Mexico - Second Small and Medium-scale Industry Development Project

Document of The World Bank co FOR OFFICIAL USE ONLY Report No. P-2842-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 SECOND SMALL AND MEDIUM-SCALE INDUSTRY DEVELOPMENT PROJECT June 4, 1980 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 Bnk authorization.  Currency Unit - Peso (Mex$) 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 May 21, 1980, the peso traded at 22.80 per US dollar. Fiscal Year January 1 to December 31 Abbreviations ACF - Average cost of term funds to multipurpose banks (excluding checking and savings accounts) which stood at 19.8 in April, 1980. CENAPRO - Centro Nacional de la Productividad (National Productivity Center) CONACYT - Consejo Nacional de Ciencia y Tecnologia (National Science and Technology Council) FIDEIN - Fideicomiso de Conjuntos, Parques y Ciudades Industriales y Centros Comerciales (Fund for Industrial Estates and Commercial Centers) FOGAIN - Fondo de Garantia y Fomento a la Industria Mediana y Pequeina (Fund for Guarantees and Development of Medium and Small- Scale Industry) FOMEX - Fondo para el Fomento a las Exportaciones de Productos Manufacturados (Fund for Export Development of Manufactured Products) FOMIN - Fondo Nacional de Fomento Industrial (National Fund for Industrial Development) FONEI - Fondo de Equipamiento Industrial (Industrial Equipment Fund) IDB - Inter-American Development Bank IMIT - Instituto Mexicano de Investigaciones Tecnol6gicas (Mexican Technological Research Institute) INFOTEC - ServLcio de Informaci6n y Tecnologia (Information and Technology Service) NAFINSA - Nacional Financiera, S.A. SAHOP - Secretaria de Asentamientos Humanos y Obras Piblicas (Ministry of Human Settlements and Public Works)  FOR OFFICIAL USE ONLY MEXICO SECOND SMALL AND MEDIUM-SCALE INDUSTRY DEVELOPMENT PROJECT LOAN AND PROJECT SUMMARY Borrower: Nacional Financiera, S.A. (NAFINSA) Guarantor: United Mexican States Beneficiary: NAFINSA in its own right and as trustee for FOGAIN, FOMIN and FIDEIN, Federal Government trust funds created to serve the needs of small and medium-scale industrial enterprises. Amount: US$100 million equivalent Terms: Seventeen years, including four years of grace, and interest at 8.25 percent per annum. Project Description: The project aims at expanding the production capacity and improving the efficiency of small and medium-scale industrial enterprises by means of a comprehensive program of technical and financial assistance. Special emphasis would be given to meeting the needs of enter- prises located outside the main urban concentrations. FOGAIN would provide credit through financial inter- mediaries and guarantee credit from financial inter- mediaries to finance fixed assets and associated working capital; minority equity capital and financial assistance with equity features would be provided directly by FOMIN; factory buildings, common service facilities and equipment leasing services on industrial estates would be provided through FIDEIN; technical assistance would be provided by Nacional Financiera and other specialized institutions. The project faces a moderate level of risk; some compo- nents may develop more slowly than others. Relending Terms: FOGAIN would lend in local currency through financial inter- mediaries. Interest rates to final borrowers would initially be the following: