L N -.4 JY ec J-r- Do';mentof - The World Bank fwtR OMCIAL USE ONLY MICROFICHE COPY RePO NQ P-5649-ME Report No. P- 5649-ME Type: (PM) KAPLAN, R./ X31920 / 14036/ LATEN MEMORANDUM AND RECOMMENPATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO TilE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$50 MILLION TO THE BANCO NACIONAL DE OBRAS Y SERVICIOS PUBLICOS (BANOBRAS) WITH THE GUARJNTEE OF THEE UITED MEXICAN STATES FOR AN ENVIRONMENTAL PROJECT MARCH 9, 1992 I This docuant has a resicted distribution and may be used by recipients only in the performance of t. he oMcil duties& Its contents may not otberwise be disclsed witbout World Bank authorization. CURRENCY EOUIVALENTS Currency Unit = Peso (MEX$) US$ 1.00 = 2991 Pesos (May 31, 1991) US$ 1.00 = 3040 Pesos (February 7, 1992) FISCAL YEAR January 1 - December 31 UITS OF WEIGHTS AND MEASURES Meaic British/US Equivalent 1 kilogram (kg) = 2.20 pounds (lb) I metric ton (m ton) = 2,205 pounds s.b) 1 liter = 0.26 gallons (gal) 1 meter (m) - 3.28 feet (ft) ACRONYMS BANOBRAS National Development Bank for Public Works and Services (Banco Nacional de Obras y Servicios Publicos) CNA National Water Commission (Comision Nacional de Agua) CONADE National Ecology Commission (Comision Nacional de Ecologia) GEF Global Environment Facility GET Global Environment Trust Fund GIS Geographical Information System PCU Project Coordination Unit SARH Secretariat of Agriculture and Hydraulic Resources (Secretaria de Agricultura y Recursos Hidraulicos) SEDUE Secretariat of Urban Development and Ecology (Secretaria de Desarrollo Urbano y Ecologia) SEDUE/SE SEDUE's Subsecretariat for Ecology (Subsecretaria de Ecologia) SHCP Secretariat of Finance and Public Credit (Secretaria de Hacienda y Credito Publico) SINAP National System of Protected Areas (Sistema Nacional de Areas Protegidas) FOR OMCIAL USE ONLY MEXICO ENVIRONMENTAL PROJECT LOAN AND PROJECT SUMMARY Borrower: Banco Nacional de Obras y Servicios Publicos (BANOBRAS) Guarantor: United Mexican States Benefciaries: Secretariat for Urban Development and Ecology (SEDUE) and state environmental entities Amount: US$50 million equivalent Terms: Repayment in 15 years, including 5 years of grace, with interest at the Bank's standard variable rate. Financing Plan: LQcal Foreign ToQta United Mexican States 46.6 - 46.6 a/ GET 28.5 1.5 30.0 IBRD 39l7 5030 TOTAL 114.8 11.8 126.6 a/ a/ Includes taxes and duties (est. US$ 13.0 million) EconomIk Rate of Return: Not applicable Staff Appraial Report: Report No. 10005-ME; dated March 9, 1992 Maps: IBRD - 23195 IBRD - 23536 This document has a restricted distribution and may be used by recipients only in the phomn Ance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIREC"ORS ON A PROPOSED LOAN TO THE BANCO NACIONAL DE OBRAS Y SERVICIOS PUBLICOS WITH THE GUARANTEE OF THE UNITED MEXICAN STATES FOR AN ENVIRONMETAL PROJECT 1. I submit for your approval the following memorandum and recommendation on a proposed loan to the Banco Nacional de Obras y Servicios Publicos (BANOBRAS) with the guarantee of the United Mexican States for the equivalent of US$50 million to help finance the first phase of the Government of Mexico's Environmezftal Program. The loan would be at the Bank's standard variable rate, with a maturity of 15 years, includixg 5 yaars of grace. 2. Country/Sector Background. Over 70 percent of all Mexicans living in urban areas. About half of the labor force lives in the three largest cities (Mexico City, Guadalajara and Monterrey), and almost a quarter of the country's industrial establishments are located in these cities. This concentration of population and industry has led to serious problems of air, water and soil pollution. There are high concentrations of ozone, carbon monoxide, fine particulates, sulfur dioxide and lead in the air of Mexico City, as well as in most of the country's large and medium-sized cities, which pose a significant health hazard to a wide cross-section of the population. Water is relatively scarce in much of the country; only 15 percent of surface waters are above the elevation of 500 meters where 75 percent of the population live and where 80 percent of industrial plants are 'ocated. Exacerbating this problem is the fact that much of the country's surface water is polluted with municipal, industrial or agricultural waste. Only two- thirds of the urban population are connected to a sewer system. Because of inadequate sanitation, waterborne diseases are still the number one cause of infant mortality in Mexico. The country also suffers from environmental problems in the rural areas. Some 80 percent of Mexico's land has been eroded to some degree; severe erosion now affects more than 40 percent of the territory. An environmental issue of global concern is the fact that the country's diverse biological resources are under increasing threat as natural habitats are converted to agricultural uses and cattle ranching. Only one-third of the country remains under forest, and only 25 percent of the forest lands are considered "intact" biologically. Similarly, although wildlife trade is strictly regulated by Mexican law, Mexico is one of Latin America's largest exporters of wildlife, as regulations are only weakly enforced. 