Mexico - Second Tropical Agriculture Development (PRODERITH II) Project

Document of The World Bank FOR OMCIL USE ONLY Rewt N,.P-4230-:. REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO USt109 MILLION TO NACIONAL FINANCIERA, S.N.C. WITH THE GUARANTEE OF UNITED 4EXICAN STATES FOR A SECOND TROPICAL AGRICULTURAL DEVELOPMENT PROJECT (PRODERITH II) February 7, 1986 Thi docet b a restided dklxbomm ad may be wed by replemts only in the performanc of Ideir oUdal dud. lb mteint ma mot othrwis be didlsd wi tht wiod Bak uthorizdo.  Currency Unit - Peso (Mex$) On January 30, 1986, the exchange rate in the controlled market was US$1 = Mex$400.90; the freemarket exchange rate stood at US$1 = Mex$441.00. Fiscal Year January 1 - December 31 CURRENCY EQUIVALENTS (est. December 1985) US$1 = Mex$ 380 Mex$ I = US$0.0026 Mex$ 1 million = US$2,632 WEIGHTS AND MEASURES I hectare (ha) = 10,000 m2 = 2.47 acres I kilometer (km) = 0.62 miles I square kilometer (km2) = 0.39 square miles = 100 ha I kilogram (kg) = 2.2 pounds 1 liter (1) = 0.26 gallons 1,000 kg = I metric ton (t) = 0.98 long ton ABBREVIATIONS ANAGSA - National Insurance Company, S.A. BANRURAL - National Rural Credit Bank CPNH - National Water Plan Commission CRECIDATH - Tropical Center for Extension Training CSAT - College for Tropical Agriculture DGID - General Directorate for Irrigation and Drainage ERR - Economic Rate of Return EFF - Extended Fund Facility FIRA - Agricultural Trust Fund FRR - Financial Rate of Return IDB - Inter-American Development Bank INIA - National Institute for Agricultural Research INIFAP - National Institute for Forestry, Agriculture and Livestock Research. INIF - National Institute for Forestry Research INIP - National Institute for Livestock Research NAFINSA - Nacional Financiera, S.N.C. PRODERITH - Program for Development of the Humid Tropics, CPNH PRONADRI - National Program for Integrated Rural Development, 1985-88 QRs - Quantitative Restrictions RCRD - Regional Centers for Rural Development RDD - Rural Development Districts SARH - Secretariat of Agriculture and Hydraulic Resources SAM - Mexican Food System SCT - Secretariat of Communications and Transport SRA - Secretariat of Agrarian Reform SHCP - Secretariat of Finance and Public Credit SPP - Secretariat of Programming and Budgeting USDA/SCS - United States Department of Agriculture/Soil Conservation Service  FOR OMCIAL USE ONLY MEXICO SECOND TROPICAL AGRICULTURAL DEVELOPMENT PROJECT (PRODERnI II) I. LOAN AND PROJECT SUMMARY Borrower: Nacional Financiera, S.N.C. (NAFINSA). Guarantor: United Mexican States. Beneficiary: Secretariat of Agriculture and Hydraulic Resources (SARH). Amount: US$109 million equivalent. Terms: Repayment in 15 years, including 3 years of grace, at the standard variable interest rate. Project The project's main objectives would be to: (a) support Objectives: the Government's key objective to alleviate rural poverty and raise rural incomes; (b) expand the rational exploitation of Mexico's tropical lowlands using technologies, administrative and organizational measures which were successfully developed and replicated under the first phase project; (c) increase agricultural productivity and production; (d) improve agricultural support services; (e) strengthen institutions to ensure effective coordination of multi-sectoral programs in the region; and (f) promote greater producer involvement in operation and maintenance of infrastructure. Project The 850,000 ha project would bring about 143,000 ha of Description: new land into rainfed crop production and would intensify crop and livestock production and productivity on existing areas which currently suffer drainage problems. To achieve its objectives the project would: (a) construct drainage and road works; (b) provide on-farm works; (c) implement soil conservation programs; (d) streagthen farmer organization, extension and research services; (e) train technical staff and producers in the use of improved technology; (f) conduct studies; (g) provide consultant support in priority areas; and (h) improve planning and coordination of regional development programs. The project would be coordinated as in the first Tropical Agricultural Development Project (PRODERITH I) by the National Water Plan Commission in SARH. This docwment ha a sticted distiution and may be used bY reipnts on0y in the perfomne of tbeir oafrc datie Its conte may not otrwie be dislosod without World Bank authoion.  - ii - Project Benefits The project is estimated to directly benefit about 40,000 and Risks: families, the majority of whom are in the low income target group. It would also provide employment opportu- nities equivalent to about 25,800 full time jobs, in addition to benefitting urban populations in the areas of influence of flood control works and service roads. The main risks would include (a) shortage of counterpart funds and (b) problems of institutional coordination. Although the project has been given priority status, the shortage of counterpart funds is uzlikely to be com- pletely alleviated. However, partial Bank financing of local costs should help ease the situation and SPP and SARH have already agreed on 1986 (year 1) budget levels close to projections proposed at appraisal. Problems of institutional coordination should also be reduced by the federal and state level coordination mechanisms already established under the first phase project. Estimated Costs: 1/ Local Foreign Total ( (USS Million) Infrastructure 86.9 41.5 128.4 Extension Services 17.9 2.4 20.3 Training 2.3 - 2.3 Research 7.7 4.7 12.4 Cousultants - 1.8 1.8 Studies 3.3 - 3.3 Project Administration 8.6 1.0 9.6 Base Cost 126.7 51.4 178.1 Physical Contingencies 5.3 3.2 8.5 Price Contingencies 19.4 11.5 30.9 Total Project Cost 151.4 66.1 217.5 Financing Plan: Local Foreign Total - -- US$ Million Government 108.5 - 108.5 Bank 42.9 66.1 109.0 Total 151.4 66.1 217.5 1/ Rounded. Excluding taxes and duties.  - iii - Estimated Disbursements: Bank FY: 1986 1987 1988 1989 1990 1991 1992 1993 1994 (US$ Million) Annual 1.0 8.0 13.0 16.0 19.0 19.0 16.0 12.0 5.0 Cumulative 1.0 9.0 22.0 38.0 57.0 76.0 92.0 104.0 109.0 Rate of Return: 23.32 Map: IBRD 19197 Staff Appraisal Report: Report No. 5931-ME, dated February 7, 1986. ;  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO NACIONAL FINANCIERA, S.N.C. WITH THE GUARANTEE OF UNITED MEXICAN STATES FOR A SECOND TROPICAL AGRICULTURAL DEVELOPMENT PROJECT (PRODERITH II) 1. I submit the following report and recommendation on a proposed loan to Nacional Financiera, S.N.C. (NAFINSA) with the Guarantee of United Mexican States for the equivalent of US$109 million to help finance a Second Tropical Agricultural Development Project to be implemented by the Secretariat of Agriculture and Hydraulic Resources (SARH). The loan would be repaid over 15 years including 3 years of grace, at the standard variable interest rate. PART I - THE ECONOMY 2. An economic report on Mexico (Mexico: Recent Economic Developments and Prospects, No. 4996-ME) was distributed to the Executive Directors on May 14, 1984. The report's main conclusions and information on recent economic developments gathered by a new economic mission (September 1985) are summarized below. 3. Following an import-substitution growth strategy, Mexico experi- enced some three decades of high and stable growth from the 1940s to the 1960s. By 1970, however, Mexico had largely exhausted the early and efficient possibilities for import substitution. Against the expectation of rapidly rising petroleum earnings, the Government attempted to foster growth through expansion of public sector expenditures, rising subsidies, and the protection of high cost domestic production. Public sector expenditures as a percent of GDP increased by more than half between 1970 and 1976, from 20.9% to 31.9%. In 1976, Mexico experienced a serious financial and economic crisis. Although an increase in oil revenues led Mexico to a quick economic recovery in 1977, it also removed the urgency of policy reforms. Starting in 1980 rapidly rising public expenditures, unmatched by revenue growth led to increasing public sector deficits. While inflation rose, no significant pressure was felt to adjust the exchange rate, thanks to the oil earnings and the relative ease of obtaining foreign finance. 4. The crisis came to a head in 1982. Public sector expenditures reached the unprecedented level of 40.1% of GDP, while the deficit reached nearly 18% of GDP. In February, as capital flight intensified, the Bank of Mexico stopped supporting the peso, which then experienced a 40% devaluation in US dollar terms. A large wage adjustment and continuing slack in the oil market tended to undo the effects of the devaluation and kept the balance of payments under strain. Consumer price inflation nearly quadrupled from 29% in 1981 to 99% in 1982. The international banking community declined to  - 2 - commit new funds to Mexico in the amounts required. These factors led to a second devaluation of 35% in August 1982 and the suspension of amortization payments on most of Mexico's external public debt. Capital flight continued as private sector confidence was shaken by the nationalization of the banks in September 1982 and by the mandatory conversion of US dollar deposits into pesos. Also introduced were exchange controls and quantitative restrictions covering all imports. 5. The Administration of President de la Madrid, which began its term in December 1982, lost no time in taking steps to recover domestic and external confidence. The Government's program, supported by an EFF agreement approved by the IMF in December 1982, laid the basis for renegotiation of Mexico's external debt. Commercial banks agreed to restructure some USS19 billion of public sector debt and provide US$5 billion in net new loans for 1983. All obligations falling due between August 23, 1982 and December 31, 1984 were restructured over an 8-year period starting from January 1983, with a grace period of 4 years and at an interest rate of 1-7/8 percentage points over LIBOR (or 1-3/4 over the New York prime rate). The US$5 billion syndication had a 6-year maturity, with a 3-year grace period, at a spread of 2-1/4 over LIBOR (2-1/8 over prime). The restructuring exercise included an understanding that the international banks would maintain their exposure to the nationalized Mexican banks. At the same time, it provided a mechanism for eliminating private sector interest arrears and facilitating the payment of the rescheduled principal on such debt. 6. A new two-tier exchange rate system was introduced, with a controlled market for imports, most proceeds from merchandise exports (except those of in-bond industries) and debt-related transactions, and a free market for all other transactions, including those relating to tourism. The controlled rate was originally set at Mex$95 = US$1, a depreciation of some 35% in relation to the previously prevailing rate. Both rates were subse- quently adjusted daily, but at different speeds intended to bring about their eventual unification. But from September 1983, the authorities decided to allow both rates to slide at the same pace, thereby postponing reunification. 