Announcement of World Bank Supports Mexico’s Industrial Restructuring on April 27, 1989

FOR IMMEDIATE RELEASE 'World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.* Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 89/ 53 Contact: Ciro Gamarra (202) 473-8721 WORLD BANK SUPPORTS MEXICO'S INDUSTRIAL RESTRUCTURING WASHINGTON, April 27, 1989 -- Mexico will restructure several important industries through a project supported by a $250 million World Bank loan. The project includes industrial-sector policy reforms and financial and technical assistance to individual companies. The $500 million project, part of a broad industrial restructuring strategy, focuses on the textile, auto parts and flower industries. The project will complement ongoing trade-liberalization and export-development reforms by helping industries respond to a changing economic environment, increasing competition and the country's heavy debt burden. The project will help targeted industries make their operations run more efficiently and increase their competitiveness in international markets. It will also emphasize private sector participation in industry through measures to assist physical and financial restructuring and to provide technical assistance to companies that are affected by trade liberalization and have the potential to compete and export effectively. Since Mexico's economic and financial crisis began in 1982, the World Bank and the government have engaged in an active dialogue on ways to improve the structure and the competitiveness of the industrial sector. The Bank is supporting Mexico's industrial restructuring through a series of operations in key sectors, including steel and fertilizer. The current project supports government efforts to revive industrial growth and increase manufactured exports. About $150 million is slated to finance equipment and working capital investments in the textile, auto parts and flower industries. About $85 million will finance similar investments in other industrial subsectors that have been liberalized through the government's trade-policy reforms. These investment projects could include shrimp farms and other agroindustries, shoe manufacture and furniture production. About $10 million for the financing of industry-level investments, such as training facilities and promotion programs for textiles, auto parts and flowers, will also be provided. Finally, a technical assistance component will provide $5 million to finance goods and services needed for improvements of the delivery capacity of participating intermediaries and for project implementation. NOTE: Money figures are expressed in U.S. dollar equivalents. -2- The loan is to Nacional Financiera (NAFIN), which will relend the proceeds to industrial enterprises through the commercial banking system, or channel the funds to the National Bank of Foreign Commerce (BANCOMEXT) or the Industrial Equipment Fund (FONEI). The project is expected to be completed by June 1994. The balance of project costs will be covered by NAFIN, FONEI and BANCOMEXT ($150 million), and by sub-borrowers and financial intermediaries ($100 million). The World Bank's industrial-sector lending to Mexico combines policy- based, quick-disbursing loans with direct assistance to industrial companies and subsectors. Several loans have already been made. These include: two trade- policy loans of $500 million each, in July 1986 and November 1987; two export- development loans in June 1983 ($350 million) and January 1987 ($250 million); a steel-sector restructuring loan of $400 million in March 1988, and a fertilizer- sector adjustment loan of $265 million also in March 1988. The World Bank loan to NAFIN is for 17 years, including five years of grace, with a variable interest rate, currently 7.65 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.75 percent on the undisbursed balance. -0-