Announcement of Sixty-Five Million US Dollars Loan for Agriculture in Mexico on May 21, 1969

't! .FOR IMMEDIATE RELEASE • R 1818 H STREET, N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 Bank Press Release No. 69/30 Subject: $65 million loan for agri- May 21, 1969 culture in Mexico A large increase in Mexico's production of livestock and perennial and annue! crops will result from a $200 million, five-year agricultural credit program for which the World Bank is lending the equivalent, of $65 million. It is estimated that at full development, in about 6 years, participating producers will increase the value of their output by $125 million annually, to which related processing industries will add another $60 million. The program is essential to the long-range development of Mexican agricul- • ture, and to continuing the increases in production achieved during the past f~w decades. Mexico produces 95% of its own food requirements and agriculture ac- counts for about half the country's exports. Most of the increased output re- sulting from the program will be for Mexico's expanding domestic market. The program will be administered by the Fondo de Garantia y Fomento para la Agricultura, Ganaderia y Avicultura (FONDO), a trust fund of the Banco de Mexico, est ablished in 1955 to mobilize credit for farmers. 1 Under the program) credits w{ll be provided to commercial producers and agro-industries through ,pd.- vate banks and the banking system of the publicly-owned Banco Nacional Agro- pecu~rio under a rediscounting procedure operated by the FONDO. A World Bank loan of $25 million made in 1965 for the FONDO's agricultural credit program helped to finance 2,617 individual projects; in terms of value, 58% was for livestock, 20% for general crops, 17% for agro-industries, and 5% for • fruit and tree crops • /more  \./ Bank P.R. No. 69/30 - Mexico - Agriculture • • - 2 - Because of Mexico's high potential for increased livestock production good grazing land, ample water, favorable climate ~nd experienced ,ranchers and the need for more meat products, about 75% of the investments in the current program will be for livestock production. An amount of $90 million has been ear,~ , marked for the development of commercial cattle ranches in the tropical southeast in an area of some 30 million acres bordering the Gulf of Mexico. The remaining $110 million will be invested by participating operators throughout the whole country for the production of annual and perennial crops, livestock production of various kinds, excluding the southeast project, and for selected agro-industries. Loans for livestock and crop production will be used for land improvement and development, on-farm irrigation works, agricultural machinery and equipment, )farm buildings and various installations, and breeding stock. Loans for ,agro- • industries will be confined largely to primary processing ,or service-type enter- prises that are of direct benefit to the farmers and ranchers, and will be used for land improvement and utilities, building construction, machinery and equip- ment, and feasibility studies. The prospective sources of financing the $200 million requir~d for the pro- gram over five years will be as follows: producers 20%, particip~ting banks 16%, the FONDO and: the World Bank, 32% each. The total cost includes working capital requirements of about $24 million which will be provided entirely by Mexican sources. To induce credit institutions to increase their participation in the financing, the FONDO will rediscount loans at rate~ ranging from 5% to 7·1/2%, depending on the contribution of the participating banks and on the size of the loans. The ultimate borrower will J~ay between 10% and 11% inte:rest; in addition, a technical service fee of 1%~ payable to the FONDO, will be charged on the face value of loans for agro-industries which involve more technical preparation than crop production and cattle raising. The loan will be made to the NacionaJ. Financiera s.A., an official financing institution which borrows abroad on behalf of the Mexican Government. It will be for a period of 20 years, including a 5-year period of grace, with interest at 6-1/2%. The loan will be guaranteed by the Mexican Government. • - 0 -