Mexico - Rio Fuerte/Rio Sinaloa Irrigation Project

Document of FIL C r m%sm The World Bank ury FOR OFFICIAL USE ONLY Report No. P-2543-ME REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO NACIONAL FINANCIERA, S. A. WITH THE GUARANTEE OF UNITED MEXICAN STATES FOR A RIO FUERTE/RIO SINALOA IRRIGATION PROJECT May 14, 1979 This document has a restricted distribution nd my be used by recipients only in the performance of their official duties. Its contents mayr not othenrwise be disclosed writhout World Bank authoriztion.  Currency Unit - Peso (Mex$) Since September 1, 1976 the Mexican peso has been floating and has fluctuated around Mex$ 22.60 to the US Dollar since mid-1977. On May 4, 1979, the peso traded at 22.83 per US dollar. Fiscal Year .1 January I to December 31 Abbreviations DITA = District Integrated Technical Assistance Program IDB e Inter-American Development Bank IFAD = International Fund for Agricultural Development PEMEX = Mexican Petroleum Company PIDER = Investment Program for Rural Development SARH = Secretariat of Agriculture and Water Resources  FOR OFFICIAL USE ONLY MEXICO - RIO FUERTE/RIO SINALOA IRRIGATION PROJECT LOAN AND PROJECT SUMMARY Borrower: Nacional Financiera, S.A. Guarantor: United Mexican States Project Executing Agency: Secretariat of Agriculture and Water Resources (SARH) Amount: US$92 million equivalent Terms: Payable in 17 years, including 4 years of grace, at an interest rate of 7.9 percent per annum. Project Description: The project would promote development of intensive irri- gated agriculture in the State of Sinaloa through: (i) construction and rehabilitation of irrigation and drainage infrastructure serving 76,000 ha in the Rio Sinaloa Irrigation District; (ii) reclamation of 60,000 ha of saline lands and rehabilitation of irrigation and drainage infra- structure serving another 60,000 ha in the Rio Fuerte Irrigation District; (iii) a program of technical assistance, applied research and studies benefitting area farmers; (iv) equipment for operation and maintenance of the districts; and (v) a telephone network to link major operating centers of the two districts. The project would directly benefit 19,700 families comprising 17,250 ejidatarios 1/ and 2,450 private farmers. Family incomes would typically increase three-fold as a result of the project; preproject annual family incomes are typically in the range of US$500-US$1,700. About 95 percent of the project beneficiaries have present incomes corresponding to the lowest 30 percent. 1/ Eiidatarios are members of an ejido, a form of group land tenure based on usufruct. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Estimated Cost: ---- US$ millions ---------- % Foreign Local Foreign Total Exchange I. Fuerte Irrigation District 39.6 26.6 66.2 40 Civil works 22.0 14.4 36.4 41 On-farm development 11.7 8.2 19.9 41 Equipment for Operation and Maintenance 0.4 4.0 4.4 90 Engineering 5.5 - 5.5 - II. Sinaloa Irrigation District 50.2 30.8 81.0 38 Civil works 37.2 24.2 61.4 41 On-farm development 5.8 4.1 9.9 41 Equipment for Operation and Maintenance 0.3 2.5 2.8 90 Engineering 6.9 - 6.9 - III. Agricultural Extension Program 8.2 0.7 8.9 8 IV. Agricultural Research and Studies 5.8 1.2 7.0 17 V. Total Baseline Cost 103.8 59.3 163.1 36 VI. Contingencies 61.3 25.3 86.6 Physical contingencies 12.3 8.8 21.1 Price contingencies 49.0 16.5 65.5 TOTAL COST 165.1 84.6 249.7 34 Financial Plan: US$ millions % Government 157.7 63 Bank 92.0 37 TOTAL 249.7 100 Estimated Disbursements: Bank FY 1980 1981 1982 1983 1984 1985 1986 ------------- US$ millions ------------- Annual 2 12 28 28 14 4 4 Cumulative 2 14 42 70 84 88 92 Rate of Return: 18 percent Staff Appraisal Report: Report No. 2454-ME dated May 7, 1979  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO NACIONAL FINANCIERA, S.A. WITH THE GUARANTEE OF UNITED MEXICAN STATES FOR A RIO FUERTE/RIO SINALOA IRRIGATION PROJECT 1. I submit the following report and recommendation on a proposed loan to Nacional Financiera, S.A. with the guarantee of United Mexican States for the equivalent of US$92 million to help finance a Rio Fuerte/Rio Sinaloa Irrigation Project. The loan would be repaid over 17 years, including 4 years of grace, with interest at 7.9 percent per annum. PART I: THE ECONOMY 1/ 2. Some of the major features of the Mexican economy were analyzed in "An Updating Report on the Economy of Mexico" (1110-ME), distributed to the Executive Directors on March 23, 1976. A special economic mission visited Mexico in April-May 1977. Its report has been discussed with the Mexican authorities and is about to be circulated to the Executive Directors. The discussion which follows reflects the principal and updated findings of the mission. Past Performance 3. For most of the three decades preceding the mid-seventies, Mexico was outstandingly successful in achieving rapid economic growth while main- taining stability in prices and the balance of payments. From 1940 to 1970, average GDP growth exceeded 6 percent per year in real terms, inflation averaged less than 5 percent per year from the mid-1960s to 1972, and the dollar value of the peso, fixed in 1954, was maintained until the September 1976 devaluation. The Government's role in this achievement was to carry out direct investments in infrastructure and in key industries such as power, steel and petroleum, while creating a stable regulatory and institutional framework, as well as good profit prospects, to induce private sector growth. 4. This strategy produced rapid growth, but did little to reduce contrasts within the Mexican economy. While land redistribution under the reform of 1915 was continued, most of the peasants who received land could not improve their economic status as they could not benefit from basic infrastructure, credit and technical assistance. Rapid population growth made social equity even more difficult to achieve. Population growth in Mexico accelerated steadily, primarily as a result of reduced death rates, and reached 3.4 percent per year by 1970. Despite economic growth, the high demographic growth rate made adequate absorption of the labor force in productive employment difficult. Some 40 percent of the labor force is either relatively unproductive and poorly paid, or openly unemployed. 1/ Part I is substantially unchanged from the President's Report for a Second Fertilizer Project (R79-68) of March 30, 1979.  -2- 5. During the 1970s, Mexico experienced increasing public sector deficits, inflation, large balance of payments deficits, capital flight and a marked slowdown in the real rate of growth of GDP, which dropped to less than 2 percent in 1976--the lowest annual growth rate experienced by Mexico since the mid-thirties. On September 1, 1976 the authorities abandoned the fixed exchange rate of 12.50 pesos per dollar that had remained unchanged since 1954 and let the peso float; in recent months it has remained rather stable at rates fluctuating around 22.60 pesos per dollar. Following the devaluation, Mexico obtained major support from the IMF. In the last quarter of 1976, Mexico was able to draw on the Fund for US$480 million. For 1977-79, an Extended Fund Facility accompanied by a comprehensive three-year stabilization program was negotiated. The new Government ratified the agree- aent with the IMF shortly after taking office on December 1, 1976, and to date has complied with the program agreed upon with the IMF. Current Economic Policy 15. The present Government inherited a difficult situation. High inflation, large public sector deficits, increasing foreign indebtedness and lack of confidence in economic management indicated a need for economic stabilization. However, the situation also called for more expansionary policies; economic activity had slowed down, net private investment was virtually nil, and the gap between new job creation and growth of the labor force was increasing. High world prices for petroleum offered profitable investment opportunities in the petroleum sector; indeed, increased production for export of these products seemed by far the best way to meet a large part of Mexico's high debt service requirements in the coming years. 7. Faced with these conflicting needs and opportunities, the Mexican authorities have adopted a mixed strategy aimed at reducing lower-priority public expenditures and increasing public revenues, while proceeding with petroleum and other high-priority investments. The objectives of the Govern- ment's program include control of inflation together with a return to high rates of economic growth. Better management of public sector expenditures, more rational pricing and cost control in public sector enterprises, promotion of private savings, limiting wage increases to justifiable levels, and more effective cooperation with the private sector are important parts of the Government's economic strategy. 