Announcement of One Hundred Twenty-Five Million US Dollars for Fifth Agricultural and Livestock Credit in Mexico on March 11, 1976

,, •World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. • Telephone: (202) 393-6360 BANK NEWS RELEASE NO. 76/18 March 11, 1976 $125 Million for Fifth Agricultural and Livestock Credit in Mexico Mexico will be assisted by a loan of $125 m:j.llion from the World Bank to help finance a project designed to provide agricultural and livestock credit, and incre~se the productivity and incomes of small and medium farmers. The loan, which is being made to the Nacional Financiera (NAFIN), is guaranteed by the United Nexican ·states and provides for onlending to Fondo de Garant1a y Fomento para la Agricultura y Avicultura (FONDO), the executing agent of the project. The Government's developmmt policies are presently geared to the need to increase agricultural production and improve the situation of the rural poor. The reorganized agricultural system, public investment and service programs in agriculture and other incentives, including Government support price policies, have created a demand for agricultural investment credit which the project will help to meet. Increased produc- • tion of basic foodgrains and milk will help meet the rising demands of Mexico's growing population. Production of live c;attle and fruits will help improve balance of payments through import substitution and export expansion. The increased flow of institutional credit and the technical services provided will help to raise the productivity of the "ej idatarios", increase their incomes and integrate them into the market economy. Under the project, at full development, family incomes are expected to mre than double in most cases. Over 46,000 families, about 250,000 people, will directly benefit from the overall project. Of these, about 37,000 families (about 200,000 people) are of the lowest income strata and will receive institutional investment credit for the first time. The project will also help to reduce unemployment and tm.deremployment through the creation of approximately 5,000 man-days equivalent per year. In addition, labor requirements during the investment period will present further opporttmities. The total cost of the project is estimated at $413 million.. It will provide term credit for investment in livestock production, annual and perennial crop produc- tion and agro-industries establishment. It comprises a low-income producers• sub-project, an agro-industries sub-project for producers, and a program of applied research, training and monitoring. The loan of $125 million is being made to NAFIN, a financial agency of' the Mexican Government, f'or a term of 20 years, including 4 years of ~race, at an annual interest rate of 8.5 percent. Re-lending terms by participating banks will be at a • rate of' between 11.5 percent and 14.5 percent for the medium-income producers, repay- able in 3 to 15 years, including 1 to 3 years of' grace. The low-income producers' sub-loans will carry interest rates of' between 7.6 percent and 9 percent, repayable in 3 to 15 years, with grace periods of' 1 to 3 yea.rs. Note: Money figures a.re expressed in US dollar equivalents. Form No. 1121 (9-75) PROJECT: TECHNICAL DATA Fifth Agricultural and Livestock Credit • COUNTRY: Mexico TOTAL COST: $413.3 million BANK FINANCING: $125 million, for 20 years, including 4 years of grace, with interest at 8-1/2% per annum. OTHER FINANCING: IDNDO - participating Banks and producers: $288. 3 million IMPLEMENTING ORGANIZATION: Fondo de Garantia y Fomento para la Agricultura y Avicultura (PONDO) Insurgentes Norte 423, piso 13 • Ml!xi.co 3, D. F. PROJECT DESCRIPTION: The project will provide term credit for investment in livestock production, annual and perennial crop production and establishment of ~o-industries. It consists of (i) a low-income producers• sub-project (LIPS) tailored to the needs of the traditional small farmers; (ii) a medium-income producers' sub-project (MIPS); (iii) an agro-industries• sub-project for groups of agricultural producers, including "ej idatarios"' and small farm, rs; and (iv) a program of applied research, training and monitoring. PROCUREMENT: As under the previous loans for agricultural credit in Mexico, procurement will be through normal commercial channels. It is not practicable to arrange for. bulk procurement and :international co~etitive bidding procedures, since the items to be purchased by the many sub-borrowers are relatively small and do not lend them- selves to standardization. At least three quotations will be obtained for the procurement of machinery and equipment for agro-industrial 1.mits wherever the cost of a single item of equipment, or an assembly delivered by a single manufac- turer, exceeds $150,000. Further, the FONDO will make availabe to sub-borrowers a list of suppliers of agro-industrial machinery from the Bank member countries and Switzerland • ECONOMIC P~TE OF RETURN: On-farm investment (77.4% of the loan): 27%; Agro-industries' sub-project (15.4% of the loan): ESTIMATED COMPLETION DATE: 1979 30% • •