3. The country's severe environmental problems are the result of several factors. In the past, Mexico encouraged industrialization often without prior assessment of its potential enviromnental costs. Price subsidies to consumers of water, electricity, petroleum and gas stimulated excess demand and resulted in inefficient resource use. Also, past government agricultural policy both tended to induce migration from the rural areas into a few major urban areas and supported colonization programs and credit subsidies for cattle ranching (which contributed to deforestation and conversion to pasture of large tracts of land). Consistent with the government's policy of opening the economy and reducing the intervention of the public sector in the economy, many distortionary policies and environmentally dianaging programs have now been eliminated. 4. In 1982, the government created the Secretariat for Urban Development and Ecology (SEDUE), consolidating in a single agency most of the environmental protection responsibilities which had previously been dispersed in several federal agencies. SEDUE is responsible for regulating air and water quality, ensuring that public and private sector investments meet established enviromnental criteria, -2- and managing federal protected areas. As the government experienced a severe budgetary crunch and implemented strong measures to stabilize the economy in the mid-1980s, resources available to SEDUE's Sub-secretariat for Ecology (SEDUE/SE) fell dramatically, limiting severely its effectiveness in carrying out its functions. SEDUE/SE's investment budget in 1990, although slighdy higher than the 1989 budget (the agency's low point), was only 60 percent of its 1986 level in real terms. As a result of the shrinkage in SEDUE's budget, SEDUEJSE's staff was cut in half, and, with the salaries of all but the top levels significantly below salaries in the private sector, many of the most qualified staff left. A small core of highly qualified, experienced and motivated staff have remained in top positions, but the bulk of SEDUE/SE's staff is relatively inexperienced and has tended to treat the agency as on-the-job training on their way to more lucrative private sector employment. By the end of 1990, the government began to take firm measures to strengthen the agency. SEDUElSE's 1991 budget was triple in real terms the 1990 level, and the top levels of government have emphasized the need to ensure a strong federal institutional capacity for environmental protection and natural resources management, and to reshape and strengthen SEDUE/SE to play a leadership role in this area. 5. Mexico's environmental legislation is far ahead of that of most developing countries. Article 27 of the Mexican Constitution estahlishes the obligation of the federal government to conserve the nation's natural resources and to preserve and restore ecological equilibrium in the public interest. Article 73 gives the Congress the authority to promulgate laws defining the respective roles of the federal, state and local levels of government in environmental protection. Exercising this constitutional authority, the Congress passed the Ley General del Eguilibrio Ecoloeico y la Proteccion al Ambiente (General Ecology Law) which went into effect in March 1988. It contains rules which define ecological planning and zoning, environmental impact studies, restoration of degraded ecosystems, protection of natural areas and plant and animal life, sound exploitation of natural resources, and pollution prevention and control. The law contains the framework for ensuring a more sensitive and sustainable development pattern in Mexico through improved intersectoral cooperation, increased social participation, and the creation of strog new environmental standards. The law also defines protected areas in Mexico, and provides the basis for sound management of protected areas by govermnent in close coordination with society-at-large. Finally, the law defines clearly the respective responsibilities of the various levels of government with regard to environmental protection and natural resources -management. It sets the stage for the decentralization of many enforcement responsibilities to the states and municipalities, while reserving critical functions for the federal government. Some implementing regulations and standards, however, stil remain to be issued. The institutional framework envisioned under the law would gradually free SEDUE/SE from many direct enforcement responsibilities and allow SEDUE/SE to provide training and technical assistance to state environmental agencies, and to coordinate the efforts of state and federal agencies. To date, 27 of Mexico's 31 states have passed environmental legislation. Eventually, this decentralized approach should provide a broader base for enforcement and public involvement, but in the short term investments in institutional development at the central and state levels of government, and further reform and fine tuning of the policy and regulatory framework and of state legislation are required. 