Mexico - Power Sector Project

FIL E C O P Y RESTRICTED E COPY tur X RReport No. P-460 This report was prepared for use within the Bank and its affiliated organizations. They do 'not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO COMISION FEDERAL DE ELECTRICIDAD (COMISION) AND NACIONAL FINANCIERA, S. A. FOR THE POWER SECTOR PROJECT November 26, 1965-  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECCWffDENDATION OF ITHE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO COMISION FEDERAL DE ELECTRICIDAD (COMISION) AND NACIONAL FINA!TCIERA, S.A. FOR THE POWER SECTOR PROJECT 1. I submit the following report and recommendation on a proposed Loan in an amount in various currencies equivalent to US$110 million to Comision Federal de Electricidad (Comision) and Nacional Financiera, S.A. PART I - HISTORICAL 2. The Bank's first loan to Mexico was made in 1949 jointly to Comision and Nacional Financiera to help finance the expansion of Comision's power facilities. The Bank has now made a total of seven loans for power expansion in Mexico totalling about $255 million, net of cancel- lations - constituting more than half of the Bank's total lending to Mexico. Five of the seven power loans have been made to the Comision; the last one was in 1962 for $130 million, the largest development loan in the Bank's history. Disbursements under this loan were completed in February 1965. 3. Initial discussions with the Bank regarding a further power loan to Mexico took place early last snring and an appraisal mission visited Mexico in April and May 1965. Negotiations were held from October 6 to October 27. Negotiators were Dr. Alfredo Navarrete, Director of the Na- cional Financiera, and the following officials of the Comision: Lic. Guil- lermo Martinez Dominguez, Director General; Lic. Carlos Seyrde, Controller; Lic. I4anuel Calderon-de-la-Barca, Head of Office of Finance; Ing. Pablo Tapie, Head of Freouency Unification; Ing. Jorge Young, Head of Planning; Lic. Rafael de Pina, Chief, Legal Department; and Mr. David B. Goldstein, Financial adviser. 4. The proposed loan would ir;crease the Bank's lending to Mexico to $606.3 million (net of cancellations). Mexico has received no IDA credits. The following is a summary of Bank loans to Mexico (as of October 31, 1965):  -2- Year Borrower Purpose Amount Undisbursed ($ million) 1949-1962 Loans fully disbursed 316.3 1960 Nacional Financiera Roads 25.0 2.8 1961 Nacional Financiera Irrigation 15.0 2.7 1962 Caminos y Puentes Federales de Ingresos and Nacional Financiera Toll Transport 30.5 2.9 1963 Nacional Financiera Irrigation 12.5 10.2 1963 Nacional Financiera Roads 4o.o 32.1 1965 Caminos y Puentes Federales de Ingresos and Nacional Financiera Toll Transport 32.0 31.9 1965 Nacional Financiera Agricultural 1/ Credit 25.0- 25.0 Total (less cancellations) 496.3 Of which has been repaid 75.1 Total now outstanding 421.2 Amount sold 39.4 Of which has been repaid 24.3 15.1 Total now held by Bank 406.1 Total undisbursed 107.7 1/ Not yet effective. 5. Construction and procurement have been generally proceeding according to schedule with the exception of the 1960, 1962 and 1963 highway loans, on which delays in disbursements were caused respectively by very heavy rains, by difficulties in obtaining the right-of-way and by limited budgetary allocations; remedial actions have since been initiated. 6. In addition to the project now under consideration, there is an irrigation project in an advanced stage of appraisal. The Government has also expressed an interest in obtaining Bank loans for further irrigation and road development as well as for water supply and sewerage.  PART II - DESCRIPTION OF THE PROPOSED LOAN 7. The main characteristics of the proposed loan would be as follows: Borrower Comision Federal de Electricidad, a public agency charged with the devel- opment of electric power in Mexico; and Nacional Financiera, S.A., a fi- nancial agency of the Mexican Govern- ment which, under the existing Mexican legislation, has to be the borrower or co-borrower of Bank loans. Guarantor: The United Mexican States Amount: The equivalent in various currencies of $110 million. Purpose: To help finance the 1965-1966 power expansion program. Amortization: 20 years: with no repayments during the first 4 years; semi-annual install- ments beginning November 1, 1969, to retire the loan on November 1, 1985. Interest Rate: 5 1/2% per annum. Commitment Charge: 3/8 of 1%. PART III - THE PROJECT 8. A detailed appraisal of the project (TO-497a) is attached. 