Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY Reort No. P-3104-ME REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO NACIONAL FINANCIERA, S.A. WITH THE GUARANTEE OF UNITED MEXICAN STATES FOR AN INTEGRATED RURAL DEVELOPMENT PROJECT (PIDER III) June 30, 1981 This document bh * resrtetd ditribution snd may be used by recipiets ody In the perfordmnce of their official dudes. Its contents may not otherwise be disclosed without World Bank sthorIbation. CURRENCY EQUIVALENTS Since September 1, 1976 the Mexican peso has been floating; it fluctuated around Mex$ 22.60 to the US dollar from mid-1977 to the second half of of 1980. On June 22, 1981, the peso traded at 24.39 per US dollar. FISCAL YEAR January 1 to December 31 ABBREVIATIONS BANRTRAL National Rural Credit Bank (Banco Nacional de Credito Rural, S.A.) CIDER Rural Development Research Center (Centro de Investigacion de Desarrollo Rural) COPLAMAR Commission for Marginal Areas (Coordinacion General del Plan Nacional de Zonas Deprimidas y Grupos Marginados) COPLADES State Committee for Development Planning (Comite de Planeacion para el Desarrollo Estatal) CUC Master Coordination Agreement (Convenio Unico de Coordinacion) DGDRI Directorate General of Integrated Rural Development (Direccion General de Desarrollo Rural Integrado) DT Rainfed Agricultural District (Distrito de Temporal) FICAR Trust Fund for Credit in Irrigated Areas (Fideicomiso Para Credito en Areas de Riego) FIRA Agricultural Trust Funds in the Bank of Mexico (Fideicomisos Instituidos en el Banco de Mexico en Relacion con la Agricultura) IDB Inter-American Development Bank (Banco Interamericano de Desarrollo) MRDO Micro-regional Rural Development Office OHDR General Directorate for Hydraulic Works for Rural Development (Direccion General de Obras Hidraulicas para el Desarrollo Rural) PEMEX Mexican Petroleum Company (Petroleos Mexicanos) PIDER Integrated Rural Development Program (Programa Integral de Desarrollo Rural) PLANAT National Program for Assistance to Rainfed Agriculture (Programa Nacional de Apoyo a la Agricultura de Temporal SAHOP Secretariat of Human Settlements and Public Works (Secretaria de Asentamientos Humanos y Obras Publicas) SARH Secretariat of Agriculture and Water Resources (Secretaria de Agricultura y Recursos Hidraulicos) SPP Secretariat of Programming and Budget (Secretaria de Programacion y Presupuesto) SRA Secretariat of Agrarian Reform (Secretaria de la Reforma Agraria) FOR OFFICIAL USE ONLY MEXICO RURAL DEVELOPMENT PROJECT--PIDER III LOAN AND PROJECT SUMMARY Borrower: Nacional Financiera, S.A. Guarantor: United Mexican States Amount: US$175 million equivalent Terms: Fifteen years, including 3 years of grace, at an interest rate of 9.6 percent per annum. Onlending Terms: Approximately US$22.5 million of the proposed loan would be onlent through FIRA and FICAR to small farmers for on-farm investments and rural industries development at interest rates that would be agreed upon with the Bank (para 76). Project Description: The project seeks to increase the productivity, incomes, and living standards of poor rural families in seventeen micro-regions in the states of Yucatan, Zacatecas, Guerrero, and Sinaloa. Of the 17 micro-regions in these four states, programs in eight have been appraised. For the remaining nine, detailed programs are in preparation; appraisal, satisfactory to the Bank, of these programs would be a condition of disbursement for each micro- region. In addition, the project would strengthen the on-going PIDER rural development program through actions designed to: (i) improve micro-regional investment planning; (ii) increase beneficiary participation in the program planning, execution, and evaluation stages, and in the operation and maintenance of infrastructure; (iii) in- crease effectiveness of extension, credit, and farmer organization; (iv) conduct feasibility studies for produc- tive investments and for applied research; (v) provide training and specialized technical assistance; and (vi) improve the monitoring and evaluation system. The project includes investment in the following activities: Directly Productive Components (61 percent of project cost) Small-scale irrigation; soil and water conservation; crop, livestock, and beekeeping development programs; reforestation and afforestation; fisheries; rural industries; and medium-term development credit. This document has a restricted a"' in and tn'y be used by recipients only in the perfornance of their official duties. Its contekltt_..., ., otierwise be disclosed without World Bank authorization. - ii - Productive Support Components (26 percent of project cost) Extension services; applied research in support of the extension program; rural marketing facilities; organization of farmer groups and support of land titling programs; construction, rehabilitation, and maintenance of rural roads; rural electrification; a program to generate productive employment oppor- tunities for rural women; and feasibility studies for productive investments. Social Infrastructure (10 percent of project cost) Primary schools and boarding facilities; rural health clinics; a pilot nutrition program; village water supply systems; and village self-help programs for community improvement. Management (3 percent of project cost) Monitoring and evaluation; and staff training. Benefits: The project is expected to benefit some 250,000 families in the 17 micro regions. About 46,000 families would benefit from the directly productive investments under the project. Risks: The project has institutional and climatic risks. Institutional risk would be minimized by decentralizing PIDER's planning and operations and by improving the design and execution of several program components. Stronger farm development programs through the rainfed agricultural district program would minimize climatic risks. Overall, considering the capacity of the imple- menting agencies and the importance of this program, the risks are acceptable. - iii - Estimated Cost: 1/ - US$ Million------ Component Local Foreign Total I. Directly Productive 155.6 42.2 197.8 A. Agricultural Development 63.8 15.0 78.8 B. Livestock Development 46.5 15.6 62.1 C. Other 45.3 11.6 56.9 II. Productive Support 67.6 14.2 81.8 III. Social Infrastructure 27.6 4.5 32.1 IV. Project Management 10.0 3.0 13.0 V. Base Cost 260.8 63.9 324.7 VI. Contingencies 146.6 34.4 181.0 Physical 18.5 4.3 22.8 Price 128.1 30.1 158.2 VII. Total Cost 407.4 98.3 505.7 Financial Plan: -----US$ millions------ Local Foreign Total Government 267.7 - 267.7 Bank 76.7 98.3 175.0 Beneficiaries 63.0 - 63.0 Total 407.4 98.3 505.7 Estimated ------US$ millions------- Disbursements: Bank FY 1982 1983 1984 1985 Annual 50 63 56 6 Cumulative 50 113 169 175 Economic Rate of Return: On the basis of 62 percent of investments for which benefits were quantifiable, the rates of return for the 8 micro- regions already appraised range from 14 percent to 44 per- cent, with the aggregated rate of return estimated at 27 percent. Staff Appraisal Report: Report No. 3231-ME, dated June 30, 1981. 1/ A detailed cost table is provided as Annex IV. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO NACIONAL FINANCIERA, S.A. WITH THE GUARANTEE OF UNITED MEXICAN STATES FOR AN INTEGRATED RURAL DEVELOPMENT PROJECT (PIDER III) 1. I submit the following report and recommendation on a proposed loan to Nacional Financiera, S.A. with the Guarantee of United Mexican States for the equivalent of US$175 million to help finance an Integrated Rural Development Project (PIDER III). The loan would be repaid over 15 years, including 3 years of grace with interest at 9.6 percent per annum. US$22.5 million of the proposed loan would be onlent through the Agricultural Trust Funds in the Bank of Mexico (FIRA) and the Fund for Credit in Irrigated Areas (FICAR) for on-farm investment and establishment or expansion of rural industries. Loans would bear interest rates as agreed with the Bank (para. 76). PART I: THE ECONOMY 1/ 2. The Mexican economic situation and major issues of economic policy were analyzed in "Special Study of the Mexican Economy: Major Policy Issues and Prospects" (2307-ME), distributed to the Executive Directors on May 30, 1979. The most recent economic mission visited Mexico in February 1980 and is about to finalize its report. Country data sheets are attached as Annex I. Past Performance 3. For the three decades preceding the mid-seventies, Mexico was successful in achieving rapid economic growth while also maintaining stability in prices and equilibrium in the balance of payments. From 1940 to 1970, GDP growth exceeded 6 percent per year in real terms, inflation averaged less than 5 percent per year from the mid-1960s to 1972, and the dollar value of the peso, fixed in 1954, was maintained until 1976. The Government's role in this achievement was to carry out direct investments in infrastructure and in key industries such as power, steel and petroleum, while creating a stable regula- tory and institutional framework, as well as good profit prospects, to induce private sector growth. 4. This strategy produced considerable progress and better living standards for many Mexicans. However, the incomes of poor farmers and marginal urban dwellers, whose productivity was low and has not been increasing, have been lagging behind. There was, therefore, little reduction in contrasts within the Mexican economy. Land reform was largely implemented in the late thirties and while further land redistribution has continued, most of the peasants who received land could not significantly improve their economic status as the parcels of land allocated were small, the soil often quite arid and benefits from infrastructure, credit and technical assistance scant. 1/ This section is substantially unchanged from the President's Report for the Second Urban and Regional Development Project (P-3035-ME of April 23, 1981). Only minor changes have been introduced in paras. 8 and 14. Rapid population growth, which reached a peak of almost 3.5 percent per year by the mid-1970s, also made social equity difficult to achieve. Even Mexico's sustained economic growth was not sufficient to absorb the rapidly growing labor force into productive employment, and by the 1970s some 50 percent of the labor force was either relatively unproductive and poorly paid, or openly unemployed. 5. Policies undertaken to remedy this situation in the first half of the seventies were somewhat self-defeating. As a result, by the mid-1970s Mexico experienced increasing public sector deficits, inflation, large balance of payments deficits, capital flight and a marked slowdown in the real rate of growth of GDP, which dropped to 2 percent in 1976--the lowest rate experienced since the mid-thirties. On September 1, 1976 the authorities abandoned the fixed exchange rate and let the peso float; it devalued by 80 percent. The authorities also adopted a plan for economic stabilization for which Mexico obtained major support from the IMF. The Administration which took over in December 1976, established as its main objective control of inflation, to be followed by a return to high rates of economic growth. The former was to be achieved through stabilization policies, while the latter was to be made possible thanks to the impact of major oil discoveries which would reduce the foreign exchange constraint. Both objectives were important in restoring the confidence of the private sector. Recent and Current Situation 6. The Government succeeded in bringing inflation down to 17 and 18 per- cent in 1978 and 1979, respectively, as against an annual rate of almost 29 percent in 1977. The deficit in the current account of the balance of payments peaked at US$4.2 billion (or 5.3 percent of GDP) in 1975 and declined to US$1.8 billion (equivalent to 2.5 percent of GDP) in 1977. Favorable oil prospects and increasing capital inflows brought about a rapid increase in imports reflecting both a decisive reduction in protectionism and the growing demand for capital and intermediate goods upon which the expansion of the economy depended. The current account deficit increased to US$2.9 billion (or 3.2 percent of GDP) in 1978 and further to US$5.2 billion (about 4.3 percent of GDP) in 1979. The public sector deficit peaked at about 9 percent of GDP in 1975 and declined to about 7 percent in 1979. Mobilization of savings by the banking system has recovered. GDP growth was about 7 percent in 1978 and 8 percent in 1979 as compared to 2 percent in 1976. 7. The growth record for 1980 continued to be favorable and GDP is estimated to have increased at about 7.5 percent. The current account deficit of the balance of payments was much higher than anticipated due to continued expansion of imports (mostly capital and intermediate goods and foodstuff) and is estimated to have been US$6.7 billion (about 4 percent of GDP). Despite the substantial inflow of imported goods, strict domestic credit restrictions, generally adequate lending rates and modest increases in real wages coupled with substantial productivity increases, inflation has been higher than anticipated. This is essentially because of expansionary budgetary policies, with investments increasing at a rate of more than 15 percent a year in real terms. A shortage of essential consumer goods and construction materials, aggravated by the inadequacy of the transport system to handle distribution of domestically produced goods along with increasing imports, has contributed to price increases. The increase in the consumer price index in 1980 was around 30 percent. - 3 - 8. The persistence of strong inflationary pressures is beginning to exert increasing influence upon a number of factors in the Mexican economic scene. First, the now substantial differential between price trends in Mexico and in its major trading partners, which has not been fully compensated in the exchange rate, is eroding the hitherto adequate inducements to export non-oil goods and makes imported goods increasingly attractive to domestic users, even in cases where domestic production is efficient. WThile the peso has been allowed to depreciate vis-a-vis other currencies, its float is very moderate. It is estimated that by the end of 1981 such depreciation will be of the order of 8-9 percent. At the present forecast of the 1981 price movements in Mexico and in the world markets this would compensate for only a part of the differential between these trends. Secondly, wage pressures, which have been moderate and have not contributed to the inflationary process up to now, may gain force if strong inflation continues. Both these impacts could affect the pattern of resource allocation in Mexico, tilting it toward capital inten- sive processes of production. 9. The Government will not have an easy task in maintaining price increases much below 30 percent during 1981. The need to expand public invest- ment in key infrastructure sectors and to maintain the present level of expen- diture in the energy sector leaves relatively little scope for significant adjustments in the size or structure of public expenditure. At the same time, the intention of the Government to implement much delayed increases in prices of publicly supplied goods like gasoline will imply a temporary push upwards of the price index. Economic Problems and Prospects 10. Mexico has the organizational and natural resources necessary to attain its ambitious goals of rapid growth and alleviation of poverty. The new petroleum riches will greatly relax the financial constraints on growth. The proven oil and gas reserves are estimated at about 60 billion barrels. Exploitation of these reserves should allow Mexico to substantially increase production of crude oil and natural gas from the equivalent of about 1.2 million bbl/day in 1976. The recently stated goal of the Government is to reach a production level of about 3.0 million bbl/day in 1981, and to more or less maintain it at a level that will accommodate exports of 1.5 million bbl/day (compared to the 1.1 million bbl/day target up to September, 1980). The Government continues to indicate its unwillingness to exceed this limit for fear that Mexico will increasingly become a classical "oil producing country" with the economic and social tensions that would ensue. But even at this production level, the challenge is: how to mobilize Mexico's resources-- its human skills, its institutions, and its experience--to help resolve its long term development problems. The most serious of these are poverty, unemployment, inadequate growth of agricultural production in non-irrigated lands, and urban-regional imbalances. 