Mexico - Agricultural Marketing Project For Perishables

Document of The World Bank F F FOR OFFICIAL USE ONLY Report No. P-3504-ME REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPME-- TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$115 MILLION TO NACIONAL FINANCIERA, S.A. WITH THE GUARANTEE OF UNITED MEXICAN STATES FOR THE AGRICULTURAL MARKETING PROJECT FOR PERISHABLES March 31, 1983 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 $) Since December 20, 1982, Mexico has the following exchange rates: (i) a sliding controlled rate for priority imports, most exports and service payments on foreign debt; this was set at 95.0 pesos per dollar on December 20 and was about 104.0 on March 15, 1983; and (ii) a free exchange rate for all other transactions; in recent weeks the free peso has been trading around 150 per dollar. FISCAL YEAR January 1 to December 31 WEIGHTS AND MEASURES 1 hectare (ha) = 10,000 m2 = 2.47 acres 1 kilometer (km) = 0.62 mile 1 square kilometer (km2) = 0.39 sq mile = 100 ha 1 kilogram (kg) = 2.2 pounds 1 liter (1) = 0.26 gallons 1 metric ton (m ton) = 1,000 kg = 0.98 long ton ABBREVIATIONS ACF - Index of Average Cost of Funds to Multipurpose Banks BANOBRAS - National Bank for Public Works and Services BANPESCA - National Bank for Fisheries and Ports BANRURAL - National Rural Credit Bank CECADE - Development Training Center CPD - Project Development and Coordination Group EDI - Economic Development Institute FAO - Food and Agriculture Organization FEFA - Special Fund for Agricultural Finance FERTIMEX - Mexican Fertilizer Corporation FICART - Trust Fund for Credit in Rainfed Areas FIDEC - Trust Fund for Marketing Development FIDESA - Promotion and Assistance for Development (Consultants) FIRA - Agricultural Trust Funds in the Bank of Mexico FONEI - Industrial Equipment Fund ICB - International Competitive Bidding IDB - Interamerican Development Bank IFAD - International Fund for Agricultural Development IMF - International Monetary Fund NAFINSA - National Development Bank PIDER - Integrated Program for Rural Development PLANAT - National Program for Assistance to Rainfed Agriculture SAM - Mexican Food System SARH - Secretariat of Agriculture and Water Resources SECOFI - Secretariat of Commerce and Industrial Development SHCP - Secretariat of Finance and Public Credit SIDA - National Marketing Development Program SPP - Secretariat of Programming and Budgeting UNPH - National Union of Horticultural Producers  F'OR OFFICIAL USE ONLY MEXICO AGRICULTURAL MARKETING PROJECT FOR PERISHABLES Loan and Project Summary Borrower: Nacional Financiera, S.A. (NAFINSA) Guarantor: United Mexican States Beneficiaries: Trust Fund for Marketing Development (FIDEC); Agricultural Trust Funds of the Bank of Mexico (FIRA); Trust Fund for Credit in Irrigated and Rainfed Areas (FICART). Amount: US$115 million equivalent, including capitalized front-end fee. Terms: Fifteen years, including 3 years of grace, at the standard variable interest rate. Onlending Terms: Funds provided to FIDEC would be in the form of a grant. Funds to FIRA and FICART (for the investment program at the producer level) would be on the same terms and conditions as the Bank Loan to NAFINSA. Project Description: The proposed project is a credit program to promote greater private sector participation in modernization of the food distri- bution system. The project would support development-oriented subprojects for improving marketing facilities at the producer, wholesaler and retailer levels. It would also help integration and coordination of various marketing activities. Investments would allow adoption of modern technologies of handling, packaging and delivering perishable products that would reduce product losses and costs, as well as improve the quality of products delivered to consumers. The proposed project would be implemented over a two-and-a-half year period. Project Risks: The project does not present any special risk in terms of the technical and financial soundness of various investment programs that would be financed under the project. However, a potential risk is in the area of institutional support and coordination. FIDEC is a relatively new institution, although it has incorporated positive elements of similar Bank of Mexico trust funds that have performed well. To minimize this risk, the project would strengthen FIDEC's (a) planning, programming, and impact analysis capabilities; and (b) technical services and training. Also, provision of technical services under the project would minimize risks during the implementation period by providing back-stopping to FIDEC in the execution of the overall program and by training staff in technical marketing areas. 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.  - ii1 - Estimated Cost: Local Foreign Total --------US$ Million- I. Productive Investment Medium and Long-term Investment Producer Level 56.0 30.0 86.0 Wholesale and Retail Level 69.0 37.0 106.0 Subtotal 125.0 67.0 192.0 II. Productive Support National Marketing Informative System 1.5 1.5 3.0 III. Institutional Support Planning and Programming 0.2 0.1 0.3 Promotion Program 0.3 0.1 0.4 Training and Extension 0.2 0.1 0.3 Subtotal 0.7 0.3 1.0 IV. Special Studies 0.5 1.0 1.5 V. Technical Services 0.3 0.7 1.0 VI. Investment Cost (Baseline) 128.0 70.5 198.5 VII. Price Contingencies 17.8 9.8 27.6 VIII. Total Investment Cost 145.8 80.3 226.1 IX. Front-End Fee on Bank Loan - 0.9 0.9 Total 145.8 81.2 227.0 Financial Plan: Local Foreign Total -------US$ Million---------- Government/Banking System 68.2 - 83.0 Beneficiaries 43.8 - 44.0 Bank 33.8 81.2 115.0 TOTAL 145.8 81.2 227.0  - iii - Estimated Disbursements: Bank FY 1984 1985 1986 1987