1 fees. It is this foreign exchange element wl).ich the Government of Honduras is now borrowing from the Worid Bank. This is the Bank's fir"st loan to Honduras. The loan is for a period of nine years, bearing interest of h~, including the 1% statutory cor.JI1ission charged by the Bank. Amortization will begin on December 1, 1957 and is to be paid in semi-annual instalments, the last being payable on December 1, 196h. After approval by the Bank's Executive Directors, the loan documents • were signed today on behalf of Honduras by His Excellency General Carlos Izaguj rre, Honduran Ambassador to the United States, and by Mr. Robert L ~ ,:: Garner, Vice President,}on behalf of the World Bank. • .. ,... J  .'. ,' - 4 ;:...,__.,,,--, .' .. -I • Supplementary Statement on Loan to Hon~)~3~s Honduras, bordered on the west by Guateillala and El Salvador and on the ~ . .. ' east by Nicaragua, has its main coast on the Caribbean, but also has an outlet ·to the Pacific at the Gulf of Fonseca. It has a land area of 112,100 square \' kilorn~\ers (.59 ,161 sq. mis), and is the second largest of the Central American countriE:i;~. But its territory is extremely mountainous, and the. poJ?ulation \\ density o~: 14 people per square k,ilometer i.s the second ~owest in ~he region. Moreover, the people of Honduras are not concentrated in one nucleus as in neighboring countr:tes:t but are settled in a large number of interior river basins and in plains and valleys along the Pacific and Atlantic coasts. Th~ northeastern corner of the country, the so-called Mosq1..l.itia, is almost completely uninhabited and unexplored • • Economically most developed,, although not the most populous part of the country, is the coastal plain facing the Atlantic. developed plantations of bananas, which account for more than half of the exports Here are the large well- "•'., "-.'· Other parts of the country produce coffee, minerals, lumber, cattJ\1, tobacco and abaca fibre, and these commodities are also exported in small quanti• ties. through the Atlantic ports. Cereal crops and cotton are grown ma~nly for local consumption. The national income of Honduras was estimated in 1952 to have been 420 million Lempiras, equivalent to ~210 million, or an income of ~135 per head. More than half of the national income originated in agriculture, for~stry and fishing; industry, including construction work, contributed 12%; trade and trans- port made up 15%; and the remaining 20% came from private and public se~ices, • rents, etc •  • - 5- In the past two decades econorni.c': progress vin Honduras has been slo~r. production has been recovering gradually from the effects of the depression and banana disease during the ,30,s. Coffee and timber have become more important exports but have only partially made up for the slo~ recovery in the banana trade. There has not been any major increase of agricultural or industrial production for the domestic market. On the other hand, the real national income appears to have increased at a faster rate than the volume of national production, due mainly to the larg~r share retained by Honduras from the banana industry. As the fight against new plant diseases obliged the banana companies to introduce costly irrigation works and spraying . systems, banana production re1uired more . labor. There were also rises in wages, so that the share of Honduran labor in the value of production increased. From 1949-50 onwards the payment of income truces by the companies also augmented the country's share in the benefits from the industry. In additign, the country's terms of trade improved because o_:f increases in the prices ;of the •• principal exports, bananas an.~ coffee. Th~s, although national production in'!"' creased in volume by less than 3% per annum, at the same rate as population, between 1939 and 1953, real income rose by 4% per annum. This means.that r~al income per head rose by about 1% per annum over that period. Progress was interrupted in 1954 by severe floods on the northern coast, and a major strike on the banana plantations. In 1955, how~yer, .the economy showed signs of a good recovery. Honduras has great unutilized natural resources in land and forests. The '} small internal .market and ·the dispersion . of population limit possibilit:i{~s for . ~- development, however, and substantial investment will be required to provide adequate transport and power, The Government of Honduras has created, in the •  -6- • last six years, a Central Bank and a Development Bank and has set up an efficient budget and tax department. In addit~on, a National Economic Council was set up earlier this year to coordinate investment plans. Public investment, especially in road construction, has increased. Efforts have also been made by the Government to improve agricultural practices and to raise educational levels. Truces were increased steeply in early 1955 in order to ensure that the development program could be financed without inflation • • •