Announcement of World Bank Lends One Hundred Nineteen Million Five Hundred Thousand Dollars for Three Development Projects in Mexico on April 27, 1978

·~ ·~ . .,. '-'-..:.~: . . . FOR I Mtvi'EDIA.TE RELEASE i•World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. • Telephone: (202) 393-6360 BANK NEWS RELEASE NO. 78/76 APRIL 27, 1978 WORLD BANK LENDS $119.5 MILLION FOR THREE DEVELOPMENT PROJECTS IN MEXICO The World Bank has approved three lnnns totaling $119.5 million to support development projects in Mexico. These three projects, with a total investment of $327 million, will help the poorer sections of the population to increase their incomes and improve their standards of living. The projects will benefit some 43,000 farmers in tropical areas and 50,000 lm-..,·- income urban people, creating also about 20,000 new permanent jobs. Concentrated on the least developed regions of the country, the p,-ojects will help discourage migration to the largest urban centers. A $56 million loan is for increasing agricultural production in six areas in the tropical lowlands of Mexico. A second loan, of $47 million, supports a project • designed at expanding and improving the capacity and efficiency of small and medium- scale industrial enterprises. A third loan, of $16.5 million, will help provide low-cost shelter and urban services to poor people in the Lazaro c!rdenas area. Tropical Agricultural Development The humid tropical lands located on the Gulf Coast and the southeast region of Mexico represent the largest underexploited agricultural region of the country. With their exploitation, the cropped areas could be increased as much as 50% from the present level of 17 to 20 million hectares (ha). The project--with a total cost of $149 mi llion--is the first step of a long- term program to develop and bring into intensive agricultural production 2.4 mi 11 ion ha in that region. It includes the dev~lopment of six pilot zones of about 4,000 ha each, improvement and expansion of agricultural and livestock research programs, and strengthening of agricultural extension services. The technical, social, and admin- istrative packages developed as a result of the project would be applicable to a wider area of about 660,000 ha with similar ecological and socio-economic conditions. About 3,000 farmers, most of them with incomes below the relative poverty level in Mexico, are expected to benefit directly from the project with the support of a $56 million World Bank loan. The beneficiaries' incomes are expected to double from $700 to $1,500 yearly per family upon completion of the project in five years. On ful 1 development of the project, in 15 years, their incomes wi11 increase to an average of $4,300 per family. • Another 40,000 farmers, in the impact zones of the pi lot projects, wi 11 also benefit from improved extension services9 Around 100,000 man-days of unskilled labor per year wi 11 be generated during the five-year construction period • • • •I NOTE: Money figures are expressed in U.S. dollar equivalents.  -2- The loan to Nacional Financiera, S.A. (NAFINSA) will have a term of 17 years, including 4 years of grace, with interest at 7.5% per annum. Small and Medium-Scale Industry • . The Small and Medium-Scale Industry Development Project aims 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 $47 million loan will help finance part of a program which will require total investments of about $132 million over the initial three-year stage. The project is expected to have a direct impact on production by providing financial and technical assistance to small and medium-scale industrial enter- prises and to •help create 15,000 to 18,000 permanent jobs. It will stimulate investment in less developed parts of Mexico, expanding employment pros9ects in areas close to where labor migration begins, thus discouraging further migration to large urban areas. The project is also expected to achieve major institution-building objectives towards an integrated and balanced development of small and medium-scale industries, creating for the first time the institutional framework required for a closer coordination in the activities of numerous financing and technical assistance institutions in Mexico. It is estimated that about three quarters of the enterprises assisted wi 11 ~ be smal 1 enterprises with 25 employees or less. The loan to Nacional Financiera, S.A. (NAFINSA) will have a term of 15 years, including 4 years of grace, with interest at 7.5% per annum. , ., Lazaro Cardenas Conurbation Development The L,zaro cirdenas Conurbation Development Project is part of Mexico's attempt to improve urban planning and administration, promote growth in selected priority areas to provide jobs and services for low-income residents, and reduce migration to the largest cities. The project has been conceived as an integrated approach to the needs of the urban poor in the Lizaro cJrdenas area, on the Pacific Coast of Mexico. It will relieve a critical shortage of low-cost shelters and other basic urban services, adopt design standards that the lowest-·income groups can afford, and provide increased job opportunities. The total cost of the project is estimated at $36.1 million. The L£zaro C~rdenas region is among the fastest-growing urban areas in Mexico. ·It has a zone of influence of approximately 12,000 km2 spread over Michoac{n and Guerrero, two of the poorest and least developed states in the country. Both states have traditionally been "exporters" of unskilled emigrants to overcrowded Mexico City. ~ Some 50,000 people.