Announcement of Loan Being Granted to Mexico on October 18, 1950

I~TIONAL BANK FOE REC01JSTRUCTI0N AND DEV'ELOPMEin1 FOR THE PBESS .. FOR D1MEDIATE RE!Ji!ASE Press Relea~e No. 218 October 18, l950 The International Bank for Reconstruction and Development ~nnounced today that it had agreed to lend up to $10,000,000 to ess!st in financing small ente~- priaes in Mexic;p. The money will be made available thx·ough a line of credit to a consortium consisting of' eight of the principal M~.;dcan. commercial banks, together with Macional Financiers, the official financ:!.ng agency of the Me~:tcan Government. The Bank °Qelieves t;hat by t~king advantage of the experience and facilities of the private, banks, it can effectively assist in finan,c~ng a broad cross-section of enterprise in Mexico. This:\.$ the first o:pe;ration of this type which the Bank has conducted in the American Repµblics. • The co:mm~rcial banks in the consortium are Me~ico, S.A., :Banco de Comercio, S.A., Banco :Cntemacional, aa follows: Banco Nacional de s.A., Banco de y Mexico, S.A., Banco Mexicano, s •• , all in Mexico C:tty; Banco Mel~antil de Londre.a Monterrey, s.A., Danco Ind\'lstr:J.al, de Monteney., S.A., in Monterrey; and. Banco Comerc ial Mexicano, S .A. , :t.n Chill.uahi.ia. MelUbers of tlle conso:rtium will obtain loans unde~ the line of c:;..~dit in ~~ order to en,ableihem to finance the cost of i~pqrts reqµired for spec!fic develo,- ment :proj~cts submitted by MeXican firms and approved by both the consortium and the Benk. The l.oan will be gt,.ia:ranteed by the Me~ican G9verrmien-c. In recent years Mextco has obtaineq. substanti~l external f:tnancing for major devr2,lo:pment projecte carried 04t by ite, fJO'Vetnmente,'- agencies and ;tniportaut indus- trial enterprises.. The Jnte;rne.t;ic;mal Bar,..k has i t~elf made loans totallins $50,100 .,ooo to finance er-tr;msive electric :power p;rojecte :t.n \~Ie~ico. The present • line of credit 1,$ :prilD.B-rily intend.eel. tq,meet t}J.e neede of sme.ller :p:rivate enter- prisee,. whose inves~ent p~ogrwns, altllot.1$11 :h1div1.d'2ally on a :relatively modest ' .,. -2.- scale, would collectively ma~e a significant contribution to the development of the Mexican economy. Loans will normally range from $25, ,(DOC to $1,;:ooo, 000. Applications by Mexican firpis for loans. under the line e>:E' credit, sponsored by indiv:t.dual members of the consortium, will in the :first instance be scrutinized. by the consorti.um as a whole and, if aJ_Jproved,will then: be submitted to the Bank. When the Bank in turn approves a proj~ct, it will grant a loan to those members of the consorti\U!l wh<? wish to ]_.)articipate, and they wi~..'.1(. re-lend. the proceea,s to the applicant. In order to ensure active and b~lanced;coo:peration among the melilbe~s of the consortium, not less than five will participate in each loan, ani individu.al- ::particip~tions will not be less than 5% and. not more than 40% of each loan. Nacio~al Financiera :ts the agency through which the Mexican Goverrr.nen"l:i will 81Jarautee each loan. In addition, it wlll, at its di$cretion, be able to eponso1' projects and to :partici!)ate in loans on the same basie· as the collllllerc:i.al banks in • the consort11.un • This ~echanism will enable the Inte!'Ilational Bank while retaining power to ~ ensure -that the loans conform to its ger..ere.l standards and objectiv~s, to delegate to the conso1"tium the greater :part of the cl,.etailed screening of the m.unerotia projects. In the selection of these projects, the tests of economic ~nd technical feaaibili ty and of the cred.1 t standii1s of the apJ;'licant w1.ll be suJ?:p:+eraented by the broad general cri te!'ia of the fore:l€>1!1 exchange earnins 01-- saving :potential:t t!es of the :project and the measure in wh!ch it will contrihut~ to the belariced develop- men~ of the Mexican economy. Furthe:rmore, the Bank is aftorcled a welco~e oppor- tunity of close collaboration with the I>l.41vate l:>ank.G of a zp.embe:.· country. '!'he latest date for the Bank's approval of loans under the line of ci--edit will be June 30, l952. The te?'IJl,~·Of the ioe.ns will not in general exceed five years frQm the ttme of appi~val by ·the !3~nk. The partlci:pat:t~ members of tb.e ,. consortium wiU be c4a~g~d 1nter.e~t on each ioan at the rate ot 2-1/2%,, :plus the 1% commission which, in accordance with the l3apk' s Articles of Agreeme:p:t', will be aUocate~·to its spe~ie.l :re,e:z-ve fund. J f - 3 - After approval by the :Bank's Executive Directors~ the Loen·Agreemen:t was signed today by Alfonso Cortina, Financial Co~:iselor of the Embassy: of Mexico in Washington, on behalf of Nacional Financiera and of the Consortium of Mexican Banks; and by Eugene R. Black, !>resident, on behalf of the International :Bank.: The Gua1•antee Asreement we.a signed by Alfonso Cortina on behalf of the Mexican Government and by Eugene R. Black on behalf of the International Bank .... • •