Mexico gets $400-mln loan from WB for rural development

February 6
11:28 PM 2016

Mexico is formally signing an agreement on $400 million loan from World Bank for rural development. The money will be used for extending financial lending to farmers and fishermen in Mexico. The Mexico's national agricultural financing agency FND will increase the lending support to small and medium enterprises (SMEs). 

Mexico, the second largest economy in Latin America, is receiving $400 million rural development loan from World Bank with a time frame of five years. Mexico's national agricultural financing agency will use these funds to lend to indigenous people, who are below poverty line. 

Bloomberg reports that women will also be major beneficiaries from the rural development financing program. Mexico's President Enrique Pena Nieto is keen on rural development and has been taking several measures for boosting growth in rural areas. About 31 percent of rural people are suffering from extreme poverty as against the 13 percent poor people in urban areas. 

Beating the forecast of 0.5 percent growth rate, the Mexican economy rose 0.6 percent for the fourth quarter of 2015, according to the data estimates by National Statistics agency. The GDP growth rate was 0.8 percent in the third quarter. However, Mexico's economy is growing at its slowest pace since early 2015. 

The Fiscal Times reports that Mexico has been suffering from uneven demand from the US. As a result, export performance of Mexico has become uncertain. The industrial sector was flat during the third quarter and services segment rose 0.9 percent. However, the positive sign is that improvement in the domestic demand amid drop in currency Peso. 

The lower inflation rate is helping Mexicans save more money. The rise in purchasing capacity of consumers is also supporting the Mexican economy. Marco Oviedo, chief Mexico economist at Barclays Plc said: "The services sector remains strong. This is likely driven by the still positive sentiment in the private sector."

The surpassing of forecast is for the fourth consecutive quarter. The inflation rate is also low. The GDP for full 2015 rose 2.5 percent as against the average forecast of 2.3 percent by 21 economists participated in a survey by Bloomberg. The National Statistics Institute will finalize the DGDP figures on 23 February. 

The World Bank's loan is helpful for implementing National Agricultural Financing Agency's lending scheme to SMEs.  Mexico's President Enrique Peña Nieto is aiming to enhance living standards in southern states such as Oaxac, Guerrero and Chiapas. The long-term strategy of the government is to control violence, drug trafficking and other illegal activities in the country, as reported by El Daily Post.

Peña Nieto assumed office as President of Mexico in 2012. The Finance Ministry has confirmed the loan approval from the World Bank. However, the press office at Finance Ministry declined to comment on the amount of loan and providing more details. 

Mexican currency Peso started moving up after the release of GDP data. Peso against US dollar rose 0.8 percent to 18.1831. Peso suffered loss of value to the tune of 6.1 percent this year so far. The interest rate hike by US Federal Reserve and drop in oil prices have been increasing risk factor to the Mexican government spending.

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