6. In early 1990, SEDUE pubiished the 'National Program for Environmental Protection: 1990- 1994." This program is intended to orient the efforts of tne federal government and social groups in environmental protection. Key emphases of the program are: (i) decentralization of environmental control authority to state and municipal levels of government; (ii) ecological planning and zoning, including appropriate designation of wildlands as protected natural areas; (iii) use of the "Polluter Pays Principle" to ensure that development decisions internalize associated environmental costs, and to help defray the cost of environmental management; and (iv) improved interagency coordination. The -3 - government further clarified intentions regarding the role of SEDUE/SE in a letter to the Bank dated January 31, 1992 describing the transformation of SEDUE/SE into a second-tier institution- an insftiution that coordinates and supervises the front-line monitoring and enforcement actions of other federal and state entities, and of the private sector. 7. Project Objectives. The overall objective of the proposed project would be to support the government's ability to carry out key environmental protection and natural resource management functions in the short term and at the samne time to strengthen the institutional and policy framework to enable the govermnent to carry out these functions in a more efficient and decentralized manner in the future. The project would support the government's strategy of transforming SEDUE/SE over time into a second-tier institution as described in the government's letter to the Bank (para. 6). 8. Project Description. The project would finance the first phase of the government's environmental program concentrating on key fuictions of SEDUE/SE and setting the stage for a more decentralized approach. It would also finance activities and studies to support preparation of a second phase which would focus on state-level environmental agencies, building on the experience of the first phase. The first phase would have three components. Componej I would finance key environmental services, namely monitoring and controlling water and air pollution (29% of total costs), minimizing potential negative environmental impacts of public and private sector investment projects (11%) and conserving biodiversity (44%). Component II would strengthen sector management and administration, through institutional strengthening of SEDUE/SE (4%), a pilot decentralization program with five states (5%), and the commissioning of special studies to explore the use of economic instruments to complement the current heavily command and control approach to environmental management (1%). Component m would support the strengthening of the regulatory framework through the preparatior. of additional technical standards for pollution control and natural resource protection (3%). Preparation for the second phase of the government's sectoral program would involve carrying out four pre-investment studies and finacing the activities of a coordinating unit reporting to SEDUE/SE to prepare the program (3%). 9. The total project cost is estimated at US$126.6 million equivalent, including taxes and duties (estimated at US$ 13.0 million) with a foreign exchange component of US$ 11.8 million (9.3 percent). A breakdown of costs and the financing plan are shown in Schedule A. The protected areas program (US$38.6 million; or 70 percent of the biodiversity conservation sub-component) would be financed in part by a grant from the Global Environment Trust Fund (GET). Approval for GET financing will be sought from the Regional Vice President, LAC Region on the basis of the attached Memorandum and Recommendation of the Director of the LAC Country Department II for a GET grant of SDR 21.4 million (US$30 million) for a Protected Areas Program (Report No. 10358-ME). Approval of the GET grant would be subject to the approval by the Executive Directors of the Bank loan proposed in this memorandum. Amounts and methods of procurement and of disbursement of the proposed Bank loan and GET grant, and the disbursement schedule for the Bank loan are shown in Schedule B. Retroactive financing from the Bank loan of up to US$5 million would be granted for eligible expenditures incurred after Maruch 1, 1991. A timetable of key project processing events and the status of Bank Group operations in Mexico are given in Schedules C and D, respectively. Two maps (IBRD - 23195 and IBRD - 23536) are also attached, as is the Staff Appraisal Report No. 10005-ME, dated March 3, 1992. 10. Proiect Implementation. BANOBRAS would be the borrower and administrator of the loan, and the administrator of the GET grant. The loan and grant proceeds would be disbursed over a four year period. Components I (including the protected areas program) and m of the project, and two of the pre-investment studies for phase II of the project, would be implemented by SEDUE's general -4- directorates in the central offices and by SEDUE's state delegations. Component II would be executed by SEDUE's Coordinating Unit of Advisors to the Under-secretary for Ecology, with a series of studies on the use of economic instruments for environmental management being carried out under the direction of an inter-secretarial task fo.ce comprised of high level representatives from the Secretariat of Finance and Public Credit (SHCP) and from SEDUE. The third pre-investment study (on environmental impacts on human health) would involve participation by the Secretariat for Health, and the fourth pre-investment study (on future scenarios of near-term environmental decisions) would involve participation by the National Ecology Commission (CONADE). O rall authority for project management would be vested in SEDUE/SE, which would be assisted in project management by a Project Coordination Unit (PCU) located in CONADE. 