FILE COPY Appraisal of Fertilizer Project · Report No. 734-ME FILE COPY Appraisal of Fertilizer Project Mexico May 5, ... 3-4 Ratio of Urea Nitrogen to Total Nitrogen Fertilizer

Report No. 734-ME FILE COPYAppraisal ofFertilizer ProjectMexicoMay 5, 1975

Industrial Projects Department

Not for Public Use

Document of the International Bank for Reconstruction and DevelopmentInternational Development Association

This report was prepared for official use only by the Bank Group. it may notbe published, quoted or cited without Bank Group authorization. The Bank Group doesnot accept responsibility for the accuracy or completeness ot the report.

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CURRENCY EQUIVALENTS WEIGHTS AND MEASURES

Mex$1.0 = US$0.08 1 Metric Ton (ton or MT) - 1,000 kilogramsMes$12.5 = US$1.00 1 Kilogram (kg) = 2.205 pounds (lbs)

1 Kilometer (km) = 0.62 miles1 Hectare (ha) = 2.47 acres1 Cubic Meter = 1 m3

= 35.3 cubic feet (cu. ft.)1 Normal Cubic Meter of Gas (Nm3) 37.3 Standard

Cubic Feet of Gas (SCF)1 MSCF = 1,000 SCF

PRINCIPAL ABBREVIATIONS AND ACRONYMS USED

BHC Benzene HexachlorideCONASUPO Compania Nacional de Subsistencias PopularesDAP Diammonium PhosphateDDr Dichloro-diphenyl-trichloroethaneFFM Fosfatados Mexicanos S.A.GOM Government of MexicoGUANOMEX Guanos y Fertilizantes de Mexico S.A.HYV High Yielding VarietyK20 Potassium (potash) content in FertilizerIW KilowattKWh Kilowatt hourMW MegawattN NitrogenNAFINSA Nacional Financiera S.A.NPK Complex FertilizersP205 Phosphatic content in FertilizerSSP Single SuperphosphateTPD Tons per DayTPY Tons per YearTSP Triple Superphosphate

FISCAL YEAR

July 1 - June 30

MV= cO

APPRAISAL OF FERTILIZER PROJECT

Page No.

SUMMAABY AND CONCLUSIONS ..... ................................ -

I. INTRODUCTION .................. ................................ 1

II. THE FERTILIZER INDUSTRY AND GUANOiMEX ....... ..................... 1

A. The Mexican Fertilizer Industry ............................. IB. Description of Guanomex . ... ...........* ..................... 2C. Organization and Management ...................... 3D. Past Production and Financial Position . ................ 3

III. THE MARKET .................................................. 7

A. Agriculture in Mexico and the Need for Fertilizers . ......... 7B. Fertilizer Supply and Consumption .......................... 9C. Fertilizer Distribution ..................................... 13D. Fertilizer Prices ................................. . ...... 13E. The Market for Insecticides .. 13

IV. THE PROJECT ....................................... 1

A. Project Scope ............................ 14B. Technology .. 15C. Utilities ............................. 15D. Employment and Training .......................... 16E. jcology and Safety .................................... . . 16F. Project Execution 16

V. CAPITAT COST ESTLMATES AND FINANCINGI PLAN ...... .......... 17

A. Capital Cost . . ............... 17B. Financing Plan ................. 19C. Procurement . . . ........... . 20D. Allocation and Disbursement of Bank Loan ......... ........... 20

VI. FINANCIAL ANALYSIS .. ........................................... 21

A. Analysis of the Project ............... a....... 21B. Financial Rate of Return and Sensitivity Analysis ,.. .... 24C. Financial Forecasts for Guanomex . . . ........... ............. a 24D. Financial Covenants . . . .................. 25E. Major Risks. .. . ........................ 26

This report was prepared by Messrs. Tarnawiecki, Brown, de la Balze, Pratt,Carpio, Suebsaeng and Becher of the Industrial Projects Department

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Page No.

VII. ECONOMIC ANALYS IS 26

A. World Fertilizer Prices ......... 26B. 'Economic Rate of Return ......... 27C. Direct Foreign Exchange Savings ..... 28D. Other Benefits ...... 28

VIII* AGREEMENTS 28

ANNEXES

1-1 Glossary of Terms used in the Report1-2 Units and Conversion Factors2-1 Description of the Company2-2 Organization Chart of Guanomex2-3 Manufacturing Units of Guanomex2-4 Historical Financial Statements3-1 Crops and the Need for Fertilizers in Mexico3-2 Historical Development of Fertilizer Supply and Consumption3-3 Agro-Chemical Inputs according to an Agricultural Sector

Model for Mexico3-4 Ratio of Urea Nitrogen to Total Nitrogen Fertilizer Consumption

in Selected Countries3-5 Fertilizer Supply and Consumption Projections3-6 Imports of Urea in Selected Countries3-7 Description of Conasupo3-8 The Role of Organo-Phosphorus Insecticides4-1 Description of the Projected Plants4-2 Feedstock for Ammonia Plants in Mexico4-3 Parathion Manufacture5-1 Total Capital Cost Estimates for the Project5-2 Capital Cost Estimates for the Sub-projects5-3 Schedule of Capital Expenditures and Escalation Factors5-4 Estimation of Permanent Working Capital5-5 Disbursement Schedule for IBRD Loan6-1 Assumptions used for Financial Projections6-2 Manufacturing Costs of Different Production Units of Guanomex6-3 Projected Income Statements for the Project Alone6-4 Profit and Cash Flow Break-even Charts6-5 Projected Balance Sheets and Cash Flow Statements for the

Project Alone6-6 Cost and Benefit Streams for Financial Rate of Return Calculations6-7 Projections for Existing Facilities6-8 Consolidated Financial Projections7 Cost and Benefit Streams for Economic Rate of Return Calculations

MAP IBRD 11494 - Location of Plants and Marketing Areas

MEXICO

APPRAISAL OF FERTILIZER PROJECT

SUMMARY AND CONCLUSIONS

i. This report deals with the appraisal of a fertilizer project inMexico comprising two plants with a total capacity of 2,500 tons per day(TPD) of urea and the expansion of an insecticide (parathion) plant from7,500 to 10,000 tons per year (TPY). One of the urea plants (1,000 TPD)and the insecticide plant to be expanded are located at or near Salamanca,in the State of Guanajuato, and the other urea plant (1,500 TPD) at Coatza-coalcos, in the State of Veracruz. The plants will be owned by Guanos yFertilizantes de Mexico (Guanomex), a fully-owned Government corporation,with major responsibility in the manufacture and distribution of fertilizer.The feedstock will be ammonia produced from natural gas by Petroleos Mexicanos(Pemex), the government agency which has exclusive rights to extract, refineand distribute petroleum and natural gas, and operate basic petrochemicalindustries. Total financing required for the project is estimated at US$150million, US$53 million of which is in foreign exchange (including US$7million in interest during construction). A Bank loan of US$50 millionequivalent is proposed, to be made to Nafinsa and Guanomex, and guaranteedby the Government.

ii. Chemical fertilizer consumption grew in Mexico at an average rateof 10.4% annually in the last decade reaching in 1973 a total of 750,000nutrient tons, of which 75% is nitrogen (N), 21% phosphate (P205) and 4%potassium (K20). The present average rate of fertilizer application inMexico (29 nutrient kg/ha)--although nearly twice that for all developingcountries combined-- is below the world's average of 50 kg/ha. Furthermore,the Mexican average masks a wide range of fertilization levels from nearlyoptimum dosages in flat irrigated land in the northwest to none in many rain-fed highland areas (it is estimated that fertilized land--now about 5.7million ha--can be doubled). Nitrogenous fertilizer consumption is expectedto grow at 8.7% annually through 1985 consistent witlh the findings of a modelfor Mexican agriculture developed jointly by the Government and the Bank.

iii. Mexico has a well developed fertilizer industry based on extensiveresources of natural gas and sulfur. At present, production and consumptionof finished fertilizer are roughly balanced, but practically all the phos-phate rock and more than one third of the ammonia required has to be imported.During the 80s, however, Mexico is expected to become substantially self-sufficient in fertilizer raw materials. Recent finds of phosphate depositsin Baja California and an aggressive program to further prospect for anddevelop natural gas resources and to build additional capacity for the pro-duction of ammonia and petrochemicals coupled with adequate infrastructure,experienced manpower, and competent technical and managerial personnelshould provide the basis for Mexico to become independent of imports andpossibly a net exporter of fertilizers.

iv. Production and distribution of fertilizer in Mexico is mainlycarried out by three enterprises, two of which are fully Government-owned(Pemex and Guanomex) and a third which is a joint public and private sectorenterprise: Fosfatados Mexicanos S.A. (FFM). Guanomex now operates 16fertilizer plants with a combined capacity of 437,300 TPY of N. The Companyis efficiently run, has a good record for plant construction and in 1973-74operated available nitrogen capacity at 80%, less than it would most likelyhave achieved had it not been constrained by a shortage of ammonia in theworld market. Guanomex has a sound financial structure. The Government isaware of the importance of pesticides in agricultural production and hasgiven Guanomex an important, but non-exclusive role in their manufactureand distribution.

v. The project envisages the utilization of modern, proven technologyfor the manufacture of urea and parathion, using the assistance of experiencedengineering firms. In agreement with the Bank two of the firms--FosterWheeler Energy Corp. (US) and Atlas Foster Wheeler Mexicana--have alreadybeen contracted for the 1,000 TPD urea plant. Furthermore Guanomex has setup a Project Execution Team to implement the project with similar responsi-bilities as in earlier projects and the Bank considers this arrangement to besatisfactory. The insecticide plant expansion involves little new in processor equipment and, with the advice of the licensor--Stauffer of the US--nodifficulties are expected.

vi. The proposed Bank loan would be made for 14 years, including3-1/2 years of grace. Guanomex would pay 12% per annum interest with thedifference of 3-1/2% over the assumed Bank interest rate of 8-1/2% accruingto the Government. The loan will finance equipment procured through inter-national competitive bidding; long-lead imported equipment which, because ofbeing critical to the completion of the project, will be procured from alimited list of suppliers; items under US$50,000 procured by internationalshopping; and fees for process licensing and engineering services. To main-tain the schedule of the Bajio II urea plant, the Bank has agreed to theadvanced contracting of engineering services and long-lead equipment andGuanomex has been advised that, subject to approval of the loan by theExecutive Directors, up to US$3.6 million will be reimbursed to Guanomex fordown payments on these contracts. The balance of the financing required willbe met by raising Guanomex's equity by Mex$750 (US$60.0) million and long-termborrowing of Mex$502 (US$40.2) million from Mexican and foreign financial insti-tutions.

vii. During the initial years of operations of the two new urea plantsup to 36% of their output may have to be exported. Based on expected ureaprices of US$122 per ton delivered to retailers in Mexico and US$93 per tonf.o.b. for sales abroad in those years when exports have been projected tooccur, the project is forecast to yield a financial rate of return of 14.5%after income taxes (20.3% before taxes). The financial position of Guanomexis projected to remain sound; it will be safeguarded by a number of financialcovenants and further improve as loans are repaid, reserves are built up, newefficient plants are built to replace some of the obsolete units and newpolicies now being developed on fertilizer distribution, transportation andinventories are implemented.

