Mexico - Current economic position and prospects

%MOW we tnwEr RESTRICTED rILE. ,Lur I Report No. CA-14a This report is for offlcial use only by the Bank Group and specifically authorized organizations or persons. It may not be published, quoted or cited without Bank Group authorization. The al ou PJ& uudos ro.ul acce.L Aspon-bflU .wo u. e au5La7 wJ mpl eriW es lule report. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION CURRENT ECONOMIC POSITION AND PROSPECTS OF MEXICO November 15, 1971 Central America and Caribbean Department  f.rfRRDNCY EQUTVALENTS U.S. $1 - 12.5 pesos 1 peso (Mex.$) - U.S. $ 0.08 1 billion pesos - U.S. $ 80 million  TABLE OF CONTENTS BASIC DATA SULi ~ XK k- CONCLIOSIONMS .................................,e e fi - -xi I. TE DEVELOPM'EUNT FRWORK OF MEXICO ................. Background . . Economic Management ............................ 2 Short- and Medium-term Issues . . Longer Term Issues . .7 II. SECTORAL ISSUES AND POLICIES . 11 Agriculture . . .11 Forestry ... 20 Fisheries ...21 Industry ... 22 Mining ... 29 Power ... 29 Transport . .. 30 Education.. 31 III. FINANCING GROWTH: (1) THE MONETARY SYSTEM ......... , 33 The Management of Financial Savings .33 Issues for Development. 36 IV. FINANCING GROWTH: (2) PUBLIC FINANCE .38 Public Investment, Savings and Borrowing . . 38 Federal Government . . .40 Federal District .. 43 Decentralized Agencies . . 44 Public Finance Outlook . . .45 V. BALANCE OF PAYMENT POLICIES AND GROWTH PROSPECTS .... 48 Background ........................ 48 Imports .... 50 Exports.. 50 Private Capital Flows ............... ...... , 56 Public External Debt and Growth Alternatives ... 58   I. Population and Employment II. National Accounts III. Balance of Payments and External Trade IV. External Debt V. Public Sector Finances VI. Monetary Statistics VII. Agricultural Statistics VIII. Other Sectors IX. Prices and Wages This report is based on the findings of an economic mission to Mexico in April/May 1971 composed of P. P. Kuczynski (mission chief), G. P. Pfeffer- mann (deputy mission chief), P. Ruof (financing and industry). H. B. Meier and L. Thornton (investment analysts), C. Aguirre (IMF Consultant), E. Meldau (public finance). M. Perkins (Consultant. general agriculture), A. Stapleton (peasant agriculture), Y. Franchet (quantitative analysis) and H. Bergendorff (econometrics).   BASIC DATA Area and Population Area: 1,972,547 square kilometers 1960 1970 Population (millions) 36.0 50.6 Annual rate of population growth % 3.4 3.5 GDP per capita (US$) (current market prices) 334 668 I. ECONOMIC INDICATORS GDP at current market prices (Mex$ billion) 151 423 Origin of GDP (in percent) 100.0 100.0 Agriculture 15.Y 11.6 Mining 1.5 3.9 Manufacturing 22.6 27.0 Construction .1 4.5 Power 1.0 1.8 Commerce 31.1 32.2 Other 23.8 22.0 1960-69 1970 Annual chamges in selected economic indicators (in percent) GDP at current market prices 10.7 12.9 GDP at constant market prices 7.1 7.7 Manufacture value added 9.0 9. Agriculture value added 3.6 5.5 Exports 7.2 -1.2 Imports 6.h 18.2 Money suppl.y etc. 11.3 9.6 Mexico City wholesale price index 2.0 6.0 GDP deflator 3.h h.8  Public Finances (Mex$ billion) Federal Government: current re-verues 1. 20.h 29.2 33.1 39.4 current expenditures 7.7 17.8 24.2 26.4 29.7 current surplus 0 9.7 Federal District (Mexico City): current surplus 0.8 1.5 1.8 2.1 2.2 Decentralized pUblic sector agencies: current surplus 3.6 4.3 5.2 5.0 4.5 Total public sector current surplus 7.7 1: T.U 13.5 16.4 Capital revenues ... 1.1 0.8 1.0 0.9 Public investment 11.2 16.i 26.6 27.8 27.4 Net borrowing 3.5 6.6 13.8 12.9 12.0 Public investment financed out of non-borrowed resources (percent) 6959 40 54 56 Balance of Payments (million us>) Exports of goods and nonfactor services 1331 1,972 2,871 3,012 3,345 Imports of goods and nonfactor services -1,1482 -1,994 -2,862 -3,347 -3,489 Balance before factor income payments -151 -22 9 -335 -144 Factor income payments (net) -160 -327 -602 -672 -788 Balance on current account -311 -350 -593 -1,007 -932 Private direct investment (net) -38 214 298 352 394 Gross public sector borrowing2/ 352 336 929 932 Amortization of public sector 'aebt 2/ 189 424 603 673 Net public sector borrowing 2/ 163 -88 326 259 Other capital flows (net), errors and omissions and changes in reserves 186 224 -31 396 Public mediur- and long-term debt (million US$) Total outstanding (end of period, including undisbursed) 842 2,169 3,441 3,764 _/ For Public Finances 1966 data is shown because 1965 was not a representative year. 2/ Public sector accounts data. Include short-term loans and loans repayable in local currency.  1960 1965 1969 1970 1971 P/ Public medium-and long-term debt (inillin-n IIR' ) Wtnnt.-) Gross borrowing 272.1 385.7 9111.4 781.4 Amortization 180.7 396.5 459.8 4 6 ..73.6 Net borrowing 91.4 J 10A 8F 81= _ 307.8 Debt S=Ynrice Interest 44 88 151 217 - ^ortizatior: 172 397 460 474 Total service 26 465 611 6 Debt service ratio (percent of e-or-s of go-ods and norfctor services) 16.2 24.5 21.3 22.9 ..... IBRD loans granted to Mexico (net of cancellatin+4ons) na oi' Tin 30 1971 US$ 1,053.4 million Of which , are held by the Bank US$ 764.3 million Structure of New External Borrowing T nter-na i4onal 4sti tuti4ons..... 32 1.506 ..... 1- L I_ L " i WJ.ULUV.LUL1Q . (* . ***** Bilateral credits ..... 10.3 5.2 9.1 ..... Dond 3/ s- '. .800 .. Suppliers' credits ..... 10.9 18.0 13.8 ..... Enian.cial inst.itution . . . .. 37.8 58C 6. IlV-r PostioLnu k,-1LL