Announcement of World Bank Supports Mexico’s Rural Development Effort : Second Loan to Pider to Benefit 270,000 Rural Poor on June 17, 1977

:,.. . . ~. FOlt·IMMEDIATE RELEASE World Bank E ' . 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. • Telephone: (202) 393-6360 BANK NEWS RELEASE NO. 77/136 June 17, 1977 WORLD BANK SUPPORTS MEXICO'S RURAL DEVELOPMENT EFFORT SECOND LOAN TO PIDER TO BENEFIT 270,000 RURAL POOR Mexico's national rural development effort, designed to improve agricultural produc- tion and raise poor farmer's income among aoout 5 million rural people, will be ciSSisted by a further World Bank loan of $120 million. The loan will raise the Bank's lending for agricultural and rural development in Mexico to above $1 billion and the project will give particular attention to employment creation in Mexico's poorer regions8 The loan will help finance the second phase of the Investment Program for Rural (; ·,DPvelopment, better known by its Spanish abbreviation 11 PIDER 1, 1 in 20 depressed regions of t e country, where about one million rural people live. It will continue the successful first stage supported by the World Bank in 1975 in another 30 regions of the country. The PIDER Program, originally established in 1973 by the Mexican Government, is one of the most important efforts of that country to raise incomes and improve living standards of its 12 million rural poor whose per capita incomes are less than $100 and who constitute nearly 50% of the rural, and 20% of the total, population of Mexico. About $500 million have so far been invested through PIDER in 86 regions of Mexico -- including 65 regions supported by the World Bank and the Inter-American Development Bank ( I ADS) and further investment of $700 million are planned for the 1977-1982 period, making the total investment about $1.2 billion in a total of 100 depressed areas. These areas range from the arid to the humid tropica1 zones. ( ••• I • 'NOTE: Money figures are expressed in US dollar equivalents •  -2- \ In total, some 6,500 rural communities of 4 million people are already bene- ~ \ (- I\ ~fiting under the program, while some 5 million rural people (about 25% of the rural \ population) are expected to benefit directly or indirectly when the program is complete in 1982. The PIDER Program PI DER was Initiated by the Mexican r.r.,,t:> rnm~n t- to address the economic imbalances created during the past decades. While Mexican agriculture achieved a 4% annual rate of growth between 1940-1965 -- among the highest in Latin America-- most of the rural population was little affected. Most growth came from larger farmers, many with irrigated holdings, among which agricultural investment and services were largely concentrated. The produc- tive potential of smaller producers, especially those farming rainfed plots in more isolated areas, was largely ignored. PIDER was created to integrate and expand government rural development ~activities to develop this small-producer potential. PIDER's activities now encompass infrastructure for increased productivity, credits to small farmers, technological inputs, extension, all-weather roads, marketing facilities, together with education and other social amenities, such as safe drinking water. The program's long-range goal is to provide investment and services in the most deprived rural areas to raise rural living standards through increased productivity. It also seeks to increase opportunities for permanent and temporary employment, and stre~gthen supporting productive activities and improve basic social infrastructure. Progress Under PIDER I With implementation of PIDER I only half completed, more than 14~000 ha ha·ve been irrigated, more than 100 cattle and small stock units ·have been constructed, including the establishment of 5,000 ha of improved pasture, and some 220 beekeeping ( . n i t s provided., Over 1,700 km of feeder roads have been constructed; 270 villages electrified; and 260 villages provided with drinking watero ••• /  • - 3 - • PIDER has already achieved considerable institutional change in Mexico's development, and a major accomplishment has been the reform of the agriculture extension service. Aims of PIDER II About 70 percent of the project funds will be for productive investments in livestock, irrigation, rural industries, fruit production, soil and water conservation, and associated farm development credit; 20 percent for support services, like rural roads, markets, extension services, electrification, and farr.1er organization efforts; 9 percent to investment in social infrastructure, including primary schools and village water supply; and 1% to project evaluation, applied research znd training. Beneficiaries under the project have family incomes ranging from $250 to $750 a year, placing them in the lower 40% of the national income distribution. About 46,000 fanilies (273,000 people approximately) are likely to benefit directly. Some 32,000 farm families are expected to achieve a near doubling of incomes over eight years. The incomes of an additional 14,000 farm families, who wi 11 benefit from the 34,000 ha to be irrigated, are expected to triple from present levels when the project is fully developed. About 30,000 permanent jobs and 65,000 mun-years of temporary employment will be created. New rural industries i,.1ill provide the equivalent of full-time employment