11. Poverty: Mexicans have participated unevenly in the remarkable economic growth of the last several decades. According to estimates for 1977, at least 2.8 million households (25 percent of the total) had incomes of less than one-third the national average, of which at least 2.4 million (22 percent of the total) lived in absolute poverty. The root causes of this persistent problem are three: rapid population growth, past neglect of non-irrigated agriculture (where some two-thirds of the poor are principally employed), and slow absorption of labor in high-productivity jobs. - 4 - 12. The Government is acting on all three fronts. A family planning program started in 1972 has already helped reduce population growth from 3.5 percent per year to an estimated 2.9 percent in 1980. The program is being further strengthened by the present Administration, with the ambitious goal of reducing population growth to 2.5 percent per year by 1982 and to 1 percent by the year 2000. New approaches are also taking hold in rainfed agriculture (see para. 15). On the employment front, new tax incentives have reduced the anti-employment bias and additional efforts to stimulate employment will have to be continued. The expected rapid growth of output should also create jobs more rapidly. In spite of this progress, however, the still rapid growth of population and the staggering increase of the labor force (at 3.7 percent per annum) made unavoidable by the high percentage of young people in today's population, renders the eradication of absolute poverty a difficult goal to attain in the near future. The Government has under its consideration several types of subsidies for the poor. These could prove to be short-term palliatives and preempt resources which would otherwise be available for investment in employment-creating activities or for improving educational or health standards of the poor on a more permanent basis. 13. Open and hidden unemployment, which are now respectively at 6-7 percent and 40 percent of the labor force, will remain major problems in the years to come. With the expected GDP growth rate of 8 percent per annum, the economy should be able to absorb the additional labor force, assuming no significant change in the participation rate (now at about 29 percent) and some increase in labor productivity. In absolute terms, however, the present levels of underemployment and unemployment are likely to remain. 14. A National Employment Plan was published in 1979. It calls for a number of measures to strengthen the so-called informal sector in both urban and rural areas. To increase the productivity of those employed outside the modern sector, and their employment opportunities, a major effort will be required in the area of vocational training. Technical assistance programs are also needed to stimulate more organized and structured forms of activities, especially in the services sector. While there is no doubt that the authorities are concerned about unemployment and underemployment, and while the institu- tional structure to carry out some important programs already exists, a concen- trated effort will be required to take effective action and to make better use of human resources, by improving technical skills to reduce substantially the level of hidden and open unemployment. 15. In agriculture, crop and livestock production has shown inadequate growth since the mid-1960s and, of late, demand has outstripped domestic supplies of grains. Faced with diminishing returns to investment in new large-scale irrigation works, continuing low productivity and income per capita in the non-irrigated ("rainfed") sector, widespread malnutrition and increasing dependence on imported food (especially grains), the present Administration has launched a major program (SAM - the Mexican Food System) aimed at increasing self-sufficiency in food, providing for minimum nutritional needs of the rural and urban poor and increasing rural employment. SAM emphasizes increased production of grains through a combined system of sub- sidies, guaranteed producer prices and government underwriting of crop loss risks. Greater emphasis is being placed on technical assistance, demonstration - 5 - and credit to develop the underutilized rainfed agricultural potential. Programs to rehabilitate existing irrigation works serving nearly one million ha are underway. Small-scale irrigation development is being promoted. Construction of new large-scale irrigation units continues, but now represents a smaller proportion of government investment. The banking system is being encouraged to provide greater support to agricultural production and processing programs. These initiatives should lead to an acceleration of production growth, more equal development opportunities for Mexico's farmers, and an improvement in the living conditions of the rural poor. 16. The main urban-regional problems are two-fold: (a) growing conges- tion, pollution, high cost of services (especially water) and other manage- ment problems that stem from the continued rapid growth of Mexico City (already the third most populous metropolitan area in the world and moving rapidly to become the first) and other areas in the dry, densely populated central plateau, and (b) retarded development, poverty and great difficulty in pro- viding better jobs or adequate public services to the one-third of all Mexicans who live in towns of less than 2,500 inhabitants. The present Government has taken many positive steps to confront these problems, including an administra- tive re-organization, elaboration of a comprehensive plan, and introduction of a strong package of incentives to promote growth in a few well-selected growth poles. 17. The expected high growth rate of the economy in the years to come is the country's strongest weapon with which to reduce poverty and unemployment. Industry has moved to the leading position and is expected to play a major role in expanding domestic production and exports. A National Industrial Development Plan was published in 1979 and it reflects the preoccupation of the present Administration with the long-term prospects of the industrial sector and their implications for employment. Industry has the potential for considerable expansion in many areas, including efficient import substitution in chemicals, petrochemicals and capital goods as well as exports of a variety of manufactured products. While most of the above industries are known for their capital intensity, they are expected to promote secondary industries with considerable employment opportunities. These will be enterprises producing secondary petrochemicals, finished plastic goods, metal parts and components for capital goods. Tourism export earnings are also expected to increase substantially. The prospects for the industrial sector are, however, subject to the caveats mentioned in para. 8 above. 18. The main problem for the Mexican economy in the years to come will remain the reconciliation of high growth rates with relative price stability and a larger participation of low-income groups in the expanding wealth of the nation. The National Development Plan, published in April, 1980, marks the final step in the planning activities carried out by the present Adminis- tration and places in a consistent framework the specific targets indicated in a number of sectoral plans prepared in the previous two years. In addition to presenting a macroeconomic picture of development prospects, the National Development Plan dwells in great detail on the policies required to achieve various economic and social targets. These policies are essentially sound but call for a major implementation effort on the part of the Administration. Growth with low inflation poses difficult challenges of adjusting prices of public goods and services without undermining the existing consensus - 6 - of the country, and improving income distribution would call for policies that encourage labor intensive technologies in industry and agriculture without slowing down modernization of the economy. 19. Mexico's public and publicly guaranteed debt service ratio has been increasing over the recent past and peaked at 69 percent in 1979. This high ratio reflects the still relatively low level of exports to GNP and the high proportion of Mexican borrowing from commercial banks; the ratio of external public debt to GNP (24 percent in 1979) is average for middle-income countries. The public debt service ratio declined to around 30 percent in 1980, not only as a result of rapid increases in petroleum exports but also because some of the debt contracted on the least favorable terms had been prepaid. Debt service on Bank loans amounted to about 3.2 percent of public debt service in 1980; this ratio is projected to remain about the same during the early and mid-1980s. The Bank currently holds about 5.7 percent of Mexico's total medium and long-term public debt, and this ratio is not likely to change significantly over the next few years. Mexico is creditworthy for borrowing on conventional terms. PART II - BANK GROUP OPERATIONS IN MEXICO 1/ Bank Operations 20. As of May 31, 1981, Mexico had received 71 loans from the Bank amounting to US$4,954.4 million net of cancellations and terminations; of these, 38 loans totalling US$1,870.4 million were fully disbursed. The Bank held US$4,235.1 mil- lion, of which US$2,072.4 million had not yet been disbursed. Some 43 percent of Bank lending has been for agriculture and rural development (24 loans for US$2,132.7 million), 15 percent for industry (12 loans for US$747.5 million), 14 percent for power (12 loans for US$704.8 million), and 17 percent for transportation (15 loans for US$830.4 million); the remaining 11 percent has been for water supply (US$244.5 million), tourism (US$114 million), and urban development (US$180.5 million) projects. Annex II contains a summary statement of Bank loans as of May 31, 1981 and notes on the execution of ongoing projects. 21. Implementation of most Bank-financed projects was delayed during the period of economic difficulties in the mid-1970s and during the period of adjustment and stabilization that followed the September 1976 devaluation of the peso. Since then, the Government has taken important actions to accelerate implementation of the projects. Adequate budget financing has been provided. Projects which had important structural constraints were modified and rephased to account for changed circumstances. Government and Bank officials have periodically met to review project implementation, and greater attention has been focused in Mexico on monitoring project implementation and disbursements. As a result of these measures, most of the Bank-assisted projects are proceed- ing satisfactorily and plans have been formulated to strengthen execution of those projects where improvement is still needed. The effectiveness of these 1/ This section is substantially unchanged from the President's Report for the Second Urban and Regional Development Project, (R-3035-ME of April 23, 1981>. However, minor changes have been introduced in paras. 20-22, and 24-28. actions is reflected in disbursement totals. In FY78 US$91 million were disbursed to Mexico, in FY79 disbursements totalled US$233 million and in FY80 disbursements further increased to US$404 million, or 38 percent of the undisbursed balance at the beginning of the year. FY81 disbursements through May were US$350 million. IFC Operations 22. As of May 31, 1981, IFC had made investment commitments in 23 companies in Mexico, for a total of US$551.2 million, of which US$401.2 million had been sold, repaid or cancelled. A summary statement of IFC investments is presented in Annex II. Bank Strategy 23. The main objectives of Bank lending in Mexico have been to: (i) support policies and programs leading to a wider distribution of the benefits of economic growth; (ii) help finance projects that make, directly or indirectly, significant contributions to output and employment; (iii) help reduce Mexico's urban-regional imbalances; and (iv) help break bottlenecks preventing more rapid growth. Therefore, the Bank has preferentially sup- ported projects of high social priority that help the rural or urban poor, projects that promote higher levels of employment and production, and those that help to decentralize economic activity. Given Mexico's potential for satisfying its future foreign exchange needs, the Bank is now concentrating on the institution-building aspects of the projects it finances and on the development of suitable sectoral and economic policies through regular dis- cussions with the authorities as well as in the context of project financing. The Bank is thus helping to create the institutions, policies and mechanisms which would channel self-generated resources to meet the above mentioned objectives in the future. The Government is fully in accord with this new emphasis, and has requested that the Bank concentrate its efforts on sectors which are of key importance to Mexico's development and which require insti- tutional improvements and/or the formulation of suitable policies with great- est urgency. The proposed project would match this strategy by strengthening the planning, implementing, and monitoring capacity of institutions at the state and local level, by improving beneficiary participation in rural development efforts, and by helping finance the productive, support, and social infrastructure investment necessary to increase the incomes and improve the living standards of the rural poor in four states. 24. Because of the difficult structural problems of agriculture, and the sector's crucial importance to the country's further development, the Bank has made agriculture the leading sector for its lending. The Bank's agricultural lending program for Mexico has four goals: first, to increase productivity of presently cultivated lands through selected programs of irrigation and on-farm improvements; second, to improve the productivity of small farmers through programs for (a) rural development, (b) rainfed agricultural development, and (c) bringing new areas in the humid tropics under cultivation; third, to complement infrastructure investments with general support services, including agricultural extension and marketing programs and provision of medium-term credit; and fourth, to promote employment opportunities in rural areas through - 8 - pcograms of agro- and rural-industries. The Bank has made eleven loans in FY76-81 totalling US$1,466 million for irrigation, rural development and ;,ricultural, agro-industrial and livestock credit programs. Several projects for rainfed agriculture, rural development, irrigation and support services are in preparation. 25. Past Bank lending for industry has been aimed at (a) assisting the Government's efforts to reduce the balance of payments deficit, (b) decentralizing industrial activities away from the major and increasingly congested urban areas, and (c) promoting greater employment in the sector by supporting medium- and small-scale industry. A steel project which the Bank helped structure and finance is now operating in a previously under- developed area on the west coast of Mexico (Lazaro Cardenas) and the city in which it is located is developing into a new growth pole. The fertilizer sector has been strengthened by two Bank assisted projects which the State- owned fertilizer company (FERTIMEX) is carrying out. Loans for projects to promote the development of small- and medium-scale industrial enterprises and to support an industrial equipment fund (FONEI) were approved by the Executive Directors in FYs78-79; they offer support to the private sector at a time of rapid expansion. The Executive Directors also approved in FY80 a second small and medium scale industries project and a project for the mining sector, which up to now has received insufficient resources from the financial system. Two capital goods industries projects are under discussion for possible Bank support, which would aim at assisting the Government develop adequate policies for the sector, institution-building and the transfer of appropriate tech- nology to Mexico, so that employment might be increased in the engineering subsector and the base in the manufacturing industry strengthened. One of these projects was recently appraised. A project to reduce air and water pollution in the Mexico City and adjoining areas has been appraised and will be presented to the Executive Directors in the coming months. 