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viii. Long-term international prices per ton of urea and ammonia areprojected to be US$130 CIF Mexican port and US$88 delivered at factory siterespectively. For the part of urea projected to be exported between 1979and 1982, estimated FOB US Gulf prices have been used in the calculation ofthe project benefits. On this basis, the project's economic rate of returnis 24.0%. A drop of 10% in the urea price would depress the return by 6.2percentage points. Lower capacity utilization (at 80%) would result in areturn of 20.3% and a capital cost overrun of 15%, would still leave a satis-factory rate of return of 21.2%.

ix. Guanomex has agreed that a study of fertilizer distribution systems,including the optimization of inventory levels, coupled to a survey of themeasures required to promote the proper use of fertilizer by small farmers,should be carried out under terms of reference agreed upon by the Bank andthe recommendations of such a study be implemented after having been reviewedby the Bank.

x. The project would result in substantial benefits to the Mexicaneconomy and faces no important technical or financial risks. Based onrecommendations summarized at the end of this report, the project is suitablefor a Bank loan of US$50 million equivalent.

I

I. INTRODUCTION

1.01 The Mexican Government development bank, Nacional Financiera S.A.(Nafinsa) and Guanos y Fertilizantes de Mexico S.A. (Guanomex or the Company),a firm fully owned by Nafinsa, have requested a Bank loan of US$50 millionequivalent for a project comprising two urea plants and the expansion of aninsecticide (parathion) plant to be located in the States of Guanajuato andVeracruz (Map: IBRD 11494). The proposed urea plants will have capacitiesof 1,000 and 1,500 tons per day (TPD) or a total of 825,000 tons per year(TPY), equivalent to 379,500 TPY of nitrogen (N). 1/ They will increase thecountry's existing N capacity by 79% to 858,400 TPY of nitrogen. The para-thion plant's capacity will be increased by 33% to 10,000 TPY.

1.02 The fertilizer sector in Mexico was first reviewed by the Bank inJune 1974, at which time the project's scope was outlined. The appraisalof the project was carried out in Mexico in September 1974 by Messrs.Tarnawiecki (Chief), Brown and de la Balze of the Industrial Projects Depart-ment. This would be the first Bank Group operation in the fertilizer sectorin Mexico.

II. THE FERTILIZER INDUSTRY AND GUANOMEX

A. The Mexican Fertilizer Industry

2.01 Mexico has a well established fertilizer industry based mainly ondomestic natural gas and sulfur but so far requiring large ammonia and phos-phate rock imports. The manufacture of nitrogenous fertilizer is for allpractical purposes in the hands of two organizations, both of them in thepublic sector: Petroleos Mexicanos (Pemex) produces virtually all theammonia made locally, and Guanomex produces all other nitrogenous fertili-zers, with the exception of by-product ammonium sulfate (para. 3.07).Pemex is the Government agency which, in Mexico, is in exclusive charge ofpetroleum extraction and refining and the distribution of petroleum productsas well as the manufacture of petrochemicals, including ammonia. 2/ As aconsequence of this organizational set-up, ammonia and urea are manufacturedby two different enterprises; this arrangement, although not in widespreaduse, does not interfere with efficient and economical integration of themanufacturing operations as long as the ammonia and urea plants are locatedclose to each other; this is the case in the proposed project.

1/ A glossary of terms used in the report is contained in Annex 1-1and frequentlv used units and conversion factors are shown in Annex 1-2.

2/ Domestic distribution of all fertilizers, including imported products,is the exclusive responsibility of Guanomex (para. 3.12).

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2.02 Phosphate fertilizers are manufactured by Guanomex and Fertili-zantes Fosfatados Mexicanos (FFM), a company which is also one of the largestphosphoric acid exporters in the world; though majority-owned by Banco deMexico, FFM is generally considered as a private enterprise. Until nowpractically all phosphate rock has been imported (96% of requirements). How-ever, last year, deposits of phospPate nodules were found in the Baja Californiaterritory. Drilling over a 300 km area and evaluation of reserves will not becompleted until late in 1975, but preliminary indications are that these de-posits will probably permit Mexico to satisfy its own phosphate needs and possi-bly leave an exportable surplus.

2.03 Feedstock for the production of ammonia in Mexico is natural gasfrom deposits developed by Pemex, mainly in the States of Tamaulipas andTabasco. Production of ammonia has not increased significantly since 1969(para. 3.08) but Pemex intends to utilize its rapidly growing reserves ofnatural gas (estimated at 11 trillion SCF at the end of 1973) 1/ to furtherdevelop its petrochemical industries, including trebling ammonia productionby 1985 (para. 3.10).

B. Description of Guanomex

2.04 Guanomex, created in July 1943, was originally charged with theresponsibility of promoting the exploitation of Mexico's guano deposits andthe use of fertilizers in general (Annex 2-1). Subsequently, small instal-lations for the manufacture of simple superphosphate (SSP) and bone mealwere added and, in 1951, the first Mexican chemical nitrogenous fertilizerplant came into operation with the manufacture of ammonium sulfate inCuautitlan, in the State of Mexico.

2.05 Rapidly expanding demand favored the establishment of severalfertilizer plants in the private sector. In 1965, the Government decidedthat orderly growth of the industry, savings in transportation costs andthe realization of economies of scale could be obtained by consolidationof most of the fertilizer activities. Between 1965 and 1969, Guanomex,through negotiations, bought out Fertilizantes de Monclova S.A. (ammoniumnitrate), Fertilizantes del Istmo S.A. (ammonium sulfate), Fertilizantesdel Bajio S.A. (urea) and Fertilizantes Delta as well as Montrose MexicanaS.A. and Lerma Industrial S.A. (chlorinated insecticides). The Governmentalso transferred to Guanomex the assets of Industria Petroquimica Nacional,a small private company then in process of liquidation and, in 1970, Guanomexacquired a controlling interest in Fertica S.A., a holding company owningfertilizer plants in Costa Rica, El Salvador and Guatemala.

1/ The Government has budgeted US$248 million for the development ofadditional gas reserves (mainly in the States of Chiapas and Tabasco)in the 3-year period ending in December 1976.

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2.06 At present Guanomex has 36 plants of which 16 are fertilizerplants 1/ with a total capacity of 437,300 TPY of N, 122,000 TPY of P205 and27,000 TPY of K20 2/ as well as two plants for the manufacture of chlorinatedand phosphorated insecticides (7,700 and 7,500 TPY respectively) and smallplants for various chemicals. The average age 3/ of the Company's fertilizerplants is now about 10 years and four plants are more than 15 years old.The location of the manufacturing facilities as well as the Company's salesareas are shown in Map: IBRD 11494.

C. Organization and Management

2.07 The organization chart for the Company is shown in Annex 2-2.Guanomex's Board of Directors consists of nine members appointed by thePresident of Mexico, including the Secretary of National Patrimony, andPresident of Pemex, Mr. Francisco J. Alejo, who is the Chairman, the Secre-taries of Agriculture, Finances, and Industry and Trade, and representativesof Nafinsa. The day-to-day operations are carried out by six decentralizeddepartments under the General Director, Mr. Luciano Barraza Allande. Manu-facturing plants are grouped in 11 units (Annex 2-3) under the general direc-tion of the Production Manager, Mr. Adolfo Sisto Velasco, an experiencedengineer of international reputation. The Company's agricultural extension,fertilizer promotion and sales activities are coordinated under Mr. FranciscoCastillo Creus.

2.08 Construction of new plants is the responsibility of the DevelopmentDepartment presently managed by Mr. Ernesto Badillo, a competent executivewith a background in agricultural economics. Three divisions report to him:Research, Projects and Construction Supervision. With the collaboration offoreign and local engineering firms, Guanomex has gained considerable experi-ence during the implementation of more than a dozen plants, including fourlarge scale fertilizer plants, which have been built in the last six years.

D. Past Production and Financial Position

2.09 The production performance of Guanomex has been satisfactory.Manufacturing units are well run and quality of the engineering and techni-cal plant staff is high. In the last two years average capacity utilization(in terms of nutrient tons) was 80% for nitrogenous and 93% for phosphaticfertilizers. Operating data for the more important plants are summarizedbelow and detailed data for all plants are given in Annex 2-3.

1/ Not including four mixing plants.

2/ Manufactured from imported potassium salts.

3/ Weighted average based on nutrient contents.

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Guanomex - Capacity Utilization

Capacity Year of Capacity UtilizationProduct/Plant Product N P205 Start-up /1 1970 1973 1974

___----- (000 TPY) --- -/1

Urea- Camargo 85.0 25.8 - 1968 77 97 81- Minatitlan 305.0 140.3 - 1963 18 78 76

Ammonium Sulfate- Bajio 60.0 12.3 - 1969 45 95 81- Coatzacoalcos 100.0 20.5 - 1966 17 50 44- Guadalajara 120.0 24.6 - 1968 97 84 78

DAP and NPK- Coatzacoalcos 80.0 /3 14.4 36.8 1970 5 /2 84 101- Minatitlan 140.0 25.2 23.8 1962 72 95 99- Monclova 50.0 9.0 8.5 1963 100 106 119

SSP- Cuautitlan 120.0 - 21.6 1963 92 105 105- Guadalajara 120.0 - 21.6 1968 21 63 60

Parathion- Salmanca 7.5 - - 1973 - 55 /2 62

/1 Years ended June 30./2 Year of start-up/3 DAP

The above table indicates that with the exception of one SSP and oneammonium sulfate plant and the recently completed insecticides plant allother production units have been operating at a rather high capacity utili-zation. The urea plants suffered over the last two years from scarcity ofammonia supplies which, however, will be alleviated by the output of newPemex ammonia plants (para. 3.10), of which one, in Minatitlan, startedoperations in January 1975.

2.10 The financial administration of Guanomex is centralized, and the11 manufacturing units are cost centers only. The Company's recent incomestatements are shown in Annex 2-4 and, for the last four years, are summarizedbelow:

Guanomex - Summary Income Statements (1971-1974)(Mex$ Million)

Year Ended June 30 1971 1972 1973 1974

Net Sales 1,449.8 1,772.3 1,847.1 2,353.3Cost of Goods Sold 1,133.7 1,352.4 1,411.0 1,859.3Gross Profit 316.1 419.9 436.1 494.0

Administration and Sales Expenses 190.9 227.4 254.7 334.3Operating Profit 125.2 192.5 181.4 159.7

Interest Paid 110.1 96.1 98.8 153.7Plus: Other Income /1 25.8 24.1 40.5 78.2Profit before Tax 40.9 120.5 123.2 84.2

Income Tax 3.8 35.4 35.8 33.3Profit after Tax 37.1 85.1 87.4 50.9

Workers' Participation in Profit 1.2 7.5 8.7 4.4Retained Net Profit 35.9 77.6 78.7 46.5

Cost of Goods Sold/Sales (%) 78.2 76.3 76.4 79.0Operating Profit/Sales (%) 8.6 10.9 9.8 6.8

/1 Mainly interest received for accounts receivable.

