Peru: approvals for US$605 million in 2004

(Caracas, December 14, 2004).- In 2004, approvals in favor of Peru totaled US$605 million, representing 17% of the total of US$3.50 billion approved by the institution.

For macroeconomic stability and structural reforms, US$240 million were approved through two operations. The first, for US$140 million, backs the government’s priorities of combating poverty and unemployment, and guaranteeing sustainable public finances, through actions to improve the planning, quality of execution, follow-up and evaluation, targeting and control of social expenditure for the benefit of low-income sectors. Improvements are also needed in the system of geographical allocation of funds.

A second initiative for US$100 million aims to strengthen fiscal discipline through the introduction of hierarchical decision procedures, budget transparency and fiscal rules. As a supplement to the improvement of the macroeconomic conditions that these actions promote, the operation also supports the Peruvian government’s initiative for improving the State relation’s with the private sector, by reducing administrative barriers to business in a framework of efficiency and transparency.

The loan contributes to deepening policies to simplify procedures for setting up new businesses; and creates expedite mechanisms for existing businesses, which improves the efficiency of the use of public funds, and promotes a competitive and transparent environment in the public procurement system in an effort to strengthen incentives for private investment.

In the areas of basic needs, environment and infrastructure, US$267 million was contributed to finance major conservation works for the road, economic, energy and social infrastructure. In the water and energy sector, US$127 million was provided for the irrigation of agricultural areas (the valleys of Olmos, Cascajal, Motupe and La Leche), generating up to 2.24 GWh of hydroelectricity. The CAF assigned US$80 million for the social development infrastructure sector, and US$60 million was approved for government projects in the transport and energy areas.

For competitiveness, productive sector and the MSMEs, loans were approved for investment projects, working capital and lines of credit for commerce totaling US$94 million channeled directly or through the financial system. Assistance was provided to meet the needs of the microfinance sector, where the CAF is now the main multilateral source of support for the regulated institutions in the sector. Three Edpymes (MSME development entities) of recognized quality were introduced in central and north Peru, and a bond issue in local currency by Mibanco received support, being the first operation of this type by that institution.

During 2004, US$4 million in cooperation funds were approved for Peru, for integration, competitiveness, governance and culture.

Integration projects and events were financed to strengthen Peru's participation in the IIRSA initiative, together with implementation of strategies to promote private investment and develop border infrastructure.

In the field of Competitiveness, during this period, the CAF supported business and commercial exchanges, the First Port Development Plan, development of the Tourism Quality Plan, participation of micro and small enterprises in the FTT negotiations, and implementation of the national strategy to strengthen commercial capacity.

For Governance, the II version of the Governance and Political Management Program concluded with the graduation of 306 participants from the provinces of Arequipa, Cajamarca, Huancayo, Piura and Lima. This program trains at institutional level a critical mass of leaders and their support teams in public management and political affairs.

The second program in execution is Transparent and Efficient Municipalities, which transfers the best practices in electronic government and cadastre identified in similar socio-political contexts. For this program, the CAF formed an alliance with the OAS Agency for Development and the Canadian Agency for International Cooperation. The program, which covers the five Andean countries, has so far assisted 15 Andean municipalities with technical assistance, and trained 320 people in these two areas. In Peru, the program has been executed in the San Borja and Puente Piedra municipalities, as well as the Lima municipal district through the Lima Metropolitan Cadastral Institute.

The Tools for Governance and Consensus Building Program began during the year and graduated the first group of 80 people. Its objective is to train strategic actors in the public sector and civil society in modern negotiating techniques, marketing of public agendas, and persuasion.

In culture, projects were assisted to promote the country's cultural heritage, through the creation of a web portal, and national participation in international fairs and events. In the area of Cultural and Community Development, projects were supported to build capacity and strengthen responsibility and social capital. The music program was assisted in its three sections: orchestra (creating the first Youth Orchestra in Peru), choral and lute. Sports instruction continued with two projects: one with the mainly Afro-Peruvian population in Chincha with support from private enterprise; and a second project to strengthen capacities in the mentally handicapped population in alliance with the Special International Olympics.

In the area of productive community management and management of public services, action continued with the promotion of local cooperation and self-management in Huaura province, and significant progress was made in creating similar initiatives for the Quechua-speaking population of Cuzco department.