Announcement of World Bank Supports Mexico’s Growth-Oriented Adjustment Program on July 22, 1986

HOLD FOR RELEASE • World Bank 1818 H Street . N .W , Washington . D .C. 20433 . US.A . BANK NEWS RELEASE Contact: A. Pimenta-Neves EMBARGO: HOLD FOR RELEASE UNTIL 5:30 P.M. (202) 477-5761 (EDT), TUESDAY, JULY 22, 1986 World Bank Supports Mexico's Growth-Oriented Adjustment Program WASHINGTON, July 22 -- The President of the Wo r l d Bank, Mr. Barber Conable, today welcomed the program of structural reforms announced by the Government of Mexico . Mr. Conable said, "these changes, designed to improve the efficiency and competitiveness of the Mexican economy, are unprecedented in scope, and the recent sharp decline in international oil prices makes their implementation both more urgent and more difficult." The Bank's President praised the decision of the Government to • proceed expeditiously with the implementation of the program. "By increasing. the efficiency of the Mexican economy", he added, "this program of structural reform will enable Mexico to restore economic growth -- lacking the last few years -- on which the well-being of the population depends . " "The World Bank has had a long, fruitful and collaborative relationship with Mexico", Mr . Conable said. "The scope of the structural changes Mexico has decided on, and the scale of Mexico's current difficulties, warrant an equally exceptional response from Mexico's partners." In order to support Mexico's program of structural change, the World Bank is increasing its lending to Mexico substantially. Mr. Conable announced that he had already submitted three loans for Mexico -- totalling US$ 698 million -- to the Board of Directors for consideration on July 29. These loans, plus lo ans already approved in 1986, and additional loans expected to be agreed with Mexico in the next few months, would bring total World Bank commitments in 1986 to the unprecedented level of US $2.0 billion . · The three loans already submitted to the Board are in direct support of Mexico's program of structural change. The largest of these is a quick-disbursing loan for US$ 500 million to support Mexico's trade liberalization program. An industrial recovery loan for US$ 150 million will provide financing to private industrialists to expand capacity and to re-orient existing capacity to improve efficiency and competitiveness. A I technology development loan for US$ 48 million is the first Bank loan designed exclusively to support industrial technology development in Mexico, providing specialized financing and strengthening research and development in this area.  • -2- Two additional loans are expected to be submitted to the Board of Directors in the next few months, totalling about US$ 700 million. A loan for agricultural credit will provide finance for Mexico's small- and medium-scale farmers to assist them in increasing productivity in this period of structural reforms, which involves changing prices for their inputs and products. The second will finance the import requirements of private exporters. The program announced by the Government of Mexico covers the years 1986-1988. It includes the reduction of trade barriers, the maintenance of a realistic exchange rate and interest rates, the promotion of non-oil exports, more realistic pricing of public services and the restru cturing of key public enterprises in steel, fertilizers, transportation, and other sectors in order to improve their efficiency. These reforms will take a number of years to complete, although initial steps have been taken in all areas. In 1987 and 1988, the Bank will continue to assist Mexico in the execution of its growth-oriented adjustment program by supporting further progress in trade liberalization and by financing the implementation of • structural changes in other sectors of the economy. In this way ; the World Bank also hopes to contribute to the creation of additional productive employment opportunities, one of the major challenges facing Mexico's policy-makers. The International Finance Corporation (IFC), an affiliate of the World Bank, has increased its operations substantially in the past six months and is planning a very active program in the coming 12 months in support of Mexico's adjustment efforts. New important activities of the IFC are in mining , construction materials, petro-chemicals, manufacturing, tourism and other sectors. All these projects will have strong foreign exchange earning components . In addition, IFC will be actively involved in assisting with the restructuring of Mexican private and public companies. Mr. Conable emphasized that the strategy which Mexico has embarked on is designed to resume growth in a stable environment. He indicated that the World Bank is willing to commit a large volume of resources to support this strategy as Mexico proceeds with its implementation. But he stressed that the total resources needed were very large, particularly in view of the continued decline in oil prices. The effective implementation of Mexico's courageous efforts to deal with its problems will require the full cooperation of Mexico's commercial creditor banks in Europe, the US, Japan , and elsewhere, and all other creditors . He is confident that this cooperation will be forthcoming. I