Mexico - Ocoroni Irrigation Project

Documont of The World Bank FOR OFFICIAL USE ONLY Repr No. P-2881-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 THE OCORONI IRRIGATION PROJECT September 24, 1980 This dcumet ha a restcted dWrlbution ad may be ue by recipiets only in the peifrmance of Itheir ofeAli du"le. its cmntmet may not othervwis be disclosed without World Bank authorIztion.  CURRENCY EQUIVALENTS Since September 1, 1976 the Mexican peso has been floating; it has fluctuated around Mex$ 22.60 to the US dollar since mid-1977. On September 9, 1980, the peso traded at 23.0 per US dollar. FISCAL YEAR January I to December 31 WEIGHTS AND MEASURES 2 1 hectare (ha) = 10,000 m - 2.47 acres 1 kilometer (km) 2 ' 0.62 miles 1 square kilometer (km ) - 0.39 sq. miles - 100 ha 1 kilogram (kg) = 2.2 pounds 1 metric ton (mt) - 1,000 kg - 0.98 long ton ABBREVIATIONS ANAGSA: National Crop and Livestock Insurance Agency (Aseguradora Nacional Agricola y Ganadera S.A.) BANRURAL: National Rural Credit Bank (Banco Nacional de Credito Rural) CIAPAN: Center of Agricultural Research of the Northern Pacific Region (Campo Experimental del Instituto de Investigaciones Agricolas de la Zona Pacifico Norte) COPLAMAR: Commission for Marginal Areas (Comision para las Areas Marginadas) ERR: Economic Rate of Return FERTIMEX: Mexican Fertilizer Corporation (Fertilizantes Mexicanos S.A.) FIRA: Agricultural Trust Funds of the Bank of Mexico (Fideicomisos Instituidos en el Banco de Mexico en Relacion con la Agricultura) ICB: International Competitive Bidding LCB: Local Competitive Bidding NAFINSA: National Development Bank (Nacional Financiera, S.A.) PEMEX: Mexican Petroleum Company (Petroleos Mexicanos) PIDER: Integrated Program for Rural Development (Programa Integral para el Desarrollo Rural) PLAMEPA: On-farm Improvement Plan in Irrigation Districts (Plan de Mejoramiento Parcelario) PNDR: Plan for Small Scale Agricultural Infrastructure Development (Programa Nacional de Desarrollo Rural) SARH: Ministry of Agriculture and Water Resources (Secretaria de Agricultura y Recursos Hidraulicos) SHCP: Ministry of Finance (Secretaria de Hacienda y Credito Publico) SRA: Ministry of Agrarian Reform (Secretaria de Reforma Agraria)  MEXICO FOR OFFICIAL USE ONLY OCORONI IRRIGATION PROJECT LOAN AND PROJECT SUMMARY Borrower: Nacional Financiera, S.A. Guarantor: United Mexican States Beneficiary: Secretariat of Agriculture and Water Resources (SARH) Amount: US$23 million equivalent Terms: Payable in 15 years, including 3 years of grace, at an interest rate of 9.25 percent per annum. Project Description: The project would promote intensive irrigated agriculture on about 10,000 ha in the Ocoroni Valley, in the Northwest of the State of Sinaloa, through: (a) construction of the El Sabinal dam, located 40 km up- stream on the Ocoroni river; (b) construction of a diversion dam at San Miguel; (c) construction of distribution and drainage canal systems, including service roads and control structures; (d) land clearing on about 6,000 ha, leveling of about 3,500 ha, and removal of rocks from about 2,100 ha. of land; (e) provisions for a program of intensive agricultural support services (extension, research, equipment, demonstration and training); (f) equipment and machinery for operation and maintenance of project facilities; and (g) Studies for further development of irrigation and drainage in the Ocoroni, Sinaloa and Fuerte River Basins. The project would directly benefit about 2,000 ejidatario 1/ families. There will be no private holdings. About 90 percent of the beneficiaries will be organized in communal groups of 20 to 40 families each, while the remaining 10 percent will cultivate the land individually, also within the ejido system. On full development, annual family incomes will increase about threefold. There are no major risks associated with the project because of the Mexican experience in execution of irrigation infrastructures and dam building. 1/ Ejidatarios are members of an ejido, a form of group land tenure based on usufruct. | This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - Estimated Cost: -----US$ millions----- Local Foreign Total I. Civil works and engineering 13.27 12.12 25.39 II. Land clearing, leveling and derocking 1.70 1.53 3.23 III. Technical assistance 1.00 0.25 1.25 IV. Equipment for operation and maintenance 0.09 0.81 0.90 V. Indemnities and Resettlement 2.80 0.74 3.54 VI. Studies for Agricultural Development 0.35 0.35 0.70 VII. Total Baseline Cost 19.21 15.80 35.01 VIII. Contingencies Physical contingencies 2.88 2.58 5.46 Price contingencies 8.52 5.56 14.08 TOTAL COST 30.61 23.94 54.55 Financial Plan: US$ millions % Government 31.6 58 Bank 23.0 42 TOTAL 54.6 100 Estimated Disbursements: Bank FY 1981 1982 1983 1984 1985 1986 --------------- US$ millions -------------- Annual 0.7 1.3 7.0 7.0 5.0 2.0 Cumulative 0.7 2.0 9.0 16.0 21.0 23.0 Rate of Return: 15 percent Staff Appraisal Report: Report No. 3083-ME.  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 THE OCORONI 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$23 million to help finance the Ocoroni Irrigation Project. The loan would be repaid over 15 years, including 3 years of grace, with interest at 9.25 percent per annum. PART I: THE ECONOMY I/ 2. The Mexican economic situation and major issues of economic policy were analyzed in "Special Study of the Mexican Economy: Major Policy Issues and Prospects" (2307-ME), distributed to the Executive Directors on May 30, 1979. The most recent economic mission visited Mexico in February 1980 and is now preparing its report. Country data sheets are attached as Annex I. Past Performance 3. For the three decades preceding the mid-seventies, Mexico was very successful in achieving rapid economic growth while also maintaining stability in prices and the balance of payments. From 1940 to 1970, 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 1976. The Government's economic 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 regula- tory and institutional framework, as well as good profit prospects, to induce private sector growth. 4. This strategy produced considerable progress and better living standards for many Mexicans. However, the incomes of poor farmers and marginal urban dwellers, whose productivity was low and has not been increasing, have been lagging behind. There was therefore little reduction in contrasts within the Mexican economy. While land redistribution has continued, most of the peasants who received land could not significantly improve their economic status as they received only limited benefits from infrastructure, credit and technical assistance. Rapid population growth, which reached a peak of almost 3.5 percent per year by the mid-1970s, made social equity difficult to achieve. Even Mexico's sustained economic growth was not sufficient to absorb the rapidly growing labor force in productive employment and by the 1970s some 50 percent of the labor force was either relatively unproductive and poorly paid, or openly unemployed. 1/ This section is substantially unchanged from the President's Report for the Seventh Agricultural Credit Project (Report P-2836-ME of June 9, 1980).  5. During the mid-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 2 percent in 1976--the lowest rate experienced 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; since then it has remained rather stable at rates fluctuating around 22.60 pesos per dollar. Following the devaluation, Mexico obtained major support from the IMF. The new Government ratified a three-year extended facility agreement with the Fund shortly after taking office on December 1, 1976, and was generally successful in adhering to it. Recent and Current Situation 6. 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. Rich new petroleum discoveries and high world prices offered profitable investment opportunities in the petroleum sector; indeed, increased production for export of these products seemed by far the only 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 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 Government's program included control of inflation to be followed by a return to high rates of economic growth. Better management of public sector expenditures, tax reform, more rational pricing and cost control in public sector enter- prises, promotion of private savings, limiting wage increases to justifiable levels, and more effective cooperation with the private sector were important parts of the Government's economic strategy. 8. This approach succeeded in bringing inflation down to 17 and 18 percent in 1978 and 1979, respectively, as against an annual rate of almost 29 percent in 1977. The deficit in the current account of the balance of payments peaked at US$4.2 billion (or 5.3 percent of GDP) in 1975 and declined to US$1.9 billion (equivalent to 2.5 percent of GDP) in 1977. Favorable oil prospects and increasing capital inflows brought about a rapid increase in imports reflecting both the resolve to reduce protectionism and the growing demand for capital and intermediate goods upon which the expansion of the economy depends. The current account deficit increased to US$2.6 billion (or 2.8 percent of GDP) in 1978 and further to an estimated US$4.6 billion (under 3.8 percent of GDP) in 1979. The public sector deficit peaked at about 9 percent of GDP in 1975 and declined to about 7 percent in 1979. Mobilization of savings by the banking system has recovered at a strong pace. GDP growth in 1978 was about 7 percent and in 1979 is estimated at about 8 percent as compared to 2 percent in 1977.  - 3 - 9. The growth outlook for 1980 continues to be favorable and the economy should increase at about 8 percent, but inflation will remain a problem, essentially as a result of expansionary policies with investments increasing at a rate of more than 15 percent a year in real terms. These investments call for continued increase in imports of capital and inter- mediate goods. The import program will put a severe strain on the existing infrastructure capacity, especially ports and rail transport in which bottle- necks already exist. Additional strain on the transport system is likely to come from the large imports of grains as a result of a bad crop this year. 10. Another threat to the efforts of the Government in reducing inflation below 20 percent may come from the wage area. The agreed increase in the minimum wage of about 21 percent for 1980, after three consecutive years of decline in real wages, while not automatically reflected in the total wage bill, is likely to establish a floor in union bargaining within the modern sector and contribute to a cost push which might be passed on to consumers. 