hotel helped pioneer ecotourism as an effective balance between development and conservation. Its success has prompted about 30 other hotels to replicate the concept in the southern Amazon region. The proprietor of the company accords IFC significant credit in helping the company “survive” through financial support as well as advice to the company. Both the Orient Express Hotels and ecotourism hotels are linked to local communities through the purchase of goods and services. As high-end hotels, both companies have relatively high employee-per-room ratios, and increased their direct employment. Both have also invested in staff development, with the ecotourism lodge, for example, sending some of its trail guides for training in well-established safari hotels in east and southern Africa. The hotels have also generated broad indirect employment, in areas such as transport services, food and beverage outlets, tour operators, and souvenir industries.15 Two WBG-supported concessions helped improve tourism-related transport services, although some limitations underlined the need for enhancing competition in monopolistic sectors. In transport, IFC invested in the Orient Express Hotels–sponsored Peru Rail, a concession agreement for the operation of the Cusco– Machu Picchu rail network. The concession substantially increased passenger transfer capacity and enhanced service quality. However, it has remained a monopoly since inception, user charges have been high, and Peru’s antimonopoly office found it guilty of blocking competition. Recent concessions to allow two additional operators are expected to add competition and reduce tariffs.
Both the Peru rail and airport concessions illustrate the critical need to encourage competition as much as possible, and to develop optimal concession agreements that compensate for lack of competition in monopolistic sectors. Both IFC and MIGA supported a concession to upgrade Lima’s international airport. The resulting increased handling capacity has helped Peru cope with substantially increased traffic volumes and, at the same time, maintain service quality. However, an IEG evaluation of the project found that the concession undermined competition in that the operator was given a 40 year concession, the longest in the Latin America and Caribbean Region. The operator also charges the highest fees in the region. It was given the right to compete with subcontractors on cargo operations and airport services, thereby conferring an unfair advantage. The project has also not yet resulted in
the expected development of a second runway, which remains a main capacity constraint. Both the Peru rail and airport concessions illustrate the critical need to encourage competition as much as possible, and to develop optimal concession agreements that compensate for lack of competition in monopolistic sectors. The Bank-financed Vilcanota Valley project aimed to help enhance sustainable tourism in the region through investments in visitor services, historic preservation, and cultural education for local residents and tourists. However, the project experienced substantial delays and has not yet met its objectives due to an over-ambitious initial project design and lack of local capacity to implement the project. The project has recently been restructured and the scope substantially reduced to raising tourism awareness and conducting feasibility studies. Outcome Rating. IEG rates the outcome of WBG support for growth in the tourism sector as moderately satisfactory.
Supporting the Development of Agriculture and Agribusiness Country Developments Increasing the incomes of the agriculture-dependent poor remained a major challenge in 2003. The agriculture sector in Peru comprises: (i) the modern exportoriented agribusiness sector; (ii) the medium-size traditional crop agriculture mainly oriented to internal markets; and (iii) smallholder subsistence agriculture. Following liberalization in the 1990s, particularly the removal of price controls and government marketing monopolies, the sector had grown at 4 percent a year from 1996–2002. In 2003, agriculture accounted for 8 percent of GDP and employed 30 percent of the labor force. However, the sector was characterized by low productivity and low farmer incomes. An estimated 80 percent of the extreme poor worked in traditional agriculture and fisheries. Despite being one of the largest fish producers in the world, fisheries accounted for just 1 percent of GDP, indicating limited value added. A range of constraints to increased productivity and income in traditional agriculture included: (i) small and decreasing land holding size as a result of both past government land distribution policies and the subdivision of land within families; (ii) high margins among intermediaries; (iii) difficulties in getting products to markets; (iv) dependence on precipitation levels for adequate water supply in some areas; (v) and inadequate plant and animal health standards that restricted access to international markets. Regarding agribusiness, the sector was still nascent. Although it had re-
The World Bank Group’s Contribution to Enhancing Participatory and Sustainable Growth
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