26. As regards physical infrastructure, the Bank's operations have been focused on investments in key areas of the country as well as on institutional reforms and sector policies aiming, inter alia, at suitable pricing mechanisms to help generate additional resources for investment financing. The Airports Development Project (FY74) was designed to support the Government's policy of regional integration; the Fourth Railway Project (FY81) supports improvements of institutional aspects and financial management of the sector. The Mexico City Water Supply and Sewerage Project (FY 73) was instrumental in the strength- ening of specialized institutions for the efficient provision of water and sewerage in the capital city. The First and Second Medium Size Cities Water Supply and Sewerage Projects (FY76 and 81, respectively) were designed to reinforce the planning, managerial and financial performance of specialized water supply and sewerage institutions at the federal and municipal levels and contribute to the establishment of tariffs more closely related to costs. A Highway Sector Project was approved by the Executive Directors in FY79. A loan to assist the Mexican Government in structuring large investments in port development was approved by the Executive Directors in March 1981. 27. The Government and the Bank have long recognized the regional economic disparities prevailing in Mexico. In June 1976 the Government enacted a law of human settlements to provide a new institutional framework - 9 - to deal with the pressing problems of over-concentration of economic activi- ties in the larger metropolitan areas. The Government has adopted a National Urban Development Plan that spells out its regional development priorities in operational terms, and several projects are now being prepared to meet the needs for basic urban services for poor families and to provide key regional infrastructure in selected priority cities. One such project, to assist in the development of the Lazaro Cardenas conurbation area on the West Coast, was approved by the Executive Directors in FY78, and a second project for oil-producing southeastern Mexico was approved by the Executive Directors in FY81. 28. A loan in support of a national program for the vocational and technical training has been negotiated and is expected to be presented to the Executive Directors shortly. The Economic Development Institute (EDI) is assisting CECADE (a similar institute under the Ministry of Programming and Budgeting) in training Government staff in several aspects of project prepara- tion, monitoring and evaluation. A course on urban and regional development has recently been concluded and several courses for agriculture, rural develop- ment, and agro-industries are programmed for the near-term. 29. The Inter-American Development Bank (IDB) is the second largest source of multilateral aid to Mexico. The IDB has made loans totalling US$2,428 million to December 31, 1980. Over sixty percent of this lending has gone for agricultural and rural development projects, and the balance for transportation, industry, water supply, and tourism infrastructure. In 1980, the IDB approved three loans totalling US$280 million for water supply, fisheries and pre-investment study projects. The IDB and the Bank have worked in parallel on several projects; most recently the IDB and the Bank have each made loans for the National Program for Small-Scale Agricultural Infrastruc- ture, the Integrated Rural Development Program (PIDER), agricultural and live- stock credit, small- and medium-scale industries development, and hotel develop- ment projects. The International Fund for Agricultural Development (IFAD) has approved a loan of US$22 million for a rural development project in the State of Oaxaca which was appraised by the Bank's staff and for which the Bank is acting as cooperating institution for administering the loan. The Bank has financed a few projects in which there has been parallel financing from bilateral and commercial sources (e.g., power, steel and tourism development projects). In recent discussions with the Government, the possibility of a more widespread use of cofinancing arrangements was explored and we intend to seek opportuni- ties for such cofinancing in the near future. PART III - THE RURAL SECTOR Background 30. Mexico has a land area of 197 million ha, of which only about 30 million are considered cultivable. Another 78 million ha are classi- fied as range land and 44 million ha are considered suitable for forestry. Of the potentially arable land, only 15 million ha are now being cropped, including about 5 million ha under irrigation. - 10 - 31. Agriculture employs about 39 percent of Mexico's labor force, providing a livelihood for some 4 million families, of which 1.3 million are landless. The majority of this labor force is engaged in activities with very low productivity, and about two-thirds have earnings below the minimum wage. 32. Almost 90 percent of rural Mexicans suffer some degree of malnutri- tion. Forty percent of them--about 9.5 million people--are seriously mal- nourished. Half of this seriously malnourished population are children under the age of 14. Social infrastructure in the small towns is minimal; for example, in 1970, only one-third of the rural families had access to potable water. Few towns have waste disposal systems meeting acceptable sanitary standards. 33. The social consequences of low incomes, limited employment possibili- ties, and the lack of infrastructure and social services are severe. Most farmers barely produce at the subsistence level and must seek jobs in urban areas. The landless compete for the few low paying seasonal farm jobs avail- able and are migrating in large numbers to urban areas; over half of the new entrants in the rural labor force migrate to the cities. Preventable illnesses--gastrointestinal disease, pneumonia, malnutrition--are common, and the principal factors that result in an infant mortality rate in rural areas that is half again as high as the national average. Government Policies and Programs 34. Programs to increase agricultural productivity, employment, and incomes are receiving priority attention. A major effort to increase cropped area and productivity in the rainfed agricultural zones is underway. The program utilizes the recently created rainfed agricultural district structure to provide, in a timely and integrated manner, farm extension, demonstration, applied research, soil and water conservation, and credit services to farmers. A recent Bank loan partially financed the strengthening of this program at the national level and intensive program implementation in nine of the 124 established districts. Less intensive, but significant, strengthening of the program is underway in the other 115 districts using the Government's resources. Irrigated agriculture, the source of most of Mexico's increases in agricultural production, will continue to be expanded with the ultimate goal of doubling the irrigated area. Several important large-scale projects are being con- structed or are in the advanced stages of planning, and increasing emphasis is being placed on small-scale irrigation. A sizeable program to increase the efficiency of water use and intensity of cropping in existing irrigated areas is also underway. 35. Basic needs programs are receiving much greater levels of funding. The Commission for Depressed Areas and Marginal Groups (COPLAMAR), begun in 1977, now has an annual budget of US$1.7 billion. COPLAMAR finances Government agencies' investments in rural roads, potable water systems, health clinics, housing, and rural stores in selected zones with extremely limited production potential where programs such as the rainfed agricultural districts or inte- grated rural development (paras 36-45) would have little chance of success. - 11 - 36. Mexico's extensive Integrated Rural Development Program, PIDER, has been strengthened and intensified. PIDER concentrates on funding productive investments in selected zones that have potential for increasing agricultural production; it complements productive investment with the necessary support services and social infrastructure to ensure a balanced development. The PIDER Program 37. The PIDER program was established in 1973 to focus public investment in well-defined regions with widespread poverty and with unrealized productive potential. PIDER's purpose was, and remains, to help increase incomes, employ- ment, and living standards of the rural poor through execution of comprehensive programs of productive, support and social infrastructure investments. The basic programming unit in PIDER is the micro-region. Micro-regions are areas of one or more contiguous municipalities in which there are a high degree of poverty and an underutilized productive potential. To date, 130 micro-regions have been established, covering about half of the nation's rural poor. A typical micro-region has an area of 8,000 square kilometers, and a population (mostly rural) of about 135,000. 38. PIDER is a program that helps focus the efforts of the various Government secretariats and agencies to carry out investments and provide services.l/ PIDER provides the mechanism necessary to maintain consistency between the actions of the different agencies and serves as the channel through which additional budget resources are provided to the agencies for work in the PIDER micro-regions. PIDER accounted for an average of 8.8 percent of total public investment in the rural areas during the period of 1977-1980. As of January 1980, PIDER had invested US$1.6 billion in these micro-regions; 44 percent was devoted to directly productive investments, 41 percent to productive support, and 15 percent to social infrastructure investments. 39. The PIDER program has largely been financed by Government resources; about 18 percent of the funding has come from loans from the World Bank, IDB, and IFAD. A loan for US$110 million was approved by the Bank in May 1975 to assist activities in thirty micro-regions (PIDER I). A second loan of US$120 million assisting development in twenty micro-regions was approved in July 1977. The Inter-American Development Bank (IDB) is supporting the program in an additional fifteen micro-regions with a loan of US$40 million. IFAD has financed two micro-regions in the State of Oaxaca with a loan of US$22 million; the Bank appraised the project and is acting for IFAD as the cooperating institution for administering the loan. 1/ Agencies participating in PIDER include the Secretariat of Agriculture and Water Resources and its sub-agencies, the Secretariat of Human Settlements and Public Works, the Mexican Coffee Institute, the Coconut Promotion Agency of Guerrero, the Secretariat of Land Reforms, Department of Fisheries, National Bank for Rural Credit, Bank of Mexico, National Fruit Development Commission, Administrative Committee for the Federal School Construction Program, Federal Electricity Commission, Secretariat of Public Health and Assistance, and the National Company for Popular Subsistence. - 12 - Organization and Management 40. PIDER was among the first programs in Mexico that was based on multi-year, multi-sectoral development and investment plans. Activities in each micro-region are based on such a plan. In PIDER I and II, micro-region plans were prepared by the Secretariat of Programming and Budget (SPP) at the federal level with the participation of micro-region staff who in turn worked with project beneficiaries to define priorities and strategies. This highly centralized approach was necessary at the beginning to gain experience in programming and to ensure consistency while building the institutional capacity in the micro-regions. In 1978, the Government, with Bank assistance, undertook a mid-term evaluation of PIDER I. This evaluation served as a focal point for a new strategy in 1980 that would give state governments a larger role in the planning and implementation of PIDER activities, assign responsibility for micro-regional programming to micro-regional level staff, and increase the participation of beneficiaries in project planning and execution. 41. Federal Level. PIDER programming guidelines and policies are set by the Directorate of Regional Programming in SPP. The General Directorate of Integrated Rural Development Programs in SPP is responsible for: (a) establish- ing policies, providing guidelines and support for the preparation, implementa- tion, and monitoring and evaluation of integrated rural development programs; (b) coordinating among the various line agencies participating in PIDER; (c) establishing budgetary procedures and annual budget allocations; and (d) reviewing the micro-regional investment programs. 42. State Level. PIDER has been incorporated under the umbrella of the Master Coordination Agreement (CUC) between the federal and state governments. CUC has existed since 1977 as a means of revenue sharing, allowing the federal government to fund state governments' infrastructure investment programs (primarily roads, schools, water supply, and public buildings). Under this recent amplification of CUC, the state level authorities will take responsibility for the detailed micro-region planning and program execution, following broad guidelines set at the federal level. Overall state-level rural development policy and priorities are set by the State Development Planning Committee (COPLADE). The COPLADE, chaired by the state Governor, includes chief repre- sentatives of the federal agencies in the state. The COPLADE has responsibility for formulating specific development activities and reviewing of federal agencies' budgets for the state. Each COPLADE has a rural development subcommittee which is charged with responsibility for setting state-level policies and strategies for rural development and overseeing the implementation of programs, such as PIDER. The SPP state representative is technical secretary of the subcommittee. At the state level, SPP plays an important role in programming investment plans, monitoring and evaluating the results of PIDER, and maintaining budget supervision. 43. Micro-regional Level. A micro-regional development subcommittee, consisting of mayors, representatives of the rural communities selected by the beneficiaries, and technicians of the state and federal implementing agencies, has responsibility for: - 13 - (a) short- and medium-term programming for the micro-region; (b) facilitating coordination and execution of the PIDER micro-regional program components; and (c) monitoring of program performance and supervision of program operation, with special emphasis on beneficiary participation. 44. SPP has a Micro-regional Rural Development Office (MRDO) in each micro-region. The MRDO is a recent innovation that consolidates a number of functions in one team to help ensure the effectiveness of PIDER in each micro-region. The MRDO is headed by a micro-regional coordinator who is the person primarily responsible for promoting the execution of the plan for the micro-region. He is assisted by teams responsible for working with the community to ensure the effective participation of beneficiaries in PIDER planning and operation, a study team to analyze the development needs and potential of the micro-region, and a monitoring and evaluation team to monitor project progress and evaluate project impact. The micro-region coordinator represents PIDER in other development and sectoral organizations. For example, the rainfed agricultural districts have an executive committee responsible for, inter alia, determining agricultural development priorities and monitoring agricultural programs. The micro-region coordinator is a member of the executive committee, ensuring that PIDER's needs and priorities are taken into account in determining state and micro-regional agricultural policies, as well as ensuring that PIDER plans accurately reflect the agricul- tural development support that the Rainfed Districts' staff can provide. 