11. The Government will not have an easy task in maintaining price increases within acceptable limits. The cumulative increase in the consumer price index in 1980, through July 31, 1980 of about 18 percent, resulting in part from the newly introduced value-added tax, may adversely affect expecta- tions about inflation. At the same time, the need to expand public investment in the key infrasture sectors and to maintain in real terms the current programs in the energy sectors, leaves relatively little scope for significant adjustments in the level of public expenditure. Economic Problems and Prospects 12. Mexico has the institutional and natural resources necessary to attain her ambitious goals of rapid growth and alleviation of poverty. The acute short-run disequilibria that affected the country during the mid-70s have been brought under control; the new petroleum riches will greatly relax the financial constraints on growth. The proven oil and gas reserves are estimated at about 60 billion barrels. Exploitation of these reserves should allow Mexico to substantially increase production of crude oil and natural gas from the equivalent of about 1.2 million bbl/day in 1976. The stated goal of the Government is to reach a production level of about 2.7 million bbl/day in 1981, and to more or less maintain it at a level that will accommodate exports of 1.1 million bbl/day; by mid-year production had reached 2.3 million bbl/day. The Mexican Government is unwilling to exceed this limit for fear of becoming increasingly a classical "oil producer country" with the economic and social tensions that would ensue. But even at this production level, the challenge for Mexico is how to mobilize its resources--its human skills, its institutions, and its experience--to help resolve its long term development problems. The most serious of these relate to poverty, unemployment, stagnation in agriculture, and urban-regional imbalances. 13. Poverty: Mexicans have participated unevenly in the remarkable economic growth of the last several decades. According to preliminary esti- mates for 1977, at least 2.4 million households (22 percent of the total) lived in absolute poverty, while at least 2.8 million (25 percent of the total) had incomes of less than one-third the national average. The root causes of  -4- this persistent problem are three: rapid population growth, past neglect of agriculture (where some two-thirds of the poor are principally employed), and slow absorption of labor in high-productivity jobs (mostly in industry). 14. The Government is acting on all three fronts. A family planning program, started in 1972, has already helped reduce population growth from 3.5 percent per year to an estimated 2.9 percent at the present time. The program is being further strengthened by the present administration, with the ambitious goal of reducing population growth to 2.5 percent per year by 1982 and to 1 percent by the year 2000. New approaches are also taking hold in regard to rainfed agriculture (see para. 17). On the employment front, new tax incentives have reduced the anti-employment bias and efforts to stimulate employment will have to be continued. The expected rapid growth of output should also create jobs more rapidly. In spite of this progress, however, the still rapid growth of population and the staggering increase of the labor force (at 3.7 percent p.a.) made unavoidable by the high percentage of young people in today's population, renders the eradication of absolute poverty a difficult goal to attain in the near future. The Government has under its consideration several types of subsidies for the poor. These could prove to be short-term palliatives and which would preempt resources which would otherwise be available for investment in employment creating activities or for improving educational or health standards of the poor on a more permanent basis. 15. Open and hidden unemployment, which are now respectively at 8-9 percent and 40 percent of the labor force, will remain major problems in the years to come. With the expected GDP growth rate of 8 percent p.a., the economy should be able to absorb the additional labor force, assuming no significant change in the participation rate (now at about 29 percent) and some increase in labor productivity. In absolute terms, however the present levels of under employment and unemployment are likely to remain. 16. A National Employment Plan was published early last year. It calls for a number of measures to strengthen the so-called informal sector in both urban and rural areas. To increase the productivity of those employed outside the modern sector, and their employment opportunities, a major effort will be required in the area of vocational training. Technical assistance programs are also needed to stimulate more organized and structured forms of activities, especially in the services sector. While there is no doubt that the authorities are concerned about unemployment, and underemployment, and while the institutional structure to carry out some important programs already exist, a concentrated effort will be required to take effective action and to make better use of human resources by substantially reducing the level of hidden and open unemployment. 17. In agriculture, crop and livestock production has shown little growth since the mid-1960s. Faced with diminishing returns to expensive new large-scale irrigation works, as well as the continuing low productivity (and income per capita) in the non-irrigated ("rainfed") sector, the present administration has re-organized the parts of the Government that deal with agriculture in order to design and implement a new strategy. This strategy emphasizes production increases through a balanced development program.  - 5- Greater emphasis is being placed on technical assistance, demonstration, and credit to develop the underutilized rainfed agricultural potential. Programs to rehabilitate existing irrigation serving nearly one million ha are underway. Small-scale irrigation development is being promoted. Construction of new large-scale irrigation units continues, but with a smaller portion of budget resources than in the past. The banking system is being encouraged to provide greater support to agricultural production and processing programs. These initiatives should lead to an acceleration of production growth, more equal development opportunities for Mexico's farmers, and an improvement in the living conditions of the rural poor. 18. The main urban-regional problems are two-fold: (a) growing conges- tion, pollution, high-cost of services (especially water) and other manage- ment problems that stem from continued rapid growth of Mexico City (already the third most populous metropolitan area in the world) and other areas in the dry, densely populated central plateau, and (b) retarded development, poverty and great difficulty in providing either better jobs or adequate public services for the one-third of all Mexicans who live in towns of less than 2,500 inhabitants. The present Government has taken many positive steps to confront these problems, including an administrative re-organization, elaboration of a comprehensive plan, and introduction of a strong package of incentives to promote growth in a few well-selected growth poles. 19. The expected high growth rate of the economy in the years to come is the country's strongest weapon with which to reduce poverty and unemployment. Industry will be a leading sector in expanding domestic production and exports. A National Industrial Development Plan was published last year and it reflects the serious effort of the present administration in identifying the long-term prospects of the industrial sector and their implications for employment. Industry has the potential for considerable expansion in many areas, including efficient import substitution in chemicals, petrochemicals and capital goods as well as exports of many different manufactured products. The Mexican Petroleum Company (PEMEX) has an ambitious investment program to produce a variety of primary petrochemicals on a large scale for both domestic consumption and exports and equally vigorous expansion is expected in investment for the production of secondary petrochemicals. Tourism export earnings are also expected to increase substantially. 20. A National Development Plan was published in April 1980. This Plan marks the final step in the planning activities which the current administra- tion has undertaken in order to obtain a more structured picture of the economic and social problems facing the country. In the past three years, a National Urban Development Plan and the already mentioned Industrial Development and Employment Plans have appeared; the National Development Plan aims at formulating a national development program reconciling the sectoral targets and making them consistent with the general economic and social strategy of the Government and with the availability of domestic and foreign financial resources.  - 6 - 21. Mexico's public and publicly guaranteed debt service ratio has been increasing over the recent past and peaked above 60 percent in 1979. This high ratio reflects the low level of exports relative to GNP and the high proportion of Mexican borrowing from commercial banks; the ratio of external public debt to GNP is average for middle-income countries. The public debt service ratio is expected to decline to around 40 percent in the early 1980s, not only as a result of rapid increases of petroleum exports but also as a function of repayment of some of the debt contracted on the least favorable terms. Debt service on Bank loans amounted to about 2.9 percent of public debt service in 1978; this ratio is projected to remain about the same during the early and mid-1980s. The Bank currently holds about 6.1 percent of Mexico's total medium and long-term public debt, and this ratio is not likely to change significantly over the next few years. Mexico is creditworthy for borrowing on conventional terms. PART II - BANK GROUP OPERATIONS IN MEXICO Bank Operations 22. As of July 31, 1980, Mexico had received 65 loans from the Bank amounting to US$4,220.9 million net of cancellations and terminations; of these, 37 loans totalling US$1,760.4 million were fully disbursed. The Bank presently holds US$3,586.4 million of which US$1,657.3 million have not yet been disbursed. Some 43 percent of Bank lending has been for agricul- ture and rural development (22 loans for US$1,841.4 million), 17 percent for power (12 loans for US$704.8 million), 16 percent for transportation (13 loans for US$666.7 million), and 18 percent for industry (10 loans for US$747.5 million); the remaining 6 percent has been for water supply (US$130 million), tourism (US$114 million), and urban development (US$16.5 million) projects. Annex II contains a summary statement of Bank loans as of July 31, 1980 and notes on the execution of ongoing projects. 