Announcement of Eighteen Million Two Hundred Thousand Dollars to Guatemala for Highway Construction and Maintenance on July 29, 1955

FOR lMMEDIATE RELEASE :'!I ,._ INTERNATIONAL BANK FOR .RECONSTRUCTION AND DEVELOPMENT ( WORLD BANK) 1818 H STREET, N.W., WASHINGTON 25, O.C. TELEPHONE: EXECUTIVE 3-6360 C PRESS RELEASE NO. 412 SUBJEnT: $18.2 million loan to Guatemala. J'uly 29, 19$5 The World Bank today made a loan or $18. 2 million to Guatemala to assist in financing the completion of the new Atlantic and Pacific Highways and in the execution of a program to improve and maintain exis.ting roads. The projects should reduce transport costs, facilitate internal and external trade a.nd stimulate agricultural production, Guatemala's main economic activity. The Bank of America of San Francisco is participating in the loan, without • the tiorld Bank's guarantee, to the extent of $576,000 representing the first maturity which falls due February 1, 1959. The new Atlantic Highway will provide an alternative route to the single- track railroad which is now the only connection between central Guatemala and the Caribbean. It will be a paved, all-weather road, 190 miles long., running between Guatemala Cfty and Puerto Barrios on the Ca.ribbean, with a short branch to the new port of Santo Tomas n ar Puerto Barrios. Puerto Barrios, Guatemala's chief port, handles two-thirds of the export-import trade. At present, the capa.city of the railroad which serves it is nearing saturation, and rail service is. often interrupted by landslides. Work on the Highway was begun in 1951; by the end of March 1955 about half the grading was done and some of the bridges and culverts had been. completed. Construction is expected to be completed in 1958. The new Pacific Highway will be the backbone of the road system in the • It ;1 Pacific coastal plain and the piedmont, of western Guatemala. It will ruJt1 midway  . • between the Pacific Coast and the Inter•l.merican Highway, and will be 217 miles long.. In the noI'th, it wil;t extend to the Mexican border. In the south, it will extend to El Salvador, and will join the new Literal Highway being con- structed in El Salvador with the help of a World Bank loan of $11.1 million made in October 19.54. Construction or the Pacific Highway was begun in 1952, and 133 // miles w;~{ have beer,_, completed by the end of 1955. The Bank' s loan will help to finance construction of the remaining sections: 37 miles between Taxisco and the El Salvador border and 47 miles between Coatepeque and the Mexican border. The entire Highway should be completed by 1958. The region through which the Pacific Highway passes contains the richest agricultural land in Quatemala. The piedmont is one of Guatemala's largest / coffee-producing are~is and the coastal plain is particularly well adapted to tbe • / growing of sugar cane, cotton, corn and cattle. The agricultural potentialities of the plain are now practically unexploited; only one-sixth of the land is under cultivation. By facilitating the marketing ~f crops,. the Pacific Highway will make possible a rapid and substantial increase of cultivation in the area. The O~tenala highway system has deteriorated seriously because of' iDadequa_te ·.:.: maintepance. The Bank's loan will help ta finance~ three-year program for the improvement and better maintenance or existing highways. The progra:rn incl~de$ the reorganization of the Maintenance Division of the Highway Department, the j\ e~tablishment,'bf central and regional workshops and the training of personnel of the Department. The highway construction and maintenance pro~am was prepare~. by the Govern- ment with the assistance er consulting engineers. The total cost of the program is estimated at the equivalent of $40!2 million~ The Bank's loan will pay for • imported equipmEnt, materials and services.: The local currency expenditures equivalent to $22 . million will be met by the Goverrunent from budgetary I'  - 3- appropriations. t .• This is the Bank• s first loan to Guatemala. I~., June 19S4, on assuming office, the Government expressed its desire to establish a close working relationship with the Bank, and in October/November 1954 a Bank mission went to Guatemala to apprai~e the economic situation and to assist the Government in setting up a. National Economic ~+anning Council. At the same time arrangements were made tc station a resident Bank Representative in Guatemala to advise the Government on general economic and financial policies and to assist the Council in preparing a five-y~~r development program. 'I'he loan is for a term of 1, years and bears interest of 4-5/8% per annwn, including the l% statutory commission charged by the Banlc. Amortization will be gin Febru~ry 1, 195 9. • After having been approved by the Bank's Executive Directors., the loan documents were signed today by Lieutenant Colonel Jose Luis Cruz-Salazar, Guatemalan Ani:>assador .in the United States., on behalf of the Gove"1D'lent of Guate- mala and by Mr. Eu.gene R. Black, President, on behalf of the World Bank • • • (I Supplf:mental ,&tatement ... on .Loan to Guatemala General o·~atema1a, with 3.1 million people and 42,000 square miles, is the mqst 11 · populous and the third largest or the Central American RepUblics. It is a mount~ei:nous coLU1try with extremely fertile volcanic soils, and a rari:ge of altitude which offers a wide variety of climates. 