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The Inter-American Development Bank (IADB) has approved a US$300mn policy-based loan to Peru to promote national competitiveness.

The programme supports reform in three basic areas. The first area provides a framework for public-private cooperation in the design and coordination of government policies intended to improve productivity and competitiveness. To this end the National Competitiveness Council, which is composed of senior officials from both the public and private sectors will be strengthened and restructured to allow for greater independence in the selection of the private sector members. This will contribute to the stability of the council and its credibility and effectiveness as a high-level, public-private consensus building body.

The second area includes reforms designed to improve the climate for private-sector investment and addressing specific policy and institutional impediments to greater efficiency at the enterprise level. These reforms include government efforts to enhance productivity through new regulations and other measures that will enable entrepreneurs to start new businesses more quickly, make the port system more efficient, strengthen job training, and streamline commercial dispute resolution.

Other measures will enhance creditor rights, improve access to credit histories to promote better banking, increase the use of information technology and improve the efficiency of scarce public funds invested in science and technology.

The third area of reform supported by the programme will also promote public-private cooperation to develop business efficiencies through the creation of linkages and clusters.

A stable macroeconomic framework will be maintained, and the programme will be coordinated with related initiatives of the World Bank, the Andean Development Corporation and the United States Agency of International Development.

The loan, which will be disbursed in two tranches, reflects the IADB strategy for Peru to increase the economy’s productivity and competitiveness and thereby contribute to the reduction of poverty.

It brings the bank’s total lending to Peru during 2003 to US$523.9mn. Other IADB investments support transportation, housing, financial markets, urban transportation and reform of the state.

The loan is for 20-year term, with a 5.5-year grace period, at variable interest rate based on Libor.