23. Implementation of most Bank-financed projects was delayed during the period of economic difficulties in the mid-1970s and during the period of adjustment and stabilization that followed the September 1976 devaluation of the peso. Since then, the Government has taken important actions to accelerate implementation of the projects. Adequate budget finance has been provided. Projects which had important structural constraints were modified and rephased to account for changed circumstances. The Government and Bank officials have periodically met to review project implementation, and greater attention in Mexico has been focused on monitoring project implementation and disbursements. As a result of these measures, implementation is proceeding satisfactorily on most of the Bank-assisted projects and plans have been formulated to strengthen execution of those projects where improvement is still needed. The effective- ness of these actions is reflected in disbursement totals. In FY78 US$91 million was disbursed to Mexico, in FY79 the disbursements totalled US$233 million and in FY80 disbursements further increased to US$401 million or 40 percent of the undisbursed balance at the beginning of the year.  -7- IFC Operations 24. As of July 31, 1980, IFC had made investment commitments in 22 companies in Mexico, for a total of US$535.2 million, of which US$393.1 million had been sold, repaid or cancelled. A summary statement of IFC investments as of July 31, 1980, is presented in Annex II. Bank Strategy 25. 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 contributions to output and employment; and (iii) help reduce Mexico's urban-regional imbalances. Therefore, 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. 26. 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's agricultural lending program for Mexico has four goals: first, to increase productivity of presently cultivated lands through selected programs of irri- gation and on-farm improvements; second, to improve the productivity of small farmers through programs for (a) rural development, (b) rainfed agricultural development, and (c) bringing new areas in the humid tropics under cultivation; third, to complement infrastructure investments with general support services including agricultural extension and marketing programs and provision of medium-term credit; and fourth, to promote employment opportunities in rural areas through programs of agro- and rural-industries. The Bank has made thirteen loans in FY74-80 totalling US$1,497 million for irrigation, rural development and agriculture, agro-industries and livestock credit programs. Several projects for water control and irrigation, rainfed agriculture, rural development, and support services are in preparation; a rainfed agri- cultural development project and an integrated rural development project are expected to be ready for presentation to the Executive Directors in the coming months. 27. Past Bank lending for industry has been aimed at (a) assisting the Government's efforts to reduce the balance of payments deficit, (b) decentralizing industrial activities away from the major and increasingly congested urban areas and (c) promoting greater employment in the sector by supporting medium- and small-scale industry. A steel project which the Bank helped structure and finance is now operating in a previously under- developed area on the west coast of Mexico. The fertilizer sector has been strengthened by two Bank assisted projects which the state-owned fertilizer company (FERTIMEX) is carrying out. Loans for projects to promote the develop- ment of small- and medium-scale industrial enterprises and to support an industrial equipment fund (FONEI) were approved by the Executive Directors in FYs78-79; they offer support to the private sector at a time of rapid expansion. A second small and medium scale industries project was approved by the Executive Directors in June 1980. The Executive Directors recently approved a project for the mining sector which up to now has received insufficient resources from the financial system. A capital goods industry project is under discussion for possible Bank support.  - 8 - 28. As regards infrastructure, the Bank's operations have been focused on investments in key areas of the country as well as on institutional reforms and sector policies aiming, inter alia, at suitable pricing mechanisms to help generate additional resources for investment financing. The airports 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 have been instrumental in the establishment of specialized institutions for efficient provision of drinking water and in the pricing of water at levels more closely related to costs. A highway sector project was approved by the Executive Directors in FY79. A medium-size cities water supply project and a railways project have been appraised and are being processed for submission to Executive Directors. 29. The Government and the Bank have long recognized the regional economic disparities prevailing in Mexico. In June 1976 the Government adopted the Law of Human Settlements to provide a new institutional framework to deal with the pressing problems of over-concentration of economic activities in the larger metropolitan areas. The Government has adopted a National Urban Development Plan that spells out its regional development priorities in operational terms, and several projects are now being prepared to meet the needs for basic urban services for poor families 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 a second project for the oil producing southeastern Mexico has been appraised. 30. The Inter-American Development Bank (IDB) is the second largest source of multilateral aid to Mexico. The IDB has made loans totaling US$2,148 million to December 31, 1979. Over sixty percent of this lending has gone for agricultural and rural development projects, and the balance for transportation, industry, and tourism infrastructure. In 1979, the IDB approved five loans totaling US$251 million for industrial credit, irrigation, human resources, highways and export promotion 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 Integrated Program for Rural Development (PIDER), agricultural and livestock credit, small- and medium-scale indus- tries, and hotel development. The International Fund for Agricultural Development (IFAD) has approved a loan of US$22 million for a rural develo- ment project in the state of Oaxaca which was appraised by the Bank's staff. PART III - THE AGRICULTURAL SECTOR Background 31. Agriculture is the most important source of income for Mexico's rural population of approximately 24 million. It employs about 34 percent of the labor force in the country, despite increasing migration to urban areas. The sector sustains about 4 million families, of which 1.3 million  -9- are landless. The number of landless families is increasing because of the limited availability of farm land. The majority of the primary sector labor force, however, is engaged in activities with very low productivity, with about two-thirds of agricultural labor earning incomes below the minimum wage. 32. Agricultural external trade remains favorable and exports in 1979 amounted to about US$1.78 billion, or 20 percent of the total merchandise exports (almost 35 percent of non-oil exports), while the share of agricultural imports, US$0.83 billion, in total merchandise imports was about 7 percent. However, the combined effect of rapid population growth and the declining growth in agricultural production and bad harvests because of droughts in recent years, have resulted in a significant increase in food imports, partic- ularly of corn, wheat, sorghum and oilseeds. 33. The Mexican agriculture is marked by wide disparities in resource endowment, technology, productivity and income. As a consequence of the wide range of conditions in the country's two million square kilometers, Mexican agriculture is characterized by sharp contrasts, such as that between the subsistence farms in the Sierras and the technology intensive commercial farms in the western irrigated zones. Comparing the 0.2 million modern farms with the 1.5 million subsistence farms at the other end of the spectrum, income per ha in the former is 2.7 times the latter, and income per capita about 20 times as high. 34. Since adoption of Government policy to promote irrigation and the creation, in 1946, of the Secretariat of Hydraulic Resources, three different phases can be distinguished in the development of agriculture. During the period 1945-55, crop production grew at a rate of 7.3 percent per annum; most of the rapid increase coming from opening nearly 110,000 ha per annum to intensive irrigated cultivation. The growth of livestock production during the same period averaged 3.7 percent per annum, resulting in a combined growth rate of 6 percent for the sector as a whole. In 1955-65, the expansion of irrigated land declined to about 65,000 ha per year and agricultural and livestock production sector expanded at a more moderate rate of 4.2 percent per annum. Since 1965, the cropped area has remained constant at about 15 million ha. Agricultural production grew only at a yearly average of 1.4 percent between 1965 and 1978, while livestock production continued to expand at about 4 percent per annum. The share of agriculture in national GDP has declined from 14 percent in 1965 to just over 9 percent in 1978, or about 11 percent of the non-oil GDP. 35. Mexico has, however, a considerable potential for further agri- cultural development. Large areas of unused or underused lands could be brought under intensive agriculture. Productivity gains would be possible with extension of improved technology and applied research to the rainfed areas, while the promotion of land improvement and reclamation and soil and water management would enable to bring another 10 milion ha under rainfed cultivation. Furthermore, the Government proposes to double the irrigated area to about 10 million ha by the year 2000. 