9. The project is the expansion program of the Mexican Power Sector for the two-year period 1965 and 1966. It includes not only the program of the Comision, but also that of Industrial Electrica Mexicana S.A. de C.V. (IEMSA), an affiliate of the Comision, and that of Compania de Luz y Fuerza del Centro (Centro), the principal operating subsidiary of Mex- light. The Comision is the Mexican agency with overall responsibility for power development in Mexico and its affiliate IEMSA is one of the country's two major power distributing agencies. The head of the Comi- sion also represents the Board of Directors of Centro in its policy direc- tion. The loan would be made to the Comision, with portions to be used by IEMSA and Centro for parts of the project. The Comision has been effectively carrying out the power expansion program, for which Loan 316 was made, and is now improving the coordination of the entire Power Sector. During the recent negotiations an understanding was reached regarding steps to be taken by the Comision to increase the efficiency and productivity of the Power Sector, with particular attention to the planning and operations of Centro.  - 4 - 10. The project consists of the installation of new generating, trans- mission and distribution facilities, as well as a program of rural electri- fication and the first phase of the conversion of the only 50-cycle system to a frequency of 60 cycles. It includes the completion of construction of generating plants under way, the building of important transmission lines and associated substations and the expansion of distribution networks in the principal cities of Mexico. The project is focused mainly on expanding transmission and distribution facilities to meet the rapidly rising power demand in Mexico and make possible more effective use of generating facil- ities. During the negotiations an understanding was reached regarding se- lective increases in rates through the Power Consumption Tax, the proceeds of which are retained by the Comision. These additional revenues are ex- pected to result in a rate of return of about 8% on net fixed assets in operation. 11. The total cost of the project is about $300 million, of which about half is being financed by Mexico from its own internal sources. A special feature of the financing arrangements is that the proposed ex- ternal financing of $145 million would be provided jointly by a Bank loan and by credits from other sources. Preliminary discussions with various governments and private lending institutions indicate that at least $35 million of the external financing should be obtainable from sources other than the Bank. The recommended Bank loan of $110 million has accordingly been determined in the expectation that Mexico will obtain the remainder of the external financing frcm countries which will be the major suppliers of equipment for the program. 12. The Government of Mexico has agreed that financing from other sources under the "Joint financing" arrangement will be used only for goods in the project and, in the case of equipment, will be used only to finance procurement under contracts awarded under the same interna- tional competitive bidding arrangements as the Bank loan. Of the total proposed Bank loan, about $89 million would be for the procurement of equipment under international competitive bidding, both abroad and in Mexico within the limits of a 15% maximum preferential margin for Mexican firms, as was authorized in the case of the previous power loan to Mexico. About $14.5 million would be for the estimated foreign exchange component of civil works and the balance for interest during construction, consult- ing services, training, testing and special equipment. PART IV - LEGAL INSTRWMENTS AND AUTHORITY 13. The draft Loan and Guarantee Agreements, as well as the Report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement of the Bank, are being distributed to the Executive Directors separately.  - 5 - 14. The provisions of the Loan Agreement conform to the general pattern of loan agreements for similar projects. Special features are: (a) Withdrawals in excess of $40 million (the estimated maximum reimbursement for 1965 expenditures) are not authorized until the borrowers have furnished to the Bank satisfactory evidence that actions have been taken to assure an 8% rate of return in 1966 (Section 2.04); the rate covenant, as well as the usual debt limitation, will apply to the Power Sector as a whole. (b) The borrowers agree to make their best efforts to ob- tain and utilize for the project from financial insti- tutions outside Mexico loans totalling not less than $35 million on terms satisfactory to the Bank, the borrowers, and the guarantor (Section 5.15). The am- ortization schedule on the Bank loan will be revised insofar as practicable, without extending the total term of the loan, so that payments of principal on the Bank loans plus payments of principal on other loans under the "Joint financing" arrangement would equal the payments on principal which would have been necessary if the full amount of this external finan- cing had been provided by the Bank (Section 2.10); and (c) A condition of effectiveness of the Loan Agreement is that subsidiary agreements have been reached by the borrowers with Centro and IEMSA on parts of the project to be carried out by them (Section 7.01). 