for about 4,000 people. In addition, some 200,000 people will have access to improved rural infrastructure. ( •••• I •  '• . • - 4- ·, ·, Rural Industries Encouraged ' The PIDER II project will promote rural industries to provide employment opportunities to rural residents, especially the landless. About $14 million will go to.support this development in both project areas, and include projects for processing agricultural products, small industries producing goods at low cost for local consumption and very small scale, labor-intensive village industries. Expansion of credit to small farmers is an important benefit of the PIDER 11 project. About $24 million, or 19 percent of the loan, will be used for medium- and long-term credit for on-farm development. The estimated total cost of the project is $255 million. The loan will • finance 47 percent of project costs and the balance ($128 million) will be provided by the Government and by the beneficiaries ($7 million in cash). Beneficiaries will contribute an additional $20 million worth of material and labor not included in l. the tota! cost of the project. Agriculture and rural development is the leading sector for Bank lending to Mexico, accounting for nearly 40% of Bank lending to the country. This is the fifteenth agricultural project (total $1,024 million). The loan is beinq made to Nacional Financiera, S.A. -- a finance aqencv of the Mexican government. It will have the guarantee nf the Government of ~exico, with a term of 17 years, including 31y~ars of grace, and an interest at 8.2 percent per annum • •  ,: . • J.1121 -76) T E C HN I CA L D A T A • PROJECT: Integrated Rural Development Project -- PIDER I I COUNTRY: Mexico TOTAL COST: $255 mi 11 ion BANK FINANCING: $120 million payable in 17 years, including 3}years of grace, at an interest rate of 8.2 percent per annum. OTHER FI NANC i NG: Government of Mexico: $ 127.8 Million. Beneficiaries: $ 7.2 Million IMPLEMENTING ORGANIZATION: Secretaria de Programacion y Presupuesto (SPP), Humboldt 31, 3d floor, Mexico l, D.F. PROJECT DESCRIPTION: The project consists of directly productive, productive support and social infrastructure component of a program designed to raise the income and improve the standard of living of poor rural families in 20 selected micro-regions in Mexico. The rural inciustrial component will also be extended to the 30 micro-regions of the Bank-assisted PIPER I project. The individual project components are: f) • Directly Productive C6mponents (70% of project) a) Construction and rehabilitation of small-scale water facilities to irrigate about 34,000 ha and to provide for domestic and livestock use; b) Development of rural indus- tries that will provide employment for some 6,000 rural dwellers; c)Development of about 500 livestock units; d) Soil and water conservation on about 80,000 ha; e) Pilot fruit production units, including planting of a total of 7,500 ha; f) Provision of seasonal p10- duction credit", and medium and long term development credit to enable more effective use of infrastructure facilities; g) Other productive investments, including beekeeping, small stock, foresiry and fisherie~ development. Productive Support Components (20% of project) a) Construction of about 2,000 km of feeder roads using labor intensive methods; b) Ins- tallation of electric power distribution systems in 300 villages benefitting about 131,0fiQ persons; c) Suppo~t of rural marketing program; d) Organization and training of farmers; e) Provision of intensive technical assistance to promote improved farming methods; and f) Assistance for preparing feasibility studies for directly productive investments in each micro-region. Social Infrastructure (9% of project) a) Installation of water supply systems to serve about 214,000 persons; b) Construction or renovation and equipping of 1,500 classrooms to accomodate about 60,000 students; c) Provision of materials and equipment for self-help activities in. ejidos and villages, such as housing improvements, and community centers. Monitoring and Ev~luation (1% of project) a) The Center for Research in Rural Development will carry out project related evalua:ion dnd applied research and train PIDER planing and administrative staffp ·( I..._ PROCUREMENT: Civil works and building construction, machinery, equipment, materials • and supplies will be procured under the following procedures: i) In order to obtain as much competition 1n bidding as possible, contract will be grouped into larger packages, where feasible. I • • • I  • - 2 - ii) Contracts and purchases exceeding $250,000 equivalent will be awarded under interna- { ~ional competitive bidding in accordance with Bank Guidelines. A preference of up to 15 peicent for domestic suppliers will be permitted in evaluation of bids for manufactured items. iii) Contracts of less than $250,000 equivalent will be let under local competitive bidding or as negociated contracts under normal government procedures which are sati~- factory, or executed by force account. CONSULTANTS: Provision is made for consultant services to identify and carry out feasibility studies of productive investments in the micro-regions (1,700 man-months to cost about $3.6 mi11ion). ECONOMIC RATE OF RETURN: Average on the directly productive and productive support components is 23.7 percent. ESTIMATED COMPLETION DATE: January 31, 1981. • ( ( •