Announcement of World Bank Approves Two Loans to Mexico Totaling 450 Million Dollars on December 14, 1989

FOR IMMEDIATE RELEASE Wo rid Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.* Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 90/30 Contact: Ciro Gamarra (202) 473-8721 WORLD BANK APPROVES TWO LOANS TO MEXICO TOTALING $450 MILLION Loans will Finance Low-Income Housing and Agricultural Marketing Projects WASHINGTON, December 14, 1989 -- The World Bank has approved two loans, totaling $450 million, to help finance a housing project in Mexico that will benefit 250,000 poor families and another project to modernize the food-marketing system in the country. The first loan, for $350 million, was made to the National Bank for Works and Public Services (BANOBRAS) for the housing project. The second, for $100 million, was made to Nacional Financiera (NAFIN), Mexico's national finance agency, for the agricultural marketing project. Low-income Housing This project will cover part of the credit program for 1989-1994 of the Fondo Nacional de Habitaciones Populares (FONHAPO), a public housing trust fund administered by BANOBRAS. The project will include serviced lots, home improvements and low-cost houses. The World Bank loan will also finance two special investment programs for land tenure and urban upgrading in rapidly-growing northern border cities and unregulated settlements in Mexico City and other urban centers. The investment programs will support infrastructure works such as drainage, roads, sewerage, water, and electricity networks. FONHAPO will relend funds to borrowers, such as public agencies, cooperative groups and private developers, to help them carry out housing projects. To qualify, beneficiaries must earn less than two-and-a-half times the minimum wage, or about $250 a month. The project will help strengthen FONHAPO and its borrowers. Studies will be undertaken on building codes and administrative procedures, informal settlements, and savings mobilization among low-income families. Further, the project will expand the credit available to the largest and poorest segment of the housing market and assist FONHAPO in recovering the costs of its investments, allowing it to gradually increase its own contribution to new investment financing. The project will generate construction jobs and improve sanitary and environmental conditions in low-income communities. -2- The balance of the cost of the $700.million project will be financed by the government, FONHAPO, sub-borrowers and beneficiaries. The project is expected to be completed by December 1994 and the Bank loan to be disbursed over six years. Agricultural Marketing The agricultural marketing project will help make the food-marketing system more efficient through modern technology, improved marketing practices and better dissemination of trade information. The $177.6 million project includes a line of credit to help agroprocessors, wholesalers and retailers modernize their marketing operations through investments in specialized packing, transport, storage and warehouse equipment, creation of wholesale and retail markets, and modernization of retail stores. The line of credit, totaling $176.1 million, will be provided by FIDEC, a trust fund of the Bank of Mexico, to private-sector enterprises through commercial banks. The project will also help consolidate FIDEC and the national market information system and will provide technical assistance to retailers and producers. Market-related studies including an auction system for selected wholesale markets will be undertaken. The balance of project financing will be provided by FIDEC ($24.8 million), sub-borrowers ($35.2 million), and financial intermediaries ($17.6 million). The World Bank loan will be disbursed over four years. The main benefits of this project will include reduced marketing costs and improved quality and distribution of food products. Less-congested urban markets will increase the incomes of producers, merchants and consumers. The project will also help expand exports and create at least 20,000 new jobs. The project will consolidate progress achieved under an earlier agricultural marketing project, assisted by the World Bank with a $115 million in April 1983. The World Bank loans are for 17 years, including five years of grace, with a variable interest rate, currently 7.73 percent, linked to the cost of the Bank's borrowings. They also carry an annual commitment charge of 0.25 percent on the undisbursed balances. NOTE: Money figures are expressed in U.S. dollar equivalents.