11. Project Sustainability. The proposed project supports several activities which are intended to improve the effectiveness and efficiency of the government's environmental protection and natural resource management functions beyond the project period. By supporting the transformation of SEDUE/SE into a second-tier institution, and testing tne decentralization of environmental protection functions in up to five states, the project would contribute to a more rational and sustainable distribution of responsibilities for environmental management. In addition, the project would assist the government in introducing economic instruments to achieve environmental goals. Finally, the protected areas program, which would seek to manage resource exploitation of Mexico's protected areas in a manner tMat would not jeopardize the biological diversity contained in those areas, is expected to result in additional resources required for the conservation of protected areas (e.g. through visitors' receipts, etc.). 12. Lessons Learned from Previous Bank Involvement. A recent review of supervision experience with several Bank-financed projects in Mexico with environmental components identified three major implementation difficulties: (i) low remuneration and high turnover of SEDUE/SE staff have made it difficult for SEDUE to set and enforce technical standards effectively; (ii) inter-institutional coordination has been limited, reducing the effectiveness of the government's efforts to protect the environment; and (iii) chronic delays in the provision of counterpart funds for environmental components of Bank-financed projects have hampered project implementation. The proposed project addresses these difficulties by: (i) supporting a strategy of transforming SEDUE/SE's staff into a cadre of qualified, experienced and motivated environmental managers, as articulated in a letter to the Bank from the Government of Mexico (para. 6); (ii) supporting the establishment of a single national water quality monitoring network, and harmonization of sample collection and analysis methodologies by SEDUE/SE and the National Water Commission (CNA, reporting to the Secretary of the Secretariat of Agriculture and Hydraulic Resources, SARH) and development of a single data base of water quality indicators, all underpinned by a coordination agreement signed by the respective Secretaries of SEDUE and SARH; and (iii) requiring the allocation of adequate counterpart funds for FY92 as a condition of loan effectiveness, and reviewing the adequacy of government provision of counterpart funds in the context of formal annual project implementation reviews. 13. A general lesson from other investment projects with relatively weak institutions is the advisability of focusing efforts on a few line ministries. This simplifies implementation arrangements and Bank supervision, allowing the government and the Bank to place greater emphasis on technical rat}er than procedural issues. It also increases accountability within the government for progress on project implementation. Another lesson is the need to specify specific outputs that allow the government and the Bank to assess periodically the degree to which the project is achieving its stated goals. By holding periodic reviews on progress in achieving the expected outputs, the government and the Bank have the opportuni:y to agree on any necessary modifications in project design at an early date. The proposed -.5- project design incorporates both of these lessons. 14. Rationale for Bank Involvement. The Bank's assistance program for Mexico is designed to support the recovery of economic growth, and places special emphasis on strengthening the social sectors and on protecting the environment. Within the environmental sector, the focus is on efforts to improve resource use and productivity, as well as to ensure that policy analysis evaluaces the social costs (including environmental impacts) of potential investments and policies. Given the weaknesses of the environmental sector, Bank assistance is needed to catalyze institutional and regulatory reform and strengthening, and policy development in such areas as the efficient use of regulation and the application of the polluter pays principle. The proposed project would complement on-going and proposed projects in agriculture, infrastructure and mining that rely on an adequate institutional set-up in the environmental sector to ensure compliance with existing environmental norms. It we .-' also complement environmental components of: (i) the Forestry Development project (Ln. 3115-ME); (ii) the Water and Sanitation Sector project (Ln. 3271-ME); (iii) the Decentralization and Regional Development project (Ln. 3310-ME); (iv) the Mining Sector Restructuring project (Ln. 3359-ME); and (v) the Irrigation and Drainage Sector project (Ln. 3419-ME). A proposed Transport Air Pollution project (FY92) in the Mexico City Metropolitan Area would assist Mexico in reducing air pollution from mobile sources in the metropolitan area. A proposed Agricultural Technology Project (FY92) would support the efforts of the extension service to stem on-farm soil erosion. In addition, a work program and projects aimed at phasing out the use of ozone depleting substances are at an advanced stage of preparation. They would be financed on concessional terms under the provisions of the Montreal Protocol. 