The Inter-American Development Bank today announced the approval of a $9 million soft loan to support the second phase of a municipal development program in San Pedro Sula, the second largest city in Honduras.
The program is aimed at achieving a sustainable improvement of urban services in San Pedro Sula, the Honduran industrial capital, by restructuring the municipal financial management system to increase transparency and efficiency, as well as by modernizing the arrangements for the provision of services such as water and sewage treatment, surface transportation, waste management, and improvement of marginal neighborhoods.
The IDB sponsored the first phase of the program with a $27 million loan that sought to strengthen the city’s finances, support the creation of technical units to supervise urban services concessions, and develop a methodology for projects in low-income settlements. While those goals were achieved, some of the loan resources were used to finance repairs of damaged caused by Hurricane Mitch.
The second phase will include activities to improve municipal management of San Pedro Sula’s road system and increase transparency and sustainability in its financing. To that end, a sector investment fund will be established.
Another component of the program will support the hiring of a private sector company to run the city’s solid waste management and street sweeping services. San Pedro Sula’s garbage dump will be turned into a sanitary landfill and a social program will be implemented to retrain a community of people who make a living from an informal system of trash recycling.
A third component will support efforts to resettle people living in marginal neighborhoods, including those along the city’s riverbanks; legalize land holdings and stimulate the real estate market for low-income people. Infrastructure investments will be made to develop housing for at least 2,000 people.
Other components will foster improvements in planning and management of urban growth and development, with an emphasis on civil society and private sector participation. The Municipal Environmental Department will be strengthened and a plan will be developed to manage the Merendón watershed. Municipal finances will continue to be modernized through the implementation of an integrated financial management system and the expansion of electronic government services.
The San Pedro Sula municipal development program reflects the strategy agreed between Honduras and the IDB to support state modernization, the improvement of services for low-income people and the delivery of public services with private sector participation.
The loan, made with resources from the IDB’s Fund for Special Operations, was granted to Honduras for a 40-year term, with a 10-year grace period. Interest rates will be 1 percent during the first 10 years and 2 percent thereafter. San Pedro Sula will repay the loan into a special rotating fund that will be used for future municipal projects.