2.11 The Government controls the price of fertilizer and that of theCompany's principal raw material, ammonia, through a pricing policy whichis directed towards avoiding great fluctuations in fertilizer prices andwhich largely determines the Company's profitability. The other majorinput, phosphate rock, is dependent on international prices. The effectof world market price fluctuations for raw materials on the Company's prof-itability will decline as Pemex's ammonia capacity is expanded and domesticphosphate rock production on a large scale commences and thus replacesimports. Domestic fertilizer prices were increased between 1971 and the endof 1974 (i.e. from US$108 to 122 per ton of urea placed at main distributionpoints), but they are still substantially below those presently prevailingin the international market, which for urea are now between US$300 and 350per ton. It is expected that this gap between domestic and internationalpr4ces will narrow as the latter recede from their current exceptionallyhigh level.

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2.12 The Government has appropriated Mex$500 million to compensate theCompany for losses incurred through the importation of ammonia at the presenthigh prices and its sale for direct application as fertilizer at the lowerdomestic price as well as for those losses resulting from higher cost of someimported raw materials which are not reflected in the finished product price.During FY1974, the Company had received Mex$82.8 million for this purpose.

2.13 Guanomex's recent balance sheets are also shown in Annex 2-4 andare summarized for the last four years below:

Guanomex - Summary Balance Sheets (1971-1974)(Mex$ Million)

As of June 30 1971 1972 1973 1974

Cash and Near Cash 120.3 94.2 77.4 57.8Receivables 702.3 697.4 816.0 1,003.8Inventory 415.3 468.8 648.8 912.9Other Current Assets 67.4 57.4 65.9 113.0

Total Current Assets 1,305.3 1,317.8 1,608.1 2,087.5

Investments 403.6 374.7 385.5 375.5Fixed Assets (Net) 869.4 962.3 923.6 904.1Other Assets (Net) 107.9 140.3 137.4 154.5

Total Assets 2,686.2 2,795.1 3,054.6 3,521.6

Payables 185.6 250.9 274.3 459.6Short-term Debt 719.9 720.7 951.6 1,003.5Other Current Liabilities 122.8 152.7 152.0 346.6 /1

Total Current Liabilities 1,028.3 1,124.3 1,377.9 1,809.7

Long-term Debt 586.3 528.0 486.1 544.9

Equity-Share Capital 925.0 955.0 1,000.0 1,000.0-Reserves 146.6 187.8 190.6 167.0

Total Equity 1,071.6 1,142.8 1,190.6 1,167.0

Total Liabilities and Equity 2,686.2 2,795.1 3,054.6 3,521.6

Current Ratio 1.3 1.2 1.2 1.2Debt/Equity Ratio 35/65 32/68 29/71 32/68Net Profit/Equity Ratio (%) 3.4 6.8 6.6 4.0 /2

/1 Including Mex$82.8 million received from the Government's compensatoryfund (para. 2.12) but not yet entered as income received.

/2 If the compensatory Mex$82.8 million is included as income in FY 1974,the profit/equity ratio would be 8%.

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2.14 The Company's low current ratio in the last three years resultsfrom Guanomex acting, in a way, as a financing agent for fertilizer sales.Even "cash" sales are frequently not paid for 60 days or more. Receivablesare interest-free for sixty days and earn an interest of about 1-1/4% monthlyafterwards. Furthermore, Guanomex also extends direct credits to dealerscovering the payment terms that they in turn accept from the buyers. Begin-ning in FY 1973, the Company accumulated sizable inventories of finishedgoods 1/ (over 70% of total inventories) in line with a Government policy toavoid lack of fertilizer at a time of worldwide shortages. In addition,Guanomex is undertaking a study of the optimum level of its inventoriestaking into account freight, storage and capital costs as well as the maximumadmissible risk of crop losses due to lack of fertilizers in different areas.

2.15 Guanomex has established good vertical reporting proceduresand horizontal communications, particularly among the Production, Financial,Sales and Development Departments, are being improved. The Finance Departmentis mainly geared to the accounting aspects of financial control. Guanomexwill strengthen this department and provide it with the capacity for bettercontrol of current assets and prepare adequate financial projections asrequired by the Bank. Guanomex has also agreed to provide the Bank withquarterly financial statements and annual audited reports submitted by inde-pendent auditors acceptable to the Bank.

III. THE MARKET

A. A riculture in Mexico and the Need for Fertilizers

3.01 Of the total area of Mexico, less than 12% (about 22 million ha.)is arable land (i.e. excluding permanent pastures, forests and arid land).A relatively large proportion is left fallow each year so that actuallycultivated land was estimated in 1974 at 16 million ha., of which approximately24% is irrigated. Double-cropping in some areas, especially in the Northwest,increases cropped area by about 0.6 million ha.

3.02 The main food crops are corn, wheat, sorghum, beans and soya andthe main industrial crops are cotton, sugarcane and coffee (Annex 3-1).The following table compares the agricultural yields for several crops inMexico with those of a number of other selected countries:

1/ Including fertilizer held by dealers on consignment.

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1972 Yields for Several Crops in Selected Countries(kg/Ha.)

Wheat Corn Sorghum Beans Cotton Sugarcane Coffee

Mexico 2,721 1,148 2,118 524 822 62 584Argentina 1,612 1,862 1,600 932 240 51 -Peru 1,006 1,788 3,250 800 610 155 657Ave. S. America 1,458 1,464 1,647 654 250 51 550US 2,196 3,675 3,808 1,458 490 92 -Canada 1,680 4,985 - 1,595 - - -Average Europe 2,952 6,084 3,880 281 620 77 -

" Asia 1,255 1,766 489 408 240 49 518If Africa 1,065 1,382 806 429 270 59 437" World 1,628 2,785 1,170 489 371 53 514

It can be seen that Mexican yields for wheat 1/, sorghum and cotton areconsiderably higher than the world averages although the yield for corn islower than in all other major producing areas. It is expected that yieldsfor beans, sugarcane and coffee, although also higher than the world averages,can be improved. Agricultural production in Mexico during the last 10 yearshas not kept pace with population. The availability of new land is limitedand water is a scarce resource in large areas. Under these conditions,future growth of agricultural output will be based, to a large degree, onbetter utilization of existing resources and improved farming practices,including intensified and proper use of fertilizers and pesticides, irriga-tion, multiple cropping and development of new--and perhaps more versatile--varieties of the most important crops.

3.03 At present, the average fertilizer application rate in Mexico--although 1.9 times higher than for all developing countries taken together--is below the world average (Annex 3-1, Table 2). Averages, however, maskthe wide variety of agricultural practices in Mexico ranging from very modernfarming on flat irrigated land in Northwestern states, in which fertilizerdosages approach (and may occasionally surpass) optimum economic rates, tono fertilization in many rain-fed highland areas. Guanomex estimates thatthe area now being fertilized--estimated at 5.7 million ha.--can be doubled.

1/ With the help of the Rockefeller Foundation, high yielding varieties(HYVs) of wheat were developed in Mexico from Norin 10, a Japanesedwarf variety introduced in the US after the Second World War. In 1964they were exported to the Indian sub-continent where they have contri-buted largely to the increase in yields attained in the last decade.

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B. Fertilizer Supply and Consumption

1. Past

3.04 The historical growth of fertilizer consumption and production inMexico is analyzed in Annex 3-2 and summarized below:

Mexico - Consumption and Production of Fertilizer(000 tons of Nutrients)

Calendar Apparent Consumption Production Surplus (Deficit) /LYear N P K Total N P /2 Total N P Total

1953 22 15 1 38 14 10 24 (8) (5) (13)1963 197 68 14 279 163 53 216 (34) (15) (49)1969 398 125 20 543 390 115 505 (8) (10) (18)1970 405 118 22 545 407 115 522 2 (3) (1)1971 435 148 23 606 427 131 558 (8) (17) (25)1972 485 148 31 664 448 161 609 (37) 13 (24)1973 560 158 33 751 543 205 748 (17) 47 301974 /3 611 186 40 837 559 231 790 (52) 45 (7)

Ave. Growth Rate(%/Year)1953/73 17.4 12.5 18.6 16.0 20.1 16.3 18.81963/73 11.0 8.8 9.2 10.4 12.8 14.5 13.2

/1 Excluding K20 which is all imported./2 Not including phosphoric acid exported by FFM/3 Preliminary estimates by Guanomex.

3.05 After a very rapid growth in the decade from 1953 to 1963, fertilizerconsumption has continued growing at a fairly steady annual rate of 10.4%from 1963 through 1973. Domestic production substantially balanced consump-tion with a small, though growing surplus of phosphatic fertilizer and adeficit in nitrogen fertilizer. All potassium fertilizer is imported. Theaverage N:P 0 :K0 ratio was 17:4.8:1 in 1973, slightly lower in N than in1969, when it was 20:6.2:1. This nutrient ratio compares to a world averageof 1.9:1.2:1 in 1972, and stems from the preponderant use of fertilizer onsoils rich in phosphate and potassium, mainly in the Northwest (Annex 3-2,Table 9). As fertilizer application in other areas increases and nutrientsin new cultivated land are depleted, the relative demand for phosphate andpotassic fertilizers should increase.

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3.06 The three principal nitrogenous fertilizers consumed in Mexicoare ammonia (32%), urea (24%) and ammonium sulfate (26%). While the pro-portion of direct ammonia application has remained at more than 30% oftotal N since 1953, the consumption share of urea has more than trebled andthat of ammonium sulfate, which in 1953 accounted for two-thirds of consump-tion, has declined substantially.

3.07 The main nitrogenous fertilizers produced in Mexico are liquidammonia (see following para.), urea, whose output gtew from 19,000 tons in1963 to 167,000 tons in 1973, and ammonium sulfate, which, although relativelyless important than 10 years ago, still accounts for 19% of all N productionin Mexico. In addition to the ammonium sulfate produced by Guanomex, thisfertilizer is also a by-product in the manufacture of caprolactam (by Univex),steel (Altos Hornos de Mexico), and coke (Compania Mexicana de Coke).

3.08 In the last three years (1971-1973), about 27% of Mexico's totalammonia consumption--for direct application as fertilizer as well as anintermediate material for other fertilizers and industrial uses--wasimported as shown in the following table:

Sources and Uses of Ammonia in Mexico(000 tons of N)

…------ Sources -- …-- -----------------Uses ------------------

Calendar Produc- Total Processed for Other Indus-Year tion Imports Supply Fertilizer Fertilizer use trial Uses

1953 14 1 15 1 14 -1963 125 49 174 60 110 41970 410 61 471 175 289 71971 398 95 493 166 319 81972 435 169 604 158 437 91973 455 203 658 177 472 9

To substitute for the current Mexican import requirements of ammonia andutilize its significant resources of natural gas economically, Pemex hasembarked on an expansion program which is described further below.

2. Future

3.09 Guanomex has made projections for the consumption of nitrogenthrough 1985 based on regression curves fitted to actual 1950-1973 consump-tion and the implicit projected average growth rate of 8.7% annually isconsistent with results derived from a model for the Mexican agriculturalsector that was developed jointly by the Government of Mexico and the Bank'sDevelopment Research Center (Annex 3-3). Guanomex projects consumption ofurea and complex fertilizers to grow more rapidly than in the past becauseof their suitability for most crops and soils, ease of handling and lower

transportat.ion costs. Furthermore, Guanomex and the Bank agree that growthin the direct application of ammonia as fertilizer will slow down sinceapplication rates in many areas of the northwest are already high. Ureaconsumption, however, even after such accelerated increase, would provideonly 45% of the total N consumption in 1985, which is a lower proportion thanin many other countries (Annex 3-4). Urea is presently applied to and most ofthe projected growth in consumption wll take place in irrigated land and dryfarming areas which have adequate rainfall and where modern farming techni-ques are widespread, such as Sonora, Sinaloa, Baja California, Chihuahua,Jalisco and Guanajuato. The projections for individual products through 1985are contained in Annex 3-5.

