Peru: World Bank Approves $150 Million for Decentralization and Competitiveness

In Washington: Alejandra Viveros (202) 473-4306

In Lima: Sandra Arzubiaga (511) 615-0660

Sarzubiaga@worldbank.org

WASHINGTON, December 8, 2005 – The World Bank’s Board of Directors today approved a $150 million loan for Peru to assist with the government decentralization process and enhance competitiveness. 

“This loan will support the Government of Peru’s commitment to the reduction of poverty and inequality by making the government more responsive to citizens,” said Marcelo Giugale, World Bank Director for Bolivia, Ecuador, Peru and Venezuela. “By moving to a more decentralized system of government, the country will allow resource expenditure to be more focused on the needs of different regions.”

The Third Programmatic Decentralization and Competitiveness Development Policy Loan will assist the Government of Peru in the decentralization of public functions and resources, while supporting its competitive enhancement program. This is the third and last of a series of programmatic development policy loans supporting Peru’s reform agenda under the current administration. The program seeks to protect fiscal sustainability during the country’s transition to a more decentralized state, strengthen management and fiscal capacity at sub-national levels, and support the creation of a better regulatory and investment environment to increase Peru’s competitiveness, with a strong focus on export promotion and regional development.

The loan will facilitate the following key outcomes:

·         Strengthen tax administration and revenue collection at the national and local levels of government.

·         Strengthen public debt sustainability by supporting the regulation of decentralized borrowing and debt reporting procedures for sub-national governments.

·         Implement a centralized public expenditure evaluation system to effectively monitor, coordinate and assess public expenditure at all levels of government.

·         Enhance the quality of budget decisions and ensure efficient and targeted service delivery provided by local and regional governments that have adopted new responsibilities.

·         Increase domestic and foreign private investment by improving the overall investment climate, reducing administrative barriers, and enabling transparent contract enforcement.

·         Facilitate increases in exports, particularly non-traditional ones.

·         Reduce logistics costs through improved policy frameworks and service provision at ports and on the road networks, as well as the facilitation of improved transportation services.

“The program supports the implementation of a fiscally-sustainable decentralization process while enhancing economic competitiveness at the regional level,” said Rossana Polastri, World Bank task manager for the project. “The program will remove bottlenecks for the country’s economic development and improve the provision of public services, which are essential to reduce poverty and increase the quality of life of Peruvians.”

The first Programmatic Decentralization and Competitiveness Development Policy Loan for $150 million, approved by the World Bank Board of Directors in December 2003, stressed fiscal sustainability by establishing a new fiscal decentralization framework and ensuring a hard budget constraint alongside a series of related competitiveness measures. The second loan for $100 million, approved by the Board in December 2004, reflected an emphasis on supporting the Government of Peru’s competitiveness agenda, and moved towards measures that enhance efficiency and quality in service delivery.

The new $150 million fixed-spread loan has a repayment period of 11.5 years, including 10 years of grace.

###

For more information about the Third Programmatic Decentralization and Competitiveness Development Policy Loan, please visit:

http://web.worldbank.org/external/projects/main?pagePK=64283627&piPK=73230&theSitePK=40941&menuPK=228424&Projectid=P089826

For more information about the World Bank’s work in Peru, please visit: http://www.worldbank.org/pe

For more information about the World Bank’s work on Public Sector Reform in Latin America & the Caribbean, please visit: http://www.worldbank.org/lacpublicsector