45. This new process was first tested in the four states included in the proposed project (Guerrero, Sinaloa, Yucatan and Zacatecas). In practice, it has worked well, and represents important progress in decentralizing PIDER planning and executing authority to the local level. In those micro-regions where this system has been fully implemented, community participation and interest has increased, government agencies have better integrated their efforts, and the quality of micro-regional planning has improved. As a result of these experiences, PIDER and CIDER, with the assistance of state and micro-region staff, have prepared a manual for investment programming, and have begun using the new system in all PIDER micro-regions. Bank Experience with PIDER 46. In 1978, the Mexican Government and the World Bank jointly undertook a mid-term evaluation of the first Bank loan (PIDER I). The report was done only four years after the beginning of PIDER, before most of the productive investments had reached full development. Therefore, most of its conclusions regarding impact are qualitative. For the few cases in which an attempt is made to quantify, the results are indicative of a small sample of subprojects rather than of program-wide impact. With the completion of PIDER I, SPP is now preparing a Project Completion Report which will assess the physical progress and the development impact of PIDER I. The following summary relies on the mid-term evaluation, and should not be interpreted as a final evaluation of PIDER's results. - 14 - 47. PIDER has achieved an important institutional impact. Most specifically, PIDER has helped: (a) develop a flexible and efficient method to fund thousands of small projects through the decentralization of expenditures to the state level; (b) coordinate, at both the federal and state levels, the investment activities of numerous executing agencies; (c) strengthen the activities of agencies involved in rural development; (d) create a professional rural development research agency (CIDER); and (e) organize state-level development committees, which were later transformed into the COPLADES. 48. In general, the components which required least organization of beneficiaries and coordination among agencies for their operation (e.g., roads, electrification, schools) or which had short development periods and adequate technical support (e.g., small-scale irrigation, goat keeping and beekeeping) were most likely to be operating with few problems. Those requiring a high degree of beneficiary training or cooperative management (e.g., large livestock, rural industries, water supply) were more likely to be functioning at an unsatisfactory level. 49. Productive Projects. Productive investments under PIDER I empha- sized small-scale irrigation and, to a lesser degree, livestock development. Small-scale irrigation works have usually resulted in significant increases in production and income and created additional jobs, most of which were taken by landless individuals. In general, livestock projects financed under PIDER I had a relatively small effect on production, income and permanent employment. A number of livestock units have encountered serious technical and organizational problems and have not resulted in the expected benefits. In general, problems have been encountered because large units with 15-50 participating farmers have been proposed and the organizational problems have proven too difficult. In other cases, livestock programs were not fully appropriate on technical grounds; the lack of alternative technologies hampered planners who sought to increase farm productivity. These difficulties were compounded in those cases where construction or installation of infrastructure was carried out by one agency, while credit for stocking or assistance for making the project productive was provided by another. 50. Changes are being made in PIDER's livestock program to take advantage of experience--both the problems mentioned above and the successful cases. Smaller units are being promoted; greater emphasis is being placed on the generally more successful small-stock projects (goats, pigs) and apiculture where organizational problems are fewer. Technical support has been increased through major improvements in the Secretariat of Agriculture and Water Resources' Rainfed Agricultural Districts Program which will help ensure the viability of future livestock investments and strengthen the involvement of credit institutions (paras 34, 65). Better criteria for design and operation of livestock subprojects are being developed and would be applied under the project (para 63). - 15 - 51. Productive Support. The quality and impact of productive support programs (e.g., extension, beneficiary organization, roads and credit) under PIDER has been uneven but improving. Agricultural extension, for example, has been strengthened by the reorganization of the service along the lines of the training-and-visit system through the rainfed agricultural districts (DT) program (para 34). The DT program has been particularly useful in promoting involvement of agricultural credit institutions in development programs of SARH, thereby ensuring that credit is provided to complement extension and infrastructure programs. The rural roads component of PIDER has accounted for the bulk of productive support investments. CIDER evaluations found that road investments typically resulted in 70 percent reduction in cost of goods transport, making feasible the use of purchased inputs and the marketing of agricultural surplus. Roads have also had an important, but transitory, effect in generating jobs. 52. Social Infrastructure. Benefits from social infrastructure are difficult to quantify, but evidence is that communities have valued access to potable water, schools, and health clinics. Improved health services may have substantial financial benefits, since very often sickness is the major cause of family financial problems. Easier access to water has improved family health and productivity, enabling many families to start small irrigated vegetable gardens, and giving women additional time to devote to raising of small animals or employment in cottage industries. Water supply projects have, in a large number of cases, been troubled by poor operation, inadequate mainte- nance, and breakdown of the systems. Inadequate attention was devoted to the organization and training of villages to operate and maintain the systems once installed and beneficiary communities did not fully understand that collection of adequate water charges was necessary to pay for the upkeep of the system. Both PIDER and the Secretariat of Human Settlements and Public Works (SAHOP) have taken corrective measures. Beneficiary participation in the planning of water supply projects has increased with the decentralization of micro-region planning (paras 43, 44); maintenance and operation requirements are reviewed with the beneficiaries before works are started; and local management--State Potable Water Boards--has been strengthened. With these measures, there has been a marked improvement in the performance of potable water systems. Bank Experience in Other Rural Projects 53. As indicated in Part II, agriculture and rural development projects have accounted for nearly half of Bank lending to Mexico. In addition to the previously cited experience under PIDER, experience under other projects has been applied in the design and preparation of PIDER III. This experience has benefitted primarily the productive support components for agricultural and livestock development. Operations Evaluation reports on several irrigation projects have emphasized the importance of adequate extension services in achieving farm development; experience under the Bajo Rio Bravo Irrigation (Ln. 1111-ME), Papaloapan Rural Development (Ln. 1053-ME), and Tropical Agricultural Development (Ln. 1553-ME) projects has helped improve the national extension system. These improvements, and others being instituted in the Rainfed Agricultural Development Project (Ln. 1945-ME) would be extended to the proposed project. The findings of the Project Performance Audit Report on the Fourth Livestock and Agricultural Development Project (SecM9-522 dated July 3, 1979) have influenced the design of credit components of subsequent projects, including PIDER III. - 16 - The first integrated rural development project financed by the Bank in Mexico was the Papaloapan Rural Development Project, (Loan 1053-ME Gi November 15, 1974). This project has encountered a number of management and financial difficulties. Actions have been taken to strengthen the execu- ting agency, and the Government is preparing a proposal to reduce the scope of the project. US$12 million of the US$50 million loan has, therefore, been cancelled. Many of the problems encountered by the Papaloapan project centered on the difficulty of executing a comprehensive, multi-sectoral rural development project through a line agency, in this case the Secretariat of Agriculture and Water Resources. The sharp focus of the lead agency has enabled agricultural development to proceed rapidly, surpassing project objectives. However, some support infrastructure and most social infrastructure components have not been implemented on schedule. PIDER is not expected to face similar problems because it has a strong and functioning coordination mechanism and clear division of responsibilities among the participating agencies. PART IV - THE PROJECT Background 55. A report, entitled "Rural Development Project--PIDER III" No. 3231-ME, dated June 30, 1981 is being circulated separately to the Executive Directors. Negotiations took place in Washington, D.C. from June 1 to June 12, 1981. The Mexican negotiating team included Mr. Arturo Ortiz of NAFINSA and Mr. Marco Antonio Morelos Chon of SPP. Project Description 56. The project consists of directly productive, productive support and social infrastructure components designed to raise the income and improve the standard of living of some 250 thousand poor rural families in 17 selected micro-regions in the states of Guerrero, Sinaloa, Yucatan, and Zacatecas (map IBRD 15264). Within the four states, the micro-regions have been selected on the basis of: (a) productive potential, but lack of infrastructure to exploit this potential; (b) a high proportion of economically active population with total net annual family income less than 500 times the regional minimum daily rural wage; 1/ and (c) capability of the state-level staff for programming coordinating, and executing multi-year investment programs. 1/ This level includes about half of the rural population. - 17 - 57. Project preparation was coordinated by SPP. Beneficiaries and local representatives of government agencies played an important role in establishing village and micro-region plans; the final planning document was the responsibility of the SPP state planning office which worked closely with beneficiaries, micro-regional staff and other line agencies. The micro-regions included in the proposed project are the first prepared under this highly decentralized system, hence the Bank has worked closely with SPP to establish the new methodology for micro-region planning and to apply it in two micro- regions of each of the four states as a pilot exercise. The lessons of the pilot exercise were then applied to re-program the original eight micro-regions which were subsequently appraised by the Bank and form the basis for this report. The remaining nine micro-regions to be partially financed by the proposed loan are now being planned according to the revised methodology and will be submitted to the Bank for appraisal. It would be a condition of disbursement that each micro-region had been prepared according to the agreed format and had been appraised in a manner satisfactory to the Bank (Schedule 1, Para 3(c) of the draft Loan Agreement). 58. Previous Bank loans financed 30 micro-regions in 19 states (PIDER I) and 20 micro-regions in 15 states (PIDER II). Because of the decentralization of PIDER planning, programming, and execution, the proposed project is concentrated in four states where the revised methodology has been proven. The selected micro-regions do not overlap with those supported under PIDER II. However, seven of the proposed 17 micro-regions were supported under PIDER I. In those cases, PIDER III would be extending or consolidating, rather than duplicating, the achievements of the previous project. 59. About 61 percent of the project funds would be channeled into productive investments in livestock, irrigation, rural industries, forestry, crop development (annual crops, fruit, coffee, and coconut), fisheries, soil and water conservation, and associated farm development credit; 26 percent to productive support investment for the development of feeder roads, market facilities, extension services, electrification, farmer organization, a pilot program to develop productive projects benefitting women, feasibility studies for productive investments, and baseline studies; and 10 percent to investment in social infrastructure, such as construction of primary education and drinking water facilities, materials for self-help projects on a local initia- tive basis, and a pilot nutrition program. The remaining 3 percent would be used for management and monitoring and evaluation of the project. The estimated distribution of project investments is based on plans completed for eight micro-regions. The plans for the remaining nine micro-regions are in an advanced stage of preparation, and the distribution of planned investments is expected to follow the broad outlines of the other eight micro-regions. Annual budgets are based on feasibility studies for investments; the annual budget follows, but is not constrained by, the multi-year plan. Therefore, this investment balance is indicative rather than precise and fixed. Detailed Description 60. PIDER III, on the whole, finances the same types of activities as did PIDER I and II. However, two new components have been added (Productive Programs for Women and Nutrition) and two important on-going components (Livestock and Agricultural Development) have been significantly strengthened. - 18 - 61. Productive Programs for Women. The on-going PIDER program has financed a limited number of programs providing employment or income-generating opportunities for women. The most important are the SARH home extension service, which helps women to raise small animals and improve home gardens. Some of the additional production is sold on the market, although most is used to improve the family's nutrition. Additional cottage industry type invest- ments, such as small shops for the making of clothing or handicrafts, have benefitted rural women. However, these efforts have been small in comparison to the lack of remunerative employment opportunities for women in the rural areas. Therefore, the proposed project would include a pilot program of: (a) Studies to identify: (i) the types of productive projects currently operating in Mexico that have proven most successful in providing earning opportunities for women; and (ii) existing local resources (human, financial, and physical) that would provide potential for such projects; (b) Training for women, communities, and staff of Government agencies to promote acceptance of greater numbers of women in productive activities; and (c) Training and technical assistance for specific productive projects to be financed under PIDER III. This would include assistance in setting up effective cooperatives and marketing organizations as well as training in technical skills. The program would be executed by a number of institutions, including SARH, the National Indigenous Institute, the Integrated Family Development Program, and various other federal and state agencies. 62. Nutrition Program. A pilot nutrition program would be implemented in selected communities in Zacatecas, Guerrero, and Yucatan where problems of malnutrition are most pressing. The focus of the program is to ensure that the food surplus generated by PIDER is directed to improving the nutritional intake of malnourished rural families. Under this component, funding would be provided for: (a) supplementary home food production--home gardens and small animal raising; (b) installation of rural stores to increase access to food staples at reasonable prices; (c) education of beneficiaries on proper nutritional balance, and possibilities for increased nutritional efficiency in purchase, preparation, and consumption of foods; (d) establishment of a nutritional surveillance system to: identify the seriously malnourished; prevent serious malnutrition by early referral to the health system of those clearly at risk; monitor seasonal fluctuations in food production in order to anticipate food shortages and identify areas where assistance will be required; and (e) evaluation of the impact of the PIDER program on the nutritional status of beneficiaries. - 19 - The program would be implemented as an integral part of PIDER activities and would be subject to the decentralized planning process now in use. Primary responsibility for program execution would be with: SARH for supplementary production and nutrition education (through the home extension worker program); National Company for Popular Subsistance (CONASUPO) for rural markets; the Mexican Social Security Institute for the nutritional surveillance system; the Secretariat of Public Health and Assistance for health and nutrition education; and SPP for monitoring and evaluation. 