36. About one-third of the area under cultivation in Mexico is cur- rently irrigated and the 5 million ha or so of irrigated agriculture ac- counts for 50 percent of normal output. A major part of the irrigation  - 10 - facilities depend on surface flow of water stored in reservoirs and, in recent years, adverse weather conditions have affected the water levels in reservoirs. In May 1980, water availability in these reservoirs was 39 percent of the storage capacity as compared to 67 percent a year earlier. Because of the reduced availability of water, irrigated agriculture has suffered and crop production has declined significantly. However, with normal rainfall patterns, the irrigation projects under construction would signifi- cantly augment production capacity. 37. Water has been a key factor in the development of Mexican agriculture and is essential to productive activities and improvement of the living condi- tions of the rural population. The agriculture sector accounts for about 95 per- cent of the total consumption of water in the country and efficient hydraulic infrastructures have contributed much to agricultural production over the past 35 years. Efforts for balanced exploitation of the national water resources and their conservation are reflected in the 1971 Federal Water Law, which unified existing laws and regulations. The creation of the National Hydraulic Commission institutionalized this effort in 1972 leading to the formulation, in 1975, of the National Water Plan with Bank involvement. It established a systematic basis for a national water strategy, embodying 50 years of experience in management of hydraulic resources for the global planning of water use through the end of the century. It formulated specific regional strategies to address territorial and sectoral disequilibria in water resource endowment, management and demand, within the framework of the overall national needs. The proposed project fits into this strategy, since it is based on careful planning of surface water management, to promote development of the available potential in the Northwestern Pacific Region, one of the four areas which the Water Plan included in its regional approach. Government's Policies and Programs 38. The present administration has perceived the dimensions of the problems of the sector and has stated its commitment to improve the living conditions of the poorer sections of the rural population and to focus on agricultural diversification. 39. In order to achieve both, the Government has designed a strategy aimed at making fuller use of water and land resources, obtaining higher productivity in new and existing lands and expanding the cropped area, both irrigated and rainfed, complemented with rehabilitation of those irrigation districts where infrastructure is inadequate or land is in poor condition. The rehabilitation programs have received important support from Government agencies, the Mexican banking community, and participating farmers. New lands are also expected to be brought into production, mostly under rainfed conditions; increasing attention is being given to rainfed agriculture through the 123 recently established rainfed districts. The Government has given high priority to integration of technical assistance and exten- sion services with marketing and credit in rainfed areas. The Bank has worked closely with Mexican officials in preparing the recently appraised rainfed agriculture development project in support of the national rainfed district's program. The Government is also taking action to meet the needs of the indigenous population and of the people in marginal areas, expanding significantly the program of the Commission for Marginal Areas (COPLAMAR) to extend infrastructure support and public services (such as health, water, schools, and food distribution) to these groups.  - 11 - 40. Additionally, the strategy for development in the agricultural sector calls for investment in training, applied research, rural infra- structure, irrigation, land clearing, access roads, as well as marketing and storage facilities. To reduce income disparities in the rural areas, the Bank has supported an integrated approach along these lines by parti- cipating in the Integrated Program for Rural Development (PIDER) and the National Plan for Small Scale Agricultural Infrastructure Development (PNDR). Furthermore, to provide impetus to agricultural development, the Government has substantially increased credit resources for production and investment purposes. Also, it has taken measures to strengthen the credit and technical assistance delivery systems as well as to promote participation of private banks. The proposed project would support the development of unexploited productive lands under intensive irrigated agriculture to increase crop production and provide farm employment opportunities in the area. Experience in Previous Irrigation Projects 41. In the past seven years (FY74-80), the Bank has approved 13 rural development and agricultural loans amounting to US$1,497 million: Irrigation (Panuco, Sinaloa, Fuerte/Sinaloa, Bajo Bravo/ Bajo San Juan and Apatzingan) - US$451 million; Rural Development (PIDER I and II and Papaloapan Basin) - US$280 million; Credit V, VI and VII Project - US$650 m$llion; Area Development (Tropical Agriculture) - US$56 million; and Small-scale Agricultural Infrastructure Development - US$60 million. As noted in Annex II, by and large, these projects are progressing satis- factorily. Implementation of the Panuco, Sinaloa and Bajo Bravo/Bajo San Juan projects was initially delayed mainly because of budgetary constraints. Accentuating these delays were large cost increases unforeseen at appraisal done prior to oil price increases of the mid-1970's. The Government and the Bank jointly reviewed these problems and agreed that the projects be financed over a longer period of time. This review led to reformulation of the Bajo Rio Bravo/Bajo Rio San Juan project with cancellation of US$100 million from the original loan of US$150 million. A supplementary loan of US$25 million was approved by the Executive Directors for the Panuco Irrigation Project on July 11, 1978. Sinaloa Irrigation project was redesigned, and the Bank made a new loan in FY79 for additional works in Sinaloa and the adjoining Rio Fuerte irrigation districts. Following these actions, im- plementation of all these irrigation projects is now satisfactory and on schedule. Operations Evaluation of Irrigation Projects 42. Since 1961, nine irrigation projects have been supported by the Bank. Four of these have been completed, two of which have been audited by  - 12 - the Operations Evaluation Department (OED). One of these two -- Third Irrigation Project (Loan 450-ME of May 1966) -- has been revisited by an OED team for impact evaluation. The observations of the two OED audit reports 1/ and the impact evaluation report 1/ are summarized below: - On balance, both projects have been very successful, as the ex post economic rates of return exceeded the appraisal esti- mates (except in a section of the Third Project, accounting for 17 percent of the investments). Original project objectives have been exceeded in terms of production, employment and social benefits of strengthening commercialization and indus- trialization of ejidos. The Third Project led to more equal income distribution in its area of influence. - Both projects suffered from delays in implementation and cost overruns. - Quality of project design, appraisal, management and supervision are important for success of the project. OED reports emphasize the importance of joint programs for exploitation of ground and surface water resources of the project area. - Under the Third Project, the Borrower had not fully complied with conditions regarding controlling groundwater extraction, recovery of operation and maintenance in part of the project area and recovery of additional investment charges in the whole project area. 43. Experience with past lending for irrigation projects has influenced the preparation and design of the proposed Ocoroni Irrigation Project. Tech- nical services and on-farm investments are now included in project costs and sensitivity analyses are being made for construction delays for changes in costs and benefits. Bank staff have also become more involved in project preparation. Special efforts were made by the Government and the Bank to ensure proper review of the design for the Ocoroni Irrigation Pro- ject. Also, the planned implementation period was carefully reviewed and was extended from a proposed four-year period to five years. 44. Extensive discussions have been held with the Government on cost recovery practices. The Ministry of Agriculture and Water Resources has reaffirmed its policy to recover from beneficiaries of irrigation projects the operation and maintenance costs in full. In addition, following an assess- ment, through a socio-economic study, of the capacity of beneficiaries to pay, the Government proposes to recover as much as possible of the investment costs. 1/ 1. Project Performance Audit Report: Mexico Third Irrigation Project (Loan 450-ME); SecM76-147; March 8, 1976. 2. Mexico Rio Colorado Irrigation Project (Loan 527-ME); SecM79-498 June 29, 1979. 3. Mexico Impact Evaluation Report: Third Irrigation Project Report No. 2559 of June 18, 1979.  - 13 - In their recently adopted National Development Plan (para 20 ante), the Government has stated its policy of reducing subsidies where feasible and of making them explicit where these are retained. The cost recovery covenant (paras 66-69) for the proposed project incorporates the above principles. PART IV - THE PROJECT Background 45. A Staff Appraisal Report (No. 3083-ME, dated July 14, 1980) is being circulated separately to the Executive Directors. The proposed project was prepared by the General Directorate for Large Scale Irrigation of the Secretaria de Agricultura y Recursos Hidraulicos (SARH) and was appraised by a Bank mission in April 1980. Negotiations took place in Washington, D.C., in September 1980. The Mexican negotiations team was headed by Mr. Arturo Ortiz of Nafinsa, and included representatives from Secretaria de Agricultura and Recursos Hidraulicos and Secretaria de Hacienda y Credito Publico. 