7. The Government took additional steps to deal with the problems of private external debt, procedures to compensate owners of nationalized banks, and a more flexible application of the foreign investmeat law. Private sector debts totalling approximately US$12 billion were registered under a special Central Bank restructuring facility (FICORCA) at stretched out maturities varying between 6 and 12 years, with 3- to 4-year grace periods. Moreover, the Government undertook the restructuring of Mexican private sector obligations guaranteed by official credit agencies abroad. The Governmment also transferred back to private ownership most of the 400 private firms that were controlled by the commercial banks prior to their nationalization. 8. Under the IMF agreement, the Administration committed itself to a drastic reduction of the public sector deficit, from 17.7% of GDP in 1982 to 8.5Z in 1983, 6.2% in 1984, and 3.5% in 1985. The program objectives were satisfied, and in some cases exceeded, during 1983. Public finances were strengthened considerably. The public sector financial deficit was reduced  - 3 - to 8.7% of GDP. Curbs on expenditures were wide ranging. Public employee salaries were reduced by roughly 20X in real terms. As for the capital bud- get, projects already far advanced and those important for employment, equi- ty, or foreign exchange earnings were continued, but virtually no new pro- jects were iaitiated, with the result that investment declined to less than 7% of GDP, well below the peak 1981 level of 13.9%. Exchange losses to the public sector, which had reached 4.6% of GDP in 1982, were virtually elimi- nated as the rate of devaluation slowed dramatically in 1983. Revenue per- formance was aided by significant price increases for nearly all public goods and services, including petroleum products, electricity rates, food, etc. 9. As the domestic financing requirements of the public sector con- tracted from 14% of GDP in 1982 to only 5% in 1983, monetary expansion slowed correspondingly. Real saving deposit rates, which under controls had fallen to highly negative real levels, were raised to mildly positive levels. These adjustments, together with the previous exchange rate devaluations, greatly eased speculative pressur's on the peso while bringing about an improving trend in price stabilization. Consumer price inflation, which had peaked at 120Z in the twelve months ending in March 1983, declined steadily to around 80% by the end of the year. Needless to say, the sharp compression of real incomes led to a deep recession. Economic activity contracted by 5.3% in real terms, while wage employment fell by 1.5%. At the same time, the balance of payments experienced a major turnaround, with the current account moving from a deficit of over USS6 billion in 1982 to a surplus of US$5.3 billion in 1983, while international reserves rose from US$1.7 billion at the end of 1982 to US$5.1 billion one year later. 10. The adjustment process continued into 1984, but at a reduced pace as the year progressed. The fiscal deficit (adjusted for postponed interest payments) exceeded 9% of GDP, which was above the 6.2% target set for the second year of the EFF program. The main factors in this deficit overrun were higher-than-programmed expenditures for interest payments, a substantial real growth in transfers and subsidies (especially for agriculture and the state development banks), and lower-than-expected revenues from oil exports and some non-petroleum taxes. Inflation continued its decline, falling by 20 percentage points to 59%, but this was well above the targeted level of 40%. Several factors contributed to inflation overshooting its target. In early 1984, monetary control was greatly complicated by a rapid accumulation of foreign reserves, which was unmatched by a commensurate increase in domestic savings. Also, tighter capital and import controls had raised levels of effective protection for domestic producers, making possible continued high rates of domestic price increases. By late 1984, monetary policy came under new expansionary pressure. This was in response to the mounting financial needs of a public sector whose deficit was trending sharply upward, and to accommodate the rapidly-growing demand for credit from a reviving private sector. Domestic interest rates lost competitiveness with foreign rates while the peso appreciated sharply in real terms, so that by December 1984 there were renewed indications of large-scale capital flight. 11. Despite these difficulties, 1984 was a generally upbeat year, with positive economic growth (3.5%) after two years of recession, and a mild recovery of wage employment (2.7%). The balance of payments remained strong,  - 4 - with a current account surplus of US$4.0 billion; and a further US$3.4 bil- lion was added to the nation's foreign exchange reserves. The general improvement in the Mexican economy up to mid-1984 was widely noted, particu- larly by the international banking cQmmunity. Mexico had become a model of how to achieve a turnaround in macro-economic performance over a remarkably short period of time, while making orderly arrangements for continued service of its external debt. Mainly for this reason, the Government's 1984 borrow- ing of US$3.8 billion from commercial banks carried much more favorable terms than the borrowing in 1983 (10-year maturity, 5-3/4-year grace period, and a spread of 1-1/22 over LIBOR or 1-1/82 over prime). Negotiations on the rescheduling of nearly US$50 billion in foreign commercial debt were also initiated. Recent Developments 12. Mexico's economic performance has deteriorated since late 1984. Real growth exceeded 6% during the first half of 1985, but there were signs of overheating in the economy. High inflation continued, the real exchange rate appreciated, non-oil and oil export earnings declined, imports increased by 40%, capital flight resumed, international reserves fell, real interest rates in the free credit market rose sharply, and the private sector was increasingly crowded out of the domestic credit market. By August, it had become evident that Mexico would be unable to meet the ambitious targets established in the third year of its EFF program. The 1985 fiscal deficit is now expected to reach 9.6% of GDP, while inflation will run over 60%. Non- oil and oil export earnings alike declined by over 10% relative to 1984. The international price of Mexican crude oil fell from nearly US$27/barrel at the end of 1984 to around US$25/barrel by the end of the year. These diffi- culties have now been exacerbated by the recent quakes, which will place new pressures on the fiscal and the balance of payments accounts, and by the uncertain outlook for the international oil market, interest rates, and export markets. 13. In response to the emerging new crisis, the Government has adopted a series of corrective fiscal, exchange rate, financial, and trade policy measures. In February, the Government announced its intention to liquidate or sell 237 non-strategic state enterprises. Of these, 20 have since been sold for a total value of about USS30 million. Since early March, time deposit interest rates have been raised in stages from an average of about 45Z to nearly 65% in December. On July 24, the Government announced the removal of prior import licensing restrictions on items representing around 40% of 1984 imports. As a result, the level of imports subject to quantitative restrictions (QRs) fell to the lowest level in a quarter century. The controlled peso was simultaneously devalued by 17% and shifted from a fixed to a variable crawling peg. To reduce current expenditures, thousands of civil servants were dismissed, and a number of Government departments abolished. In November, the Government reopened discussions with the GATT with a view to consider membership. This is a development of considerable political significance; membership would greatly enhance further movement towards trade liberalization.  14. Notwithstanding these initial steps, further strong measures are needed during 1986, as there is evidence of a continuing high public sector deficit, a widely fluctuating differential between the official and parallel exchange rates, and financial market disintermediation. There is concern that the higher-than-planned inflation rate, the fluctuating gap between the controlled and the parallel exchange rates (10% in late January 1986), and the slow progress of the Government's fiscal and trade reforms over the past 18 months have hurt Mexico's non-oil export performance and confidence in the prospects for recovery from the crisis. The Government recently decided to negotiate a new economic program with the IMF for 1986 and the 1986 budget is aimed at cutting the fiscal deficit from 9.6% of GDP in 1985 to 4.9% of GDP. This adjustment is to come mainly from an increase in public sector revenues (equivalent to 1.5% of GDP) and a decrease in programmable expenditures (equivalent to 2.4% of GDP). Medium-Term Prospects 15. The Government's strategy, as outlined in the National Development Plan (NDP) for 1983-88, combines special efforts to recover from the present crisis with a longer-term perspective on regaining balanced and stable growth to overcome structural problems. The main problems facing Mexico in the years ahead include the heavy burden of service on the debt, both internal and external, an oversized public sector which is in need of streamlining, the still high rate of population growth (2.6% estimated for 1983) together with an even higher rate of labor force growth (a little under 4%), slow growth in agriculture, widespread poverty, a highly skewed interpersonal and interregional income distribution, an overly oil-dependent economy with a strong anti-export bias, and a relatively inefficient manufacturing sector. 16. The medium-term strategy presented in the NDP focusses on the need for structural changes in the economy, including a greater export orientation through revision of external trade policies, poverty alleviation through basic needs policies and an improvement in labor absorption, and the regional decentralization of economic activity. 17. Mexico's medium-term prospects for recovery and stable economic growth are reasonably good, provided the Government is persistent in pursuing its structural adjustment policies, private sector confidence is restored, and the internatioaal eavironment remains reasonably favorable. Adequate domestic policies include inter alia renewed efforts to reduce the fiscal deficit, to reduce effective import protection (largely unaffected by the recent removal of ORs), to ease domestic interest rate and credit controls, and to maintain a realistic exchange rate, preferably through largely automatic adjustment mechanisms. Restoration of private sector confidence is crucial, since only a strong and dynamic private sector will be able t. raise investment and production from the present depressed levels and to supply the increasing non-oil export surplus required for the resumption of growth and the maintenance of sound balance of payments prospects. 