Statement by Mr. Zhang Shengman at the executive directors' meeting of June 22, 1995

International Bank for Reconstruction and Development International Development Association International Finance Corporation FOR OFFICIAL LISE ONLY EDS95-245 June 22, 1995 Mexico -- Country Assistance Strategy and the Related Projects Statemnent By Zhang Shengman Board Meeting -- June 22,1995 Expecting a likely loblg sessionitoday, 1 would like to circulate my comments in writing. I have four points: 1. 'Tlheloanisbefore us are iLnpressivebotlhin teruis of speed and scope as well as size. Behlindthem, no doubt, lay an extra-ordiniary effort by the Bank in response to an extra- ordinary situation of a miemiiber anidcomnpfelhensive ways, lhe tiimiely cotuitiy. It nmany response constitutesa test to the credibility and ability of the Bank in the 1990's and beyond. I think our Staff and our Institution have scored very well on the test. It is also a testimony to the fact that provided there is tlhe niecessarywill on the part of the menibersliip, the Institution is fully capable of measuring up to challeniges. 2. I agree that our wish notwithstandinlg, the process of recovering in Mexico may, and perhaps will, not be all smooth. Therefore, it is important to recognize that apart from the short-term liquidity cnimches, those longer term structural problems will inevitably require more time. In addition, there will be uncertainties associated with the external environment. Looking forward, Mexico crisis is another sbarp reninder that in pushiing ahead with economic reform and lil eralization, a cowitly must hiave (i) a stronig government pursuing prideiit macro policies anid This document has a restricted distribution and may be used by recipients only in the performance of their officialduties. Its contents may not otherwise be disclosed without World Bank authorization.  (ii) sufficient financial cushion to cope with unexpected adverse developments in the world economy. This is a message, in my view, relevant for the Bank's work in general. 3. Despite its enormous achievements, Mexico today continues to have some 34% of the population living in poverty. This is clearly very high, particularly in relation to the countrys per capita income level. I am pleased to note that the Country and the Bank have selected this area to be one of the Bank's priorities in Mexico. In this connection, I share the view that part of the answer may well lie beyond the achievement of economic growth, and the Bank should be prepared to examine, from a pragmatic perspective, all the dimensions that may lie at the root of the problem. 4. I am aware that these proposed loans and the indicative lending programs will have direct implications for the Bank's exposure level in Mexico. The relevant paragraphs in the CAS document are most helpful. I, for one, find the rationale given sensible and appreciate the flexibilityby the Bank in this respect. It calls for no re-stressing that the Bank should continue to exercise such flexibilityin other countries as well. 2