Announcement of Fifty-Two Million Five Hundred Thousand US Dollars Irrigation and Road Loans in Mexico on January 26, 1968

ff;.?::/;.: -~"~~/~.f'.,(>o ~~,p LwoRLD-BANK! E\t LOPM NT 1818 H STREET, N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 Bank Press Release No. 68/7 , Subject: $52.5 million irrigation January 26, 1968 and road loans in Mexico Two World Bank l?ans totaling the equivalent of $52.5 million, announced .,c.to- 1\ day, wil~ benefit key sectors of the Mexican economy: agriculture and transporta- tion. A: loan of $25 million will assist in rehabilitating the irrigation system in one of Mexico's most highly productive areas -- the Rio Colorado District in the Mexicali Valley~ The irrigated area will be increased by 67,000 acres to encom- pass ~bout 500,000 acres. The annual value of crop produ~Jion in the District is expected to increase by 18% to a total of $90 million. Since much of the output • is exported, the project is important to the national economy as well as to the region directly affected. The other loan, amounting to $27.5 million, will be used to upgrade sections of roads t9taling over 1,300 miles so that they can acconnnodate increasing traffic, and to construct a new 41-mile road which w~ll provide a short-cut for through (( traffic in an area northeast of Mexico C;ty. This brings total Bank lending in Mexico, the Bank's third largest borrower, to $677.6 million. Mexico's rapid economic growth in the 1,st 20 years has greatly increased the demand for good transport facilities, particularly roads. As a result of large ;, ' ,.:.l ,, ',) investments in highway canst-ruction, the length of the netw.ork has been increased by 22,350 mile.s and the qhality of the roads has been ·'consid~rably improved. • ~ Large ir1 \vestments have also been made in agriculture, from which ·nearly half "=,~"'J the population derives a living. Irrigation has been given priority since about a third of Mexico's crops are produced==gtt irrigated land, although it .r~presents only ,r;,,;;"' / more  - 2 - )) • about 13% of the total cultivable area. Agricultural output now en~bles Mexico to fully meet its own food needs and provides substantial exports as well. The value <Jf agricultural exports accounts for about two-thirds of all exports. Both loans will be made to Nacional Financiera, S.A., a Mexican Government financial agency, and guaranteed by the Government. Both will be for a term of 20 years and bear interest of 6-1/4%. The irrigation loan will have~ grace ?eriod of 7-1/2 years/and the highway loan, of 4 years. Provident National Bank, Philadelphia has agreed to participate in the )25 million irrigation loan to the extent of $125,000. The following financial insti.eutions will participate in the $27 .5 million road loan for a total amount of $833,173: Provident National Bank, Philadelphia Crocker-Citizens National Bank, San Francisco The First Na.tiot1al Bank of Chicago r. United California Bank, Los Angeles Vnited States National Bank of Oregon Theodoor Gilissen, N.V., Amsterdam Union Bank, Los Angeles The First Pennsylvania Banking and Trust Company, Philadelphia Marine· Midland Gr'ace Trust. Company of Ne';'.17 York 1 Marine Midland Trust Company of Westertr" New York, Buffalo Firma F. van Lanschot,,, s'-Hertogenbosch, The Netherlands §25 Million Loan for Rio Colorado,'trrigation Proiect The mountainous terrain of much of Mexico, combined with arid and semi-arid ~onditions in many regionsl) limits· cultivation to 74 million acres, or only 16 per cent o'f the total land area. Increases in agricultural output, therefore,· can be attained only by using the available arable land more intensively. Where water is not plentiful, irrigation provides the main means of increasing production. An , impressive expansion of /.!/Y;:Jgation took place in the 1930s, but the works did not :imake full:::, use of water te'sources, and unlined canals resulted in excessive w,ter losses. Since 1960, the Government has concentrated on improving these systems. 'rhe loan for the Rio Colorado project will be the Bank's fourth loan for Mexico's program to promote better use of water in publicly operated irrigation districts, bringing the total lent to $71.5 million. The Mexicali Valley, in which the Rio Colorado Irrigation District is located, extends south from the United S'tates border into the States of Baja California and Sonora. Water for irrigation <;pmes from the Colorado River, which originates in the United States, and from wells. The amount of surface flow of the river avail- • able to Mexico was set by an International Treaty in 1944. The livelihood of the 300,000 people living in the area depends la~gely on the agricultural sector. The / more  - 3 - • -;-~:~"' existing irrigation system in the Rio Colorado District, which has been constructed over a per~od of years by several groups, has become i~creasingly inadequate. The farm~,rs will not be able to maintain the present high level of production unless remedial measures are taken. · The project being assisted by the Bank loan will increase the quantity of water for irrigation by the reconstruc;tion of the canal systems, the rehabilita- tion of existing wells and the drilling of new ones, the integration of ground- water supplies wi'th gravity flows from the Colorado River, and land leveling for greater efficiency of distribution. All drains will be rehabilitated to permit better control of salinity. The project also includes the construction of office buildings and repair shops, improved'' roads, and .a telecommunications· system to facilitate operation and maintenance. The project is scheduled for completion in 6\ years at a total cost equivalent to $95 million. The Bank loan will cover the estimated foreign exchange cost of civil works. The remaining costs will be met by the Mexican Government. Farmers in the area are also expected to invest about $12 million for on-farm improvements over a 15-year period. When construction work is completed, water users will make payments to the Government over a period of 25 years to defray about half the in- vestment cost of the project, and will pay water charges to cover the entire cost. of operation and maintenance. A specialist from the Food and Agric~ulture Organization of the United Nations (FAO) assisted in the appraisal of the p1·oject under the joint Bank/FAO .Coopera- •• tive Program • The project will.be executed and operated by the Secretaria de Recursos Hi- draulicos, a Federal Ministry in charge of all major irrigation development in Mexico, with long experience and high compe~ence in ~he field. $27.5 Million Loan. for Highways Mexico comprises an area of about 758,000 square miles. More than half the population of 45 million is concentrated in 10 states in the middle of the country, covering only 14% of the total area and centered on Mexico City: Since 1955, the road network has been more than doubled to a total of nea.rly 40,000 miles, over half of which. is pavea. ·Two of the earlier World Bank loans totaling $65 million assisted in the coustruction or impro\1 ement of S ,600 miles. of roads and the acqui- sition of maintenance and other equipment. ~o other lQans aggregating $62.S mil- lion were used for tQll facilities. The works nqw b~\ng financed consist of the reconstruction and resurfacing of three primary ro~ds totaling 750 miles; the improvement and bituminous surface treatment of four. \tertiary roads totaling 550 miles; and the construction, in- cluding asphaltic ··concrete surfacing, of a 41-mile primary road. Traffic on the three primary roads to be reconstructed is already heavier than they were designed for, and their widening and resurfacing will permit sub- stantial savings in vehicle operating costs and travel time. The most important road in this group is the Culiacan-Empalme-Nogales road which forms part of the ~ • trunk route along the western seaboard from Nogales, on the United States border,\ to Mexico City, passing through Guadalajara, and many other., important towns. Traffic on the tertiary roads now justifies their paving and other improvements. / more J) - 4 - . the estimated foreign exchange component. fh~remaining costs will be met by (~?~? I( The project is scheduled for completion in late 1971 at a total estimated cost equivalent to $76.2 million. The Bank loan of $27 .5 mill.ion will finance the Mexican Government. Nearly all contracts-- for the works will be let on the • basis of international competitive bidding. The Secretariat of Public"works, a Federal agency with extensive exper- ience in highway construction and maintenance, is responsible for the planning, construction and maintenanc~ of the project highways. - 0 - I\ /• • •