18. As regards the external environment, foreign commercial banks should be willing to maintain their presence in Mexico to meet the country's v1  - 6 - fundamental liquidity needs, and foreign markets must be open to Mexico's non-oil exports. If interest rates on world financial markets continue their decline, Mexico will benefit substantially, while she will lose export revenue if oil prices continue to deteriorate. A one percentage point drop means a savings of about US$800 million in overall interest payments, compared to a loss of US$550 million in gross export revenues resulting from every US$1/barrel decline in the export price of oil. 19. A rescheduling agreement covering US$29 billion of Government debt was signed in March 1985, following approval by the IMF of the terms of a third-year EFF. The rescheduling agreement concerning the balance of US$19 billion in loans to Mexican Government agencies was signed in August 1985. These agreements provide that previously unrescheduled debt due for repayment in 1985-90 (amounting to about US$20 billion) will have its maturities extended to 14 years. The maturities of previously rescheduled debt due in 1987-90 will be stretched over 11 years. The 1983 syndicated loan of US$5 billion will be restructured to carry terms identical to the 1984 syndicated loan. In summary, the rescheduling agreement stretches maturities of US$48 billion of public debt in such a way that gross amortization of the debt remains virtually constant between 1985-98, in contrast to the prior situa- tion where 75% of the debt service would have fallen due in 1986-89. The banks have the choice of the London Interbank Offer Rate, a domestic refer- ence rate, or a fixed rate. These terms are based on the understanding that the Government will continue to adhere to prudent economic policies. 20. Under moderately favorable external and domestic conditions, Mexico's economic growth could reach a sustainable 4-5% a year-somewhat below the post-World War II average for Mexico of 6% annually-toward the late 1980s. However, should a more outward-oriented growth pattern compris- ing fiscal discipline, improved domestic efficiency, and non-oil export development fail to materialize, Mexico could enter into a period of prolonged stagnation, characterized by insufficient labor absorption, domestic price distortions, and continued balance of payments difficulties. External Debt and Creditworthiness 21. Mexico's external public and private debt increased by about US$4 billion during 1983, and by about half as much in 1984 to US$94.4 billion. It is expected to remain roughly unchanged in 1985. Net new borrowing is expected to average some US$3-4 billion each year during the remainder of the decade. Assuming that the Government promptly adopts policy adjustments, as needed, and that oil prices do not fall substantially below USS20/barrel, the ratio of external debt to GDP should decline steadily from 55% in 1984 to around 50% by 1990. The debt servlce ratio after rescheduling is projected to decline slowly from the 1985 level of 62% to about 52% in 1990. Mexico's net foreign borrowing needs for 1986 are estimated by the Government at around US$4.0 billion of which US$2.5 billion is expected to come from com- mercial banks. 22. At the end of 1984, the last year for which a comprehensive exter- nal debt report is available, the Bank's share in Mexico's debt was 4.8%  (excluding undisbursed). The Bank's share in Mexico's total public external debt service payments during that year was 4.5%. As a result of commercial bank debt rescheduling, this share is expected to rise to as high as 7% by 1990. The Bank's exposure in Mexico as of end-September 1985 amounted to 7.6% of its total. In view of the good medium- and long-term potential of its economy, and in the expectation that sound economic policies will be pursued in the future, Mexico is considered creditworthy for IBRD borrowing. PART II - BANK GROUP OPERATIONS IN MEXICO Bank Operations 23. As of September 30, 1985, Mexico had received 91 loans from the Bank, amounting to USS7.72 billion, net of cancellations and terminations; of these, 59 loans totalling US$3.6 billion were fully disbursed. The Bank held US$6.1 billion, of which US$2.4 billion had not yet been disbursed. Some 40% of Bank lending has been for agriculture and rural development, 20% for industry, 9% for power, and 18% for transportation; the remaining 13% has been for water supply, tourism, urban development, and vocational training. Annex II contains a summary statement of Bank loans as of September 30, 1985. 24. Of the US$7.72 billion total lending, about USS4.7 billion was for establishing or streagthening institutions for channelling credit to areas where credit supply was deficient or non-existent, and setting up in the com- mercial banking system the ability to carry out project-related appraisal of investments in agriculture, industry, and tourism. These credit programs have facilitated lending to low-income farmers and small- and medium-scale industrial and tourism enterprises. 25. The Government arranged adequate budget financing in the years 1978 to 1981, which significantly improved project implementation. Government and Bank officials met periodically to review project implementation, and greater attention was focused on project monitoring. As a result of these measures, most of the Bank-assisted projects were being implemented satisfactorily until mid-1982, and disbursements rose from US$91 million in FY78, to US$448 million in FY82. However, the 1982 financial crisis again caused delays in the provision of counterpart fuads; consequently, disbursements in FY83 declined to US$389 million. A Special Action Program (SAP) was established in early 1983 to help the Government by alleviating the counterpart funding constraints on development projects, and 18 Bank-financed projects are receiving support under the Program. Partly as a result of the SAP, dis- bursements during FY84 improved significantly at US$528.87 million or 35% over disbursements in 1983. The FY85 disbursement figure is US$787.93 million, 49% over 1984 or 100% over projected. A reconstruction loan is also being appraised to respond to the needs of the September 1985 earthquakes. The proposed loan will be multi-sectoral and will cover all aspects of the overall reconstruction program. In addition, ongoing loans will be adjusted to address reconstruction needs.  -8- IFC Operations 26. As of September 30, 1985, IFC had made investment commitments in 27 companies in Mexico, for a total of US$753.9 million, of which US$572.8 mil- lion had been sold, repaid or cancelled. A summary statement of IFC invest- ments is presented in Annex II. IFC has been working together with the Bank in preparing proposals to establish a facility for provision of foreign exchange financing to private sector companies, for the importation of machinery, equipment, and spare parts required for production of exportable products, for efficient import substitution, and for improvements in the utilization of their existing productive capacity. IFC approved a US$100 million facility (including funds mobilized from foreign commercial banks) in 1983, which is providing finance for fixed investmerts of a larger size than those assisted under the Bank loan for an Export Development Project. Bank Strategy 27. The Bank's major objectives in Mexico prior to the 1982 crisis were to: (a) support policies and programs leading to a wider distribution of the benefits of ecoaomic growth; (b) help finance projects that, directly or indirectly, contributed significantly to output and employment; (c) help reduce Mexico's urban/regional imbalances; and (d) help free bottlenecks which prevent rapid growth. These continue to be important objectives of Bank assistance to Mexico. However, following the 1982 economic crisis, and a reassessment of the Bank's role in Mexico, the Bank Management concluded that: (a) increased Bank lending, critical to Mexico's recovery, must be linked to central policy reforms; and (b) the Bank should play a central role in assisting Mexico's return to voluntary lending. To prepare itself for this new role, the Bank has intensified and broadened its economic and sector work. Specific policy reforms that are presently being pursued through a dialogue with the Mexican Government cover priority macro-economic and cross-sectoral issues, such as trade liberalization, rationalization of preferential credit systems, improvement in public sector pricing and invest- ment and subsidy reduction. Traditioaal lending incorporating project- or sector-specific policy issues will be conducted in parallel with policy dialogue on cross-sectoral or macropolicy issues. 28. Because of the difficult structural problems of agriculture and the sector's crucial importance for the one-third of the nation's population living in rural areas, the Bank has made agriculture the leading sector for its lending. The Bank's agricultural lending program in Mexico aims at (a) a more efficient and rational use of natural resources to increase production; (b) productivity improvements of cultivated lands, with emphasis on the productivity of small farmers; and (c) promotion of employment - generating investments in rural areas. To support these goals, infrastructure invest- ments in Bank-assisted projects have been complemented with support services, such as extension, marketing programs and credit. The Bank has made 10 loans in FYs8O-85 totalling US$1,566.0 million for irrigation, rural and agricul- tural investment projects, and agro-industrial and livestock credit pro- grams. Projects for irrigation, rehabilitation, extension and research, seed multiplication, forestry, agro-industries and agricultural credit are in various stages of preparation. Special emphasis has been placed in recent years on the development of rainfed areas.  - 9 - 29. Bank lending for industry aims at: (a) improving competitiveness and export growth in selected industrial subsectors; (b) decentralizing Industrial activities away from the major, increasingly congested, urban areas; and (c) promoting greater employment. Between FYs8O-85, seven loans amounting to US$947.30 million were approved in the areas of small- and medium-scale industry, mining, vocational training, development of capital goods industries, and promotion of exports. In response to the current needs of the industrial sector, several projects to support non-oil export develop- ment, acquisition of modern technology, financial restructuring of enter- prises, and industrial recovery and growth are in various stages of prepara- tion. A Trade Development Policy Loan (DPL) is now being appraised aiming at supporting the trade liberalization process, assisting in the recovery of sustainable economic growth and facilitating the mobilization of commercial bank funds to cover part of the external financing needs for 1986. 