8. The measures instituted by the current Administration have produced good results. Inflation was brought back to 18 percent in 1978, down from an annual rate of more than 60 percent in the last quarter of 1976, immediately after the devaluation. The deficit in the current account of the balance of payments peaked at $4.2 billion in 1975 and declined to $2.0 billion in 1977. The favorable oil prospects and increasing capital inflows allowed it to increase again and it is estimated to have been $3.1 billion in 1978. Public sector net deficit also peaked at 8.6 percent of GDY in 1975 and declined to 5.4 percent of GDY in 1978. Mobilization of savings by the banking system has also been recovering at a strong pace. The GDP rate of growth is estimated at 6.5 percent in 1978 as compared to less than 1 percent in 1977. The outlook for 1979 is favorable; the rate of growth of the economy should increase while  - 3 - efforts to control the rate of inflation will have to be continued; the deficit in the current account of the balance of payments and the public sector's financial requirements are likely to remain at the 1978 levels in real terms. Economic Issues and Prospects 9. A comprehensive social program is gradually emerging. It is aimed at strengthening the political system, improving income distribu- tion and the living conditions of the poor, increasing public sector efficiency and accelerating growth. The program takes into account two overriding economic priorities--energy development and adequate supplies of foodstuffs--and takes the form of a three stage economic strategy. The first stage--the stabilization period--was devoted to overcome the serious economic problems the present Government inherited. The second stage will be devoted to establishing the basis for attaining a high, equitable and stable rate of growth. During this stage--1979-80--efforts will be made to overcome supply bottlenecks, increase agricultural production, improve the marketing system, increase the efficiency and competitiveness of the country's indus- trial sector and create the conditions necessary for a more just distribution of the benefits of growth. Accelerated and equitable growth would be the characteristics of the third stage. 10. Mexico has the human, institutional and natural resources necessary to attain these ambitious goals. The short-run disequilibria that have affected the country during the mid-70s have been brought under control; the new petroleum riches and the country's ability to exploit them have greatly relaxed the financial constraints on growth. In his last State of the Union speech President Lopez Portillo announced that Mexico's present oil and gas reserves amounted to 20 billion barrels on July 31, 1978 and that probable and potential reserves amounted to 37 billion and 120 billion barrels, respec- tively. These figures were revised upward in January 1979 and proven oil and gas reserves put at about 40 billion barrels. Exploitation of these reserves should allow Mexico to increase production of crude oil, natural gas and petrochemicals from the equivalent of about 1.2 million bbl/day in 1976 to about 3.3 million bbl/day in 1982 and export earnings are projected to rise from about US$600 million in 1976 to approximately US$11 billion in 1982 (on the basis of very conservative price assumptions), not counting potential gas exports. 11. The challenge ahead is how to use these vast riches to help resolve Mexico's long-term development problems which include the following: (i) Population and Poverty. Many Mexican families have not partici- pated in the sustained economic growth of the last several decades. As of 1975, about 3.6 million Mexican families--35 percent of the total--receive incomes less than one-half the national average. The members of most of these families work--more than half of them in agriculture--but they produce little and receive little. Mexico's labor force is now growing at about 3.1 percent per year; during the 1960s this growth rate was 2.0 percent per year. The challenge of providing productive jobs for both new entrants and existing under- productive workers is awesome;  -4- (ii) Stagnation in Agriculture. Crop and livestock production in Mexico, which had grown by 6 percent per year during 1945-55 and 4.2 percent per year during 1955-65, grew at only 2.1 percent per year during 1965-75, resulting in increased imports of corn and wheat; (iii) Regional Imbalances. The heavy concentration of people, production, and public services in the Mexico City area-- which has currently a population of about 12 million and is growing at over 5 percent each year--and the scarcity of productive employment and services for rural Mexicans are challenges to urban management, economic development, and social justice. They imply diversion of some of Mexico City's future growth to other regions, as well as the gradual concentration of scattered rural populations into small towns so that basic public services could be provided more economically and productive activities would have a better chance of developing. 12. In the medium term the prospects for resumption of economic growth with relative price stability are good. Poverty will remain a problem but the Government is taking steps to address it. The alleviation of the external constraint on growth brought about by the expected petroleum earnings (para. 15), together with the Government's efforts to increase public sector savings and to stimulate private investment, could produce economic growth of 7 to 8 percent per year in the remaining four years of the present administration. Resumption of economic growth combined with the intensification of the Govern- ment's family planning program, 1/ the new emphasis on rainfed agriculture, and the implementation of specific programs aimed at increasing productive employment, should help to address the structural problems mentioned above. 13. In agriculture, the current administration has undertaken a far- reaching administrative reform that will allow broader and more effective Government action in the sector. Emphasis is laid on productivity gains and yield increases in both irrigated and rainfed areas. The previous goal of self-sufficiency ia agricultural goods is being rephrased in terms of the sector's overall capacity to pay for its own imports. Irrigation is fostered through programs for construction of irrigation and drainage works and for rehabilitation of existing irrigation districts to increase efficiency of water use. The new emphasis on rainfed agriculture, relatively neglected in the past, should lead to an increase in the productive potential of vast areas currently under-exploited and to a reversal of past trends towards 1/ On October 28, 1977, President Lopez Portillo announced the ambitious goal of reducing the population growth to 2.5 percent per year by 1982, then progressively to 1.8 percent by 1988, 1.3 percent by 1994, and 1 percent by the year 2000. About two-thirds of Mexico's population live in urban areas, well served by hospitals and health centers, with good family planning education and services. The program is now being extended to rural areas.  -5- larger income disparities between the modern and traditional agricultural subsectors. These initiatives, together with the realistic exchange rate, promise a resumption of production growth for both domestic and export markets and an improvement in the living conditions of the rural poor. 14. Industry has potential for considerable growth in many sectors, including import substitution in chemicals, petrochemicals and capital goods as well as exports of many different manufactured products. The Mexican Petroleum Company (PEMEX) has already started an ambitious investment program to produce a variety of primary petrochemicals on a large scale for both domestic consumption and export, and it is expected that the private sector will complement this by investing in the production of secondary petrochemicals. Tourism export earnings are also expected to increase. 15. Paramount among the benefits of recent public sector investments are the new possibilities opened to the Mexican economy through the dis- coveries of rich petroleum fields. The Government has decided to use these large hydrocarbon resources to help manage Mexico's heavy debt service burden and to enhance the country's development prospects. The additional domestic demand likely to occur, due to increased public investment and programs aimed at increasing employment and the productivity of the poor, will have to be satisfied partially through increased imports. The import capacity will be increased considerably, however. Rapidly increasing petroleum exports and favorable tourism earnings prospects, the recovery of agricultural exports and resumption of growth of manufactured exports have strengthened the balance of payments outlook and will keep the current account deficit at reasonable levels despite higher imports. 16. Mexico's public debt service ratio has been increasing over the recent past and reached 48 percent in 1977. This comparatively high ratio is more a reflection of the low level of exports relative to GNP and the high proportion of Mexican borrowing from commercial banks than it is an indication of a high level of external debt relative to the size of the economy. When middle income developing countries are ranked by the ratio of external public debt to GNP, Mexico ranks as average. The public debt service ratio is estimated to have peaked above 50 percent in 1978 and, mainly as a result of the rapid expansion of petroleum exports, is expected to decline to levels of around 40 percent in the early 1980's. Debt service on Bank loans amounts to about 4.3 percent of public debt service; this ratio is projected to decrease over the next years to some 3.6 percent in 1982. The Bank currently holds about 7 percent of Mexico's total medium- and long-term public debt, and this ratio is not likely to change in any significant way over the next few years. Mexico remains creditworthy for borrowing on conventional terms considering the country's excellent medium- and long-term potential and the well conceived economic strategy which the Government has adopted to realize it.  - 6 - PART II - BANK GROUP OPERATIONS IN MEXICO 1/ Bank Operations 17. As of March 31, 1979, Mexico had received 57 loans from the Bank amounting to US$3,128.9 million net of cancellations and terminations; of these, 33 loans totalling US$1,486.4 million were fully disbursed. The Bank held US$2,595.3 million of which US$1,086.2 million had not yet been disbursed. Some 40 percent of Bank lending has been for agriculture and rural development (19 loans for US$1,264.4 million), 23 percent CTor power (12 loans for US$704.8 million) and 17 percent for transportation projects (12 loans for US$546.7 million); the remaining 20 percent has been for industry (US$352.5 million), water supply (US$130 million), tourism (US$114 million), and urban development (US$16.5 million) projects. Mexico was carrying out a stabilization program (para. 9), and because of scarcity of counterpart funds some projects fell behind schedule in 1976 and 1977. Adequate budget support for Bank projects has now been secured. Annex II contains a summary statement of Bank loans as of March 31, 1979 and notes on the execution of ongoing projects. IFC Operations 18. As of March 31, 1979, IFC has made investment commitments in 17 companies in Mexico, for a total of US$202.4 million, of which US$130.5 million had been sold, repaid or cancelled. The balance held by the Corporation, US$71.9 million, consists of US$62.1 million in loans and US$9.8 million in equity. A summary statement of IFC investments as of March 31, 1979, is presented in Annex II. Bank Strategy 19. The main objectives of Bank lending in Mexico have been to: (i) support policies and programs leading to a wider distribution of the benefits of economic growth; (ii) help finance projects that make directly or indirectly, significant corntributions to output, exports, and employment; and (iii) help resolve critical adjustment problems that Mexico is currently facing. The Bank is preferentially supporting projects of high social priority that help the rural or urban poor, projects that promote higher levels of employment and production and those that help to decentralize economic activity. 20. Because of the difficult structural problems of Mexico's agricul- ture and the sector's crucial importance to the country's further development, the Bank has made agriculture the leading sector for its lending. The Bank agricultural lending program for Mexico has four goals: first, to increase productivity of presently cultivated lands through selected programs of irr*- gation rehabilitation and on-farm improvements; second, to improve the pro- ductivity of small farmers who receive the benefit of most Bank lending through programs for (a) rural development, (b) rainfed agricultural development, 1/ Part II is substantially unchanged from the President's Report for a Second Fertilizer Project (R79-68) of March 30, 1979.  - 7 - (c) bringing new areas under cultivation, and (d) establishing irrigation and drainage units; third, to complement infrastructure investments with general support services including agricultural extension and marketing programs and provision of mediuin-term credit; and fourth, to promote of-Faacm employment opportunities in rural areas through programs of agro- and rural-industries. The proposed project would support several of these goals; it would rehabilitate inadequate infrastructure and reclaim soils that have lost their productivity. The project would open new lands to intensive cultivation under irrigation. In addition, the project would support expansion and improvementts Li 'it pcogram of technical assistance that were beguni under a previous project. The Bank has made nine loans in FY 72 through 78, totalling US$835 million, for irrigation, rural developfent and agriculture and livestock credit programs. A US$25 million supplemental loan for the Rio Panuco Irrigation Project and US$60 million loan for a small-scale agricultural infrastructure project were approved by the Executive Directors in FY79. Projects for rehabilitation of irrigation districts, water control, rural development and support services are in preparation for possible future support from the Bank. 21. Past Bank lending for industry has been aimed at (a) assisting the Government's efforts to reduce the balance of payments deficit, (b) decentral- izing industrial activities away from the major and increasingly congested urban areas, and (c) promoting greater employment in the sector by suppocting medium and small scale industry. A large steel project is now operating in a previously underdeveloped area on the west coast of Mexico. A fertilizer project strengthens development of the resource-rich southeast region and the central area and a US$80 million loan for a fertilizer project approved by the Executive Directors in FY79 gives further support to the development oF an Lndustrial center on the west coast of Mexico. A. project to promote the development of small- and medium-scale enterprises and a third industrial equipment fund project were approved by the Executive Direct:ors iFi FY78; both offer support to the private sector at a time of rapid expansion. A fourth industrial equipment loan is under subriss[ori to the Executive Directors. A capital goods industry project which would relieve bottlenecks in the subsector is under study for possible Bank support. 22. As regards infrastructure, the Bank's operations have been focused on investments in key areas of the country as well as on Li,slilutional reforms and sector policies aiming, inter alia, at suitable pricing mechanisms to help generate addittonal resources for investment financing. The aL[pocts development project (FY74) was designed to support the Government's policy of regional integration; the third railway project (FY76) supported improve- ments of institutional aspects and financial management of the sector. The Mexico City (FY73) and medium cities (FY76) water supply projects naviva LaStrumental in the establishment of specialized institutions for efficient provisLon ofT drinking water and in the pricing of water at m.fnls nore closely related to costs. A highway sector project loan was approved by the Executive Directors in FY79. A second airports project is being processed. 23. The Government and the Bank have long recognized the regional economic disparities prevailing in Mexico (para. 11). In June 1976 thie Government adopted the Law of Human Settlements to provide a new institutional framework to deal with the pressing problems of over-concentration of economeic  activities in the larger metropolitan areas. The Government has recently adopted a National Urban Development Plan that spells out its regional devel- opment priorities in operational terms, and several projects are now being prepared to laeet tihe needs for basic urban services for poor fainilies and to provide key regional infrastructure in selected priority cities. One such project, to assist in the development of the Lazaro Cardenas conurbation area on the West Coast, was approved by the Executive Directors in FY78, and another !r)Jet Ec;)c the southeast part of the country will be appraised in the coming months. 24. The Inter-American Development Bank (IDB) is the second largest source of multilateral aid to Mexico. The IDB has made loans totaling US$1,830 million. Over sixty percent of this lending has gone for agricul- tural and rural development projects, and the balance for transportation, industry, and tourism infrastructure. In 1978, the IDB approved three loans totaling US$236 million for coal mining, irrigation, and tourism projects. The IDB and the Bank have worked in parallel on several projects; most recently the IDB and the Bank have each made loans for the National Program for Small- Scale Agricultural Infrastructure, the Investment Program for Rural Develop- ment (PIDER), agricultural and livestock credit, small- and medium-scale industries, and hotel development. The International Fund for Agricultural Development (IFAD) is also considering a rural development project in the state of Oaxaca; Bank staff is assisting in project preparation and appraisal. PART III - TPE AGRICULTURAL SECTOR Background 25. The agricultural sector provides the livelihood for a rural pop;tla- tion of some 4 million families scattered over 95,000 villages. Unemployment and under-employment are major problems in the agricultural sector. With a cropped area Fluctuating around 15 million ha, there is a heavy concentration of population iL comparison to cropped area. This is one of the major causes determining the level of income in the agricultural sector, which is lower than that of other sectorsz GDP per Worker (1975) US$ Index Agriculture 120 100 National Average 384 320 Industry and Services 504 420 26. During the period 1945-1955, agricultural output grew at a rate of 6 percent per annum; most of the rapid increase in production came from opening nei.rly 110,000 ha per annum to intensive irrigated cultivation. Irrigation has played a central role in Mexico's agricultural development plans; rainfall over much of Mexico's best lands is either erratic or too  - 9 - sparse to allow economic use of modern farm technologies. Irrigation has helped spur production, and it has also been a powerful means of income redistribution. Because land holdings in all new irrigation districts are strictly limited by Mexican law, eiidos 1/ have been established on most land in new irrigation districts thereby providing productive irrigated lands to families who formerly were either landless or had rights to uneconomic holdings. 