Announcement of World Bank Lends Four Hundred Million US Dollars to Mexico for Irrigation and Drainage on December 4, 1991

FOR IMMEDIATE RELEASE bWorId Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. * Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 92/30LAC Contact: Ciro Gamarra (202) 473-8721 WORLD BANK LENDS $400 MILLION TO MEXICO FOR IRRIGATION AND DRAINAGE WASHINGTON, D.C., December 4, 1991 -- Over half a million people, mainly poor rural farmers, will benefit from an irrigation and drainage sector project in Mexico to be financed with the support of a World Bank loan of $400 million. The rehabilitation and modernization of the irrigation and drainage infrastructure will promote the efficient use of water and facilitate the introduction of improved operation and maintenance practices. The loan will help finance a portion of the government's irrigation and drainage investment program for the period 1991 through 1994. The investment program for the period is estimated at $1.2 billion. The project will help the government to sustain the irrigation and drainage sector through adequate levels of investment selected on the basis of rigorous economic and technical criteria, procured competitively and implemented efficiently. It will also help decentralize irrigation funding and management through institutional reforms that would gradually move funding investments from a centrally-managed system of government grants towards a system based on regional and local public utilities which would help recover costs through user charges and collection instruments, and thus help sustain the investment by beneficiaries. About 68 percent of World Bank loan funds will finance major civil works; about 20 percent will finance small contracts for civil works, engineering services and electro-mechanical repairs; about 11 percent will finance the acquisition of equipment, material and parts; and about 2 percent will finance technical assistance. The investments include rehabilitation and modernization and transfer to users of 21 irrigation districts representing about 60 percent of the total; deferred maintenance of the remaining 56 irrigation districts; repair and acquisition of maintenance equipment; completion of 23 investments and construction of 3 new investments. NOTE: Money figures are expressed in U.S. dollar equivalents. - 2 - In support of these investments the project also includes environmental studies and actions, institutional development assistance for the National Water Commission and user organizations, and other studies and designs. The investment program is expected to incorporate, by the end of 1994, about 300,000 hectares of new land under irrigation, and nearly 1 million hectares currently under irrigation will have improved their efficiency as a result of the rehabilitation and modernization projects. Additionally, investments in drainage and other land improvements will have brought under production some 560,000 hectares of rainfed agriculture. The program is estimated to benefit some 425,000 farmers of which about 50 percent currently have an income of less than the minimum wage. In addition, some 100,000 people will benefit from river control works. Of the total cost of the program, estimated at $1,245 million, the government of Mexico will provide $645 million and the Inter-American Development Bank $200 million. The $400 million World Bank loan was made to Nacional Financiera, S.N.C., with the guarantee of the United Mexican States. The loan is for 17 years, including five years of grace, with a variable interest rate, currently 7.73 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.25 percent on the undisbursed balance. -0