Announcement of World Bank's Record Lending to Mexico on June 14, 1978

FOR IMMEDI.ATE RE_LEASE •World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. • Telephone: (202) 393-6360 BANK NEWS RELEASE JUNE 14, 1978 WORLD BANK'S RECORD LENDING TO MEXICO The World Bank has. approved six loans totalling $469.5 million for developmeni projects in Mexico in fiscal year 1978. This is the largest amount of loan commitments for Mexico in one fiscal year and represents an increase of about 30% over the previous highest level of $360 million in fiscal year 1975. The 1978 lending program for Mexico included a $200 million loan to help finance an agricultural credit project. Th·is is the largest opera- tion ever undertaken by the World Bank in Latin America and the largest loan made by the World Bank (IBRD) for development. The other loans approved during the fiscal year were: $100 million • for industrial development, $56 million for tropical agricultural development, $47 mil lion for small- and medium-scale industrial enterprises, $16.5 million fo~ urban development in the Lazaro Cardenas area, and $50 million for a tourism project. As of June 1978, the World Bank had approved a·total of 54 loans for Mexico amounting to $3.2 billion. Almost 40% of this figure ($1.2 billion) is represented by 17 loans for agriculture and rural development projects. Other sectors supported by World Bank financing in Mexico since 1949 have been transportation (12 loans for $547.8 mill ion), power (11 loans for $714.8 million), industry (8 loans for $457 million), tourism (3 loans for $114 million), water supply (2 loans for $130 million) and urban development (l loan for $16.5 million). The main objectives of World Bank lending in Mexico have been to support policies and programs leading to a wider distribution of the benefits of economic growth, and to help finance projects aimed at making significant contributions to production, exports and employment. The Bank has made agri- culture the leading sector for its lending in view of the difficult structural problems of Mexico's agriculture and the sector's crucial importance to the ·country I s further development. • •• I • NOTE: Money figures are expressed in U.S. dollar equivalents.  - 2 - Two loans totalling $230 million for the agricultural sector have • supported Mexico's national rural development program, better known as PIDER. The first loan, of $110 million, was granted in May 1975 and the second one, of $120 million, in June 1977. PIDER was established by the Mexican Govern- ment to improve agricultural production and raise incomes of some 5 million poor farmers. PIDER projects include investments in livestock, irrigation, rural industrie3, fruit production, soi 1 and water conservation, and farm development credit. They also include electrification, rural roads, markets and extension services as much as social services, like primary schools and village water supply. The following projects received financing from the World Bank during fiscal year 1978, ending June 30th this year: Agricultural Credit About 67,000 farm families, or about 390,000 people, will benefit from an agricultural credit project supported by a $200 million loan. The project, the sixth of this type to be assisted by the World Bank in Mexico, is aimed at increasing production, improving incomes and creating employment in rural areas. With an estimated total cost of $627.2 million, the project will provide medium- and long-term credit for investments in crop, livestock, and agro-industrial development. One-third of the credit program under the project • will be earmarked for low-income producers with average annual family incomes of $500 to $1,000. The project is expected to create 9,000 additional jobs in the live- stock sector and in agro-industrial enterprises; while an estimated 9,000 man-years of temporary employment will be generated annually. Industrial Development A $100 million loan will help the Fonda de Equipamiento Industrial (FONEI), a Federal Government trust fund, to finance investment projects for the production of industrial goods and to expand exports of services from Mexico's northern border zone. The project will involve total investments of about $425 million. FONEI will provide medium- and long-term financing to industrial enterprises through commercial banks for the acquisition of machinery, equipment and other fixed assets. The project is expected to produce net annual foreign exchange earnings, or savings, of about $130 million, and also to generate 13,000 to 16,000 new jobs. Most of the financing is also expected to go to projects • outside Mexico City, contributing to industrial decentralization and regional development. ... /  - 3 - • Tropical Agricultural Development A $56 million loan will help increase agricultural production in six areas in the tropical lowlands of Mexico. With a total cost of $149 million, the project is the first step of a long-term program to develop and bring into intensive agricultural production 2.4 million hectares in the largest under- exploited region of the country. The project will directly benefit 3,000 farmers, whose incomes are expected to double from $700 to $1,500 yearly per family in five years. At the project's ful 1 development, in 15 years, incomes wi 11 increase to an average of $4,300 per family. Another 40,000 farmers will also benefit from improved extension services. Small- and Medium-Scale Industry The World Bank also approved a $47 million loan to help finance a project aimed at expanding the production capacity and improving the efficiency of small- and medium-scale industrial enterprises, particularly those located outside the main urban areas. The program will require investments of about $132 million over the initial three-year project. The project will stimulate investment and employment in less devel- • opped parts of Mexico, helping to discourage migration to larger urban areas. It is expected to generate 15,000 to 18,000 permanent jobs. About 75% of the enterprises to be assisted will be small-scale, with 25 employees or less. Lazaro Cardenas Development Some 50,000 1ow-in come residents ·of the Lazaro Cardenas area, on the Pacific Coast of Mexico, will benefit from an urban development project assisted by a World Bank loan of $16.5 million. With a total cost estimated at $36.l million, the project is expected to relieve a critical shortage of low-cost shelters and other basic urban services, and provide increased job opportunities in the region. The project, the first of its kind in Mexico, is an integrated ap- proach to the needs of the urban poor in the region, which is one of the fastest-growing urban areas in the country. The project is expected to be a model for future integrated urban programs designed to improve the living condi- tions of the urban poor. Tourism Development A $50 million World Bank loan will support a tourism development project, including the construction of about 20,000 new rooms and other tourism • f ac i 1 it i es • • •• !  - 4- The loan will help the Fonda Nacional de Turismo (FONATUR), the Mexican agency for tourism development, to carry out its 1977-79 natio~wide program. The project is expected to generate over 32,000 permanent jobs directly and another 33,000 indirectly. Net foreign exchange earning·s from the FONATUR program are expected to amount to some $3 billion during the • life of the assisted subprojects. - 0 - • •