3.10 Production projections for N fertilizers through 1984 are based onknown projects for which definite construction schedules and financing plansexist, i.e. the two urea plants included in the present project, three ammoniumsulfate and nitrate plants, and four ammonia plants which Pemex plans to com-plete by 1980 (Annex 3-5, Table 3), as well as a 200,000 TPY DAP and complexfertilizer plant, whose site will be finally decided after a long-term sourceof supply of phosphate rock is secured and the corresponding feasibility studyis prepared. The production and consumption projections contained in Annex 3-5are summarized below:

Nitrogenous Fertilizer Production and Consumption Projections(000 tons of N)

Years Total Nending Urea Other Solid Fert./1 Ammonia SurplusJune 30 Prod. Cons. Prod. Cons. Prod./2 Cons./3 Prod. Cons. (Deficit)

1975 173 175 228 278 82 191 483 644 (161)1976 175 201 232 297 129 203 536 701 (165)1977 177 231 237 316 414 216 828 763 651978 247 266 284 335 387 230 918 831 871979 465 312 294 348 274 245 1,033 905 1281980 507 355 296 370 250 261 1,053 986 671982 526 467 325 403 367 301 1,218 1,171 471985 526 654 363 468 355 374 1,245 1,496 (251)

/1 Ammonium sulfate and nitrate, and complex fertilizers/2 Other than ammonia required to manufacture other fertilizers

and for other industrial uses/3 For direct application as fertilizer.

3.11 It can be seen in the table above that in the first four full yearsof operation of the project (1979-82), urea production from the existing andproposed nlants would be higher than the consumption projections used. Sincethe need for other solid fertilizers, on the other hand, exceeds their pro-jected production, it is probable that some of the urea could be diverted to

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manufacture mixed fertilizers. Nevertheless, in the financial projections ithas been conservatively assumed that about 120,000 tons annually of N as ureawill be exported, between 1979 and 1982, mainly to the Central American CommonMarket and South America. Imports of urea in the Western Hemisphere are shownin Annex 3-6. Guanomex has already had experience in exporting urea in thelast 10 years 1/.

C. Fertilizer Distribution

3.12 Guanomex is the only agency for the wholesale distribution offertilizer for domestic consumption (including ammonia for direct applica-tion); exports are handled by both Guanomex and FFM. Guanomex has avoided,as a matter of policy, being tied to only one distribution channel. In 1973,it sold more than half (57%) of its fertilizer through some 200 dealers, 95%of which were private enterprises and 5% cooperative organizations and threewere small public sector agencies. The balance of the Company's sales (43%)were handled through agricultural banks which have become increasingly moreimportant (having been responsible for 15% of sales in 1970 and 21% in 1973),5% was exported, 8% sold directly to sugar mills, and the residual 9% went to"direct" clients, i.e. mainly agricultural "uniones" or non-profit privatecredit and input distributing associations of farmers.

3.13 In spite of this extensive network of sales outlets, adequateavailability of fertilizer throughout the country is apparently not assured--especially not for small farmers in the isolated highland areas. Guanomexhas agreed to carry out, in coordination with an independent agency, a ferti-lizer marketing and distribution study which is to be completed not later thanone year after approval of the Bank loan. The study will include considerationof availability of credit and the need for agricultural extension servicesand other agricultural inputs particularly as they are required by the poorersegment of farmers 2/, as well as the optimum rates of fertilizer applicationfor various crops in each State, taking into account not only the specificrequirements of each crop but also soil characteristics and rainfall and otherclimate conditions. The study will be carried out under terms of referenceagreed upon with the Bank and the study's recommendations will be implementedafter consultation with the Bank.

3.14 One of the channels that can be used for the sale of small amountsof fertilizer in small villages is the Compania Nacional de SubsistenciasPopulares (CONASUPO), a public sector agency in charge of distributing commonstaples in the poorer urban and rural areas, and the warehousing and sellingorganizations affiliated with it (Annex 3-7). While in 1974/75 Guanomexexpects to sell only some 85,000 tons of fertilizer (or about 3.4% of thetotal) through Conasupo's network, it intends to subsequently increaseConasupo's participation in the distribution of fertilizer.

1/ Exports increased from 6,800 tons in 1964 to 58,000 tons in 1972 anddropped to 35,800 tons in 1973 as a result of a narrowing of the surplusof production over consumption.

2/ 50% of all the farmers produce less than Mex$1,000 (US$80) per capita andaccount for only 4% of output and 3% of sales (Annex 3-7). Another 34%,earning between Mex$1,000 and Mex$5,000 (US$400), produce 17% of agri-cultural output but sell only 9%.

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D. Fertilizer Prices

3.15 As mentioned previously, all fertilizer prices are controlled bythe Government both at the factory gate and at farm level. Since 1965efforts have been made to equalize freight costs, but only in 1973 werefertilizer prices made uniform for most destinations. Historical prices forammonia and bagged urea delivered at any train station in the country areshown below. In the case of urea, these prices include a weighted averagefreight and loading charge of Mex$105 per ton:

Mexico - Fertilizer Prices to Farmers(per ton of product)

Ammonia UreaCalendarYear Mex$ US$ Mex$ US$

1970 965 77.2 1,420 113.61971 992 79.4 1,350 108.01972 892 71.4 1,350 108.01973 1,273 101.8 1,350 108.01974 May 1,644 131.5 1,450 116.01974 Oct. 1,644 131.5 1,520 121.6

As a result of Government policy, present fertilizer prices in Mexico aremuch lower than those prevailing in international trade (para. 2.11). Inthe last three months of 1974 export prices for urea have ranged betweenUS$300 and 350 (Mex$3,940/4,375) per ton fob Western Europe and between US$358and 370 (Mex$4,475/4,625) per ton fob US Gulf ports. In the case of urea,Guanomex is able to sell considerably below the international price becauseof the low price at which it buys ammonia (para. 6.03) from Pemex. As men-tioned in para. 2.12, the Government protects Guanomex in the re-sale ofhigh-cost imported ammonia through a compensatory fund.

E. The Market for Insecticides

3.16 The Government expanded Guanomex's operations in 1968 through anauthorization to manufacture insecticides (para. 2.05) and in 1973, Guanomexinstalled an organo-phosphoric (parathion) insecticide plant. At present,approximately one half of Mexican consumption of insecticides is covered bythe Company's production which, in the last two years, averaged about 3,000tons of 100% DDT, 775 tons of BHC, 2,000 tons of toxaphene and 4,300 tons ofparathion. The proposed 33% expansion of the parathion plant is aimed atsubstituting cuts in DDT consumption because of ecological considerations(Annex 3-8) and therefore no difficulties are foreseen in marketing theexpanded output of parathion.

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IV. THE PROJECT

A. Project Scope

4.01 The project which is described in more detail in Annex 4-1comprises three sub-projects:

- A 1,000 TPD (330,000 TPY) urea plant (the "Bajio II" plant),which will be an expansion of the existing Bajio Unit, locatednear Salamanca, State of Guanajuato;

- A 1,500 TPD (495,000 TPY) urea plant (the "Istmno" plant), whichwill constitute a new unit, to be located at Coatzacoalcos,State of Veracruz;

- A 10 TPD (2,500 TPY) expansion of an existing parathion plant(the "Salamanca" plant expansion) which will form part of theexisting Salamanca Unit, located at the city of the same name.

4.02 The existing Bajio Unit produces urea and ammonium sulfate (Annex2-3). Pemex has a 250 TPD ammonia plant near the Guanomex facilities andis building a 900 TPD plant side by side to be completed by the end of 1977(i.e. three months ahead of the Bajio II urea plant) to jointly provide thefeedstock for the two urea plants. This is expected to be a reliable sourceof ammonia since only 25% of the ammonia capacity would be required to supplythe two urea plants at full capacity. 1/ Both ammonia plants are based onnatural gas drawn from extensive fields (Annex 4-2) centered at Tierra Blanca,State of Veracruz, and Villahermosa and Cactus, State of Tabasco, at adistance of about 600 and 1,000 km respectively. The needed land for theBajio urea expansion has already been acquired and most of the infrastructureexists. Salamanca, 3 km away, is an important railway and highway junctionand has a population of about 100,000. The size for the Bajio II plant hasbeen geared to the expected capacity of the inland market served by it.

4.03 For the Istmo urea sub-project, several sites were studied, andone next to a well-dredged basin in the Pajaritos inlet, close to Coatza-coalcos on the Gulf of Mexico (Map: IBRD 11494) and adjacent to existingfacilities of Pemex and FFM, was chosen. The site is also served by rail-road and paved road. The project will have some additional facilities (andtherefore higher costs) such as a jetty for shipping urea, office buildingsand a large polyethylene bag manufacturing unit (60 million bags/year capacity)that will also supply the Bajio sub-project and the existing Guanomex plants.Polyethylene chips will be purchased from Pemex.

1/ The balance of ammonia will be used for the production of ammoniumsulfate in the Bajio Unit, direct application to crops or transportedto other Guanomex plants.

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4.04 The ammonia for the Istmo plant will be supplied by Pemex from oneof two plants, of 1,500 TPD capacity each, based on natural gas drawr. fromfields located about 150 km away (Annex 4-2), being built at Cosaleacaque,near the city of Minatitlan, about 25 km away, at a major petrochemicalinstallation of Pemex. In addition, Pemex has in operation, at Cosal2acaque,two other plants with a capacity of 180 and 1,000 TPD, which supply ammoniato the existing Guanomex plants in the Minatitlan Unit (Annex 2-3). 1/ Pemexwill also build at its own expense the ammonia and carbon dioxide pipelinesfrom its factory to the Istmo urea site. One of the Pemex ammonia plants wascompleted in January 1975 and the other is about six to twelve months aheadof Guanomex. There is therefore no difficulty foreseen in obtaining adequateand timely supplies of ammonia for the urea project. Because Pemex and Guano-mex are both state-owned, there have been no long-term ammonia supply contractsbetween the two companies and judging from the close cooperation between thetwo firms and their coordinated investment programs none appear necessary.Furthermore, the Government has given general assurances that ammonia andother inputs will be made available to Guanomex as required for the efficientoperation of the project as well as of the existing plants.

4.05 The Salamanca Unit comprises a 60 TPD Krebs electrolytic plant toproduce caustic soda and chlorine, a 30 TPD DDT plant using the MontroseChemical Corp. process, small BHC and toxaphene plants and a 25 TPD parathionplant. As mentioned in para. 3.16 the proposed expansion of this plant,besides improving the present production process, will allow to phase outDDT production over the next 5 to 10 years in line with a planned decrease inthe consumption of this type of pesticides in Mexico.

B. Technology

4.06 Processes for urea synthesis are widely available. Guanomex haschosen the Stamicarbon process (Holland) for the two proposed plants. Aprilling tower will be used for the finishing operation in the Bajio sub-project but whether the same system or a pan granulator developed by TVA(US) will be selected for the Istmo sub-project has not yet been decided.Parathion manufacture is described in Annex 4-3. The process for the manu-facture of parathion is supplied by Stauffer (US).

