Mexico - Small- and Medium-scale Mining Development Project

Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY Repot No. P-2735--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 SMALL AND MEDIUM-SCALE MINING DEVELOPMENT PROJEC' March 6, 1980 This document has a restricted distribution and may be used by recipients only in the performance of their olicial duties. Its contents may not otherwise be disclosed without World Bank 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 February 1, 1980, the peso traded at 22.60 per US dollar. Fiscal Year January 1 to December 31 Abbreviations ACF = average yearly cost of borrowed funds to financieras (investment banks and financial departments of multipurpose banks) which stood at 18.4 percent in February 1980. CFM Comision de Fomento Minero (Mining Development Commission) CRM = Consejo de Recursos Minerales (Mineral Resources Council) FM = Fideicomiso Minerales no Metalicos Mexicanos (Mexican Trust Fund for Non Metallic Minerals) IDB = Inter-American Development Bank LIBOR = London Interbank offered rate for six-month funds NAFINSA = Nacional Financiera S.A. SEPAFIN = Secretaria de Patrimonio Nacional y Fomento Industrial (Ministry of National Patrimony and Industrial Development)  MEXICO FOR OFFICIAL USE ONLY SMALL AND MEDIUM-SCALE MINING DEVELOPMENT PROJECT LOAN AND PROJECT SUMMARY Borrower: Nacional Financiera, S. A. (NAFINSA) Guarantor: United Mexican States Project Executing Agencies: Comision de Fomento Minero (CFM), Fideicomiso de Minerales no Metalicos Mexicanos (FM) and Consejo de Recursos Minerales (CRM). Amount: US$40 million equivalent. Terms: Seventeen years including four of grace, at an interest rate of 8.25 percent per annum. Project Description: Medium and long-term loans would be provided to small and medium-scale mining enterprises through CFM and FM to finance fixed assets required to increase production capacity. Equipment would also be leased on a long-term basis, with option to purchase. Credit would also be provided to enterprises for ore reserve development, both on a risk-sharing and secured basis. About ten regional mineral beneficiation plants would be constructed to process minerals produced by small and medium-scale mining enterprises. Technical assistance would be provided by CRM, CFM and FM to mining enterprises and equipment would be provided to the executing agencies to expand their technical services. The project presents the risks of possible delays in commiting resources due to institutional constraints and possible loss of interest in the sector by investors due to mineral price declines. However, these risks are considered to be moderate and acceptable on the whole. Onlending Terms: CFM nd FM would onlend either in Mexican pesos or in fo eign currencies and interest rates would be adjusted periodically. Peso denominated loans would carry an interest rate of 1.5 to 2.0 percentage point above the average cost of funds to financieras and financial departments of multipurpose banks (ACF). U.S. dollar denominated loans would carry an interest charge of at least one percentage point above LIBOR. The ACF is computed periodically by the Bank of Mexico and stood at 18.4 percent in February 1980. Rental fees on equipment leasing operations would include a cost of capital consistent with the interest rates for peso loans. The Government would take the foreign exchange risk and repay the loan; Bank resources would remain with the Executing Agencies permanently. I 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 and Sources of ---------------(in US$ millions)------------- Financing: Project Financing Requirements Bank Government CFM FM CRM Total Financing Financing Credit 40.6 12.1 - 52.7 17.9 34.8 Equipment Leasing 22.6 6.0 - 28.6 12.9 15.7 Beneficiation Plants 10.4 5.1 - 15.5 4.9 10.6 Technical Assistance 3.2 0.4 6.6 10.2 4.3 5.9 Total 76.8 23.6 6.6 107.0 40.0 67.0 Estimated Disbursements: in US$ million Fiscal Years 1981 1982 1983 1984 Annual 2.5 12.0 18.0 7.5 Cumulative 2.5 14.5 32.5 40.0 Staff Appraisal Report: No. 2764-b-ME of February 25, 1980.  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 SMALL AND MEDIUM-SCALE MINING DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed loan to Nacional Financiera, S.A. (NAFINSA) with the Guarantee of United Mexican States for the equivalent of US$40 million to help finance the foreign exchange cost of a Small and Medium-Scale Mining Development project. The loan would v bear interest at 8.25 percent per annum and would have a repayment period of 17 years, including 4 years of grace. About US$17.9 million of the proposed loan would be onlent to small and medium-scale mining enterprises in either Mexican pesos or foreign currencies. Peso denominated loans would carry an interest charge of 1.5 to 2.0 percentage point above the average cost of funds to financieras and financial departments of multipurpose banks (ACF). Dollar denominated loans would carry an interest charge of at least one percentage point above LIBOR. The ACF is computed periodically by the Bank of Mexico. The Government would carry the foreign exchange risk. PART I: THE ECONOMY 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. Past Performance 3. For the three decades preceding the mid-seventies, Mexico was outstandingly successful in achieving rapid economic growth while also main- taining 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 regulatory 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. The absolute income levels of the poorer house- holds rose more or less apace with those of their richer countrymen, but there was little reduction in contrasts within the Mexican economy. While land redistribution has continued, most of the peasants who received land could  - 2 - not significantly improve their economic status as they received only limited benefits from infrastructure, credit and technical assistance. Rapid popula- tion growth,which reached 3.3 percent per year by the mid 70's,made social equity even more difficult to achieve. Even Mexico's sustained economic growth was not sufficient to absorb the rapidly growing labor force in produc- tive employment and by the 1970s some 50 percent of the labor force was either relatively unproductive and poorly paid, or openly unemployed. 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 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 at the end of 1976. 