Announcement of Mexico Develops Forestry Sector in Durango and Chihuahua on August 31, 1989

FOR IMMEDIATE RELFASI World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.* Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 90/7 Contact: Ciro Gamarra (202) 473-8721 MEXICO DEVELOPS FORESTRY SECTOR IN DURANGO AND CHIHUAHUA WASHINGTON, August 31, 1989 -- Mexico will use a World Bank loan of $45.5 million to carry out a project designed to improve forestry activities in the states of Durango and Chihuahua, increase rural incomes and employment, and protect the environment. The project is Mexico's first forestry-development and conservation scheme to be assisted by the World Bank. It is expected to serve as a model for similar projects in the country. The Mexican government selected Durango and Chihuahua as the project area because these states' forestry sectors are considered the most important in the country. The two states have more than one-third of Mexico's 28 million hectares of dense temperate forests. The project has been designed to reduce environmental damage caused by traditional forestry and forest-industry practices in these two states. The project also aims at strengthening institutions responsible for environmental monitoring, research and protection. The $91.1 million project includes a line of credit to forest producers to purchase equipment for logging, transport, road maintenance and wood processing and to provide working capital for seasonal log purchases and other operations. The project will also finance the rehabilitation and improvement of 728 kilometers of roads in Durango and 487 kilometers in Chihuahua. Environmental-protection measures will include monitoring of road rehabilitation and forest harvesting, preparation of an environmental profile of the project area and research into endangered species of plants and animals, and improvements in infrastructure for natural parks and reserves. The National Amerindian Institute (INI) and forestry-administration units will receive assistance to strengthen their capabilities in providing technical assistance and training to the Indian communities in the project area. Economic activities to be generated by the project are expected to provide Durango and Chihuahua and the federal government with additional revenue averaging nearly $13 million a year. Direct employment to be generated for skilled and unskilled laborers in the management and harvesting of forests and the transport and manufacture of forest products is estimated at 3,360 full-time jobs. - 2 - Cofinancing for the seven-year project will be provided by Mexico's federal government, $37.2 million; forest producers, $4.1 million; and financing institutions, $4.3 million. The World Bank loan was made to Nacional Financiera, the financial agency of the Mexican government. This agency will transfer the loan proceeds to the Secretariat of Agriculture and Water Resources, the Secretariat of Communications and Transport, the Secretariat of Urban Development and Ecology and INI. The line of credit will be disbursed through the agricultural trust funds in the Bank of Mexico and the trust fund for Credit in Rainfed and Irrigated Areas in the National Rural Credit Bank. The World Bank loan is for 17 years, including five years' grace, with a variable interest rate, currently 7.73 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.25 percent on the undisbursed balance. NOTE: Money figures are expressed in U.S. dollar equivalents.