15. The Guarantee Agreement follows the usual pattern. PART V - THE ECONOMY 16. In April 1965 a Memorandum on Recent Economic Developments in Mexico was submitted to the Executive Directors (R65-59). More recent information - summarized in an attachment - indicates a continuation dur- ing 1965 of the private investment boom that began in 1964. With a view to preserving domestic price stability and to preventing excessive pres- sures on the balance of payments, public investment activity was greatly curtailed in 1965 from the unusually high level of 1964. Owing to sub- stantial medium-term foreign borrowing in 1964 the burden of the foreign debt service will be relatively heavy for the next few years, but will decline steeply thereafter. Mexico's highly diversified export structure, and the dynamism shown by its newer export industries make its balance of payments prospects quite favorable so that, with continuation of Mexico's present external debt management policy of reasonable terms to maturity and adequate grace periods, her ability to service substantial additional amounts of foreign debts remains high.  - 6 - PART VI - COMPBIANCE WITH THE; ARTICLES OF ACREEMNT 17. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VII - RECOMMENDATION 18. I recommend that the Executive Directors adopt the following resolution: RESOLUTION NO. Approval of Loan to Comision Federal de Electricidad and Nacional Financiera, S.A. in the amount of the equivalent of U.S. $110,000,000 to be gLaranteed by United Nexican States. RESOLVED: THAT the Bank shall grant a loan to Comision Federal de Electricidad and Nacional Financiera, S.A., to be guaranteed by United Mexican States, in an amount in various currencies equivalent to one hundred and ten million United States dollars (U.S.$110,000,000), to mature on and prior to November 1, 1985 to bear interest at the rate of five and one-half per cent (5 1/2%) per annum, and to be upon such other terms and conditions as shall be substantially in accordance with the terms and conditions set forth in the form of Loan Agreement (Power Sector Program - 1965/66) between the Bank and Comision Federal de Electricidad and Nacional Financiera, S.A. and the form of Guarantee Agreement (Power Sector Program - 1965/66) between United Mexican States and the Bank, which have been presented to this meeting. George D. Woods President By S. R. Cope Attachments Washington, D. C. November 26, 1965  MEMORANDUM ON RECENT ECONOMIC DEVELOPMENTS AND PROSPECTS IN MEXICO Introduction 1. In July 1964 the report of a mission which had made a comprehensive appraisal of Mexico's development program and prospects (WH-137a) was sub- mitted to the Board. The report gave particular attention to the activities of the public sector and to a public investment program for 1964-1965, and made some tentative projections until 1970. Early in 1965, shortly after the present Government had taken office, another Bank mission visited Mexico to review with the authorities the more recent developments and the intentions of the new Government, and to modify, where appropriate in the light of this review, the conclusions of the previous mission (WH-147). The new Government indicated at that time that it had begun work on a new public sector program covering the years of its constitutional period of office, i.e., ending in 1970. Current indications are that the broad out- lines of this program may be completed early in 1966, and it is intended to review it carefully with the help of the Mexican authorities once the structure of public expenditures and their financing has been decided upon by the Government. 2. The present memorandum is therefore of an interim nature, and is in- tended to update some of the information and judgements contained in WH-137a and in WJH-147. Its chief conclusion is that the judgements expressed in WH-137a regarding the basic flexibility and strength of the Mexican economy, the feasibility of a long-term growth rate of 6 percent, and Mexico's credit- worthiness for substantial external borrowing, remain valid. Regarding the events of 1964 - a steep expansion in public investments, financed largely by short- and medium-term foreign borrowing and by recourse to the Central Bank - the conclusion of WH-147, that these events were of an extraordinary and non-recurring nature, also remains valid. During 1965 a major contraction of public investment activities occurred. Among the most important questions that will have to be answered in the course of the forthcoming program review is whether the domestic savings mobilized for the public sector will be sufficient to permit a recovery of public investment to levels that