27. The rate of increase of crop and livestock production declined, however, to 4.2 percent per annum during 1955-1965 and to 2.1 percent per annum during 1965-1975. In large part, this trend toward stagnation is the effect of a decline in the rate of expansion of irrigated and culti- vated areas. Between 1945 and 1955, irrigated area expanded rapidly at the rate of about 110,000 ha per annum. However, this increase dropped sharply after 1955; an average of 65,000 ha per annum of irrigated lands were brought under cultivation between 1955 and 1975 as projects became more expensive due to increasing technical difficulty. Overall, the rate of growth of cultivated area was nearly 3 percent per annum between 1945 and 1965, but since 1965, cropped area has been constant at around 15 million ha. Government's Policies and Programs 28. The agricultural policy of the Mexican Government has in recent years focused on increasing production of basic food crops (maize, wheat and rice) and on raising incomes and living standards for the pooret sections of the rural population. The Government's strategy for increasing agricultural production includes measures to increase the cropped area and to increase the productivity of lands currently being cropped. 29. Several programs for the development of both irrigated and rainfed agriculture will bring new lands into production. The Government's goal is to double the cultivated area (an increase of 15 million ha) by the end of this century. To meet this goal, an additional 5 million ha would be brought under irrigation through new schemes and expansion of existing systems. Expansion of drainage systems, development of new farm technologies, and a program of economic incentives would increase rainfed lands under cultiva- tion by nearly 10 million ha. A substantial portion of the increase in rain- fed lands would take place in the tropics of Mexico; the Bank is assisting the pilot Tropical Agricultural Development Project (Loan 1553-ME) which will develop and prove the technology for intensive agricultural development of the zone. 30. The present administration is placing emphasis on programs to increase farm productivity. A program to rehabilitate those irrigation districts where infrastructure is inadequate or where lands are in poor 1/ An ejido is a form of group land tenure based on usufruct; its members are called ejidatarios.  - 10 - condition has been expanded with important financial support from the Mexican banking community and the participating farmers. Increasing attention is being given to development of the potential of rainfed agriculture. The 110 recently established rainfed agricultural districts would promote the adoption of modern technology and would be the basis for strengthening the delivery of technical assistance and marketing services to farmers. Such programs are complemented by other public investments to improve the incomes and employment levels of the rural poor. The most important of these is the national Invest- ment Program for Rural Development (PIDER) which provides a balanced package of directly productive, support, and social infrastructure to residents of Mexico's poorest rural zones. 31. Thus, the Government's agricultural development strategy is to provide access to modern farming techniques for a higher proportion of its rural popula- tion. The strategy calls for investments by the Government in education, applied research and extension as well as in physical infrastructure for irrigation, drainage, access roads, land clearing, and marketing and storage facilities. At the same time, the Government would stimulate private investment through the credit institutions. The Bank is supporting the Government's strategy in both these areas. Four projects approved by the Executive Directors in FY78 and FY79 finance part of the Government's program to expand intensive irrigated and rainfed agriculture. The sixth agricultural credit project, approved by the Executive Directors in FY78, supports private investment in agriculture and agroindustries. The proposed project would continue Bank support of the Government strategy by providing infrastructure and technology necessary for nearly 20,000 farmers to significantly increase their productivity. Experience in Previous Projects 32. Implementation of Bank-financed projects has generally been satis- factory. Because of a shortage of counterpart funds and the necessity for the Government to carry out a stabilization program, implementation of three irrigation projects fell behind schedule. The scope of one project--the Bajo Rio Bravo-Bajo Rio San Juan project--was significantly reduced (R77-305 dated December 13, 1978). The two other projects, the Rio Panuco and Rio Sinaloa irrigation projects, had been appraised prior to the rapid inflation of the mid-1970s. The compound effect of higher than anticipated inflation and delays necessitated by fiscal stringency was to nearly double the cost of each project. To ameliorate the effects of these cost increases during a period of recovery, a US$25 million supplemental loan for the Rio Panuco project was approved by the Executive Directors last year (R78-164 dated June 27, 1978), and the scope of the Rio Sinaloa project was reduced (R79-51 dated March 13, 1979). Adequate budgetary allocations are now being made for these projects, and execution is proceeding satisfactorily in accordance with the revised plans. PART IV - THE PROJECT 33. A Staff Appraisal Report entitled "Rio Fuerte/Rio Sinaloa Irrigation Project," No. 2454-ME, dated May 7, 1979 is being circulated separately to the Executive Directors. The project was prepared by SARH and was appraised  - 11 - by a Bank mission in September 1978. Negotiations took place in Washington, D.C. on April 30 through May 2, 1979. The Mexican negotiating team was led by Mr. Pedro Galicia. Project Description 34. The proposed project would increase the productivity of 196,000 ha of farm lands through: (a) reclamation of 60,000 ha of saline lands, and rehabilitation of irrigation infrastructure serving another 60,000 ha in the Rio Fuerte Irrigation District; and (b) construction and rehabilitation of irrigation and drainage infrastructure benefitting 76,000 ha in the Rio Sinaloa Irrigation District (Map IBRD 13953R). Infrastructure works would be comple- mented by a program of intensive technical assistance and applied agricultural research benefitting farmers in both districts. 35. The Rio Fuerte Irrigation District covers a total area of 210,000 ha. The district is irrigated by gravity canals that lead from the Rio Fuerte which is regulated by the Miguel Hidalgo Dam. In addition, transfers of water from the adjoining Rio Sinaloa Irrigation District can be used to augment the water supplied from the Rio Fuerte. In its first loan to Mexico for irrigation development (Loan 275-ME in 1961), the Bank assisted in the successful reclama- tion of saline lands in two of the five units in the Fuerte district totalling about 77,000 ha. Since the completion of the first project, an additional 60,000 ha have become salinized due to poor drainage. The proposed project would include reclamation of these lands and improvement of the irrigation infrastructure serving an additional 60,000 ha not benefitted under the previous project. 36. The Rio Sinaloa Irrigation District covers at the present time 54,000 ha that are potentially irrigable by wells and diversion from the unregulated flow of the Rio Sinaloa. The area actually irrigated in any given year fluctuates with the available water supply and is considerably less than the total potential area. The ongoing Rio Sinaloa irrigation project (Loan 970-ME of March 1, 1974) will establish a storage dam on the Rio Sinaloa at Bacurato, a diversion dam downstream, irrigation and drainage infrastructure serving 29,000 ha, and main irrigation canals to supply water through the existing secondary network to 16,000 ha. The 105,000 ha of potentially irrigable land of the Rio Sinaloa district was orriginally to have been developed under the Sinaloa project, but the area was subse- quently reduced in the modified project (R79-51 dated March 13, 1979 refers). The Bacurato dam, under construction, will be capable of supplying suffi- cient water to irrigate the full 105,000 ha. Under the proposed project, the surplus water available from Bacurato would be used to leach accumulated salts from about 60,000 ha of soils in the Fuerte district. The Fuerte district will use the full excess capacity of the Bacurato Reservoir until 1984 when the completion of the leaching program and reduction of water losses will provide a surplus capacity to expand the irrigated area of the Sinaloa district. The proposed project, therefore, includes construction of irrigation and drainage infrastructure to serve the remaining potentially irrigable area of 76,000 ha in the Rio Sinaloa Irrigation District.  - 12 - 37. In addition to construction of irrigation canals, drains, and feeder roads within the two irrigation districts, the project includes a telephone system to link operating headquarters of the districts with the Bacurato control room, construction of houses for ditch riders, purchase of equipment necessary for operation and maintenance of the districts, expansion of the groundwater observation well network, and a program of technical assistance and applied research including studies on drainage problems and potential expansion of irrigated area. Technical Services 38. Agricultural extension services in the established irrigation dis- tricts have been satisfactory. The Government has taken action to strengthen these services under the ongoing Rio Sinaloa irrigation project, the latest of which is the establishment of the District Integrated Technical Assistance Program (DITA), which is among the best technical assistance programs in Mexico. The proposed project would support expansion of DITA programs in both districts. DITA provides agricultural extension and water management advice using procedures similar to the training and visit system which has been supported in a number of Bank-financed projects. At the farm level, extension activities are handled by separate teams assigned to specific areas. A field extension officer at the professional level is assigned to an area of about 3,000 ha, with responsibility for about 300 to 500 families. Depending on the work load, the field extension officer may be assisted by an agricultural technician. Farm visits are made on a regular basis in a cycle of 10 to 14 days. At each visit the extension officer gives written recommendations to the farmer or ejido management, keeping a copy for his own records. Field extension officers meetings are held at weekly intervals at either the zone or area levels. Meetings are also held at intervals of 2-3 weeks at the unit or district level for more formal training and technical discussions. 39. Field technicians are supported by special units (e.g. hydrology, deep wells, water use, applied research); each unit has subject matter specialists who work closely with the field extension workers. Of particular importance is the unit for applied research which conducts selected farm trials which serve to orient the field extension officers and to facilitate farmer demonstrations. Applied research is largely conducted at the Northwest- ern Agricultural Research Center located near Los Mochis. Research is well conducted and relevant to farmers' needs. However, insufficient funding has prevented expansion of the farm demonstration and field trial program to the desired level. 40. The total cost of technical services under the project (including contingencies) is estimated at US$22.4 million, of which US$2.6 million would be in foreign exchange. With a view to making a meaningful contribution to this critical element of the project, it is proposed that the Bank finance not only the foreign exchange component but also US$7.4 million equivalent of local costs of extension services, investigation and applied research.  - 13 - Monitoring and Evaluation 41. Monitoring and evaluation is routinely conducted by staff of each irrigation district as a part of their program of operations. Basic data, the most important of which are cropped areas, cropping patterns, water use, yields, prices, operation and maintenance activities, extension activities, ground water levels, progress of works and reservoir storage are collected and used in the management of the districts. Project Management 42. The project would be implemented by SARH through its ordinary channels. The Office of Major Infrastructure Programs in Northern Sinaloa would have lead responsibility for project execution. Within the office, specific teams manage project planning, design, and construction phases. These teams are supported by specialist staff of SARH from the state and national headquarters. Responsibility for operation, maintenance, and administration of completed works rests with each chief of an irrigation district. The chief is head of an executive committee consisting of farmer representatives and technical staff from related government agencies. The heads of Infrastructure Programs and of each irrigation district report to the State Representative of SARH. This mechanism promotes delegation of responsibility to the field level while allowing appropriate central manage- ment. Management under the ongoing Rio Sinaloa irrigation project has been satisfactory and is considered suitable for the proposed project. Project Cost and Finance 43. The project is expected to cost US$249.7 million, of which US$84.6 million would be foreign exchange. The US$92 million Bank loan would finance 37 percent of total project costs, i.e., the foreign exchange costs and US$7.4 million of local costs for incremental technical assistance services, applied research and studies. The balance would be financed by the Government (63 percent). Cost Recovery 44. Project costs would be recovered through a combination of water charges, income taxes and production taxes. While previously water charges were set at low levels and large subsidies were provided to irrigation dis- tricts, the present administration has moved to increase water rates and make the districts self-sustaining. The Government's policy is to recover the full cost of operation and maintenance through volumetric water charges and, in addition, to recover a portion of investment costs through levies. The portion of investment costs directly recovered is set after completion of a socio-economic study of the district to determine the beneficiaries' capacity to pay. This study is normally conducted after the district begins to supply water to the fields; thus, there is greater certainty regarding the ability of beneficiary farmers to pay and of the investment cost of project works. The portion of capital investment recovered in this fashion is limited by Mexican law to 30 percent. Additional amounts would be raised from taxes; about US$3.1 million annually of incremental income taxes are expected to be generated by the project.  - 14 - 45. Assurances have been obtained that the Government will collect water charges to recover: (a) the full cost of operation and maintenance; and (b) that portion of capital costs as shall be determined to be reasonable in light of the beneficiaries' capacity to pay and the need to make efficient use of the water provided to them. The portion of capital cost to be recovered would be determined after review of a study to be submitted to the Bank by December 1, 1984. The study would be periodically updated and water rates appropriately revised (draft Guarantee Agreement, Section 3.08). The study is expected to borrow heavily from experience under the ongoing Rio Sinaloa irrigation project, for which a similar study is expected to be completed in early 1980. Procurement 46. Contracts for major civil works would be awarded on the basis of international competitive bidding in accordance with Bank guidelines. To encourage competition, works would be grouped where possible into contracts with a value of at least US$2 million. Contracts for smaller civil works for which international competitive bidding would not be efficient would be let under the Guarantor's ordinary procedures. Such contracts would include on-farm works, such as smoothing of land, for which farmers are expected to form partnerships. This work provides income to the farmers pending completion of the works, but more importantly, it trains them in proper level- ing procedures and prepares them to maintain their fields in good condition for irrigation. SARH provides engineering services and supervises such contracts. 47. The estimated cost of vehicles, farm machinery and equipment is about US$8.8 million, out of which US$6 million would be subject to interna- tional competitive bidding according to Bank Guidelines for Procurement. A margin of preference up to 15 percent would be allowed for equipment produced in Mexico. About US$2.8 million worth of equipment, which for reasons of efficiency are not suitable for international competitive bidding, would be purchased through the Guarantor's ordinary procurement procedures (Schedule 2 to draft Guarantee Agreement). Disbursement 48. The loan is expected to be disbursed over a seven year period, mid- 1979 through mid-1986. A schedule of estimated disbursements is provided in the Loan and Project Summary. Project Impact 49. The proposed project would directly benefit 19,700 families compris- ing 17,250 eiidatarios and 2,450 private farmers. Of the 196,000 ha project area, 137,500 ha (70 percent) are held by elidos and 58,500 ha are held by private land owners. Average farm size is less than 10 ha, and 95 percent of project beneficiaries have less than 20 ha. The present net incomes of these farmers vary from US$500 to US$1,700, placing them in the lowest 30 percent of the national income distribution. At full development their net farm incomes would increase three-fold, and would range from US$1,900 to US$6,000. Over  - 15 - 95 percent project benefits would accrue to small farmers whose holdings are mostly in non-irrigated areas or zones affected by salinity. The five percent of farmers whose holdings exceed 20 ha are concentrated in zones now served by irrigation and not affected by salinity; they would receive less than five percent of net project benefits. 