15. GET support for the protected areas program is iusti'ied because: (i) the urgency of the threats to Mexican biodiversity of global importance req1uires prompt attention which would not be financed by other sources; (ii) the program would allow the testing in several ecosystems of a variety of approaches to protecting biodiversity in the context of specific challenges to the viability of individual protected areas; and (iii) the approach to financing (i.e. a modified time-slice operation) if found successful, could be used in other countries where the legal and institutional conditions would permit the absorption of a relatively large amount of donor resources. 16. Agreed Actions. At negtations, agreement was reached: (i) on the text of a letter from the government outlining the strategy for transforming SEDUE/SE into a second-tier institution, progress toward which would be discussed at each of the annual evaluation meetings; (ii) on the timetable for the initiation, completion and discussion with the Bank of studies to be carried out under the project; (iii) that no modifications will be made to the coordination agreement between SEDUE and SARH without the prior agreement of the Bank; (iv) on the dates by which SEDUE will transfer authority to SEDUE's state delegations to review environmental impact assessments in agreed sub-sectors and to monitor compliance with established mitigation plans; (v) on the staffing and training requirements of SEDUE's central offices and state delegations for reviewing environmental impact assessments; (vi) that new procedures, satisfactory to the Bank, to facilitate public access to and comment on environmental impact assessments would be published by December 31, 1992; (vii) regarding ecological planning and zoning, that SEDUE/SE will publish in SEDUE's Gaceta Ecologica (Ecological Journal) a summary of the ecological planning and zoning criteria resulting from the exercises carried out under the project, and that the government shall make operational by June 30, 1992, in a manner satisfactory to the Bank, a geographic information system (GIS) to store the results of these exercises; (viii) regarding the institutional analysis of SEDUE/SE, that: (a) by July 31, 1992, the government will submit to the Bank for its recommendations and comment the reports of the consultants carrying out the institutional analysis, (b) on the basis of the consultants' reports and recommendations, and taking into account the Bank's -6 - recommendations and comments, the government would reorganize SEDUE according to an action program acceptable to the Bank to be prepared by December 31, 1992; and (c) the action plan would include staffing and budgeting targets to cafry out SEDUE's mandate; (ix) regarding the decentralization pilot program, that one additional state could be se:ected by the Government and the Bank at the first annual evaluation meeting, and up to two more at the second annual evaluation meeting based on agreed criteria; (x) regarding the studies on economic instruments for environmental management: (a) on the structure and composition of the inter-secretarial task force and its responsiUilities; (b) on the timetable for contracting the consultants to carry out the studies in the first year; (c) on the mechanism to agree on the terms of reference of any research and policy work to be carried out in subsequent years; (d) that the govermnent will submit to the Bank by June 30, 1993 the reports of the consultants carrying out these studies and allow the Bank one month to comment on the ryorts; and (e) that the inter-secretarial task force shall take the Bank's comments into account and will ibsue by November 30, 1993 its report on the results of the studies on economic instruments and envirounmental management and its policy recommendations and proposed plans of action; (xi) on the timetable for issuing the ecological standards to be prepared under the p :oject; (xii) that the government would maintain the PCU and continue to staff it with individuals with exporictIce and qualifications satisfactory to the Bank; (xiii) regarding monitoring and evaluation, that: (a) the government will hold quarterly evaluation meetings each February, May, August and November; (b) the Bank would have the opportunity to comment on he agenda prior each meeting, and will feceive the Bank the minutes of each meeting promptly after the meeting takes place; and (c) the February meeting shall be designated an annual evaluation meeting and shall include the participation of the Bank; (xiv) that the annual evaluation meeting will: (a) be based on the results of project monitoring contained in the minutes of the November quarterly meeting (and based on the implementation targets and goals agreed at appraisal); (b) pros Me an opportunity for the government and the Bank to discuss key project issues; and (c) conclude with agreement on an annual plan of action, including specific goals and projections for project implementation for the calendar year during which the annual review is held; and (xv) that the government and BANOBRAS would have project records and accounts audited each fiscal year by independent auditors acceptable to the Bank, and furnish to the Bank as soon as possible, but in any case no later than six months after the end of each fiscal year, a certified copy of the agreed audit reports. Prior to loan effectiveness, the government will: (i) demonstrate that adequate funds have been allocated in the federal