30. Bank lending for transport has focused on regional development, strengthening of institutions and rationalization of public investment out- lays and pricing policies. Between FYsBO-85 six loans amounting to US$753.75 million were approved including two in each of the following three sub- sectors: highways, railways and ports. Additional projects to support the above goals were undertaken in the urban sector. During FYs80-85 four loans were approved in the urban sector, totalling US$408.5 ~aillion in the fields of water supply and sewerage and urban development. Additional projets are under consideration in the transport and urban sectors aiming at strengthen- ing the various institutions in the areas of planning, management, and finance. These upcoming projects would further support the Government's decentralization objectives. 31. The Economic Development Institute (EDI) is assisting Mexico through various courses/seminars dealing with policy alternatives and institutional reforms. EDI training is specifically directed at courses/ seminars on water supply and sanitation sector management, transport policy, agricultural policy, industrial development and finance, and macro-policy analysis. 32. The Inter-American Development Bank (IDB) is the second largest source of multilateral aid to Mexico. The IDB has made loans to Mexico totalling US$3.4 billion as of September 30, 1985. Over 50% of the total has gone to agricultural and rural development projects, and the balance to transportation, industry, water supply and sewerage, tourism infrastructure, education, municipal development and pre-investment. The IDB and the Bank have coordinated their assistance on several projects. Each has made loans for the national integrated rural development program (PIDER), agricultural and livestock credit, small- and medium-scale industries development, and hotel development projects. The International Fund for Agricultural Develop- ment (IFAD) has approved a loan of US$22 million for a rural development project in the State of Oaxaca, which was appraised by the Bank's staff and for which the Bank is acting as cooperating institution for administering the loan.  - 10 - PART III - THE AGRICULTURAL SECTOR Agriculture in the Economy 33. Mexico's agricultural sector contributes some 10% of the gross domestic product, employs about one-third of the country's active labor force, and contributes approximately 6Z to the country's exports. During the decade of the 1970s agriculture's rate of growth declined significantly to average 3X per annum as terms of trade turned against agriculture. Also, agriculture's share of exports dropped dramatically and imports sharply increased, and as a result sectoral policies came under review. Agricultural production again increased in both 1980 and 1981 at an annual rate of about 6.5% at least in part because of a deliberate policy of increasing subsidies on basic products and inputs under the Government-sponsored Mexican Food Program (SAM). However, SAM proved too costly, and in 1982, when prices were allowed to lag behind the high inflation rate of that year, the value of production experienced a 0.4% negative growth rate. Present Agricultural Policy 34. At the end of 1982, when the current Government took office, there was an urgent need to reassess and reorient agricultural development poli- cies. After substantial devaluations, domestic farr-gate prices had deterio- rated in real terms. Strong price increases, especially for the basic comr- modities, were required if farmers were to maintain and increase production levels. On the other hand, in order to suppress inflation there was a need to contain food price increases. Also, in view of high public sector defi- cits, the Goverment's agricultural subsidy policy needed to be overhauled. 35. The strategy which was developed and outlined in the National Development Plan for 1983-1988, aims at accelerated agricultural growth. The policy emphasizes the importance of agriculture in increasing Mexican exports and guaranteeing farm prices which are consistent with international prices; the fiscal problem was to be addressed by reducing consumer and producer subsidies, but due to continued high inflation and reduced incomes progress in reducing consumer subsidies has been less than expected. Controlled producer prices for most important crops, including basic staples such as maize and wheat, have been raised twice-yearly to compensate for inflation since the beginning of 1983, and are currently at or close to international levels. As a result, the average annual growth of production of basic sta- ples has been about 5% in 1983-1984. Input subsidies have been strongly reduced. Subsidized prices for key inputs (i.e., fertilizer and seeds) are now only available for rainfed-maize production to small farmers holding less than 20 ha each. Interest rates on agricultural subloans, which until recently were fixed and generally negative in real terms, have been made variable and are to approach positive levels gradually in accordance with a timetable that forms part of the General Interest Rate Agreement between the  - 11 - Government and the Bank. Continued adjustments of irrigation water rates are being made in order to achieve operation and maintenance cost recovery under a general strategy to improve the use and management of Mexico's water and soil resources. 36. The Government is also taking steps to decentralize planning, programming and implementation of rural development projects to state and Local levels and to improve interagency coordination. In support of these initiatives, SARH published the 1985-1988 National Program for Integrated Rural Development (PRONADRI) which focuses on the poorer segment of the farw- ing population who have not traditionally received significant support. Regional Development in the Humid Tropics 37. Mexico's humid tropics are located primarily on the Gulf Coast and in the southeast of the country. Within this area SARH estimates that there are about 7.5 million ha of unutilized or underutilized land with soils of moderate-to-good agricultural potential, primarily in the coastal plains. The rainfall reaches 1,700 mm and falls mainly between June and September. The high temperatures and humidity lead to serious disease, pest and weed problems. In addition to these problems, agricultural development in the region has been constrained by: (a) poor access for inputs and outputs; (b) regular flooding of lowland areas; (c) high illiteracy rate; (d) competi- tion for resources from the rapidly developing petroleum industry; and (e) steady expansion of extensive livestock production. 38. Despite operating at a low level of technology, the area produces a significant proportion of the national crop output. For example, in 1980 it produced 25% of the national maize crop, 34% of the rice, 13% of the beans, 65% of the sugar, 25% of the beef, 100% of the cacao, 50Z of the coffee, 65% of the honey, and 252 of the forestry products. 39. Systematic studies to determine the technical, social and adminis- trative constraints limiting development of the lowland tropics began in 1978. These included the Bank-financed pilot Tropical Agricultural Develop- ment Project, Loan 1553-HE (PRODERITH I). The development strategies which resulted included: (a) increased crop production through more efficient and rational use of aatural resources; (b) priority development of coastal plains where low-cost supporting infrastructure could be incorporated into local rural development schemes; (c) improvement of clean water supplies to urban areas and reduction of upstream contamination; and (d) development of river- based hydroelectric schemes. The 1983-1988 National Development Plan supports these strategies and expansion of the PRODERITH approach in high potential areas with relatively few drainage problems. Past Experience with Bank Lending 40. In the past ten years (FY75-85), Bank participation in the agricul- tural sector amounted to US$2,732 million distributed among 22 projects as follows:  - 12 - (a) Irrigation: (Panuco 969-ME), Sinaloa I (970-ME), Rio Fuerte/Sinalos II (1706-ME), Bajo Rio Bravo/Bajo Rio San Juan I (1111-ME), Apatzingan (1858-ME), Ocoroni (1908-ME), and Bajo Rio Bravo/Bajo Rio San Juan II (2100-ME) - US$539 million; (b) Integrated Program for Rural Development PIDER I (1110-NE). II (1462-NE), and III (2043-ME) and Papaloapan Basin (1053-ME) - US$431 million; (c) Rainfed Agriculture: PLANAT (1945-ME) and San Fernando (2191-ME) - US$311 million; (d) Agricultural Marketing: FIDEC (2262-ME) - US$115 million; (e) Agricultural Credit: FIRA V (1217-ME), VI (1569-ME), VII (1891-ME), VIII (2454-ME), Interim (2610-ME) - USS1,130 million; (f) Area Development: Tropical Agriculture PRODERITH I (1553-ME) and Chiapas Agricultural Development (2526-ME) - US$146 million; and (g) Small-scale Agriculture Infrastructure Development (1643-ME) - US$60 million. 41. During the past year, completion reports were issued on two pro- jects: the Bajo Rio Bravo Irrigation Rehabilitation Project (Loan 1111-ME) and the PRODERITE I Project (Loan 1553-ME). In general, implementation of ongoing projects is currently slow because of limited counterpart funds. This slowness and the fact that the Government's financial control and reimbursement procedures are cumbersome, had caused disbursements to lag. The Government, in consultation with the Bank, has reduced the scope of and cancelled loan funds for some of the ongoing projects and has reviewed the financial control procedures and introduced some simplification. Recent stringent stabilization measures contributed to the budgetary problems, which further slowed down execution of ongoing projects and disbursements. How- ever, the Bank's implementation of a Special Action Program has eased the budgetary constraints somewhat and facilitated project implementation. Experience of PRODERITH I 42. The PRODERITH I Project was considered a success by the June 1985 completion report. In the six pilot areas which comprised the project, the following overall benefits were identified: (a) the crop area was increased by about 40,000 ha; tb) yields of basic crops rose significantly e.g., between 1979 and 1983 maize yields in two of the pilot areas increased about 60% compared to average rainfed district increases in the same zone of about 20%; (c) drainage infrastructure reduced waterlogging on about 100,000 ha; (d) the level of farm family participation reached 30-50% in the pilot areas; (e) 32 detailed local development plans were prepared in close collaboration with the communities themselves; (f) over 950 farmer groups were established for production, marketing and credit purposes; and (g) about 50 women's groups were formed for small-scale agroindustrial projects such as poultry units, sheep flocks and bakeries.  - 13 - 43. The main reasons for the project's success were: its pilot approach to testing development strategies, effective and stable project management, careful local development planning, training and supervision of field staff, high density extension coverage, and strong support from senior SARH offi- cials. Despite the successes there were early problems most of which were resolved during implementation, including: lack of experience with design, construction and supervision of drainage works in the humid tropics, poor administrative coordination with other extension agencies, inadequate moni- toring of credit flows, and insufficient attention to marketing constraints. PART IV - THE PROJECT Background and Rationale for Bank Involvement 44. The proposed project was prepared by CPNH with assistance from Bank missions that visited Mexico between January and April 1985. It was appraised in June 1985, and negotiations took place in Washington, D.C., from January 27 to 29, 1986. The Mexican delegation was headed by representatives from NAFINSA. and included representatives from SARH and the Secretariat of Finance and Public Credit (SHCP). 45. The rationale for the project stems from the largely positive experiences of PRODERITH I whose pilot areas were chosen to be representative of wider areas of expansion. As such they were always seen as precursors to future investments which SARH currently describes as the phased development of Mexico's tropical lowlands by the year 2000. SARH has also concluded that of the many development programs tested in the region, PRODERITH has achieved the most success and therefore should be the model for future investments. This is consistent with the Government's and the Bank's focus on providing more direct productive assistance to poorer farmers in rainfed regions which have traditionally received only limited support. Continuing Bank involvement In the program is justified by its high priority, the need to assist in the consolidation and further refinement of the strategies developed under PRODERITH I, and the shortage of additional financial re- sources needed to carry on the development program in the region. Project Objectives and Description 46. The main project objectives would be to: (a) alleviate poverty by improving economic conditions of about 40,000 rural families through more efficient utilization of local re- sources and provision of improved infrastructure and services; (b) expand the rational exploitation of Mexico's tropical lowlands using technical, administrative and organizational measures successfully tested under PRODERITH I; (c) increase agricultural productivity and production; and (d) strengthen agricultural institutions, and promote greater producer involvement in operation and maintenance of infrastructure.  - 14 - The project would draw heavily on the experience of the first phase project and has been designed in accordance with the Government's 1983-1988 National Development Plan and 1985-1988 PRONADRI objectives. 47. The project would comprise eight subareas. Four would be expansion areas of PRODERITH I pilot projects (Pujal Coy II in Panuco, Centro de Vera Cruz in Vera Cruz, Zanapa-Tonala in Tabasco, and Oriente de Yucatan in Yucatan) (Map, IBRD 19197) and one would reestablish the pilot project which was cancelled in 1983 but now appears to warrant renewed support (Tesechoacan in Vera Cruz).'/ The remaining areas would be new pilot projects to be selected from a list to be studied in the first two years of project imple- mentation. During negotiations, Government provided assurances that it would complete the feasibility studies of the new pilot areas for Bank review, approval and selection by December 31, 1987. 48. Project components would include: (a) infrastructure construction in the subproject and pilot areas as follows: (i) about 1,500 km of farm service roads to improve access for inputs and marketing of outputs, about 700 km of which would be adjacent to drains; (ii) about 700 km of primary, secondary, and tertiary drains to remove excess surface water and lower water tables; (iii) about 1,400 supporting structures such as culverts, fords, and bridges; and (iv) general civil works including about 109,000 tons of iaput storage, about 20 silos, about eight heavy equipment repair and maintenance facilities, and two office complexes for field staff; (b) on-farm land treatment as follows: (i) about 36,000 ha of field drains, ditches, and land smoothing; (ii) about 47,500 ha of soil conservation systems involving contour farming, terracing, grassed waterways, windbreaks, and conservation tillage; and (iii) about 60,000 ha of mechanical clearing and major land smoothing; Cc) purchase of heavy equipment and vehicles for operation and maintenance of infrastructure (about 120 units) and vehicles for construction and production operations; (d) streagthening of agricultural extension, farmer organizations and agricultural research serving about 40,000 families on a net area of about 850,000 ha of potentially productive land (794,000 ha in the five subproject areas and 56,000 ha in the three new pilot areas) within a gross geographic area of about 1.2 million ha. Main investments for extension personnel would include purchase of about 180 vehicles and 180 motorcycles. Main investments in research would include minor works to complete facilities begun under PRODERITH I, purchase of laboratory and mass media equipment and vehicles, and support of about 195 man-years of research for the extension program; 1/ The sixth of the PRODERITH I pilot areas is included for expansion under the Bank-financed Chiapas Agricultural Development Project (Loan 2526-ME).  - 15 - (e) training in techniques of integrated rural development, rural communications, producer organization, self management schemes (e.g., operation and maintenance of infrastructure), drainage and soil conservation, and production systems-oriented methodology in crop, livestock, and forestry production. Four types of training would be offered: formal (480 man-months), in-service (480 man- months), new staff (600 man-months) and for producers (1,500 man- months); (f) studies as follows: (i) complementary studies on the subproject areas; (ii) detailed studies on the five new pilot areas from which three would be selected after Bank review for financing; and (iii) marketing studies for the products to be produced in the subproject areas; and (g) fifteen man-years of consultancies including 8.0 man-years of expatriate technical assistance in soil conservation and 5.5 man- years in mass media communications. These would extend two effective ongoing programs (USDA Soil Conservation Service and FAO) established under PRODERITH I. The balance of 1.5 man-years would be for short-term local or expatriate consultancies to resolve specific technical issues as they may arise during implementation. Project Execution 49. Despite a reorganization of SARH in August 1985, responsibilities for project management would continue largely along the lines successfully established under PRODERITH I. CPNH through its Project Coordinating Unit (PRODERITH) would be responsible for overall project coordination, monitoring and supervision. The executive secretary of CPNH would continue to chair the Technical Committee, which would comprise all executing agencies plus the National Rural Credit Bank (BANRURAL), the Agricultural Trust Fund (FIRA), the National Insurance Company (ANAGSA), the Secretariat of Finance and Public Credit (SHCP) and SPP. During negotiations, Government provided assurances that CPNH would continue to act as project coordinator and that the Technical Committee would be maintained. Furthermore, in order to ensure that adequate investment and production credit would be made available from existing sources, Government also provided assurances that the existing agreement on supply, coordination and supervision of credit established under PRODERITH I would be extended to cover the area and implementation period of the project. A Bank mission visited Mexico in December 1985 to appraise a Mexico: Agricultural Credit Fira/Ficart Project which will help ensure the supply of credit to the project area. 50. Day-to-day execution of the infrastructure and civil works activi- ties would be the responsibility of the General Directorate of Irrigation and Drainage (DGID). Civil works designs for the first year's work program have. been prepared and tendering would begin before Board presentation. Research  - 16 - would be executed by the National Institute for Forestry, Agriculture and Livestock Research (INIFAP) and extension services by separate Regional Centers for Rural Development (RCRD) within SARH's Rural Development Dis- tricts (RDD). PRODERITH field offices would operate as separate RCRD and subproject and pilot area chiefs would report directly to the RDD chiefs thereby ensuring effective integration with SARH's existing extension infra- structure. However, the project would require PRODERITH field staff to do additioaal work not covered under existing RCRD job descriptions, such as preparation of local development plans and monitoring and evaluation of the project. Consequently, SPP and SARH would identify certain staff positions as 'special posts" to ensure that salary levels adequately compensate staff for this additional work. This review is underway. Extension services would increase direct support to farmer groups and enterprises with the long-term goal not only of increasing production and farmer income but also of recover- ing at least part of the cost from the groups themselves. Training programs which have already been planned in detail would be provided by PRODERITH with assistance from the Chapingo Graduate University's extension training center near Vera Cruz (CRECIDATH). Project Costs and Financing 51. The total project cost is estimated at US$217.5 million excluding taxes and duties. Foreign exchange is estimated at US$66.1 million or 30% of total costs. The base cost is estimated at US$178.1 million based on December 1985 costs. In view of the wide divergence between international and local inflation rates, all cost tables and financial projections are presented in US dollars. Physical contingencies (5% of base costs) have been estimated at the rate of 10% on infrastructure and civil works only. Price contingencies (17% of base costs) have beer estimated at 7.0% for 1986, 7.0% for 1987, 7.5% for 1988, 7.7% for 1989, 7.6% for 1990, 4.5% for 1991 and 4.5Z for 1992, and have been applied to all components except salaries. No price contingencies have been applied to the US dollar equivalent value of salaries since the Government's stated objective is to keep public sector operating expenditures controlled; between 1982 and 1984 real wages actually fell about 30%. Consequeatly, real US dollar increases in salaries over the project period are unlikely. The proposed Bank loan of US$109.0 million would finance 50% of total costs net of taxes and duties, which is equivalent to 100% of foreign exchange costs (US$66.1 million) plus 28% of local costs (US$42.9 million). Bank financing of local costs is justified in view of stringent stabilization measures undertaken by the Government in its efforts to reduce the deficit, the high poverty level of the project beneficiaries and the relatively small foreign exchange component of the project (30% of total costs). The Government would provide the balance of 50% of project costs which would be equivalent to 72% of local costs. The project would require about 180 man-months of consultant services. Special Account 52. To expedite project implementation, a Special Account would be established in NAFINSA. Up to US$7.0 million would be deposited by the  - 17 - Bank in the Special Account, which is equivalent to about four months of peak loan requirements. The Special Account would he replenished through the normal reimbursement of project expenditures. Procurement 53. There would be no international competitive bidding (ICB) on Infra- structure and civil works, estimated to cost about US$105 million, due to the relatively small and dispersed nature of works. However, it is proposed (except as the Bank shall otherwise agree during implementation) to package all roads and road drain combinations (about US$23.0 million or about 22% of all works under the project) in contracts of not less than US$0.5 milliou equivalent for procurement through local competitive bidding procedures (LCB) in accordance with Bank guidelines. For any civil works over US$1.5 million, the Bank's prior approval would be required before contracts were awarded. During negotiations, Government provided assurances that it would agree with the Bank on bidding procedures for all contracts awarded under the project. 