C. Utilities

4.07 Utilities required for each of the three sub-projects are describedin Annex 4-1. Electricity will be purchased from the Government-ownedComision Federal de Electricidad (CFE). In addition to drinking water frompublic systems, water will be obtained from wells for all the needs of theBajio and Salamanca plants as well as for processes in the Istmo plant, andfrom the river for cooling purposes in the latter plant. There have been noconstraints in the availability of utilities and none are expected in the

1/ The surplus ammonia not needed for the Guanomex plants will be usedfor direct application as fertilizer, shipped to other plants orexported.

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future. Nevertheless, general assurances have been obtained from the Govern-ment that electric power for the project as well as for Guanomex's existingfacilities will be made available as required by Guanomex to operate efficiently.

D. Employment and Training

4.08 Guanomex's total employment will increase by 11% to a total ofabout 4,800 as a result of the operation of the proposed project. Guanomexis already a large company with 11 operating units and most skilled and highlevel positions will be staffed from internal sources and existing trainingprograms. Therefore, additional training requirements are small; some staffwill be trained by Guanomex, along with the process licensor and the engin-eering firms, in the specific technology and operating systems utilized inthe three proposed plants. The cost of this training is included in theproject's costs.

E. Ecology and Safety

4.09 The urea plants will be designed and operated with emission levelsof effluents following standards acceptable to the Bank. Gaseous and liquideffluents present virtually no problem in a well designed and operated ureaplant, particularly because of the benefits derived from the recovery ofvaluable raw materials and chemicals used. Dust dispersion has become a majorconcern in many US plants and some of them have recently switched to granula-tion rather than prilling to minimize this problem. With regard to the Istmoplant Guanomex will investigate the viability of this approach during theearly design stage and for the Bajio plant will seek measures to diminishpollution--and losses-- from the prilling operation. The safety record ofGuanomex is comparable to those in modern fertilizer factories in developedcountries.

4.10 The dangers in the manufacture and use of parathion are primarilyrelated to safety during handling rather than environmental impact becauseparathion, although highly toxic, is rapidly degradable. Guanomex hasalready implemented stringent safety regulations in the existing parathionplant (the one being expanded) regarding such factors as employee educationand good housekeeping practices in minimizing spills, and distributors andfarmers are informed about the proper techniques for the pesticide's use.No accident has occurred since the factory began production at the end of1972. However, taking into account the hazards in the manufacture, trans-portation, warehousing and use of this product (Annex 3-8), the Bank hasobtained assurances from Guanomex that monitoring of safety measures will becontinuously implemented.

F. Project Execution

4.11 The urea plants will be built under a contract with an experiencedinternational engineering company, selected by following Bank guidelines, inassociation with a qualified local engineering firm. The contract will pro-vide for a guarantee on timely completion and plant performance levels.

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Civil works, construction and erection will be carried out by local firms.The parathion expansion will be executed by a local engineering firm basedon the process design and the guidance of the licensor, Stauffer (US) in thesame manner as was done for the original plant. Guanomex has an experiencedproject team that will oversee the execution of the project and since ithas used the same approach to project implementation in its existing unitsand its record of completing projects successfully is good the Bank doesnot think that an outside technical advisor is needed.

4.12 Guanomex, in agreement with the Bank, initiated steps to selectthe urea engineering firms shortly after the mission visited Mexico and,following procedures for evaluation and selection agreed between Guanomexand the Bank, has contracted the services of Foster Wheeler Energy Co. (US)and Atlas Foster Wheeler Mexicana for the Bajio sub-project. The selectionof engineering firms for the Istmo sub-project is expected to be made inMay 1975. A preliminary project execution schedule has been submitted byGuanomex and the Government has given assurances that the required importlicenses required by the project will be promptly made available to Guanomexas needed.

V. CAPITAL COST ESTIMATES AND FINANCING PLAN

A. Capital Cost

5.01 Total financing required for the project is estimated at US$150.2million equivalent, of which US$53.5 million is in foreign exchange (Annex 5-1).A summary of the estimate is given in the following table:

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Summary of Financing Requ1ired for the Project

----In Mex$ Million------ ----In US$ Million------Foreign Local Foreign LocalExchange Currency Total Exchange Currency Total ¾

Land Acquisition and Site Dev. - 51 51 - 4.1 4.1 5.1Equipment, Supplies and Spares 309 292 601 24.7 23.4 48.1 59.9Freight, Insurance and Duties 17 34 51 1.4 2.7 4.1 5.1L:icenses and Engineering 75 51 126 6.0 4.1 10.1 12.2Erection and Supervision 11 64 75 0.9 5.1 6.0 7.9CiLvil Works 9 84 93 0.7 6.7 7.4 9.3Pre-operating Expenses 1 4 5 0.1 0.3 0.4 0.5

Base Cost Estimate (BCE) 422 580 1,002 33.8 46.4 80.2 100.0Physical Contingencies

(11% of BCE) 45 64 109 3.6 5.1 8.7Price Escalation (30% of BCEplus physical Contingencies) 116 215 331 9.3 17.2 26.5Installed Cost 583 859 1,442 46.7 68.7 115.4

Incremental Working Capital - 227 227 - 18.1 18.1Project Cost 583 1,086 1,669 46.7 86.8 133.5

Interest during Construction 85 123 208 6.8 9.9 16.7Total Financing Required 668 1,209 1,877 53.5 96.7 150.2

5.02 The breakdown of the capital costs for each of the three sub-projectsis shown in detail in Annex 5-2 and summarized below:

Summary of Capital Costs of Sub-Projects-/(US$ Million)

Foreign LocalBajio II Plant Exchange Currency TotalBase Cost Estimate 12.6 14.8 27.4Contingencies 4.5 6.4 10.9Working Capital - 6.9 6.9

Total Sub-Project Cost 17.1 28.1 45.2

Istmo PlantB3ase Cost Estimate 18.6 29.8 48.4Contingencies 7.4 15.0 22.4'Wlorking Capital - 10.3 10.3


Salamanca Plant ExpansionBase Cost Estimate 2.6 1.8 4.4Contingencies 1.0 0.9 1.9Working Capital - 0.9 0.9


Total Project Cost 46.7 86.8 133.5

1/ Excluding interest during construction.

5.03 The above capital cost estimates were arrived at through consul-tation with Guanomex and Foster Wheeler, using recent quotations for mainpieces cf equipment and current unit costs for civil works, and hence arebased on prices prevailing during the last quarter of 1974. The estimatesare consistent with other fertilizer projects currently being financed bythe Bank Group. Physical contingencies have been taken at 11% of the basecost estimate (BCE) which is an ample margin for standard urea plants.Contingencies for price escalation have been calculated on the basis ofprojected price increases of 12% for 1975, 10% for 1976 and 8% thereafterfor foreign exchange and internationally bid local equipment costs, and 16%,14% and 12% respectively for civil works and other local currency costs.The expected schedule of capital expenditures and the escalation factorsare shown in Annex 5-3. The required working capital is estimated inAnnex 5-4. Interest during construction was calculated at rates of 12% onthe IBRD loan and 13.5% on other loans (para. 5.05 below).

B. Financing Plan

5.04 The proposed financing plan for the project is as follows:

In Mex$ Million ---- ---- In US$ Million ----Foreign Local Foreign LocalExchange Currency Total Exchange Currency Total

EquityShare Capital - 750 750 - 60.0 60.0

Long-Term DebtIBRD 625 - 625 50.0 - 50.0Foreign & Local Banks 43 459 502 3.5 36.7 40.2

Total: 668 1,209 1,877 53.5 96.7 150.2

Guanomex shall increase its share capital (US$60.0 million equivalent) inaccordance with such a schedule as required by Guanomex to carry out theproject and comply with the financial covenants (para. 6.12). The proposedBank loan (US$50 million) would cover a little less (93%) than the foreignexchange or 33% of the total financing required by the Proiect.

5.05 The proposed loan would be extended to Guanomex and Nafinsaat an interest rate of 8-1/% for a term of 14 years starting in July 1975and including 3-1/2 years of grace. The Government would guarantee theloan and Nafinsa would charge Guanomex a fee of 3-1/2% thus bringing thetotal rate paid by Guanomex on the loan proceeds to 12% annually.

5.06 The Government has agreed to provide, or have provided, to Guanomexany funds, in a form satisfactory to the Bank that might be required to coverany cost overrun on the project in accordance with the agreed implementation

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schedule (para. 4.12) and reach a satisfactory working capital level. Forpurposes of this covenant the project will be considered completed when eachof the sub-projects will have been tested and proven to be satisfactory inaccordance with established engineering procedures and practices, have beenoperated for at least 30 days at production rates of not less than 80% ofrated capacities and the Company will have a current ratio of at least 1.3:1.0.

C. Procurement

5.07 International competitive bidding (ICB) according to Bank guidelineswill be used for equipment and spares estimated to cost about US$27.6 million(excluding physical contingencies but including price escalation). Proprietaryequipment essential to the process and items in limited supply, which arecritical to the timely completion of the project, and estimated to cost US$4.4million equivalent, may be procured after bidding from short lists of qualifiedsuppliers, both the lists of this equipment and their potential suppliers re-quiring the prior approval of the Bank. Small items, costing less thanUS$50,000 equivalent each and US$1 million in total may be purchased directlyfrom foreign suppliers on the basis of suitability, availability and priceconsiderations following the Company's procurement procedures. The list ofthese small-cost items will also be subject to prior Bank approval. A pref-erence of 15% or the applicable customs duties, whichever is lower, will beallowed to Mexican manufacturers for the purpose of evaluating internationalcompetitive bids. The engineering firms contracted or to be contracted(paras. 4.11/4.12) will handle procurement under the direct control ofGuanomex and assist the Company in bid evaluations. Procedures to expeditedeliveries will be worked out between Guanomex and the engineering firms,including the assignment, if required, of Guanomex procurement officers towork closely with the engineering firms and some of the suppliers.

D. Allocation and Disbursement of Bank Loan

5.08 The proceeds of the Bank loan would cover: a) the estimated CIFcost of equipment imported after ICB (US$18.4 million); b) the estimatedcost (US$1.0 million) of small-cost items costing less than US$50,000 procuredfrom abroad through normal commercial channels; c) the estimated cost ofimported proprietory or long-lead items (US$4.4 million); d) the ex-factorycost of equipment expected to be won by local suppliers through ICB procedures(estimated at US$9.2 million net of sales taxes); e) licenses, engineering andother technical services; and f) interest during construction on the Bankloan, as summarized below. In order to maintain the schedule of the Bajio IIplant, advanced contracting of an engineering firm and orders for equipmenthave been placed in January for critical long-delivery items of equipmentfrom a geographically widely distributed list of qualified suppliers. Guanomexhas been advised of the Bank's willingness to reimburse retroactively fromJanuary 1, 1975, up to US$3.6 million equivalent for goods and services asdescribed in items (c) and (e) above to meet down payments for these goodsand services, subject to the approval of the loan by the Executive Directors.

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Allocation of Bank Loan(US$ Million)

Equipment, Supplies, Spares, Ocean Freight and Insurance /1 33.0

Licenses, Engineering, Erection and Supervision /1 7.5Interest during Construction on IBRD Loan /1 5.6Unallocated 3.9

Total 50.0

/1 Including price contingencies.