46. A brief description of the project may be found in the Loan and Project Summary, at the beginning of this report. Please see the attached map for location of the more important works. Supplementary data on the project are provided in Annex III. Project Objectives and Description 47. The proposed project fits into the Bank's strategy in the country (paras. 25-26) and supports the Government's policies for agricultural develop- ment outlined in paras. 39 and 40. It would aim at increasing agricultural production in the Ocoroni Valley, in the lower Rio Sinaloa Basin, in the State of Sinaloa, by bringing 10,000 ha of new lands under irrigation. Irrigated land would be equally divided among the 2,000 beneficiary families (all ejidatarios), each receiving 5 ha. 48. The Ocoroni Valley is under the jurisdiction of the Sinaloa de Leyva municipality and adjoins highly productive irrigation districts in the state of Sinaloa. It has easy access to the distribution, marketing, credit, transportation and agricultural research infrastructures available in Culiacan, Los Mochis and Guasave. 49. The valley's population, about 3,600 (760 families), living in three ejidos, is currently engaged in subsistence rainfed agriculture on about 2,400 ha including 400 ha in the dam site of El Sabinal. Family income from farming is only about Mex$ 19,500 (US$866) per annum and is supplemented in great measure with seasonal off-farm employment in the adjoining irrigated areas. The combined farm and non-farm family income in the project area is presently around Mex$ 25,000 (US$1,100) per annum, which is below the relative poverty level (US$2,605 per annum). About 200 families would be evacuated from the dam site in El Sabinal; the terms of their indemnification and resettlement were reviewed by the Bank staff and were found to be satisfactory. These terms contemplate either the allocation of 5 ha of irrigated land per family in the project area or adequate cash compensation for those who wish to  - 14 - settle elsewhere. Approximately, 1,000 landless drifter families would also be settled in the project area under the ejido system, bringing the total number of beneficiaries to about 2,000 families. 50. The Ocoroni River, the principal source of water in the valley and a tributary of the Sinaloa River, is not regulated at the present time and the water resource potential in the area is not fully exploited. Even though the valley covers an area of about 30,000 ha, water constraints limit development of irrigated agriculture to about 10,000 ha. 51. Availability of groundwater resources in the project area is limited and the project is based on careful planning of surface water resource develop- ment. It entails three broad types of activities: (a) construction of irri- gation and drainage and related infrastructure works, (b) land clearance and leveling; and (c) intensive agricultural support services to help the benefi- ciaries manage water and soil resources efficiently. Construction would include an earth fill reservoir dam at El Sabinal, upstream on the Ocoroni 3 River, with a storage capacity of about 300 million m , of which 260 million m would be live storage; a diversion dam at San Miguel; water distribution and drainage; road networks; related service works and control structures. The area to be commanded by the projected irrigation infrastructure works would be organized into an irrigation district, to be established by government decree, in compliance with the 1971 Federal Water Law. In addition, the project contemplates studies for the planning of agricultural development in the region. Technical Assistance 52. Technical assistance in the Ocoroni Valley is currently provided through the Rainfed Districts Department of SARH and is confined to support- ing extensive rainfed agricultural practices. Agricultural research in the region is carried out by the Center of Agriculture Research of the North Pacific Region (CIAPAN), situated near Guasave, where soils and climatic conditions are similar to the project area. 53. Substantial technical assistance is needed to achieve the imple- mentation of an efficient agricultural production plan. The proposed project would support the provision of a comprehensive technical assistance program. Each of the two irrigation units to be established in the new irrigation district would be further divided into two extension areas to be served by an agricultural extension officer and two intermediate tech- nicians. Each officer would be responsible for about 1,500 ha and about 300 farm families. Staff recruitment would be phased in accordance with the development of the area and each field extension agent would receive three months of training at the CIAPAN research station.  - 15 - Credit 54. The lack of basic productive infrastructure and of working capital, calls for provision of adequate agricultural credit to support the farming activities under the project. The Ocoroni area will be served mainly by the existing BANRURAL branch of Sinaloa de Leyva. Additionally, two branches of BANRURAL, one regional and one local, are located in Guasave. Private banks are also active in this area. 55. About US$1.7 million of long and medium-term credit per annum would be needed for resettlement and for on-farm development not financed under the * project. About US$7.2 million of working capital per annum would be needed for essential farm inputs. Assurances were obtained at negotiations that the short-, medium- and long-term credit required to utilize the facilities included in the project would be provided by the financial institutions operating in the area (Section 3.07 of the draft Guarantee Agreement). Marketing, Storage and Transportation 56. The bulk of the increased crop production under the project would be marketed through the well developed facilities and efficient organization existing in the State of Sinaloa. The transportation, road and railway networks in Sinaloa de Leyva and Culiacan connect the area with Guasave and Los Mochis and also with the urban centers of Mazatlan, Guadalajara and Nogales. Project Implementation, Operation and Maintenance 57. The project would be implemented by SARH through its established channels. SARH maintains offices in each state, organized following head- quarters pattern and administered by the State representative of SARH. On the project site, construction of physical works would be administered by the resident engineer who reports to the State Representative. The Chief of the new Irrigation District of Ocoroni would be responsible for the opera- tion, maintenance and administration of the completed works and would report to the General Directorate of Irrigation Districts at SARH headquarters. The extension services in the project area would be coordinated by the Chief of Technical Assistance in the office of the Project Director of Operation. The Chief of the Irrigation District would head an Executive Committee consisting of representatives of farmers, official credit institutions operating in the area, and technical staff from related Government agencies (SARH, SRA, NAFINSA, ANAGSA) and oversee development of agriculture in the area. 58. The Operation and Development Section of the Irrigation District would be responsible for operation and maintenance of irrigation infrastructure works. Adequate maintenance equipment would be procured under the project. The Irrigation District would prepare and annually update the program to ensure proper maintenance of the facilities.  - 16 - Dam Design and Safety 59. An independent governmental body of recognized experts on dam design and construction, called Consultivo Tecnico, has been functioning since 1962 with the responsibility of reviewing the adequacy of all dam designs prepared by SARH and carrying out periodic reviews during construc- tion. This group is fully capable of performing the work necessary to meet Bank guidelines on dam design and safety. In relation to the project, the Government has confirmed that this body will be responsible for reviewing the final design of the El Sabinal dam, for continuing periodic reviews during final engineering and construction stages, and for making recommendations for maintenance, inspection and safety of the dam throughout its operation. Monitoring and Evaluation 60. Monitoring and evaluation is routinely conducted by staff of each irrigation district as a part of its program of operations. Basic data, the most important of which concern cropped areas, cropping patterns, water use, yields, prices, operation and maintenance activities, extension acti- vities, progress of work and reservoir storage, are collected and used in the management of the districts. 61. During the development period, monitoring or construction work would be undertaken by the Chief Engineer of the project. Afterwards, operation and management would be monitored and evaluated by the office of Drainage and Irrigation in the Irrigation District. Likewise, the technical assistance program would be monitored and evaluated through monthly reports to be prepared by the Extension Service. Family budget data would also be obtained through the staff of each unit, composed of social workers, sociolo- gists and economists. 62. Progress of construction, operation and maintenance, agricultural development and technical assistance would be recorded in periodic reports, which are part of the routine operations of SARH, and would be available to the Bank for review and comments. Assurances were obtained that no later than one year after the completion of loan disbursements, a project completion report would be submitted to the Bank (Section 3.04(b) of the draft Guarantee Agreement). Project Cost and Finance 63. Total project costs are estimated at US$54.6 million, based on current costs including allowances for physical and price contingencies. The proposed Bank loan of US$23 million would finance 96 percent of the estimated foreign exchange component of the project. Remaining costs would be met by the Government, including a small portion of the foreign exchange component for land clearing financed through a special Government program. Retroactive Finance 64. In order to speed up project implementation, retroactive financing of up to US$350,000 is proposed for expenditures for final design, preparation of bidding documents and construction of the access roads to the storage and diversion dams, main canals and work camps. To be eligible for such financing  - 17 - the contracts must have been let in accordance with Bank guidelines (Sched- ule 1, Section 3 of the draft Loan Agreement). Accounts and Auditing 65. SARH would maintain separate accounts to reflect the financial situation of the project, would have such accounts verified, and would provide the Bank an annual summary statement (draft Guarantee Agreement, Section 4.02). The Government requires periodic internal control and verification of all accounts of its Ministries and these procedures have been examined and found to be satisfactory. Cost Recovery 66. Project costs would be recovered through water charges and produc- tion taxes. Water control and measuring structures would be part of the canal network and distribution systems to achieve high efficiency in the use of water. 