adequately meet Mexico's development needs. Output and Employment 3. Between 1950 and 1964 the Mexican economy underwent a process of rapid and continuing structural transformation. GNP grew at an average annual rate of 6.1 percent; after some deceleration in the early sixties, the growth rate exceeded 10 percent in 1964 and is expected to be between 6.0 and 6.5 percent in 1965. A continuation of the expansion over the next five or ten years at an annual rate of around 6 percent is well within the capacity of the economy; if foreign markets develop favorably, an even higher rate might be attained provided that average productivity continues to rise at its 1950-64 pace, and the ratio of the labor force to population does not decline from its present level of about 32 percent. Both population and labor force have been  -2- growing at a steadYLy increasing rate; their future growth rate is estimated at about 3.6 percent and thus poses both a challenge and an opportunity in- asmuch as during the next ten years some 6 million new persons will be entering the labor force, as against some 4 million during the preceding decade. 4. At the beginning of the sixties Mexico's urban population for the first time exceeded 50 percent of the total. While 20 years earlier the rural in- habitants had been about two-thirds of the population, by 1975 this proportion is likely to have shrunk to little more than one-third. These changes are the combined result of internal migrations and of the lower mortality rate in urban areas; the rural population is expected to expand at about 1.7 percent per annum, as against 4.8 percent for the urban areas. 5. This change in population distribution has been both a cause and a con- sequence of changing composition of the economyTs output. Agriculture, live- stock, forestry and fisheries in 1950 accounted for over one-fifth of gross domestic product; in 1964 the corresponding figure was littLe more than 15 percent, while the shares of manufacturing, construction, electricity production and sundry service activities rose correspondingly. Manufacturing production has been particularly dynamic. Aided by a large and growing domestic market, by a sizable inflow of direct foreign investment and by the active promotional policy of the official credit institutions, the long-term growth rate of this sector has been of the order of 7.5 percent per year, reaching almost 14 per- cent in 1964 and over 9 percent in the first half of 1965. Another leading sector has been the generation of electricity which during the past 14 years grew at an annual average rate of 9.5 percent and which is expected to in- crease at about the same rate during the next five years, although the fore- seeable additions to industrial demand make an even higher growth rate likely untifl 1967. Recent Monetary and Fiscal Trends 6. One of the more remarkable features of Mexicots development in recent years has been that it has occurred in a framevork of reasonable price stability. Although between 1960 and 1964 (end of year figures) the money supply expanded by 65 percent - or 13.3 percent annually - wholesale prices (yearly averages) rose by only 7.5 percent, i.e., about 1.8 percent per year. Several causes ac- count for this, particularly the monetization of the subsistence sector, the high marginal savings coefficient of the private sector, and a combination of Government policies among which moral suasion, administered imports and some direct price controls stand out. Only in 1964, when the very high growth rate put unusual pressure on available resources, did prices rise by more than 5 per- cent; during the first half of 1965 only negligible further increases occurred, while the money supply fell almost 5 percent. The Mexican authorities are keenly aware of the close relation between domestic prices and the balance of payments and have expressed their intention to continue to follow a monetary policy which takes thi3 relation into account. 7. Although the private sector produces about 90 percent of Mexico's out- put of goods and services, the public sector plays an important role in the countryls development, accounting during 1962-1964 on the average for about 44 percent of gross domestic investment. During the early sixties, when private  - 3 - investment - both domestic and foreign - was lagging, capital expenditures in the public sector were used as a partial offset. The private investment boom of 1964 happened to coincide with further increases in public investments which rose from between Mex$ 12 and 13 billion in 1963 to about 16 billion in 1964. However, during the first half of 1965, while private investments continued high, the public sector retrenched deliberately. For the full year its real investments may not be greater than in 1960-1962, i.e., be- tween Mex$ 9.5 and 10.5 billion, although cash