5.09 The estimated quarterly disbursement schedule of the Bank loanis shown in Annex 5-5. Any surplus funds remaining undisbursed after comple-

tion of the project will be cancelled.

VI. FINANCIAL ANALYSIS

A. Analysis of the Project

6.01 Although the project implementation schedule as envisaged now fore-

sees that commercial operations of the Bajio II urea plant will begin beforeJanuary 1978 and the other plants, three months later, the proforma finan-

cial statements have conservatively assumed that commercial operations of

the three sub-projects will start only on April 1, 1978, and the project'sassumed life time is 12 years from that date. Production is forecast to

commence at 70% of rated capacity and increase to 75% in 1979, 85% in 1980and 90% thereafter. Assumptions for the financial analysis are given inAnnex 6-1. Operating costs and product prices have been assumed to remain

in constant terms at their level of the last quarter of 1974, except forsmall changes in the prices of ammonia and parathion discussed below.

6.02 The production of the Bajio II and Salamanca plants are all expected

to be sold in the domestic market at prices in constant December 1974 terms ofrespectively Mex$1,520 (US$121.6) per ton of bagged urea and Mex$17,370(US$1,390) per ton of parathion delivered at railroad stations throughout the

country. Over the first four years of operations the Istmo plant will exporton average about 60% of its forecast urea production, gradually divertingsales to the local market as domestic consumption increases (Annex 6-1). FOB

ulrea export prices are based on projections made by the Bank's CommodityDivision 1/. Parathion currently sells in the domestic market for Mex$16,000

per ton, considerably below the price for imported parathion of Mex$28,000 per

1/ Bank Report No. 467 (June 19, 1974) and updating memorandum ofNovember 6, 1974.

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ton. Guanomex intends to improve the profitability of parathion productionby increasing the price to Mex$17,370 in constant December 1974 terms beforeFY 78 and this has been anticipated in the financial projections. Finally,the projections for the Istmo plant include nominal revenues from the supplyof 37 million bags to the Company's other plants at an assumed transfer priceof Mex$2.73 per bag, which is the price now paid to outside suppliers.

6.03 Past production costs for urea and parathion and estimated futurecosts in the proposed new plants are shown in Annex 6-2. Total factory costs 1/(excluding depreciation) in the new plants are expected to be about Mex$540(US$43.20) per ton of bulk urea; this compares to about Mex$609 (US$48.90)per ton in the existing Minatitlan II plant in FY 73. Total cost for bulkurea (including depreciation) in the Istmo plant is estimated at Mex$966(US$77.28) per ton delivered to distributors, slightly higher than in theBajio II plant (Mex$918 or US$73.44 per ton) due to extra depreciationcharges for infrastructure and bag-making equipment, and also higher averagefreight costs. The cost of ammonia used in the projections--Mex$600 (US$48)per ton--anticipates an increase in real terms in the current price ofMex$520 (US$41.6) charged by Pemex but is still not only considerably belowthe current exceptionally high ammonia prices of about Mex$4,500 (US$360)prevailing in the international market but also those expected for the late1970s (para. 7.02).

6.04 The project will be part of different production units of Guanomexand will not be operated as an independent profit center. However, Guanomexhas agreed to maintain and submit to the Bank quarterly production reports,including operating costs, in sufficient detail to monitor the performanceof each of the three plants included in the project.

6.05 For the projected financial statements, December 1974 prices havebeen escalated year by year through 1978 using the expected general inflationrates (Annex 5-3). The proforma income statement for the project is shownin Annex 6-3 and summarized below for the first four years of operation.Other income represents interest charged by Guanomex on accounts receivableoutstanding for more than 60 days. Income tax has been conservatively takenas 42% although it can be partially waived for projects like this deemed tobe in the national interest. 2/ Workers' participation in profits is a legalrequirement and has been estimated at 11% of net income after tax.

1/ In constant December 1974 Mex$.

2/ In the last five years, income taxes paid by Guanomex averaged 25.7%of net income before taxes.

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Summary Pro-Forma Income Statement for the Project(Mex$ M4illion) /1

Years ending June 30, 1978 /2 1979 1980 1981

Net Sales 169.1 1,157.6 1,407.9 1,623.3Cost of Goods Sold 113.4 741.6 828.4 866.1

Gross Profit 55.7 416.0 579.5 757.2Non-Manufacturing Costs 32.1 196.3 223.9 242.1

Operating Profit 23.6 219.7 355.6 515.1

Less: Interest /3 35.7 136.3 124.1 109.3Plus: Other Income 6.7 18.6 28.2 37.3

Profit before Tax (5.4) 102.0 259.7 443.1

Tax - 40.5 109.1 186.1

Profit after Tax (5.4) 61.5 150.6 257.0Workers' Profit Participation - 6.8 16.6 28.3

Retained Profit (5.4) 54.7 134.0 228.7

Cost of Goods Sold/Sales (%) 67.1 64.1 58.8 53.4Operating Profit/Sales (%) 14.0 19.0 25.3 31.7

/1 December 1974 prices have been escalated year by year through 1978 in thepro-forma financial statements.

/2 Three months of operations only/3 Mainly interest received on outstanding accounts receivable.

6.06 The income projections show the project's attractive profitabilitythat results from the expected operating efficiency of the new plants andthe favorable ratio between the ammonia and urea prices (para. 6.03). Con-sequently, the level of capacity utilization at which the two urea plantsbreak even is low, namely 46% on a profit basis and 40% on a cash basis in1979. A break-even chart is shown in Annex 6-4. Since profitability of theproject as well as of the Company depends so decisively on ammonia and solidfertilizer prices controlled by the Government, the Bank has obtained from theGovernment assurances that it will take all action required to enable Guanomex,operating efficiently, to meet at all times its operating costs, maintain,after completion of the project, a long-term debt service coverage of at least1.4 times and earn a reasonable return on invested capital. The proforma cashflow statement and balance sheet for the project (in current Mex$ until 1978and constant 1978 Mex$ afterwards) is contained in Annex 6-5.

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B. Financial Rate of Return and Sensitivity Analysis

6.07 For the calculation of the project's financial rate of returnnominal capital costs (excluding interest during construction) and operatingcosts and revenues were deflated by the expected annual rate of generalinflation (Annex 5-3) and expressed in December 1974 Mex$. The resultingcapital cost stream in real terms and the financial costs and benefits (takenfrom the proforma income statement for the project) are shown in Annex 6-6.The project's financial rate of return is 14.5% after income tax and 20.3%before income tax.

6.08 Sensitivity tests are also shown in Annex 6-6, and summarizedbelow:

Sensitivity Tests on Financial Rate of Return (After Tax)

Base Case 14.5%Urea Price decreased by 10% 10.7%Urea Price increased by 10% 18.0%Capital Cost increased by 30% 10.0%Capacity Utilization 80% 10.1%Ammonia price increased by 30% 11.9%

Variations in the price of urea and/or ammonia have a considerable effecton the return, and a 30% increase in the ammonia cost (from US$48 per ton toUS$62.4) would lower the return after taxes by 2.6 percentage points. A capitalcost overrun of as much as 30% would leave a rate of return of 10.0%, and evenat only 80% capacity utilization the return would still be satisfactory.

C. Financial Forecasts for Guanomex

6.09 The financial forecasts for Guanomex, excluding the project, areshown in Annex 6-7. Capacity utilization--now averaging 83%--is expected toreach 90% by the time the project is operating commercially. This improve-ment will be brought about by the increased availability of ammonia for theurea plants, the rehabilitation (or substitution) of some facilities and othermeasures currently being undertaken to improve operations. Prices for ureaand parathion have been discussed above. Other product prices and productioncosts have been escalated from their levels in the last quarter of 1974 byusing general inflation rates-until 1978 and kept constant thereafter.

6.10 Annual gross revenues from the re-sale of products not manufacturedby Guanomex (primarily imported ammonia and solid fertilizers) have beenrealistically assumed to remain, in constant December 1974 terms, at their1973/74 level of about Mex$660 million. The assumed margin on these salesis 10% which is assured for the FYs 1975 and 1976 by the compensatory fundof Mex$500 million established by the Government (para. 2.12).

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6.11 The consolidated financial forecasts for the Company's existing andproposed facilities are contained in Annex 6-8 and summarized in the tablebelow:

Summary of Consolidated Financial Statements for Guanomex(Mex$ Million)

Year ending June 30 1975 1976 1977 1978 1981

Net Sales 2,802 3,351 3,718 4,232 5,557Cost of Goods Sold 2,175 2,594 2,870 3,194 3,804Non-manufacturing Costs 417 498 549 641 857Interest on Long-Term Debt 65 50 44 73 119Net Income after Tax and Workers'Profit Sharing 65 121 162 215 468

Depreciation 55 55 55 88 185Cash Available for Long-termDebt Service 185 226 261 375 773

Debt Service (long-term Debt only) 132 143 129 159 294

Current Assets 2,313 2,471 2,563 2,938 3,163Current Liabilities 1,978 2,046 2,059 2,178 2,019Net Fixed Assets 898 1,379 2,008 2,360 1,879Long-term Debt 478 707 1,023 1,221 695Equity 1,312 1,684 2,096 2,525 3,657

RatiosCost of Goods Sold/Sales (%) 77.6 77.4 77.2 75.5 68.5Net Income after Tax and Workers'Profit Sharing/Equity 5.0 7.2 7.7 8.5 12.8

Debt Service Coverage 1.4 1.6 2.0 2.4 2.6Current Ratio 1.2 1.2 1.2 1.3 1.6Debt/Equity Ratio 27/73 30/70 333/67 33/67 16/84

The project will bring substantial improvement in the Company's overallprofitability through more efficient operations, economies of scale in thelarger or enlarged plants and proportionally lower overhead. No provisionhas been made in the projections for major investments besides the project,other than for normal renewals and replacements. Debt service coverage anddebt/equity ratio will be satisfactory, but the current ratio will be lowbecause of the rapid expansion of the Company's operations and its continuedreliance on short-term debt to cover high fertilizer inventory levels andcredits to distributors.

D. Financial Covenants

6.12 To ensure sound financial management, assurances have been obtainedfrom Guanomex that it will: (i) at all times maintain a debt/equity ratio ofnot more than 60/40; (ii) not incur any new debt if by doing so a debt servicecoverage of at least 1.4 cannot be maintained; (iii) after completion of the

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project, maintain a current ratio of not less than 1.3:1; (iv) not undertake anyadditional investments, which may impair its ability to carry out and operatethe project and meet all its obligations; (v) in any given year, not pay dividendsor pre-pay debt other than to the Bank unless after such payment or cash outlay,its current ratio would remain above 1.5:1.0, except that prepayment of debtwill be allowed if such prepayment is part of a refinancing agreement underterms more favorable than the loan being prepaid.