50. The project would decrease on-farm underemployment, through provision of additional 3.3 million man-days of employment per year at full development. In addition, it would generate substantial indirect benefits by preventing salinization of additional lands and by creating secondary employment opportunities. Economic Evaluation 51. The economic rate of return for the project is estimated to be 18 percent; sensitivity analysis shows that the rate of return would be 14 percent if project cost were to increase by 10 percent and farm yields decrease by 10 percent. This analysis does not include a share of the costs of the Bacurato storage dam and other works financed under the ongoing Rio Sinaloa irrigation project. An integrated analysis, including the cost and benefit streams of the Rio Sinaloa project and the proposed Rio Fuerte/Rio Sinaloa project, yields a rate of return above 13 percent. Risks 52. The project carries no major risks. The quality and performance of the project organization in the area is well above average even for Mexican standards, and experience has shown that it is able to carry out infrastruc- ture works, operate the irrigation system and provide research and extension services in a satisfactory manner. Irrigated farming is well established in the zone, and farmers should readily adopt modern technology and improved production methods. Therefore, newly irrigated lands should easily reach the yield levels conservatively projected. Reclamation of saline lands would employ technologies proven in adjacent areas and has little risk. PART V - LEGAL INSTRUMENTS AND AUTHORITY 53. The draft Loan Agreement between the Bank and Nacional Financiera, S.A., the draft Guarantee Agreement between United Mexican States and the Bank, and the Report of the Committee provided for in Article III, Section 4 (iii), of the Articles of Agreement are being distributed to the Executive Directors separately. 54. Special conditions of the project are listed in Section III of Annex III. 55. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank.  - 16 - PART VI - RECOMMENDATION 56. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments By I. P. M. Cargill May 14, 1979  - 17- ANEX I Pae 1 of 5 mIXICO - OCIAL IHDICATOtS DATA SHEIT REPERENCE GROUPS (ADJUSTED AVERAGES LAND AREA (THOUSAND SQ. Km.) x . - MOST RECENT ESTIMATE)L TOTAL 1972.5 SM SAM 1lTT HIGHER AGRICULTURAL 950.0 NDST RECENT GEOGRPHIC INCOME INCOME 1960 Lb 1970 Eb ESTIMATE Lb RGION /c GROUP /d GROUP Le GNP PER CAPITA (US$) 360.0 660.0 1110.0 1066.7 867.2 1796.4 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 770.0 1047.0 1221.0 911.1 578.3 1525.0 POPULATION AND VITAL STATISTICS TOTAL POPULATION, MID-YEAR (Mll.LIONS) 36.0 50.4 64.2 URBAN POPULATION (PERCENT OF TOTAL) 50.7 58.7 63.3 57.9 46.2 52.2 POPULATION DENSITY PER SQ. KM. 18.0 26.0 33.0 25.6 50.8 27.6 PER SQ. KM. AGRICULTURAL LAND 36.0 52.0 68.0 77.6 93.3 116.4 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 45.8 46.2 46.3 42.0 42.9 34.8 15-64 YRS. 50.9 50.1 50.3 52.2 53.5 56.0 65 YRS. AND ABOVE 3.3 3.7 3.4 3.7 3.5 5.7 POPULATION GROWTH RATE (PERCENT) TOTAL 3.1 3.4 3.5 2.7 2.5 1.6 URBAN 4.9 4.8 5.1 4.3 4.7 3.4 CRUDE BIRTH RATE (PER THOUSAND) 46.1 43.8 42.0 35.8 37.8 27.0 CRUDE DEATH RATE (PER THOUSAND) 14.0 10.2 8.6 9.1 10.8 9.9 GROSS REPRODUCTION RATE 3.2 3.1 3.0 2.6 2.5 1.9 FAMILY PLANNING ACCEPTORS. ANNUAL (THOUSANDS) .. 25.1 608.0 USERS (PERCENT OF MARRIED WOMEN) .. .. 13.1 15.1 20.0 19.3 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1970-100) 87.5 100.0 99.1 102.1 107.3 103.8 PER CAPITA SUPPLY OP CALORIES (PERCENT OF REQUIREMENTS) 107.0 105.0 117.0 103.9 105.3 110.4 PROTEINS (GRAMS PER DAY) 65.0 65.0 66.9 60.3 63.0 77.7 OF WHICH ANIMAL AND PULSE 29.0 28.0 /f 27.5 26.7 21.7 22.2 CHILD (AGES 1-4) MORTALITY RATE 12.7 9.8 8.4 8.7 8.0 1.9 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 56.3 62.4 64.7 62.6 57.2 63.0 INFANT MORTALITY RATE (PER THOUSAND) 74.0 68.5 52.0 56.9 53.9 38.2 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL *- 54.0 62.0 60.7 56.8 67.7 URBAN .. 71.0 70.0 78.0 79.0 83.5 RURAL *- 29.0 49.0 34.9 31.8 41.5 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. .. .. 61.1 30.9 70.3 URBAN .. .. .. 80.3 45.4 90.7 RURAL *' 13.0 14.0 25.4 16.1 38.3 -POPULATION PER PHYSIClAN 1800.0 1480.0 .. 1899.3 2706.8 1310.8 POPULATION PER NURSING PERSON 2830.0 / 1620.0 /h .. 1220.1 1462.0 849.2 POPULATION PER HOSPITAL BED TOTAI 1900.0 960.0 830.0 422.3 493.9 275.4 URBAN .. 780.0 .. 258.2 229.6 129.9 RURAI *- 1310.0 /i .. 2281.6 2947.9 965.9 ADMISSIONS PER HOSPITAL BED .. .. .. 25.6 22.1 18.9 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.4 5.7 .. 5.2 5.2 3.9 URBAN 5.7 5.7 .. .. 5.0 RURAL 5.2 5.8 .. .. 5.4 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 2.9 2.5 .. 2.0 2.0 0.9 URBAN 2.6 2.2 .. 2.1 1.5 0.8 RURAL 3.4 3.2 .. 2.7 2.7 1.0 ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. 59.0 .. 51.2 64.1 59.2 URBAN .. 80.7 .. 77.3 67.8 78.0 RURAL .. 28.0 .. 12.8 34.1 12.5  - 18_ ANNEX I Page 2 of 5 TABLE 3A MEXICO - SOCIAL INDICATORS DATA SHEET REFERENCE GROUPS (ADJUSTED AVERAGES MEXICO / - MOST RECENT ESTIMATE) SAME SAME NEXT HIGHER MOST RECENT GEOGRAPHIC INCOME INCOME 1960 Lb 1970 Lb ESTIMATE /b REGION Jc GROUP /d GROUP /e EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 80.0 10740 112.0 103.5 99.8 97.6 FEMALE 77.0 102.0 109.0 102.9 93.3 87.4 SECONDARY: TOTAL 11.0 22.0 30.0 37.2 33.8 47.8 FEMALE 8.0 17.0 29.0 37.9 29.8 42.6 VOCATIONAL (PERCENT OF SECONDARY) 24.0 24.0 .. 14.7 12.8 22.7 PUPIL-TFACHER RATIO PRIMARY 44.0 46.0 46.0 32.8 34.9 25.4 SECONDARY 13.0 14.0 17.0 17.8 22.2 24.9 ADULT LITERACY RATE (PERCENT) 62.0 74.0 76.0 74.9 71.8 96.3 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 14.0 24.0 40.0 26.9 12.4 32.3 RADIO RECEIVERS PER THOUSAND POPULATION 95.0 276.0 301.0 173.5 104.5 201.9 TV RECEIVERS PER THOUSAND POPULATION 19.0 59.0 84.0 69.4 28.1 97.7 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 79.0 .. .. 72.8 45.2 70.9 CINEMA ANNUAL ATTENDANCE PER CAPITA 10.0 5.0 4.3 4.3 4.6 4.4 EMPLOYMENT TOTAL LABOR FORCE (THOUSANDS) 11300.0 13000.0 16600.0 FEMALE (PERCENT) 15.2 17.4 18.5 21.4 25.7 17.4 AGRICULTURE (PERCENT) 54.0 45.0 41.0 37.8 46.2 38.4 iNDUSTRY (PERCENT) 19.5 22.9 24.2 PARTICIPATION RATE (PERCENT) TOTAL 30.2 28.8 28.8 30.8 33.8 33.7 MALE 51.1 47.4 46.8 47.2 48.1 50.8 FEMALE 9.2 10.1 10.7 13.2 17.3 12.6 ECONOMIC DEPENDENCY RATIO 1.6 2.0 1.8 1.7 1.4 1.4 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 28.7 lh 27.9 .. 28.9 23.6 20.2 HIGHEST 20 PERCENT OF HOUSEHOLDS 58.8 lh 58.3 .. 57.7 52.3 47.9 LOWEST 20 PERCENT OF HOUSEHOLDS 3.5 lh 3.4 .. 3.2 4.3 3.2 LOWEST 40 PERCENT OF HOUSEHOLDS 10.3 lh 10.5 .. 10.7 13.1 13.7 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. 251.9 191.9 RURAL .. .. 350.0 200.6 193.1 157.9 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 484.0 403.1 319.8 448.8 RURAL .. .. 345.0 258.0 197.7 313.1 ESTIMATED POPULATION BELOW POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 29.0 24.8 19.8 23.2 RURAL .. .. 40.0 65.2 35.1 54.5 Not available Not applicable. NOTES /a The adjusted group averages for each indicator are population-weighted geometric mans, excluding the extreme values of the indicator and the most populated country in each group. Coverage of countries among the indicators depends on availability of data and is not uniform. lb Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; aad for Most Recent Estimate, between 1973 and 1977. ic Latin America & Caribbean; /d Intermediate Middle Income (5551-1135 per capita, 1976); /e Upper Middle Income (S1136-2500 per capita, 1976); /f Av. 1964-66; /g Including midwifery and nursing auxilliaries; lh 1963; /i Data refer to rural health centers only. September, 1978  - 19 - ANNEX 1 DnzuzTONoS Or SOCIAL INICATOtS Page 3 of 5 IS* The adjusted group averages for each indicator era population-weighted geometric means, excluding the extrem values of the indicator and the moat populated country in each sroup. Coverage of countries among the indicators depends on availability of date and is not uniform. Due to lack of data, group &verages for Capital Surplus Oil Exporters and indicators of access to water and excrete diaposal, bou-ing, income distribution and poverty are elplt population-weighted geometric a ns without the xclusion of xtrem values. LAND AREA (thous-nd sq. km) Population per hospital bed - total, urban, and rural - Population (total, Total - Total surface are- comprising lnd area and inland vaters. urban, and rural) divided by their respective nusber of hospital beds Laricultural - Most recent estimte of agricultural area used teaporarily available in public and private general and specialieed hospital snd re- or permanently for crops, paatures, market and kitchen gardens or to habilitation centers. Hospitals are establishments permanently staffed by lie fallow, at least one physician. tstablishments providing principally custodial care are not included. Rural hospitals, however, include health and medi- Gap PER CAPITA fUS$) - iNP per capita *stimates at currant market prices, cal centers not permanently staffed by a physician (but by a medical as calculated by same conversion method as World Bank Atlas (1975-77 basis): sistant, nurse, midwife, etc.) which offer in-patient accomnodation and 1960, 1970, and 1977 data, provide a limited range of medical facilities. Admisaionns per hospital bed - Total number of edmisions to or discharges flGY CONSUMPTION PER CAPITA - Annual consumption of comercial energy from hospitals divided by the n=ber of beds. (coal nd lignite, petroleum, natural gas and hydro-, nuclear end geo- thermal elactricity) in kilograms of coal equivalent per capita. HOUSING Average sloe of household (Persons per household) - total, urban, and rural - POPULATION AND VITAL STATISTICS A hou ehold consists of a group of individuals who share living quarters a Total population. mid-year (millions) - As of July 1; if not available, and their mein eals. A boarder or lodger may or rav nor be included in average of to end-year estimates; 1960, 1970, and 1977 data, the household for statistical purposes. Statistical definitions of house- Utrban Population (percent of total) - Ratio of urban to total popule- hold very. tion; different definitions of urban areas may affect comparability Average number of persons per room - total, urban, and rura1 - Average nun- of data among countries, ber of persons per room in a11, urban, and rural occupied coovestioral Population density dwellings, respectively. Dwellings enclude non-pe-r.nent structures and * Per sq. a. - Mid-year population per square kilom-ter (100 hectres) unoccupied parts. of total area- Access to electricity (nprcont of dwellings) - total, urban, and rural - Per sq. k. agriculture land - Computed as above for agricultural land Conventional dwellings with electricity in living quarters as porcentage only. of totl. urban, and rural dwellings respectively. Population age structure (percent) - Children (0-14 years), working-age (15-64 years), and retired (65 years and over) as percentages of mid- EDUCATION year population. Ad lsated enrollment ratios Population growth rate (percent) - total, and urban - Compound annual Primary school - total, and fe.ale - Total and female enroll.ent of a11 ages growth rates of total and orban oid-year populations for 1950-60. at the primary level as percentages of res?pctivelv tri-ary school-age 1960-70, and 1970-75. populations; normally includes children aged 6-11 years bht adjonted for Crude birth rate (per thousand) - Annual live births per thousand of different lengths of primary education; for coontrlos with universal eds- mid-year population; ten-year arithmetic averages ending in 1960 and cation enrollment may exceed 100 percent since some pupils are below or 1970 and five-year average ending in 1975 for most recent estiate, above the official school age. Crude death rate (per thousand) - Annual deaths per thousand of mid- Secondary school - total. ard fonale - Coaputed as above; secondary odoca- ye-r population; ten-year arithmetic averages ending in 1960 and 1970 tin requires at least four years of approved prirury instruction; pro- and five-year average ending in 1975 for most recent estimate. vides general vocational, or teacher training instructions for pupils Gross reproduction rate - Average number of daughters a woman will bear usually of 12 to 17 years of age; correspondence courses are generally in her normal neproductive period if she eaperiences present age- e-ciuded specific fertility rates; usually five-year averages ending in 1960, Vocational enrollment (Percent of secondary) - Vocational institutions in- 1970, ad 1975. dude technical, industria1, or other prograns which operate independently Fsily plannine - acceptors, annual (thousands) - Annual number of or as departn.nts of secondary institutions acceptors of birth-control devices under auspfoes of national family Pupil-ceacher ratio - priary, and secondary - Toral studesct enrolled in planning program, prinary and secondary ievels divided by numbers of teachers in the corre- Family planning - users (percent of married women) - Percentage of eponding levels. married women of child-bearing age (15-44 years) who use birth-control Adult literacy rate (Percent) - Literate adults (able to read and write) as devices to a11 married women in nuns age group, a percentage of total adult population aged 15 years and over. PCOD AND NUTRITION CONSUMPTION Index of food production per capita (1970-100) - Indem number of per Passenger cers (per thousand ponulatian) - Passeoger cars comprise motor cars capita annual production of a11 food comodities seating less than eight persons; excludes ambulances, hearses and nilitary Per capita supply of cacis(percent of recoirement.) - Computed from, vehicles. energy equivalent of net food supplis available in cu-ntry per capita Radio receivers (per thou-and population) - All typen of receivers for radio per day. Available supplies comprise domestic production, iports less broadcasts to general public per thouoand of population; ecludes unlicensed exports, and changes in stock. Net supplies exclude animal feed, seeds, receivers in countries and in years when registration of radio sets was in quantities used in food processing, and losses in distributio. Re- effect; data for recent years ay nat bh comparable since most countries quirements were estimated by FAG based on physiological needs for nor- sbolished licesing. m1 Activity and health considering environmnental temperature, body TV receivers (per thousand copulation) - TV receivers for broadcast to gener.l nights, ag and sea diotributions of population, and allowing 10 per- public per thousand population; excludes unlicenned TV receivers in comn- cent for waste at household level. tries and in years when registration of T" vetc -c in effect. Per crpite supply of protein (grdas per day) - Proteiv content of per Newspaper circulation (per thrusand population) - Shows tho average dmc00- capita -e: supply f food per day. Net supply of food is defined as ti-o of "daily general interest mewspper', definoe as a periodical publi- above. Requirements for all countries established by LSDA provide for cation devoted pritarily to recording general nes. It is considered to a minimum allowance of 60 gras. of total protein per day and 20 franc be "daily" if it appears at least four times a -eek of animl and pulse protein, of which 10 grams should be animal protein. Cinema annual attendance per capita per year - Based on the number of tickets These standards are lower than those of 75 grmss of total protein and sold during the year, including admissionm to drive-in cinesas -ad mobile 23 gra of animal protein as an average for the world, proposed by units. PAO in the Third World Food Surv.y Per capita protein supply from anial and pulse - Protein supply of food EMPLOYMENT derived from anluals and pulses in grans per day. Total labor force (thousands) - Econumically active persona including armed Child (ages 1-4) mortality rate (per thousand) - Annual deaths per thous- forces and unemployed but ecluding housewives. stdents, etc. Defici- and in age group 1-4 years, to children in this age group. clans In various countries are not comParable. Femal (percnto) - Female labor force as percetage of total labor fre EALTH Agriculture (percent) - labor force in farming forestry, hunting and fishing Life expectancy at birth (years) - Average number of years of life as percentage of cota labor force. remaining at birth; usually five-year averages ending in 1960, 1970, Industry (2orcent) - Labor force in ining, construction, --ufa-turing ard and 1975. electricity, water and can as percentage of total labor force. Infant mortality rate (per thousand) - Annual deaths of infants under Participation rate (percent) - total, -le, and fenale - Total, m1e, and one year of age per thousand live birhts. emale labor force as percenrages of their roscecri se porulatiu s. Access to sEfe water (percent of population) - total, urban, and rural - The.s are TrO's ad)ated parricipatior raereflec-inog ee-sen Number of people (total, urban, and rural) with reasonable access to atrucrure of the population -nd lung time trend. safe water supply (includes treated surface waters or untreated but Econoric dependency ratio - Ratio of population ouder 15 and 65 and over to uncont-ainated water such an that from protected boreholes, prings, the labor force in age group of 15-64 years. and sanitary wells) as percentages of their respective populations. In ma,urban area a public fountain or standpost located not mere INCOME DISTRiBLTION them 200 meters from a house may be considered as being within rea- Percentage of private income (boch in ash and kind) received by richest 5 someble access of that house. In rural areas reasonable access would percent, richest 20 percent. poorest 20 percent. and poorest 40 percent imply that the housewife or =e=bers of the housebold