outlays for capital purposes will be substantially higher because of the payments of bills to suppliers and contractors for the previous year's works. The overall financial picture for 1965 is by no means clear yet; it appears likely, however, that public sector savings on current account will decline. This probable reduction originates mainly in the Federal Government, even though, partly in con- sequence of some doubling up of taxes in the transition to a new system of income taxation, its revenues will rise by some 15 percent. One important cause for the increase in current expenditures was the rise in doctors, and nurses' pay in 1965 which, together with the large-scale expansion of health facilities during 1964, made for an increase of about Mex$ 600 million in the transfers to the social security agency. Moreover, the large debts incurred in 1964 produced an increase of close to Mex$ 1.0 billion in Federal Govern- ment interest payments in 1965. Savings in the rest of the public sector cannot yet be estimated; on the one hand better controls over expenditures and sounder administrative practices appear to have been instituted in some of the decentralized agencies and public enterprises, but on the other hand some of these too are now bearing a substantially higher burden of interest payments owing to the increase in their indebtedness during 1964. In any event, the drastic curtailment of public investment expenditures in 1965 - especially in the social security agency and in the power sector - made possible a substantial decline in the public sector's reliance on Central Bank financing during the first half of 1965. For the full year it appears likely that such financing will be less than Mex$ 2.5 billion, against ap- proximately 4 billion in 1964. Net external financing also is likely to decline appreciably in 1965 (for details, see below, The External Sector). The External Sector 8. Mexico's foreign exchange earnings from goods and services grew at an average annual rate of 5.4 percent between 1950/52 and 1962/64. However, there was a perceptible difference between their growth during the first half of the period (5.9 percent) and the more recent years (4.9 percent), attributable primarily to a slowing down of the expansion of earnings from the services account and secondarily to smaller growth rates in commodity exports. The future average annual rate of increase of foreign exchange earnings on current account is likely to be of the order of 5 percent, though considerable fluctuations, like that of 1964 when receipts rose by 7.4 percent, are likely to recur. The prospects for future service receipts vary greatly: remittances of braceros (Mexican migrant agricultural workers in the United States), which grew by 5.3 percent per year in the first half of the period, have more recently been declining by about 2.5 percent annually under the impact of increasing agricultural mechanization in the United States. With the announced policy of the U.S. Government to terminate  the bracero program they may be assumed to become negligible before 1970. Tourism (including border trade), on the other hand, has been growing at almost 7 percent annually since the 1956158 period, now accounts for over 13 percent of all receipts from exports of goods and services and shows in- dications of a similar or even higher growth rate during the next few years. The recently concluded agreement between Mexico and the United States to expand substantially the number of commercial aviation routes and flights between the two countries is likely to contribute to this result. 9. Commodity exports as a whole have been growing at about 4.3 percent annually in recent years. For the foreseeable future an average annual rate slightly in excess of 4 percent appears probable and under favorable as- sumptions a rate of around 4.5 percent might well be achieved. In addition, a steady transformation of the structure of Mexico's exports has occurred. In the early fifties its traditional exports (cotton, coffee, tomatoes, non- ferrous metals, petroleum and its products and henequen) accounted for 74 percent of all commodity exports; in 1962/64 this proportion had sunk to less than 46 percent. Special factors, such as tne additional sugar exports to the United States, made possible by the absence of Cuba from this market, ac- counted for only a small proportion of this change. Of greater i.mportance was the rapid growth of several more solidly based export lines like sulphur and shrimp, the recovery of the livestock industry - seriously affected in the late forties by the compulsory slaughter of over one million animals to eradicate foot and mouth disease - and, most important of all, the steady growth of a variety of manufactured exports which by 1964 accounted for over 11 percent of all commodity exports. Mexico has thus become far less de- pendent on the exports of a few primary commodities than any other Latin American country. 10. The prospects of amedium-to long-term annual groTwth rate of about 5 percent in foreign exchange receipts on current account augur favorably for Mexico's future capacity to service official foreign debts, even when ac- count is taken of the likelihood that the remittance of interest and dividends on private foreign investment, which already in 1962/64 represented over 11 percent of foreign exchange earnings, may well grow even faster. The service ratio on external public debt, which in 1964 was 20 percent and which in 1965 is about 25 percent, would amount to little more than 6 percent in 1970 if no new debts were incurred in the meantime. This very rapid decline is at- tributable to the present rather unfavorable debt structure, much of which originated in 1964 when substantial amounts of short- to medium-term foreign borrowing were used to finance very substantial increases in public invest- ment (see WH-147). However, Mexico's development in the next few years will probably require inflows of external capital not much smaller than in the early sixties, nor are such reductions required by the prospects of foreign exchange earnings. What is important is that new debts be incurred on as favorable repayment terms as possible, that substantial grace periods be obtained and that the average maturity structure of the total official ex- ternal debt be thereby stretched, thus lightening the debt burden during the next few years. The results of the first half of 1965 indicate that this is indeed being attempted. Not only did the total external debt out- standing (including undisbursed) decline from US$1,973 million to about US$1,908 million, but this result was achieved primarily by repayments of  relatively short-term official debts to commercial banks substantially in excess of new borrowings of this type. The term to maturity and grace periods of foreign borrowing will continue for several years to be of great importance for Mexicots financial standing and the Mexican authorities have stressed their intention of restricting their borrowing on relatively short-term to the greatest extent feasible. 11. A gross foreign borrowing (disbursements) program adequate to Mexico's development needs might reach a level of about US$500 million by 1970, against about US$h00 million in 1963, US$700 million in 1964 and an estimated US$400 - 450 million in 1965. If most of the borrowing is done on reasonable terms and with adequate grace periods, the official debt service ratio by 1970 can be expected to be below 20 percent and under more favorable assumptions may well be below 17 percent. For the even longer term, Mexico's capacity to service foreign debt may be expected to increase further, as the economy gains in flexibility and capacity to generate savings and as the diversification of the foreign sector makes additional progress. Naturally, for these develop- ments to materialize, prudent development policies will be required together with sound financial management; this will imply not only restraint on ex- ternal borrowing on unfavorable terms but also, equally important, domestic policies which will facilitate the development of the export industries (including services) with the greatest possibilities for expansion. The Mexican authorities have, in the past, shown full appreciation of these factors. Western Hemisphere Department November 26, 1965  MEXICO BASIC DATA Area: 760,000 Population (mid-1965): 41.0 million Rate of growth 3.6% Population density per square mile 54 Gross National Product 1964 224.6 billion pesos Rate of growth in real terms 1950-1964 6.1% 1960-1963 3.6% 1963-1964 10.0% Per capita 1964, US$ 453 dollars Origins of Gross Domestic Product (est.) 1950 1964 Agriculture, livestock, forestry and fishing 20.0%, 15.1% Manufacturing and electricity 19.8% 23.8% Mining and petroleum 4.5% 3.9% Others 55.7% 57.2% Percent of GNP at Market Prices 1962 1963 1964 Gross fixed investment (eat.) 14.1 14.6 16.5 Gross national savings (est.) 13.0 13.3 14.2 Deficit of the balance of payments on current account 1.1 1.3 2.3 Interest and profits of private foreign capital 1.1 1.2 1.3 Federal Government current revenues 7.7 8.0 7.7 States and municipalities (incl.Fed.District) current revenues 2.6 2.6 2.4 Resource Gap as Percent of Investment 8.0 8.9 13.7 31 December 30 June Annual Rate of Money and Credit (Mex$ billion) 1964 1965 Change 1960-1964 Total money supply 28.6 26.4 13.3% Time and savings deposits 8.7 n.a. 15.3% Commercial bank credit to private sector 11.9 13.1 14.2% lWholesale prices (1958=100) 116 117 1.8% Cost of living (1958=100) 115 119 1.3%  - 2 - Federal Government Operations (Mex$ billion) 1962 1963 1964 Current revenues 13.6 15.3 17.4 Current expenditures 11.6 12.8 13.9 Surplus on current account 2.0 2.5 3J5 Revenues on capital account - - 01 Direct investments 2.8 2.8 3.7 Indirect investment 0.8 1.4 1.3 Overall deficit -1.6 -1.7 -1.5 Consolidated Public Sector Operations (est.)(Mex$ billion) 1962 1963 1964 Public Sector Fixed Investments 10.4 12.4 16.0 Public sector savings 8.2 9.0 9.5 Domestic borrowing from banks (net) 2.9 1.8 4.2 Gross foreign borrowing 4.9 5.1 7.5 Amortization of external debt -3.2 -2.8 -2.8 Financial investment and statistical discrepancies -2.4 -0.7 -2.4 External Public Debt (US$ million) 1962 1963 1964 30 June 1965 Total debt end of period (incl.undisbursed) 1973.0 1908.0 Total annual debt service 306.9 285.1 365.7 Debt service ratio 19.3% 16.7% 19.9% Balance of Payments (US$ million) 1960 1961 1962 1963 1964 Exports of Goods and Services 1371.8 1463.4 1586.8 1709.3 1836.6 Commodity exports 738.7 803.5 899.5 935.9 1023.5 Tourism and border trade 521.3 556.7 585.3 656.5 703.9 Others 111.8 103.2 102.0 116.9 109.2 Imports of Goods and Services 1682.9 1683.9 1743.2 1915.3 2248.8 Commodity imports 1186.4 1138.6 1143.0 1239.7 1493.0 Tourism and border trade 261.5 287.5 310.1 349.5 376.8 Interest and profits of private foreign capital 141.6 148.1 159.3 185.6 242.2 Others 93.4 109.7 130.8 140.5 136.8 Balance on Current Account -311.1 -220.5 -156.4 -206,0 -412.2 Errors and omissions (net) 108.1 - 88.9 9.0 72 -113.3 Long-term capital 120.1 285.5 260.9 301.4 503.6 Direct private investment -38.0 119.3 126.5 117.4 151.7 Official capital (net) 163.5 173.6 133.0 190.3 360.4 Other - 5.4 - 7.4 1.4 - 6.3 - 8.5 Short-term capital 74.3 2.4 -96.6 -57.7 53.5 Changes in Central Bank reserves - 8.6 -21.5 16.9 109.7 31.6  - 3- Commodity Concentration of E 1 964 Cotton 16.6% Coffee 9.2% Sugar and molasses 8.7% Non-ferrous metals 7.6% Shrimp 5.4% Beef cattle and fresh and frozen meat 4.1% Sulphur 3.4% Tomatoes 3.3% Total, eight largest items 58.3% Foreign reserves, December 31, 1964 (US$ million) 583 Equivalent to 5 months of estimated 1965 commodity imports Western Hemisphere Department November 26, 1965  Table 1: MEXICO - EXTERNAL MEDIUM- AND LONG-TERM 1/ PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF JUNE 30, 1965 WITH MAJOR REPORTED ADDITIONS JULY 1 - OCTOBER 1, 1965 Debt Repayable in Foreign Currency (In thousands of U.S. dollar equivalents) Debt outstanding Major reported Item June 30, 1965 additions Net of Including July 1 - undisbursed undisbursed October 1, 1965 TOTAL EXTERNAL PUBLIC DEBT 1,657,451 1,907,574 25,000 Publicly-issued bonds 113,035 113,035 - Privately-placed debt 898,209 900,325 - Suppliers' credits 302,267 304,323 - Other 595,942 596,002 - IBRD loans 307,380 399,939 25,000 IDB loans 19,596 72,392 __ U.S. Government loans 17h,h07 246,451 - Export-Import Bank 133,868 156,912 /2 - AID, ICA, Lend-lease 4o,539 59,539 Loans from other governments 97,990 128,598 Canada 2,750 2,750 France 36,146 66,754 /3 - Germany 19,688 19,688 - Italy 39,406 39,406 /3 - Nationalized properties h6,834 46,834 - /1 Debt with an original or extended maturity of one year or more. /2 Does not include $90,000,000 authorized by Export-Import Bank. 73 Does not include undisbursed portion of the following lines of credit: $150,000,000 French credit ($105,305,263) $75,000,000 from Instituto Mobiliare Italiano ($29,521,026) $10,000,000 from Banque Nationale pour le Commerce et l'Industrie ($9,771,485). Statistics Division IBRD-Economics Department November 2, 1965  Table 2: MEXICO - ESTIMATED CONTRACTUAL SERVICE PAYMENTS ON EXTERNAL MEDIUM- AND LONG-TERM PUBLIC DEBT OUTSTANDING INCLUDING UNDISBUPSED AS OF JUNE 30, 1965 WTPH MAJOR REPORTED ADDITIONS JULY 1 - OCTOBER 1, 1965 /1 Debt Repayable in Foreign Currency (In thousands of U.S. dollar equivalents) GRAND TOTAL DEBT OUTST. (BEGIN.OF PERIOD) PAYMENTS DURING PERIOD INCLUDING AMORTI- YEAR UNDISBURSED ZATION INTEREST TOTAL 1965 1,889,605 /2 371,522 81,372 h52,894 1966 1,733,046 327,020 81,805 408,825 1967 1,h06,664 2h6,657 68,984 315,641 1968 1,160,807 207,049 59,196 266,245 1969 95h,239 164,675 h8,8h2 213,517 1970 790,071 111,250 41,705 152,956 1971 679,457 98,991 35,796 13h,787 1972 550,581 52,021 30,468 112,490 1973 499,275 71,200 25,901 97,101 1974 428,109 62,791 22,025 5h,516 1975 365,318 52,821 18,437 71,258 1976 312,497 h3,002 15,702 58,703 1977 387,630 39,136 13,326 52,462 1978 230,360 36,763 11,216 47,979 1979 193,598 3h,804 9,132 h3,936 /1 Includes service on all debt listed in Table 1 prepared November 2, 1965, except for the following items for which repayment terms are not available: Privately-placed debt $ 4,129,000 Inter-American Development Bank $ 3,000,000 U.S. Government Lend-lease $ 6,750,000 Loans from other governments $ 4,090,000 $17,969,000 /2 Amount outstanding for 1965 is as of June 30; the service payments are for the entire year 1965. Statistics Division IBRD-Economics Department November 2, 1965