E. Major Risks

6.13 No major risks are expected. The capital cost estimates for theproject include a provision of US$26.5 million equivalent to cover priceescalation and the project completion schedule is considered realistic. Inview of the Company's past experience and the assistance of qualified inter-national engineering firms, risks in the execution and operation of the pro-ject are considered to be minimal. On the basis of the consumption estimatesurea production may temporarily exceed domestic consumption. However, totalprojected production of solid nitrogenous fertilizer does not cover all theexpected consumption of nitrogen; therefore it is probable that part of thepotential surplus urea will be absorbed to manufacture mixed fertilizers.Nevertheless, the possibility that part of Guanomex's output of urea in 1979/82may need to be exported at lower than the assumed price for domestic sales hasbeen conservatively taken into consideration in the financial projections(para. 6.02). Finally, although the assumed volumes of urea to be exportedin those years (averaging 120,000 tons of N annually) are higher than quanti-ties previously exported by Guanomex (para. 3.11) they would amount to onlyabout 15% of total Guanomex's N production between 1979 and 1982.

VII. ECONOMIC ANALYSIS

A. World Fertilizer Prices

7.01 Fertilizer prices in the international market are subject tosurplus/scarcity cycles resulting from fluctuations in demand coupled tothe large investments and long lead time required for the construction ofnew manufacturing capacity. The present worldwide fertilizer shortage andhigh prices have been aggravated by simultaneous shortages of foodgrain andhigher prices for fertilizer feedstocks (mainly petroleum, natural gas andphosphate rock). Current plans to expand productive capacity are expectedto lead to a downturn of fertilizer prices. Projected urea prices 1/ are asfollows:

1/ Bank Report No. 467 (Price Forecasts for Major Primary Commodities,June 19, 1974) and updating memorandum of November 6, 1974.

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Price Projections for Urea(US$/Ton FOB)

In Nominal Terms In Constant 1974 Terms

1975 335 3001976 306 2501977 212 1601978 151 1051979 146 951980 150 911985 255 111

B. Economic Rate of Return

7.02 For the economic analysis of the project, capital and productioncosts, and urea prices, have been converted to real 1974 terms. Duties andinterest during construction were deducted from the capital costs. Exceptfor ammonia, the economic costs of inputs have been taken as being equivalentto their financial costs. 1/ The economic cost for ammonia is estimated atUS$88 per ton in line with recent estimates of the Bank's Commodities Divisionand TVA. 2/ Estimated ocean freight and port handling charges of US$25/tonwere added to the projected FOB 1978 urea price of US$105 to arrive at anequivalent price for urea landed at a Mexican port. For the years 1979-82the projected export price of urea (averaging US$93/ton) has been used tovalue the conservatively estimated volume of exports in those years. Forparathion, gross sales at Mexican prices have been used for economic benefitcalculation even though its international price is about 40% higher; this has,however, only a relatively small effect on the project's economic rate of return.

7.03 The economic cost and benefit streams are shown in Annex 7. Theeconomic rate of return of the project is 24.0%. Sensitivity tests are alsoshown in Annex 7 and summarized below. Separate rates of return for thetwo urea plants were also calculated and found not to differ significantlyfrom the overall return for the project.

Sensitivity Tests for the Economic Rate of Return (%)

Base Case 24.0%Economic Price of Urea up 10% 29.5%Economic Price of Urea down 10% 17.8%Ammonia Cost up 220 19.1%Capital Cost up 15% 21.2%Capacity Utilization at 80% 20.3%

1/ Duties on the few chemicals and maintenance materials required to beimported are about 5% of their CIF value and have been disregarded.

2/ Unpublished December 1974 draft report on fertilizer costs in developedand developing countries.

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The economic rate of return is very sensitive to variations in the economicprice of urea, a 10% decrease in the price resulting in an economic rate ofreturn of 17.8%. A 20% increase in the economic cost of ammonia has a smallerimpact. A 15% capital cost overrun would still result in a satisfactory rateof return. At 80% capacity utilization, the return would be 20.3%. Thus,except for a combination of a substantial cost overrun and extraordinary long-term depressed urea prices--an unlikely event--the economic rate of return issatisfactory.

C. Direct Foreign Exchange Savings

7.05 The project will make it possible for Mexico to save on the importa-tion of urea (and in initial years export urea) improving her balance ofpayments. Gross foreign exchange savings after the initial five years ofoperation, will be about US$96 million annually in constant December 1974 terms.

D. Other Benefits

7.06 The project will help to make Mexico independent of importedfertilizer eliminating the risk of loss of agricultural production in timesof scarcity in the world fertilizer market and insulating farmers from violentfertilizer price fluctuations. During construction, the project will providedirect employment to about 1,000 people and contribute to the improvement andconsolidation of the technical competence of the staff of Guanomex and Mexicanengineering firms. Finally, about US$64 million of equipment and services isexpected to be provided from Mexican sources.

VIII. AGREEMENTS

8.01 Prior to or during negotiations, agreements were obtained on thefollowing main issues:

A. From the Government, that it will:

i) Make available, to Guanomex or cause to make available by Pemexor other agencies of the public sector, the ammonia and otherinputs required for the efficient operation of its plants(paras. 4.04 and 4.07);

ii) Provide all the import licenses required for the execution ofthe project according to schedule and its efficient operationafter completion (para. 4.12);

iii) Guarantee the loan and charge Guanomex a fee payable to Nafinsa of3-1/2% on the Bank loan, so that the effective interest ratepaid by the Company is 12% per annum (para. 5.05);

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iv) Provide the financing of cost overruns of the project in a mannersatisfactory to the Bank (para. 5.06);

v) Take all action required to enable Guanomex, operating efficiently,to meet all its expenses, service debt out of its earnings andearn a reasonable return on invested capital (para. 6.06);

B. From Nafinsa, that it will:

Charge Guanomex a fee of 3-1/2% per annum on the amounts out-standing of the Bank loan (para. 5.05);

C. From Guanomex, that it will:

i) Provide the Bank with the Company's quarterly financialreports and annual audited balance sheets as well as periodiccash flow projections (para. 2.15);

ii) Within one year of the date of the proposed loan, have studiesmade, according to terms of reference agreed upon with the Bank,on fertilizer markets, transportation, distribution and marketing,optimum levels of inventories and accounts receivable and theircontrol, and the promotion of proper fertilizer use by smallfarmers (para. 3.13);

iii) Establish pollution control measures acceptable to the Bankand monitor them adequately (paras. 4.09 and 4.10);

iv) Maintain and submit to the Bank quarterly production andcost reports for each sub-project (para. 6.04);

v) Agree to the financial covenants listed in para. 6.12 includingmaintaining a debt:equity ratio of no more than 60:40 and,after completion of the project, a debt service coverage of atleast 1.4 and a current ratio of no less than 1.3:1.0.

8.02 Based on the above agreements, the project is suitable for a Bankloan of US$50 million equivalent.

Industrial Projects DepartmentMay 5, 1975

ANNEX 1-1

MEXICO - FERTILIZER PROJECT

GLOSSARY OF TERMS USED IN THE REPORT

1. Aqua Ammonia: Solution of ammonia in water. Solubility ofammonia in water depends greatly on temperature. At 00C (320F), solubilityis about 900 grams per liter and only 7.4 g/lt at 1000C (2120F). Aquaammonia is also used as fertilizer by dissolving anhydrous ammonia inirrigation water.

2. Ammonia or Anhydrous Ammonia: A compound of nitrogen and hydrogen(NH3) obtained by synthesis of nitrogen and hydrogen. It is a gas at normalatmospheric temperature and pressure. It can be liquefied at -330C (-280F)at atmospheric pressure but it can also be liquefied at ordinary temperaturesby application of pressure. For instance at 600F (15.50C) a pressure of 107.6lbs per sq. in. (7.3 kg/cm2) or about 7 atmospheres would be required. Ammoniais applied as a fertilizer because of its high nutrient content (82% N) but itrequires special expensive equipment for storage, transportation and applica-tion and soils having high temperatures may produce prohibitive losses.

3. Ammonium Carbamate: An intermediate product--NH4-C02-NH2--formedby reaction of ammonia and carbon dioxide during the synthesis of urea.

4. Ammonia Feedstocks are the sources of hydrogen used for ammoniaproduction. Except for the minor use of hydrogen produced by electrolysingwater, the principal feedstocks are hydrocarbons such as natural gas, naphtha,heavy fuel oil and coal.

5. Ammonium Nitrate (AN) or chemically NH4NO3 is produced by reactingammonia with nitric acid. Nitric acid (HN03 ), in turn, is made from ammonia(NH3). AN contains 34.5% nitrogen, half in the ammonium form and half in thenitrate form, and is very hygroscopic. It also is a commercial explosive.In many countries, a diluent--e.g. limestone--is added to lower the analysisand negate the explosive properties as well as to minimize the hygroscopicproperties. Mixed with small amounts of fuel oil it is known as ANFO explo-sives used in open pit mining.

6. Ammonium Sulfate (AS): Reaction product of ammonia and sulfuricacid (NH4)2 S04. It should contain not less than 20.5% N.

7. Bagged Fertilizer: Solid fertilizers delivered to the user in bags.Net weight of the bagged fertilizer is commonly 100 lbs, 50 kg and 100 kg.Smaller bags are available in some countries for use on lawns, gardens, etc.Bags are usually made of jute, polyethylene, jute lined with polyethylene,woven polypropylene and multiple-ply paper.

8. Biuret: Carbamylurea--NH2CONH2CONH2H20--is an impurity containedin small amounts in synthetic urea. It is generally kept to a low levelbecause of its damaging effects on maturing seeds and plant leaves.

ANNEX 1-1Page 2

9. Bulk Fertilizer: Solid or liquid fertilizer sold loosely in tankers,ship holds, train wagons, trucks or large containers. Anhydrous ammonia issometimes transported in refrigerated barges or railroad tanks.

10. Chemical Fertilizers: Manufactured chemical compounds suitable asfertilizers should be high enough in nutrient content; stable to avoid hazardsand handling problems; water soluble and available to plant root systems. Itis the common practice to report the nutrient content of materials in terms ofpercentages of N (nitrogen), P205 (phosphorus pentoxide)j and K20 (potassiumoxide)2/. Commercially available materials meeting these requirements to a

Primary Fertilizer Materials

% of N %,of P205 % of K20Nutrient Nutrient Nutrient

Urea 46% Triple Superphosphate 46% Potassium Chloride 61%Ammonium Nitrate 34% Single Superphosphate 18% Potassium Sulfate 54%Ammonium Sulfate 21% Dianmmonium Phosphate 46%Diammonium Phosphate 18%

Because of the high nutrient content of urea, diammonium phosphate and potassiumchloride (KCl), they are some of the most popular fertilizer materials in theworld today.

11. Complex or NPK Fertilizers: All three primary nutrients (N, P205,K20) are frequently applied to the soil at the same time in ratios varyingwith the nutrient requirements of different crops. Complex fertilizers con-tain at least two chemically combined nutrients. To facilitate handling, theseveral required chemicals are usually agglomerated into uniform granules fordistribution. The analysis of each nutrient is given as a ratio to describethe NPK product. Thus 15-15-15 complex fertilizer contains 15% each of N,P205, and K20; and 12-24-12 complex fertilizer contains 12% N, 24% P205 and12% K20.

12. Crop Yield: Output of crop in kg or tons per ha. or lbs/acre.

13. Diammonium Phosphate (DAP) or chemically (NH4) 2HPO , is producedby reacting NH3 with phosphoric acid (H3PO0) followed by granulation and drying.