budget fok project implementation in 1992; (ii) enter into contractual arrangement satisfactory to the Bank for the transfer of the proceeds of the loan and the GET grant from IANOBRAS (as financial agent) to the government; and (iii) issue and make effective the water pollution prevention and control regulation under the General Ecology Law. Conditions of disbursement would be, for: (i) each environmental laboratory, the preparation of architectural and engineering plans acceptable to the Bank; (ii) action programs in each state participating in the decentralization pilot program: (a) agreement between SEDUE/SE and the Bank on the detailed action plan for that state; and (b) an operating agreement acceptable to the Bank and signed by the SEDUE/SE and the state government; and (iii) purchase of satellite imagery to monitor compliance with ecological planning and zoning criteria, adoption of such criteria by the government. 17. Environmental Aspects. The proposed project (rated "C") is designed to strengthen the capability of the Government of Mexico to manage the country's natural resources and to protect the environment. No adverse environmental impacts are expected. 18. Proect Benefits. Mexico's environmental problems are grave. The country can benefit from investment in establishing an adequate institutional and policy framework for systematically addressing these problems. The key functions component would result in reduced air and water pollution, systematic evaluation of potential negative environmental effects of public and private sector investments and design of mitigating activities, and protection of Mexicp's endemic sand endangered species. 'he sector management component would result in advances in strengthening management within the federal environmental agency, experience in strengthening states' abilities to carry out front-line environmental protection functions, and economnic analysis and policy to complement the current command and control approach. 19. Rislk. By the time of the closing date, the proposed project is expected to increase the recurrent costs of SEDUE/SE by about 30 percent above the current level. However, SEDUE/SE's 1991 budget accounts for less than 0Q2 percent of the total federal budget, and this increase should be fully within its absorptive capacity if the government's current strong political commitment to environmental improvements is maintained. Two potential risks are: (i) a decline in the govermment's resolve to strengthen SEDIUE and to address aggressively enviromnental problems; and (ii) inability to establish a policy framework that would enhance sufficiently SEDUE's ability to sustain increased recurrent costs. Given the government's strong commitment to improving the environment, and the policies expected to be developed by the inter-secretarial Task Force on Modernization of Environmental Management and provisions under the project for monitoring the adequacy of the budget, these risks are considered to be acceptable. 20. Recommedatiin. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and recommend that the Executive Directors approve it. Lewis T. Preston President Attachments Washington, D.C. March 9, 1992 Sgbedule A MEXICO E3nvironmental Prejl g.iat..Costs and Financing Plan EstimaedCost Loca Foreign Total - (US$ millions) (a) Key functions component 25.4 8.2 LOU i. Pollution control 30.1 5.3 35.4 ii. Environmental impact 11.9 1.1 13.0 iii. Biodiversity 53.4 1.8 55.2 (b) Modernization of Envir. Mgt. 8 1 i. Institutional strengthening 1.5 2.8 4.3 ii. Decentralization 5.5 0.0 5.5 iii. Economic instruments 1.1 0.0 1.1 (c) LegislationIregulations/standauds 4.1 041 (d) Studies 2 1 0.1 O (e) Project coordination unit 1.2 0. 112 Base cost estimates (a-d) !lQ09 11.2 .122, (e) Contingencies i. Physical 0.6 0.3 0.9 ii. Price 3.3 0.3 3.6 PROJECT COSTS 114.8 X. 126.6 (of which taxes) 13.0 Financing Plan: US$ millions. (S IBRD 50.0 39 a/ GET 30.0 24 Government of Mexico 46.6 37 a/ 44% of total project costs net of taxes -9- Schedue H page I of 2 MEXICO Environmental Project Procurement Methods and Disbursement Schedules Procurement Methods: Category LBOthICBer Total US$ millions------- Civil Works 8.9 1.5 10.4 (1.7) (0.6) (2.3) 16.51 10.61 17.11 Goods 9.3 6.2 3.8 20.3 (5.5) (2.9) (0.7) (9.1) [2.21 [2.11 11.91 16.2] Studies and Training 45.3 a/ 45.3 (28.6) (28.6) [681 16.81 Incremental operating 8.0 43.9 51.9 expenses (2.5) (7.5) (10.0) [0.71 [9.21 1 9.91 9.3 23.1 94.2 126.6 (5.5) (7.1) (37.4) (50.0) [2.21 [9.3] [18.51 [30.01 (Figures in parentheses are the respective amounts financed by the Bank loan; figures in brackets are the respective amounts financed by the GET grant) a/ Consulting services to be procured following the August 1981 Badk Guidelines for the Use of Consultants by World Bank Borrowers and by the Bank as Executing Agency. - 10- Shedue b page 2 of 2 MELXICO Environmental Project Allocation of Loan Proceeds: Amount of the Loan % of Allocated (Expressed Expenditures Cate&or in US$ million Equivalent) to be Financed 1. Goods and equipment 8.3 100% of foreign; 75% of local 2. Civil works 2.0 100% of foreign; 75% of local 3. Studies and Training 25.7 100% of foreign; '5% of local 4. Operating expenses 9.0 60% up to US$5 (except salaries for million; thereafter, peimanent staff) 30% up to US$ 8 million; thereafter, 10% 5. Unallocated 5.0 TOTAL 50.0 E3stmated Loan and Grant Disbursements: Bank FY: 92 93 94 95 96 -- in US$ millions ---- Bank lan Annual 8.0' 17.0 12.0 9.4 3.6 Cumulative 8.0 25.0 37.0 46.4 50.0 EIT grant Annual 3.1w 6.8 9.2 9.0 1.9 Cumulative 3.1 9.9 19.1 28.1 30.0 Cumulativetotal 11.1 34.9 56.1 74.5 80.0 Including retroactive financing of up to US$5 million for expenditures made after March 1, 1991, and ihe initial deposit of US$5 million into the special account for the Bank loan. Including the initial deposit of US$2.5 million into the spF'cial account for the GET grant. - 11 - Schedule C MEXICO Environmental Project Timetable gf Key Project Processing Events (a) Time taken to prepare: 8 months (b) Prepared by: Government of the United Mexican States with Bank assistance (c) First IBRD mission: November 1990 (d) Appraisal mission departure: June 1991 I/ (e) Negotiations: November 1991 1/ (f) Planned Date of Effectiveness: April 1992 I/ The protected areas program (proposed for GET grant financing) was appraised and negotiated in February 1992. - 12 - MEXICO - ENVIRONMENTAL PROJECT Schedule D STATUS OF DANK GROUP OPERATtONS IN MEXICO Page 1 of 2 .......,......................................... A. STATEMENT OF BANK LOANS (As of 0ece0ter 31, 1991) AInount in USS miltion (less cancellation) Credit/ Fiseal .................................... Loan Va. Year Borrower Purpose Bank IDA Undisbursed 91 loars fully disbursed 9,391.41 of which SECALs, SALs, Program Loans, and Interest Support a* Ln. 1929-NE 1981 SANOSRAS Railway IV 149.88 Ln. 2331-ME 1983 BANCOMEXT Expert Development 349.33 Ln. 2882-NE 1988 SANCOMEXT Trade Policy Loan It 500.00 Li. 2918-ME 1988 AFItN Agricultural Sector Loan 300.00 Ln. 3159-NE 1990 BANCOMEXT Interest Support Loan 1,260.00 Ln. 3207-NE 1990 BANOSRAS Road Transport & Telecom 380.00 Subtotal 2,939.21 Ln. 2428-ME 1984 BANOtRAS Highway Sector It 200.00 0.02 tn. 2450-ME 1984 BANPESCA Lazaro Cardens jnd. Port 38.25 11.02 Ln. 2526-N! 1985 KAFIR Chiapas Agricultural 0ev. 58.00 23.36 tn. 2546-NE 1985 WAFIN Smull/Mediua-Scale Oev. It 105.00 1.41 Ln. 2575-1E 1985 BANOSRAS Railways V 300.00 51.87 Ln. 2638-ME 1986 AIAFtN Agricul. Dev. Proderith it 88.30 61.95 Ln. 2666-ME 1986 BANOBRAS munfiipal Strengthening ' .00 35.45 tn. 2669-HE 1986 SANODRAS Solid Waste Management Pilot _ -00 15.73 - Ln. 2745-ME 1987 BANCOMEXT Trade Policy Loan 1 500.00 3.31 Ln. 2746-YE 1987 WAfIh Industrial Recovery 150.00 7.55 Ln. 2747-N! 1987 NAFIN Industrial Technology Dev. 48.00 15.14 * tn. 2777-NE 1987 SANCONEXT Export Developaent It 250.00 7.81 Ln. 2824-1E 1987 BANOBRAS Urban Tranrpoft 125.00 70.74 Ln. 2837-ME 1987 NAFIN AgriculturaL Credit IX 400.00 0.81 Ln. 2858-NE 1987 NAfIN Sm/Nediuu-Scalt Indus. IV 100.00 26.92 -n. 2859-ME 1987 NAFIW Agricultural Extension 20.00 5.24 Ln. 2875-ME 1987 DANOSRAS Nfghway Naintenae 135.00 77.26 Lii. 2876-ME 1988 NAflN Manpower Trafning 80.00 14.79 tn. 2916-NE 1988 WAFIR Steel Sector Restructuring 321.01 135.40 •Ln. 2919-ME 1988 NAfIN F*rtilizer Sector 265.00 35.24 Li. 2946-ME 1988 BANOBRAS Ports Rehabilitation 50.00 13.34 Ln. 2947-ME 1988 BANOSRAS Housing Finance 300.00 11.45 * Ln. 3047-N 1989 NAFIN Industrial Restrueturing 2S0.00 95.89 Ln. 3083-NE 1989 KAFIR Hydroelectric Dvlophient 460.00 277.38 * Ln. 3085-tE 1989 FANCOtT Financial Sector Adjustment 487.14 1.75 *Ln. 3086-HE 1989 NAFII Public Enterprises Reform S00.00 0.71 * Ln. 3087-ME 1989 NAftl Industrial Sector Policy 500.00 2.49 Ln. 3113-NE 1990 WAFIt Forestry Developmnnt 45.50 40.18 Ln. 3140-NE 1990 BANORAS Low-Ilnme Nousng II 350.00 198.38 Ln. 3141-NE- 1990 AFIN Agriculturing Marketing It 100.00 4.26 Ln. 3189-ME 1990 NAFIN Transmission £ Distribution 450.00 300.60 Ln. 3208-ME 1990 DSAOBRAS Telecom. Technical Assist. 22.00 19.00 Ln. 3271-Ni 1991 BANOBIAS Water Supply & Sanitation 300.00 218.16 Ln. 3272-wN 1991 MAFIN BasIc Health Care 180.00 170.00 Ln. 3309-ME 1991 SANCOMPEX txport Sector 300.00 201.29 Ln. 3310-ME 1991 WAFIN Decent. & Regional bevetp. 350.00 314.95 * Ln. 33S7NME 1991 WAPIt Agricultural Sector AdJ. It 400.00 219.68 Ln. 3358-NE 1991 NAFIt Technical Training tII 152.00 142.00 L. 3359-ME 1991 WAFIN Mining Sector Restructuring 200.00 179.99 tn. 3407WNE 1992 WAFIt Primary Education 250.00 238.09 Ln. 3419-NE bP 199M2 WAFt Irrigation & Drainage S ctor 400.00 400.00 ........ ...... . ........ ........... Total 18,686.61 3,650.61 Of Which ha been repafd 4,778.77 ............ Total nom held by the Bank 13,907.84 Amtont sotd : 92.34 Of which has been repaid: 92.34 Total Undisbursed . 3,650.61 3,6o50.61 ,,......._..,..........,_,_.... au Approved durins or after FY80 and fully disbursed. MPdS.: LA2C1 t> Met yet effective. Fitt w8-12-91.wkl *SA, SECMA, or Progras Loan uider ftp(etantation. February 24, 1992 - 13 - MEXICO - ENVIRONMENTAL PROJECT Schedule D "EXICo Page 2 of 2 B. STATV4EWT OF IFC INWSTMSETS AS of December 31, 1991 CUSS Fil l i on) ----i- ---Origi--ul Approvals--- Year Obligor type of Business Loan Equity Total ,,,,............ _v__......... ___............ ..... ............ ....................... A.......................................................__._.... ......