World Bank approves $330 million loan to help Peru mitigate climate change

The World Bank Board of Executive Directors approved a $330 million loan Tuesday to help Peru’s recently created Environment Ministry improve and strengthen the environmental management of key sectors such as mining, urban transport and biodiversity conservation.

“The World Bank has decided to support Peru resolutely in the implementation of environmental policies permitting sustainable development,” said Felipe Jaramillo, World Bank Director for Bolivia, Ecuador, Peru and Venezuela. “In the context of the global financial crisis, it is key to identify and adopt an increasing number of policies that could make progress in both the economy and environmental protection,” he added.

The World Bank’s programmatic loan is the first in a series of three that will fund institutional reforms and policies in five key areas: improved environmental management, fuel and transport sector reform, biodiversity conservation, and the sustainable environmental management of both the mining and fisheries sectors.

The loan includes a LIBOR rate plus a 0.75 percent fixed margin to be repaid in 21.5 years and a grace period of 13.5 years.

According to the “Environmental Analysis of Peru,” published by the World Bank, the cost of environmental damage amounts to 3.9 percent of the country’s GDP, or approximately $2.3 billion in losses caused by air and water pollution.

Peru’s principal environmental problems are air pollution – especially in Lima due to vehicle and industrial emissions – water pollution, soil erosion resulting from overgrazing on the slopes of the costa and sierra and deforestation. More than 11 thousand tons of solid waste are created every day in the country and the past century has taken 10 million hectares away from Peru’s Amazon jungles.

Air pollution levels in Lima and Callao, in terms of particulate matter (PM10), exceed those of Mexico City, Sao Paulo and Santiago – all cities with a greater number of cars than Lima and less favorable geographic conditions.

The diesel used in Peru is low quality, containing high levels of sulfur – 5,000 parts per million – which contributes to the generation of particulate matter.

“The program aims at improving the quality of fuels, especially diesel, the most commonly used fuel in public transportation. According to the law, by January 1, 2010, the quality of fuels must improve substantially. This means updating vehicles in Lima, where there are currently many old and highly polluting cars, to improve air quality,” said Environment Minister Antonio Brack.

In Peru, home to 70 percent of Earth’s tropical glaciers, water is also dire issue. The country’s glaciers, which feed hydroelectric plants and provide drinking water to Lima, the world’s second largest desert city after Cairo, Egypt, are in the process of accelerated meltdown due to global warming.

According to Peru’s National Resources Institute, or Inrena, the Andes Mountains have lost at least 22 percent of their glacier area since 1970.

The Quelccaya Glacier, the largest ice cap in the Peruvian Andes, has shrunk by 30 percent in the last 33 years and last May, Irena’s Glaciological Unit reported that the Broggi Glacier, located atop Cordillera Blanca – the largest glacier chain in the tropics – had completely disappeared.

And, although fishing resources in Peru are among the largest in the world, they are threatened by several factors, including overcapacity of the fishing fleet which had led to the overfishing of several marine species, including anchovies.

“Peru will take all the possible measure to implement its policies and mitigate the effects of climate change,” said Brack in comments to daily El Comercio. “We have obtained an important loan that we will use to preserve our forests.”

In January, the Ministry of Agriculture has launched a nationwide tree-planting project with the astounding goal to plant 40 million trees by Feb. 20 to capture more than 570,000 metric tons of carbon dioxide annually.

Peru’s Environment Ministry has also solicited a $220 million loan from Japan to create and secure national protected areas, which are designed to preserve 18.2 million hectares of land – including 17 million hectares of forest – across the Andean country.

Germany has recently granted Peru 7 million euros for forest conservation.

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