The World Bank Approves $150 Million For Peruvian Government Decentralization

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Washington, December 2, 2003 – The World Bank approved today a $150 million loan to Peru to support an ambitious and innovative government decentralization program. A key goal of the Programmatic Decentralization and Competitiveness Structural Adjustment Loan is to assist in making government more responsive to citizens. 

“The decentralization process will promote sustained, broad-based economic growth and improve the quality of and access to government services by all Peruvians,” said Marcelo Giugale, World Bank Country Director for Bolivia, Ecuador, Peru and Venezuela. “These benefits will contribute to the reduction of poverty and inequality, particularly in the countryside.”

A guiding principle of Peru’s decentralization is that it will not impose any additional financial burden on the public sector. The World Bank loan will help meet that goal by providing financial resources to prevent funding emergencies at the national, regional and local level.

The World Bank loan will also support such measures as the expansion of the tax base and the strengthening of the tax system, as well as the reinforcement of community and business sector participation in decentralization. In addition, the loan will enable authorities to  modernize ports, roads and other infrastructure in order to reduce logistics costs, thereby promoting foreign investment and economic growth.

Another key goal of decentralization is increasing the transparency of government. “Decentralization would include citizen involvement in the budget process to an extent that is unprecedented in Latin America,” said Fernando Rojas, World Bank task manager for the project.

World Bank assistance is designed as a three-step process. Follow-up loans in 2004 and 2005 would advance a total of $200 million in additional funds.

The $150 million, fixed spread loan is repayable in 14 years, with 8 years of grace.