Announcement of a Two Hundred Million Dollars World Bank Loan for Agricultural Credit in Mexico on May 18, 1978

FOR IMMEDIATE .RELEASE ' •World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. • Telephone: (202) 393-6360 BANK NEWS RELEASE NO. 78/91 MAY 18, 1978 A $200 MILLION WORLD BANK LOAN FOR AGRICULTURAL CREDIT IN MEXICO A $200 million World Bank loan will help finance an agricultural credit project in Mexico aimed at increasing production, improving incomes and creating employment in rual areas. About 67,000 farm families will benefit from the project; their real incomes are expected to doubie within six years. The sixth agricultural credit project to be assisted by the World Bank in Mexico has an estimated cost of $627.2 million. It will provide medium- and long-term credit for investments in crop, livestock, and agro-industrial develop- ment. A program of applied research, training and monitoring will provide technical support. One-third of the lending program will initially be earmarked for low-income producers. Average annual family incomes of these producers are expected to • increase in six years from $500 to $1,300 in livestock enterprises, and from $1,000 to $2,000 in crop enterprises. The project will also benefit farmers whose average incomes exceed $2,000 a year. At full development, the project will create in the livestock sector an additional 8,000 full-time jobs and an estimated 4,000 man-years of temporary employment annually. The agrlcultural development will generate demand for an estimated 5,000 man-years of hired farm labor and increase employment of family labor. Some 1,000 full-time jobs will be generated by the new investments in agro-industrial enterprises. The project will also help increase production of a wide range of crops and livestock products--particularly basic foodgrains, oil seeds, milk, meat, fruits and nuts. The increase in the value of production each year is estimated at $115 ;nillion for crop•.; and $74 million for livestock product:,.s. The $200 mill ion loan to Nacional Financiera will have a term of 17 years, including 4 years of graGe, with interest at 7.5% per annum. The proceeds of the loan will be re-lent through the Agriculture Trust Funds in the Bank of Mexico (Fira). The World Bank has made five previous loans totaling $400 million for agri- cultural credit projects in Mexico. In addition, three Bank loans for agri- cultural and rural development include $63.4 million for medium- and long-term development credit earmarked for low-income farmers . • --~-"---------------- ---- NOTE: Money figures are expressed in U.S. dollar equivalents. FORM NO. 1121 (5-76) T ECHN I CAL D A T A PROJECT: COUNTRY: TOTAL COST: Sixth Agricultural Credit Mexico $627.2 million • BANK FINANCING: $200 million for a term of 17 years, including 4 years of grace, with interest at 7.5% per annum. OTHER FINANCING: Agriculture Trust Funds (Fl RA), $244 mi 11 ion Beneficiaries, $96.9 mil lion Participating banks, $86~3 million IMPLEMENTING ORGANIZATION: Agriculture Trust Funds (FIRA) .Bank of Mex i c0 5 de Mayo No. 2, Mexico D.F. Cable: Banxico Met{i co PROJECT DESCRIPTION: It will finance, over a three-year period, subloans for medium- and long-term investments channeled through private and public flnancial institutions to: (a) increase the supply of crop and livestock pro- ducts to meet the needs of a rapidly expanding national market; (b) enable the agricultural sector to expand its contribution to export earnings and import substitution; (c) impro~ the opportunities for employment in rural areas both on farms and in agro-industrial en~ prises; and (d) raise the incomes of farm families. PROCUREMENT: Bulk purchasing under international competitive bidding will not be feasible since the agricultural lending activities cover, over a three-year period, a large variety of farm/ranch investment activities widely distributed geographically, and involve a large number of sub-borrowers. As in earlier projects, FIRA will require sub-borrowers to obtain quotations from several sources of supply, whenever practicable, for goods or works financed by it, and for imports of breeding cows. Machinery and equipment for agro-industrial units will be purchased by private producers or groups of producers. Whenever the cost of a single item of equipment, or an assembly delivered by a single manufacturer, exceeds $250)000, quotations will be solicited from not less than three supp1 iers. Moreover, FIRA will make available to pro- spective sub-borrowers a list of suppliers of agro-industrial machinery, including in it those from Bank member countries and Switzerland as well as their agents or representatives or partners in Mexico. After the loan is signed, FIRA will advertise locally and notify all the embassies in Mexico of the details of the agro-industries component of the project. CONSULTANTS: Sixty man-months of consulting services to assist with local training and further improvement to dairy production grazing systems and 12 man-months of consulting services for the FIRA monitoring program are includ· ed in the project. ECONOMIC RATE OF RETURN: ESTIMATED COMPLETION DATE: 28% 1982 - 0 - •