'l'he t.msurpassed scenic beauty of ita mountain regions, with theiruagreeable climate and relics of the pre-C'olombian and Spanish cQlonial civilizations., have made Guatemala a popular tourist center. At the same time, the rugged and broke11 topography has hindered communic~tiol'l$ and created obstacles to development. The Sierra Madre., the continuation of the Andean Cordillera, divides the eount;ry into distinct regions. Because or the mild climate and fertile soils, the bulk of .the population lives in the central highlands and their Caribbean and Pacific slopes. In this area, the Indians 1 who form 6o1, ot the ·'population, follow their t;raditional agricultural pursuits in a way little changed since the Spanish conquest more than four hundred years agoo The 11l,adinotf·\, or pure or partly European descent., are engaged in more highly deve!oped economic activities, -:::_:~~ chief of which is growing the mild "blue" coffee for whit:ih Guatemala is f'amous. In this area is the capital., Guatemala City, the industrial and conmercial center of the country. • On the Pacific side of the highlands is the piedmont region, with cattle ranches and plantations of sugar cane, rice and tobacco. Lower down is the .Paci.tie coastal plain, as yet sparsely inhabited., but potentially the richest agricultural region of Guatemala. In the Caribbean lowlands the principal product~ are bananas, exported through Ptierto Barrios, the chief seaport. To the north lies the largely uneXl)lored and spars.ely populated tropical forest, area of the Peten. Economy Agriculture employs about 7S% or the population and accounts for two-thirds of the national incane which., in 19$4, was equi wlent to $$SO million. Industrial prodqction accounts for only about one-tenth 9f the national income. Apart from a CE:ment plant at Guatemala City, most manufacturing plants are small and produce consumer goods for the local market. Mining is confined to the quarrying of s,tone and sand and to two small lead-zinc· mines. Much of the country is covered .;wf.'th fores.ts containing valuable tropical hardwood trees., but forestry production has been limited because of difficulty~! tral'lSport. Guatenala is nearly self-sufficient in .f'oodstuffs. The main crops grown for doJnes,tic use are corn., rice, beans, sugar and cotton; livestock and dairy production has also been rising in recent yeare. Cotton productiop. now exceeds ~omestic requirements and cotton is likely to become an important 'export.. The total value of exports in 1954 amounted to $96 million; coffee acco~ted tor • mor, than t~ee-qut;lrters of this. Other exports are bananas, essential oils produced from citronella and lemon grass, chicle, abaca and tropical woods. In 1954 the value ot Guatemala's imports was equivalent to $86. million; they ()  - s· .... ,.-, • consisted prlmax-il.7 of manutactured goOds .s1.1ch as textiles, .machinery,,. motor vehicles and gasoline. More than three,-quarters or Guatenalan exports are shipped to, the Unite~ States,. -and the United States supplies two-thirds of Guatemalan imports.. bports: to Western Europe have r,cently µiereased and now account f'or m<>re: th@n 20,C .of the total. Guatemala. has no exchange restrictions and the quetzal has been at par with the United Stat·es dollar for more. than 30 years. Bank Gene.ral Survey Missio_!! In early 1950, the Government requested the World Bank to organize a mtssion to sur~~Y' Gua temala 1 s economic development potentialities and to make recOfflmenda- tions re-~rding the scale and order of priority or investments in various fields. A mission ·organized on this basis spent three months in Guatemala in mid-19$0 and submitted its repoz:t to the Government in 19Sl. The general program proposed by the mission laid primary emphasis on the . improvement of agi-icultural produc·tivity, and the expansion or transportation facilities, as means of diversifying the economy and stimulating the expansion of industry. The mission singled out the inadequacy of the transportation system as probably the greatest barrier to Guatemala I s economic development, and recanmend.ed the adoption, of a national plan for the development and maintenance of' highways. The opening up of the Pacific coastal plain to mechanized agri- culture was recomnendeq as offering the greatest possibilities for a rapid increase in food supplies. • Although the government or that time fonnally accepted almost all the recommendations of the mission 1 it proceeded during the period 1951-S4 to adopt economic plans and policies which increasingly di verged from \t1 J-iese recommendations. This made it impossible for the Bank to provide any further assistance. The ns goverrunent which came into power in June 1954 has made, vigorous efforts to acc.ele:rate Guatema.la 1's development ard has re-established active relations with the World Bank. A National Council of Economic Planning has been established to plan and coordinate economic development. The Bank has stationed a menber of its staff 1n Guatemala to assist the Ceuncil in the preparation of a five-year development program. In line with the recommendations of the 19,0 mission., this progr8lll gives i'J.j.gh priority to an expansion,,and improve- ment or the hi~y system, which the Bank's loan •de today will help. to finance • •