Announcement of Seven Million Two Hundred Thousand US Dollars Road Loan to Panama on August 19, 1960

W O R l,, D Ii ~ N. I< r • INTERNATIONAL BANK FO'R RECONSTRUCTION AND DEVELOPMENT 1818 H STREET, N.W., WASHINGTON 25 1 D. C. TELEPHONE: EXECUTIVE 3-6360 PRESS"RELEME NO. 647 SUl3JECT: $7.2 million road loan August 19, 196o to Panama The World Bank today made a loan equivalent to $7.2 million to Pana.ma for road cons:truction and improvement. Ten ne~f feeder roads, having a totali.. length of 187 miles are to be built in potentially rich agricultural areas; and e±ght existing roads {tota.i 86 miles), linking the new roads with main highways, will be paved. The roads will open large new areas to settlement and agriculture, Will encour'tige increased production in areas already under cultivation, and • will reduce transportation costs of moving agricultural produce to markets • Four private banks are participating in the loan, without the World Bank's guarantee, for a total amount of $457,000 representing the first two matur~ties which fall tiue in July 1964: and January 196.5. The J?articipating banks a.re The Chase Manhattan Ba:ok, :Bankers Trust Company, The First National City Bank of New York and Ce1;1tral National Bank of Cleveland. The economy of Panama, aside from canal Zone activities, depends predomi- nantly on agriculture. Good roads are essential to the cotu1try's economic growth since the main agricultural areas are some distance from consuming centers and ~~l:m~st all produce has to be transported overland. Panama now has about 1,758 miles of roads, of which nearly half are earth roads usable only in dry weather. The road network is concentrated in the most densely inhabited part of the country between the Canal and the Costa Rican border south Of the ;. Continental Divide. In tp.is region conditions are favorable for the growing .) - 2 - of various crops, for dairying and cattle-raising and, in some localities, for sug!U", coffee and citrus fruits . From "the more inaccessible areas, agricultural • products are sent to market by pa.ck horse or human carriers, so that farmers concentrate on products that will withstand the rigors of transport and not necessarily on those best suited to soil and climate. The Panamanian Government intensified its efforts to improve road transport in 1955 when, with the assistance of a Bank loan of $5-9 million, it undertook to (1) organize a highway department in the Commission of Roads, Airports and Docks; and (2) to reconst.ruct nearly all its surfaced roads and to provide for their continued maintenance. When the Government prepaid the Bank loan in 1958, an effective highway department had been established and the rehabilitation pro- gram was well under way; it is still in progress. The effect of this program is already evident in ·the impressive growth of veh:i.cle traffic in the past five • yea.rs. The project now being undertaken will provide access to consumption centers from additional areas. The new roads will be built on the Peninsula de Azuero and in the Provinces of Veraguas, Cocle and Chiriqui where more than half the population lives. The,area to be served is about 494,ooo acres of which about 161,000 acres are already in cultivation. On t~e latter, the value of produc- tion is expected to increase, and a considerable volume of additional produc- tion will come into being as the remaining acrea,ge is developed. The new and improved roads are scheduled for completion in 1964 by which time the Inter-Ame~ican Highway between Panama City and the Costa Rican border will also be finished. Thereafter there should be a substantial reduction in . road transportation costs by the use of larger trucks and trailer trucks, increased speed, longer useful life of vehicles and lowered fuel consumption and vehicie maintenance costs. • :~ - 3- The total cost of the road project is estimated at the equivalent of $14.5 • million. The Bank's loarl 1)1111 cover the fore:lgn exc:b.ange requiremen1ts and the Government of Panama is 8..L.-ranging to finance the remaining costs. The Bank's loan is for a term of 15 years and bears interest of 5-3/4"/o including the l"/o commission which is allocated to the Bank's Special Reserve. Amortization will begin in July 1964. Arter having been approved by the Bank's Executive Directors the loan agreement was signed by His Excellency Fernando Eleta, Minister of Finance, on behalf of the Republic of Panama • • • Ci