The Inter-American Development Bank has approved a conditional credit line to support rural areas in Mexico, along with a first operation for $750 million for the operation of an enhanced farmers income transfer program (Programa de Apoyos Directos al Campo, PROCAMPO).
The approved credit line totals $2.5 billion and it includes two other individual loans to be approved in coming years.
PROCAMPO was created in 1994 to compensate producers of basic crops for the effects of eliminating price subsidies due to trade liberalization, as agreed by Mexico on joining the North America Free Trade Agreement (NAFTA).
In 2009, the Mexican government extended the duration of the program owing to its coverage, effectiveness, equity and capacity to transfer income with few distortions.
The Mexican government also decided adjustments to PROCAMPO, such as increasing payments by hectare to farmers holding less than 5 hectares, and setting a cap of 100,000 Mexican pesos (US$7,500 approx.) for payments per beneficiary in each growing cycle (there are two growing cycles a year, spring-summer and fall-winter).
The main component of the first loan will help finance income transfers to farmers with holdings of up to 10 hectares. A significant portion of these resources are expected to be used by beneficiaries to improve income levels and diminish income fluctuations.
A second component of the first loan will help improve PROCAMPO’s operation, through better focalization , georeferencing and updating the list of beneficiaries, and expanding to 85 percent the proportion of beneficiaries who receive payments through direct deposits or debit cards. These actions will increase the program’s transparency, strengthen the link between beneficiaries and financial system, reduce operating costs and shorten the time needed for a transaction.
The IDB’s renewed focus on impact evaluation establishes a system for data collection, processing and analysis that will allow the Bank to estimate PROCAMPO’s impact on family and/or producer unit income depending on geographical region, size of the land holding, and other variables.
The next operations in the $2.5 billion credit line will help finance direct income transfers in coming years, as well as additional adjustments to PROCAMPO stemming from the evaluation of this first operation.
The loan was approved for a 25-year period, with a 5-year grace period, and a LIBOR-based interest rate.