63. Livestock Development. As discussed in para 49, many livestock investments financed under PIDER I and II faced significant organizational and technical difficulties. The causes of these difficulties, as well as factors that have made other projects successful, have been under study and the design of subsequent investments usually reflects the experience. Under PIDER III, the Government would devise formal criteria, acceptable to the Bank, for the design of livestock investments, including such matters as organizational structure, rights and obligations of participants, management, evaluation methodology and monitoring indicators (Section 3.08 of the draft Guarantee Agreement). Only those livestock investments meeting the agreed criteria would be financed under the Project (Schedule 1, para 3(e) of the draft Loan Agreement). Agricultural Development 64. Agricultural development programs funded by PIDER are the responsi- bility of SARH. Under terms of a master coordinating agreement between SARR and SPP, agricultural investments proposed under PIDER would be reviewed and approved by the executive committee of the appropriate rainfed agricultural district (DT). Because the PIDER micro-region coordinator is a member of this committee, local-level coordination between PIDER and SARH would be greatly strengthened. At the same time, the technicians of the rainfed district would be in a position to implement the proposed strengthening of a number of programs, such as the new criteria for design and execution of livestock sub-projects (para. 63) could be effectively supervised by DT staff. 65. Experience under previous projects has shown that agricultural development efforts sometimes have been poorly integrated with credit programs. Under the proposed project SARH, PIDER, and credit officials would be members of the DT executive committee, which would ensure closer communication and better coordination of programs. Credit support of small irrigation works has generally been weakest; therefore, SARH would obtain commitment from a bank to lend to the proposed beneficiaries of small irrigation schemes prior to starting physical works (Section 3.06 of the draft Guarantee Agreement). 66. Staff Development. A modest component for staff development (seminars and short-term training) would benefit staff directly involved in the project; presentation of a detailed training program acceptable to the Bank would be a condition of disbursement for that component (Schedule 1, Para 3(h) of the draft Loan Agreement). - 20 - Organization and Management t7. The project would follow the general organizational and management structure described in paragraphs 40-45. General PIDER programming policy is developed by the Subsecretariat of Programming in SPP. SPP works closely with the various implementing agencies to ensure that their programs address the development goals agreed upon for each micro-region. Responsibility remains for the implementing agency to ensure technical soundness and economic provi- sion of their services under PIDER. Coordination of agencies' work programs with PIDER planning and execution has been improving steadily. Master coordin- ating agreements signed between agencies at the federal level have helped to define the responsibilities of the various agencies for different components of PIDER. 68. At the local level, the COPLADES (para 42) have served to inte- grate the field staff of the agencies into effective teams. SPP is improving the effectiveness of its micro-regional staff by establishing a Micro-regional Rural Development Office (MRDO) in each micro-region. It would be a condition of loan effectiveness that, in the eight micro-regions already appraised, MRDOs had been staffed (Section 6.01(a) of the draft Loan Agreement). Monitoring and Evaluation 69. One of the innovations of Mexico's rural development efforts is the use of a separate, parallel evaluation agency, the Center for Rural Development Research (CIDER). CIDER has evaluated a number of PIDER investments on a sample basis and has worked closely with PIDER to ensure the findings are incorporated into PIDER's activities. However, PIDER has not had a strong internal monitoring or evaluation unit. Under the project, and in collabora- tion with the participating agencies, CIDER, and consultants, SPP would establish within PIDER a system for: (a) reporting physical progress of project activities; (b) evaluating the impact of these activities on an ongoing basis; and (c) identifying shortcomings in performance in a timely manner. 70. At the national level, the general directorate of operations in SPP would establish a group to review and compare PIDER's micro-regional evalua- tions and serve as technical support to the state and micro-regional units. This unit would also identify studies designed to investigate and suggest alternative solutions to specific project-related problems or issues arising during project execution. At the state level, the SPP Monitoring and Evaluation Office would analyze the information collected at the micro-regional level and carry out impact evaluation of those PIDER activities which would help to readjust the sub-projects or find alternative strategies or programs for the micro-regions. At the micro-regional level, a monitoring and evaluation team would be established in each MRDO. It would be a condition of loan effective- ness that a plan, acceptable to the Bank, had been prepared for the monitoring and evaluation units at the Federal, State, and micro-regional levels (Section 6.01(b) of the draft Loan Agreement). 71. To further strengthen monitoring and evaluation, the project would include socio-economic studies at the community level to: (a) provide baseline data against which to measure the impact of PIDER-supported activities; - 21 - (b) promote pilot testing of alternative sectoral strategies in such areas as livestock, water supply, and marketing; (c) identify requirements for special- ized technical assistance or training for new or existing sub-projects; (d) assess the development potential and socio-economic structure of communities within the micro-regions; and (e) assist in the identification of productive sub-projects. Presentation of a specific work program, acceptable to the Bank, for the feasibility and socio-economic studies component of the project would be a condition of disbursement for the component (Schedule 1, para 3(g) of the draft Loan Agreement). Twelve man-months of consultant services would also be provided to assist in program development. The costs of consultant services have been estimated at US$8,500 per man-month for fees and US$1,200 per man-month for travel and subsistence. Project Cost and Finance 72. Project costs are detailed in the Loan and Project Summary and in Annex IV. Total costs are estimated to be US$506 million of which US$98 million, or 19 percent, are are foreign costs. The proposed US$175 million loan would finance about 35 percent of project cost, equivalent to the foreign exchange cost and 19 percent of local costs. Bank financing of some local costs is recommended because of the project's evident high priority and the low proportion of foreign costs. The Government would finance $268 million of project cost (53 percent) and beneficiaries would contribute about $63 million, or 12 percent of project costs. The Government and Bank shares include US$54 million (11 percent of project cost) in development credit which beneficiaries would repay with interest. To ensure that the Government investment benefits as many families as possible, Government investment per beneficiary family would be limited to $10,000 for livestock development or soil and water conservation subprojects and US$15,000 for small-scale irrigation subprojects. Cost Recovery 73. For all productive investments benefitting individuals or groups of farmers, the Government policy is to require a contribution of the beneficia- ries to the capital costs as well as requiring beneficiaries to pay the full costs of operation and maintenance. The level of contribution to capital costs depends on the nature of the investment and the beneficiaries' capacity to pay; beneficiaries' contributions are agreed in writing before construction of works begins (Section 3.05 of draft Guarantee Agreement). Disbursement 74. The loan would be disbursed over a four-year period. Retroactive finance of US$5 million would be provided for expenditures made after January 1, 1981 in the eight appraised micro-regions (Schedule 1, Para 3(a) of the draft Loan Agreement). Retroactive finance is proposed to avoid delays and to maintain an even pace of project execution. It would allow works in the eight micro-regions that have been appraised to be done during the dry season of 1981 and would enable the pace of micro-region development activities, estab- lished under PIDER I, to be maintained. - 22 - Credit 75. Short-term credit for production or working capital would be financed by Mexico's well-established public and private banking system and would not be reimbursed out of the proposed loan. Medium-term credit for on-farm development and agroindustries would be financed by the proposed loan through the Agri- cultural Trust Funds in the Bank of Mexico (FIRA) and the Trust Fund for Credit in Irrigated Areas (FICAR). These agencies have participated in other Bank projects and would rediscount subloans made by private and public banks to beneficiaries of directly productive investments under the Project. Terms and conditions of subloans would be identical to those for other agricul- tural credit projects. 76. These loans now have repayment periods ranging from 2 to 15 years, including grace periods of up to 3 years, and interest rates range from 14.0 to 21.5 percent per annum. These rates are now under review with Mexican authorities; agreement with the Bank on the revised interest rates would be a condition of disbursement for this component (Schedule 1, para. 3(f) of the draft Loan Agreement). Interest rates would be adjusted annually in accordance with changes in the 12-month average cost of borrowed resources to Mexican banks (draft Project Agreements with the Banco de Mexico, S.A. and the Banco Nacional de Credito Rural, S.A., Schedule 1, Para C). Procurement 77. Civil works would be scattered over the project area, and individual contracts would not be large enough to attract foreign bidders. Mexico's construction industry is experienced and capable of executing works at costs competitive with international levels. Contracts for construction of civil works (totalling about US$200 million) would be procured following local procedures satisfactory to the Bank. In most cases, these contracts would be subject to local competitive bidding. Force account would be used in some cases where the Government agencies have an established and demonstrated capability, particularly construction of feeder roads and drilling of wells. In cases where bidder interest is low because of the isolation and small size of project works, negotiated contracts would be allowed. Experience under previous projects has shown these practices to be reasonable and efficient. 78. Materials and equipment (totalling about US$115 million) would be purchased by several agencies in small quantities. Where feasible, contracts for the purchase of materials and equipment shall be grouped and procured through international competitive bidding. Contracts for less than US$350,000 equivalent could be procured through local competitive bidding or local shopping in accordance with the Government's ordinary procedures which are satisfactory to the Bank. There are a sufficient number of suppliers of such goods representing both domestic and international manufacturers to ensure adequate choice and competitive prices. Because of the competitiveness of local suppliers and the strong representation of international manufacturers through Mexican firms, it is expected that most contracts would be awarded to Mexican bidders. Equipment for on-farm development, financed through loans to farmers, would be purchased directly by the farmers from local suppliers, considering local availability of spare parts and service. Procurement arrangements are set forth in Schedule 2 to the draft Guarantee Agreement. - 23 - Economic Evaluation and Project Impact 79. Analysis of the expected impact of the project is based on the investment plans completed for eight micro-regions for which plans have been appraised. The investment pattern in the nine remaining project micro-regions is assumed to parallel that of the first eight regions. As each micro-region's medium-term plan is reviewed annually and adjusted as circumstances warrant, the final distribution of project investments and impact cannot be precisely stated. The following analysis should be interpreted as an indication of the expected impact of the project, based on the best available estimates. 80. The estimated average economic rate of return for the project as a whole is 27 percent; the rate of return for investment in individual micro- regions would range from 14 to 44 percent. The variation is caused by the large differences in ecology and productive potential between the various microregions as reflected in the cropping pattern and farm yields. The rates of return have been calculated on the basis of investments in agriculture and livestock equivalent to 62 percent of total investment, for which benefits are quantifiable. Investment costs along with costs of extension, farmer organiza- tion, and the production support costs needed to achieve project benefits were included in the calculation. The costs of social investment have not been charged against the project, nor have the benefits from improved health, education, and community development been credited to it. Labor was shadow priced at half of the official minimum wage in Guerrero and Yucatan where unemployment is high. In Sinaloa and Zacatecas, where alternative sources of employment exist and compete for workers, labor was priced at the minimum wage. 81. Sensitivity analysis shows that the rate of return of the project would remain above 12 percent if overall benefits decrease by 30 percent or if overall costs increase by 40 percent. A two-and-one-half-year delay in project benefits would result in a rate of return of 12 percent. However, some micro-regions are more sensitive than others; in those micro-regions, the rate of return would fall to 12 percent with a 10 percent increase in cost or reduction in benefits, or with a six-month lag in achieving project benefits. 82. The project is expected to benefit about 250,000 poor families. Some 46 thousand families would benefit from directly productive investments; their average incomes are expected to increase from US$450 to US$2,500 as a result of the project. About 500,000 man-days of incremental permanent employment is expected to result from the project. At full development in 13 years, the project is expected to result in incremental production of 128,000 metric tons (t) of basic crops, oil crops and feedgrains; almost 17,000 t of cacao, coconut, and coffee; 116,000 t of citrus; 21,000 t of vegetables; 56,000 t of fruits; some 15,000 t of cashew; 8,360 t of livestock; 16 million liters milk; and 902 t of honey. Most of this production would be consumed domestically. Risks 83. The main risks associated with the project would be institutional and climatic. The major institutional problems would be to ensure effective coordination between the various line agencies and to effectively strengthen - 24 - execution of those components of the project where previous performance has been marginal. The institutional risk is acceptable because: (a) the states included in PIDER III were chosen for their experience with such projects, and actions are already being taken with the decentralization of PIDER to the state level have redefined responsibilities and strengthened coordination where it was weak in the past; (b) agencies have already played a key role in planning overall investments as well as sub-projects, and agency personnel show a higher level of commitment than in the past; and (c) SARH programs in the rainfed districts have been strengthened and better address the needs of PIDER beneficiaries. The most serious climatic risk would result from drought, and the emphasis on better conservation and farming practices built into project design is intended to reduce this risk. Environmental Impact 84. The project is expected to have beneficial effects on the environment. Soil and water conservation and forestry programs would reduce erosion losses in the Project micro-regions. The improved farm practices promoted under the project would ensure development appropriate to the capacity of the land and safe application of agro-chemicals. PART V - LEGAL INSTRUMENTS AND AUTHORITY 85. The draft Loan Agreement between the Bank and Nacional Financiera, S.A., the draft Guarantee Agreement between United Mexican States and the Bank, the draft Project Agreement between the Bank and Banco de Mexico, S.A., the draft Project Agreement between the Bank and Banco Nacional de Credito Rural, S.A., and the Report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement are being distributed to the Executive Directors separately. 