Announcement of World Bank Supports Industrial and Agricultural Projects in Mexico on June 29, 1987

, FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.• Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 87/99 Contact: Ciro Gamarra (202) 477-5320 WORLD BANK SUPPORTS INDUSTRIAL AND AGRICULTURAL PROJECTS IN MEXICO Iq WASHINGTON, June 29 -- The World Bank has approved two loans to Mexico, amounting to $205 million, to provide financial and technical assistance to micro-, small- and medium-sized industrial enterprises and to improve agricultural productivity and income through extension services. The first loan, of $185 million, was made to Nacional Financiera (NAFIN) through government trust funds to provide long-term credit and badly needed equity funds to small- and medium-scale industrial enterprises. The second loan, of $20 million, was also made to NAFIN to help finance an agricultural extension project that would test strategies to enhance the quality and cost effectiveness of extension services in Mexico. The small- and medium-scale industry project is part of a broad program of World Bank assistance for Mexican recovery and restructuring efforts in industry. It complements the government's trade liberalization measures which were supported by a $500 million trade policy loan the Bank approved in July 1986. The agricultural extension project complements the policy reforms being taken by the Mexican authorities in agriculture and the government's investment programs in rural development, irrigation and credit. Small- and Medium-Scale Industry The project is aimed at improving the quality and range of financial and technical assistance services to small- and medium-scale industries, whose financial viability is currently being seriously undermined by high inflation and whose prospects will be affected by the increased competitive pressure as a result of the trade liberalization measures. NAFIN will provide the loan resources through FOGAIN, a small- and medium-scale industry development trust fund; FOMIN, industrial development national trust fund; FIDEIN, the industrial cities, connnercial centers, and parks' trust fund; and SECOFI, the Secretariat Commerce and Industry. The loan will provide $100 million to FOGAIN for financing fixed asset investments, covering plant and machinery purchases, associated working capital needs and related civil works. It will also provide $20 million for risk capital and $25 million for pilot financial restructuring, both through FOMIN. NOTE: Money figures are expressed in U.S. dollar equivalents.  - 2 - NAFIN will also provide about $10 million for fixed asset investment and working capital needs of micro-enterprises which are unable to borrow through the normal banking channels for want of collateral. A technical assistance component, of $20 million, to improve the technical and institutional capabilities of FOGAIN, FOMIN, FIDEIN, NAFIN, and SECOFI is also included under the project. The project is expected to enable small and medium industrial enterprises to restructure their production units to become more competitive and to reduce the transition difficulties in moving from a highly protected environment to one which is internationally competitive. The estimated total cost of the project is $350.3 million, with the balance being provided by the intermediaries and beneficiaries ($104.5 million), the government and the executing agencies ($60.5 million) and the United Nations Development Programme ($300,000). The Bank loan will be disbursed over seven years. This is the fourth project assisted by the World Bank in Mexico's small- and medium-scale sector. Between 1978 and 1983 the Bank provided three loans, totaling $322 million, to support small- and medium-scale industries development. Agricultural Extension The agricultural extension project will promote an extension methodology similar to the training and visit (T & V) system to enhance the quality, efficiency and effectiveness of Mexico's extension service. The project will test extension strategies in 20 of Mexico's 192 rural development districts, which are representative of two of Mexico's four major agroecological zones: the irrigated areas of the arid northwest and the temperate central highlands. The loan will finance training programs for extension personnel, researchers and farmers; construction of limited office facilities at the Secretariat of Agriculture and Hydraulic Resources (SARR) service centers; and procurement of vehicles and equipment for extension and research personnel. About 400,000 small and ejido (communal) farmers on about 1.8 million hectares are expected to benefit from the project. At full development, it would also provide additional employment opportunities for about 11,200 full-time jobs in intensified crop and livestock activities, and promote the development of women's groups in agricultural production and related activities. The estimated total cost of the project is $73.8 million, with the balance of $53.8 million being provided by the government. The $20 million World Bank loan will be disbursed over five years. Both loans are for 15 years, including three years of grace, with a variable interest rate, currently 7.92 percent, linked to the cost of the Bank's borrowings. They also carry an annual commitment charge of 0.75 percent on the undisbursed balances. - 0 -