67. The Government's policy is to recover the full cost of operation and maintenance through water charges and as much as possible of investment costs. However, the Agrarian Reform Law limits the recovery of investment costs from ejidatarios to 30 percent. The portion of investment costs to be recovered would be settled 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. 68. Assurances were 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 which is reasonable in light of the beneficia- ries' capacity to pay. The portion of capital cost to be recovered would be determined on the basis of a socio-economic study to be carried out by SARH by December 31, 1985. The study would be updated periodically and water rates appropriately revised (Section 4.04 of the draft Guarantee Agreement). The Government would be making best efforts to establish and collect interim water charges to cover the estimated operation and maintenance costs and as much as practicable of the investment costs during the period in which only part of the project area would be irrigated. 69. Ex ante analysis of the cost recovery index indicates that it would reach about 22 percent for the project as a whole. The analysis is based on the assumption that beneficiaries would pay the full cost of operation and maintenance of the irrigation works through irrigation water charges, and that farmers' contribution to investment would amount to 30 percent over 25 years, as established by the Mexican law. The water charges payable represent about 12 to 15 percent of the family net farm incomes. Procurement 70. About 85 percent of the contracts for the principal irrigation and drainage works, amounting to about US$35.0 million, would be procured by international competitive bidding (ICB) in accordance with Bank Guidelines for Procurement. Civil works would, insofar as possible, be grouped into  - 18 - contracts having a minimum value of US$2.0 million. Small jobs (telecommunica- tions, buildings, houses), which because of the timing or nature of the work, could be better handled if not included in major contracts, would be contracted following ordinary Government procedures which are satisfactory to the Bank. This process would expedite the construction of minor civil works under local competitive bidding (LCB). The maximum value of a contract for LCB would be US$220,000, with the total of all such contracts not exceeding US$4.5 million. 71. Small or dispersed contracts for on-farm development works (including land clearing, removal of rocks and leveling), about US$1.5 million, would also be let under LCB, or through negotiations under the Guarantor's ordinary procedures. In the project regions, farmers organize themselves into groups to contract for land clearing and leveling on small tracts of up to 250 ha using their own machinery. SARH provides engineering services and supervises such contracts. 72. The estimated cost of vehicles, farm machinery, and operation and maintenance equipment is about US$1.5 million, of which about US$1.0 million would be subject to ICB, according to Bank Guidelines for Procurement. For bid evaluation, a 15 percent margin of preference or the prevailing custom duties, whichever is lower, would be allowed for equipment and vehicles pro- duced in Mexico. About US$0.5 million worth of minor equipment, not suitable for ICB, would be purchased through normal local procurement procedures, which are satisfactory to the Bank (Schedule 2 of draft Guarantee Agreement). Disbursements 73. The proposed Bank loan would reimburse (a) 49 percent of the cost of civil works and engineering, (b) 90 percent of the cost of machinery and equipment, (c) 49 percent of the cost of land clearing, leveling and removing of rocks, and, (d) 40 percent of the cost of technical assistance. The loan is expected to be disbursed in slightly over five years, beginning in September 1980 through December 31, 1985. A Schedule of Estimated Disbursements is provided in the Loan and Project Summary. Land Tenure 74. The establishment of the new Ocoroni Irrigation District would have an important land redistribution impact and would enable settlement of new landless families. In addition to the existing 760 families in the project area, settlement of 1,240 additional families would take place -- each of the families receiving 5 ha of irrigated land. 75. After completion of the project, land tenure on the 10,000 ha of the project area would be as follows:  - 19 - No. of Size of Families No. of Total No. Total Project Area Farm (ha) per Farm Farms of Families Area (ha) Individually operated 5 1 200 200 1,000 Jointly operated 100 20 52 1,040 5,200 Jointly operated 200 40 19 760 3,800 Total 271 2,000 10,000 76. Thus, of the 2,000 farm families, 10 percent (200) would be engaged in individual farming under the ejido system. The remaining 90 percent (1,800) would be organized in communal groups of 20 to 40 families each, who would cultivate the land jointly on 100 ha and 200 ha farms, respectively. Project Impact 77. Benefits derived from the project would be the increase of income and employment. At full development, which would materialize in the 11th year, 423,000 mandays of on-farm employment per annum (about 57 percent of the available labor) would be generated compared to about 32,000 mandays on-farm per annum without the project. Likewise, annual incomes would increase from about US$1,100 to between US$3,000 and US$3,900 per family (of about 5 members on the average) on full development. 78. The total cropped area would increase from 2,400 ha to about 14,700 ha, which would imply reaching, at full development, a cropping intensity of 147 percent. As a result, the total volume of production would increase from 3,100 metric tons to 55,000 metric tons, bringing the total annual net value of production from US$250,000 to US$6.2 million, in real terms, mainly from production of high yield crops such as maize, soya, sorghum, vegetables and cotton. Social and other intangible benefits would accrue to the farmers, who would receive access to educational, health, marketing and credit facilities and related services. Economic Evaluation 79. The economic rate of return (ERR) for the project is estimated at 15 percent. The results of a sensitivity analysis show that the rate would remain acceptable at about 13 percent if project costs were to increase by 10 percent and, at the same time, benefits were to decrease by 10 percent. A switching value test was also performed and indicated that if total project costs were to increase by about 32 percent or benefits were to decrease by 24 percent, the project's ERR would still be 12 percent, which is the estimated opportunity cost of capital in Mexico. An unlikely two years delay in project construction would reduce the ERR to 12.5 percent.  - 20 - Environmental Impact 80. The project would not have any harmful effects on the environment and would prevent increasing erosion from progressive deterioration of soil structures under current rainfed cultivation practices. Chemicals used to control pests and diseases would be applied following prescribed procedures and application would be closely monitored by extension agents who would also train farmers in their safe use. Project Risks 81. There are no unusual risks for the project. The project design has taken into account potential water shortages. An analysis of the seasonal and annual variations in the Ocoroni River runoff indicates that the El Sabinal reservoir capacity is about twice the projected annual demand of water and is sufficient to cover expected levels of water consumption and the risk of water shortages is well within the acceptable safety margin standards of SARH. Irrigation would not bring about generation of water logging or salinity because of the drainage system and the careful allocation of water to the farm lands. The project phasing and production projections took due account of the basic skills that the farmers have acquired in the off-farm activities in adjoining irrigation districts and the design of an adequate technical assis- tance program to improve their experience and train them in farm management, operation of irrigation schemes and judicious use of water. PART V - LEGAL INSTRUMENTS AND AUTHORITY 82. 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. 83. Special conditions of the project have been described in Part IV of this report and are listed in Section III of Annex III. 84. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 85. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments  -21 - ANNEX I TABLE 3A Page 1 of 5 MEXICO - SOCIAL UDICATORS DATA ShEET MEXICO REFERENCE ROUPS (WEIGHTED AVE AiS LOD R (THOUSAND SO KM.) - MDST RECENT ESTIMATE TOTA 1972.3" AGRICULTURAL 977.2 MOST RECENT MIDDLE INCOME MIDDLE IMECE 1960 lb 1970 /b ESTIMATE /b LATIN AMERICA & CARIBBE EARO GNP PER CAPITA (US$) 380.0 710.0 1290.0 1384.1 2381.1 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 770.0 1047.0 1384.0 1055.9 1641.4 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (MILLIONS) 36.4 50.3 65.4 URBAN POPULATION (PERCENT OF TOTAL) 51.0 59.0 65.2 63.4 53.9 POPULATION PROJECTIONS POPULATION IN TEAR 2000 (MILLIONS) 116.0 STATIONARY POPULATION (MILLIONS) 205.0 YEAR STATIONARY POPULATION IS REACHED 2075 POPULATION DENS ITY PER SQ. AD. 18.0 26.0 33.0 28.1 77.2 PER SQ. A0t. AGRICULTURAL LAND 36.0 52.0 67.0 81.7 129.5 POPULATION AGE STRUCTURE (PEKCENT) 0-14 YRS. 45.6 46.5 45.6 41.4 30.6 15-64 YRS. 51.0 50.0 50.9 54.7 61.1 65 YRS. AND ABOVE 3.4 3.5 3.5 3.9 8.2 POPULATION GROWTH RATE- (PERCENT) TOTAL 3.1 3.3 3.3 2.7 1.6 URBAN 5.0 4.8 4.6 4.1 3.3 CRUDE BIRTh RATE (PER THOUSAND) 45.0 42.0 38.0 34.8 22.8 CRUDE DEATh RATE (PER THOUSAND) 12.0 9.0 8.0 8.9 8.9 GROSS REPRODUCTION RATE 3.2 3.1 3.0 2.5 1.5 FAMILY PLANNING ACCEPTORS. ANNUAL (THOUSANDS) .. 25.1 845.7 USERS (PERCENT OF MARRIED WOMEN) .. .. 21.0 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 97.0 100.0 101.0 106.9 113.1 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIRENENTS) 110.0 112.0 114.0 107.4 125.3 PROTEINS (GRAMS PER DAY) 65.0 66.0 66.0 65.6 91.0 OF WhICH ANIMAL AND PULSE 27.0 27.0 27.0 33.7 39.6 CHILD (AGES 1-4) NORTALITY RATE 14.0 9.8 6.0 8.4 4.3 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 58.0 62.4 65.0 63.1 67.8 INFANT MORTALITY RATE (PER ThOUSAND) 78.0 74.0 60.0 66.5 55.9 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. 54.0 62.0 65.9 URBAN .. 71.0 70.0 80.4 RURAL .. 29.0 49.0 44.0 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. .. .. 62.3 URBAN .. .. .. 79.4 RURAL .. 13.0 14.0 29.6 POPULATION PER PHYSICIAN 1700.0 1481.0 1815.0 1849.2 1030.1 POPULATION PER NURSING PERSON .. 1613.0 1398.0 1227.2 929.4 POPULATION PER HOSPITAL BED TOTAL 617.0 831.0 851.0 480.3 289.7 URBAN .. 549.0 758.0 RURAL .. 1289.0 1077.0 ADMISSIONS PER HOSPITAL BED .. .. .. .. 17.0 ROUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.4 5.7 URBAN 5.7 5.7 RURAL 5.2 5.8 . AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 2.9 2.5 URBAN 2.6 2.2 RURAL 3.4 3.2 ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL * 59.0 URBAN .. 80.7 RURAL * 28.0  - 22 - ANNEX I Page 2 of 5 TABLE 3A MEXICO - SOCIAL INDICATORS DATA SHEET MEXICO REFERENCE GROUPS (WEIGHTED AVERAES - HOST RECENT ESTIMATE) MOST RECENT MIDDLE INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b LATIN AMERICA 6 CARIBBEAN EUROPE EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 80.0 104.0 116.0 99.7 105.9 MALE 82.0 107.0 119.6 101.0 109.3 FEMALE 77.0 102.0 114.0 99.4 103.0 SECONDARY: TOTAL 11.0 22.0 39.0 34.4 64.0 MALE 14.0 27.0 42.0 33.5 71.1 FEMALE 8.0 17.0 36.0 34.7 56.9 VOCATIONAL ENROL. (% OF SECONDARY) 24.0 24.0 *- 38.2 28.8 PUPIL-TEACHER RATIO PRIMARY 44.0 46.0 46.0 30.5 29.4 SECONDARY 13.0 14.0 17.0 14.5 26.1 ADULT LITERACY RATE (PERCENT) 65.0 74.0 76.0 76.3 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 14.0 24.0 42.4 43.0 84.6 RADIO RECEIVERS PER THOUSAND POPULATION 91.0 278.0 306.0 245.3 192.2 TV RECEIVERS PER THOUSAND POPULATION 18.0 60.0 85.0 84.2 118.5 NEWSPAPER ("DAILY GENERAL LNTEREST") CIRCULATION PER THOUSAND POPULATION 79.0 .. .. 63.3 93.0 CINEMA ANNUAL ATTENDANCE PER CAPITA 10.0 5.0 4.2 .. 5.7 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 10993.0 14493.5 18951.2 FEMALE (PERCENT) 15.2 17.4 19.0 22.2 30.4 AGRICULTURE (PERCENT) 55.1 45.0 39.0 37.1 37.0 INDUSTRY (PERCENT) 19.5 23.0 26.0 23.5 29.3 PARTICIPATION RATE (PERCENT) TOTAL 30.2. 28.8 28.8 31.5 40.9 MALE 51.1 47.4 46.8 48.9 55.9 FEMALE 9.2 10.1 10.7 14.0 26.2 ECONOMIC DEPENDENCY RATIO 1.6 1.7 1.7 1.4 1.0 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS .. HIGHEST 20 PERCENT OF HOUSEHOLDS 61.1/c 60.7 57.7 LOWEST 20 PERCENT OF HOUSEHOLDS 3.4/c 3.3 2.9 LOWEST 40 PERCENT OF HOUSEHOLDS 9.8/c 9.9 9.9 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. 270.0 RURAL .. .. 216.0 190.8 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN ., .. 332.0 474.0 RURAL .. .. 332.0 332.5 385.8 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. RURAL .. Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970 between 1969 and 1971; and for Most Recent Estimate, between 1974 and 1978. /c 1963. April, 1980  - 23 - ANNEX I Page 3 of 5 DWINITIMS O? IMOdL IfDICATOfS Na-e Aithoeg the dat. eta dre fro -nre 5a-11y (edgd the tait eathooittae end allable, *it ahold alao ho totd that they my tot he ote- eatiooliy oeprable hat. of lb. look of etedardiend deftititn and eonc.pt ad by diff-rot e-twcie. incoiletiag the data. The dat. Ien,toe thela... _tf e to de-cib, order. of npitede, iMltos. tende., et oh-totoia certain -aJo. dOtffrooca. beta..c- ti. TbI::.-rfret genp ar (I) the te "Caty greep of the eabjact coatry ad (2) A ootry groop with atetawbt highe aerg ieee thee the o-tory groop of th abjac oo-at4y ett for "Cpital S-iorl Oil Ieportera' gong ther 'iddie ta-n North ifrioa cad Kiddie feet ia hftem batt- of ntreege eeco-tgtoaieffott.. . Co herfeen . gro dot. the o-orag. ott per-tto weighted aritheaic -at toe ok tettee-r and h-a only whet at le.a halfof the catrian to a gTop he. date foe that Seiet I--. the ovrgof -etoita mg the .iedtcatre depeda t- the availability of data ad Lo net -if.w-, -too met ha neerteed to releti.g awnga of - iodteetr to another. Th.... -.rege ere tely te.afo1 it ceporieg the -aite of on iedi.tete to e Ctim ..g the eastry end eaeene ttpe. LAIM AMA (thoetoed nq.hn.) oeaitorIbeceo-ropelattoc divoded by oone ot pretlitog Phy- Total - Totel eeefaoe arae .ite .ad -e ead inland water.. eiieo lf_t to deica1 -choi at -i-verity la.ol. Aeiteltoeal1 - lainata ofCereiwe r. Iedteoarl tepeoatly Poowlati oa -Criea Paean - Popelatito ditidod by t.hbe of poet.titiog oet pe.petta.., sacht ad kit- aerdan or to lie follow; 1q77 date. edo en fenel greda-tetoesa .lpticol oore ...o aneltantore. Powlateete toetal nd- tta. obe. - tta - Popoltin f total, GNP PR CAITA (U09) - GO per -pita aetiatee at tornt earht prioto, tei- as. n aa) iie yteeepci hr of -epicaI bade teleted hy eeoev-oioo etbod eeWarld beak Atlaa (1916-78 baeie); 1960. availble it poblie an private geral an epecia1ted heapi talan w- 19Th , an 1978 deta. habilitatioe,ontaee. Ropitale era aetehltahetn Pata-oly ateffad St CfgSiNP'f0? Pig CAPiA - aalontpino oneiiby at 1a.t on phyeiciea. ftetblih-tea providieg pieciptlly ootodial loop CONUMPTON PR CAITA 1 .- pt_-f_S (o.-I core a- nt ieclnded. eralhptaa h-.a.,e ielada haalth and die and lIgnite, petelean, etorel gee ca hydro-, tocen end geotharel elne- entere oat peettetly etaffed by a phyeitian (hat by a endioe1 nenietat. "triity ) Itt kilstgn of tel qilatpae -epite; 1t60, 197i,. cd 1978 oeree, .1dwife, etc.) wihio offar it-petiot a..t.adation ad prov,tde a date. 1initad reg of eadica faeilltt-e P.,Ioaatai perpoee erhan boapi- tale laia da titi peliocipo1 getrl cad epacialieed heepitele. and roral POPULATION AU VITAL STATISTICi .p,l . .. . 4- d- .t . .. Total Poat- o.adTetffl of- A. of J.oly 3I; 19h0. 197t, -d 1978 Adp. ee oalo roro opTale endt nfia adi earoity canter.. "t.. 1W~~~~~~~~~~~~~~~~~~rehoa.pieeIe divide.d hy ch. onher of bode - Urbat Poooto focent ftictal) - itio of orbet to total ppolatiat; diffatee deiition Of rban eree eay aft o ronparahility of deta HOUSING _ag _ot,irn; 1960, 1970, oad 1978 data. A-era Sitee of Hgo.eehold oa-on-ear haceehold - total. orha. an M.4l- Poenittiot Prolectio A h-eahld -oalta of eIr-p of ioditdaale eb,.ehe, iigqatr FPooeto it ee 20f00 Cor-t Poptiltion, pooJoCttin ore bte..d Ce fli end their ote mole. A boarder .,ldgIny Frna o he bteclo dadi total popaltiee by age cad .-o an their netelity end fnotility ret... the hoe.aheld for etatieticol Pt."p..a PrJecinprinto a neetelity occes oeiaof tbrna level ten-beaetha. feren a to.-ttl ra.ederl -Avragstn taglife "eptteny obirth ienao ith ettetyc per capita i... a fprnapern aolore,tdcrloeeidcoetoa levo, end faneLa life aePecctoc etahiliiag st 77.5 yeare. Th. par.- dre-Infee. reopeoCivl.. 1 felbog eolda....t-p.r..teid et 'tl-een etar foC atlt rt lthv thra lenn aeie decline to otocpied parte. fertility origt Ioon leve end p-e f-dly pleaig efoeoe Aea to Elett-tt it ct of dwelline - total. arha.teroa- oehf-otiry i. that atelnod -n of the ae rite -bientida of sartelity Convetionl fwellioee with alectetity it hob qeartera IIeetg Et"d frIliyJrad oep tjeco p-tpeee. of ctotl, orhat aod roral dealI.itfaropect-vly. i tia 12iteaecrlati -"I a: accotyppulc hr s to rwh i.eo the bircth rate is aqe1 to the death rate, and slat the eNe eteo.tere ea- IA mien c_toct. Thin ie achieved _tly ft.e fertility reran dtlite tO AdJoetd fetolleete tatita the replt-net ira of ot oat reprodetiotete., whet each ganartiot piotaho oa.mi earioettl sale od f ana. of w-a etPl-ca itnoif -eclY. The etatiotey ptpoletion eiet In noiatfolae at the primary leo a.. pecatge f reepatti-o teinted o- cho hoae ft the proJooted teeirtct f the popolccti. peinory tho-g pooeina nily ieiodae childea egad 6-il it the year 20001. ed the rott of de-Iito of feecility tete to replete- yanre hot tdjeted f or differoot laagthe of prinety doottiot; for Y-7b.-i;;.1 P.-I-C.. C. --Id - Th. yC h.. p.p1.1i. coontries.ith otireat.I ado...cio.t...atrolet nay oeocd .100 poectoc tet heloo ooaioi-oce -Teyaeta ttooypplto sieca am popile ore ha1m or cov the officie1 echool 0g.. a~ ieeb. beeny rece. aoday echtol - totel. nab cad f lel - C.epoted a. oboc; ...c.tdar Povolkociodtt ..1.i. . ql iieoeitv e0fdottti eo Itna Ir..tetf_or Yate of opprtd Pi-try iercit Pe a. a.- idper orlato PO tior iloecr li hctra) fprovidee garel coeconl.t toacher trat.ig srottefoe popib tota tote.o.olly Of 22 t t17 eer of age; cotrepoodo.... c..re.e er.a.geoa.aly Peeee hk. oeittrlland - C.nyptd oa above foe ogricoltoeal lud oclodd. 1 .1 Only. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~V toot tona aoool tia feecet of sacndaey) -r ...ttiotol itstitoti... PPoo,tyoite Al. Stoc.tora fteecetr - Childean (0-l4 er),orCkiog-aga (15- iocado tahtoa, odoetlia,ooteprgao hchpeteiep- h4 yeC.r). en eatired (65 yare an eve) an peocotega. of aid-year p.p.