86. The following features of the draft Loan, Guarantee, and Project Agreements referred to in the text and listed in Section III of Annex III are of special interest: (a) Additional conditions of loan effectiveness include: (i) that micro-regional rural development had been staffed in each of the eight micro-regions that have been appraised; and (ii) that a plan, satisfactory to the Bank, had been issued for monitoring and evaluation units at the federal, state, and micro-regional levels. (b) Additional conditions of disbursement include: (i) Disbursements would be made against expenditures in a micro-region only if the micro-region's plan had been prepared in accordance with the agreed format and appraised in a manner satisfactory to the Bank; - 25 - (ii) Disbursement would be made against expenditures on livestock investments only when those investments were made in accordance with criteria agreed to by the Guarantor and the Bank; and (iii) The Bank would disburse only against sub-loans made at interest rates agreed between the Guarantor and the Bank. 87. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 88. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments June 30, 1981 - 26 - ANNEX I Page 1 of 5 TABLE 3A MEXICO - SOCIAL INDICATORS DATA SHEET MEXICO REFERENCE GROUPS (WEIGHTED AVEGES LAND AREA (THOUSAND SQ. XM.) - MOST RECENT ESTIMATE)- TOTAL 1972.5 MOST RECENT MIDDLE INCOME MIDDLE INCOME AGRICULTURAL 977.2 1960 /b 1970 /b ESTIMATE /b LATIN AMERICA & CARIUBEAN EUROPE GNP PER CAPITA (US$) 400.0 750.0 1640.0 1616.2 2609.1 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 769.2 1141.0 1672.7 1324.1 2368.4 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THOUSANDS) 36369.0 50313.0 65509.0 URBAN POPULATION (PERCENT OF TOTAL) 50.8 59.0 65.9 64.2 53.2 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 108.9 STATIONARY POPULATION (MILLIONS) 188.0 YEAR STATIONARY POPULATION IS REACHED 2075 POPULATION DENSITY PER SQ. KM. 18.4 25.5 33.2 34.3 80.6 PER SQ. KM. AGRICULTURAL LAND 36.0 52.0 65.1 94.5 133.9 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 45.6 46.5 45.3 40.7 30.1 15-64 YRS. 51.0 50.0 51.2 55.3 61.5 65 YRS. AND ABOVE 3.4 3.5 3.5 4.0 8.3 POPULATION GROWTH RATE (PERCENT) TOTAL 3.1 3.2 2.9 2.4 1.5 URBAN 4.9 4.8 4.2 3.7 3.1 CRUDE BIRTH RATE (PER THOUSAND) 45.0 42.3 36.0 31.4 22.9 CRUDE DEATH RATE (PER THOUSAND) 12.0 9.0 7.3 8.4 9.1 CROSS REPRODUCTION RATE 3.4 3.2 2.6 2.3 1.6 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. 25.1 842.0 USERS (PERCENT OF MARRIED WOMEN) .. .. 40.0 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 97.0 100.0 101.0 108.3 119.8 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 110.0 112.0 114.0 107.6 125.7 PROTEINS (GRAMS PER DAY) 65.0 66.0 66.0 65.8 92.5 OF WHICH ANIMAL AND PULSE 27.0 27.0 27.0 34.0 39.7 CHILD (AGES 1-4) MORTALITY RATE 13.0 8.8 5.7 7.6 3.4 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 58.3 62.4 66.0 64.1 68.9 INFANT MORTALITY RATE (PER THOUSAND) 78.0 74.0 60.0 70.9 25.2 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL 23.5 54.0 62.0 65.7 URBAN .. 71.0 70.0 79.7 RURAL .. 29.0 49.0 43.9 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. .. .. 59.9 URBAN .. .. .. 75.7 RURAL .. 13.0 14.0 30.4 POPULATION PER PHYSICIAN 1798.0 1480.6 1815.0 1728.2 973.3 POPULATION PER NURSING PERSON .. 1612.2 1398.0 1288.2 896.6 POPULATION PER HOSPITAL BED TOTAL 577.6 828.1 851.0 471.2 262.3 URBAN .. 1151.2 758.0 558.0 191.8 RURAL *- 1350.9 1077.0 ADMISSIONS PER HOSPITAL BED .. .. .. .. 18.2 HOUS ING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.4 5.7 URBAN 5.7 5.7 RURAL 5.2 5.8 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 2.9 2.5 URBAN 2.6 2.2 RURAL 3.4 3.2 .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. 58.9 .. URBAN .. 80.7 .. RURAL .. 27.8 .. - 27 - ANNEX I TABLE 3A Page 2 of 5 MEYICO - SOCIAL INDICATORS DATA SHEET MEXICO REFERENCE GROUPS (WEIGHTED AVERA9ES - MOST RECENT ESTIMATE) - MOST RECENT MIDDLE INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b LATIN AMERICA & CARIBBEAN EUROPE EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 80.0 104.0 116.0 101.7 105.9 MALE 82.0 107.0 119.0 103.0 109.6 FEMALE 77.0 102.0 114.0 101.5 102.2 SECONDARY: TOTAL 11.0 22.0 39.0 35.3 66.3 MALE 14.0 27.0 42.0 34.9 73.2 FEMALE 8.0 17.0 36.0 35.6 59.5 VOCATIONAL ENROL. (% OF SECONDARY) 24.0 27.0 9.0 30.1 28.4 PUPIL-TEACHER RATIO PRIMARY 44.0 46.0 41.0 29.6 26.8 SECONDARY 13.0 14.0 17.0 15.7 23.6 ADULT LITERACY RATE (PERCENT) 65.0 74.2 82.4 80.0 75.4 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 14.0 24.5 42.4 42.6 83.9 RADIO RECEIVERS PER THOUSAND POPULATION 90.7 27B.4 306.0 215.0 181.6 TV RECEIVERS PER THOUSAND POPULATION 17.9 59.5 88.7 89.0 131.1 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 79.0 .. 66.6 62.8 123.8 CINEMA ANNUAL ATTENDANCE PER CAPITA 10.0 5.0 4.2 3.2 5.7 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 10990.9 14488.8 18965.4 FEMALE (PERCENT) 15.2 17.4 19.3 22.6 32.9 AGRICULTURE (PERCENT) 55.1 45.0 36.8 35.0 34.0 INDUSTRY (PERCENT) 19.5 23.0 25.7 23.2 28.7 PARTICIPATION RATE (PERCENT) TOTAL 30.2 28.8 29.0 31.8 42.3 MALE 51.1 47.4 46.5 49.0 56.5 FEMALE 9.2 10.1 11.2 14.6 28.5 ECONOMIC DEPENDENCY RATIO 1.6 1.7 1.7 1.4 0.9 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS .. HIGHEST 20 PERCENT OF HOUSEHOLDS 61.1/c 60.7 57.7 LOWEST 20 PERCENT OF HOUSEHOLDS 3.47E 3.3 2.9 LOWEST 40 PERCENT OF HOUSEHOLDS 9.8T 9.9 9.9 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 270.0 RURAL .. .. 216.0 187.6 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 471.0 513.9 RURAL .. .. 471.0 362.2 385.1 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. RURAL .. Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1976 and 1979. /c 1963. May, 1981 - 28 - ANNEX I Page 3 of 5 DEFINITTIONS OF SOCIAL INDICATORS fotes: Although the dte ere deae fromsute generally judged the sca -thoritativa and -elable, it should also be notd that they may not ha nte- naiell -oparable bec.u.. of the lack of tneedardised d.fini,ieos end --ecpte need by difft.fest teuntetia ie collectieg the dens. The date are. ..... themes, .. usfulIe describe ordain of agnitude, indicate treda. and chorec-erta certau aejor differences. hev ges countrie.. Theenfrene gtap ar (I the see country groop of the -bJ-eo coutry and (21 sutry group slob s--eh., bigher avrgIicm ta hecuty grouP of the auhjeot country (eacept fur "Cepital Surplus lII l p-rters Sroup eheosMidl un Seth Africa and tiddle tEat.a. o bcueofsrne se -ululeffiintee:)..I t~he refgscents group dun the snrgee are popuition .eighted eritheetic neafee each Indic-c ored ah.- only obe. ajoriy o,f the countries In egou has dens for that iodlot-r. Ooc. the oover.ge of countries a-on the oddicatr do- doo tbe vel-lbili1ty of dens end is not unifom, caution ist hr soencised in relating avetges of et indicator no e--h-n Thesuvrgoaeo yefuI coprIng the -se of IIe Ondl-uo an s ties emeu the c--ocya.d refernc groups. L,AM AREA ftcb.ue.ed sq.e.) ypltcpeOapalrd- ctul, rhe, -udrro I .oute (toa- toal- 1Tta surf oe er comprIinig land area end island wtes.uron adru)didebyIIttroetntibro optlhd Agricultural -E stMt of egicoliura1 are used temporarily or pereanetly .vaflahle In publIc and priveegaea sd npecIie:ll h,epintlandro for crops. petoe, eket end k h.cbe gerdet or no lie tailo; l970 dute. bhtlib aioet rra-. Soa1 cIn r tblIahm.t._pe_ocetly staffed by atleant..t. physici-r tanbllshoane pr-oldivy priocipelly -ust- GtiPPEg CAyTA (19.) - tO" pen cap ita ea-tZe ec cu...ot sarke prcta, -a- d.1 cor. are cot included. eunu hospitals, h.nvr.c. d ban culaed b ses coverion sethed as World hak Atlc (19 71-7 basie); OhI, end medical cec-r cot parn-e-yI tufedbyapacian (hot by a 1970, end l979 date, andicaI -sisa-, nuse adaife, etc.) hich offer in-patient ccse- def ,,n poide a lhiied range of oedica1 facilities. Foe Ltatis- ENERfGY CONSUMPTION PER CAITA - uAl- cns. ptit f -nrcial snry (elticel putycee.n. rbet hospitals include WHO. pnincipe1lgeteceIl hospitals, andlignite, petrleu, -tarlgeenhdo- .uc.s.r and gor .a elc-td rural, bonyltl loca or rura h-spitls.1 and meIdicl an1 d materity tricity) In kilegrem of ceal eqoivalet pet capita; 1960, 1970, aed 1979 c..tters. Specialited hosyilvlo ace Incldedolyudertoa. date. Admiaslone Fr HcnctalBed - T-co nu-ber of daiaaio.. to or discharges fron hoapltols divided by She number of bed POPULATION ANDf VITAL STATISTICS Total PopuletOco, hId-Tear fthou...tds) - As of July 1; 1960, 1970, cod 1979 HOLfSING data. Ah.eruge So I f I otsbod rccoo -soshold) - tonal, urban ,ad rural- Urban Prultin Icrcee of t-nel - atlo of urben to tona populotioc; A house hold crootot of grop of ilodioidul hwb shar loving q"It"r, different definitions of orban aresa as pffect ocapurabiltey of dnt end thee. ao l.A bo-de- or lodger nay or may ntb nluded It aog cnties; 19101 1971, and 1979 data,th heueebci for_' 'ttiuclcu -p--oat PonulatOon Projections ~~~Av-r..eon-he of -e-o- cor_cooc-_rul rban and rena - Av-rege u Poultosf Yee 2000 - Current population projections ne base.d on 1901 her of Pe rsons cer roc iv all urbo, and cu I ccpied. -toeiien toteS populaion by age end ass and ther mrtliey ad fsrnility cetea. deIliogs, rep-cti-ely. Dwell ig. eucludd -P.rm.e. strutuesad Pr.Jentionpe etr for mantelityrae copia- ofthre eeaec- Iu...cupisd prs iog life euPsen- atI birth icesn ihcutysPer.cPita inc.eAces.n iecico (tercet of doel1LIcoa - rtona, urban, en ua - level, and femaleclift sapernaocy seblleing an 77.5 yas The paro- Cooventienu.l dnlcg. wthelctictyInlvgquressprtasnge asters foe fertiity Irte e hav threY ees aeig eln in or.f tona, urbue, end r...el dwellicna -epeci-oly. fer tility accoding to incom I.vsI and past f_mt plannIngPonttmac Each cu...try Is the ..s...gned one of thse tine cobitaticon of mentaity EDUCATIONl and~ fnti'licy trsoda for projection pueposee. Adluened EInnolse- Ratios Snn_ar Feelp int o stationa.ry pplainthere In no growh snePriayeho..ttl aeud feal. -lro... totu mal an.d femal the birthIrt seult he death rate, and alto the age anrutr re- eso Ie f all uge at the primay -etel aspercetage Of respective mains conetant. This Is achieved otly utter fe-ility rates decline to Pr,mry etbool-egeP populaicon.; no-aly i-oldee ehildre aged 6-01 the relceet ee of u.it ne reproduction rune hbe each gnsanYear hot adja-d for diffiere.t leegths of primary ed_atios; fun ofwmnePls itslffsnatly. The stationey poplaio steus Jato it .tivnsl d..ccnice enrollmentImay e.Cend 100 percent et=astd'.on`the hbst ofI the projected charcersic fb-ppti onalneIoepupils are elo ocohvtedfbiu cho es inteyeer 2000, cod the rant of d ins of f-rtil Icy oats to replee-...our scoo - oa, malean femae Cmpte asaov;seodary aest level. edo~~tetiosuito lesIot ar f approved primary inateno; tear stationery peeplattonis reabsIhd - The ye- when o.titonry population Prvdeagnrl vntca, or ,eaher traleng last-eios.. f or popik Per em. he. - id-year Ppoplation per square klllo.ne tI(101 hat.trts) cf V..toainl n_ iset(percet If secndsrI - V.catioliatltnto.. tonl nn; 19.1970 and 1979 det. inclde teohoic-,inutra, enohr"rgam Jh operate il,dped- Per soh. asiclonl ad - Computd as above for gric-Itu-1 land setly or ca deperta-ie o.f scnay inaintin. euly; 1961, 1970 and 1978 data. Punil- hnc raio - Primet. aed -eodery - TonalI students earold is Pouet M a trucno feenceati -Childre (D-14 peace). enrki.e-aga (15- PrImr and aecondry level dfvided by numbers of neachea Is he 64 pear), ..d rond(0 er an-d over) as percetages of mId-pear pepn- correspondingleve.a.. lein 90,I,sd197 daa,Mlt literacy ra te(pret- ile edalte (able to read and write) -ousio teh hate (oerceno) -r-otl - Annua goewch rect of tone1 sdd- Asa.percentge of ntelautpopeIutioo aged 11 pears and ever. year populnloes foe 1950hi,l!hO-, end 1970-79. FepulstlonOr, b at pecet.-uban _A-..euI grwcb renes ef orban popn- COgSUMPFTION lationefoe1910-100 1960-70, And1970-79. Pelsenger G,lane - feth-ussdhcpuain - Pe-eger crer comprise est I Crude fith hate_(pan thouseed) -Ade-ua live births Per th..u..d of afd-y- creutieg lees that eighpesn;ecus amuacs hmeeed populuetue; 1900, 1970, and 1979 dc._ sil itery vehilee,. Crde math fate leer thousan.d)- Annua Ideaths per thooeaeds of mid-peerRadio escivene leer thonsaod eoo'ulacIce) - All types of reni-ra far radio ppu,lation;1990, 19701, eM 1979 data, bredcse ogeea pbi prccudo poplait; encldeeem bar eoma rpodctv period it she nupeniecee praet ege-epeifIc gtses It effec; data for recet peaa may no be coparble ain ....p aie;uealy fivepe evraseedieg In 1900, 19 70, aed 1979. most c...atnies abolieed lice...ing. FmlPlt-Aces tnrs. hea (thuI dl-Ana ubro eceere TV R-ni-er inerethousued eepulation) TV recivers for bredoat tnt ef blreb- tnnru devices undet ...pit", of necien... I.Ily planing program, general publi e huod ppltc;eoueulras VreIe Famly pi..eica - Users Coerce o. f marriedZeem ) - Perc...tase of maried Innonies andTI er hnrgernico Vsn s oefec. me_s of child-heanleg age (15-44 y-ae)whus birth- -otrl d-ciena no N_PeweseI Ciccu"anine leth ..easedfrc n)- Sh-w the -verag tie- all maried w__e In sam age grou.P culstioc of "daily generaIl lor-oe newspape", defined A. aperiedical publicacice deo-cd primarily cc recrding genra. nws It is c..aidered FOOD AND fNUTRITIONf to be "daily" if It appears an leean tou tIme ekI Ogden of Fend Productico ten Capita (1969-71-100) - Iode of pen cepite annal.lue..cn Atted..c. ten Capita ce a-f d Is ihe number ad 1eduti f allfoo t iodtiee, Production snaludee seed and fend and tichkt sol IduIg heper, including admissions to dries-is cIfsas ,Iso caedrperhes Coditieacovo- prisay goods (s g. sngsras ad mobile units. instend of eugr) hfith ens eldible sod cotait st (e.gE. coffee end te re eafudedi. Aggregt rduclo of eac h coet ry is base d on LABOf FOREt -t 1-nu average producerprice weights; 1961-60, 1970 , and l97S deta. Ttetl Isbe Forc (theu..ande) - Ecnemlc.lip active parsoes, iulndimg Per anin suely f eaonle Cercet of rnieec)-Computd from are fressd unemployed buc secluding hoswvs tdns tc.. ensrgyeqctoaeun ofnet fed supnlas evilable. .. ..u..r tpence pita -aveing populationo all ages. lfot eio v-ri..I.. reteisa ens peIay rilebemple epiedaei rdciv imper les no comparable; 1901,flOP7 and 19719 dat.i~~ neperte, aed chaugee in sooth Set aupplia... euclde anial fend, aseda, FP.-Ie (osreeni - Feml ee oc a eceaeo ttllhrfrs qnaeitia ned iftod procemeing, and losses in disteibtnion. falqeire- Aanieulture (tercnt) - LborfreInfrig ferese, butingan emte wer etmed by PAP had on phyeiologi-Il needs o nI -ma cti- fishing ca per-etags of cocal labor forts; 19600 1970 and l9P data, nip sad helth c..ne,ideie -aireemen.talcep-etr, bd e- be aeIndusry fprcent) - Labor force In ainiog, co-tr-cII.c, .f sngcoieg end se distr ibution of popnlstie, and alloing 10prcent for -s at1 and eetrct, ue ed gases. percetage of nta. Ilabo ftone; 1960. household level1; 1901-iS,.1970, end 197P date. 1970 end 1979 dat.- Per o..ite _arrlp of ertin(rea eec dy) - Protein cueteot of Pence pins-ttcta oht rret - tnal, ae an Teml - Fertilepitte er net supl of fend per dy. fNst supply of fd Is defiedas abov.