54. Equipment for operation and maintenance of works and laboratory equipment for research estimated to cost about US$11 million, would be procured under ICB procedures in accordance with Bank guidelines. Qualified domestic manufacturers for the supply of equipment, goods and materials would receive a margin of preference of 15% or the import duty, whichever is the lower. The balance of equipment, vehicles, goods, and material contracts which would comprise large numbers of small items in individual contracts under US$150,000 equivalent (US$5.0 million) would be procured according to local competitive bidding procedures acceptable to the Bank. For any goods over US$250,000, the Bank's prior approval would be required before contracts were awarded. Consultants for soil conservation and mass media communiLa- tions would be selected in accordance with Bank guidelines. During negotia- tions, Government provided assurances that it would follow the procurement procedures outlined in paras 53 and 54. Table 1 - Procurement Arrangements aJ Project Element ICB LCB Other Total Cost -USS Million- Civil Works - 102 3 bJ 105 (71) (2) (73) Equipment 11 5 - 16 (9) (4) - (13) Services - - 96 96 _ - (23) (23) Total 11 107 99 217 (9) (75) (25) (109) a/ Values in parenthesis reflect amount financed by Bank. 5/ Quotations, direct contracting or force account for contracts up to US$50,000 equivalent.  - 18 - Disbursements 55. The proceeds of the loan are expected to be disbursed over an eight-year period, which is based on the profile for similar agricultural projects ia Mexico. The proposed loan would be disbursed mainly against normal documentation. Purchase of small items and contracts of less than US$20,000 would be grouped together as far as practical and disbursements made against statements of expenditure (SOEs). Disbursements for contracts for buildings and other works costing less than US$150,000 would also be made against SOEs. All contracts and supporting documents for SOE would be re- tained by the executing agency for review by the Bank as required and would be audited (para. 56). Recurrent expenditures would be financed on a declin- ing basis as follows: year 1, 30%; year 2, 20%; year 3, 10%; years 4 and 5, 5x; thereafter 0%. The project provides for retroactive financing on infra- structure and purchase of laboratory equipment, not to exceed US$4.0 million for expenditures incurred after July 1, 1985. This would facilitate the implementation of approved infrastructure and continue the research work established under PRODERITH I. Project completion is estimated at June 30, 1993. Accounting and Audets 56. Prior to submission to the Bank, all documentation, including SOEs would be subject to the independent review and approval of SPP in accordance with its established control procedures. SARH would maintain separate accounts on the project. An audit satisfactory to the Bank would be made of the accounts and SOEs. Certified copies of these statements would be submit- ted to the Bank no later than six months after the close of each fiscal year. The Borrower would also furnish to the Bank any other pertinent information concerning these accounts as the Bank shall reasonably request from time to time. Monitoring, Evaluation and Progress Reporting 57. The Monitoring and Evaluation Group established under the first project in the PRODERITE project unit in CPNH would continue to operate under the p-;oposed project. It would monitor progress on project impact and the status of agricultural development, infrastructure works, research and exten- oion, training and credit activities in the project area. It would analyze beneficiary acceptance and response to the development investments in terms of poverty alleviation, changes in production systems, as well as the pro- ject's environmental and sociological impact. Control areas would be established in similar agroeconomic areas to permit a valid impact analysis to be made. An additional responsibility of the Group would be to monitor, collect, process and analyze information on advances in research, their relation to the technical assistance offered and the extent to which the Xecommendations generated by the research centers are appropriate in support- ing production at farm level. 58. The Group's findixgs would be taken into consideration in the preparation of each year's work program and budget for the project and would  - 19 - assist project management in identifying the problems and constraints so that they could be acted upon in a timely manner. Analysis of adoption rates of technical packages would also permit management to continually update the design and content of its extension services. The Group would also prepare an annual progress report and final completion report for Bank review, using a similar format to that developed under PRODERITH I. Financial and Economic Justification 59. The project would remove constraints to agricultural development in the five subproject areas through drainage and road development. In addi- tion, by encouraging the adoption of improved production practices, it would raise agricultural incomes and welfare of about 40,000 rural families, the majority of whom are in the low income target group. The area under rainfed cropping would increase by about 143,000 ha primarily at the expense of extensive livestock production. Although a wide range of crop and livestock activities are possible in the lowland tropics, the project is expected to have the greatest impact on the following at full development in Year 16: annual maize production would increase about 101,000 tons, beans about 22,000 tons, sorghum about 210,000 tons, soya about 60,000 tons, rice about 14,000 tons, fruits about 219,000 tons and vegetables about 18,000 tons. Annual output of livestock products resulting primarily from increased productivity per hectare would increase by about 57 million liters of milk and 25,000 tons for meat. This incremental production of major crops would make a signifi- cant contribution to import-substitution (food grains and pulses, feed grains and oilseeds) as well as modest contributions to exports (cacao and poten- tially fruit and vegetables). The incremental value of production at con- stant 1985 prices of major crops is estimated at about US$100 million per year. Typical farm family incomes are expected to increase significantly. For example, an ejidatario with 7 ha of mixed annual and perennial crops is estimated to increase his annual family income from current levels of about US$1,300 to about USS4,300 by full development. 60. The internal economic rate of return (ERR) of the project is estimated at 23.3% and is based on the incremental value of crop and live- stock production over a 20-year period. Secondary benefits from drains and roads such as reduced flooding in urban areas and improved access to markets have not been included although they are likely to be considerable. The projected changes in land use and cropping patterns follow closely the investments in basic infrastructure and provision of services. Economic prices for traded commodities were derived from medium- and long-term Bank projections adjusted for handling, transport, and, where appropriate, processing. The calculation includes the costs of three proposed pilot areas, but no benefits from these areas have been included. Sensitivity analyses indicate that an increase in total project costs of 20% would reduce the ERR to 19% and a decrease in project benefits of 20% would reduce it to 18.2%. The combined effect of these two seasitivity tests would reduce the ERR to 14.5X, and a delay of three years in achieving project benefits would also reduce the ERR to 14.5%. Switching value tests have been calculated at three levels of opportunity cost of capital (11%, 15% and 20%), all of which support the project investment. Thus, the economic viability of the project is robust in the context of likely alternative scenarios.  - 20 - Recovery of Operation and Maintenance Costs 61. The two approaches to operation and maintenance of infrastructure (O&M) agreed by SARi at appraisal are defined according to whether they are large works or small local works. The first refers to larger works which would benefit many communities (roads, drains and large structures). For these SARi would enter into agreements with local organizations such as multi-ejido unions to provide paid labor to maintain the works. However, responsibility for this O&M would remain with DGID. The second approach would introduce an innovation which it is hoped will ultimately lead to larger scale recovery of O&M costs of certain infrastructure over a wide area even outside the project. For these smaller works which would benefit individual communities (access roads and secondary, tertiary and field drains), SARH would train local groups to carry out the maintenance them- selves. Beginning on an experimental basis on 40,000 ha in the Pujal Coy II subproject area, SARH would establish small funds to cover the costs of materials such as seed for grassing of drains and gravel for access roads. Start-up money for these funds would be provided by the project but over time (about four years for each group) community contributions would gradually take over responsibility for the fund's operation. During negotiations, Government provided assurances that these funds would be established on a pilot basis. Marketing 62. Incremental production generated by the project would be marketed primarily in the local area of the coastal plains where considerable deficits in supply of major crops and livestock products exist. The production increase in basic fooderops, feedgrains and oilseeds (maize, beans, rice, sorghum, soya, sesame and safflower) would also help offset Mexico's imports in these categories. Incremental fruit production (pineapple, mango, citrus and papaya) would be consumed in local urban centers and to a lesser extent by processing industries and small exporters of fresh tropical fruit. The projected increase in sugar production which is