--or about 60% of the population projected for the La~aro • Cardenas urban area in 1981-- wi 11 benefit directly from the construction of low-cost shelters. The roads to be constructed under the project will 1 ink-up a total of about 62,000 ha of cultivated land and another 120,000 ha of grazing areas • •• • I 1, ' ·~ •. -3- • Of these, about 30,000 ha and 44,000 ha wi 11 be completely newly opened land for cultivation and grazing, respectively .. About 25,000 people in the O!.lt.lying agricultural areas are expected to benefit from the new roads. Some l 1 200 additional permanent jobs wi 11 be generated through the production credits component. An estimated 16,000 man-months in temporary jobs wi 11 also be generated during the construction period of the various physical components of the project. The project, the first of its kind in Mexico, should help establish an efficient model for future integrated urban programs designed to improve the living conditions of the urban poor. The $16.5 mill ion loan to Banco Nacional de Obras y Servicios P~bl icos, S.A. will have a term of 17 years, including 4 years of grace, with interest at 7.5% per annum. -o- • • FORM NO. 1121 (5-76) T E C HN I CA L DA T A PROJECT: COUNTRY: TOTAL COST: Tropical Agricultural Development Me'x i co $ 149 mi 1l i o.n • BANK F I NANC I NG : $56 million for 17 years, including 4 years of grace, with interest at 7.5% per annum. OTHER F iNANC I NG: Government of Me"xico, $91.3 million Beneficiaries, $1.7 million IMPLEMENTING ORGANIZATION: Secretarfa de Agricultura y Recurses Hidra61icos (SARH) Comision d el Plan Nacional Hidraulico Tepi c 40 Mex i co, D. F. PROJECT DESCRIPTION: The project consists of: (i) developm~nt of six pilot projects, of about 4,000 hectares each, introducing technical packages for annual and perennial crops and livestock;(ii) improvement and • expansion of agricultural and li.vestock extension programs in the humid tropics; and (iii) support for the tropical agricultural and livestock research programs. PROCUREMENT: Contracts for construction of civil works (t0tal $30 million) will be procured following local competitive bidding procedures. No less than 70% of the civil works and buildings will be constructed under contracts having an estimated value of $500,000 each or more and procured under local competitive bidding. The rem~Jning 30% could be done through co~tracts awarded without public bidding or by force account. Except for goods for on-farm development financed through agricultural credit, contracts for supply of goods·will be grouped when feasible in packages of at least $250,000 equivalent. Such contracts will be procured through international competitive bidding in accordance with Bank guidelines; domestic manufacturers will be allowed a 15% prefer~nce. Contracts for less than $250,000 could be procured under local procedures. ECONOMIC RATE OF RE.TURN: ESTIMATED COMPLETION DATE: 17% 1983 - 0 - • "' C FORM NO. 1121 (5-76) • PROJECT: COUNTRY: T E C H N I C A L DA T A Small and Medium-Scale Industry Development Me'xi co TOTAL COST: $ 132 mi l l ion BANK FINANCING: $47 million for 15 years, including 4 years of grace, with interest at 7.5% per annum. OTHER FINANCING: ,Government of Mtxico, $26.4 mill ion Banco de Mfxico, $17.6 million Private sector, $41 million IMPLEMENTING ORGANIZATION: Nacional Financiera, S.A. (NAFINSA) Isabel la Catolica 51 Mejd co 1 , D., F. Me'x i co PROJECT DESCRIPTION: The project comprises: (a) a credit and guarantee • program to finance fixed assets and working ca~ital associated with such investments to be carried out through commercial banks and other financial intermediaries, to be administered by the staff of the Fonda de Garantfa y Fomento a la lndustria Mediana y Peque;a (FOGAIN); (b) reinforcement of a program to provide risk capital, on a minority and temporary basis, to small and medium-size enterprises which are unable to obtain sufficient equity capital to expand, to be administered by the staff of the Fonda Nacional de Fomento Industrial (FOMIN); (c) a program to lease, with or without option to purchase, plant buildings and equipment to small and medium-scale enterprises, to be administered by the staff of the Fideicomiso de Conjuntos, Parques y Ciudades lndustriales (FIDEIN); and (d) the creation of a new corps of industrial development extension agents based in NAFINSA 1 s field offices that \;.puld assist small and medium-scale enterprises to identify their financial and technical assistance needs and to obtain such assistance, and support to specialized technical assistance agencies. PROCUREMENT: Procurement will be made along standard Bank guidelines for development finance companies (DFC) operations. The staff of FOGAIN, FOMIN and FIDEIN will ensure that assets acquired by the enterprises carrying out the individual expansion projects are adequate in quality, reasonably priced and appropriate for the intended use. ECONOMI( RATE OF RETURN: Not available. ESTIMATED COMPLETION DATE: 1982 • -0-  't,. FORM NO. 1121 • (5-76) T E C HN I CA L DA T A PROJECT: Lazaro Carden as Conurbation Development COUNTRY: Me'xi co TOTAL COST: $36., million BANK FINANCING: $16.5 million, for 17 years, including 4 years of grace, with interest at 7.5% per annum. OTHER FINANCING: Government of Mex k.o, $18 mi 11 ion Beneficiaries, $1.6 million IMPLEMENTING ORGANIZAITON: Fi de i comi so Ci udad Lazaro Cardenas ( FLC) Cerro del Otate No. 18 Col. Romero de Terreros Me'xi co ·20, D. F. Mexico PROJECT DESCRIPTION: It consists of: (a) shelter and related physical elements (urban upgrading, sites and services, construction materials loans, training centers, and technical assistance); (b) • a credit 1 ine and the construction of industrial premises to promote and diversify economic activities in the region; (c) regional feeder roads and river control works; and (d) technical assistance to strengthen FLC, and studies to prepare additional urban development projects for possible assistance from the Bank. PROCU.REMENT: Civil works fo·r the river control component will be awarded under international competitive bidding, except for contracts not exceeding $250,000 equivalent each, which wil I be let under the Mexican public sector's ordinary procurement procedures (subject to an ~ggregate limit of $1.25 mil lion), which are considered satisfactory. The rest of civil works are of minor scope, scattered over several locations. Purchases of equipment will also be awarded under the Government's usual pro- curement procedures. ECONOMIC RATE OF RETURN: 24% ESTIMATED COMPLETION DATE: 1981 -o- •