_ 195/9 Itdstrias Perfect Circle, S.A. a/ Industrial Equipment 0.80 0.00 0.80 1958 Bristol de Mexico, S.A. a/ Aircraft Engine Overhaul 0.50 0.00 0.50 1961 Aceros Solar, S.A. a/ Twist Drills 0.30 0.00 0.30 1962W56/8 Fundidora Monterrey, S.A. a/ Steel 2.30 21.40 23.70 1ff3 Tubas de Acero de Mexico Stainless Steel Pipes 0.90 0.10 1.00 1963 uimica del Ray, S.A. a/ Sodium Sulphate 0.80 0.00 0.80 1964/66 Industria del Nierro, S.A. Construction Equiprnt 0.00 2.00 2.00 1970 inrera del Norte a/ Iron Ore Mining 1.50 0.00 1.50 1971 Celmse Mexicana, S.A. of Textiles 12.00 0.00 12.00 1972 Proitora Papat Periodco, SACV A/ Pulp and Paper b/ 0.00 0.00 0.00 1973/79 Cementos Voracru, S.A. ao Cement 15.90 0.00 15.90 1974/81 Cancun Aristos Hotel aJ Tourism 1.00 0.30 1.30 197378 lexinox, S. A. 8/ Stainless Steel 12.00 3.20 1S.20 1978/81J83 Papeles Ponderosa, S.A. e/ Pulp and Paper t0.70 5.00 13.70 1978 Tereftalitos Nexicanos, S.A. a/ Petrochemicals 19.00 0.00 19.00 1979/81/86 Hotet Camino Real Ixtapa, S.A. Tourism 0.00 4.20 4.20 1979/83 Eapressm Tolteea, S.A. Caemnt 168.00 8.00 176.00 1979f91 Conductores Monterrey, S.A. Electrkal Uire & Cable 21.40 0.00 21.40 1980 Indistrias Resistot S A at Partiele Board 25.00 0.00 25.00 1980 Vidrio PIao de Mexico, SA. Flat tlass 114.90 0.00 114.90 1980 Mi ners Real do Angeles, S.A. a/ Mining 110.00 0.00 110.00 1980 Corporaclon Agroindustrial S.A. , Agribusiness 11.30 3.00 14.30 1981/86 Celulosicos Contauro, S.A. a/ Pulp and Paper 59.50 0.00 S9.50 198 Capital Goods Facility a/ Capital Goods Finncing 100.00 0.00 100.00 1984/87 Ietalsa, S. A. Auto Chassis 8.00 1.40 9.40 1984 Protelson, S.A. de C.V. e/ Agribusiness 2.00 0.80 2.80 1984/90 Promeciones tidustriales Mexicanas, S.A. Petrochemicals 36.40 0.00 36.40 1986/8 Celulosa y Papel de Ouranso, SA de CV Pulp and Paper 10.00 3.10 13.10 ¶986 Agromx Phase I (AESA) a/ Veg. and Fruit Processing 1.50 0.50 2.00 1986 Cicas Coretr uawr Fac ct Constr. Guarantee Facility 20.00 0.00 20.00 1987 Industrias Sutfamex S A. de C.V. Chemicals & Petrochemicals 2.00 0.50 2.50 198? Sealed Power de Mxico Auto Assembly 9.00 0.00 9.00 1987/91 Crescent Market Aggregates Cotruction Materials 73.00 0.00 73.00 1988/91 Apasco, S.A. de C.V. Cement & Cons. Haterials 91.00 0.00 91.00 1980 Satual, S.A. de C.V. Food awd Food Proesing 21.00 2.00 23.00 1988/92 Polimr (AlL), A.S. de C.V. Petrochemicalt 19.10 0.00 19.10 1989 Grupo feama/Vise Consumer Goods Conglomorat 80.00 27.60 107.60 1989 Sanas Sorffn Development finance 60.00 0.00 60.00 1989 Cewntos Moxicanos Cemnt & Const. Materials 68.00 0.00 68.00 1990/91 Condinex, S.A. de C.V. Electromanufacturlng 53.00 9.54 62.54 1990 Indelpro, S.A. de C.V. Petrochemicals 30.00 0.00 30.00 1990 lanco Natiomnl do exico Developent Fitnae 60.00 0.00 60.00 1990 Ransomer Credit Line Oevwelopant Finance 20.00 0.00 20.00 1991 Mexico Fund Money & Capital Markets 0.00 6.60 6.60 1991 Petrocel, S.A. Chemicals & Petrochemicals 32.00 0.00 32.00 1991 Vitro Flotado Class & Related Manufac. 126.00 10.20 136.20 1991 VVitro, S.A. d/ Glass & Retated Mnajf. 0.00 8.00 8.00 ¶991 . CeLuter do Telefoeni S.A. de C.V. Telecommunications 52.00 1.00 $5.00 1991 Grupo Industriat 0imbo, 8A de CV Bakery 100.00 0.00 100.00 1992 Aislantes Leon S.A. de C.V. Battery Mnufacturing 10.00 7.00 17.00 1992 lanco Mecwonal de Mexico f/ Development Finnce 40.00 0.00 40.00 1992 Lomeo Mercantil del Norte, S..C. f/ Development Finnce 20.00 0.00 20.00 Cross Total Commitments O/ 1731.80 t25. 1857.24 Less Cameetlations, Terminations, Repayymnts and Sales 1081.50 6.tO 1147.60 Totat Comitments Nov Held by IFC 650.30 59.34 709.64 T"-A Undisbursed (Including Participants) 125.60 0.00 125.60 a/ Irwestments uhich have been fully cancelled, terminated, written off, sold, redeemed or repaid. b/ US$2,000. ¢/ Loan Wut includes gusrontee of 20 mlltion (Cicasa). d/ Rotudes xc derwritlg and placements of 515.0 miLlion (Apesco), 520.0 mIllion (Vitro), ad $19.8 iltlion (Conrdmx). mdeI ilva: LA2C1 - / Excludes swap tranctions (Banca Serfn tlSS6.5 milLion and Indelpro S6.0 million). ZFC-12-91.wk1 t/ Approas not yet signed. Feb. 28, 1992 liRD 2319S ^ 4> ~~~~~~~~~~~~~~~~~~~~~UNITED STATES Of AMERICA CAUlFOfdit .W. C H I H V A H U A 5 O N O 1R A S\, M erifl 1 0t (-si<& 8 tt;uduo 0tw| / inL.%& MEXICO . - ' oto --- (- ,!~~~~~~~~~~~~b ENVIRONMENTAl PROJECT OAJA C5"' 0 ' A H V I I Aw+ CAIl Of NsA t*b SVf i: ., - ° > FX,.fhi X e, -) sm CMR' FOR CONC OiF WLDUF RC \~~~~~~~~~~~~~~~~~~~~~~~~~ V E V 0 _3 K*w aNmqt ?* A° Pouc 5A / - 9 W fg~~~~~Cu L D U f A N G O ../ ' ' ' ' v. S V 'f - 2 R~~~~~~~~~~~~~~~~AMAVOIPAS ° PCFALCMES OR 1WMi huN "'2A§S / ^rCArf" / ! c-S . 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NATIONAL CAPITAL c (3CQliecon D t1 it X ^ /' to ) < \ ; (3 STATE ti4S~~~~~~~~~~~~~~~~~~~~~~STAE APIAL t3oterrav M atVaoiraa - STAtE BOUNDARES topa, Ciudad INTERNATIONAL BOUNDARIES .oactido ((j t' 9Cb. S. t- z~~~ 3 acatecascio, 0 t0020t-° n t ~~~~~~~~~~~~~~9 "v "; A >17 NA 140/C ~~~~ > Sea t0.uisPcaos i 0.Tampica AM LAGAITOS a liLA :sAaa0 \ AgNA taInlao ,. .- al Topic t,%(40 rW ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~A )-*l- Fudint .'A it"/''8lQ{OD 5 r F 47rl/1% MeuidaPs/ OLet0 | / OGuanauaIa i_, APOO 1 IA TAN VA W I - ~~ ~ ~~~~ 'A Quere(ar '. ,,,k -xt plo CQLIf' 2 tWIC"d$ A .- I S[ r 0 --f Rf f \ t A) J rl ALYJPUkOO IAOArA NA NiWIGAAN 4QMEXICO 't Yilt o, Tse xe PW ACe 5oo z N-i b O J° 9 Mt)NES@%o L , i i~~~~~M T 9~a Po -~~~~~~~~~~~~~~~~Cja' Mae--8 ..te10 rtA®XGATML _cfndhfrrXlMvellitr~ ~ ~ ~ ~~~~ ~~~~~~~~) rm: MAW 'AOvr '~~~ A) -, ~~~MONACA N,ac = heua cum'o0m ib. 0 i -. x. ~~~~~~~~~ABASCO VV~e~j Crt/mpl4ml.p.o ot MLf - __H LAG(NASOE ~ ~ ~ ~ AGA Zy Lark atop. Thoda,aokafto. &0o4 aid A. bacorkoto. .Ira.aa - IA~Aco.1coo T A"~ car N-,.. _k. _ ep lIL. IOU' 'p..d 9,LJ' 7.i.. %,.R r 1.09 6F