Announcement of 25 Million Dollars Loan in Mexico for Agriculture on September 17, 1965

• :,, , " ' }r~ INTERNATIONAL BANK FOR • RECONSTRUCTION AND DEVELOPMENT 1818 H STREET, N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE. 3-6360 Bank Press Release No. 65/45 Subject: $25 million loan in Septembe~ 17, 1965 Mexico for agriculture The World Bank has approved a loan equivaliant to $25 million to assist in financing an agricultural credit program in Mexko'. Under the program credits will be provided to farmers through private banks via a rediscounting procedure administered by the Banco de Mexico, the central bank. This is the first World Bank operation in which funds will be channeled to agriculture throcgh and with the participation of private banks. The Bank loan will increase the funds avail- able for medium and long-term loans to operators of medium-sized and commercial farms producing farm crops, tree crops and livestock and to businessmen for the • construction of plants to process agricultural products • Eleven commercial banks have agreed to participate in the loan, without the World Bank's guarantee, for a total amount equivalent to $1,440,000 representing the first two maturities and part of the third and fourth maturities which fall due between August 15, 1969 and February 15, 1971. The participants are Wells Fargo Bank, San Francisco; The Northern Trust Company, Chicago; Wachovia Bank and Trust Company, Winston-Salem; Crocker-Citizens National Bank, San Francisco; Fidelity-Philadelphia Trust Company; Bank of America National Trust and Savings Association, San Francisco; National Bank of Commerce of Seattle; Meadow Brook National Bank, Hew York; The First Pennsylvania Banking and Trust Company, Phila- delphia; J. Henry Schroder Banking Corporation, New York; and Banque Lambert, s.c.s., Brussels. Although the Mexican economy, including the agricultural sector, is expand- ~ ing rapidly, a deterrent to agricultural development has been a scarcity of  I • ..~ / it ''. • - 2 .. '""' credit, particularly on medium and long term. Agricultural production must con- tinue to be expanded to keep pace with the fast-growing population -- it is now 38 million and growing at an annual rate of 3.11. -- and to increase exports; Mexico not only supplies about 951. of its own food but agriculture accounts for more than half of all exports. One of the objectives of the project to be assisted by the Bank loan is to increase the total funds available for agricultural loans by stimulati,ng the pri- vate banks to use their own resources for this purpose., The principal direct benefits will be increased production of livestock, farm crops and tree c.rops and reductions in the cost of production and processing farm products. In addi- tion, the project will provide more employment opportunities and & general improve- ment of the economy in the areas directly affected. Most of the increased farm production will be absorbed by expanding markets within Mexico; some beef and fruit will be available for export. The project being assisted by the loan will be administered by the Fondo de • Garantia y Fomento para la Agricultura, Ganaderia y Avicultura (Fondo) which was established as a trust fund. of the Banco de Mexico in 1955 to mobilize mote credit for farmers. Its operations grew slowly but steadily until 1962 when its assistance to small farmers was greatly accelerated as a result of a $20 mil- lion loan from the U.S. Agency for International Development. The Bank loan should enable the Fondo to achieve a comparable increase in its assistance to oper.ators of larger ferms -- those whose income exceeds 100,000 pesos annually and whose farms normally comprise about 125 to 250 acres of irrigated land or its equivalent in dryland farming or ranching as well as to processors of agricultural products. Under the project it is expected that private banks will lend approximately 700 million pesos (US$56 million) over a three-year period, of which up to 9~ ~ -· ;I - 3 - will be rediscountedby the Poncio, partly from ita own reaourcea and partly from the Bank loan. The loans will be used for pasture improvement; water facilities,. livestock-handling facilities; fencing; the purchaae of ilupr~ved breeding stock; land development; farm reclamation, irriaation and drainage works; and for the storing and processing of such agricultural products as milk, fruit and vegetables. About half the proceeds of the Bank loan baa been earmarked for the liveatock industry, 201 for general crop production, 10,. for processing facilities, 81 for tt·ee crops, and the remainder mainly for technical services. The loan will be made to the Nacional Pinanciera, S.A., an official financing institution which borrows abroad ou behalf of the Mexican Government. The loan will be for a term of 20 years and bear interest at the rate of S-1/21 per annum. • Amortization will begin August 1S, 1969. the loan will be guaranteed by the United Mexican States • •