do nnt have to of ho s holds. spend a disproportionate part of the day in fetchiog the laily's water needs. POVERTY TARGET GROUPS Access to excreta disposal (percent of population) - total urban, and Estimated absolute poverty intone level (US$ per capita) - urban sod rural - rural - funbhr of people (total, urban, and coral) served by secrets Absolute poverty incoe levl is that income level btlow which a nioral disposal as percentages of tneir respective populacions. Eicreta nutritionally adequate diet plus essential ono-food cequiremteos is act disposal may include the collection and disposal, with or without affordable. treatment, of human encrera and waste-water by water-borne ysteoa Estimated relative poverty income level (US$ per capita) - urban and rural - or the use of pit privies and si=ilar icetallatioss. Relative poverty income lev-l ia that income level lens than one-third Population per physician - Population divided by number of prscticing per capita personal in-oe of the country. physicians qualified from a =edic-l school at university level. Estimted population below poverty income level (percent) - urban and rural - Popul.tiom par suesing person - Population divided by number of Percent of populetito (urban and rural) who are either "absolute poor" or practicing male and female gradu-te nuras, practical nurses, and reltive poor" whichever is greater. assistant nurses. Economic and Social Dlte Division Economic Anlysis and Projection. Department  -02 ANN0EX I Page 4 of 5 MEXICO0 - ECONOMIC DEVELOPMEN0T DATA SHEET1 Actual Ostioct-s Prul-tod Growth Rates A. of G100 1965 1970 1975 1976 197 7 1978 1982 1966/70 197 1 /75 1976 /82 19~63 19~75 1992 NATI1ONAL ACC0UN10 Contant 1972 Prices 11S$ Million cros Dc-oool Product 26,603.2 36,978.6 48,906.9 49,283.5 49,709.3 52,940.9 74,221.2 6.8 5.6 6.4 99.96 99.1 95.9 Colas fr- Teru of Troda 8.0 88. 680.5 504.4 149.9 497.1 3,234.0 62.6 50.3 24.9 0.04 0.9 41. 005 --atc nou 26,611.2 37,066.? 49,187.4 49,787.9 49,859.2 53,437.6 77,955.2 6.9 5.8 5.6 100.09 100.0 190.0 lopotto (iolu..lng_FS) 2734.9 3,650.8 5,894.2 4,843.5 4,722.2 5,334.2 10,332.2 6.9 8.8 8.4 10.4 11.5 03.3 (lo rt.apniy)2,409.8 3,099.2 4,147.0 4,030.9 4,642.0 5,1. 092344 61 13.5 9.I. 12. Outom Cap 264.2 760.6 1,737.2 792.6 80.2 393.5 259.9 23.6 18.0 -23.8 9.5 3.4 0.4 cuo_npolio 22,394.1 30,662.1 40,397.9 40,645.3 40,753.9 43,314.4 60,614.0 6.6 5.7 6.0 01.6 90.9 79.1 Onvo,tt=en 4,571.3 7,165.2 10,527,6 9,935.2 9, 183.6 10,466.7 17,401.1 9.4 9.0 7.4 18.9 202. 5 22.3 Coos, Donoatic Saaisgu ~~~~~4,72.9 6,494.6 9,790.3 9,142.6 9,105.3 10,083.2 17,141.1 5.6 6.5 10.01 18.3 19. 22. CrM0 Nationali Savigo 4,329.9 6,100.4 9,003.9 9,205. 9,133.0 9,942. 9 15,237.9 6.2 5.6 10.2 17.0 16.9 2. TRADE_ LN 10300 AND 0110 Curret Pni-et 010 Millions As of 7. of Total 01/PORTS. TOTAL 2.073.2 j3,469 9,636.7 80241.5 7,8. 9,842.1 24.6071.0 10.5 20.4 16.3 110.0 1i00.0 100.0 food 5.9 74.6 443.0 149.1 270.5 339.1 504.7 66.1 42.9 1.9 0.3 5.1 2.0 Potr-1-o oud Prud-cto 26.2 54.2 291.1 279.9 009.1 192.:5 - 15.7 40.0 - 1.3 3,4 Orh-c Goodo 1,52 7.5 2,223 .4 5,979.2 5,643.3 5,138.7 6,097.7 18,660.5 7.9 21.5 12.9 73.6 60.1 75.1 Eo-ano -Ori-e 523.6 0,064.7 2,022.9 2,170.2 2,064.3 2,4212.0 5,699.8 15.7 12.7 13.9 24.9 23.4 22.9 EXPORTS ,TOTALI 1.964,6 2,74.5~, 6,8. 6,7. 7,454 9,160.1 24,244.2 6.9 17.2 21.8 180.0 100.1 100.0 Selected A.ge "Ioulur G.odo - 642.4 711.6 954.2 1,220.2 1,414.7 1,384.5 1,966.5 2.1 6.0 10.9 32.7 15.2 0.1 Pet-ole- sod Pr-dot 40.1 39.4 460.-I 557.0 915.8 1,824.4 11,065.1 -0.9 64.3 57.5 2.0 7.6 485.6 Selectd Nlcao199.7 244.3 457.6 464.3 500.4 558.1 1,0118.5 5.2 13.4 12.8 9.7 7.5 4.2 Mar00atrIrll 132.5 326.9 1,069.3 1,190.0 1,390 .6 1,516.8 3,005.3 19.8 26.8 15.9 6.7 17.6 12.4 Gther Ounds 153.9 26.6 63.3 43.8 46.7 53.6 87.4 -29.6 18.9 4.7 7.8 10 0.4 Nou-ator Oeri-e 096.0 1,397.7 3,077.2 3,294.2 3,175.9 3, 772. 7 7,111.4 11.6 17.1 22.7 4.1 50.:6 29.3 TRADE 3801CE0 Avo... 72-100 E.peot Pri.Icelden 77.7 90.3 169.3 166.4 165.9 196.9 354.6 2.6 13.9 13.4 Deportt Price Isdeu 74.6 85.9 149.9 152.9 160.6 172.8 240.7 2.9 11.0 7.9 Tem, of Trod 194.2 102.9 113.2 100.8 103.3 110.7 147.3 -0.3 1.9 5.2 VALUN ADD80D BY7 000TO0 Coa..tat 1972 PrOu-, US$ Million Au of % of Total pri-ay 3,644.6 4,139.0 4,493.2 4,347.1 4,400.6 4,614.5 5,191.2 2.6 1.6 2.1 19.2 12.7 6.9 lec-odan 0,139.9 02,406.9 16,949.2 07,428.6 18,020 .2 20,094 .7 32,643.0 9.8 6.6 9.7 26.4 30.5 43.4 Teociay 14,919.7 20,422.7 27,075.5 27,502.0 27,108.5 28,321.3 32,085.7 6.6 5.0 4.6 54.4 36.0 49.7 Totto1 (GDP) 26,603.2 36,978.6 48,506.9 49,293.5 49,789.3 52,940.5 74,721.2 6.9 5.6 6.4 100.0 108.0 108 .0 CONSOOL:DATED PUBLIC 01C000 FI8ANCES As . o f 01Y Current R-cipto 3,042.0 5,300.0 9,263.0 10,119.9 10,579.1 11,568.2 21,335.3 13. 1 11.4 12.2 11.5 18.8 27.6 Correo NuEn.diturco 2,329.0 3,853.2 0,245.3 9,837.3 8,964.6 9,627.3 15,715.0 10.6 16.3 9.5 8.0 17.0 20.2 Pobli S-ofgo 713.0 2,534.8 917.7 1,292.6 1,614.5 1,912.9 5,619.3 16.6 -9.9 29.3 2.7 D.9 7.2 enorc, for I-ont-ot 776.3 1,612.6 987.1 1,392.1 1,701.9 2,019.0 5,775.4 23.2 -14.8 20.7 2/ 2.9 2.0 7.4 Iueoo_o 1, 741.5 2,279.3 5,234.5 5,103.9 4,226.2 4,894.4 9,008.7 5.5 18 .1 9.5- 6.9 10.6 12.7 Defliot (net) 965,2 666.9 4,247.4 3,711.7 2,324,3 2,874.6 4,113.3 -2.1 46.8 -0.5 3.6 8.6 5.3 ALLIOCATION OP 00011 PUBL1C SECTOR At 1 of Total 01P0N1IT17RES E-egy - . 5,372.0 5,194.6 6,303.6 - . - - - 22.0 30.0 - Transport oad Ooe.toicatlan - 1,752.6 1, 732. 7 0 72 .6 --- - - 8.9 7.9 - So-la1 Welf-e 4,225.6 4,590.3 4,461.2 --- - - 21.3 20.5 Industry -- 1,641.4 1,511,4 1,531.3 8. - - 03 7.0 - Agri-ult-r -- 1,970.8 1,459.9 1,575.1 *.-- - - 10.0 7.3 - G--trl Adolnlt-atien ad Dnteu- -- 3,293,.7 3,786.9 4,764.7 --- - - 16.6 22.0 - Connrca- 1,533.1 1,2 14.0 1,290.4 --- - - 7.2 5.9 - T.crion- 63.3 64.3 71.6 - - - - 0.3 0.3 - Total 19 0,061.3 19,562.1 Z1L232.5. 100.0 180.0- Pio19AOts SELECTERD INDICATORS15/8 917 1976/82 I0081 2.49 5,66 5.32 13.56 23.43 2.84 2.86 - - - 3.20 3,90 3.29 10,n-t Elootielty 0.7'5 1,29 0,07 -4.04 -14,42 2.65 1.42 - . - 1.11 1.44 1.47 M-rOiel So-ogs Eatin -0.16 -0,04 -0,00 0,73 0,24 90.9 . - 0.15 0.16 0,29 Value Added nor Worker (1972 prOi... On Mlilliun Au . of Tonal E961-1970 7 , of -veag 8.B30 F0R00 AND 0171001 PER WORKER 1960 1970 1960 1970 Growth Rate 1960 1970 1960 1920 Growth Rear Agrlo-ltur 5.4 5.1 50.5 39.2 -0,6 608,0 939.0 34.7 33.0 4.4 Industry 2.1 3,0 19.6 23.1 3,6 2,460.9 4,134.9 140,6 145.8 5.3 brui.e. 3,2 4.9 29,9 32.7 4.4 3,222,8 4,944.8 183,6 142,0 2,3 Tnto1 10.7 13.0 100.0 100.0 2.0 1,755.6 2,047.6 100.1 100.0 5,0 2/ This low rota of growh it cau-d by u peak in public i-oetart in 1975. The pr-jeot-d roi for 1927-82 it about 137.  ANNEX I - 21- Page 5 of 5 BALANCE OF PAYMENTS. EXTERNAL ASSISTANCE AND DEBT (US$ million at current prices) Actual Preliminary Estimates Projections 1970 1975 1976 1977 1978 1980 1982 ISUMMARY BAL.JOCE OF PAYMENTS Exports (including NFS) 2,745.4 6,091.5 6,770.3 7,454.2 9,160.1 16,117.1 24,244.2 Imports (including NFS) 3,416.9 8,636.6 8,241.5 7,582.8 9,842.1 16,747.9 24,870.0 Beacurce Balan 671.5 -2,555.1 -1,471.2 - 129.6 - 692.0 - 630.8 - 625.8 Intezrest net -307.0 -1,266.5 -1 572.6 -1,804.3 -2,050.1 -2,625.5 -3,303.0 Direct Investment Income - 267.5 - 657.5 - 715.5 - 480.8 - 823.5 -1,072.1 -1,383.9 Workers' Remittances 122.7 174.6 193.0 211.3 231.4 280.0 338.8 Current Transfers, net 55.3 123.4 153.0 199.8 218.5 261.3 312.9 Current Account Balance -1,068.0 -4,181.1 -3,413.3 -2,002.6 -3,105.7 -3,787.1 -4,661.0 Private Direct Investment 322.8 748.8 588.7, 437.3 679.7 875.5 1,098.2 Public Med. and Lung Tern Loans, net 258.6 3,565.8 4,264.5 3,896.0 2,890.9 3,721.0 4,510.5 (Disbursements) (821.3) (4,418.6) ( 5,417.9) ( 6,365.2) ( 6,778.1) ( 9,821.9) (11,685.0) (Repayments) (-562.7) (-852.8) (-1,153.4) (-2,469.3) (-3,887.2) (-6,100.9) (-7,174.5) Other Capital 588.7 31.7 -1,773.0 -1,860.0 100.0 100.0 50.0 (Public Short Tue-) (139.6) (842.8) (839.8) (-950.0) (-200.0) (-200.0) (-200.0) (Other Capital, ..e.i.) (449.1) (-811.1) (-2,612.8) (-910.0) ( 300.0) ( 300.0) ( 250.0) Change in Reserves (-= increase) -102.1 -165.2 333.1 -470.7 -564.9 -909.4 -997.7 GRANT AND LOAN C,OMITMENTS 843.0 4,304.9 5.628.8 6,146.3 - PUBLIC MED. AND L.T. LOANS IBRD 146.8 310.0 410.0 162.0 _ _ Other Multilateral 112.3 121.8 171.2 280.0 Governments 78.8 317.2 270.3 250.0 - - Suppliers 69.7 115.3 99.5 150.0 Banks and Financial Institutions 435.4 3,300.3 4,511.9 4,704.3 Bonds - 140.3 165.9 600.0 DEBT AND DEBT SERVICE EXTERNAL DEBT Public Debt Outstanding & Disbursed 3,227.8 11,256.9 15,554.0 19,413.2 Outstanding and Disbursed (end of Period) o ..3,17 Interest on Public Debt -227.3 -827.7 _1,075.4 -1,193.8 $Millions Percent Repayment on Public Debt -496.0 -762.0 -1,217.4 -2,469.3 Public M & L.T. Other Debt Service (net) - 79.7 -438.8 - 497.2 -1,012.5 Total Debt Service (net) -803.0 -2,028.5 -2,790.0 -4,675.6 Leas Burden on Export Earnings 2/ (7.) IBRD 1,405.7 7.2 a. Public Debt Service 25.2 25.4 32.9 47.8 Other Multilateral 699.4 3.6 b. Total Debt service 28.0 32.4 40.1 61.0 Governments 903.8 4.7 c. Total Debt Service and Direct Suppliers 421.0 2.2 Investnent Income 37.3 42.9 50.3 67.3 Bonds 1,316.1 6.8 Average Terns of Public Debt Other Fiansi1al a. Interest as 7 of prior year's Institutionu 14,667.1 75.6 D.O. and D. 7.8 10.2 9.6 7.7 Total 19j413.2 100.0 b. A-ortization as