WASHINGTON, July 26, 2016 – The World Bank (WB) Board of Executive Directors approved a US$100 million loan yesterday that will contribute to reducing transportation costs and improving road safety, as well as the planning and management capacity of Paraguay’s road network. The project will benefit approximately 400,000 Paraguayans that use Routes 1 and 3, which link important development hubs in the country.
“For a land-locked country like Paraguay, positioning itself in the global competitiveness map necessarily calls for connecting its territory with an adequate and efficient infrastructure, lowering connectivity costs, improving accessibility and promoting economic and social cohesion,” said Santiago Peña, Minister of Finance of Paraguay. “We are aware of the multiplier effect that investing in infrastructure has on the economy; it is for this reason that the country is undertaking significant efforts at constructing and maintaining its road network, because it will result in more jobs and improved competitiveness,” he said.
The project approved today will benefit in particular users of Routes 1 and 3, which connect both the capital Asuncion and the Central department respectively with important development hubs in the southern and northern parts of the country, as well as farmers, cattle ranchers, freight and passenger transport companies in the areas covered by the routes.
“The transport sector is strategic in terms of improving the country’s competitiveness, its regional integration and providing better opportunities to people by connecting them to markets and public services,” said Jesko Hentschel, World Bank Director for Argentina, Paraguay and Uruguay.
The benefits of the upkeep of these road networks will be reflected in lower travel costs and times, along with improved road safety. It is estimated that the project will address the mobility and accessibility needs of approximately 400,000 inhabitants, nearly half of whom live in rural areas.
“This project falls within the National Infrastructure, Transport and Logistics Plan being meticulously undertaken by the National Government, and will be a significant contribution to our 20-year strategy and vision for the road sector, in particular as regards to adequate road maintenance with a view to minimizing overall costs, without neglecting quality, and also to improve and guarantee road safety,” said Ramón Jiménez Gaona, Minister of Public Works and Communications.
Among other priorities, this financing will support efforts by the Ministry of Public Works and Communications to rehabilitate and maintain approximately 319 kilometers of road in the departments of San Pedro, Caaguazú, Canindeyú, Misiones and Itapúa. It will also provide funding to improve road safety, such as the installation of guardrails, improved roundabouts and the construction of pedestrian areas for the most vulnerable users.
Recent studies indicate that roads are rapidly deteriorating in the country, probably due to insufficient maintenance: while in 2011 close to 68 percent of paved roads were in good condition, by 2015 that figure had dropped to 59 percent. Moreover, every year around 1,200 people lose their lives and approximately 40,000 are seriously injured due to traffic accidents. The economic cost of traffic accidents varies between 2 and 4 percent of Paraguay’s GDP.
The project falls under the World Bank’s 2015-2018 Partnership Strategy with Paraguay, which supports the country’s efforts to reduce extreme poverty to 9 percent by 2018 and increase income levels among the poorest 40 percent of the population. The cooperation program is focused on protecting the poorest from economic volatility risks, guaranteeing their access to quality public services and promoting their financial inclusion.
The US$100 million loan comes from the International Bank for Reconstruction and Development, the World Bank Group institution for medium-income countries, has a 35-year maturity period and an eight-year grace period.
