Mexico - Preparation of A Deconcentration Program For the Mexico City Region

Document of The World Bank FIL Z FOR OFFICIAL USE ONLY Report No. P-3359-ME REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$9.2 MILLION TO BANCO NACIONAL DE OBRAS Y SERVICIOS PUBLICOS, S.A. WITH THE GUARANTEE OF UNITED MEXICAN STATES FOR THE PREPARATION OF A DECONCENTRATION PROGRAM FOR THE MEXICO CITY REGION June 24, 1982 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.  Currency Unit - Peso (Mex $) The Central Bank withdrew from the exchange market on February 18, 1982; prior to that date the rate of exchange was 26.9 pesos to the US dollar. In recent weeks the peso has traded around 47.6 pesos to the dollar. Fiscal Year January 1 to December 31 Acronyms AMCM Area Metropolitana de la Ciudad de Mexico (Mexico City Metropolitan Area - includes the Federal District and 12 municipalities of the State of Mexico) BANOBRAS Banco Nacional de Obras y Servicios Publicos (National Bank of Public Works and Services) CCCP Comision de Conurbacion de la Zona Ce-ntro del Pais (Planning Commission of the Central Conurbation Zone) DF Distrito Federal (Federal District) PRODECEN Programa Integral de Desarrollo de la Zona Centro (Comprehensive Development Program for the Central Conurbation) SAHOP Secretaria de Asentamientos Humanos y Obras Publicas (Secretariat of Human Settlements and Public Works) SHCP Secretaria de Hacienda y Credito Publico (Secretariat of the Treasury and Public Credit) SPP Secretaria de Programacion y Presupuesto (Secretariat of Programming and Budget) ZCCP Zona de Conurbacion del Centro del Pais (Central Conurbation Zone - includes DF and 130 municipalities in 5 surrounding States)  FOR OFFICIAL USE ONLY MEXICO DECONCENTRATION PROGRAM FOR THE MEXICO CITY REGION Loan and Project Summary Borrower: Banco Nacional de Obras y Servicios Publicos, S.A., BANOBRAS Guarantor: United Mexican States Beneficiary: Planning Commission for the Central Conurbation Zone, CCCP Amount: US$9.2 million equivalent, including capitalized front-end fee. Terms: Fifteen years, including 3 years of grace, at an interest rate of 11.6 percent per annum. Relending Terms: The Peso equivalent of the loan would be re-lent to the Beneficiary and would be repaid in fifteen years, including 3 years of grace, at an interest rate of 11.6 percent:per annum. Project Description: Consultant services for the formulation of a comprehen"sive medium-term investment program for the Central Conurbation Zone (ZCCP) and the preparation of detailed engineering, economic and financial analyses of individual projects, aiming at spatial diversion of incremental growth from the metropolitan core to the rest of ZCCP. The areas of study would include administrative, financial and budgetary aspects of the deconcentration program; inter-modal trans- portation and accessibility patterns; water resource;manage- ment; urbanization, including land use planning and location of economic activities; agricultural development in peripheral areas. Project Risks: The main risks are associated with the large number of administrative units involved, the difficult managertal task of the implementing agency and the need for endorsement of the deconcentration program by the new Administration taking * office in December 1982. However, the expertise already acquired by the Central Conurbation Commission as a coordin- ating agency in a complex political setting and the support for the deconcentration program expressed by the federal and state governments make these risks acceptable. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - Cost of Project: Local Foreign Total (in millions US$ equivalent) Planning and Engineering Studies 5.5 9.5 15.0 Front-end Fee on Bank Loan - 0.2 0.2 5.5 9.7 15.2 The costs do not include Mexican taxes on consultant services. Annex IV provides details of the cost estimates for the studies. Sources of Finances: Local Foreign Total (in millions of US$ equivalent) Government Resources 6.0 - 6.0 IBRD - 9.0 9.0 Capitalized front-end fee - 0.2 0.2 Total 6.0 9.2 15.2 Disbursements: IBRD Fiscal Year 1983 1984 1985 1986 Annual 2.0 3.0 3.2 1.0 Cumulative 2.0 5.0 8.2 9.2 Economic Rate of Return: Not Applicable Staff Appraisal Report: None.  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO BANCO NACIONAL DE OBRAS Y SERVICIOS PUBLICOS, S.A. WITH THE GUARANTEE OF UNITED MEXICAN STATES FOR THE PREPARATION OF A DECONCENTRATION PROGRAM FOR THE MEXICO CITY REGION 1. I submit the following report and recommendation on a proposed loan to Banco Nacional de Obras y Servicios Publicos, S.A.,(BANOBRAS) with the Guarantee of United Mexican States for the equivalent of US$9.2 million to help finance a Deconcentration Program for the Mexico City Metropolitan Region. The loan would have a term of 15 years, including 3 years of grace, with interest at 11.6 percent per annum. The Government would bear the exchange risk. The loan includes a capitalized front-end fee of US$0.2 million. The Peso equivalent of the loan would be re-lent to the Planning Commission of the Central Conurbation Zone (CCCP), which would repay in 15 years, including 3 years of grace, at an interest rate of 11.6 percent per annum. PART I: THE ECONOMY 1/ 2. The Mexican economic situation and major issues of economic policy were analyzed in "Mexico: Development Strategy - Prospects and Problems" (Report No. 3605-ME), distributed to the Executive Directors on August 31, 1981. Country data sheets are attached as Annex I. Background 3. Fdr the last thitty years, the Mexican economy recorded a high rate of growth: on average, GDP grew at 6 percent per year in real terms between 1950 and 1980, allowing butput per capita to increase by 3 percent per year over the same period. Sustained growth brought about rapid industrial- ization: especially after 1955, industry has been the most dynamic sector of the economy, growing at an average rate of 7.5 percent per year, while agri- cultural output grew at 3.5 percent per year; thus, the share of the indus- trial sector in GDP went up from 26 percent in 1950 to 38 percent in 1980. A similar change took place in the structure of foreign trade, with manufac- tured products accounting for an increasing share of total exports between 1950 and 1975. Finally, the last thirty years witnessed the passage from a rural to a largely urban society: in 1980, the fraction of total population living in urban areas was estimated to exceed 60 percent, while it was less than 30 percent in 1950. 4. Successful exploitation of profitable opportunities by a dynamic private sector has been the main engine of growth in the Mexican economy; but the market mechanism, left to itself, would have done little to correct the effects of an uneven distribution of resources on the relative position of 1/ This section is substantially unchanged from the President's Report for the San Fernando Rainfed Agricultural Development Project (P-3354-ME of June 2, 1982). However, minor changes were introduced in para 7.  - 2 - the poorer segments of the population and of the less favored areas of the country; hence the government has had to play a critical role in balancing the need to provide resources and incentives for growth against the demands for a fair distribution of its benefits. 5. In the early seventies, the government sought to build up infra- structure, expand basic industries, stimulate agricultural output and imple- ment massive social programs. The difficulties it encountered in mobilizing enough resources to attain all these aims simultaneously led to excessive public sector deficits, while domestic supply rigidities caused a large part of aggregate demand to spill over into imports. Efforts to redress financial imbalances by strengthening public revenues fell short of their goal and, in September 1976, the hitherto fixed parity of the peso was abandoned, while the government imposed a strict stabilization program on the economy. Economic Performance, 1976-1981 6. The Administration of President Lopez Portillo, which took office in December 1976, saw the control of inflation and the improvement of the current account balance as its most urgent tasks; it succeeded in reducing the rate of increase of domestic prices by half between 1977 and 1978 while, at the same time, the current account deficit decreased by over 40 percent. In 1978, the economy resumed its path of rapid growth. One of the major constraints on economic growth - the availability of foreign exchange - had been greatly relaxed by the successful exploitation of Mexico's oil reserves; these, which at the end of 1981 stood at 72 billion barrels (with potential reserves estimated at 200 billion barrels), enabled the economy to purchase the raw materials and capital goods needed to sustain high GDP growth, while the revenues from federal taxes on oil exports provided the government with resources, on a hitherto unprecedented scale, to pursue some of its long- standing policy goals. 7. In 1978-1981, output grew at an annual rate exceeding 7 percent, and, with productivity increasing at about 3 percent per annum, conditions were created not only to absorb fully the new entrants into the labor force, but also to lower open unemployment, which is estimated to have fallen to 4-5 percent of the labor force in the modern sector. The Administration succeed- ed in achieving investment growth of over 16 percent per year, strengthening its support to agriculture, reversing the trend towards a worsening trade balance on basic foods, containing to some extent rural migration and provid- ing small farmers with access to more efficient production methods. Finally, a combination of fiscal incentives and administrative regulations had a posi- tive effect on spatial decentralization, one of the major policy objectives of the Administration. 8. A marked increase in the size of the budget was the first result of the government's new commitments: the expenditure budget grew, in real terms, 20 percent per year between 1979 and 1981; furthermore, actual expend- itures exceeded budget figures by significant amounts (by as much as 12 per- cent in 1981). Revenues hiave grown more slowly, and, as a result, the public sector deficit amounted to over 14 percent of GDP in 1981. Despite a high rate of mobilization of private savings into the financial system - made pos- sible by a scheme of adjustable rates on peso deposits - the government had  to resort increasingly to foreign borrowing: although foreign indebtedness, as a percentage of GDP, had fallen from 31 percent in 1977 to 20 percent in 1980, it rebounded again to 30 percent in 1981; in the same year, the govern- ment's planned foreign borrowing amounted to more than half the revenues expected from oil exports. By 1980, moreover, the side-effects of rapid GDP growth were making themselves felt; aggregate demand - with total investment growing at over 16 percent per year, in real terms, since 1979 - was exerting pressure on prices, and domestic inflation reached 26 percent, while the nominal exchange rate had remained practically stable since 1977; as a result, non-oil exports were decreasing in real terms, while imports - encouraged to some extent by a more liberal trade policy - had grown by 30 percent per year since 1979. At the end of 1980, the current account deficit amounted to 4 percent of GDP, as it had in 1976. Recent Developments 9. In 1981, the need to bring domestic inflation under control and to help restore the competitiveness of non-oil exports became obvious. The Administration opted for a policy of gradual adjustment, counting on slower demand growth in 1982 - brought about partly by a deceleration of public expenditures - to moderate inflation, and allowing a faster rate of float of the peso to reduce the gap between domestic and foreign prices over a two- year period. With a favorable outlook for oil exports, no major problems were expected in the external sector, and a path of gradual adjustment to a rate of growth of 6-7 percent appeared sustainable in the long run and was considered to be less costly in terms of inflation and unemployment than more drastic stabilization measures. Thus, the Administration decreed a 4 percent cut in its expenditures, reintroduced import licenses on 80 percent of im- ports, tightened public procurement procedures and allowed the float to pro- ceed at a faster pace. 10. This program suffered a setback when, in the second half of 1981, it became apparent that oil sales would not reach their target: actual oil revenues, at US$14 billion, turned out to be 25 percent below what had been forecast. The public sector had to increase its foreign borrowing by US$4 billion, and the current account deficit reached an estimated US$11.3 bil- lion, or 8 percent of GDP, at the end of the year. The exchange markets reacted by increasing the downward pressure on the peso and, in early 1982, two events combined to make a guided float increasingly costly to maintain: on the one hand, it seemed likely that oil sales for the year would again fall short of expectations; on the other, the 5 percent increase in domestic prices in January - due in part to the rise in domestic fuel prices decreed in December 1981, and in part to a 34 percent raise in the minimimum wage for 1982 - suggested that inflation, which had reached 28.7 percent in 1981, might well accelerate further in 1982. Once more, the exchange markets reacted unfavorably, and, in order to stop the steady drain on reserves re- quired for maintaining the float, the authorities withdrew their support of the peso on February 18. The peso is presently trading around Mex$47 to the dollar, amounting to an adjustment of 74 percent (40 percent in dollar terms).  - 4 - 11. Simultaneously, the Administration announced a stabilization pro- gram, which was published on April 19, and whose main components are a 3-point reduction in the public deficit/GDP ratio, an overall reduction of 8 percent in public expenditures, lower targets for public and private imports, ceilings to monetary growth and federal borrowing, the imposition of a month- ly monitoring process for the expenditures of all public agencies and the setting of expenditures targets for the main public enterprises. Investment projects, in particular, will receive close scrutiny before they are author- ized to proceed. Finally, the Administration has committed itself to the liberalization of certain essential imports (basic foodstuffs, raw materials and capital goods). Prospects 12. The rate of inflation for 1982 has been forecast at 50 to 60 per- cent, partly as a result of the devaluation and partly because of the wage increases (between 10 and 30 percent for the public sector, 30 percent for a large part of the private sector) granted shortly thereafter. This suggests that the credit ceilings set by the stabilization program will turn out to have substantial effects on real expenditures. As a result, GDP growth is likely to be only about 3 percent, in real terms, in 1982. 13. The Mexican Administration has sought to minimize the disruption caused by the stabilization measures so as not to jeopardize the remarkable growth of the past years. In doing so, it has opted for a policy which will trade off inflation and external imbalances in the very short run for a les- ser effect on real growth. The high inflation expected in 1982 will likely offset part of the effects of the devaluation on the competitiveness of non- oil exports. On the other hand, the external sector can improve, in the short run, only to the extent that imports show a substantial deceleration, since, even though the adoption of a more realistic parity has removed a major obstacle to non-oil exports, the stimulus to foreign sales is unlikely to have a significant effect on aggregate exports in the next few months. Finally, the Administration has little margin to reduce its expenditures during this fiscal year; the only item in which substantial cuts can be effected in the short run is public investment: general expenses (38 percent of the expenditure budget), debt service (21 percent) or transfers and subsi- dies are virtually fixed for the duration of the budget. On the other hand, if the Administration adheres to a strict budgetary policy, thereby contribu- ting to moderate the rate of domestic inflation, significant improvements are likely to appear by the end of 1983: non-oil exports, led by tourism and certain consumer goods, will probably grow substantially; a lower public sec- tor borrowing requirements will reduce the pressure on the peso; and, by 1984, Mexico could reach a sustainable 6 percent rate of GDP growth, while maintaining the current account deficit within manageable limits. Lastly, the Administration has an opportunity to overhaul the entire system of trans- fers and subsidies, improving their cost-effectiveness. 14. The country still faces structural problems in the years to come, related mainly to poverty and unequal interpersonal and inter-regional dis- tribution of income. Efforts were made in the past to improve the living conditions of the poorer segments of the population. A family planning prog- ram started in 1972 assisted in bringing the growth rate of the population to  - 5-- an estimated annual average of 2.6 percent, down from 3.5 percent in the 1970s. To tackle the problems of malnutrition and increasing dependence on foreign food, the present Administration launched the SAM (Mexican Food System) Program, aimed at increasing self-sufficiency in basic foods, provid- ing for minimum nutritional needs of the poor and increasing rural employ- ment. The Administration also placed greater emphasis on the promotion of small scale irrigation, rehabilitation of underutilized existing irrigation works and provision of credit and technical assistance for the development of rainfed agriculture. 15. The main urban-regional problems are: growing congestion, pol- lution, high cost of services (especially water) and other management prob- lems that stem from the continued growth of Mexico City (already the third most populous metropolitan area in the world and moving rapidly to become the first) and Monterrey and Guadalajara, located in the dry, densely populated central plateau; and retarded development, poverty and great difficulty in providing better jobs or adequate public services to the one-third of all Mexicans who live in small, scattered rural centers. The present government took many positive steps to confront these problems, including an administra- tive reorganization and the elaboration of a comprehensive National Urban Plan in 1978 and of a National Industrial Development Plan in 1979, which reflect the preoccupation of the present administration with the long-term prospects of the industrial sector and their implications for the correction of the problems of unemployment and regional imbalances. 16. The high rate of growth experienced by the Mexican economy in recent years has provided the strongest weapon to tackle the long-term prob- lems mentioned above. At the present time, Mexico is in the midst of an adjustment process which will mean lower real growth and employment genera- tion in the next few years. Lower growth, however, will afford an opportu- nity to reappraise many of the past years' goals and policy instruments, and there is evidence that the Administration, after having adopted unpopular decisions in a politically difficult year, intends to carry out such a reap- praisal. 17. Mexico's public and publicly guaranteed debt service ratio has been increasing over the recent past and peaked at 69 percent in 1979. This high ratio reflects the still relatively low level of exports to GNP and the high proportion of Mexican borrowing from commercial banks. The public debt service ratio declined to around 30 percent in 1980, not only as a result of rapid increases in petroleum exports, and because some of the debt contracted on the least favorable terms had been prepaid; but it is estimated to have risen significantly in 1981. Debt service on Bank loans amounted to about 3.2 percent of public debt service in 1980; this ratio is projected to remain about the same during the mid-1980s. The Bank currently holds about 5.9 per- cent 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 cre- ditworthy for borrowing on conventional terms.  - 6 - PART II - BANK GROUP OPERATIONS IN MEXICO 2 Bank Operations 18. As of March 31, 1982, Mexico had received 72 loans from the Bank amounting to US$5,218.1 million net of cancellations and terminations; of these, 44 loans totalling US$2,438.6 million were fully disbursed. The Bank held US$4,405.3 million, of which US$1,942.9 million had not yet been disbursed. 3/ Some 46 percent of Bank lending has been for agriculture and rural development, 14 percent for industry, 13 percent for power, and 15 percent for transportation; the remaining 12 percent has been for water supply, tourism, urban development and vocational training projects. Annex II contains a summary statement of Bank loans as of March 31, 1982 and notes on the execution of ongoing projects. 19. Of the US$5.2 billion total lending, about US$2.5 billion was for establishing or strengthening institutions for channelling credit to areas where credit supply was deficient or non-existent, and setting up in the commercial banking system the ability to carry out project-related appraisal of investments in agriculture, industry and tourism. These credit programs have facilitated lending to low-income farmers and small- and medium-scale industrial enterprises based on productive investment plans rather than collateralized credit. 20. Implementation of most Bank-financed projects was delayed during the period of economic difficulties in the mid-1970s and during the period of stabilization that followed the September 1976 devaluation of the peso. Since then, the government has arranged adequate budget financing and has significantly improved project implementation. Four projects which had important structural constraints were modified and rephased to account for the changed circumstances. Government and Bank officials have met periodi- cally to review project implementation, and greater attention has been focused in Mexico on project monitoring. As a result of these measures, most of the Bank-assisted projects are being implemented satisfactorily and dis- bursements have risen from US$91 million in FY78 to US$413 million in FY81. IFC Operations 21. As of March 31, 1982, IFC had made investment commitments in 23 companies in Mexico, for a total of US$551.2 million, of which US$404.1 million had been sold, repaid or cancelled. A summary statement of IFC investments is presented in Annex II. 2/ This section is substantially unchanged from the President's Report for the San Fernando Rainfed Agricultural Development Project (P-3354-ME of June 2, 1982). However, some minor changes were introduced in paras. 23 and 26. 3/ These totals do not include a $180 million loan for agricultural development approved in March 1982, nor a $152.3 million loan for capital goods, and a $60 million loan for pollution control, approved after March 31, 1982. These loans have not yet been signed.  -7- Bank Strategy 22. The main objectives of recent Bank lending in Mexico have been to: (a) support policies and programs leading to a wider distribution of the benefits of economic growth; (b) help finance projects that make, directly or indirectly, significant contributions to output and employment; (c) help reduce Mexico's urban-regional imbalances; and (d) help break bottlenecks preventing rapid growth. 23. Because of the difficult structural problems of agriculture and the sector's crucial importance for the one-third of the national population living in the rural areas, the Bank has made agriculture the leading sector for its lending. The Bank's agricultural lending program in Mexico has four goals: first, to increase productivity of presently cultivated lands; second, to improve the productivity of small farmers; third, to complement infrastructure investments with support services, such as extension, market- ing programs and credit; and fourth, to promote employment generating invest- ments in rural areas. The Bank has made eleven loans in FYs76-81 totalling US$1,466 million for irrigation, rural development and agricultural, agro- industrial and livestock credit programs. A US$175 million loan for a rural development project and a US$180 million loan for an irrigation rehabili- tation project have been approved by the Executive Directors in FY82, and a US$138.4 million loan for San Fernando rainfed agricultural development is under consideration by the Executive Directors. An agricultural marketing project has been appraised. Several projects for rainfed agriculture, fisheries, regional or river valley development and rural credit are in preparation. 24. Bank lending for industry has aimed at: (a) reduction of the balance of payments deficit; (b) decentralizing industrial activities away from the major and increasingly congested urban areas; and (c) promoting greater employment. A steel project which the Bank helped structure and finance is now operating in a previously underdeveloped area on the west coast of Mexico, and the city in which it is located, Lazaro Cardenas, is developing into a new growth pole. Four loans for industrial projects to promote the development of small- and medium-scale industrial enterprises, to finance expansion of small- and medium-scale mining, and to support an indus- trial equipment fund (FONEI) were approved by the Executive Directors in FYs78-80. They offer support to the private sector at a time of rapid expan- sion and are directed at all three goals mentioned above. A loan for a voca- tional training project was approved by the Executive Directors in July 1981; it is assisting a program to increase the supply of skilled workers and tech- nicians. A US$152.3 million loan for development of a capital goods indus- tries project and a US$60 million loan for pollution control were recently approved by the Executive Directors. 25. Bank lending for physical infrastructure has been focused on regio- nal development and strengthening of institutions and sector policies. A highway sector project (FY79) and the fourth railway project (FY81) support these goals. The first and second medium size cities water supply and sewer- age projects (FY76 and 81) reinforce the planning, management and finance of specialized water supply and sewerage institutions at the federal and muni- cipal levels, and contribute to the establishment of tariffs more closely related to costs; a third project has been appraised and is expected to be presented to the Executive Directors in the coming months.  26. The government has adopted a National Urban Development Plan that spells out its regional development priorities in operational terms. A project to assist in the development of the Lazaro Cardenas conurbation area was approved by the Executive Directors in FY78, and a second urban project for oil-producing southeastern Mexico was approved by the Executive Directors in FY81. 27. The Economic Development Institute (EDI) is assisting CECADE (a similar institute under the Ministry of Programming and Budget) in training government staff in project preparation, monitoring and evaluation. EDI assistance is directed at courses on urban and regional development, agricul- ture, rural development and agro-industries. The Bank has also assisted the Mexican authorities in training personnel for managing water supply and industrial credit projects. 28. The Inter-American Development Bank (IDB) is the second largest source of multilateral aid to Mexico. The IDB has made loans to Mexico totalling US$2,697.1 million as of March 31, 1982. Over 60 percent of the total has gone for agricultural and rural development projects, and the balance for transportation, industry, water supply, and tourism infrastructure. The IDB and the Bank have coordinated their assistance on several projects. Each has made loans for the national integrated rural development program (PIDER), agricultural and livestock credit, small- and medium-scale industries development, and hotel development projects. The International Fund for Agricultural Development (IFAD) has approved a loan of US$22 million for a rural development project in the state of Oaxaca which was appraised by the Bank's staff and for which the Bank is acting as cooperating institution for administering the loan. 29. Bank-supported power, steel, fertilizer and tourism projects in Mexico have been co-financed by several bilateral export credit agencies and commercial banks. The capital goods credit project, which will be presented to the Executive Directors shortly, will be co-financed with commercial banks and export credit agencies. In January 1982, Mexico borrowed US$500 million to provide complementary financing for Bank-assisted projects where project specific co-financing would be difficult. PART III: THE URBAN SECTOR Development Issues and Objectives 30. Mexico's recent development has been paralleled by intensified planning activities, stemming from awareness of the country's economic and political realities and the belief that its structural distortions cannot be cured by market mechanisms alone. During the present Administration, a new generation of planners has attempted to formulate a long term development strategy. Considerable strides have been made towards identifying a coherent set of objectives, outlining policies and action programs and institutional- izing new formulas for administrative coordination.  - 9 - 31. The recurring theme of these planning efforts has been the regional redistribution of economic activities and urban growth, a long-standing concern of the Mexican government. The current Administration has emphasized this theme with a degree of determination which has few parallels in indus- trializing countries. The 1979 Economic Development Plan (Plan Global de Desarrollo) advocated decentralization on grounds of distributive equity, economic efficiency and political participation in the development process. Sectoral consistency of national planning with regional development goals has been emphasized in a series of documents: the Administrative Deconcentration Plan (1976); the Demographic Plan (1977); The Industrial Development Plan (1979); the Employment Plan (1979); the Housing Program (1979); the Mexican Food Plan (1980). 32. In May 1976, the Ley de Asentamientos Humanos introduced normative prescriptions for territorial development planning. This was institution- alized by the Ley Organica de la Administracion Publica Federal, which created a Subsecretariat of Human Settlements within the Secretariat of Public Works (SAHOP). During the past five years, the General Directorates of SAHOP (Territorial Planning, Urban Planning, Housing, and Urban Manage- ment) have gained increasing influence on various sectoral aspects of public policy. After the publication of the National Urban Development Plan approved in 1978, State, Conurbation and Municipal Plans have been produced, with the stated objectives of restraining population settlement and new indu- strial activities in the Mexico City region, re-directing federal investment and fiscal incentives towards selected geographical regions, and achieving more orderly growth and land use at the local level. In general, these plans indicate physical improvement targets and priorities, but remain sketchy in the definition of financial and implementation constraints and often rely on complex networks of interlocking institutional responsibilities. The Current Approach to Territorial Development 33. The general approach of SAHOP reflects most of the tenets of con- temporary spatial planning. The main argument is that the geographic concen- tration of investment resources engenders cumulative economic growth, stimu- lates population movement towards major cities and causes urban congestion, diseconomies of scale and comparatively higher overhead capital and operation costs. These trends are viewed as fostering increasing disparities within, and among, the country's regions and in the living conditions of the urban and rural populations. If unchecked, these trends would lead, in the long run, to physical deterioration of the environment, economic inefficiency and foregone development opportunities in the periphery. 34. SAHOP's diagnosis of present trends in Mexico is generally consis- tent with the experience of other countries, but its urban planning recommen- dations, with insufficient definition of the economic and financial frame- work, tend to show an 'architectural' approach to spatial organization. Although some indications are given of the relative priority of different development programs, the corresponding commitment of resources has not been quantified over a specified time sequence, nor has it been linked to the actual capacities of the executing agencies. Policies remain somewhat vaguely outlined regarding such issues as capital transfers, subsidies, public and private sector roles, credit and fiscal incentives and land tenure policies.  35. Despite these shortcomings, urban and regional development perspec- tives have captured the imagination of decision makers and, having been incorporated in the political dialogue, are beginning to exert significant influence. Large investment programs linked to economic decentralization have been launched around three industrial ports (Tampico, Coatzacoalcos and Lazaro Cardenas) and development programs have been intensified in the Northern Border Zones. A system of geographically based incentives has been designed to promote industrial growth in selected areas. Social investments are being tailored to redress regional income and employment disparities, while transfer of resources and administrative deconcentration are being actively considered. The fact that territorial plans are acquiring normative validity and inspiring legislative and budgetary decisions, makes it all the more urgent to link spatial development goals with financial and administra- ive constraints. 36. The concern with translating the current flow of territorial planning schemes into a coherent budgetary framework is clearly perceived by the government, and has been the subject of dialogue with the Bank. What is needed is an iterative, inter-disciplinary process, in which regional plan- ning objectives (quantitative, qualitative, spatial, temporal, sectoral, inter-sectoral) would be matched with financial and institutional resources. Progress in this direction will require time, professional skills and sustained efforts. Given the size and complexity of the country, it appears advisable to limit, at least initially, to an experimental scale the task of formulating regional development budgets, and focus on specific regions. The proposed project would, by addressing this issue in the metropolitan region of Mexico City, constitute a challenging pilot experience. Bank/Country Goals, Role and Sector Lending Strategy 37. Mexico's urbanization pattern and the inordinate growth of its central conurbation has been a recurrent subject of dialogue between the Bank and the Mexican authorities. A country-wide review of urban and regional development policies was undertaken in 1974 and led to the publication of three major documents 4/ where spatial decentralization and deconcentration of Mexico's metropolitan growth were recognized as crucial to the country's economic development strategy. Discussions with the government on related subjects were pursued subsequently and intensified in recent years, as these issues were addressed by the government in a series of legislative and institutional measures. 38. In May 1979, the problem of regional imbalances in Mexico was summarized in a chapter of the "Special Study of the Mexican Economy" (Report No. 2307-ME of May 30, 1979). At the request of the government, a special 4/ "The Economic Development of the Isthmic Region of Mexico", Report No. 1080-ME of March 1976, "Spatial Development in Mexico," Report No.1081a-ME of January 1977 and "Urban Development in Mexico", Report No. 1449-ME of January 1977.  - 11 - study was produced for the state of Tabasco 5/ and another report is being prepared which deals with the state of Chiapas. The current impact of industrial decentralization policies and incentives has been the object of a survey concerning manufacturing activity in the northern border zone, the Bajio region and in the three new port development areas. 39. A substantial part of Bank lending in Mexico has financed projects in the central conurbation region, mainly in highways, railways, water and sewerage infrastructure and in industrial and agricultural development, some of which have supported the deconcentration goals of the Mexican Administra- tion. Two urban projects have been financed by the Bank, both aimed at providing infrastructure, community facilities and low-cost housing to complement expanding economic activity in growing peripheral regions, one around Lazaro Cardenas in the states of Michoacan and Guerrero, and the other in the oil-producing areas of the states of Tabasco, Veracruz and Chiapas. The first project's shelter related programs have achieved a valuable demon- stration impact, though delays have been experienced in the implementation of the other components. The second project is still in the preliminary stages of execution. The Study Area 40. Mexico's Central Region consists of the Federal District (DF) and the five surrounding States (Mexico, Hidalgo, Tlaxcala, Puebla and Morelos - see Map IBRD No. 16309-R). The heavy concentration of population and econo- mic resources in this region explains the growing concern of Mexican author- ities with spatial planning. During the decade 1969-1978 the DF alone received over 55 percent of Federal expenditures in social improvements and a per capita share four times higher than the national average. In 1980 the Central Region absorbed over one-fifth of the Federal investment budget, or the equivalent of US$6 billion (Mex$142.4 billion). The high share of public investment in this region is mainly due to the concentration of 14.3 million people in the Metropolitan Area of Mexico City (AMCM). The AMCM results from the agglomeration of the 16 delegations which make up the Federal District with 12 contiguous, urbanized municipalities of the State of Mexico. Some fifteen other towns of substantial size are located within two-hour commuting distance, including the five state capitals: Toluca (170,000), Pachuca (110,000), Tlaxcala (30,000), Puebla (840,000) and Cuernavaca (270,000). These peripheral cities and the AMCM are encompassed within the perimeter of the Central Conurbation Zone (ZCCP), an area within 50-100 kms of Mexico City's center, covering 15,400 km2 and including the most developed portions of the surrounding states. This conurbation zone, which represents less than one percent of the country's territory, accounts for 27.3 percent of its population, 56 percent of its industrial production and about one half of the output of the commercial and service sectors. 5/ "Mexico - Oil Impact on Regional Development: A Case Study of the State of Tabasco", Report No. 3087-ME of August, 1979.  - 12 - 41. Mexican planners are of the opinion that continued growth of the metropolitan area would mean further extension of squatter areas, urban poverty and underemployment, environmental pollution, water scarcity, growing external diseconomies and further claims on public resources to meet incre- mental needs. While the preliminary results of the 1980 Census confirm the progressive decline of demographic growth in the Federal District (from 5.7 percent per year in the 1940's, to 4.8 percent in the 1950's, 3.5 percent in the 1960's and 3.2 percent in the 1970's) the most conservative projections for the Central Conurbation Zone point to a population of about 32 million by the year 2000, of which about 4 million would be in scattered locations, 7 million in a ring of thirty planned growth centers within 100 km of Mexico City and 21 million in the AMCM. How to maintain economic efficiency and social harmony in an urban agglomeration of this size poses an important challenge to planners and the government. 42. Growing congestion of the metropolitan core is already producing centrifugal tendencies within the region. As noted above, during the past three decades the population of the Federal District grew at average annual rates below 5 percent, but the twelve adjacent municipalities in the state of Mexico recorded an average growth rate of 12.8 percent per year. This could be considered the natural overspill of the capital city across its jurisdic- tional boundaries, but very high rates of growth also occurred in outlying cities such as Puebla, Toluca and Cuernavaca. 43. Government policy excludes the conurbation zone from the benefits of the industrial decentralization law of February 1979, which was designed to promote establishment of industry in other regions. The incentives provi- ded by the law (fiscal exemptions, lower energy costs, soft-term credits, infrastructure) are available only in remote municipalities of the central region. The law also makes minimal allowances for a few industrial parks within the zone. Yet, during the last three years nearly one thousand new plants were located in the states immediately surrounding the DF, wherever infrastructure, land and transportation links were available, indicating that the potential benefits of the foregone incentives are outweighed by the ex- ternal economies of relative proximity to the country's major consumer market. 44. Several industrial parks have been successfully established by the private sector in the states of Mexico, Hidalgo and Puebla and two others are being financed by the Bank under the FIDEIN (Trust Fund for Industrial Parks) line of credit (IBRD Loan 1881-ME of September, 1980). A well publicized, concerted action program, just outside the Conurbation Zone, is currently supported by the Government in Atlacomulco (State of Mexico), where a new industrial park has been developed. Two industrial towns have been deve- loped in the past: Ciudad Sahagun in the state of Hidalgo and Cuatitlan in the state of Mexico. Recently, the largest private bank, BANAMEX, has de- cided to relocate 5,000 employees to new headquarters near the city of Queretaro, some 200 km northwest of Mexico City, where it is developing a new town for 40,000 inhabitants.  - 13 - The Metropolitan Deconcentration Program 6/ 45. The extension of urban growth beyond the jurisdictional limits of local authorities created a new set of administrative problems in several metropolitan areas of the country. This made apparent the need for a legal framework to coordinate local improvement programs, which was provided in May 1976 by the Law of Human Settlements, through the new institution of the "conurbation commissions." According to the law, any urban area that is in more than one state, or consists of more than one municipality, can be declared a Conurbation (by the national and state governments, respectively, in the two cases mentioned). The commissions for interstate areas are chaired by the Secretary of SAHOP, and are composed of the relevant state governors, mayors and other officials, who are empowered to adopt a plan (subject to approval by the President of the Republic) to coordinate terri- torial development initiatives. To date, six Conurbation Commissions exist, in the areas surrounding Tampico, Torreon, Puerto Vallarta, Manzanillo, Lazaro Cardenas and Mexico City. 46. The Planning Commission of the Central Conurbation (CCCP) has produced a territorial plan (Plan de Ordenacion, hereinafter referred to as the Conurbation Plan) and a Comprehensive Development Program for the Conurbation Zone (the PRODECEN or Programa Integral para el Desarrollo de la Zona Centro del Pais) which present guidelines for industrial location, road and rail transportation, land use control, soil conservation, water resources management, agricultural development, urban upgrading, administrative decon- centration, education, health and manpower policies. 47. The overall strategy embodied in the two documents is to offset further population concentration by: (i) strengthening the economic bases of peripheral urban areas; (ii) promoting the establishment of manufacturing and distributive activities in these areas; (iii) improving local employment opportunities and living conditions for the resident population; and (iv) diverting part of the migratory movements towards alternative destinations either within or away from the conurbation zone. The PRODECEN identifies the co-responsibilities and actions to be carried out by the federal, state and local government agencies, defines their legal bases and congruency with federal sector plans, spells out the agreements to be signed with state governments and suggests specific priorities. 6/ The term deconcentration is used in this report to mean the diversion of development trends and resources away from the metropolitan core (or primate city) into the surrounding areas within the same region, as opposed to decentralization, which implies the transfer to more distant regions. While in current parlance the two terms are sometimes used interchangeably, they correspond to very different concepts, as they do in legislative, judicial and administrative practice.  - 14 - The Conurbation Plan 48. The proposals of the Conurbation Plan raise some interesting issues. While they acknowledge the impossibility of halting the growth of Mexico City, they also reflect awareness that congestion and environmental deterioration already threaten the functional efficiency and economic produc- tivity of the metropolitan system, which are critical to sustaining the Government's parallel efforts to develop other regions. The proposed program aims at preserving the income generating function of the central conurbation and adjusting its pattern of territorial development in light of the expected expansion of regional resources (human, financial, administrative and entre- preneurial). Planned spatial distribution, rather than the stimulation of incremental growth, would be the main objective of the proposed planning and coordination efforts. However, a more analytical formulation of the program is needed to determine the extent of desirable public investment in the central conurbation, since a policy of indiscriminate restraint is unlikely to lead to an adequate pattern of metropolitan development. 49. So far, the planners have focused more on the 'excessive' share of public investment received by the capital city than on its vital contrib- ution to the national economy. They argue that public investment should be reduced to curb the city's cumulative growth tendencies and the "inherent" process of congestion and decay. However, the Conurbation Plan covers also portions of the states of Tlaxcala and Hidalgo, which are among the poorest of the Federation, as well as parts of Morelos, Puebla and the state of Mexico, which fall considerably below the levels of income and welfare of the Federal District. The Directorate of Regional Planning of SPP calculated in 1975 a composite index of the relative socio-economic development of the Mexican states through factor analysis of 39 variables; these estimates indi- cated that on a scale of 100 assigned to the DF, the state of Mexico attained 74 and Morelos 63, but Hidalgo, Puebla and Tlaxcala fell short of 30. 50. The Conurbation Plan aims at reducing these disparities, although the amount, timing and character of the resources to be allocated and the promotion efforts to be undertaken are bound to vary considerably in dif- ferent territorial units, depending on their relative location and develop- ment potential. The operational definition of a deconcentration program and the promotion of its political acceptance would require identification of objective criteria to justify its distributional impact, to appraise regional versus local benefits and to establish corresponding cost-sharing policies. 51. To a large extent, land development, housing construction and the establishment of productive activities in the central region depend on pri- vate sector initiative. However, the Mexican experience indicates a fair degree of responsiveness to government guidelines by private entrepreneurs. There are a number of public instruments which help provide a framework for private initiative. The federal sector agencies carry the major burden of regional infrastructure programs as well as the maintenance and operation of facilities. A significant share of costs is also contributed by local governments, which, through their own budgets and influence on federal appro- priations, exert considerable weight on the regional allocation of public  - 15 - funds. Besides, local governments retain principal authority over land use and development control. In its present form, the Conurbation Plan does not provide the private sector with all the signals that would be needed to produce a concerted series of responses. These would involve definite scheduling of the proposed public investment programs, a review of regional credit, pricing, fiscal and incentive policies, an adaptation of existing institutional and organizational structures, and the introduction of new legislative measures. 52. The current Conurbation Plan aims a: containing further sprawl of Mexico City through densification of the presently urbanized areas and strict control of peripheral expansion. As can be seen in the attached Map IBRD 16309-R, the metropolis has already extended into the Valley of Mexico, including areas of rugged topography or subject to flooding, and is encroach- ing upon agricultural land. Part of the expected growth would be absorbed by outlying towns, interconnected by new regional highways, with large green- belts separating them from the central metropolis (a concept successfully applied, under lighter demographic pressures, in European post-war planning for the London and Paris conurbations). 53. The Plan suggests that commuting movements between the outlying growth centers and the core city would rely primarily on new rapid transit surface railways, tying-in with the existing metro-rail system. It also emphasizes road construction and proposes a series of new bypass highways as key instruments for achieving the population distribution objectives, since people tend to follow jobs in their residential choices and the location of new industries is influenced (ceteris paribus) by efficient road access. However, no additional radial roads would be constructed and strict access control would be enforced along existing and proposed highways in order to prevent the insurgence of finger-like spurs of urbanization. 54. Detailed traffic engineering and site planning would be needed to clarify whether a policy of restricted vehicular access alone would be suffi- cient to harness the interplay between development and accessibility poten- tials along the major transportation arteries. The definitive design and regulation of land development controls would require greater analysis of the expected flows of labor, goods, information and factors of production between the metropolitan core and the outlying growth centers. It would also require finer tuning of the present system of location incentives and industrial credit policies, which at present almost exclusively support transfers of activities away from the conurbation zone. This closer examination would also clarify the inter-relationships and complementarities between the decon- centration program and the parallel investment programs around the three industrial ports and in the Northern Border Zones. PART IV - THE PROJECT Origin and Status of Preparation 55. Exploratory talks on the possibility of Bank participation in projects concerned with guiding the growth of Mexico's central conurbation took place during August 1980 with the Technical Secretary of CCCP, the  - 16 - senior staff of SAHOP and the planning authorities of Mexico State. Prepara- tion missions took place in March and October 1981. Appraisal of this project was completed in January 1982. Negotiations were completed in Washington, D.C. on May 27, 1982 and attended by representatives of the Banco Nacional de Obras y Servicios Publicos (BANOBRAS), the Secretariat of the Treasury and Public Credit (SHCP) and CCCP. 56. In initial discussions about Bank participation in the Metropolitan Deconcentration Program, Mexican planners pointed to the Northern Bypass (Libramiento Norte) Scheme as a first set of projects within a specific framework of time and space. This proposal includes a number of multi-sector investment projects along a new 120 km road link which will affect directly a land belt of some 240 km and indirectly the whole metropolitan structure. Preliminary engineering work on the alignment of this road has already been started by SAHOP's Highway Department. 57. The Northern Bypass would facilitate a faster transversal connec- tion in the national transport network, channeling traffic to and from the new industrial ports and the oil producing areas of the Gulf of Mexico, the rapidly industrialising, agriculture-rich Bajio region and the metropolitan concentrations of Monterrey and Guadalajara. Recent origin and destination surveys along this axis already point to traffic volumes of over 30,000 vehicles per hour, which at present must negotiate their way through the con- gested roads of the Mexico City metropolitan area. The chosen alignment starts at Ciudad Serdan, skirts Puebla and Tlaxcala in Apizaco and bypasses the metropolitan area in the northern reaches of the Valley of Mexico, run- ning a parallel course to the railway link between Nopaltepec and Huehuetoca, where it joins the Queretaro expressway. At this junction a new inter-modal cargo terminal is planned, adjacent to the freight-yards financed under the Bank's Fourth Railways Loan (1929-ME). Thus the new bypass would intersect the major radials originating in Mexico City (to Puebla, Tlaxcala, Pachuca and Tula) and touch the proposed site for a new international airport in Zumpango. A number of industrial parks, market towns and rural centers already existing along this route would be susceptible to expansion. The area is traversed by oil, gas and power transmission lines, suitably located with respect to the existing and proposed water and drainage systems, and has considerable potential for more intensive agricultural development. 58. The investment package described in the Libramiento Norte proposal represents the most striking recommendation of the PRODECEN. The new trans- portation link also represents a major structural component in the territo- rial plans for the Central Conurbation and the State of Mexico. Its basic policy premises were laid out in the National Urban Development Plan and in the programmatic documents of the Regional Planning Directorate of the Secretariat of Programming and Budget (SPP), which proposed a new system of accessibility to influence the location of industrial and distributive activ- ities over the national territory and to promote a decentralized pattern of metropolitan growth. While a general consensus exists on the Northern Bypass strategy and some preliminary engineering is already in progress along its alignment, the critical investment decision concerning the construction of the highway has yet to be made. A broader program of studies is still re- quired to evaluate and refine the impact, scope and timing of the concomitant capital investment projects, to relate them to an operational perspective  - 17 - of regional development and to link them to a firmer conceptual and financial framework. Through the proposed loan, the Bank would assist in the prepara- tion of this more definite framework and in the complementary analyses of project feasibility. Description of the Project 59. The loan would support the pre-investment stage of a Metropolitan Deconcentration Program through the provision of planning and management advisory services in program definition and through detailed engineering, and economic and financial analysis of individual projects. The proceeds of the Bank loan would finance the services of individual experts and consultant firms, and the equipment, materials and services required for performance of their assignments. This report summarizes the results of the appraisal mission, which reviewed the studies and services proposed for financing, and estimated the corresponding manpower commitment, costs and duration (see Annexes IV and V). Project Preparation Sequence 60. Development of policy evaluation and feasibility studies would follow a parallel course. The executing agency has already completed a sub- stantial amount of planning studies, identifying a number of specific invest- ment proposals, some of which deserve immediate analysis through engineering and feasibility studies. Interim results of feasibility studies are expected to have significant impact on policy formulation. As a consequence, the decision to pursue final engineering of specific sub-projects will be made only after their financial, economic and technical feasibility and their con- gruency with general policy have been preliminarily assessed. The intention is to develop final engineering and specifications only for projects of recognized priority. Project execution is expected to span about three years, from July 1982 to June 1985. A preliminary report would be presented to the Bank by September 30,1983. The final report would be completed by September 30, 1984 (Section 2.07 of the Draft Project Agreement), allowing sufficient time for its review and discussion during the preparation of the 1985 government budget proposal. Some preparation of final engineering and of specifications and tender documents on specific sub-projects would extend to June 1985. 61. Development of the project would follow this conceptual sequence: (a) projections of expected growth of sector investment, employ- ment, income and population in the Conurbation Zone over a 20-year time horizon and for five-year periods; (b) spatial allocation of these sector growth prospects among the core city and different sub-areas of the conurbation; (c) analysis of the intermodal transport pattern resulting from the creation of new transport links and transfer points, and of the corresponding degree of accessibility of the surroun- ding areas (principally focused on the conurbation's north- eastern quadrant and the impact of the Northern Bypass);  - 18 - (d) study of the comparative advantage of each sub-area for the establishment of economic activities and tentative spatial allocation of their foreseeable growth, taking into consi- deration local capacities (land availability, existing set- tlements, relative cost of utilities and provision of urban services, other factors and constraints); (e) identification of specific projects in the following sec- tors: (i) transportation facilities, (ii) industrial parks, (iii) distribution and wholesale centers, (iv) urbanization, housing, infrastructure and community facilities, (v) water supply and sewerage services and treatment plants, and (vi) agricultural improvement projects; (f) formulation of a preliminary investment program, (for a five year period) indicating whether the projects included are already fully financed, require complementary financing for their adjustment to the program's targets, or specific allo- cations in the case of new proposals; (g) preparation of projects scheduled for the first five-year period, preliminary engineering and technical, economic and financial feasibility analyses, evaluation of the impact of the projects on the capacities of the executing agencies; (h) final engineering of priority projects, definition of the corresponding pricing and cost recovery measures and of the required programs for institutional development, proposed financing or co-financing agreements; (i) iterative process of program definition, comparing resource requirements and availability, and the existing implemen- tation and administrative capacities of the executing agencies; (j) five year financing plan indicating possible funding sources and amounts (private or public, internal or external, fede- ral, state, local participation) and assumed annual cost of interest, amortization, maintenance and operation; and (k) organization of monitoring studies to parallel the first stage of program execution and to formulate a program for the next five-year period. Expected Output 62. CCCP's Project Preparation Unit would produce a final report, des- cribing the proposed Metropolitan Deconcentration Program and setting forth the suggested course of actions over a medium-term period (of about 5 years). The report would summarize the process whereby the recommendations were arrived at, identify the basic issues addressed by the proposed projects and policies and their justification vis-a-vis the alternatives considered.  - 19 - While the planning perspective for regional development is likely to be longer, its first implementation stage would provide a realistic basis for marshalling additional financial, human and organizational resources in successive programming and implementation efforts. 63. This medium-term program would cover: (a) a capital investment budget, consistent with the implementation capacities of the executing agencies and the expected flow of resources over the stated period; the proposal would separately identify carry over commitments and new undertakings; (b) an institutional program, detailing recommendations on changes in policies, procedures and regulations, the administrative context in which specific actions are recommended, the extent to which the issues addressed impede proper area management and the alternatives considered; (c) an assessment of the expected improvements and institutional changes that would result from the proposed investments by the end of the first stage, and of the likely needs for further intensification of development efforts during subsequent stages; and (d) an evaluation of the respective roles played by and of the benefits accruing to the private and the public sectors. 64. The actions included in the medium term program would be formulated as parts of a comprehensive plan for regional development to which all indi- vidual reports would be explicitly related. An integrated approach would be applied in the evaluation of the projects. Cost allocation, reimbursement and cost-sharing policies, standards and procedures would be outlined, taking into consideration all participating institutions. Each report would, there- fore, include recommendations reflecting the multi-purpose nature of the program. 65. The budgetary proposals to be included in the implementation program would result from economic, financial and technical analyses of the respective projects. Whether or not these projects were revenue producing (partially or totally self-liquidating), their economic impact would be evaluated. Economic studies would demonstrate the relation of each project to the present situation and its expected output, effects on productivity, foreign exchange implications and direct benefits. 66. The financial aspects of project analysis would cover estimates of overall capital costs, annual costs, annual income, working capital require- ments, maintenance and operating costs, debt service, pricing and marketing arrangements, financing plans, justification and profitability analysis. Consideration of technical aspects would include surveys and descriptions of the affected areas, requirements, plans and specifications of utilities, labor, equipment and materials needed, and any special construction problems.  - 20 - Project Costs (Details in Annex IV) 67. The total cost of preparation of the Metropolitan Deconcentration Program has been estimated at the equivalent of US$15.0 million. One-half of this amount would be used in policy evaluation studies and the other half in project feasibility and engineering work. Budgets for individual studies and other preparation activities, based on a preliminary assessment of each task, have been developed to determine: (a) the order of magnitude of individual project costs; and (b) the proposed percentage of Bank financing. 68. The base costs of the policy evaluation studies (Part A) have been estimated at US$4.6 million (68 percent in foreign currencies). This corres- ponds to about 240 man months of CCCP's professional staff at an average monthly cost of US$6,000 equivalent, including salaries and social security charges (68%); an allowance for international travel of senior staff; equip- ment and services purchased abroad (32%), and about 200 man months of exter- nal consultants at an average monthly cost of US$15,500. This average month- ly rate is justified by the need to recruit the best available international expertise. Fees account for 77 percent, travel for 3 percent, local subsist- ence for 15 percent and backstop services (computer, word processing, draft- ing, printing, secretarial) for 5 percent. 69. Feasibility and engineering contracts (Part B) would be partially financed under the project for a total cost of US$4.6 million, plus super- vision and administration costs and contingencies. Within this amount CCCP would finance approximately the same number of man months as in Part A, under the same assumptions on the relationship of foreign to total costs. This would correspond to preliminary and final engineering and relevant feasibil- ity analyses for about US$150-200 million of civil works. While this repre- sents a small fraction of the current volume of public investment in the conurbation zone, it would permit adequate preparation of a number of pilot sector studies. The following breakdown by sector has been agreed with CCCP's staff for budgeting purposes: 35 percent for urban, 20 percent for industrial and 15 percent respectively for transportation, water and sewerage and agricultural sub-projects. The results of Part A studies would be instrumental in establishing the nature and expected level of required engi- neering (preliminary or final) of Part B studies. 70. Since the man month requirements of the individual studies to be performed cannot be precisely determined at present, a 20 percent allowance has been made for unforeseen variations in quantities. Price escalation has been estimated in dollar terms both for the foreign and domestic components assuming that differentials would be compensated by corresponding adjustments in the exchange rate between the Mexican peso and the dollar. Thus the pro- ject's contingencies (including unforeseen increases and price escalation) have been estimated at 43 percent of base costs, or 30 percent of total cost. The proposed loan would cover nearly the estimated foreign costs of US$9.5 million, or 60 percent of total project cost. Altogether, the studies con- tracted to consulting firms or to individual consultants would account for US$11.0 million, or 73 percent of total project costs, and the payroll of CCCP's staff for another 14 percent. The balance corresponds to allowances made for the Commission's overhead, backstop services and administrative costs.  - 21 - Financial and Institutional Arrangements for Project Execution 71. The borrower would be the Banco Nacional de Obras y Servicios Publicos, BANOBRAS, which would transfer the proceeds of the loan to the Planning Commission for the Central Conurbation. The completion of contrac- tual arrangements satisfactory to the Bank for the transfer of the loan funds to the CCCP would be a condition of loan effectiveness (Section 3.01 of the draft Loan Agreement). Counterpart funds and funds f or repayment of the loan to BANOBRAS would be provided by the government to the CCCP following the usual budgetary procedures in Mexico. The CCCP would sign a Project Agree- ment with the Bank reflecting its obligations related to the execution of the * project. 72. The CCCP is a public statutory body, with independent juridical personality, established through Presidential decree on October 5, 1976. It maintains a Technical Secretariat, with a staff of about 80 people and well equipped offices with independent computer facilities and support services. Besides its headquarters in Mexico City, the Secretariat has branch offices in the five state capitals. Over the past few years the Commission has been producing valuable urban development and sector studies, including comprehen- sive surveys of regional land use, water resources, traffic, transportation and industrial development. The Technical Secretariat has considerable experience in contracting local and foreign consultants and in supervising their performance. Its operating costs are covered by contributions from the state and municipal governments and by annual allocations from the SAHOP budget. 73. Numerous other organizations would be involved in, or affected by, the project, including public and private institutions and sector agencies at the federal and state levels. Inter-institutional coordination would be pro- vided by the Conurbation Commission Board, which meets four times a year under the chairmanship of the Secretary of SAHOP and includes the Chief Exec- utive of Mexico's Federal District and the Governors of the five neighboring states (Hidalgo, Mexico, Morelos, Puebla and Tlaxcala). Once specific pro- jects are identified, the Project Unit staff would maintain inter-sectoral coordination as needed. Bank financing of preparation activities is expected to afford an opportunity for dialogue with the Mexican authorities on policy formulation for the Metropolitan Deconcentration Program and the related planning and organizational issues. To this end, provision would be made for close consultations and periodic meetings between Bank staff and representa- tives of the governmental and non-governmental agencies involved, concerning the program's scope, budget, progress and results (Section 2.04 of the draft Project Agreement). Staffing Arrangements and Procurement of Consulting Services 74. Responsibility for retaining and supervising the services of con- sultants to be financed under the proposed loan would be assumed by the Technical Secretariat of the CCCP. The Secretariat, which already has the required professional competence, would set up a task force of 14 senior professionals backed by research assistants and support staff. This Project  - 22 - Unit would be formed by reassigning present staff and recruiting some addi- tional senior experts, skilled in the economic, financial and sector analysis of projects. (Section 2.05 of the draft Project Agreement). 7/ 75. To complement the skills of the senior staff of the Project Unit, about a dozen consultants would be individually contracted by the Technical Secretariat, in accordance with the Bank Guidelines on the Use of Consultants of August 1981 (Section 2.03 of the draft Project Agreement). CCCP has expressed a definite preference for contracting on an individual basis the resident experts who would collaborate with the Project Unit, rather than relying on the services of a team provided by a consulting organization. Although administratively more difficult, the first solution is considered justified by the limited number of contractual agreements involved and the need to recruit outstanding and acceptable individuals to perform highly specialized tasks. A complementary advantage of this formula is the possibi- lity to finance, under Part A of the Loan, the intermittent, short-term advice of an independent panel of top-level specialists on urbanization issues, who would assist CCCP and the Government in steering the course of the studies and in the critical assessment of the resulting recommendations. 76. In addition to the policy evaluation studies (Part A of the proj- ect), which would be carried out directly by the Project Unit, a substantial part of the proceeds of the loan would finance detailed engineering and fea- sibility studies of specific sector projects (Part B), which would be con- tracted to consulting firms. A large number of qualified firms exist in Mexico to perform engineering work. However, their activities are generally slanted to the technical design of physical improvements, rather than to the economic and financial evaluation of feasible alternatives. It is anticipat- ed that a large portion of the studies under Part B would be awarded to local companies, which are expected to engage competent foreign individuals to bring their capacity to the required level, or to participate in joint ven- ture with foreign firms. 77. The CCCP would present to the Bank specific proposals for the stu- dies to be financed under Part B, accompanied by sufficient information to allow the Bank a careful selection (Section 2.06 (b) of the draft Project Agreement). A format for presentation and analysis of the detailed proposals has been prepared during the appraisal mission and agreed with the Technical Secretariat's senior staff (see Annex V). Prototype terms of reference have also been provided for the preparation of specific sector projects by consul- ting firms, which would be selected according to Bank guidelines. Terms and conditions of employment of consultants would also be consistent with the Bank guidelines (Section 2.03 of the draft Project Agreement). 7/ The Project Unit would include the following senior staff: 1 regional planner, 1 project economist, 1 financial analyst, 2 transportation experts, 2 industrial development experts, 2 urban planners, 1 housing and community facilities expert, 1 municipal utility engineer, 2 rural development experts and 1 expert in water resources management.  - 23 - 78. The following criteria would be used to determine the eligibility of specific study proposals for loan financing: (i) the studies would refer to problems, issues or areas pertinent to the conurbation zone; (ii) the object of the studies would be related to the activities mentioned in para. 61e) above; (iii) the estimated cost of any engineering or feasibility study would not exceed 15% of the loan amount; and (iv) the studies completion schedule would permit their conclusions to be incorporated in the final report of the deconcentration program (Section 2.06(a) of the draft Project Agreement). 79. Given the long lead time required for engineering designs, some priority studies already underway would be considered eligible for retro- active financing as long as they were congruent with the selection criteria mentioned above. Proposals for inclusion of specific studies in the 1982 work program have already been received by the Bank. Lists of study propo- sals to be included in the 1983 and 1984 work program would be submitted to the Bank by the Commission from time to time. Eligible expenditures on prep- aration activities subsequent to March 1, 1982 are recommended for retro- active financing up to a maximum of 10 percent the total loan amount, or the equivalent of US$0.92 million. (Schedule 1, para 3 of the draft Loan Agree- ment). Disbursement 80. Bank funds would be disbursed against approved contracts, except for an estimated US$1 million under Part A of the project, which would be disbursed against statements of expenditures. The disbursement percentage would be 72 percent. Statements of expenditures would cover a large number of relatively small expenses incurred by CCCP for the project and would itemize the sub-project component involved, the contracts let, the nature of services rendered or the equipment and supplies purchased, and the amounts disbursed. Detailed documentation supporting the statements of expenses, including supervision reports and the certifications of services rendered and disbursements made, would be retained by the CCCP for review by project supervision missions. The estimated schedule of disbursement is shown in the Loan and Project Summary (page ii). The closing date for the project would be December 31, 1985. The anticipated disbursement period would be three and a half years, which is considerably shorter than the recorded regional and sectoral averages. This is justified by the special nature of this project, the advanced status of preparation of the studies and the proven experience of CCCP in carrying out similar tasks in the past. Accounts and Auditing 81. The CCCP would maintain adequate project records and accounts, including a separate Project account. In addition, the accounts and the statements of expenditures would be examined by independent auditors satis- factory to the Bank, together with the disbursement applications, to ensure that they reflect properly incurred expenditures for legitimate project pur- poses. The CCCP will submit to the Bank annual audits of relevant project accounts, the consolidated project account and the statements of expenditures (Sections 3.01 and 3.02 of the draft Project Agreement).  - 24 - Project Benefits 82. The main benefits of the project would stem from its expected impact on the formulation of a policy for the orderly development of Mexico's Central Conurbation Zone. The loan would assist in structuring a mechanism for rational appraisal of sector investment projects, in identifying inter- sectoral priorities for implementation and in preparing the corresponding financial and institutional framework. This more rigorous process of project formulation would be instrumental in anticipating possible bottlenecks in project execution and in attenuating likely frictions, delays or contradic- tions. It would also be useful for promoting a concerted pattern of budget- ary appropriations, for promoting private sector participation in developmen- tal initiatives and for structuring financing or cofinancing ventures from external lending sources. 83. The set of developmental issues affecting Mexico's Central Conurba- tion makes it one of the most critical case studies of metropolitan growth in the industrializing world. The Bank's potential contribution of interna- tional experience and the participation of qualified consultants in the pro- ject would afford training opportunities for the Mexican staff. No doubt, this would be a two-way process of learning since the experimental implica- tions of the proposed approach extend well beyond its geographical focus. Project Risks 84. As an innovative operation, the execution of this project is not immune to risk. The record of achievement of regional planning commissions in other countries is mixed. Although the CCCP is a suitable organization for undertaking a project of this kind, its coordinating efforts must take place in a complex set of governmental jurisdictions, potentially divided along vertical levels of authority and horizontal boundaries of territorial and sector domain, between the goals of special-purpose financial agencies and the divergent interests of the formal and informal sectors and of private and public enterprises. Yet, while the planning process cannot be conceived in isolation from.the political dialogue, the assumption that financial issues will become a dominant theme in Mexico during the next few years, warrants an attempt to provide a factual basis of information for reconciling and compromising among different development options. 85. The present term of the Federal Administration will end in December 1982. The change of administration is normally accompanied by an extensive reshuffle of executive responsibilities down to intermediate levels. There are, however, explicit indications that the general goals of the proposed program will be retained by future decision makers. The governors of the five states surrounding the Federal District follow a different governmental cycle and were elected during 1981 for six-year terms. All have expressed support for the Central Conurbation Plan, which they have endorsed as members of the Conurbation Commission Board. They are, indeed, eager to initiate projects and have requested the Technical Secretariat to accelerate the definition of action programs.  - 25 - 86. Preliminary conclusions of the studies should become available within about one year of the start of project implementation. By that time, the new federal administration will be installed in office and will need to develop a policy on Mexico City's growth. Given the current economic situa- tion, the next Administration is likely to deal, in the initial years, with a series of stabilization measures, possibly with severe testraint of public investment, which would allow time to evolve a suitable climate for final definition of the deconcentration program. No doubt, a few significant initiatives for territorial development will take place in the study region during this period, and monitoring these events will be a major task of the project preparation staff. However, the breadth and temporal horizon of the regional investment program are such that its general strategy would not be substantially affected. PART V - LEGAL INSTRUMENTS AND AUTHORITY 87. The draft Loan Agreement between the Bank and BANOBRAS, the draft Guarantee Agreement between the Bank and United Mexican States, the draft Project Agreement between the Bank and CCCP 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 under separate cover. 88. The completion of contractual arrangements satisfactory to the Bank for the transfer of the proceeds of the loan from BANOBRAS to the Planning Commission of the Central Conurbation would be a condition of loan effective- ness (Section 6.01 of the draft Loan Agreement). Additional conditions of special interest are referred to in the text and mentioned in Section III of Annex III. 89. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATIONS 90. I recommend that the Executive Directors approve the proposed loan. A. W. Clausen President Attachment June 24, 1982  -26 - ANNEX I Page 1 of 5 TABLE 3A MEXICO - SOCIAL INDICATORS DATA SHEET MEXICO REFeRENCE GROUPS (WEIGHTED AVE'AGES LAND AREA (THOUSAND SQ. KiM.) - MOST RECENT ESTIHATE)- TOTAL 1972.5 MOST RECENT MIDDLE INCOKE MIDDLE INCOME AGRICULTURAL 977.2 1960 /b 1970 /b ESTIMATE /b LATIN AMERICA 6 CARIEBEAN EUROPE GNP PER CAPITA (US$) 400.0 750.0 1640.0 1616.2 2609.1 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 769.2 1141.0 1672.7 1324.1 2368.4 POPULATION AND VITAL STATISTICS * POPULATION, MID-YEAR (THOUSANDS) 36369.0 50313.0 65509.0 URBAN POPULATION (PERCENT OF TOTAL) 50.8 59.0 65.9 64.2 53.2 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 108.9 STATIONARY POPULATION (MILLIONS) 188.0 YEAR STATIONARY POPULATION IS REACHED 2075 POPULATION DENSITY PER SQ. KM. 18.4 25.5 33.2 34.3 80.6 PER SQ. KM. AGRICULTURAL LAND 36.0 52.0 65.1 94.5 133.9 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 45.6 46.5 45.3 40.7 30.1 15-64 YRS. 51.0 50.0 51.2 55.3 61.5 65 YRS. AND ABOVE 3.4 3.5 3.5 4.0 8.3 POPULATION GROWTH RATE (PERCENT) TOTAL 3.1 3.2 2.9 2.4 1.5 URBAN 4.9 4.8 4.2 3.7 3.1 CRUDE BIRTH RATE (PER THOUSAND) 45.0 42.3 36.0 31.4 22.9 CRUDE DEATH RATE (PER THOUSAND) 12.0 9.0 7.3 8.4 9.1 GROSS REPRODUCTION RATE 3.4 3.2 2.6 2.3 1.6 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. 25.1 842.0 USERS (PERCENT OF MARRIED WOMEN) .. .. 40.0 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 97.0 100.0 101.0 108.3 119.8 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 110.0 112.0 114.0 107.6 125.7 PROTEINS (CRAHS PER DAY) 65.0 66.0 66.0 65.8 92.5 OF WHICH ANIMAL AND PULSE 27.0 27.0 27.0 34.0 39.7 CHILD (AGES 1-4) MORTALITY RATE 13.0 8.8 5.7 7.6 3.4 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 58.3 62.4 66.0 64.1 68.9 INFANT MORTALITY RATE (PER THOUSAND) 78.0 74.0 60.0 70.9 25.2 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL 23.5 54.0 62.0 65.7 URBAN .. 71.0 70.0 79.7 RURAL * 29.0 49.0 43.9 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. .. .. 59.9 URBAN .. .. .. 75.7 RURAL *- 13.0 14.0 30.4 POPULATION PER PHYSICIAN 1798.0 1480.6 1815.0 1728.2 973.3 POPULATION PER NURSING PERSON .. 1612.2 1398.0 1288.2 896.6 POPULATION PER HOSPITAL BED ** TOTAL 577.6 828.1 851.0 471.2 262.3 URBAN *- 1151.2 758.0 558.0 191.8 RURAL .. 1350.9 1077.0 ADMISSIONS PER HOSPITAL BED .. .. .. .. 18.2 HOUS ING 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 DWELLINCS) TOTAL .. 58.9 URBAN .. 80.7 RURAL .. 27.8  -2 7- ANNEX I Page 2 of 5 TAiL! 3A M9XeICD-TSCIAL INDICATORS DATA SHUT kEZICO REFERENCE GROUPS (WEIGHTED AVERAS - MOST RECENT ESTIMATE) - MDST RECENT MIDDLE INC10z MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b LATIN AMERICA & CARIBREAN EUROPE EDUCATION ADJUSTED ENROLLMENT RATIOS PRDMARY: TOTAL 80.0 104.0 116.0 101.7 105.9 MALE 82.0 107.0 119.0 103.0 109.6 FEMALE 77.0 102.0 114.0 101.5 102.2 SECONDARY: TOTAL 11.0 22.0 39.0 35.3 66.3 MALE 14.0 27.0 42.0 34.9 73.2 FEMALE 8.0 17.0 36.0 35.6 59.5 VOCATIONAL ENROL. (X OF SECONDARY) 24.0 27.0 9.0 30.1 28.4 PUPIL-TEACHER RATIO PRIMARY 44.0 46.0 41.0 29.6 26.8 SECONDARY 13.0 14.0 17.0 15.7 23.6 ADULT LITERACY RATE (PERCENT) 65.0 74.2 82.4 80.0 75.4 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 14.0 24.5 42.4 42.6 83.9 RADIO RECEIVERS PER THOUSAND POPULATION 90.7 278.4 306.0 215.0 181.6 TV RECEIVERS PER THOUSAND POPULATION 17.9 59.5 88.7 89.0 131.1 NEWSPAPER (CDAILY GENERALA INTEREST') CIRCULATION PER THOUSAND POPULATION 79.0 .. 66.6 62.8 123.8 CINEMA ANNUAL ATTENDANCE PER CAPITA 10.0 5.0 4.2 3.2 5.7 LABOR FORCE TOTAL LABOR PORCE (THOUSANDS) 10990.9 14488.8 18965.4 FEMALE (PERCENT) 15.2 17.4 19.3 22.6 32.9 AGRICULTURE (PERCENT) 55.1 45.0 36.8 35.0 34.0 INDUSTRY (PERCENT) 19.5 23.0 25.7 23.2 28.7 PARTICIPATION RATE (PERCENT) TOTAL 30.2 28.8 29.0 31.8 42.3 MALE 51.1 47.4 46.5 49.0 56.5 FEMALE 9.2 10.1 11.2 14.6 28.5 ECONOMIC DEPENDENCY RATIO 1.6 1.7 1.7 1.4 0.9 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 3.4Tc 3.3 2.9 LOWEST 40 PERCENT OF HOUSEHOLDS 9.87i 9.9 9.9 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 270.0 RURAL .. .. 216.0 187.6 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 471.0 513.9 RURAL .. .. 471.0 362.2 385.1 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. RURAL .. .. Not available Not applicable. NOTES /s The group averages for each indicator are population-weighted arithmetic means. Coverage of countries asong the indicators depends on availability of data and is not uniforn. /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 1976 and 1979. /c 1963. May, 1981 * The updated 198Q GNP per capita and population estimates shown in the the 1981 World Bank Atlas are $2,13Q0O (at 1978-80 prices) and 67,458 thousand. ** - Total includes specialized hospitals not included in urban/rural figures,  - 28 - ANNEX I Page 3 of 5 DEFINITIONS OF SOCIA ISIdIAditSW N-eae odtth-ghtae dctac-e crexfroxeooag edp -1hast cotcdetelcedaledcetcoeaccte cta "I etll, dsrbecdeco sgitd,dtddtaerdfi,icad. ohcate .ldp,c 1 etla IutaOcterate-eea at he jc, otr (eceptlh for 'Capital...rplo. .c E.. tr ri wee"rdi SacoorNorth dittos - td -- cl hi ot' - tg Ithear heseea stroaget ext-wrrlfilie. Lth ertt ro aateexrgsaeppito egte riecoaasftctcoPaa a lx tyxe xaoicotrcoirie agephsdt a htilttt tt h osaea atae sc ate alttoclorxrdch- - b.ca t-ltiof -- at sad teexcaxtEora,taocixaaoeheexscceed- rteatiag- erccsotat tadIa'toataratle fteereorcac.accodooraaloe ir tdioacar ccatx esoag the aotyad r -rer rae SetE iA I-ooads.e. opdtaar pa --cpo ted - race rho,' -ad t -tpdaca oa. TersE - Totd- ufc arat -piac dr are ,Ia cadetd aeec oha, a o.al I i dtoddh he ieet~aee ofhot..a aed Agatueiac -tedsc o-arcotaa crcue eseatpa pe otead catoed olacdpe grarra -tt xaalcad hosttl ard at- faa crepe, p-atoer . eakatard aitahee garde...a tor Ice Eai-; 1970 data. hbhllcII c.etae-PeLt aeceoI,rec eaaa y tfe Gtt PER GAPITA tIS)) - GP .e.aP arttctsa cracsaecpracsa...ao care ore cod d d.dlodad . toa hoepicl .- h_-ec-a,' rood health codaed a ese araesit echa eaAetd Ba ta if-ENh9 ir; t, ealyaa cceert sv a -p cated by o physcto ha b- Oaiatp-oale c ai~ried coage at sedicad taodta- eaeacs tiadry) ia kier..s at .artei-tldat per tapirs; 1960, 1970, cad 1909 taters Spetaddrrd hoxpitals ear tacla.dded alycaai tra data. Adarsadors.ry osiibed - Tat-d rahr a ddscet rda-harg- arcs Iaapitlel Oioidad by the rahe at hda PiEPULATBEfN 2D1 tiAL _TATbItTICS Excl teadeie, id-tese (theoxarodal - Ac at J.do 1; 1t60, 1971. t-d 1979 aOUSING data. teAce0c tP-ahid(cta e acaod ao,thr Sad rotc- latx apdar (rec-oe, at cacti) - doria at orb- attotoa pAoatr h-xhold do-xfr- cg-oo of iadaoid ode rho xh..e 1 idi ,at dittseec dtteicexeoa oatbacac sop. oy'ftf- aaaha of a dcc ad f.i a cad ho-rd- or lodRea asp or esy oat te iat dtdc t asegaxrie; 196E, 1970, cad d97t decc the hoseo Ldtrsoctiolocpxe taeodLi..c - It..orer -a-aaocerrta-cao_aa-ct rhet_-d rural - Ax . eregr.os teosxix tsar 20i0t -Co rsebateio rjtio .aehead ax 1980 tab tpraao r . roa f.. cdl aror cad % c -edoaid a.....ixe deg date eaeorseap at hcrrtaratgsa oe r'c' Per oapftr itoosa Aoteser tlr-rdici (ceate.r of dyelli-e) - total, _na, sad ruref - ae.ce ..... iataiicyr. asoaat...sadcsosadeliaeix. tof al.oIrbct. .cd ...cd_etltaaaesyr-iaey. Each --cay iecheesesdgxed ar a) thes :rice -b ahfyiars at aralat EDUCATIBN sod f-etility cr-ads Ear trler diot lp_rse. idjo-rd_SrL-ieac bataor is-t-cte tctodsciat -Lrsaaaaiocry ardai herle - --hgaxerixc Prbxaasoho ae.sl a axe- lras tal.. , aslc ccd tra1e sacecassa -ThisI citdca ceaer al Irale aca edx aPrisay oba-ae apdatax crtit xlodoec ohIddcexod b-dc rheretl-sasnerI I-tldof aeite-r-pe-dcetiax-ee.hetsscrh geeyi- ets botedooaedtfor dittcaratl:~I.. decyepi ydoceiic; tea atsee s plase ranEecear ly' heart.a..ery pepolaian ease eotieseithorac od ...doot a ai yrt~ ested dot percei sex sted ax the badeiath the prlejere ch-rcreereatre at the tpradct sros sees topdde ars se orcoeah ffiaial sabeab ac. aert istetlecliedocsf..arraqctaeaar lasa-r-1 t fa-par cE aptccd prisary iesarte teraa osr aocfca eaho-teya se atItr "It'llcrde.p.caid- geesai . oar iceatI'l ay...es ..r r_srdeg is _rrerice o o siee baa beer reached. __ccsly at 12 so do year at age; -erep-der.. roaree are g..s. t teasEtotbeatr eacroded. Pee ax. de. - Mid-year ttlcc ka qaeAio--s (0 hI -ctaee at ixeaect rr ..e Hrercec of ....d.r. - h."'esdtarrrix e-1 ares; 19A0. i970 cad 1909 data daiolde ehhe. ootil,r rs prgesegrpee hedepend- Pee ex a-artaaicorc- led - xpoled ca abate far cgtdctd1o-c 1-d aetdy or ca deprt.eeas at sec.odary ettoi aralqE,iL e 197 Ors.yoil-esha raio r raa.adatdt-os tet ttddc treodetex ba itexrors esresat _1Grddr p0-do year). cor-a-oge 15_ prisary sad seceadary dei drIde hy7hr ctecest b At yeses. sd recied-a (A Yra" s"eae)a fcrxgse xid-yast pen- Perseteddg deed. istior; 1960. 1970,. td 979 dera. Adolt d -rtc ae (esa-c-0 -LStria.at al c sdadrates tes pcraate fste i95D-hi, 19S0-PG ..ad 197l-7N Pepotartex Greacth Rare tear__ - erbna-A-1oa greath rate at urbar pepa- GCONSUMPTItN dattei_h tr 190-A,r ..hP-t, sd 197t-9 tessxee Casfe tesa exedatex - 1esage car cscr...rte GrdeBrhRe tetthasd) - Aexoa. lita births ta thoe...ad or red-tsar eassatgie htegtpaos aldsahdxe,tsresd parolartee; d9Ri. 19'70, ted d979 da. atitrthitcias Grids as Raets basd) Axcd deih par rheos...ds of aid-year Raix deirer tep- rheo.g.d exed eca -Add xyppe at lreaist fo radii rid ry1trse.;190 1soc 0t fe-tea aargeada a19b 9i a B soroatesot ssd lirase .. It..dR.plad-ieg-Acce -to -s.Axt bed rhofsdsl-dhtxre -toaeret a=cdpe.r R i-iarsOerr .osed..d. ieri 't . r herr rers :'t. forbrad dnth it bi--cIetribdcti-e oper hopcso: siee attdstespaec ees pobicPeedttoasor pelriox; y rerdadesr bsadiceasa b. esiasre rcato ctd- _rtgegd-1-teasaaos terr-taxrad oafrgce...ss-1 Gprobls tee (te ebP.o eels_ri1a) -tr os th eara -it-r si erEd ea (Ptn fxrewmn .... sass agegraty.coterre, tf 'diy geera 'he'sree osfpper ..datcedsepe tei_s d o r of~~~~~~~~~~~~~~~pblcte "detlyredrierildyt.. to ...ie gesrdelltas itcresdee FWDc EA~ NEIITIONth e'dty it i ' Pper at des fact rise a. see..k. lodee FtreedProdocirrr aia)9i-ll -fdeo .ret tpir toe-I GCeen Aex..st Artredsr- rer Ghas ear teate-asd as the -ebe et~ predoritc f eite esd"e. tedciacc oe ed ftdee ad rickets sidl dee h et,tae a adaissio .. e1 drie-re i ose is xc -leadar teathbasis. Carditiesoa-r Peixary goods (e.g. sgesasdnbbods te MaIo.oaePhabesedbetedI ofra to axrisr f.cofe a esatecaaveessapredocrrtite serebh- Iti-ba 1970. a 1909 dare. Tetsc Labor Foars (che.....da) - REaetri-11tr -sct psrsoos,itide Pee racis soco l, calojrie teseecarxiret) - Gospored Eras esd fortes ted otesptaped hoc ealdiag -baati-, s-deete,se, ete!yegyqotisa1t of -et1feedraopptiEsaa-idble1 darotray peers this coesateg PJ t fdth.. of ad1 ages. D.istiri...stra i t_ s .. ce. e are eretdy tacble .' oti.ra toapris do....rta ordorcier. isrprra ices or, -aparabte; t960Al970t sad 1979 data. qeptrts. ted thte.. ix stc.'gt sopydie des cide salsa teed , seds Essefe a) - rsle cabor forcea. r s.tg of total date terra. qeah r esd to teed P_c.r.stag, sed deasese da, di.te Ihotiex RItr-Ayrlee(eeec ae er it ferieg ferary, ho...g a seers acre etisated by tflae xpbsoocs aesfrcrrlat hiag a pee-eecge xlfete lbo ferre; i960, 1970'sad 19719 dais. sa e itibortix a pof oara .sd a11-oxig 10 perceec far eater- -I sa ...rri he1y, raer sad gsspercextage of total,dahe terra.; 1960, h Iohld -Ice; d961-65, i9OL, sad 1977 dais. iBOG sed 1979 dar.. Per ...ch sert xlPI o croxa .ges e dat) --eti ara tpaapt achtaeRt oreh oa.nI', so ft-ie Peet:r'ipatit o set soppy of fea Pre day. Bet ..pply at toed is detficed as -bae be ttitt race ar ceP_ tda rs ae e e sibrfrea rorrtafor a1ll rotaries esrebliehed by USIA priade tea etetra percer-ges of toal 1rt AMd fnale po.polarixa of eligeeep-rieedY; adeceof 60 gras at toted protai pea dat sad 20 cress at st-i sd 1980.1900Il. sad c1t daa. Thesese based cx ILO's pattetac ss Pdntrte,of haieh 10 grass ehald he aia rst.These sea- sieee eg-as erractore of the repolisriex sad laag e trea. -ai-a pratelesateerags lee tie ...d pccsd by RAO is the Third fEoesic i...ade... Ratio - Rate of ,petlaJr ceder RN 'd St -sd ease g.rel Peed torty; d961l-6f,197a sad d577 ac to the tare)Isht as Per .psit. rroreie axeey tees MIa ted r1ais - Pr tast I'PYlyo fr de- rice "tessant sad tose s raspe dt dt-AE6 r970 edf li9t7dt.- INCatR DittpBt IOtN Chld es 1A gaalt Rate (ea hIo ....d) - Aexol deaths Pea rho..ssod it P.....ertse of Precasts Rotor (bt !r,hysd bd Raceiteo yhhs 'sgee'Pl-' years,t.thbildree ixabthiage grrop; forrcet ds-aetopgaa-t- I pr-aer. richeslt0 pre.aar.peersstlbpeerset,sdp 4retpe rtee arise data derhv-d fr.. life rabies; 1960. 1970 ted 1979 data. et beceehebde. Life trecisact- atiret (yar)- xtags tosbe of rears of life r-iatidg The fteldeelag r. seris -ee se ver .ap `-irte aaore cf p-asr" levels at biht; IRi, 170 -d 1909 data. ad hboid he ixisapreted iab ceashderbferectio,.) teRse Kor-aitya ~Rat t,re ibecnd) - MActi. dearhe of irfeots cadet cx year Eteisared Abeolorts P_vrtalacsLvl'Oter eir - cebsa sad ratl1 o.f age pee thbac...d di-e births. Aseicre pevrry ietes leve ic abt arsslee bai1- stIn sci tcear Set ete eeeto xcate oa.ohx a oa otetftiotllyede....te diet plot eastia1 ne-fe-d! raq...lrsst i o ba7a xlPeople (totl,'.3chx sa oa)et oal cesto f tferdable. asterI sorply ttecddee tre..ted scalers aseror -eteatd hot oexc55tad_tis d Relets- P-aertv cares Levet (USt . res ist.) -crier sad eara eatr hsabasthat ftars protected borehedes, eprigs, sad.. starter sells) t* gra1rlrshai- pesray i.rrs least is cs-thirad ofiaverage pe are p..rcterges at theiraeet ete poaLtits -tn rb-esreaapabtta persece1 taos- ofthece-otr,. Urba leasI is derived free cia rera frstt caeadpc rcdcosrethat 2ti ea.rsa fr.. a. b1-1ne e ee irh adjasisse for high er cost xlf livieg ia crieb res reaiaaa btgsti rsral ere fta b eos. haes areaso letise Peoti 1xBea Abselate Pexrt cin Level.1 eeaist) - cehe esaseableacces sadd ran cha rhe hoesifatte r ..seehere. h of esal-tdrrt -Perceer of pepoletiec(cbe a eral) ai are' ebseles de- cot bat topended prrportiotate pert athe day it fetahtag tie Peer'. Acces t RaceraTideco.. 1(.tescota pof clhat-ots. urbas. sad raye - tlsber ofl.plocetrs -ob-s. tdxo-sI)serasdhtys..cess disea.a.as pseestags xl heta :asp J,ha pepa~lasiass. Recasts dispoa sty iselods -ed easehrby safr-bores sysss ore abs ss at ptt -rieta sad etmie foE...-i Me.l ysi sad Prletece... Depseaser lea hetlals.Ny 1911 !aErsiaDLftYi.ia -P,podaireedividd it tastier c ra icia physi- .peec-ecto epr --ia PaErses - Ptolati-x dtitdsd by rosier orpsrc a -slesadtefe1 gradosteeuasee, pracctcsl a...se ..ed ...sieraetccs  EqLCONMI 0ELE08201 DATA SHEETIMN1 Fags 8 f 5 A C T0 U A L1,f g P ROJ 1E CT ION GrwhRteG_ A . fCY 1970 1979 1977 199 1980 1981 1982 195 .22 1970 -75 1975-87 - l9 n 190 180 10 NATIONAL ACCOUNTS Coostast 1972 PrI-e, 079 Millions 0G 36,971.__7 49,508. 50,9626.2 58,836.1 63,11 9.3 67.512.9 611C71.4 72,110.7 O8:39Sj~97 ~ 9. Gain Gocrs 120.1 688.5 3552.2 792.6 2,049.5 1,6. ,0. .4. . - - 0.3 3.1 2.2 000 ~~~~~~~37,091.8 49,196.9 51,318.5 59,628.7 65,169.9 68,974.0 71,578.3 73,892.2 80,196.8; 6.2 5.8 3.73 100.0 103.3 100.0 Ospor- (scOO 4,411.3 6,:661.0 401. 7,679 10,:087.6 13,108.4 77,051.0 13,016.4 10,135.9 . 1.0 0,.9 4~ 11.9 05.1 18.9 . ,t: 7~~,27. 3,68 4493 5924 7093 1,1. 11,151.5 13,173.3 15.124.7j 3.8 13.6 85 8.8 10.0 08. Ooaoaeoe lop 1,138.3 2,899.2 400.3 1,745.4 3058.3~ ~~ 1,389.2 1199. -6.9 11. 21 29.7 1.1 -40 3.1 4.7 C.os _1oo 3 0,935.2' 40,767 41999.5 47,803.9 51,3358.3 51.401-9 32,690.9 53,203.8 57,788.6 6.1 4.8 2.3 65.4 78.8 72.1 looestn,ooc 7,174.8 10,527.9 5,5~~~~~67.0 12,777.6 14,819.0 17,300.2 18,380. 1,53.3 70,610.0 q4 75.8 1. 11 2. Gr,t Doe So_org 6,156.6 9.316.2 9,327.0 11,824.9 03,8010.4 17,372.1 18,88(7.6 20,648.4 22,410.3 6.9 10.4 9.3 16.6 31.2 27.9 Gros Nat. S avor-go 5,020.4 7,541.7 9,478.4 10,391.9 12,259.2 11,033.8 17,'896.4 19,073.2 21,090.1 6.2 00.0 5.8 15.7 10.8 26.5 TRAD1 IN 10030 ANDSS,Cern Felons, 093 llio- As 1 ofTotal IMPORTS, TOTAL 3,a16.9 9,636.7 7,~8 55.0 17,052.9 2 5,5896. 3 32,714.9 3881. 2 33,727.0 45,149.5 23L.5 .2-5.4. 10.5 100.0 ooc.G 100.0 lonoampeioc ~~~~~4772.4.1 94 9.7 7 7;9.2 1838.8 4.085.6 5,246.8 1.E9. 5,2511.6 8,210.7 22.2 36.8 05.5 13.8 15.9 25. 4 of sooth: Food ~~(77.6,1 490.3 751 1,086.5 2,956.2 3,654.3 3053 4,89.0 5,242.6 - 21.7 11.4 2.3 11.6 11. Peorol-a, I Frodooc 35.0 291 07. 259.7 299.4 - - -- 39.7 031 - 1.0 1.2 - Noc-Foocor leertces 1,0~~~64.7 2,2, t,954.3 4,915.5 6,962.71 9.,484.1 9 4. ,8. 1858.8. 13.7 29.2 9. 341.2 27 .72 63 Other Goodo 1,44.6 3,95. 53O4.0 12,039.4 14,249.0 17,983.9 16,38.1 [8,992.1 24,080.0 17.8 17.2 94 54.5 55.7 1000175, TOTAL ~~2,745.4 6~CL,,917 7,9. 5,285.9 23,568.7 29,049.5 29,94.5 35,260.2 46,464.1 1. 30814.2 100.5 100.5 100.0 Solorted Agrio-l- CaolGod 620.2 614.8 1,439.0 2,053.4 1,941.6 1,786.1 2.021.0 2,309.8 2,6.9 65 20. 10.2 22.4 8 .2 6.4 Beorol-o & Prodo- 38.4 460.1 1,129.4 3974.2 10,422.5 14,653.9 Il050.0 15,080.0 19,526.6 61.2 87.8 11.0 1.4 44.2 42.0 Plionrala ~~~~~~244.3 423.,4 444.9 805. 1,3146.5 1,187.81 I,367.2 1,5(60.9 1,972 16.9 25.0 9.8 .9 5.9 M.aeo(oocoras ~~~443.9 0,16. 1 ,610.5 2,351.7 2,37B.3 2,77. 2,6709,528 ,352 26. 16I3. 16.2 10. 9.3 Ote ods 1153 79. 1.7 3.2 4.8 7. 11.0( 2.5 3 19.'5 o los-too-o Sor-on 1 ,3597 .7 3,37.2 7,190. 5,9. ,1.6 9,229.5 13,944.2 13,025. 17,634.7 19.3 205. 19.7 50.9 31.5 58.0 T702 -C. 100 109072,1000 A-eros 7210t0 "oatPice Iodeo 88.2 01.14 175.2 262.4 5677.0 392.4 399.3 416.3 469.3 06.6 251.5 4.19 I Ior IPi-rIdo 90.2 1o8.G 164.1 187.9 207.9 229.1 220. 3 737.3 073.1 I 17.5 8.1 5.0 Tos f Trodo 9.9 1035.0 106.9 140.3 176.5 171.3 [31.3 173.4 171.6 2.5 12.4 -1.3 VAL0E AD0ED BY 001000 Coosta 1872 Prros, 770$ Millios Priosary 4,39.1 4,463.4 ,47,71.6 4,955.7 5 ,22 7.9 64,547.3 1 620.6 6,893.7 7,456,2 0.7 3. 4.1 11.2 0. .5 Secoodary 12,~~~~417. 16,9a.7 18.245,2 22,004.6 23,8780.0 25,920.8 26,469.7 27,1597.9 28,8,57.1 3.4 336 7.8 36.5 Tooboo 20,415.3 27,076.3 27,945.9 31,795.6 34,013.6 35,044.7 36,773.1 38,059.0 42,350.7B 5.8 4.8 5.2 55.2 53.5 54.0 Toto GDP 36,971.7 48,508.4 50,966.7 56,636.1 63,119.3 67,512.8 '.5 871.4 72,110.7 78,395.~4 6.0 5.6 4.3 100.0 100.0 17o0. CONSOLIDATED 003101 SECTIO8 F0NAN1E0 Olllio,, 1972 085 CorooR. Ocipto 35393.3 9,5191.9 17.6051.6 13,471.9 15,86.9 16,2718.7 Corr.o- Gop-d. 4,340.1 3,506.4 9,202.0 10,095 12480.4 13,978. 7 PohOG Sacigs 0,33.1 03. 140~2.7 2,60. 336.1224, ,,lio,otaroc 2,277.7 4,83. 4,426.5 6,823.3 6,893. ,9, lofo..,0 (lou) ~~666.1 4,308.9 2,57.0 3 958.2 4,0. , 7s5.i. Coe...ol Proo od-o 90.4 1359.7 23.4 331.1 418.2 538.2 (1972=1 00) 2 Eo-hooge Ran 12- 12.49 4 20.39 22.81 22.95 26.22 2, ALLOCAT10N4 0F GR050 ooth Rates As of Totol ITURES ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1979 co-o,, 5,369.1 6,474.1 7 ,7 36 .9 10,349.5 ~ 00 18.4 33.3 Traopo- aod Coo- .o.lcot.o. 1,751.1 1:,503.3 1,537. 1,4013.2 ..-3.4 144 Soolo Expecdctor-o 1,221.9 4,0. ,7. 5,338. .. oa 6 3 569 lodocory 1,646.0 1,435.6 1,392.4 1,8265 oa 28 A--co & bRat Con 1,977.1 1,617 .5 , 5 62 .7 1,474.53 -. 00 -7.1 Gro. Admi- e-taios99 9 4 -eos 3,290.0 5,161. 5,55:2.21 9,342 oo 992. oCoto_ce1,531.7 1,436.9 1,785.2 1644.90 .. 0..-. 5.2 Toolosr, 63.2 72.3 53.9 60.5 I.. 0a.-. 0.2 tota 15843.5 22,322.7 24,352.5 31,683.0 1-s 1-a. 12.,4 100. 19)71-75 1975-80 SELE02T0 INDIICATORS 1100 2.62 1.660 694 2.50 4.31 3.37 3.06 3.66 I.por Ilaccly 2.63 0.60 -4.6 3,99 4.61 4.30 1.64 7.80 IagolS_oogo la_c 2.61 5.223 017 0.19 0.17 0.16 0.14 0.24 L400BOR 1 FOoCEOilloooo -As- 4- of- Total Groth Rolet__ 19455 1979 0570 1960 197 197 96-70 1707 Alrr -it..o 5.4 4.5 4.0 50.5 34.9 29.2 -16.7 8.9 lodoorop 2.1 2.7 ~~~~ ~~~~ ~ ~~~~ ~~~~3.7 09.6 20020. 286 370 Oervcooo ~~~~ ~~~ ~~3.2 5.2. 29. 404.2 48.9 76.1 473.0 Total 10 .7 12.59 06.6 105. 100.0 100. 20.6 31. VALUJE 201D00 PER WORKER 1972 Proi- As 1 ofToa-Ooth Rote ________________-- ~~~1960 1970 19~765 1965 1~970 1--9-80 0960-7-0 1970-76 Ageliolt-r 608. 919.8 1 020.4 34.2 32.1 31.6 4 1.4 odo-r,y 2,466.'9 4,500. 3,421.6 140.4 160.1 14. 5322 S-i- ~ ,22. 3,S 5025 3,605.0 183.6 125.0 111.5 2.- Totol 1,755.6 2,665.9 3,229.2 100~.0 100.0 105 0 5.0 1.6 /The El.,fcato o this oe a h.. nbs oho-glg Iho-fto. thn flg-ro sight not r-pors..t - actly the sasciei ortryer.- .2 -Scote 30, 1991 Apr11 1962  0 0 00000"' 04000 '00 00 04" =ftftftoooftftft 0' 0 00o - 0 '0000'..ft 'Oft 010 0 OCiCiO'0oOOlft a ? >  0 '00000 00 ftO;;00000ft00'ft'ft ft 0'0ft00 = 0>2ft 2 -  0 0 ooo 0044400"040 4'00 0 0000 oftO. 0 oftOOOftoO 0 0 '0,00  .-*ft'oo 0 0 0 '0OOOftftOft 45 - ftftft 000.-' ftC' 00ftft0 OH  -. - 0ft0 ftO'Oo 0 Oft OftOft 000000000 04 00 0000.04"ft.-0 000. '000- 0-oftO ft'0040 ft - 0 ft '.'40 '0"001 '0040 0 ''0 0'00000 or..-'' ft 1" 0 Or 00040 000 44 ft'000 00 00000..oo,-'oOqo 'ft 0 0'0 fti-'.,'. 0 "ft ft -..--.-o'' -' .- ft '-'ft ftOOftftft= 0 40 0000P404..0000ft4-..0 0 ocOft' 0 OftOft '0 ft ..  0 ft. "IftOft (Oft '0'Z o 000 =0 0 00"'4' ft000 ft ft 0 ft 00 ft ftjO 0 0 '0 'ft0k00OO 000.0 0 ftft ft '>'' ft Oft. 0 '0 ft ftftft 0 0 '0 00 0 01 Zft= 000 0 0-0 -. ft 0= 0 'ft 00 0 ft 0 ft '0 0 '0 04>00 4> - - .'.oOOOoO 0-0000.1 I ' II'' V - - - - - I K 4> 0o00 000040 0000000000,-o.o.0 0 ft '01*0 - 0 - '0- I '"' 0 ooO o 000 0 00,0 0 00 0 00000'-'00000 00 ft - - [= - 0 0 0 000 000010 ftO 00 00.-.-' 0,000 0 0 0000 0 000000000,000.0 0- - 000 1., 4 I 40 ft 000 4> oooo0 -0 000 000- .00,00 I 0 0000400-00000,00 ft 0 000 '0000 0 0 040.-.000000000 - 00 04>' 0000 0 000-000000000 0 0 I' '0 44.1 000 .0 4>000-0-0- 0000 r"0 o 000 0"0 0 I 000.' 000000000 0.00 0.00 JO 0000000000000- 0 Oft0 0 oo".0'0 OOOo.--000 000 00 0 0 0000000000000 0 000.-0 0..'0 K ftg i= - .100.-0 04'.0 0 0 0 4> 010 -'0000.00 4> 0 ft 0  - 31 - ANNEX II Page 1 of 8 THE STATUS OF BANK GROUP OPERATIONS IN MEXICO A. Statement of Bank Loans (as of March 31, 1982) 1/ Loan Amount less Undis- No. Year Borrower Purpose Cancellations bursed 44 loans fully disbursed 2,438.6 970-5 1974 NAFINSA Irrigation 47.0 4.2 1022 1974 NAFINSA Airports 25.0 0.2 1053-5 1974 NAFINSA Integrated Rural Development 38.0 15.2 1111-5 1975 NAFINSA Irrigation 50.0 21.3 1186 1975 BANOBRAS Water Supply 40.0 11.8 1420-5 1977 NAFINSA Tourism 42.0 3.0 1462-5 1977 NAFINSA Integrated Rural Development 120.0 25.1 1552-5 1978 NAFINSA Industry 47.0 1.0 1553-5 1978 NAFINSA Agriculture 56.0 36.8 1554 1978 BANOBRAS Urban Development 16.5 9.2 1560-5 1978 NAFINSA Industry 100.0 4.9 969-6 1979 NAFINSA Irrigation 25.0 1.2 1643-5 1979 NAFINSA Small-scale Agri. 60.0 51.7 1671 1979 BANOBRAS Highways 120.0 80.8 1686-5 1979 FERTIMEX and NAFINSA Industry 80.0 36.6 1706-5 1979 NAFINSA Irrigation 92.0 82.7 1712-5 1979 NAFINSA Industry 175.0 97.4 1820-5 1980 NAFINSA Small and Medium Scale Mining 40.0 36.1 1858-5 1980 JAFINSA Irrigation 160.0 159.2 1881 1980 NAFINS\ Small and Medium Scale Industry 100.0 54.7 1891-5 1980 NAFINSA Agricultural Credit 325.0 262.1 1908 1981 NAFINSA Irrigation 23.0 21.0 1913 1981 BANOBRAS Water Supply 125.0 117.4 1929 1981 BANOBRAS Railways 150.0 118.3 1945 1981 NAFINSA Rainfed Agri. 280.0 249.3 1964 1981 BANPESCA Port Development 14.0 14.0 1990 1981 BANOBRAS Urban Development II 164.0 164.0 2042 1982 NAFINSA Technical Training 90.0 88.7 2043 1982 NAFINSA Integrated Rural Development 175.0 175.0 TOTAL 5,218.1 2/ Of which has been repaid to the Bank 812.8 Total now outstanding 4,405.3 Amount sold 92.3 of which has been repaid 92.3 0.0 Total now held by Bank 2/ 4,405.3 Total undisbursed 1,942.9 1/ Following loans made in FY1982 to NAFINSA were approved by the Executive Directors but have not yet been signed: 2100, for US$180 million, for an Irrigation Project. 2142, for US$152.3 million, for a Capital Goods Industries Project. 2154, for US$60 million, for a Pollution Control Project. 2/ Prior to exchange adjustments.  - 32 - ANNEX II Page 2 of 8 B. STATEMENT OF IFC INVESTMENTS (as of March 31, 1982) Fiscal US$ Million Year Obligor Type of Business Loan Equity Total 1958/59 Industrias Perfect Circle, S.A. 1/ Industrial Equipment 0.8 -- 0.8 1958 Bristol de Mexico, S.A. 1/ A.C. Engine Overhaul 0.5 -- 0.5 1961 Acero Solar, S.A. 1/ Twist Drills 0.3 -- 0.3 1962/65/ Compania Fundidora 66/68 Fierro y Acero de Monterrey, S.A. Steel 2.3 21.4 23.7 1963 Tubos de Acero de Mexico, S.A. 1/ Steel 0.9 0.1 1.0 1963 Quimica del Rey, S.A. 1/ Sodium Sulphate 0.7 -- 0.7 1964/66 Industria del Hierro, S.A.1/ Construction Equipment -- 2.0 2.0 1970 Minera del Norte, S.A, 1/ Iron Ore Mining 1.5 -- 1.5 1971 Celanese Mexicana, S.A. Textiles 12.0 -- 12.0 1972 Promotora de Papel Periodico, S.A. de C.V.1/ Pulp and Paper 2/ 2/ 2/ 1973/79 Cemento Veracruz, S.A. Cement 15.9 -- 15.9 1974/81 Cancun Aristos Hotel Tourism 1.0 0.3 1.3 1975/78 Mexinox, S.A. Steel 12.0 3.2 15.2 1978/81 Papeles Ponderosa, S.A. Pulp and Paper 9.0 3.5 12.5 1978 Tereftalatos Mexicanos, S.A. Petrochemicals 19.0 -- 19.0 1979 Cementos Tolteca, S.A. 3/ Cement 100.0 -- 100.0 1979/81 Hotel Camino Real Ixtapa, S.A. Tourism -- 3.1 3.1 1979 Conductores Monterrey, Electrical Wire S.A. 3/ and Cable 18.0 -- 18.0 1980 Industrias Resistol, S.A. 3/ Particleboard 25.0 -- 25.0 1980 Vidrio Plano de Mexico S.A.3/ Flat Glass 114.9 -- 114.9 1980 Minera Real de Angeles, S.A. de C.V. 3/ Mining 110.0 -- 110.0 1981 Celulosicos Centauro S.A. 3/ Pulp and Paper 59.5 -- 59.5 1981 Corporacion Agroindustrial, S.A. Agri-Business 11.3 3.0 14.3 Total Gross Commitments 514.6 36.6 551.2 Less Cancellations, Terminations, Repayment 382.0 22.1 404.1 Total Commitments Now Held by IFC 132.6 14.5 147.1 Total undisbursed (including participants) 35.4 1.5 36.9 1/ Investments which have been fully cancelled, terminated, written off, sold, redeemed or repaid. 2/ US$25,000. 3/ Gross commitment including amounts sold to participants.  - 33 - ANNEX II Page 3 of 8 C. Status of Projects in Execution (as of March 31, 1982). 1/ Ln. No. 970 Rio Sinaloa Irrigation Project: US$47 Million Loan of March 1, 1974; Effectiveness Date: May 29, 1974. Closing Date: June 30, 1982. Project authorities have rephased construction; a substantial reduction in project scope was approved by the Executive Directors (R79-51 of March 13, 1979). Progress is now satisfactory and the project will be completed on schedule. Ln. No. 1022 Airport Development Project: US$25 Million Loan of June 28, 1974; Effectiveness Date: September 16, 1974. Closing Date: June 30, 1982. Although behind schedule, this project is proceeding satis- factorily. Project components that have been completed are achieving higher rates of utilization than envisaged at time of appraisal because of greatly increased air traffic in Mexico. Four of the six project airports are completed, and the other two will be finished by mid-1982. Ln. No. 1053 Papaloapan Integrated Rural Development Project: US$50 Million Loan of November 15, 1974; Subsequently reduced to US$38 million; Effectiveness Date: January 27, 1975. Closing Date: December 30, 1982. : ro ject implementation experienced de'lays mostly due to management difficuities and inadequate budget support. At the borrower's request US$12 million of the loan were cancelled on March 5, 1981. A reprogramming of the project and extension of the closing date to December 30, 1982 were approved by the Executive Directors on January 4, 1982 to allow completion of the modified project. Ln. No. 1111 Seventh Irrigation Project - Bajo Rio Bravo and Bajo Rio San Juan: US$150 Million Loan of May 8, 1975; Subsequently reduced to US$50 Million; Effectiveness Date: July 30, 1975; Closing Date: December 31, 1982. In view of the project's size, complexity and high cost, the Government and the Bank agreed to phase project development over a longer period of time and substantially reduce the scope of the project to be financed under the Bank loan (R77-305 of December 13, 1977 and R79-56 of March 19, 1979). Progress on most components of the revised project is now satisfactory. The project is expected to be completed ahead of schedule. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution and, in particular, to report any problems which are being encountered and the action being taken to remedy them. They should be read in that sense, and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  - 34 - ANNEX II Page 4 of 8 Ln. No. 1186 Medium-Size Cities Water Supply and Sewerage Project: US$40 million Loan of January 13, 1976; Effectiveness Date: April 26, 1976. Closing Date: January 14, 1984. Subloan agreements have been signed with all cities included in the project, fully committing the loan. Five out of seven subprojects have been completed and works are progressing satisfactorily. Ln. No. 1420 Baja California Tourism Project: US$42 Million Loan of July 5, 1977; Effectiveness Date: June 28, 1978; Closing Date: June 30, 1982. After extension of the closing date by one year, due to difficulties in internal coordination, the project is progressing satisfactorily. Ln. No. 1462 Integrated Rural Development Project - PIDER II: US$120 million Loan of July 5, 1977; Effectiveness Date: October 28, 1977; Closing Date: July 31, 1982. The project is proceeding satisfactorily; major efforts to decentralize project planning and execution have been made. The result is increased beneficiary participation and better coordination between executing agencies at the field level. However, decentralization, reprogramming of micro- region investment plans, and several changes in management have resulted in delay in project execution; the closing date will have to be extended. Ln. No. 1552 Small- and Medium-Scale Industrial Development Project; US$47 million Loan of May 4, 1978; Effectiveness Date: January 12, 1979; Closing Date: June 30, 1982. After some initial delays, the integrated program to assist industrial enterprises is making rapid progress. Forty-eight extension agents have now received full training and have been assigned to 14 regional offices. The loan has been fully committed. Ln. No. 1553 Tropical Agricultural Development Project: US$56 Million Loan of September 27, 1978; Effectiveness Date: January 12, 1979; Closing Date: December 31, 1983. The six pilot projects have been approved by the Bank. Project authorities are making good progress in the agricultural development program of each pilot project. The applied research programs are proceeding on schedule. Disbursements are improving.  - 35 - ANNEX II Page 5 of 8 Ln. No. 1554 Lazaro Cardenas Conurbation Development Project: US$16.5 Million Loan of September 27, 1978; Effectiveness Date: February 14, 1979; Closing Date: June 30, 1983. The shelter-related component and the training centers are progressing satisfactorily. Progress has also been made in the production credit component, but delays still remain in the implementation of the industrial premises and river control components and the studies. The loan funds were recently reallocated to increase the amount allocated to the shelter- related components. The closing date was extended to June 30, 1983. Ln. No. 1560 FONEI III: US$100 Million Loan of September 27, 1978; Effectiveness Date: January 12, 1979; Closing Date: June 30, 1982. The loan has been fully committed. Ln. No. 969-6 Rio Panuco Irrigation Project; US$25 Million Loan of September 27, 1978; Effectiveness Date: January 12, 1979. Closing Date: June 30, 1982. Major project civil works are on schedule and expected to be completed by the closing date. Progress in agricultural development has been slower than infrastructure construction. The technical assistance program has been strengthened to emphasize better water utilization and intensive agriculture. Ln. No. 1643 Small Scale Agricultural Infrastructure Project: US$60 Million Loan of February 6, 1979; Effectiveness Date: April 13, 1979; Closing Date: June 30, 1983. Most livestock and irrigation subprojects to be included in the Project have been approved by the Bank, and the Government is accelerating preparation of withdrawal applications. Ln. No. 1671 Highway Sector Project: US$120 Million Loan of August 23, 1979; Effectiveness Date: October 12, 1979; Closing Date: June 30, 1984. Commitments are ahead of schedule but disbursements are behind schedule because of budget cuts in 1979 and because of delays in submitting reimbursement applications to the Bank. The authorities have agreed to increase budget allocations and speed up disbursement requests.  - 36 - ANNEX II Page 6 of 8 Ln. No. 1686 Second Fertilizer Project - Lazaro Cardenas: US$80 Million Loan of May 18, 1979; Effectiveness Date: September 21, 1979; Closing Date: October 31, 1982. Orders for most of the equipment have been placed and about 30 percent of the construction work is committed with about 22 percent completed. The project is now about 17 months behind schedule and runs the risk of further delays unless implementation arrangements are improved. FERTIMEX's manage- ment is considering steps to improve implementation. Ln. No. 1706 Rio Fuerte/Rio Sinaloa Irrigation Project: US$92 Million Loan of July 30, 1979; Effectiveness Date: October 5, 1979; Closing Date: July 31, 1986. Project implementation is on schedule. Ln. No. 1712 FONEI IV: US$175 Million Loan of July 30, 1979; Effectiveness Date: October 5, 1979; Closing Date: June 30, 1984. Demand for industrial financing continues to be strong, and most of the loan has been committed. Ln. No. 1820 Small and Medium Scale Mining Development Project: US$40 Million Loan of August 18, 1980; Effectiveness Date: December 4, 1980; Closing Date: June 30, 1984. Project execution is being initiated. Demand for credit has been less than originally anticipated due to softening of mineral prices. Ln. No. 1858 Apatzingan Irrigation Project; US$160 Million Loan of September 29, 1980; Effectiveness Date: December 19, 1980; Closing Date: June 30, 1987. Contracting for the main civil works is progressing satisfactorily and a strengthened technical assistance program is underway. How- ever, disbursements are lagging behind due to delays in processing. Ln. No. 1881 Second Small and Medium-Scale Industry Development Project; US$100 Million Loan of September 29, 1980; Effectiveness Date: December 22, 1980; Closing Date: December 31, 1984. About one-third of the loan has been committed. The program is making satisfactory progress. Ln. No. 1891 Seventh Agricultural Credit Project: US$325 Million Loan of August 15, 1980; Effectiveness Date: November 17, 1980: Closing Date: March 31, 1984. No major problems in implementation are foreseen. The review panels in the regional offices for speedy loan processing have been established.  - 37 - ANNEX II Page 7 of 8 Ln. No. 1908 Ocoroni Irrigation Project: US$23 Million Loan of March 2, 1981; Effectiveness Date: July 1, 1981; Closing Date: June 30, 1986. Project implementation is on schedule. Ln. No. 1913 Second Medium-Size Cities Water Supply and Sewerage Project: US$125 Million Loan of January 23, 1981; Effectiveness Date: June 23, 1981; Closing Date: December 31, 1984. Subloan agreements have been signed between BANOBRAS and seven cities, and investment proposals amounting to 88 percent of project costs have been submitted to the Bank. Completion of works is ahead of schedule in Toluca and Queretaro, but overall the project is one and a half years behind schedule due to delays in completion of final designs. Ln. No. 1929 Fourth Railway Project: US$150 Million Loan of February 12, 1981; Effectiveness Date: June 9, 1981; Closing Date: June 30, 1984. Project execution is proceeding on schedule. Ln. No. 1945 Rainfed Agricultural Development Project: US$280 Million Loan of March 2, 1981; Effectiveness Date: July 1, 1981; Closing Date: June 30, 1986. Project implementation has begun on schedule. Staffing of the ten project districts is near completion, and district operational committees have been established. Ln. No. 1964 Ports Development Preparation Project: US$14.0 Million Loan of May 7, 1981; Effectiveness Date: August 24, 1981; Closing Date: December 31, 1984. Project implementation is on schedule; about 40 percent of the loan has been committed. Ln. No. 1990 Second Urban and Regional Development Project: US$164 million Loan of August 13, 1981; Effective Date: January 12, 1982; Closing Date: December 31, 1986. Signing of subsidiary loan agreements is still proceeding. Good progress is taking place in the shelter-related component in Tabasco, but the remaining components are suffering delays. Ln. No. 2042 Technical Training Project: US$90 Million Loan of July 31, 1981; Effectiveness Date: November 25, 1981; Closing Date: June 30, 1984. Project implementation is proceeding rapidly.  - 38 - ANNEX II Page 8 of 8 Ln. No. 2043 Integrated Rural Development (PIDER III): US$175 Million Loan of November 6, 1981; Effectiveness Date: May 5, 1982; Closing Date: September 30, 1985. Micro-regional offices have been established and staffed. The Government has prepared the monitoring and evaluation plans for all micro-regions under the project and these are satisfactory to the Bank. The training programs are now under preparation. Loans approved in FY1982 but not yet signed: Ln. No. 2100 Bajo Rio Bravo/Bajo Rio San Juan Irrigation Rehabilitation Project II: US$180 million Loan of Effectiveness Date: ; Closing Date: December 31, 1984. This loan, approved by the Executive Directors on March 16, 1982, has not yet been signed. Ln. No. 2142 Capital Goods Industries Development Project: US$152.3 Million Loan of ; Effectiveness Date: Closing Date: December 31, 1986. This loan, approved by the Executive Directors on May 13, 1982, has not yet been signed. Ln. No. 2154 Pollution Control Project: US$60 Million Loan of Effectiveness Date: Closing Date: December 31, 1988. This loan, approved by the Executive Directors on May 25, 1982, has not yet been signed.  - 39 - ANNEX III MEXICO PREPARATION OF A DECONCENTRATION PROGRAM FOR THE MEXICO CITY REGION SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Time to prepare project: About 14 months (b) Project prepared by: CCCP (c) First presentation to Bank: March 1981 (d) Departure of Appraisal Mission: January 1982 (e) Completion of Negotiations: May 1982 (f) Planned date of effectiveness: November 1982 Section. II: Special Bank Implementation Data None Section III: Special Conditions (a) The completion of contractual arrangements satisfactory to the Bank for the transfer of the proceeds of the loan from BANOBRAS to the CCCP would be a condition of loan effectiveness (para. 71). (b) The CCCP should periodically meet with Bank representatives to exchange views on the progress of the project and make arrangements as appropriate for meetings between Bank representatives and representatives of other agencies participating in or affected by the project for consultations on project design and related planning and organizational issues (para. 73). (c) Terms of reference and conditions of employment of consultants to be engaged by the CCCP for the preparation of the studies financed under the loan would be satisfactory to the Bank (para. 75 and 77). (d) The CCCP would select projects to be financed under the loan on the basis of criteria satisfactory to the Bank (para. 78).  - 40 - ANNEX IV Page 1 of 2 MEXICO DECONCENTRATION PROGRAM FOR THE MEXICO CITY REGION Summary and Estimated Cost of Studies and Engineering Services Estimated Cost (in US$ thousand) Local Foreign Total Part A: Policy Evaluation Studies (1) Administrative, financial and budgetary framework of the program. planning, review, advisory services 18 staff and 16 consultant man months 110 250 360 (2) Urban Development (Land, Infrastructure, Community Facilities and Housing) planning and advisory services 66 staff and 54 consultant man months 380 860 1,240 (3) Regional and Urban Transport Development studies of inter-modal transportation within the conurbation zone. 36 staff and 30 consultant man months 220 460 680 (4) Industrial Development studies of location, design, construction and operation of industrial parks and distribution centers and review of regional incentives and credit policies. 48 staff and 40 consultant man months 300 610 910 (5) Water Resource Management studies of water resource management, including treatment and recycling of effluents 36 staff and 30 consultant man months 220 460 680 (6) Rural Development identification and planning of rainfed and irrigated projects to enhance local production and employment in suitable areas of the conurbation 36 staff and 30 consultant man months 220 460 680 Subtotals 240 staff and 200 consultant man months 1,450 3,100 4,550 (7) Project Administration: a/ 15% on (1) to (6) 460 220 680 Base Cost (Jan. 1982 prices) 1,910 3,320 5,230 Unforeseen Increases: b/ 380 670 1,050 Price Contingencies b/ 450 770 1,220 Total Cost of Part A 2,750 4,750 7,500 a/ See footnote on Page 2. b/ See footnote on Page 2.  - 41 - ANNEX IV Page 2 of 2 Estimated Cost (in US$ thousand) Local Foreign Total Part B: Specific Engineering and Feasibility Studies (8) Urbanization Projects land use, site planning, architectural design of shelter, community facilities and urban services in selected growth 6 centers or upgrading areas. 500 1,000 1,500 (9) Transportation Facilities Projects engineering design of urban roads, transit system, freight yards and other transport facilities. 220 480 700 (10) Industrial Estates Projects land use, site planning, engineering and architectural design of selected industrial estates. 300 650 950 (11) Water Resources Projects engineering of supply and distribution networks, treatment plants, pumping stations, reservoirs and other facilities 220 480 700 (12) Rural Development Projects engineering design of agricultural projects. 210 490 700 Subtotals 1,450 3,100 4,550 (13) Project Administration:a/ 15% on (8) to (12) 460 220 680 Base Cost (Jan. 1982 prices) 1,910 3,320 5,230 Unforeseen Increases b/ 380 670 1,050 Price Contingencies b7 450 770 1,220 Total Cost of Part B 2,750 4,750 7,500 Total Base Costs (A + B) 3,820 6,640 10,460 Total Contingencies b/ (A + B) 1660 2,880 4,540 TOTAL PROJECT COST 5,480 9,520 15,000 Front-end Fee on Bank Loan - 200 200 a/ Administrative costs have been estimated as 15% of direct expenditures by CCCP; 68% of this amtount has been estimated to be local costs and 32% foreign costs, covering international travel of senior staff, leasing of computer services, purchases ab:. bI A 20 percent variation itl quantities has been allowed for each study/project. The calculation of price contingencies has been made in dollar terms, according to the following rates:1982 1983 1984 1985 Foreign 8.5 7.5 7.5 7.5 It has been assumed that higher escalations of local prices would be compensated by adjustments in the exchange rate between the peso and the dollar.  - 42 - ANNEX V PRESENTATION FORMAT FOR THE PROPOSED SPECIFIC ENGINEERING ANID FEASIBILITY STUDIES 1. Description of Study Nature, scope, location of proposed study Its relation to the deconcentration program and to national/state/local plans Tndication of expected socioeconomic benefits 2. Present Status (if applicable) Feasibility studies, schematic plans; area surveys, investigations, borings Engineering design, specifications, tender documents, contracts awarded; construction progress, if any 3. Executing Agency Identification and. type: federal, state, local, development corporation, trust fund, etc. Principal purpose, date of establishment, historical development Organization chart, staffing and intended arrangements of the project under study 4. Financial Arrangements Estimated total cost of the project: investment, maintenance, operation Amount and sources of funds for engineering/land/materials/equipment/labor Expected financing: source and availability of domestic funds, external financing requirements Availability of alternative financing arrangements Government exemptions or deferments of capital, interest, tax payments, if any Nature and amount of subsidies, if any 5. Construction and Funding Schedule Planned construction schedule, procurement, equipment delivery and installation Anticipated flow of expenditures in local and foreign currency Physical and price contingency assumptions 6. Engineering Services Required Preliminary or final design, specifications, contract documents, bid evalua- tions, contract awards, construction supervision, including expediting, inspecting, reporting; elements suitable for local or foreign consultants Special consultants and responsibilities, including evaluation of environ- mental impact Main aspects of procurement, construction, operation and maintenance  IBRD16309R >3