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 invest- ment 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 18-20 percent in 1978 and 1979 as against an annual rate of almost 30 percent in 1977. The deficit in the current account of the balance of payments peaked at $4.2 billion (or 6 percent of GDP) in 1975 and declined to $1.9 billion (equivalent  - 3 - to 2-1/2 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 interme- diate goods upon which the expansion of the economy depends. The current account deficit increased to US$2.9 billion (or 3.1 percent of GDP) in 1978 and further to an estimated US$3.8 billion (under 3-1/2 percent of GDP) in 1979. The public sector deficit also peaked at about 9 percent of GDP in 1975 and declined to about 6 percent in 1979. Mobilization of savings by the banking system has recovered at a strong pace. GDP growth is estimated at 7 percent in 1978 and 8 percent in 1979 as compared to less than 1 percent in 1977. 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 investments which are increasing at a rate of more than 15 percent a year in real terms. These investments call for continued increasesin imports of capital and intermediate goods and, while foreign exchange will not be a constraint on account of the recent increases in oil prices, the import program will put a severe strain on the existing infrastructure capacity, especially ports and rail transport in which bottlenecks already exist. Additional strain on the transport system is likely to come from the expected large imports of grains as a result of a bad crop this year. 10. Another threat to the efforts of the Government in controlling inflation may come from the wage area. The recently agreed increase in the minimum wage of about 21 percent, while not automatically reflected in the total wage bill, is likely to establish a benchmark in union bargaining within the modern sector and contribute to a cost push which might be passed on to consumers. This increase in the minimum wage is easier to reconcile with the objective of reducing inflation below 20 percent when it is considered that it comes after three consecutive years of decline in real wages. 11. The Government will not have an easy task in maintaining price increases within acceptable limits. The increase in January in the consumer price index of about 5 percent, resulting in part from seasonal factors and in part from the newly introduced value-added tax, may adversely affect expec- tations about inflation. At the same time, the need to expand public invest- ment in the key infrastructure 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 human, institutional and natural resources necessary to attain her ambitious goals of rapid growth and alleviation of poverty. The short-run disequilibria that affected the country during the mid-70s are being brought under control; the new petroleum riches will greatly relax the financial constraints on growth. In 1979 proven oil and gas reserves were estimated at about 40 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  - 4 - of the Government is to produce 2.5 million bbl/day by 1982. The challenge is how Mexico can mobilize its resources--not only petroleum but also its human skills, institutions, and experience--to help resolve its long term development problems. The most serious of these relate to poverty, unemployment, stagna- tion in agriculture, and urban-regional imbalances. 13. Poverty: Mexicans have unevenly participated 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 less than one-third the national average. The root causes of this persistent problem are three: rapid population growth, past neglect of rainfed 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 the expected rapid growth of output should also create new jobs more rapidly. In spite of this progress, however, the rapid growth of population and of the labor force made unavoidable by the high percentage of children in today's population, renders the eradication of absolute poverty a goal attainable only several decades from now. 15. Open and hidden unemployment, which are now respectively at 8-9 percent and 40 percent of a labor force which is growing at about 3.7 percent per annum, will remain major problems in the years to come. With the expected GDP growth rate of 8 percent p.a. the economy will be able to absorb the additional labor force, assuming no significant change in the participation rate (now at about 29 percent) and taking into account an increase in labor productivity. In absolute terms the present level of unemployment is therefore likely to be maintained. 16. An Employment Development Plan was published early this year. It calls for a number of measures to strengthen the so-called informal sector both in the urban and the 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 underemploy- ment, and while the institutional structure to carry out some important programs already exist, a concentrated effort will be required to take effec- tive action and make better use of human resources by substantially reducing the level of hidden and open unemployment.  - 5 - 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. Emphasis is on productivity gains and yield increases. Programs for construction of irrigation and drainage works and for rehabilitation of existing irrigation districts to increase efficiency of water use continue. The new emphasis, however, is on rainfed agriculture, and programs now in place should increase the productivity of vast under-exploited areas and reverse past trends towards larger income disparities between the modern and traditional parts of agri- b culture. In contrast with the recent situation of severe shortfalls in output due to adverse weather, these initiatives may lead to a resumption of production growth for both domestic and export markets 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 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 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 its implications for the employment picture. Industry has the potential for considerable expansion in many areas, 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 exports and an 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 is being finalized and will be published shortly. This Plan marks the final step in the planning activities which the current Administration has undertaken in order to obtain a more structured picture of the economic and social problems facing the country. In the past  -6- two years, a National Urban Development Plan, an Agricultural Development Plan and the already mentioned Industrial Development and Employment Plans have appeared; the forthcoming 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. 21. Mexico's public and publicly guaranteed debt service ratio has been increasing over the recent past and peaked above 60 percent in 1978. 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, mainly as a result of rapid increases of petroleum exports. Debt service on Bank loans amounted to about 2.8 percent of public debt service in 1978; this ratio is projected to remain about the same during the early and mid-1980's. The Bank currently holds about 5.5 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 December 31, 1979, Mexico had received 61 loans from the Bank amounting to US$3,595.9 million net of cancellations and terminations; of these, 36 loans totalling US$1,710.4 million were fully disbursed. The Bank held US$3,010.2 million of which US$1,282.0 million had not yet been disbursed. Some 38 percent of Bank lending has been for agriculture and rural development (20 loans for US$1,356.4 million), 20 percent for power (12 loans for US$704.8 million) 19 percent for transportation (13 loans for US$666.7 million), and 17 percent for industry (8 loans for US$607.5 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 December 31, 1979 and notes on the execution of ongoing projects. IFC Operations 23. As of December 31, 1979, IFC had made investment commitments in 19 companies in Mexico, for a total of US$250.8 million, of which US$167.8 million had been sold, repaid or cancelled. A summary statement of IFC investments as of December 31, 1979, is presented in Annex II. Bank Strategy 24. 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 resolve critical adjustment problems that Mexico is currently facing. There- fore, 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. 25. 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 irri- 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, (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 medium-term credit; and fourth, to promote on-farm employment opportunities in rural areas through programs of agro- and rural-industries. The Bank has made twelve loans in FY 72 through 79, totalling US$920 million, for irrigation, rural development and agriculture, agro-industries and livestock credit programs. Projects for rehabilitation of irrigation districts and water control, rainfed agriculture, rural development and support services and agricultural credit are in preparation for presentation to the Executive Directors in the next few months. 26. 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 large 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 FY78-79; they offer support to the private sector at a time of rapid expansion. The proposed project aims at strengthening support to the mining sector which up to now has received insufficient resources from the financial system. A small and medium scale industries project has been appraised and will be submitted to the Executive Directors in the coming months. A capital goods industry project is under discussion for possible Bank support. 27. 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  - 8 - 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 are currently under discussion for possible Bank support. 28. 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 t.o deal with the pressing problems of over-concentration of economic activities in the larger metropolitan areas. The Government has recently 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 another project for the southeast part of the country is being discussed with the authorities. 29. 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 Eank have each made loans for the National Program for Small-Scale Agricultural Infrastructure, the Investment Program for Rural Development (PIDER), agricul- tural 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 which was appraised by the Bank's staff. PART III - THE MINING SECTOR 30. Mining is an industry with long tradition in Mexico; it was one of the predominant economic activities, and one of the principal sources of foreign exchange earnings, from the sixteenth century up to the early part cf the present one. By the 1920's however, other sectors had begun to grow at faster rates and mining declined in relative importance. Fluctuating international prices for minerals, occasional uncertainties about the validity and permanence of mining rights in some areas, and insufficient incentives, resulted in slow growth in the sector, except during the second world war when mineral prices were high. A program to increase Mexican participation in the ownership and management of larger mining operations initiated in the 1960's, resulted in a temporary decrease in investment in large mines; invest- ments in large-scale copper and silver as well as other mining operations  - 9 - have now been renewed. However, in recent years, growth in the sector as a whole has been slow, among other reasons (see para. 49), because of inadequate financial support, particularly for small and medium-scale enterprises. 31. Mexico's endowment of mineral resources is substantial: about 90 percent of its territory shows geological anomalies suggesting mineral potential. Moreover, its semi-arid climate results in thin coverage and comparatively easy access to mineral deposits. Yet only a small fraction of its territory has so far been explored for minerals and an even smaller proportion has been brought into production. In spite of this, Mexico is a significant producer of a number of minerals: it is the world's largest producer of silver, fluorspar and graphite, and is among the largest five producers of lead, zinc, mercury, sulphur, barite, bismuth, arsenic and antimony. In total, fifty different minerals are mined commercially. About 48 percent of Mexico's production is exported, generating about $510 million in foreign exchange in 1978. 32. There are about 15,000 mines in operation in Mexico at the present time. The great majority are small and are operated by individuals or small enterprises. The few relatively large mining enterprises in the country fre- quently operate several small or medium-size mines, there being few large- scale mining operations as such. This is both a reflection of the fragmented and varied nature of the country's geological resources, of high ore grades, and of the relatively low cost of labor which enables smaller mines to compete more or less effectively with capital-intensive operations. There is, however, a constant movement of enterprises between the small and medium-size categories, and in some cases from medium to large operations. 1/ Historically, most of the larger mining concerns had their origin in small mines which used increasingly larger and more efficient mineral beneficiation facilities. Though the size distribution of mining concerns shows a heavy preponderance of small and medium-size enterprises, large companies account for the bulk of production and exports. Thus, it is estimated that 95 percent of the mining companies accounted for only one quarter of the value of mining production in 1978. 33. In order to set conditions which would be conducive to renewed growth in the mining sector, the Government reformed mining legislation in 1975 to make more explicit its policies on the granting of exploration and production concessions, thus providing a firmer basis for the private sector to take the lead in investing in the sector. It has also adopted a strategy of lending support to small and medium mining enterprises; this is expected to result in greater production and employment by these enterprises. Consistent with previous legislation on new investments in industry, the 1975 Mining Law stipulates that Mexicans must own a majority in enterprises engaged in mining, mineral processing and trading. Large deposits of iron ore, coal, sulphur, phosphate and fluorite belong to the National Mineral Reserve however, and can only be exploited with a predominant participation of the State. 1/ See footnote to para. 52 for a definition of "small and medium" mines.  - 10 - 34. The tax treatment of mining activities was also improved. Instead of multiple and comparatively high taxes levied on the value of production and exports, the new structure introduced in 1977 combines production taxes ranging from 4 to 9 percent on the value of output (depending on the mineral produced) and income taxes. It includes allowances for reinvestment in exploration and development, and gives special treatment to medium and small-scale mining companies. The new Mining Law and the revised tax treatment have been well received by the private sector and are contributing to renewed interest in mining investment. 35. Mexico has a well developed banking system, comprising more than 200 public, private and mixed ownership financial institutions. Most large mining enterprises are able to obtain financial assistance from domestic banks as well as foreign financial institutions. Small and medium-scale enterprises, however, have limited access to the banking system. Given the limited knowledge of the mining sector among domestic banks, and the generally insufficient experience among mining enterpreneurs in preparing projects in a form accept- able to financial institutions, investment financing for medium and small- scale mining enterprises has been extremely limited. As can be expected, the smallest enterprises have the greatest difficulty in obtaining financing at reasonable terms because they lack adequate collateral and established operating and credit records. 36. The lack of access of small and medium-scale mining enterprises to bank financing is in part compensated by three Government financing and technical assistance institutions serving the sector. These are: The Comision de Fomento Minero (CFM), and Fideicomiso Minerales no Metalicos Mexicanos (FM) and the Consejo de Recursos Minerales (CRM). The three institutions operate with a high degree of autonomy but are formally responsible to, and coordinated by, the Ministry of National Patrimony and Industrial Development (SEPAFIN), with the heads of the three institutions reporting directly to the Subsecretary of Mines and Energy. The Comision de Fomento Minero 37. CFM is the oldest and largest of the government agencies assisting the mining sector. It was created in 1938 to help the development and exploitation of mineral deposits throughout Mexico. Its objectives are: (i) to serve as a holding company for Government investments in mining and related companies and as an executing agency for large-scale projects in the public sector, (ii) to provide financial assistance to private or mixed- ownership, small and medium-scale mining enterprises, (iii) to operate regional beneficiation and other plants to process minerals produced by medium and small private mines, thus reducing the transport cost of such minerals and encouraging their production, and (iv) to provide technical assistance to mining enterprises, mostly of medium and small size. 38. CFM's overall policy making body is its Board of Directors, which is headed by the Minister of National Patrimony and Industrial Development and which includes representatives of the Ministries of Finance and Public Credit, Commerce, SEPAFIN, NAFINSA and representatives of the private mining  - 11 - sector. Day-to-day operations are the responsibility of CFM's Director General. He is assisted by a General Manager and several heads of departments and divisions, responsible, respectively, for operations of affiliate companies, promotion and credit operations, technical evaluation, regional beneficiation plants, economic studies, administration, laboratories and 1 al matters. CFM maintains twelve regional offices throughout Mexico to provide technical assistance and eight promotion offices. CFM has a staff of 234 professionals about half of which are stationed in its field offices. CFM's management and staff is adequately qualified, competent for its tasks, and well motivated. 39. Up to the mid-1970's, CFM emphasized mainly its roles as a holding company for the Government in mining-related enterprises and as a promoter of mining projects in the public sector. CFM's financial assistance to medium and small-scale enterprises in the private sector had been small until then, though its regional beneficiation plant and technical assistance services were valued instruments of support. In 1975 however, and consistent with the Government's overall strategy of encouraging the private sector to take the initiative in investment, CFM began to give greater emphasis to its program in support of small and medium-scale enterprises. As a consequence, annual approvals of credit and leasing operations were more than twice as high during 1978 and 1979 (when they amounted to about US$26 million equivalent) than in the three year period 1975-1977. Since the base from which it started such operations was small, CFM expects to increase the value of financial commitments to the sector by 30 percent annually between 1980 and 1982. To undertake this task, CFM is strengthening its policies and procedures for project and credit evaluation and for project supervision and portfolio control. Fideicomiso de Minerales no Metalicos Mexicanos 40. FM was established in 1974 as a Federal Government trust fund administered by NAFINSA to stimulate exploration, exploitation and marketing of non-metallic minerals in Mexico. It was considered that a separate organization was required because the mining, processing and marketing of these minerals is in some respects different from that of metallic minerals, because a special effort was required to promote their use, and because deposits of these minerals frequently occur in ejido 1/ land, presenting special mining right and other legal problems. FM's objectives are to promote the production of non-metallic minerals by assisting the private sector and ejidos, provide technical assistance and the necessary infrastructure for this task, and, when necessary, take the lead in carrying out projects. 41. FM's governing body is a Technical Committee headed by the Minister of National Patrimony and Industrial Development and including representatives of the Ministries of Finance, Commerce and Programming and Budgeting, CFM and NAFINSA, as well as other concerned Government departments. The Committee takes an active interest in FM's affairs and approves all financial assistance 1/ Land owned by cooperatives created under the Mexican agrarian reform laws.  - 12 - transactions in excess of Mex$3 million. FM's management and staff of 52 professionals are well prepared, competent and suitably motivated. FM intends to carry out training programs to improve its professional staff's skills in project evaluation and control, financial analysis and management. 42. FM started operations in 1976 and has mainly concentrated on estab- lishing and operating mining companies to carry out projects identified by the authorities as having high priority. The volume of its credit operations for non-affiliated companies has so far been limited, and amounted to US$2.2 million equivalent up to June 30, 1979. In compliance with the Government's desire to extend support to small and medium mines, FM intends to expand its credit support functions significantly in the future. It also plans to start a program of long-term equipment leasing (with purchase option) for private mine operators; this would fill an important need, particularly for small mining enterprises which are unable to obtain financing for equipment because of an insufficient credit record. FM is also considering a further diversification of its operations to include the installation and operation of regional beneficiation plants to process minerals produced by private mine operators. These functions would enable it to offer services parallel to throse provided by CFM in the metallic mineral sector, providing valuable support to enterprises in the non-metallic mineral field. Consejo de Recursos Minerales 43. CRM was created in 1957 and is a decentralized agency under the general supervision of SEPAFIN. Its functions are to carry out geological surveys, exploration and mineral evaluation programs and to advise the Govern- ment on various aspects of mining development, such as the establishment of National Mineral Reserves, the granting of concessions, and on all matters related to the exploration, exploitation and preservation of mineral resources. Promising deposits are turned over to CFM or FM in order that mining operations may be promoted. 44. CRM also provides valuable geological advice and services to mining eiterprises in the private sector through its field offices and technical assistance through its laboratories. The latter provide assaying services and carry out mineralogical studies, for which fees are charged to the corresponding enterprises. CRM has recently been directed to orient its exploration and mineral evaluative work more clearly towards the identification of specific mLning projects rather than to general regional surveys. This is expected to result in a greater number of opportunities for small and medium mining operations over the next few years, particularly since CRM has already acacumulated a considerable amount of basic geological information on several regions of the country on which to base its identification work. 45. CRM offers privately owned mining enterprises assistance in explora- tion programs to either identify new mineral deposits or extend existing ones. CRM carries out the exploration work and evaluates results and enables enter- prises to repay the cost of such programs on either a risk-sharing or secured basis. The risk-sharing arrangement is used when enterprises cannot afford the full cost of CRM's exploration work; CRM allows them to repay up to  - 13 - 90 percent of exploration costs at extended terms. If no exploitable deposits are found CRM absorbs this share of costs. If, on the other hand, commercially exploitable deposits are identified, the enterprise repays CRM's share plus a 20 percent premium and interest charges at the rate of about 15 percent ner annum. In addition, the enterprise pays CRM a royalty of between 1 and 3 percent of the value of production for a period of up to ten years. CRM reserves the right to discontinue exploration work if the initial results are not promising. CRM's program is thus comparable to an exploration fund as the risks are shared among a large number of enterprises with the successful cases helping cover a large part of the cost of the unsuccessful ones. Exploration credit is also offered to enterprises which are able to absorb the full cost of such programs; in such cases credits are fully secured, and though an exploration premium and interest on outstanding balances are charged, no royalties on subsequent production are collected. 46. CRM's Director General is a respected geologist with many years experience in the mining sector of Mexico. He reports to a Board of Directors headed by the Minister of National Patrimony and Industrial Development and including representatives of several Ministries and Government agencies with interest in the mining sector. CRM's operations are directed from its head office in Mexico City, but three quarters of its staff are based at 27 regional offices distributed throughout the country; it employs 625 professionals, more than half of whom are geologists. Staff turnover has tended to be high but salary levels are now being reviewed with a view to making CRM more competitive with the private sector. Large-scale and complex technical problems have been assessed by CRM with the assistance of consultants. Environmental and Safety Considerations 47. Small and medium mines are required to meet federal environmental standards and usually have little problem in doing so. Chemical effluents and toxic vapors resulting from the operation of small and medium mines are negli- gible. Safety standards can likewise be met easily by most small and medium mines since they usually work narrow veins and do not have to cope with serious explosive gas and ground support problems. The Labor Department routinely carries out safety inspections of mines. Prospects for the Mining Sector and Constraints 48. Given Mexico's mining potential, and with adequate financial and technical support, a large number of small and medium mining enterprises would be able to operate efficiently and profitably. Because small and medium-size mines are distributed over a wide geographic area in Mexico, development of the sector would help reduce disparities in regional income and help increase employment in outlying areas. The basic institutional structure required to assist the sector already exists but needs to be reinforced and directed more clearly towards development of small and medium-scale mining enterprises. 49. The main constraints to the develoment of small and medium-scale mining enterprises are: (i) insufficient geological work and exploration because many enterprises have not yet developed their capacity to undertake systematic  -14 - exploration work, (ii) technical and administrative deficiencies in the manage- ment of enterprises, for instance in the planning of mining activities and the preparation of projects for presentation to financial institutions, (iii) an insufficient flow of resources from the financial system to the sector because banks do not have experience in evaluating mining projects, (iv) lack of mineral concentrating facilities in areas of mining potential to reduce the cost of transporting minerals, and (v) a scarcity of experienced professionals, both in mining companies and in some of the supporting institutions. Several universities and technical colleges are, however, now offering courses in geology, mining engineering and related fields, and it can be expected that in a few years there will be an adequate supply of professionals. The proposed project addresses itself to helping resolve the first four constraints. It is to be the first phase of a new Government program to assist the development of the small and medium-scale mining sector. PART IV - THE PROJECT 50. The project aims at helping make better use of Mexico's considerable mineral resources and at generating additional employment, especially among relatively low income groups in outlying areas. It would reinforce the main Government institutions giving support to the sector and help them focus more clearly on the needs of small and medium-size enterprises. A brief description of the project may be found in the Loan and Project Summary at the beginning of this report. 51. The project was first discussed with CFM's Director in 1977 and later in Washington during meetings with high Government officials in March 1978, when views were exchanged on how the Bank might assist Mexico in its development programs. Further discussions were held in Mexico in May and a Bank identification mission visited Mexico in October 1978. A general review of the sector was carried out in February 1979. After a preparation mission in May 1979, appraisal took place in September 1979. Negotiations took place in February 1980 and the Mexican negotiating team was headed by Mr. Pedro Galicia of NAFINSA and included the Directors of CFM and FM as well as Government and CRM representatives. The Staff Appraisal Report (No. 2764-b-ME of February 25, 1980) is being distributed separately to the Executive Directors. Annex III provides supplementary data on the project. Project Description 52. The project would provide financial and technical assistance to small and medium-size enterprises 1/ in the mining sector to help expand their exploration, mine development and production programs and would help support the institutions assisting mining enterprises. Specifically, it would include: 1/ For purposes of the project, "small and medium" enterprises are those with annual production not in excess of Mex$150 million and beneficiation plants not larger than 500 tons/day of crude mineral in the case of metallic mineral producing enterprises and 800 tons/day in the case of non-metallic mineral producing enterprises. These definitions would be reviewed from time to time by the Bank and the Borrower during project implementation; the value limit on annual production would be adjusted with reference to the current value of an agreed basket of minerals.  - 15 - A. Credit and Equipment Leasing (a) financing of fixed assets, including machinery and equipment, to small and medium-scale enterprises mining metallic minerals through CFM, and non-metallic minerals through FM. Financing would be in the form of term loans and of leases of equipment (with option to purchase) for mine preparation, mineral extraction and mineral concentration/benefi- ciation projects; (b) permanent working capital loans associated with projects described under (a) to be financed with Government resources; (c) loans to small and medium-scale enterprises through CFM for ore reserve development on both a risk-sharing and secured basis; B. Regional Beneficiation Plants about ten regional beneficiation plants, six or seven to be operated by CFM and three by FM, to process minerals produced by numerous small and medium-scale mining enterprises; these plants would permit new mining regions to develop by reducing the transport cost of minerals and would help small miners by enabling them to benefit from the economies of scale of larger equipment than they might purchase themselves. C. Technical Assistance (a) technical assistance to small and medium-size enterprises, to be provided by CFM, FM and CRM in association with the above mentioned financial assistance; (b) equipment to enable CRM to assist small and medium-scale enterprises in exploration and mine development; and equipment for CRM's labora- tories for chemical, metallurgical and other analyses; and (c) equipment for CFM's and FM's laboratories, including the estab- lishment of up to four small regional laboratories to assist small and medium-scale enterprises in areas at some distance from Mexico City. The attached map (IBRD 14778) shows the proposed and existing location of CFM and FM regional beneficiation plants and field offices. Project Implementation 53. An ad-hoc Coordinating Committee would be established within SEPAFIN under the Chairmanship of the Subsecretary of Mines and Energy to coordinate the activities of the three institutions participating in the project. While each of the three institutions will be primarily responsible for appraising the financial, economic and technical viability of projects proposed to it by mining enterprises and for supervising their execution, the Coordinating Committee would examine a sample of the proposals to insure that proper standards are applied. The Coordinating Commitee would be assisted in these tasks by a small staff of experienced professionals and, when necessary, by  - 16 - consultants. SEPAFIN has agreed to carry out a program of training for the staff of CFM, FM and CRM in order that the volume of transactions with small and medium mining enterprises visualized under the project may be undertaken without difficulty. 54. In carrying out the project, CFM and FM would observe Operating Guidelines which have been reviewed by the Bank and which would be formally adopted before the proposed loan is made effective (see Section 8.01 of the draft Loan Agreement). Under the terms of these Guidelines, the maximum subloan amount would normally be Mex$15 million (about US$652,000) for fixed assets to develop a new or existing mine and Mex$30 million (about US$1.3 million) to construct a new or expand an existing beneficiation plant. The maximum size of an equipment leasing operation would be Mex$5 million (about US$217,000). In addition, total financing available to a single enterprise, or group of associated enterprises, would not exceed Mex$50 million (about US$2.2 million). These limits would be reviewed from time to time with the Bank in the light of experience under the project. Repayment terms and grace periods granted to mining enterprises would be in accordance to the nature of the project being financed and each enterprise's capacity to repay. 55. Prior Bank approval would be required for the first three subloan proposals for mine development projects and the first three other subloan proposals processed each calendar year by CFM and by FM, all subloan proposals involving US$400,000 or more of Bank resources, all subloans to enterprises in which CFM and FM have a controlling interest, all regional beneficiation plants and the first five leasing operations each calendar year involving Bank resources of US$50,000 or more processed by CFM and FM (see Sections 2.02(b) and 2.02(c)(iii) of the Draft Loan Agreement). On the whole, the Bank is expected to review one quarter to one third of the projects financed under the loan and involving about 50 percent of the loan amount. Interest Rates on Subloans 56. CFM and FM would carry the credit risk on subloans. Enterprises requesting assistance from CFM and FM would have the option of obtaining loans denominated in pesos or in foreign currencies. The majority of loans are, however, expected to be in pesos and interest charges would be between 1.5 and 2.0 percentage points above the average cost of funds to financieras and financial departments of multipurpose banks, as computed by the Banco de Mexico (the ACF index) (see Section 2.05(b) of the Draft Project Agreement with CFM and Section 5.02(b) of the Draft Loan Agreement). Interest rates would be adjusted every six months. These interest charges are compar- able on the average to those charged under a Small and Medium-Scale Industry Develoment Project being financed by the Bank under Loan 1552-ME, and which are also linked to the ACF. This index has risen from 16.2 percent per annum Ln January of 1979 to 18.4 percent in February 1980 in response to higher rates in world money markets and the Government's policy of allowing domestic interest rates to rise sufficiently to retain resources in the financial system. The consumer price index has been increasing at an annual rate of around 18-20 percent over the past two years.  - 17 - 57. Subloans denominated in US dollars would carry interest charges of at least one percentage point above LIBOR and those in other currencies would carry comparable interest charges. The Government and the Bank would review interest charges for foreign currency subloans from time to time and adjust minimum rates in the light of market conditions. 58. Long-term leasing contracts, with option to purchase, granted by CFM and FM for equipment would be denominated in pesos and rental payments would be computed to ensure an effective return on capital consistent with the interest rates charged on peso loans. Fees charged by CFM and FM for process- ing minerals at their regional beneficiation plants would be established to recover the capital cost of such plants, a return on capital equivalent to the rate of interest charged on loans under the project and operating and mainte- nance costs (see Section 2.05(e) of the Draft Project Agreement with CFM and Section 5.02(e) of the Draft Loan Agreement). Resource Needs and Bank Financing 59. Based on the level of past operations of the three participating institutions, their plans to increase staff to process a higher volume of operations, and on estimates of the small and medium-scale mining sector's likely demand for resources over a period of 30 to 36 months, the Government estimates that the equivalent of about US$107 million would be required to finance the project. This is based on the assumption that CFM and FM will extend credit for up to 85 percent of the cost of subprojects submitted by mining enterprises. The Government has requested a Bank loan of US$40 million equivalent to finance the foreign exchange cost of the project; the Government would meet local costs. 60. The borrower would be NAFINSA, as financial agent for the Government, and Bank resources would be transferred to CFM, FM and CRM as required; resources would remain in the respective institutions and would be used for purposes similar to the project (see Sections 5.09 of the Loan Agreement and 2.11 of the Project Agreement with CFM). The Government would carry the foreign exchange risk and repay the loan through NAFINSA. A Bank loan of 17 years, including four years of grace, is recommended. Since Government approval and counterpart resources were made available for the project as of January 1, 1980, the Executing Agencies have initiated procurement of some items for regional beneficiation plants and equipment leasing. It is recom- mended that up to US$1.5 million of the proposed loan be made available to retroactively finance expenditures for such items made after February 1, 1980. Disbursements 61. The proposed loan would cover the estimated foreign exchange cost of the project and disbursements would be made on the basis of 45 percent of total expenditures for machinery, equipment and other investment goods and 25 percent of total expenditures for civil works.  - 18 - Auditing 62. The accounts of FM, CFM and CRM would be audited according to standards satisfactory to the Bank once yearly (see Section 6.02 of the Draft Loan Agreement and Sections 3.02 of the draft Project Agreements with CFM and CRM). Procurement 63. Procurement procedures for goods and services financed under the credit component of proposed loan would be the customary ones for industrial credit operations. CFM and FM would be responsible for ensuring the competi- tiveness in price and quality of items procured, and their suitability for the purpose intended. CFM and FM's subloan agreements would contain provisions to ensure satisfactory procurement procedures along these lines. Domestic producers of mining and mineral beneficiation equipment are reasonably efficient and competitive in international terms. In the case of other goods and civil works purchased by the executing agencies (i.e., for leasing operations, regional beneficiation plants and equipment for technical assistance) in packages of goods and civil works of US$1 million or more, international competitive bidding according to Bank guidelines would be required. Packages of goods or civil works of US$500,000 or more would also be purchased by international competitive bidding. Local suppliers of goods would be entitled to a 15 percent margin of preference or the applicable import duties and taxes, whichever is lower. Packages estimated to cost less than these limits would be procured on the basis of the Government's procurement procedures, which have been reviewed by the Bank and are satisfactory. Project Benefits and Risks 64. The project would be one of the Government's main instruments for supporting growth in the mining sector. It would help develop Mexico's consider- able potential for producing metallic and non-metallic minerals by assisting small and medium-size mining concerns. Such enterprises can add substantially to production and employment in mining. The investment cost per job created is lower than in many branches of manufacturing industry in Mexico (about US$7,000 equivalent per job for small mines and US$12,000 equivalent for medium-size mines) and the project is expected to result in as much as 14 to 16 thousand direct new employment opportunities. Small and medium-size mining concerns have traditionally been the origin of large mining operations in Mexico, so their development could stimulate large-scale production of some minerals in the future. 65. The project would also support the Government's regional diversifica- tion efforts. Mining resources are widely distributed in Mexico, there being little mining in the traditional centers of economic activity. The bulk of new employment generation is therefore likely to be in outlying areas where employment needs are greatest and where new job opportunities are likely to reduce migration to already congested cities. 66. Lastly, but perhaps most importantly, the project would have a considerable institution building impact by reinforcing the three agencies concerned -- CFM, FM and CRM--, helping them focus on the needs of small and medium-scale enterprises and coordinating their activities more closely.  - 19 - 67. The project presents two kinds of risks: firstly, that the parti- cipating agencies may not be able to increase their financial commitments to assist small and medium-scale mining enterprises as quickly as forecast because of insufficient manpower or other institutional constraints. Since the Government is taking adequate steps to prepare the agencies concerned for the project, this risk is acceptable. The second is a market sk; if inter- national prices for minerals should drop sharply, demand for investment financing under the project might be reduced. In view of the broad range of minerals produced in Mexico -- over 50 different ones are mined at the present time -- and of the generally favorable outlook for most minerals, this risk seems acceptable. In the event of a severe decline in prices, the project's implementation period could be extended beyond the time now anticipated. On the whole, the project presents a moderate level of risk. PART V - LEGAL INSTRUMENTS AND AUTHORITY 68. The Draft Loan Agreement between the Bank and NAFINSA, the draft Guarantee Agreement between the United Mexican States and the Bank, the draft Project Agreements between the Bank and CFM and the Bank and CRM, as well as 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. Special conditions of the project are listed in Section III of Annex III. A condition of effectiveness would be that CFM and FM formally adopt Operating Guidelines for the Project satisfactory to the Bank. 69. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 70. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments March 6 , 1980  - 20- ANNEX I Page 1 of 5 TABLE 3A MEXICO - SOCIAL INDICATORS DATA SHEET LAND AEA (THUSANDSQ. KM)XCO REFERENCE GROUPS AYERAGES LAyD AREA (THOUSAND SQ. M.)M - MOST RECENT-ESTTE) TOTAL U 19R72 .4 SAME SAME NEWX HIGHER AGRICULTURAL 944.9 MOST RECENT GEOGRAPHIC INCOME INCOKE 1960 lb 1970 /b ESTIMATE lb REGION /c GROUP /d GROUP /a GNP PER CAPITA (USS) 380.0 710.0 1290.0 1124.4 1097.7 1942.6 ENERGY CONSUMPTION PER CAPITA (:ILOGRAMS OF COAL EQUIVALENT) 770.0 1047.0 1227.0 943.1 730.7 1646.7 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (MILLIONS) 36.4 50.3 63.3 URBAN POFULATION (PERCENT OF TOTAL) 50.3 59.3 63.2. 59.3 49.0 51.2 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 116.0 STATIONARY POPULATION (MILLIONS) 204.0 YEAR STATIONARY POPULATION IS REACHED 2075 POPULATION DENSITY PER SQ. 1Q. 18.0 26.0 32.0 23.5 44.6 28.2 PER SQ. KM. ARCICULTURAL LAND 36.0 52.0 67.0 80.5 140.7 100.5 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 45.6 46.5 45.9 40.9 41.3 35.4 15-64 YRS. 51.0 50.0 50.6 54.4 55.3 56.3 65 YRS. AND ABOVE 3.4 3.5 3.5 3.9 3.5 5.1 POPULATION GROWTH RATE (PERCENT) TOTAL 3.1 3.3 3.3 2.4 2.4 1.7 URBN- 4.9 4.8 4.6 3.7 4.5 3.0 CRUDE BIRTH RATE (PER THOUSAND) 45.0 42.0 38.0 32.8 31.1 27.5 CRUDE DEATH RATE (PER THOUSAND) 12.0 9.0 8.0 8.5 , 9.2 9.1 GROSS REPRODUCTION RATE 3.2 3.1 3.0 2.4 2.2 1.8 FAMILY PLANNING ACCEPTORS. ANNUAL (THOUSANDS) .. 25.1 608.0 USERS (PERCENT OF MARRIED WOMEN) .. .. 21.0 17.7 34.7 FOOD AND NUTRI-ION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 87.5 100.0 96.1 99.4 104.4 102.0 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 107.0 105.0 117.0 107.0 105.0 120.8 PROTEINS (GRAMS PER DAY) 65.0 65.0 66.9 60.4 64.4 80.9 OF WHICH ANIMAL AND PULSE 29.0 28.0/f 27.5 28.3 23.5 31.3 CHILD (AGES 1-4) MORTALITY RATE 14.0 9.8 6.0 6.7 8.6 5.1 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 58.0 62.4 64.7 63.6 60.2 65.6 INFANT MORTALITY RATE (PER THOUSAND) 78.0 74.0 .. 76.1 46.7 45.5 ACCESS TO SAFE WATER (PERCENT OF POPUJLATION) TOTAL *- 54.0 62.0 63.4 60.8 69.4 URBAN *- 71.0 70.0 79.5 75.7 85.1 RURAL *- 29.0 49.0 38.6 40.0 43.0 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. .. .. 58.8 46.0 70.1 URBAN .. .. .. 77.8 46.0 88.3 RURAL .. 13.0 14.0 24.5 22.5 33.2 FOPUIATION PER PHYSICIAN 1700.0 1440.0 .. 1841.9 2262.4 1343.2 POPULATION PER NURSING PERSON .. 1570.0 .. 933.7 1195.4 765.0 POPULATION PER HOSPITAL BED TOTAL 1900.0 930.0 860.0 563.4 453.4 197.6 URBAN .. 780.0 770.0 279.4 253.1 260.2 RURAL .. 1310.0/g 1090.0 1140.9 2732.4 1055.0 ADMISSIONS PER HOSPITAL BED .. .. .. 25.7 22.1 17.3 HOUS INYG AVERAGE SIZE OF 'LOUSEHOLD TOTAL 5.4 5.7 .. 5.0 5.3 4.7 URBANS 5.7 5.7 .. 4.8 5.2 4.4 RURAL 5.2 5.8 .. 5.3 5.4 5.1 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 2.9 2.5 .. 1.3 1.9 1.1 URBAN 2.6 2.2 .. 1.3 1.6 1.2 RURAL 3.4 3.2 .. 1.5 2.5 1.2 ACCESS TO EL