equivalent to only 2.12 of Mexico's 1984/85 national output, would be consumed locally. Incremental milk and meat production resulting from increased productivity on a reduced pasture area would also be consumed locally. Despite imperfections, existing marketing systems are considered capable of handling the project's incre- mental output. In basic crops, the project's construction program would also help reduce problems of collection and storage. The project would also continually monitor marketing requirements through the program of local development planning and the proposed overall marketing study for the region to be carried out early in project implementation and updated on a regular basis. Environmental Impact 63. Measures would be taken to protect the environment. Civil works, in particular the drainage system, would be designed to: (a) utilize sediment  - 21 - traps to minimize soil particles from being carried into the permanent wet- lands and lagoons; (b) control the run-off of agricultural fertilizer and chemicals; and (c) maintain a depth and flow of water in the drains to reduce the possibility of establishing breeding areas for mosquitos and water- spawned insects. SARH has already initiated environmental impact studies in accordance with current legislation. Research would be conducted to deter- mine fertilizer and chemical application rates and methods compatible with obtaining optimum yields while protecting the environment from chemical contamination. The extension services would advise farmers on the safe and proper application and use of fertilizers, chemicals and cultural practices required to protect the user and the environment. This would also include the recommendation not to use dangerous chemicals in compliance with Bank Guidelines on the Selection and Use of Pesticides. Cultural practices would include soil conservation measures, such as terracing, contour cultivation, windbreaks and incorporation of crop residue into the soil. These practices would conserve soil and moisture and reduce run-off of water and soil particles that would otherwise carry fertilizers and chemicals to areas where they could cause detrimental effects. Furthermore, the Government is plan- ning to set aside by law an ecological reserve in the Pujal Coy II subproject area equivalent to 16Z (44,000 ha) of the productive area. Sociological Impact 64. With respect to sociological impact, the project would have a major impact on reducing rural poverty and would also improve the economic status of women in rural areas (paras. 42 and 59). Furthermore, the experience of PRODERITH I has produced a method of analyzing the social environment through the elaboration of local development plans. The project is also designed to focus on ejidos and small-holders, who are most likely to take advantage of drainage and flood control to intensify crop production and convert grazing land to crop production. Thus, the project would have a positive impact on the socioeconomic balance within its areas of influence. In addition, it would increase employment by about 6.7 million man-days per year, equivalent to about 25,800 full-time jobs, in the areas of intensified crop and live- stock production, as well as substantial part-time employment for weed control, harvesting and operation and maintenance of infrastructure. This would reduce the need for the unemployed and underemployed to migrate to other areas seeking opportunities for jobs. Project Risks 65. The main risks would include (a) shortage of counterpart funds and (b) problems of institutional coordination. Although the project has been given priority status, the shortage of counterpart funds 's unlikely to be completely alleviated. However, partial Bank financing of local costs should help ease the situation and SPP and SARH have already agreed on 1986 (year 1) budget levels close to projections proposed at appraisal. Problems of institutional coordination should also be reduced by the federal and state level coordination mechanisms already established under the first phase project.  - 22 - PART V - RECOMMENDATION 66. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank, and recoumend that it be approved by the Executive Directors. A. W. Clausen President Attachments February 7, 1986  AN=EX I -23 - *e1of 6 T * L | 34 ma (i~~~~~~a p.06)naIn W T.3.2 976.4 PM a cma (UP0 ..3 240.0 11173.9 2144.3 - 'R- an ma CAn CK:LOIU*3 ci o UIUIwVM.U) 529.0 773.0 1340.0 MA3. 11i.6 PWULAXIONXab-MIR (U003433) 37073.0 51176.0 73011.0 GREW ICiUATIW (2 OF TOTAL) 30.8 ". 6.7 67.7 w_ PO3ULATIOU =3 TE 2000 (NILL) 10,.e STATZOMUAE POPULAUIU (KULL) 199.0 to UTIA0 62U970 1.3 . FOFULAUX IIU map in a. 16.6 25.11 311.0 U.0 I. MSQ. KM. AGRI, LASN 37.7 52.4 74.7 91.1 16.9 WuL.TOII An X113 3 (a) 0-14 Yu 45. "A. 43.4 Ms 3i.Z 15-64 YU1 s1.0 49.9 53.1 37.1 61.5 q-n AmOl. 3.3 3.5 3.4 4.2 7a. NoWOLATom GUU "sw (X) TOTL 3.0 3.2 2.3 2.4 15 gua 4.a 6.7 4.1 3.6 3.7 CGiDE KM1 on1 cm IS) 43.4 43.4 34.0 30.9 23.4 CM MM lI (M sOs) 12.2 3.7 6.9 6.0 e.3 CGu IDOUC!I0U mu 3.3 3.2 2.2 2.0 * a.s FAN*PMLAII ACCFeu. NAL (S6) .. 25.1 1145.0 /A gnu n or 5 P ) .. .. 39.0 4 41.3 DOa or yo MD. Wa cAPT (19W71-100) 97.0 100.0 100.0 103.6 103.1 PM CrAf UP= Ol CALON CX UAGINIuNTU) 114.0 114.0 129.0 113.2 131.3 VEOTEI (CUI pU on) 6".0 67.0 77.0 ".4 93.4 O 1m1i AN2WL 9U NLE 29.0 V7.0 m.0 I 34.2 343 CGILD C(AM 1-4) Dam nATZ 1o.7 7.3 3.0 4.o 4.7 lg OMr AZ KT (lEADS) 57.0 61.3 Os.A 64. 67.2 ISNsAT MM. NTE CM Ia) 93.0 74.0 52.0 59.7 53.3 ACCES 2TO 1 MU (7PTO) TOmL 23.5 49.0 A 3.0 45.3 70.2 gumEj ,, 66.5 L 61.4 79.5 6V4 RURAL .. 21.0 7 51.0 44.2 57.0 ACCESS To iacirA DISPoSAL CZ OW POFULATIOU) TOTAL . 370 36.65.3 59.0 GlEN . 60.00 1 560.1 73.4 03.3 EMURL .. .0 13.0 25.3 '47.4 TOPULaIZO FEE FusICIA 1630.0 1510.0 ..1903.7 1070.6 tou. In Paz ORSuONu 3630.0 X390.O . 606.2 769.3 pOP. Pa fotra. Em TOTAL 190.0 970.0 ..36.0 326.3 633am 570.0j 1170.0 ..422.0 201.9 ERAL . 1370.0 ..2716.7 4513.7 hfhIiZOUM PM OISfTAL Bo..... 27.5 20.0 TOTAL 5.4 5.7 .. gum3* 5.7 5.7 MUAL 5.2 Si AvgRADE M. OF fl3oUSIEOO TOtAL. 2. 2. 113* 2.6 22 RURAL. 3.4 3.2 *tSFWAGS OF D11)Uu VTW U=. TOM .. 536.9 oam wR r a UZe.Q 10.7 IJM.. .. . 27.8 .0  -24 - ANNEX I Page 2 of 6 T A L L 3A, NEX1~~~~ SOC~IA NDICATORS D*ATAEE 116NlWlREFNENO GROUPS (WEIGHTED AVENAE) mmST (MsUT ICMNT IbTIIIATE) /b SCUIOT jIDDI CO DI0M11 Him" Luc 19bk 197O./k ZSTDT LAT. AI.XCA & CR ERWOPE ADJUSTED ENR0LLN1iT lATtOS FRtIARY: TOTAL 30.0 104.0 121.0 106.7 101.9 HALE 32.0 106.0 123.0 108.5 106.2 FEMALE 77.0 102.0 119.0 104.6 97.5 SECONDPAIT TOTAL 11.0 22.0 54.0 ".2 57.5 HALE 14.0 26.0 54.0 42.7 b4.9 nKEa 3.0 17.0 49.0 ".9 50.0 VOCATIONAL CZ OF S!ECIIIITU) 23.6 26.7 11.6 13.3 21.0 PUPIL-TEACHR &ATMO P314E 44.0 46.0 37.0 29.9 25.1 SECONDARY 13.0 14.0 13.0 16.7 19.1 m PASSEGR C STHOUlsuD 0PM 12.9 24.1 61.3 .L 46.0 54.2 uDIO ccmsIVEITEOOSID POt 89.0 273.7 291.3 32U.3 170.7 TV UCEIVERBUtVOSAO POP 17.5 58.5 109.4 112.4 149.3 NESFAPR t"ALY CENEAUL INEREST) c1alLATION PER TmUSAND POPULTION 73.3 .. 139.7 01.1 97.0 CiNE ANNUAL A3rCDmNICzfCklTA 9.8 4.9 3.8 JL 2.4 2.7 TOTAL LANOR FOxcR (SiUS) 11191.0 14722.0 22196.0 FEMALE (PERCENT) 15.2 17.4 20.5 23.6 36.3 ACRICULTUlt (PElRONT) 55.1 45.2 35.6 JS 31.4 40.5 INDISTRT (PZRcENT) 19.5 22.9 25.8 1 24.3 23.3 PARTICiPArxON RATE (PzRCET) TOTAL 30.2 23.8 29.6 33.5 43.1 WALE 51.1 47.4 46.8 51.3 55.1 rNHALE 9.2 10.1 11.9 15.9 31.4 ECONHC D6PlOUNCE RUM 1.6 1.7 1.6 1.3 0.9 -i r3 stillfr PERcmt OF PRIVA2E DCOH RECEIVED U! HONs Sor IOrWSEOLDS .. .. HRICSr 205 OF HODSEUDLDS 61.1 fh 60.7 57.7 Ib LOwEST 202 OF USEOLDS 3.4 7Th 3.3 2.97i LwIZST 402 0o NUSEEOlDS 9.8 Th 9.9 9.9k 7i ESTIMATED *501 POVERT IINCON6 LEVL CUSS PR C ) RURL .. L 85 1835. ESrIMATE RELATIVE POVElTY INCOME LEVL (USS PMl CAPITA) RUlm .. *- 471.0 519.8 RUMAL .. .. 471.0 7 359.7 ESTIMAED POP. NUOWi ASSOLUTW POIrmY ImE LIVL (2) WUJt .. .. . .. RURAL NOT AVAILAIL NOT APPLICAKL NOtES /a Tbh SouP veae toeh lltn catr are pol natlan- &ted aritimeic means. Cove of. C oera untrls aq tlb lndiaton depen. aatllbity af date and Is not naif . lb Unless atbovIns noted. "D>a fGe 1960 rffr to Mf Year Iet en 1959 ad 1961- Data for 1970" beten 1969 &ad 1971; and data gar "Naet Recet Istimte batwgea 1931 and 1983. Ic 1979; Id 1977; 1. Serwd Era wtIer supply and ag; /f 1962; AL 1980; /h 1963. JUhlE, 1935  ANNEX I - 25- Page 3 of 6 W rIIOlM OF SOF C IND hIOS NomAltho dadm dim m pmrlyjup t_o/antotmiw ad. eit holW alo ben6ted din hey my mm buioneratiomif wnpznh lema f i he Ofaiidsid slnsioe ad cue~s md b i mt cunl in colkilnath data d ThI dais am. aoasthls musf.l to Ih i _ug am (I) tw asm comy roup of sd subject country Ad (2) a cou_y romp with _omewha hihw aveap inoe then the country powdporshem etoM (eml faqrl_b Incto OiN Upors pop wam kMdle lncome North Arno ad Middl Es Is cm bMucu o_ srner Socitual MOMu) IN lb I poop da tb a'uu m popuude wusag anlnsetlc _mu for such hdwma shown only whe njonty aftdsrm h soow *Idaisr durtie-rmlor. SrAm di wag coun idaonghe _ndlmdpo.dspdon the aUllmbilty ordata and b nog uvlmf.o cutdo mu ha marcisd m ag of ooelndiranodhm Thesn averiingare only useia in compawin tWh vaeof oe ndimsra a tismo.o hecodry and r _ wOupL AREA (thousand sq.k) Cr Ade h te (perAhned)-Nm ber oflive births in the year T.und-Total . s cz b d gd i d w; ~per thound of mid-year populatWO 1960.1970. and 1933 data. 1960. 1970 ad 19U3 data. Cru Death Ate (per smN-Number of deaths in the year I -O!4Eatc of agriculural area ud temporrily or pe thoumi of mid-year populai 1960,1970. and 1983 data. perFma tly forarops. pturs maket and kitchen pgrdens or to Grw RepArsde Rate-Averge number of daugbters a woman ie fallow, 1960, 1970 and 1982 datiL will bear in ber normal reproductive period if she txp preat ageppcific arti rate uualy five-year averae ending GNP PER CAPfTA (USS)-GNP per capit estmaes at cumnt in 1960, 1970, and 1983. warket pricea, caculad by -s conrio method a World F.d Phi-AiW- epa. A. (thamAnu al num- Barsk Adm (1961-83 basi*); 1963 data. ber of acceptors of birth-conl devices imder auspces of national ENERGY CONSUMFON PER CAPFE-Anumal apparnt fanily planing proan. conmption of cmmecia pima eergy (coal and lignite, Famil Pl q-VfJs (pmea ofmmue m)-Tbhe percn- petrolum, natual ps and hydro-. nucear and geotherm l dcc- ta of muaried women of chd-bearing *ge who am pncticing or tricity) in kiogams of oi equivalent per capita; 1960. 1970. and whose husbands ar patcing any form ofcontaception Women 1932 data of child-beaing age ar gmenrly women aepd 15-49. although for some countie conbceptive ue is measured for other age POPULATON AND VfTAL SrATISICS gro8 a Tagd hI em dMII , (tharmdr)-As of July 1; 1960.1970. FOOD AND NUlrlMON and 1963 dati Isdez.of FoodProilsodis Per Capita (199-71 - 100)-Index of pUr UrEw ftp.he. (p*e ! of ta)-Ratio of urban to total capita annual production of all fcod commodities. Production pultion; diffierent definition of urba areas may affect compar- xudes -mmi p1feed and seed for agicultur Food commodities ability of dat amonsg counnties; 1960f1970, and 1983 d indude prinary commodities (e.g. supaafe instead of sugar) PqdAt*ff JrcdDn which are edible and contain nutrients (eg. coffee and tea are P.pukdon in year 2000-The projection of population for 2000. zcduded) they comprise cerals. root crops, pulses oil seeds. made ror each ecnomy sepaytely. Starting with information on veeables fruits, nu4t sugarcne and sugr beet livestock, and total popuation by age ands fetility ates moraity rates, and ivsock products Aggregate production of each country is basd trnational miation in the bm year 1980. these parameters on national average producer price weights; 1961-65. 1970. and wra projected at five-year intervals on thc basis of genealized 1982 data. amptions until the population bem stonry. *rh Capi SWp of Cdmie (pact! ureqnd'ewisin)-comput- Saiorwy populasio&-is one in which age- and x-specific mor- ed from calorie equivalent of net food supplies available in country talky rate have not chaed over a lng period, while age-ecific per capita per day. Available supps cmpse domesic produc- fertility tes have simultoudy remained at replacement level tion. imporu less exports. and chang in stock. Net supplies (net reproduction rte-1). In such a population the birth rate is cxdude aninig feod, seds for use in agricultue quantties used in constant nd equal to the deatb rate, the a structure is also food procesng and loSes in distribution. Requiremeuts were constant, and the growth rate is zero. The stationary population estimated by FAO based on physiologial needs for normal ativity ie wa estmated on the basis of the projected chracteristics of and health consideing envionmental temperature, body weights. the populaion in the year 2000. and the rate of dece of fertility age and sx ditribution of population, and allowing 10 percnt for rat to replcement keveL waste at household level 1961. 1970 and 1962 data. PopJbaum Momentsnm-Is the tendency for popuatio growth to Per Ca Sita Sulf y .1 (tdei pm' Auy)-Protein content of continue beyond the time that replacement-levd fertility has been per capita net supply of food per day. Net supply of food is defined acLeved that is, even after the net reproduction rate ha reached as above. Requirements for a*1 countries established by USDA unity. Tbe mom. tum of a population in the year r is mesuned as provide for minimum allownsom of 60 grams of total protci- per a ratio of the uiae stionay population to the population in day and 20 grans of animal and pube protein. of which 10 gnans the year t. given the aumption that fility remains at replce- should be aninal protein. These standards.are lower than dtswe of ment led from year t onward. 1965 data. 7S grms of total protein and 23 grans of animal protein as an RaPOfAtL*n DA averge for the world, proposed by FAO in the Third World Food Per sg hrq -Mld-ycar population per square kometer (I 00 hec Supply; 1961, 1970 and 1982 dataL tam) of total ae; 16 1970. and 1983 data. Per CtAV PWIt SiMl TrusslAssiFi Pa**--Protein supply Per sq.km qradtmral Amid-Computed as above for agrncultural of food derived from animls and pulses in grms perday. 1961-6. land only, 1960 1970Q and 1982 dati. 1970 and 1977 data. Apd . Age &aildcsmr (pwcear)-C3iId= (0-91 4 yars). work- CW (es 1-J) Dash Raw (pfer ehmd)-Numberofdaths of ing ae(15.64years), andrtie d (65 years andover) as pec entage children agd 1-4 yeus per thousand children in the same age of mid-year population; 1960, 1970, and 1983 data. group in a girm year. For most developing countries data derived Padeu Gtih Rae t)-t.il-Annual grwth rates of from life tables 1960. 1970 and 1983 data. total mid-year popution for 1950-60. 1960-70. and 1970-83. HEEATH Pydud. GCwi R (Riser )- hm-Annual growth rates Liy Expec y at hir (ye's)-Number of yeas a newborn of urban popultion for 1950-60. 1960-70. and 1970-83 data. infant would live if prevailing pattens of morlity for al people  -26- ANNME I Page 4 of 6 at h imo orfits birth we to say th .me throughout its life; PU-teadkr Ratio - prbmay, ad scadary-Total sudents en- 1960.1970 and 19U3 data told in prinay and sewndy level. divided by numbe of bw ANetW 3 Roto (pw Ssl d)-Number of ifanu who die tach in the corrpoKing lvel. befo aching owe yr of ag per thousan live birt in a given year 1960.1970 ad 19UI data. CONSuMPnON Aom to Sofa N (puat of 411ntd 111j ad Paueqe Cmr (per _n p . snge cats ccitt- ,Wd-NIDber of people (total wba ad riral) wit eaoable _ motor crs sCtng la s thn et pemono exclude ambud- -mm to sa er w spply (icude treaPed sface water or tau hearses and militay vehids uoudbut WncIomDiUI5 waler rich a5 thnt firomt PtOtCted Rad RedWrs (per Avhmiaaidpaeplaoe-All tyesm of receivers bordials tpr and m_tilV wes) a pr0 ofir m'pa' for radio broadcas to gener public per thousan of population; tive Popdulion in an uwbn am a pubic foutain or sandpot exl unic d ivers in countris and in year wben losed mot mmtt 200 ZGm frm a fra a howr moy be _ istraiion of radio sets was in edect; data for recent yean may as being_wid p p jl tt acae ofthet ho,ude I d not be comparble sine most countries abolihed licening. boumlbold do not ave to piad a dsproportiote pan of the day TIVRecaed (pa rheumdp ap.al.ri)-TV rcve forbroadcast in fetcig te is wa_t needs. to gna public per thousand populan;oa ecudes unlceed TV Await Lnt ijpgn (', ye in coDutries and in years when regsration orTV as wa <~~~^-~~~t * ^,,~~~a effect. ad mNs5-Ntamber of people (tol,L urba, and rn served by eocreta disposd as percentages of tbeir respove popuaioswigi Ckcdha (pr r d dpopu lmado _r)-Shows the aver- Excmer dispol may incde the oection ad doisposl, wnih or a1t ciculat of 'daily geral intest nw " deined as a without treatmenL of bhuan encmta and waste-water by water- paiodica pubbt devod primay to wrdig gcneral ne. borne syte or the us of pit privie and similar instllations It is coidted to be "daily if it apper at lest four tim a week Pepab k p w P i p"l-on divided by number of pCac h A_ A d r Cat pr r_wBaed on the tsing physiansqualifed frommedicalaschool at university level. number of tidckets sold during the year. including admision to A - w Nwdnat Po b -p4 lfdatin divided by number of dive-in cinema and mobile unitL practcig mek d fmale grdua nuse, asistant nuns, pracl nus and nurig awuliae lABOR FORCE _1 -I P lifffdtd ai*% *i idWbpu b ulud iwd Labr force anhdunempEconoyedbutce active pehsouw in- (total urbn nd rural) divided by heir respectrve nuwber of duding armtd rore and unpopployed but excludiag housewives, hospitl beds avaibe n public and pri genal and pciald students. et crng populaton or al ag9s. D1initons in hosptal d m habiation centes Hospil am esabl various mous a omable; 1960. 1970 and 1983 _auL pemanndy sfed by at ket one phyicia. Establishments prov- f (p &w)-Siake labor orce as pcrentage of toul labor iding prinpaly custodiel car ae not included. Rural hosiaK force. howee. indude beath and medical ets not pnanendy stffed Apiedlmv (pmr*t-Labor force in farming foresry. hunting by a physican (but by a medical assisnt, nure, mdwife. etc.) and fishing as perentage of total labor form 1960. 1970 and 198D whc ofer in-patient a_mmodation and provide a limited range dataL of medical faciltJieLs Ihry (perce)-IAbor force in mining, constn, manu- Ast_. pen Hospi Red-Total number of admissions to or facturing and electricity, water and gs as percentage of total labor dis;carges frm hospitals divied by the number of beds. force. 1960. 1970 and 1980 data. POE?*A we -Percm)-14 mu, f paion HOUSENG or civity rates are computed as totaL male and femal labor force Amqe S1c Of HatsMs (post pw husd)-tot1, m'ua as perce:tages of totaL mae ad female popuation of a*1 ages mEtraria-A housebold consis ofa group ofindividus who share respectivy 1960. 1970, and 1983 data. Tlese are based on ILOs lving quartr and their main meals A boarder or lodger may or partcipto rates rtin tig age-sex strucof the populato and may not be induded in the household for stisc purposes long time trend. A few estimts are from nationd sourel oqe NJV_ of Pewar pa Ram-td4 ar_wam. and ia'.- &Eemmc Dwpendecy Ratio-Ratio of population under 15, and Avera number of perons per room in all urban, and rural 65 and over. to thc working age population (those aged 15-64). occupied conventional dwelings, respectvely. Dwllings exclude non-perant structu and unocupied pats 9ICOME DISTRIDIIUtON Prea~ ofDwe^_s wit EIec&ktl-tal rh.< and nwl-- Pecetq of Toa Diuabk hcmm (both in cm* and Mmd)- Conventional dwelinp witb electricity in living quares as peren- Accruing to percentile groups of households ranked by total house- tap of total, urba and nual dwelings respetively. hold income. EDUCATION POVERTY TARGET GROUPS A#mW Ewabsa Ratin The folowing estimats are very approximate measures opoverty Rhixy cho - toral. mae md fen-ross total, and leveds, and should be interpreted with considerable caution. female enrolmnet of an1 as t the prmry levd as pecentages of Eti*anrd AAohr Po" Incens le d El Upercqfit)-wm* respective prmay shoola popuato While any countries d rw-Absolute poverty incomne levl is that income lvel conide primay school a to be 6-11 yea othes do not Mhe below whicb a minimal nutritionally adequate diet plu esseti differnc in country prnc in the age and duration of school non-food requirements is not affordable. are rflected in the r.ato alven. For some counris with univrsal E_satd Relaie P,A.ry wowme Levd (USSr pg capia)-,h.u educadon, gr enroment may xceed 100 percnt Smnc some and rwal-Rural reative poverty income level is one-third of pupib a below or above the country's standard pnmary-shool average per capita personal income of the country. Urban levl is agL denved from the nural level with adjustment for bigher cost of Secmshwy sdcoal - roald. mal and femae-Computed as above; livinig in urbn ar seoUndary educatio reque at kt four years of approved pr- Entima hAW&W Bdow Ahsmhv Pweray IAwm Lvd (pe- may W& a providp gera vo oL or tacer training cantJ-whin nd rwrl- PNtnt of population (urban and rural tuction for pupils usually of 12 to 17 years of age; correspond- who are -absolute poor.' ace coure are gmemy exlud. Voaroa E ianmi (pecn of coardmy)-Vocational institu- Comparative Analysis and Data Division tioDS indude chnical industriaL or otber progmns which operate Economic Analysis and Projections Dqprtment indendenty or as departmts of s ycondy intitutions. June 1985  No= - on - 21W NAM-m mm* mixmmumi -U an a infu Milak MAWS CANI tm mul.das mia SEilMni BdU * 'mat~~~~~~~~~~~~~~I3 *135.1 3I6.22 31.14 NiL a11ma m1aim1 ma. MA?.1 1.32 L. LU 4.s3 m1a1 amaW amL 111. limP im no 5 .FI1.37 49 .6. 3.44 -LI2 -4.11 41,4 -LuG -au4. . . -us1 em -Lu -aa1 flUi fit. Vii 9.21 13.34 U2.3 an.1 ILIV 3L111 IL.3 ILK11 2444 LII ILlS *ll.0 m1.u 9wg 4LE 6.95 3ILZ SI,l itn. Sal LE iLts 23.9 2 L t 1,32 13.92 322 a.E ae,4 LO ILK0 12 8.3 2.411 ILI14 31.29 39.11 rear vmn -at6 -LUa -2.22 -LII6 9.21 19.A 21442 ts.41 am1. -2.49 -I.31 U11 9."3 cofinUIi N.H 3.32 142.81 33.9 47 30. 329.27 342.3 m* a .m a.a4 L1 6 1.6e 3.9 iat w II I an FL afhllE 14.2 3L.24 44. 9 31.3 42.14 2J1.7 23M 3.31 446 .14 L3.1 49.55 11.11 aU 34i4 11.9t 23.41 am ML wins 36L43 21346 2.41 61.4 40.43 4.12 4My2 42.311.U42 LI1S IL. 4.33 1.31 39.76 22,29 21.16 24.4 mlI ramt aIm -1.4s -2.54 -4.3 -2.94 331.3 -3L.4 -341I -311.1 101N 1u.s aIL" -10.3 7.3I -as9 -2.13 -2.31 -LUN SI ml. 1495 31.2W 24.40 3Ll6 2.74