Announcement of a Five Million Dollar Loan to Peru for Highway Maintenance on August 5, 1955

FOR IMMED.IATE RELEASE '~ INTERNATIONAL BANK FOR • RECONSTRUCTION AND DEVELOPMENT .(WORLD BANK) 1818 H STREET, N.W., WASHINGTON 25. D.C. TELEPHONE: EXECUTIVE 3-6360 PRESS RELEASE NO. 417 FOR RELEASE 11:30 A.M. SUBJECT: $.5 million loan to Peru for August 5, 1955 highway maintenance. The World Bank today lent $5 million to Peru to help the Government carry out a program of highway maintenance and train personnel in modern highway maintenance methods. The Chemical Corn Exchange Bank is participating in the loan, without the Bank's guarantee, to the extent of $683,000, representing the first two maturities • which fall due in August 1958 and February 1959 • Transportation is one of Peru's chief development needs and directly affects the country's prospects for further economic progress, The high ranges of the Andes Mountains divide Peru's Jllrrow coastal strip on the Pacific from a vast, and so far almost undeveloped., tropical jungle in the east.. Possessing no integrated railroad system, Peru is largely dependent on roads as a means of transport and the highway system provides the only link between some of the main regions of the country. While some freight is moved by coastal ships, and many mineral products are carried to port by rail, the bulk of Peru's freight tr2ffic -- including her chief export., cotton -- moves by truck over the highways. The Peruvian Government over recent years has been investing heavily in highway reconstruction, and in particular is rebuilding the Peruvian portion of the great north-south Pan American Highway, which at present forms the main artery of _, communications in Peru. This construction increases the need for a modernized, well-equipped and continuous highway maintenance service.  - 2 - Today's loan will finance the import of maintEnance equipment, spare parts, machinery for repair shops., and materials. It will also ·cover .tees of engineering • • consultants who will assist the Pei·uvian Department of Highways during a three- year .Period in organizing and carrying out the highway maintenane~ program. The Government will make available to the Highway Department the funds necessary to cover the local currency costs. These costs will far exceed the amount of the loan and have been estimated at the equivalent of $4 million in 1956 alone·. All sub- stantial orders financed by the Bank's loan are to ·be filled through competitive bidding. Peru's highway maintenance program is expected to have various beneficial effects. It will protect the heavy investment which the Government has already made in road construction, and reduce the need of further costly rehabilitation. It will lower trucking costs by increasing the economic life of the vehicles. In vehicles and tires alone the wear and tear caused by poorly maintained roads is estimated to cost the country around the equivalent of about $10 million annually in foreign exchange. It will also decrease road transit time, and eliminate much of the damage now incurred in the shipment of perishable goods. The importance of the highway system will increase as the Government pursues • its program of building penetration roads into the undeveloped areas of the upper Amazon basin. A small .fraction of today• s loan is reserved for payment to the consulting engineers for a preliminary survey of a project for the improvement and paving of the easternmost section of the highway linking Lima with the headwaters of the Arna zon. The Peruvian economy has sholm sustained grOW'th over the past few years. Better road transport should step up this rate of progress and should assist Peruvian and foreign capital now vigorously seeking new- opportunities, particularly in mining and industry. Today's loan is for a term of 9 years and carries interest of 4-l/L% per annwn1 including the statutory 1% commission charged by the Bank!' Amortization will begin August 15., 1958. This is the seventh Bank loan in Peru and brings the total amount lent there to $.36 million. The earlier loans were $2 .• 5 million for improvements at the Port of Callao, three loans totaling $8 million for agricultural development, $18 million for an irrigaticn proj-~ct.~an.q. $2.5 million for-"the..=-c.onst.Pm.ion of ..a~~- plant, • The loan was signed, after approval of the Bank's Executive Directors., by His Excellency Don Fernando Berckemeyer, Peruvian Ambassador to the United. States, on behalf' of the Republie of Peru; and by Eugene R. Black., President, for the World Bank.