- Re- activity ae e optda oa,wae n eaelbtfreu quiremeet fur all cotnie established hy USDRA provide f. en .li-n paros.oIEsge of total, male and femal population of all age n-p-ctie-ly; allowanc of 60 gnom of toalprtIn per dy and2.0 fram at isSa and 1900, 1970, and 1979 data. These are.buse oni 00,I0's .partcilptias reese puls protein, of which 10 greas s.hou'ldphe aimllpeev Thes aseed- refleotiag ag-e tuen f the poputeco ad Se time tred, endear lower that these of 75 gr-ma ftte prtined 23 gram of few seise r rs eutlnoc animal rotela s as avrage fo the wid,t.proposed by PAO in the Third EcnmcOeoec aic-hseo oue o adt1 s 5ndoe Wfeeld Peed Surey I190 1-, 197O us 1977 daa,t the tetu1 labor force, farceetarreaimsuply feo anial sad pclee - Protein supply of tfnd de- rived from sn -lad pulss i ge prdy1961-5 1910 and 1977.dd-a. IKCiSE DISTRIBUTIOf ChildIiaa14 grtality fate ire thonead) - Annul duanhe per thoumand In Perce.c.. o" f Privete 1-oe (herb I. c-h end kind) - teceivd by richeet ag rop14 yersn childrea On rhia age gup; f onmatdeveloping coeI pereot, richest 20 pence..c, poorest 20 percent, and peermt 90 peroem nrcee dues drived from life tehlom; 1960, 1970 and 1979 data. If hemehelds. fi E t.7 b POVRUT TARGET GROUPS iIlleeoau a ii (oc)-Aeaemme f pear of life remining The Ooleieg estimates are vep ppIoimnamese of P-vnty levels at bith; 1f,1970 end 1979 dae Ed hudh nerrtdot eat elcnie Infst fetalsy at iee thoosau) - Annua deaths of infants un,der .ne peer Etaimated Abslut oetyIcm iev l f pertunics -. ehne end rurl-1 ofaee housad live bIrts Absouepoet ooslvl Ia then tcca lee eo hch a alimal Acc..a no Sate Wate (percent of peulntol co bl, .ruo uad rura - ,,runitinelly adequate diet pnl eanca ntfood requite toan is set he of pmeple (renal, urbee, and rena) wt esnheacs osf fodb eater _uppp fiecladetetd sufc ut rutreated but ncusa td simated Raleti-e Fv-rry Inc- Level (US$ retP. u -uhe ndrea etracasthat from proncte bo-hois, spriege, and sadtr sle shR.lrltv oet neslvli n-hr faeaeptcp percemteges of their nestv auu e.X an orha area pubicIpreenl i-cm o P-the icuntry. Ibe level isd derve free. the rural foamnI en staadpetI. lcted non wire than 201 meters from a house map be p le.e.Iwith dueIfstb Oer ly big rroo of lIv.e d.in ud area.. h redreasbeing inhie reweo-ble ucns of that house. Ie rural .. ares1ttim te oenltio t felo hisolut -oety Ifncoma leve freeee)-ura ress be aces nold mpl that the housewife or a-ber of the household Eand rurld Percenti. of1 populatio (urbany end rua L b' ar P"helots a blp'a ester tends.. ftc t Acoee icfaurss Dsposl' i(perndnr of 1pPlulte -fotal, urhi- andrrurald N,bsr of PeoPle (ttl,uban, and rual served by _artim disonl as pecnaeF f their rePetv population.. fne. dipslma ld the-collect- o disposal,tic.ih or without' treatment, of huma nert cotelc and Social Oatst,.ivfi -> - c>ener-hrnrecv.nne o Eb srI c11. n tt coco,it Analyote sod PostesDepactasn Ian Ovatel-u~~~~~~~~~~~~~~l~~~--. Map~~~~~K 1901 P Pnlcis u Phys1iee - Population divided by nuber ef pr.o..oinig physi- NaueisprfrsOn Pseee Poulato divide by nuber of practiolug - 29 - t t Page 4 of3 MEXICO - ECOtOnIC DEVELOFIEnT 8A0A SHEET Accst tr.tti,sss y rro ect1o,sE Gr-wth Rte. As 7 of lOT 1970 1915 1977 1978 1879 1980 196W 1985 1970-75 8975-80 I9 1980-85 11 1970 1979 1985 NATIONAL ACCOU TS Co--lost 1972 Prices. U157 Milli-os Cross DpmtStio Frod-ct 36,970.4 48,509.5 50,968.4 54,434.8 58,786.6 63, 214.8 73,655.4 93,835.3 5.6 5.6 8.2 100.3 97.3 90.2 Gsifs Pros Trm-s of Trade - 114.1 355.1 316.4 944,7 1,650.1 4,173.5 7,514.1 10,253.0 _ - - - 0.3 2.7 9.8 Gross 1-oo -sic Iccts 36,856.3 48,864.6 51, 284.8 54,978.8 60,436.] 67,388.3 81,169.5 104,088.3 5.8 6.6 8.9 109.9 100.0 10080 I=ports (i-lOtdi.g sfS) 3,754.4 5,835.6 4,782.2 6,475.3 8,544.0 11,724.3 16,518.0 21,575.5 9.2 15.7 12,5 10.2 14.1 20.7 Exporte 7s ootccposp7ity) 3,016.6 4,109.2 4,751.7 6,117.1 7,623.7 109610.2 15,999. 19,795.7 6.4 20.7 12.3 8.2 12.6 19.0 Resource Cop 737.8 1,726.4 37.5 359.2 920.8 1,114.1 1,418. 1 779.6 18.4 - 0.3 17.4 2.0 1.5 1.7 Cooso,sptls 30 ,405.4 40,064.3 41,911.7 44,457.1 49,551.2 '3,410.7 67,720.2 92.015.2 5.7 6.0 9.0 82.6 80.3 78.8 IDvest=eDot 7,168.7 10, 26.7 9,356.8 10,879.9 122,825. 15,089.7 18 867.4 23,852.7 8.0 7.8 9.3 19.5 21.2 22.9 oross Ssoostlo SiosCgs 6,430.9 8,697.2 9,308.3 10,521.7 11,994.5 13 975.6 17,449.3 22,073.1 6.5 9.6 8.0 17,4 19.7 21.2 Cross sarlo -al osclsg. 5,995.3 7,701.7 6,775.1 9,236.4 10,230.7 12,167.2 15,645.2 20,040.9 5.1 9.4 9.7 16.3 88.9 19.3 TRADE IN GO0DS A45 NFS Coersst Price-s 757 Milliso- A. % of Total 'itPOXTS, TOTAL 3,416.9 8,636.9 7,845.1 11,560.9 17511,97 26,733.8 44,506.8 71,176.9 20.4 26.2 21.0 100.0 100.0 100.0 Feed 2- 84.6 499.1 475.1 550.2 659.0 1,080.4 1,275.4 2,028.7 - 21.7 14.9 1.2 3.8 2.8 Pstcslssdm -d. 1.70 09. 107. 1733 268.1 308.4 366.-3 448.8 50.4 7.1 7.7 1.9 1.6 8.6 0F6rolee.2Dds ProduCtN406 5,845.6 5,328.1 7,500.7 11,717.2 18,3NO 3 30,652 7 73 380.3 30,66,4 3 2.3 2 20 6 85.6 8,4 .88.6 sos-Toccor servsie- 1,064.7 2,022.9 1,934.3 3,248.8 4,485.2 6,963.8 12,202.7 19,859.6 13.7 28.0 22.5 31.2 26.2 27,9 EXFORTS. TOTAL 2 75.4 6,081.7 7,795.1J. 1 0 9 5_ 58 3P4 243 192 6 40,685,9 63 305 9 17.2 31.7 20.8 188.0 180.0 100.0 OSlcrod Agrliolror1 Goods 1. 824.0 1,138.1 1947 2915 1t51W9 .,2. 5.6 29.7 9i 26 1. . Petroleu= sod Pr-ductB 38.4 460.1 1,729.4 1,793.3 3,789.3 10,777.8 2,192,9 38,885,5 64.3 87.9 26.6 1,4 24.9 59.5 8slecotd min-rols 244.3 423.4 444.9 548.8 952.2 1,095.2 1,343,6 1,844.0 11.6 23.2 11,8 8,9 6,3 2.0 f--fsctores 443-9 1,069.3 1,611.0 2,143.6 2,372.6 2, 728.9 3,514.1 5,259.9 19.2 22 3 14.1 16 2 15.6 8.1 Other Gods - 236.9 79,9 - 23.6 - - _ - - - - No-.Factor Eervceas 1,397.7 3,077.2 3,190.8 4,461.1 5,7S0.5 7,038.8 9,606.3 15,306.5 17.1 19.0 16.7 50.9 38.0 23.4 Y3ADE INDICES A-rgst 72-100 Esport Price lldes 99.1 162.0 175.8 196,0 254.5 375.9 536.3_/ 684.4 13.0 17.4 11.8 l=port Prlce Isdss 91.0 148.0 164.0 176,5 199.4 028.0 269.4 329.9 10.2 9,1 7.6 Te,ss sf Teado 96.8 109.5 107.1 109.8 127.6 164.8 199,1 207.4 2.5 7.1 4.0 OALUE ADDED l 0S0CTO0 Cosatot- 1972 P Uices, 007 Millions A. T of Tsetl prl,srs 4,136,0 4,483.9 4,765.6 4,946.8 4,922.0 5,020.4 5,326.1 5,819.9 1.6 2,5 3.0 11,2 8.4 6,2 Sa-od-ry 12,405.0 16,951.9 18,236.3 20,026.2 21,663.9 24,160.3 29,234,0 38,910.5 6.4 7.5 10.0 33.6 37 4 1. 5 Torrtary 20,406.4 27,073.9 27,982.6 29,461.9 31,900.7 34,034.1 39,095,3 49,105.0 5.8 4.8 7.6 55.2 54.3 52,3 Totgl CDP 36,970.4 48,509.5 50,968.4 54,434.8 56,786.6 63,214.9 73,655.4 93,835.3 5.6 5.6 8,2 100.0 100.9 100 C05OOLIDATED PDBLIC SECTOR FINANCES A-'% of 0DP C Rrest osrolpre 5,450.4 9,104.6 10,274.9 12,051.8 13,467.3 15,920.7 20,887.7 27,314.3 10.9 11.7 10.9 14.8 22.3 26.2 Correst £opsedi totes 3,918.4 6,6444.3 6,89077 00,18363 10,65305 12 4463.1 14,90.9 18 1 17.6 18.8 PchIto OarLogo 1~~~~~~~~",55.0 460.3 1,384,2 1,865.2 2,035.8 3,357.6 5,984.7 7,7412.6 -20.7 46.2 15, 6242 47 74 IDoossOroe 2,198.4 4,723.4 4,292.1 5,212.6 6,822.4 8,276,9 10,534.1 12,885.9 16.5 12 4 8.9 6.0 11.3 12,4 nefloft (not) 666.4 4, 243.1 2,907.9 3,343.3 3,986.6 4,919.2 4,549.3 5,143,4 44.8 2.9 2.5 1.8 6.6 4.9 ALLOGATLON OP GROSS PUBLIC SECTR 1975-79T EXPENDITURES EO-rgy 5,369.1 6,474,1 7,736.5 10,548.3 - . . I , 1804 33.3 Tegn-por- sod C-ssoitosi- 1,732.1 1,503.3 1,537.4 1,403. 2 0.0. -8.4 4 4 specCal OelforJ 4,221.9 4,602.0 4,771.6 5,338,3 Iss, S.O 16.9 lndeotry 1,640.0 1,455.6 1,392.4 1,828,5 I.a7 2.8 5 . AgeloolLUOs sod Rtral Darstopeast 1,977.1 1,617.5 1,562,7 1,474.3 =.a. -7.1 47 GegePsi A80ii5trt5-i- sod efs.a. 35,290.8 5,160.8 5,552.2 9,384.2 0,0, 29.9 29 6 Cosnaoro 1,531.7 1,434,9 1,705.2 1,444.0 =s. -8Lh 5 2 Teoriso, 63.2 73.5 53,9 48.0 =.-. -t.8 0.2 Total 19.843.9 22.323.7 24,392.5 396_8. os 19.4 180.0 DOBXSlIC PRICEt GC=eral Ptice Iodso 1972 s 100 90.4 162.0 261.4 306.5 365.1 464.2 Etchsoos Rate 12.3 12.5 22.6 22.8 22.8 22.9 SLECTED INDICATORS ~~~~~~~~~~~~~~~~~~~~~~~~1971-75 1i975-80 1980-81 ICOR 2.62 3.60 6.94 2.71 2.50 2.90 3.21 3.01 .988 1 3,66 3.88 ropers Elsstotiy 0.60 0.60 -4.63 5.20 4.00 4,90 2.00 1,00 1 .64 2.80 1.90 Oargss_l Osoigs OsRso 2,61 0.23 0.18 0.28 0.20 0.28 9,13 9,20 0.16 0,24 8.20 Is Milli- As . of Tort1 1960-1970 7. of Ader -e W- LAOR 700C0 AND OUTPUT £1R WO 0ER 1960 1970 _19 1970 Growth Rote 1960 1970 196 Gro-th Rato Agriculsure .54 5.1 50.5 39.2 -0,6 608,0 811.0 34.7 33,0 4,4 ITdostsY 2.1 3.0 19.6 23,1 3,6 2,468.9 4,136.0 140.6 145.0 5,3 .ernlces 3,2 4.9 29.9 37.7 4.4 3,222.8 4,168.7 183.6 142,0 2.3 orsta 10.7 13.0 180.0 100,0 2.0 1,755.6 2,843.9 100.0 100,0 5.0 1/ Aver-ge 9rowth rats c-lc1ltsd bIy least eqosee. 2/ This s_ri-s does sot reflect 0800i00Psoh Is i bs cltastlTchb-oo of feed. Too nev cOsssloicstin, ass p-t fia -i, es..s th-t these i. poete sate eeeelde- ably higher. 3/ Reflects inores.iog shete of oil escorts ti the tltbl. 5 isoll so lscroal s is she -elati-s prios of oil_ Apr4i 20, 1981 - 30 - BALANCE OF PAYMENTS, EXTERNAL ASSISTANCE AND DEBT ANNEX S (UD$ million at current prices) Page 5 of 5 Preliminary Actual Estimates Projections 1970 1975 1977 1978 1979 1980 1982 1985 SUMMARY BALANCE OF PAYMENTS Exports (including NFS) 2,745.4 6,081.7 7,795.1 10,92o.5 15,203.4 24,192.6 40,685.9 65,305.9 Imports (including NFS) 3,416.9 8,636.7 7,845.1 11,561.0 17,129.7 26,732.8 44,506.8 71,176.9 Resource Balance - 671.5 -2,555.1 -50.0 -639.5 - 1,926,3 -2,540.3 -3,820.9 -5,871.0 Interest. net 1 - 307.0 -1,266.5 -1,811.5 -2,292.2 - 3,199.2 -4,128.2 -4,990.2 -7,070.3 Direct Investment Income - 267.5 - 657.5 -401.4 -477.4 -587.0 -587.0 -587.0 -587.0 Workers' Remittances 122.7 174.6 251.0 277.0 320.0 352.0 425.9 566.9 Current Transfers, net 55.3 123.4 168.5 197.9 218.0 239.8 290.2 386.2 Current Account Balance -1,068.0 -4,181.1 -1,843.4 -2,934.2 -5,174.5 -6,663.6 -8,682.0 -12,575.2 Private Direct Investment 322.8 748.8 555.9 530.0 666.5 738.4 928.3 1,380.7 Public Med. and Long Term Loans, net 258.6 3,565.8 4,394.8 4,731.3 3,749.7 5,710.9 7,065.2 9,813.7 Disbursements 821.3 4,418.6 6,727.9 9,147.0 11,576.6 9,578.6 13,053.1 22,290.1 Repayments -562.7 -852.8 -2,333.1 -4,415.7 -7,826.8 -3,867.7 -5,987.9 -12,476.4 Other Capital 588.7 31.7 -2,603.1 -1,893.0 1,177.2 1,183.6 1,565.3 380.9 Change in Reservee (-= increese) -102.1 -165.2 -504.2 -434.1 -418.9 -969.3 -876.8 -999.8 GRANT AND LOAN COMMITMENTS PUBLIC MED. AND L.T. LOANS IBRD 146.8 310.0 162.0 494.5 527.0 747.0 IDA Other Multilateral 112.4 121.8 122.0 152.2' 268.4 336.0 Governments 78.8 265.2 223.3 407.8 21.2 250.0 Suppliers 69.7 158.6 105.3 133.4 2.0 300.0 Banks and Financial Institutions 443.5 3,360.7 8,250.5 8,817.8 12,240.3 4,437.8 DEBT AND DEBT SERViCE public Debt Outstanding and Disbursed 3,238.0 11,541.7 20,420.7 25,152.0 28,901.7 34,612.7 EXTERNAL DEBT (end of period) Interest on Public Debt 218.0 850.4 1,327.2 1,822.8 2,901.2 3,589.4 Outstanding and Disbursed Repayment on Public Debt 475.6 762.6 2,333.1 4,415.7 7,826.8 3,867.7 on Dec. 31, 1980 Public Debt Service (net) 693.6 1,612.9 3,660.3 6,238.6 10,728.0 7,457.1 Burden on Export Earnings 2/ (1/,) $Millions Percent a. Public Debt Service 24,2 25.8 45.5 55.7 69.1 30.4 Public M & L.T. b. Public Debt Service and Direct 33.5 36.3 50.5 60.0 72.9 32,8 Loans Investment Income IBRD 1,967.3 5.7 Average Terms of Public Debt other Off.Sournes 1,893.9 5.5 a. Interest as Y of prior year's 7.4 10.2 8.3 8.9 11.5 12,4 Other private 30,751.5 88.8 D.O. and D. Sources b. Amortization as 7Y of prior 16.3 9.2 14.6 21.6 31.1 13.4 year's D.O. and D. Total 34,612.7 100.0 IBRD Exposure a. IBRD D.O. and D. as y of 18.0 9.7 6.7 5.9 6.0 5.7 Public D.O. and D. b. IBRD Debt Service as % of 7.7 7.2 4.2 2.9 2.1 3.2 Public Debt Service - Not applicable or available February 27, 1981 1/ Includes interest on short-term private and public debt 2/ Includes wo`kers reamittaces - 31 - ANNEX II Page 1 of 9 THE STATUS OF BANK GROUP OPERATIONS IN MEXICO A. Statement of Bank Loans (as of May 31, 1981) Loan Amount less Undis- No. Year Borrower Purpose Cancellations bursed 38 loans fully disbursed 1,870.4 909 1973 NAFINSA Water Supply 79.5 8.4 968 1974 NAFINSA Roads 90.0 2.9 970 1974 NAFINSA Irrigation 47.0 13.8 1022 1974 NAFINSA Airports 25.0 3.0 1053-5 1974 NAFINSA Integrated Rural Development 38.0 20.3 1111 1975 NAFINSA Irrigation 50.0 30.2 1112 1975 FERTIMEX and NAFINSA Industry 50.0 4.2 1186 1975 BANOBRAS Water Supply 40.0 17.8 1232 1976 Ferrocarriles Nacionales de Mexico and NAFINSA Railways 100.0 4.7 1420-5 1977 NAFINSA Tourism 42.0 18.5 1462-5 1977 NAFINSA Integrated Rural Development 120.0 51.9 1524-5 1978 NAFINSA Tourism 50.0 4.3 1552 1978 NAFINSA Industry 47.0 9.9 1553-5 1978 NAFINSA Agriculture 56.0 44.0 1554 1978 BANOBRAS Urban Development 16.5 12.3 1560 1978 NAFINSA Industry 100.0 18.9 1569-5 1978 NAFINSA Agricultural Credit 200.0 4.3 969-1 1979 NAFINSA Irrigation 25.0 5.1 1643 1979 NAFINSA Small-scale Agri. 60.0 57.4 1671 1979 BANOBRAS Highways 120.0 106.5 1686 1979 FERTIMEX and NAFINSA Industry 80.0 45.7 1706-5 1979 NAFINSA Irrigation 92.0 88.6 1712 1979 NAFINSA Industry 175.0 131.2 1820 1980 NAFINSA Small and Medium Scale Mining 40.0 40.0 1858 1980 NAFINSA Irrigation 160.0 160.0 1881 1980 NAFINSA Small and Medium Scale Industry 100.0 87.5 1891-5 1980 NAFINSA Agricultural Credit 325.0 325.0 1908 1981 NAFINSA 1/ Irrigation 23.0 23.0 1913 1981 BANOBRAS I/ Water Supply 125.0 125.0 1929 1981 BANOBRAS T/ Railways 150.0 150.0 1945 1981 NAFINSA 1/ Rainfed Agri. 280.0 280.0 1964 1981 BANPESCA1/ Port Development 14.0 14.0 1990 1981 BANOBRAS T/ Urban Development II 164.0 164.0 TOTAL 4,954.4 2/ Of which has been repaid to the Bank 719.2 Total now outstanding 4,235.2 Amount sold 92.3 of which has been repaid 92.2 0.1 Total now held by Bank 2/ 4,235.1 Total undisbursed 2,072.4 1/ Not yet ettective. 2/ Prior to exchange adjustments. - 32 - ANNEX II Page 2 of 9 B. STATEMENT OF IFC INVESTMENTS (as of May 31, 1981) Fiscal US$ Million Year Obligor Type of Business Loan Equity Total 1958/59 Industrias Perfect Circle, S.A. 1/ Industrial Equipment 0.8 -- 0.8 1958 Bristol de Mexico, S.A. 1/ A.C. Engine Overhaul 0.5 -- 0.5 1961 Acero Solar, S.A. 1/ Twist Drills 0.3 -- 0.3 1962/65/ Compania Fundidora 66/68 Fierro y Acero de Monterrey, S.A. Steel 2.3 21.4 23.7 1963 Tubos de Acero de Mexico, S.A. 1/ Steel 0.9 0.1 1.0 1963 Quimica del Rey, S.A. 1/ Sodium Sulphate 0.7 -- 0.7 1964/66 Industria del Hierro, S.A.1/ Construction Equipment -- 2.0 2.0 1970 Minera del Norte, S.A, 1/ Iron Ore Mining 1.5 -- 1.5 1971 Celanese Mexicana, S.A. Textiles 12.0 -- 12.0 1972 Promotora de Papel Periodico, S.A. de C.V.1/ Pulp and Paper 2/ 2/ 2/ 1973/79 Cemento Veracruz, S.A. Cement 15.9 __ 15.9 1974/81 Cancun Aristos Hotel Tourism 1.0 0.3 1.3 1975/78 Mexinox, S.A. Steel 12.0 3.2 15.2 1978/81 Papeles Ponderosa, S.A. Pulp and Paper 9.0 3.5 12.5 1978 Tereftalatos Mexicanos, S.A. Petrochemicals 19.0 -- 19.0 1979 Cementos Tolteca, S.A. 3/ Cement 100.0 -- 100.0 1979/81 Hotel Camino Real Ixtapa, S.A. Tourism -- 3.1 3.1 1979 Conductores Monterrey, Electrical Wire S.A. 3/ and Cable 18.0 -- 18.0 1980 Industrias Resistol, S.A. 3/ Particleboard 25.0 -- 25.0 1980 Vidrio Plano de Mexico S.A.3/ Flat Glass 114.9 -- 114.9 1980 Minera Real de Angeles, S.A. de C.V. 3/ Mining 110.0 -- 110.0 1981 Celulosicos Centauro S.A. 3/ Pulp and Paper 59.5 -- 59.5 1981 Corporacion Agroindustrial, S.A. Agri-Business 11.3 3.0 14.3 Total Gross Commitments 514.6 36.6 551.2 Less Cancellations, Terminations, Repayment and Sales 379.1 22.1 401.2 Total Commitments Now Held by IFC 135.5 14.5 150.0 Total undisbursed (including participants) 150.2 3.0 153.2 1/ Investments which have been fully cancelled, terminated, written off, sold, redeemed or repaid. 2/ US$25,000. 3/ Gross commitment including amounts sold to participants. - 33 - ANNEX II Page 3 of 9 PROJECTS IN EXECUTION: PROGRESS AND PROBLEMS 1/ Ln. No. 909 Mexico City Water Supply Project: $90 Million Loan of June 18, 1973; Subsequently reduced to US$79.5 million; Effectiveness Date: April 30, 1974. Closing Date: June 30, 1981. Overall, the majority of the project works as originally defined have been completed and the physical targets of the project have been achieved. In December 1979, the Executive Directors agreed to amend the Project Description to include new works which would serve the same objective of increasing bulk water supply to the Mexico City metropolitan area and utilize a forecast loan surplus (R79-307). However, the authorities reconsidered the need for some of the works included in the new Project Description and requested that $10.5 million of the loan be cancelled. This cancellation was made as of March 6, 1981. It is expected that the remainder of the loan will be fully utilized before the closing date. Ln. No. 968 Seventh Highway Project: $90 Million Loan of March 1, 1974; Effectiveness Date: May 29, 1974. Closing Date: June 30, 1982. Substantial initial delays have been encountered in project works because of the shortage of budgetary allocations. Substantial cost increases caused by price escalation were also encountered. Taking this into account, a reduction in the scope of the project was made in August 1977, from 16 roads (1,975 kim) to ten roads and part of an eleventh road (1,216 km) which, because of cost increases, have the same total cost as the original project. The roads remaining in the project continue to be well justified as benefits have kept pace with costs. Completion is now expected in mid-1981, or about three years behind schedule. Ln. No. 970 Rio Sinaloa Irrigation Project: $47 Million Loan of March 1, 1974; Effectiveness Date: May 29, 1974. Closing Date: December 31, 1981. Project authorities have rephased construction; a substantial reduction in project scope was approved by the Executive Directors (R79-51 of March 13, 1979). Progress is now satisfactory. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution and, in particular, to report any problems which are being encountered and the action being taken to remedy them. They should be read in that sense, and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. - 34 - ANNEX II Page 4 of 9 Ln. No. 1022 Airport Development Project: $25 Million Loan of May 28, 1974; Effectiveness Date: September 16, 1974. Closing Date: June 30, 1982. Although behind schedule and still moving slowly, this project is proceeding satisfactorily. Project components that have been completed are achieving higher rates of utilization than envisaged at time of appraisal because of greatly increased air traffic in Mexico. Three of the six project airports are complete. One more will be complete by the end of this year. The last two will be finished next year. Ln. No. 1053 Papaloapan Integrated Rural Development Project: $50 Million Loan of November 15, 1974; Subsequently reduced to US$38 million; Effectiveness Date: January 27, 1975. Closing Date: June 30, 1981. Project implementation is improving after delays due to management difficulties and inadequate budget support. Reprogramming of the project is underway to adjust for these delays, and the project scope is likely to be reduced; the Executive Directors will be asked to approve a new project description shortly. At the borrcwer's request US$12 million of the loan were cancelled on March 5, 1981. An extension of the closing date is under consideration. Ln. No. 1111 Seventh Irrigation Project - Bajo Rio Bravo and Bajo Rio San Juan: $150 Million Loan of May 8, 1975; Subsequently reduced to $50 Million; Effectiveness Date: July 30, 1975; Closing Date: December 31, 1982. In view of the project's size, complexity and high cost, the Government and the Bank agreed to phase project development over a longer period of time and substantially reduce the scope of the project to be financed under the Bank loan (R77-305 of December 13, 1977 and R79-56 of March 19, 1979). Progress on most components of the revised project is satisfactory. However, some difficulties have been encountered in the execution of the land levelling component due to climatic problems and procurement practices. Ln. No. 1112 Fertilizer Project: $50 Million Loan of May 22, 1975; Effectiveness Date: July 30, 1975. Closing Date: September 30, 1981 The Bajio Urea Plant is in operation but construction of the Pajaritos Urea Plant has been delayed mainly because of material shortages and difficulties with contractors. Construction is now expected to be completed by the closing date, and no major problems are expected. The estimated cost is about 35 percent above the original budget, mainly due to increases in equipment and civil works costs. However, the project is still considered to be economically justified. - 35 - ANNEX II Page 5 of 9 Ln. No. 1186 Medium-Size Cities Water Supply and Sewerage Project: $40 million Loan of January 13, 1976; Effectiveness Date: April 26, 1976. Closing Date: January 14, 1982. Subloan agreements have been signed with all cities included in the project, fully commiting the loan. Works are progressing satisfactorily. Ln. No. 1232 Third Railway Project: $100 Million Loan of April 30, 1976; Effectiveness Date: June 16, 1976. Closing Date: December 31, 1981. The project had a slow start, traffic growth in 1976 was less than anticipated, and funding in 1976-77 (the stabiliza- tion period) was inadequate. Works are now being executed according to a revised investment plan which has been agreed upon with the Bank. Due to initial delays the project is expected to be completed by mid-1981, about two-and-a-half years behind schedule. Ln. No. 1420 Baja California Tourism Project: $42 Million Loan of July 5, 1977; Effectiveness Date: June 28, 1978; Closing Date: June 30, 1982. Construction of infrastructure at both project sites has begun. The first 250-room hotel at Loreto was completed in August 1980. Project implementation is behind schedule due to short- ages of building materials in the area. The marketing studies of domestic as well as North American tourism and the economic study of tourism have been completed. Overall, progress is satisfactory, but difficulties in internal coordination have caused disbursements to lag behind schedule. Although bottlenecks are being eliminated, the closing date was recently extended by one year to allow project completion. Ln. No. 1462 Integrated Rural Development Project - PIDER II: $120 million Loan of July 5, 1977; Effectiveness Date: October 28, 1977; Closing Date: July 31, 1981. The project is proceding satisfactorily; major efforts to decentralize project planning and execution have been made. The result is increased beneficiary participation and better coordination between executing agencies at the field level. However, decentralization, reprogramming of micro- region investment plans, and several changes in management have resulted in delay in project execution; the closing date will have to be extended. - 36 - ANNEX II Page 6 of 9 Ln. No. 1524 Tourism Development Project: $50 million Loan of March 21, 1978; Effectiveness Date: January 12, 1979; Closing Date: December 31, 1981. Progress of commitments is satisfactory and disbursements should be completed before the closing date. Ln. No. 1552 Small- and Medium-Scale Industrial Development Project; US$47 million Loan of May 4, 1978; Effectiveness Date: January 12, 1979; Closing Date: June 30, 1982. After some initial delays, the integrated program to assist industrial enterprises is making rapid progress. Forty-eight extension agents have now received full training and have been assigned to 14 regional offices. Over 80 percent of the loan has been committed. Ln. No. 1553 Tropical Agricultural Development Project: US$56 Million Loan of September 27, 1978; Effectiveness Date: January 12, 1979; Closing Date: December 31, 1983. Five of the six pilot projects have been approved by the Bank; the sixth is expected to be submitted shortly. Project authorities are making excellent progress in the agricultural development program of each pilot project. The applied research programs are proceeding on schedule. Ln. No. 1554 Lazaro Cardenas Conurbation Development Project: US$16.5 Million Loan of September 27, 1978; Effectiveness Date: February 14, 1979; Closing Date: June 30, 1982. The shelter-related component and the training centers are progressing satisfactorily, but delays still remain in the implementation of the productive credits, industrial premises and river control components and the studies. Steps to speed implementation in these areas have been recently discussed with the Government. The possibility of reallocating funds to the shelter-related components is being contemplated. Inadequacies detected in the accounting procedures of FIDELAC for the construction materials credit program have now been resolved. Ln. No. 1560 FONEI III: US$100 Million Loan of September 27, 1978; Effectiveness Date: January 12, 1979; Closing Date: June 30, 1982. Demand for industrial investment financing continues to be strong. Over 97 percent of the loan has been committed. - 37 - ANNEX II Page 7 of 9 Ln. No. 1569 Sixth Agricultural Credit: US$200 Million Loan of September 27, 1978; Effectiveness Date: January 12, 1979; Closing Date: June 30, 1982. Implementation is proceeding rapidly. The loan is expected to be fully disbursed one year ahead of schedule. Ln. No. 969-1 Rio Panuco Irrigation Project; $25 Million Loan of September 27, 1978; Effectiveness Date: January 12, 1979. Closing Date: December 31, 1981. Major project civil works are on schedule and expected to be completed by the closing date. Progress in agricultural devel- opment has been slower than infrastructure construction. The technical assistance program is being strengthened and will emphasize better water utilization and intensive agriculture. Ln. No. 1643 Small Scale Agricultural Infrastructure Project: US$60 Million Loan of February 6, 1979; Effectiveness Date: April 13, 1979; Closing Date: June 30, 1983. Most livestock and irrigation subprojects to be included in the Project have been approved by the Bank, and the Government is accelerating preparation and presentation of the balance of the program. Ln. No. 1671 Highway Sector Project: US$120 Million Loan of August 23, 1979; Effectiveness Date: October 12, 1979; Closing Date: June 30, 1984. Commitments are ahead of schedule but disbursements are behind schedule because of budget cuts in 1979 and because of delays in submitting reimbursement applications to the Bank. The authorities have agreed to increase budget allocations and speed up disbursement requests. Ln. No. 1686 Second Fertilizer Project - Lazaro Cardenas: US$80 Million Loan of May 18, 1979; Effectiveness Date: September 21, 1979; Closing Date: October 31, 1982. Orders for most of the equipment have been placed and about 30 percent of the construction work is committed with about 22 percent completed. The project is now about 17 months behind schedule and runs the risk of further delays unless implementation arrangements are improved. FERTIMEX's manage- ment is considering steps to improve implementation. - 38 - ANNEX II Page 8 of 9 Ln. No. 1706 Rio Fuerte/Rio Sinaloa Irrigation Project: US$92 Million Loan of July 30, 1979; Effectiveness Date: October 5, 1979; Closing Date: July 31, 1986. Plans and bidding documents for the Sinaloa component are well underway. Despite initial delays, the Fuerte program is now gaining momentum. Ln. No. 1712 FONEI IV: US$175 Million Loan of July 30, 1979; Effectiveness Date: October 5, 1979; Closing Date: June 30, 1984. Demand for industrial financing continues to be strong; US$125.4 million of the loan have been committed to subprojects to date, and additional subprojects requiring US$31.6 million are being considered. Ln. No. 1820 Small and Medium Scale Mining Development Project: US$40 Million Loan of August 18, 1980; Effectiveness Date: December 4, 1980; Closing Date: June 30, 1984. Project execution is being initiated. Ln. No. 1858 Apatzingan Irrigation Project; US$160 Million Loan of September 29, 1980; Effectiveness Date: December 19, 1980; Closing Date: June 30, 1987. Contracting for the main civil works has been initiated and a strengthened technical assistance program is underway. Ln. No. 1881 Second Small and Medium-Scale Industry Development Project; US$100 Million Loan of September 29, 1980; Effectiveness Date: December 22, 1980; Closing Date: December 31, 1984. About 14 percent of the loan has been committed (see previous comment on Ln. 1552). Ln. No. 1891 Seventh Agricultural Credit Project: US$325 Million Loan of August 15, 1980; Effectiveness Date: November 17, 1980: Closing Date: March 31, 1984. No major problems in implementation are foreseen. Disbursements are behind schedule because of difficulties in completing required documentation and delays in submitting reimbursement applications to the Bank. Ln. No. 1908 Ocoroni Irrigation Project: US$23 Million Loan of March 2, 1981; Effectiveness Date: ; Closing Date: June 30, 1986. The loan is not yet effective. - 39 - ANNEX II Page 9 of 9 Ln. No. 1913 Second Medium-Size Cities Water Supply and Sewerage Project: US$125 Million Loan of January 23, 1981; Effectiveness Date: June 23, 1981; Closing Date: December 31, 1984. Project implementation is on schedule. The loan is 74 percent commited. Ln. No. 1929 Fourth Railway Project: US$150 Million Loan of February 12, 1981; Effectiveness Date: June 9, 1981; Closing Date: June 30, 1984. Project execution is proceding on schedule. Ln. No. 1945 Rainfed Agricultural Development Project: US$150 Million Loan of March 2, 1981; Effectiveness Date: ; Closing Date: June 30, 1986. The loan is not yet effective. Ln. No. 1964 Ports Development Preparation Project: US$14.0 Million Loan of May 7, 1981; Effectiveness Date: Closing Date: December 31, 1984. The loan is not yet effective. Ln. No. 1990 Second Urban and Regional Development Project: US$164 million Loan of ; Effective Date: Closing Date: December 31, 1986. This Loan, approved by the Executive Directors on May 12, 1981, has not yet been signed. - 40 - ANNEX III Page 1 MEXICO INTEGRATED RURAL DEVELOPMENT - PIDER III SUPPLEMENTARY PROJECT DATA SHEET Section I - Timetable of Key Events (a) Time taken by the country to prepare project: about 18 months (b) Project prepared by: Secretariat of Programming and Budget (c) First preparation mission: February, 1979 (d) Departure of appraisal mission: May, 1980 (e) Negotiations completed in: June, 1981 (f) Planned date of effectiveness: October, 1981 Section II - Special Bank Implementation Actions None Section III - Special Conditions Conditions of Loan Effectiveness: (a) Micro-regional rural development offices would be staffed in each of the eight micro-regions that have been appraised (para 68). (b) A plan, satisfactory to the Bank, for monitoring and evaluation at the federal, state, and micro-regional levels had been issued (para 70). Conditions of Disbursement (c) Disbursement would be made against expenditures in a micro- region only if the micro-region plan had been prepared in accordance with the agreed format and appraised in a manner satisfactory to the Bank (para 57). (d) Disbursement would be made against expenditures on live- stock investments only when those investments were made in accordance with criteria agreed to by the Guarantor and the Bank (para 63). (e) It would be a condition of disbursement for the training component of the project that a detailed staff training plan, acceptable to the Bank, had been presented (para 66). 41 - ANNEX III Page 2 (f) It would be a condition of disbursement for the socio-economic studies component (Part 0) of the Project that feasibility and a specific work program, acceptable to the Bank, had been adopted (para 71). Other (g) Government-financed investment per beneficiary family would not exceed US$10,000 for livestock or soil and water conservation sub-projects would not exceed US$10,000 (para 72). (h) Beneficiaries' contribution to investment costs would be agreed to in writing before construction of works begins (para 73). (i) Before starting a small-scale irrigation work, SARH would obtain a commitment from a bank to provide credit to benefi- ciaries of the work (para 65). (j) The Bank would disburse only against sub-loans made at interest rates agreed between the Guarantor and the Bank. Interest rates on medium-term farm sub-loans would be adjusted annually to reflect changes in the cost to Mexican Banks of borrowed funds (para 76). - 42 - ANNEX IV MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT--PIDER III Estimated Project Cost ------US$ Million------ Component Local Foreign Total I. Directly Productive 155.6 42.2 197.8 A. Agricultural Development 63.8 15.0 78.8 Irrigation 27.1 9.0 36.1 Soil and Water Conservation 14.2 1.9 16.1 Fruit Crop Development 12.4 1.4 13.8 Coffee Development 8.3 2.2 10.5 Coconut Development 1.8 0.5 2.3 B. Livestock Development 46.5 15.6 62.1 Beef and Dairy 31.1 10.4 41.5 Pasture Improvement 5.6 1.9 7.5 Small-stock 9.8 3.3 13.1 C. Other 45.3 11.6 56.9 Fisheries 8.1 0.9 9.0 Forestry Development 2.1 0.2 2.3 Rural Industries 6.2 3.3 9.5 Development Credit 28.9 7.2 36.1 II. Support 67.6 14.2 81.8 Extension and Research 21.4 5.3 26.7 Rural Roads 11.3 3.8 15.1 Rural Electrification 11.3 3.8 15.1 Rural Marketing 4.3 - 4.3 Farmer Organization and Training 8.0 0.4 8.4 Feasibility Studies 5.0 0.5 5.5 Baseline Studies 3.8 0.4 4.2 Productive Programs for Women 2.5 - 2.5 III. Social Infrastructure 27.6 4.5 32.1 Education 8.4 1.4 9.8 Rural Water Supply 7.4 1.8 9.2 Health Centers 6.4 0.7 7.1 Nutrition 4.5 0.5 5.0 Self-help Materials 0.9 0.1 1.0 IV. Project Management 10.0 3.0 13.0 Monitoring and Evaluation 1.3 0.9 2.2 Organization and Management 6.2 1.5 7.7 Training and Technical Assistance 2.5 0.6 3.1 V. Base Cost 260.8 63.9 324.7 VI. Contingencies 146.6 34.4 181.0 Physical 18.5 4.3 22.8 Price 128.1 30.1 158.2 VII. Total Cost 407.4 98.3 505.7 N I A ~ W 7IBRD-15264 14NN)¶NO N C IrNN N -N NNNEEN NN N A ~ ~ ~ IN N A N N;N N ½' A A~~~~~~~~~~~~~~~~ A Cd~~~~~~~~~~~~~~~~~~~~~~~~~~~~N'S~AN NN o N0N N NGN1E4 BELIZENNCRAJ ON.O.N EL SALVADQ 0 N 0 R ~ ~ ~ ~ ~ ~ ~ ~ ~ -N- 'A.N5oN NN INNN 'N N MANNO LOCATIONS OF MICRO-REGIONS /NAdNoNNN NAAoo9NNNNNN .9 ~~~~~SINALOA ONNNANNN N/ NNNOO OA H U L -PW- d fr -SOhTh-Cu/ Poc J fl ~~~~~~~~~~~~~~~~~~~~~~~~~~~NMOCOR [TO u/f C OSALA-EL-OTA N ~~~~' EON S ~~~~~~~~ RIOSRANDE/4eA'/ - (~~~ SN ANA NM:N,, ' ~~~~~~FRESNILLOLCALERAM ex o - > r'----%.: