Announcement of Thirty-Five Million US Dollars to Mexico for Industrial Equipment Fund on May 25, 1972

INTERNA...rIOJ\~AL BANI~ FOR R'ECONs-rRUCTION AND DEVELC)PrvlENl.. 1818 H STREET, N.W .. WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 \\ ?-'~y 25 , 19 72 TECHNICAL DATA PROJECT: ___3)1ways d>UNTRY: Mexico TOTAL COST: Es ~ima.ted at $20 3 ptl. llion. // BANK FINANCING: $75.0 million, 25 years, 5-yea:\._grace period, 7!i;%- interest per annum. OTHER FINANCING: Govemment of Hexico; hanks. IMPLEMENTING ORGANIZATION: national Railways of Mexico, Ministry of Communications and Transport, Avenida Central 140, 13 Piso, Ala A, .,.! 1'k!xlco 3, D. F. PRo"lEcr DESCRIPTION: Modernization of railway equipment and improvement of operations. PROCUREMENT': All Bank financed items will be procured under international compe·titive bidding except for consulting services. Domestic manu- facturers would have a 15% preference margin on the applicable customs duties, whichever is lower. Fifty per cent of freight car requirements through 1974 would be reserved for the domestic state-owned producer, Constructura Nacional. CONSULTANTS.: Specialists will be employed to advise on manpower planning, line and yards operations, locomotive and car control, locomotive and car maintenance, telecommunications, costing, accounting principles and financial forecasts and' control of the National Railways. Consultants will furthermore assist in setting up a sectoral planning office within the Ministry of Communications and Transport. FELLCMSHIPS: Fellowships for staff of the sectoral planning office wil~ be awarded for transport economics and project evaluation techniques. ESTIMATED COMPLETION DATE: 1976. - 0 - • i)  1818 H STREET, N.W., WASHIN,GTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 'Bank Press P4!lease No. 72/32 Subject: $35.0 million to Mexico for May 25, 1972 Industrial Equipment Fund I The World Bank has approveq a loan to !ffexico equivalent to $35 .o million !• I' ,J to assist in financing the foreign component of the lending operations of the Government's Industrial Equipment Fund (FONEI). Mexican in~ustry has grown very rapidly since World War n, attaining an average annual growth rate of 8. 4% per year in real terms in the 1960s, while gross domestic product grew at an average 'rate of 7 .1%.. In 1970 the value of I manufacturing production amolD'.lted to $19. 3 billion, over three times the 1960 ~I • value in current tenns. \~~ ·-:-- -~.. . ~ .. ·~ . ---- The structure of manufact'uring indllS try has chai1ged considet'a9 1y over th-e 1 \' past 20 years. Rapid increases in output have occurred in heavy indu,~tries, • such as chemicals, steel and metal-working and slower increases in such older industries as food, beverages, tobacco, textiles and. other consumer goods. Nevertheless, the food processing industry remains by far the largest. Mexicmt industrialization has been encouraged through protection, fiscal and income policies and fairly low wages. Protection against imports through a licensing system rather than,. tariffs has played a key role in fostering industrialization. This protectidn system has undoubtedly stimulated indus- {i trial development, but it has also created structural difficulties in the industrial sector. Manufactured exports expanded very rapidly from $200 million in 1965 to close to $500 million in 1970, but Mexico's total export growth has slowed down in recent years and the balance of payments deficit on current account has widened substantially. Accordingly, the Government has been giving high priority to measures designed to attack this problem. FONEI has been established as a part of the Government's efforts to expand expol·ts nnd promote industrial efficiency. The Fund's objective is to facilitate long-term investment financing of mainly medium-sized industrial • enterprises which will generate foreign exchange earnings exports or efficient import substitution. or savings through The Fwid is expected to play an /more  .1 Bank P.R. No. 72/32 -- ~~xi.co -- FONEI - 2 - • active role in identifying s~r~sectors of industry with SU:'t_spmtia'l export opportunities. It will 'also finance project-related feasi~ility studies. FONEI's resources will total the .aquivalent of $75' million. Of this amount the foreign exchange element is estimated at $35 million, the amount of 'i\ 0 the Bank's loan. The loan is made to Naciotlal Financiera, S .A. with the guar:antee of the Governioont of the United Nexican States. The proceeds of the loan will be channeled through FONEI to financial intermediaries for the financing of projects from their industrial cl·ients which they have presented to FONE'r. It is expected that the Bank's loan will be committed over approximately three years. The loan· is ·for a period of 20 years including a th·ree-year grace period • at an interest rate of 7~% per annum. Twenty-two French, Japanese 'S\nd United States financial institutions are particiy;,ating in the Bank loan for a total amoun(t:'. pf approximately $3.9 million equivalent. T~1ey are: Manufacturers Hanover Trur;t Company, New York; First Nationg.l Bank of Washington, D.C. 9 Crocker ~\!atiortal Bank, San Franciscc;,; The Mitsubishi Trust & Banking Corp., Tokyo; 'I-h~: Mitsui Trust & Banking Co., Ltd .. , Tokyo~ The Sumitomo 'frust & Banking Co., ;/Ltd., /, Tokyo; City National Bank of Detroit~ National Bank of North Anerica, Ne,~ York; The Daiwa Bank, Ltd., /! Osaka; The Kyowa Bank, Ltd., Tokyo; U.S. Nati~jnal Bank of Oregon, Portland; Provident National Bank, Philadelphia; B.everly Bank, Chicago; The Mitsubishi Bank, Ltd., Tokyo; The:.,,S~tama Btl;lrtlc., Ltd., Tokyo; Banque Franco- -:,_~"'. Arabe d 9 Investissements Intemationaux, Par~s ;_ Republic National Bank of New York; First Wisconsin National Bank of Milwaukee; The Bank of Tokyo, Ltd., Tokyo; Girard Trust Bank, Philadelphia; Ind,ustrial National Bank of Rhode Island, Providence and The Sanwa Bank, ''Ltd~,', New York Agency. - 0 - •