- dityo s eotet of.1 seodry tbeacitotiete. t.id.. Ieeiot; 1960, 1970. aod 1978 deta. Poo-tsoy e red ne.. end sotyo i- tt.ti enatsoriedt P title tlo "I, Oi fecn)J- ctlti - A--oa groth rCea. of total aid- prinaycd eodrylvl diiddbytohret tchoa to-th year opoltion foe 1950-hi, 907. nd 1970-8 cceeepooditg levels. PPoeletiot Growh fte (eecat)- orhat - hotoaI geeh rote. of ehot pOpO- Ad.lt IiLareoy ette (Peteceot) - Litee... sto lte Cobb to etad ood -t.tt) 'aiO.fe19fA. 1960i-70. tod 1970-7 A penp .c.attogr Of COWs ndelt popolatl- aged ii y.Cr andtoe Crnda Birtb fec. fear theaoatd) - Aootl lIvr birch. per tho...ed of aid-year p,poitite; 1900. I9197. d 1978 deta..CONSUMPTINo Cred Goth gat fear theotad> - Aoooal dnathe per tho..e.d of nid-yoor PasoerCtftehontpooco)-Peegrcretpis tc poptiatio; 91960, .1970, end 1978 data, ee ettio iee chet-1.1 peea.. ; roi-d- anholaBtton. p. hecantd. iroa: aedcio aoAeag oheo dgt-gbeI o .o.aO .ill bear it niliteryo-hicle.. her -Irel,cprodeccivo period if abe enpeeoeco.. prawot o-peifto fa- Rdia leiveo fea tho-sad ooeoleCi-e - Ail type. of rec.ri-eo f to redo tillty tsto; ._oaly fiv-ye- a-erag. todiag It 1960, 1970, eod 1977. broadecat to naa: oie~0toeo fpplco;ecow ti Pelr f ttt Acatoetoltfho-teds) A- Aol to.e of sconoctra -sed rCeitte it ocoetead ic ytra ehee ottrttof ea!tt e of. bit-oto eic.odr.eio t aitifnl p Sto pe.en. te it effoot; dfete. to r..ett yeoos toy eat be c-poo-bl Icc a PnvPntoia-Oer eect onatdwnt)-Peneaof earned Coootriea bhliehed Iate_g -Oe of child-baoeioa et (.15-44yca who be ieth-cotr-l dci... to i Tvaaiv'Ere fetehcboaed eoeolotio) - TV!rceor foe broodoast to all nareted -ooIt am og groop. gaterl pohllC pte thotatod popolatiot; oclade. olcted rce-ivere POWP ADf NUtTRITION I cotateir end It y.c..he reeattof TV sota wee to effttt. Veeta iectltio (toe theoead oo tfoio) - Show thoao-rogeirco]- lode of Food Perdo.ccb por C'et f(1969-71 jwj0 - odee of Per capita Ieoe rito dol eoalitoe topt", defined aaperiditolpo prod.ctiot of oil fond tonoitlee. Pondttit ei cidea teod o-d frd and lctita 'devote prmailt eoo...trdi- tttel tne fttectedne -100 -oad-e yoer hba. Coinditiee Cooe peiar" god ( .g.B ..gn.c.t to daily' if itappeoraot leaet foor tines deek te r tldad). Aggrrgote prodoctito of ..c. ce_try II: heae.df. 00 Athe Atetid dorwoth yo F * C.iocetg tatt odov-t-ie eatonl veag prd-Ce Poict nigt.; f1901-05 1970,an I 1978 dt,,t. end ..hId ode.rigtIy..i..iSd.i.t r-.i Per Ceolta n=rly f clet (eecn ,o oeiooota) - Conpoted f en eoergyeqoivaot o r odspi .te evilehle it ..-otry per c pIta LABOR FOgaE nepece ed oeege o eop .pttppl w oid tia wd ed, mdfooettoepor o eactd IaghetaivepC. aodit..etc. qaattfeiAeot b it foo oceto. n toeito pditotboctipt. iteie T0 natte oot estiated byPAt head 00 phyetologilo1 tend. foe toel aeti- Dofiitiotet it -oei... crittoite toe toccoperabt; 1960, 1970 end otetdiatrihoticoo- ooait o loi9I pettfewsea atotr ftrococ) lebor forc in p faotog. foreacey otit.b end. hbooehbald Ievt; 1961-tI. 19701..od 1977 deta___t . .P fei" a ecacg o otllbo foeo; g, 1970 t ord 1970. tota Pa to c oev foott (rn a ar rtc cteto eecpc ooer eett - Labor foece Ic icoig, o--Ceatioo. eaefoocorttg net etyplycf toot pe dty. i tat top y 0 fooDA p-de fite cecoe.t- d electrioley, otter end gas . poecettc of ceta1lbithr foote;19, qoiea-tefo all tootf trtea eratabiahe Cd by lil proid for. ftIol 2970 otd 2979 date. olowoc o h gen o tte rotitye tp ot20oeeeofotae cd a -t-eeto ttef.---t -coti el. cnd feel - P-octptiot tr pcla pe i., of obteh 10 ocano ehooi ht eoino1 proCio. iThtee otaod- eotiviteyc-tws -eoopotedaa e, sat,-d fIal thoifrt t tode ore I-o that thoat of 75 toe of toto1 P-oteio atd 23 gEet of perc...teta of total, nit andfIeeepplcbto i ie epoioy ocinl po ctt a otavoaofor tho cl, propospod by fAt to tho Tir 191f91 n 95dt,i r 0 L' patiato octe eafP:ictio Ocriptt.PndVrcy lOhI-h, 197 tot. 1977 17,. deco.- T .... L'.pCtl,ti.Ct.-f-i Poe cocdite edrotl oty o caladelt rti apl ffndCdw- og -easeo o of thr poooio,ad Iott tint -oce. A fee tori- etond oon tomela nd polee to rane pr dey;1961-h, ioc end 177 doc. Oooontc leaodeeo tatf - tact of ppo9eoot ottr915 ot hi stftor Child ,faen1.)~ otlitdy Mtac fear thoeeatd) - totoal t6aha pee theoeaot to t.th total labor foeco. not group 1-4 yooro, co chtild- io thia . troop; for toot dwv-loeitccog etee. dato tt-t-e f rot lift eablee; 1960, 2970 ood 1977 dat... INCOM DISTRIBUTION HEALTHt Peo.. Ctetaef Poicoct lo-t (both to .eeb atd kied) - iecotv-d by oitheet Lifa toEtratt-y attth(eota) d- Av-rogo n-othr of Ytoe of lift ooaolo 5perc..ot, rcheat 20 per-te, pooeoat 20 par-et, otd p..root A0 ptoCret at biech; 1960, 197 o-d 1978 data. of horbi loa.te Mrtality tate foercthooa,odj - A..oaI toetha of itfootoottar tey.rc rccnVtlTiit of te e thooead liv bith. E.tmntid Abecoct. P-v-t} . -bon Leve fll( eec caoibta)-ohoto o Neete f popl frtel orot,ottrof ti) ti- etetol ooe r d tt orri Ioolyodeqottr diet ploneottlctfodrIirecei s to tatec eti ot tet fronp-ocett4 torhioles, tpritg, od aetiteryei)e E.titotd RtlocivePovry.c. olvl(t)crtnI)-oh-to eo PMcc t...e ofh thir repac-i- PoPoletitcoa . . ttorbeteroapobit to ot relttivt -oety iton ott cetido oveag pee cert1 fottio or ot_dp_s loCtetd -t tort thee 200 -ee- fr-. I h....enahe prolionafte rootyb obo I ve - teir deie fotheetea coteiderd oe belt tithi Ceeehe acet fththot. trtoi ea loi tih od)oetnat for higrcot of liciog itorbteota dooth boor~ to eped a diepeoporcItooaC poet of the day it f-htbtg the cod ooal-Prcet of..I pooattico ..ha cot coo l)-eh ore'aa lbttpor' rooel-Ntehecctpeoplo (tocal. orboc.r cotp. torel)rb- -daer1vehbyaccrttat diarco... I ectat f tbhtire-p-ctbepooerc E- tr-t die- EtooonJo aot 5ot1 late l11iieo pelsyitlode h olcitadooot, olb r -olC1 I 1h-o tertnIt. tcooeo Ao.. l ott pro)ectioee loporCCeo of heoctcreoard 'Iat-tte, yyfe-cn reotc itort April. 1980 Pit Poiciee oct otllrtot Ito.  sICO - XCOsu 1UST6 DATA8SO A8O I., Pape 4 o PrelOtatry ~~~~~~~~~~~lotS_tD O ProRe2 A'l Cr2 -t GSofCDY 1970 1970 1977 157 1979 1980 1902 1985 1170-iS Af1 80lf l!! 1970 1978 1982 NATIONAL 4100r1 Coatopt 1972 ria... U88 Milliots Gross Donasti Product 36,970.4 48,510.9 50.949.6 54,436.2 58,802.9 63,511.9 74,260.2 94,042.9 5.6 3.9 8.1 100.3 99.4 93.5 Gai- frto TorfO Trade - 114.1 438.8 801.9 327.5 1,283.8 3,525.6 5,125.0 6,844.3 - -9.3 98.9 -0.3 0.6 6.5 Goose Oo.sscS. 'om 36,856.3 8,949.6 51,171.6 54,763.6 60,086.7 67,037.5 79,385.2 100,887.1 5.8 3.8 9.7 100.0 100.0 100.0 I0orts (inolodt *8) 3,754.4 5,835.8 4,787.8 6,426.5 9,256.3 10,428.4 13,931.6 18,416.6 9.2 3.3 21.3 10.2 11.7 17.5 Onpoote (ip-ort Cpacity) 3,016.6 46109.4 4,751.3 6,264.0 7,646.7 10,662.0 13,677.7 17,809.0 6.4 15.1 21.6 8.2 11.4 17.2 Rsoouro- Gop 737.8 1,786.4 36.3 163.5 609.6 - 233.7 253.9 607.7 10.4 -54.5 - 2.0 0.3 -0.3 Cou ptior 30425.4 40,149 41,931.4 44,093.2 67,921.7 52,396.0 61,457.4 78,492.2 5.7 3.2 8.7 82.6 80.5 77.4 Iooaainnt 7,168,7 10,526.9 9,376.6 10,233.0 12,774.6 14,408.1 18,181.9 23,003.2 8.0 1.0t! 13.8 19.5 19.8 22.9 Gross Lo-eic SOeio 6,430.9 8,800.6 9,540.1 10,670.5 12,165.0 14,641.8 17,928.0 22,395.6 6.5 6.6 13.9 17.4 19.5 22.6 Gro.s Notional S.VOog 5,995.3 7,701.9 8,247.3 9,373.3 10,529.1 13,022.6 16,430.8 20.938.2 5.1 6.8 15.1 16.3 17.1 20.7 TRADS IS OODS AND N8r Currant Pricas. 05 Xillion As 7 of Tt.1 IMPOTS, TO.TAL 2L073.2 8,636.7 7.855.0 11.466.4 16,739.9 24,263.2 38,299.6 61,827.8 20.4 9.9 35.1 100.0 100.0 100.0 Food 49.3 - 475.1 605.7 723.0 1,422.5 1,729.7 2.704.6 46.3 6.7 30.0 0.3 5.3 4.5 Potrooloaso d Prodocta 26.2 269.1 107.5 167.1 259.5 298.4 354.5 434.2 37.6 -14.7 20.7 1.3 1.5 0.9 Other Goode 1,527.5 5,845.4 5,338.1 7,444.8 11,272.2 16,086.1 26,246.4 42,006.2 21.3 8.4 37.0 73.6 64.9 68.5 on -Puctor Sorvicas 513.6 2,022.9 1,934.3 3,248.8 4,4U5.2 6,456.2 9,969.0 16,682.6 13.7 17.1 32.4 24.8 28.3 26.0 EXPORTS. TOTAL 1/ 1,964.6 2.74535 6.081,7 11,176.4 15.503.6 24,806.9 37,601.6 597_87.7 6.9 22.5 35.4 100.0 100.0 100.0 S lOrttd Agriculturtl Goods 642.4 711.6 954.2 1,974.7 2,308. 2,799.0 3,419.7 4,391.4 2.1 28.4 14.7 32.7 17.7 9.1 Patrclno nod Product, 40.1 38.4 460.1 1,793 3 3,789.3 10 321.7 17 534.9 28,541.2 -0.9 57.4 76.8 2.0 16.0 46.6 Solortrd tisrola 189.7 244.3 457.6 548,8 952.2 1,127,8 1,447.3 1,992.0 5.2 9.0 27.4 9.7 4.9 3.8 Ooncfaroorna 132.5 326.9 1,069.3 2,143.6 2,372.6 2,946.8 4,083.4 6,301.4 19.8 26.1 17.5 6.7 19.2 10.9 Otb r Goods 133.9 26.6 63.3 - - - - - - - - -_ - - Noc-Ocotor Sorvica 806.0 1,397.7 3,077,2 4,716.1 6,080.6 7,701.5 11,116.4 18,311.7 11.6 15.3 23.9 41.1 42.2 29.6 7.11ADE INDICES Avrz 72l10 toport Potco loden 87.7 I 6.7 171.3 188.3 243.7 347.6 439.6 454.3 13.6 4.4 23.6 Irport P7ic I2d5 91.0 14.0 164.1 178.4 302.7 232.7 274.9 335.7 10.2 6.4 11.4 Yarns of Trods 96.4 112.0 104.4 105.5 120.2 149.4 159.9 162.4 3.0 -2.0 11.0 VALUE ADDED BY SECTOR Sostent 1972 Pric-. US09 Mlli.o. A. X of Total Pri-ury 3,644.6 4,139.0 4,483.2 4,347.1 4,920.7 3,019.1 5,221.9 5,541.5 2.6 1.6 1.4 19.2 12.7 7.0 S-cordory 6,139.9 12,416.9 16,948,2 17,429.6 21,958.6 24,066.6 28,909.2 37,869.3 8.8 6.4 9.6 26.4 30.5 38.9 Tntriary 14,818.7 20,422.7 27,075.5 27,507.8 31,923.5 34,426.2 40,129.1 50,632.1 6.6 3.0 8.0 54.4 56.8 54.0 Tto.1 GDP 26,603.2 36,978.6 48.506.9 49,283.3 58,802.9 63,511.9 74,260.2 94,042.9 6.8 5.6 8.1 100.0 100.0 100.0 CONSOLIDATED PUBLIC SEC00R FINANCES . % of GDY Corront Rocespto 5,841.0 9,447.1 10,497.1 12,196.4 13,716.7 16,482.8 20,328.5 26,284.3 1O.I 0.9 13.6 13.9 22.3 25.6 lorront loponditores 4,316.6 9,947.2 9,108.7 10,346.6 10,805.9 12,488.5 15,016.3 19,718.7 13.7 3.0 9.8 11.7 18.9 16.9 Poblic S-vings 13515.2 499.6 1,388.4 1,849,8 2,830.8 3,994.4 5,312.1 6,565.6 -20.0 54.7 30.2 .1 3.4 6.7 Rosoorcon for Invastasut 1 602.8 570.1 1,484.6 2,065.0 2,871.7 4,1.0 0 5,469,8 6,716.7 -18.7 53.6 22.6 4.3 3.8 6.9 hIcOstsuct 2,265.2 4,943.9 4,381.4 5,409.0 6,842.7 7,512.8 9,698.0 11,929.6 16.4 3.7 15.7 6.1 9.9 12.2 D ficit (cot) 662.4 4,275,8 2,896.8 3,344.0 3,971.0 3,400.0 4,228.2 5,212.9 45.2 -7.9 6.0 1.8 6.1 5.3 ALLOCATION OF GROSS PU6LIC SEC8oR EXPEN8DITURES . of 1ota nery - 5,369.1 6,474.1 7,736.9 6.938.2 _ 12.9 - 27.0 31.7 TSoaipoot sd Connccicction. 1,751.1 1,503.3 1,537.4 1,612.2 _ _ - - -4.2 - 8.8 6.3 - Social Walfra_ 4,221.9 4,602.0 4,771.8 5,020.2 - - 4.2 - 21.3 19.6 Indostry - 1,640.0 1,455.6 1,392.4 1,641.5 - - - _ -5.3 - 8.3 5.7 Agtriclt-oo .nd Ocral DOvalopn at - 1,977.1 1,617.5 1,562.7 1,991.9 - - - - -7.5 - 10.0 6.4 - Gnoorc1 Adnioistrotio and Dsfan-o - 3,290.8 5,160.8 5 552.2 5,450.0 19.0 - 16.6 22.8 - Co.rot - 1,531.7 1,436.9 1,785.2 1,481.7 - 5.2 - 7.7 7.3 To-ris- 63.2 73.5 53.9 57.2 - _ _ - -3.2 - 0.3 0.2 Total - 19,843.9 22.323,7 24.392.5 24,505.4 - _ _ _ 7.1 - 100.0 10o.o _ SE.LCTED INDICATORS I966/73 1971/75 l-937;2 1C0R 2.02 3.31 6.92 2.70 2.48 2.71 2.90 2.92 4.11 4.75 3.22 3.28 3.98 1T327 Ispoot Oloo-lity 1.29 0.60 -4.54 5.03 3.55 3.29 1.64 1.14 1.65 0.83 2.64 1.11 1.44 1.47 arRiDKl Sovisga Rotio 0.01 -0.02 0.20 0.31 0.22 0.36 0.20 0.22 0.14 0.29 0.30 0.15 0.16 0.28 V.oie Added Po- W-ok-o (1972 Pri..) On Hillions A 2 of Total 1960-1970 i of Av-rons LABOR FORCE AND OUTPUT PR W80RK3R 1980 1970 1960 1970 Groutb R te 1960 1970 1960 1970 -ooth Rots Agtir.lct-r 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 2,468.9 4,134.9 140.6 145.0 5.3 S-rfco- 3.2 4.9 29.9 37.7 44 3,222.8 4,044.8 183.6 142.0 2.3 Tot-l 10.7 13.0 100,0 150.0 2.0 1,755.6 2,847.6 100.0 100.0 5.0 I/ Inclodoo og.ar. 2/ This los rats of groth So row d by a peak in pabilS Inve-t 3t in 1975. Tha protjoted rats for 1977-82 is boot 132.  1911- ~~~ N