14. Dosage: Intensity of fertilizer application generally measured inkg/ha or lbs acre (nutrient content).

15. Fertilizer: The vehicle through which plant nutrients--with theexception of carbon, hydrogen, and oxygen--are added to the soil. It is usualto distinguish between natural fertilizers (such as compost) and manufacturedor chemical fertilizers. Very often when the term fertilizer is used alone itrefers to the latter.

/ Normally but incorrectly referred to as phosphoric acid or phosphate.

2 Or potash.

ANNEX 1-1Page 3

16. Granular Fertilizer: Fertilizer in a granular form, as distinctfrom powdered fertilizer which has a tendency to 'bridge' in hoppers andgenerally to make bagging and application more difficult.

17. Guano: Excrement deposited by birds (mainly sea birds) and batson areas where it is not washed away by rain. Peruvian guano averages 14% N.

18. HYV: High yielding variety.

19. Lint: Cotton fibre after ginning.

20. Mixed Fertilizer: A fertilizer made by the physical mixing orblending of two or more fertilizers and generally containing more than oneplant nutrient.

21. Plant Nutrients: Essential to plant growth are some 17 elements,six in large and the remainder in small or micro quantities. Carbon, hydrogen,oxygen, nitrogen, phosphorus and potassium comprise the first six; the othersof lesser significance include calcium, magnesium, sulfur, silicon, zinc, iron,aluminum, manganese, boron, sodium, and copper. Chlorine and cobalt are alsothought essential. Carbon, hydrogen and oxygen are readily available fromthe atmosphere and water. Nitrogen, phosphorus and potassium--three mainnutrients--and the other elements are drawn from the soil systems. Unlesssupplemented by regular additions of materials containing the three mainnutrients, soil becomes depleted of fertility by repeated cropping. Use ofnatural organic materials such as animal and vegetable wastes can be utilizedbut the scale and intensity of modern agriculture have far exceeded the avail-ability of natural 'fertilizers'. Consequently, the majority of the world'sprimary plant nutrient needs are now supplied in the form of manufactured or'chemical' fertilizers. To an increasing degree, secondary nutrients such ascalcium, magnesium, sulfur, and micro nutrients such as boron, zinc, copperand manganese are also added to soils along with the primary nutrients inratios prescribed by agronomists according to specific crop and soil needs.

22. Phosphate Rock: Rock containing phosphates mainly of calcium ingenerally comprex forms. Some deposits contain the phosphates as nodulesscattered in sterile gangue. It is used to produce phosphoric acid (H3POO)as well as superphosphates.

23. Prilled Fertilizer: Fertilizer in spheroidal particles generallybetween 1 and 4 mm in diameter.

24. Sin le Sup hos hate: A product obtained by treating phosphaterock with sulfuric acid and consisting of a mixture of monocalcium phosphateCaH4(PO4)2, dicalcium phosphate CaHPO0, tricalcium phosphate Ca3 (P0) 2 ,calcium sulfate and other impurities. Tricalcium phosphate is botallyinsoluble and is not included in the P205 content of the superphosphate (16%to 18%).

ANNEX 1-1Page 4

25. Triple Superphosphate: Obtained by reaction of phosphate rockand phosphoric acid. Since it contains no calcium sulfate, its P205 content(about 46%) is much higher than in single superphosphate.

26. Urea is known chemically as carbamide or NH CONH2--the normalamide of carbonic acid; this compound contains about L6% N, all in theammonium form. It is considerably less hygroscopic than ammonium nitrateand it is the most widely used straight nitrogen fertilizer today.

27. Urea Synthesis: Urea is made by reacting ammonia with carbondioxide. Since both of the materials are produced during the ammonia syn-thesis, urea production is usually undertaken alongside an ammonia plant.Unfortunately, the corresponding acid of carbon dioxide (carbonic acid) doesnot form stable ammonium salts as do nitric, sulfuric or phosphoric acids.Therefore, simple neutralization as used in making ammonium nitrate andsulfate fertilizers is not possible. Instead, ammonia and carbon dioxideare combined under heat and pressure to make ammonium carbonate which,although unstable, can be dehydrated under pressure to form urea, a stablecompound. Again, unfortunately, the overall reaction is reversible and evenat 300 atmospheres pressure and 200 C, the conversion to urea in a singlepass through the reactor is under 70%. This introduces several complications:high pressure must be used to maximize conversion; unconverted reactants mustbe separated and recycled; increased corrosion under the high temperatures andpressures used must be overcome, and urea decomposition into undesirableproducts must be minimized. In recent years, several engineering and producingcompanies have developed ways of surmounting these problems, and large plantscapable of producing a thousand tons per day, or more, of urea to rigidchemical and physical specifications have now been operating successfully forlong periods throughout the world.

Industrial Projects DepartmentFebruary 1975

ANNEX 1-2


UNITS AND CONVERSION FACTORS

Weight

1 metric ton (MT) = 1 .102 short tons1 short ton = 0.9072 MT1 long ton = 1.016 mT1 kilogram (kg) = 2.205 pounds (lbs)1 pound (lb) = 0.4536 kg.

Volume

1 cubic meter (m3 ) = 35.31 cubic feet = 1,000 liters (lts)= 264.2 US gallons = 6.29 barrels

1 US gallon (gln) = 3.785 lts1 Imperial (British) gallon = 4.732 lts1 barrel (bbl) = 42 glns = 158.97 m3

1 cubic foot (cu.ft.) = 7.481 glns1 SCF = 1 cu.ft. of gas under "standard"t conditions (1 atm. and 600F)1 MSCF = 1,000 SCF1 Nm3 = 1 m3 of gas under "tnormal" conditions (I atm. and 00C) 37.3 SCF.

Density

Petroleum and gas are often sold by volume but material balancesrequire calculation by weight. Specific gravities are the ratios of the weightof the substance to the weight of the same volume of water, both measuredgenerally at either 00C or 600F. Densities (weights per unit volume) aregenerally given in metric or US units. A specific gravity of 1 is equivalentto a density of 1 MT/im3 or 62.43 lbs/cu.ft. In the case of gases, densitiesare usually in kg/m3. Since the volume of gases change considerably withtemperature and pressure, they must be specified. Normal conditions are 00Cand 1 atmosphere (1.033 kg/cm2) pressure. Standard conditions are 60°F(15.5°C) and 1 atmosphere (14.7 lbs/square inch). The density of air is1.293 kg/m3 or 0.0808 lbs/cu.ft. under normal conditions.

1 MT/m3 = 62.43 lbs/cu.ft.1 lb/cu.ft. = 16.018 kg/m3 = 0.1337 lbs/gln

For crude petroleum densities are usually given in metric or US units, butan arbitrary scale is also sometimes used: the American Petroleum Institute(API) degrees.

Degrees API = 141.5 - 131.5specific gravity at 60/605F

ANNEX 1-2Page 2

Weight and Volume Equivalents for some Petroleum Products

OAPI Specific Bbls/MT Gross Heating ValueGravity Kcal/Kg

CrtudePennsylvania 42.6 0.813 7.74 10,830Texas 30.2 0.875 7.19 10,810California 22.8 0.917 6.86 10,500Mexico 13.6 0.975 6.45 10,420

Heavy Fuel OilsMid-Continent 27.1 0.892 7.05 10,760California 16.7 0.955 6.59 10,660Mexico 11.9 0.987 6.37 10,280India 0.93 6.76 9,960India 0.95 6.62 10,500

Other ProductsGas Oil 32.5 0.863 7.29 10,660Gasoline 60 0.739 8.51 11,530Gasoline 67 0.713 8.82 11,600

Heat

1 Kilocalorie (Kcal) = 3.97 British thermal units = 427 Kilogram-meters= 0.001163 Kwh = 4187 joules

1 British thermal unit (Btu) = 0.252 Kcal

Heating Value

1 Kcal/Kg = 1.8 Btu/lb1 Kcal/Nm3 = 53.8 Btu/MSCF


ANNEX 2-1


DESCRIPTION OF THE COMPANY

History

1. Guanomex was created and organized by presidential decree of June1943 as a decentralized Government-owned enterprise. Originally, it wascharged with the responsibility of promoting the use of organic fertilizer,exploiting the "guano" deposits on the Pacific coast and distributing theproducts to the farmer. In October 1948 a second decree broadened thescope of Guanomex activities into the field of production and distributionof chemical fertilizers. In 1949, installations for the production ofsingle superphosphate (San Luis Potosi) and bone meal were added, and in1950, the first Mexican chemical nitrogenous fertilizer plant startedproduction of ammonium sulphate at Cautitlan, in the State of Mexico.

2. During the late 1950's the Mexican government promoted privateinvestment in the sector as a complement to Guanomex activities. Inparticular, Fertilizantes de Monclova SA. (ammonium nitrate, NPK andphosphoric and nitric acids), Fertilizantes del Istmo SA. (ammoniumnitrate, urea, NPK, and phosphoric acid), and Fertilizantes del BajioSA. (urea) became important producers of fertilizers.

3. During the 1960's Guanomex expansion and growth took place inthree different directions. Firstly, in 1965 the Government of Mexicodecided to consolidate into a larger and stronger Guanomex all theenterprises which had been created under private auspices in the late1950's. A better coordination between the function of producing anddistributing fertilizer and the government institutions in charge of plan-ning and implementing decisions in the agricultural sector was expected.Also, the growth of the fertilizer sector in the late 1950's had not beenproperly planned, and decisions with regard to location and use of rawmaterials were far from optimal. As a result, profits were very low.Integration was expected to reduce the administrative overhead, rationalizeand thus reduce the costs of distribution, and permit a more adequate plan-ning of future expansion.

4. Secondly, Guanomex constructed and began operating new plants:for the production of urea at Camargo (250 TPD) and Minatitlan (920 TPD);single superphosphate at Guadalajara; diammonium phosphate at Coatzacoalcos;and ammonium sulphate at Torreon, Coatzacoalcos, Bajio and Guadalajara.By the end of 1967 the production and distribution of fertilizer in Mexicohad been fully centralized by Guanomex, except for most of the ammoniaproduction which is controlled by Pemex (which then sells practically allits output to Guanomex), and phosphoric acid, which is produced byFertilizants Fosfatados Mexicanos (FFM) and sold abroad or to Guanomex.

5. Thirdly, in 1968, Guanomex by-laws were reformed once more toenable the company to produce and distribute insecticides and other chemical

ANNEX 2-1Page 2

products. In 1968 Montrose Mexicana SA. and its subsidiary, Lerma S.A.,which produced chlorinated insecticides, were bought by Guanomex. In1972 a parathion plant (phosphoric insecticide) was added to the recentlyacquired Salamanca unit.

6. The GOM also transferred to Guanomex the assets of IndustriasPetroquimica Nacional (niow the Ecatepec Unit), a private company in processof liquidation; it manufactures in small scale various chemical products,such as sulfuric acid, caustic soda, chlorine, sodium hypochlorite, sulfideand hyposulfite, bone meal, etc. Finally, in 1970, Guanomex acquired acontrolling equity participation in Fertica S.A., a holding company incor-porated in Panama which owns small fertilizer plants in Costa Rica (UnitPunta Arenas), El Salvador (Unit Acajutlu,) and Guatemala (Unit Tecun Uman).Guanomex also owns a minority participation in Azutrera Panamericana, thecompany in charge of exploiting Mexican sulfur deposits.

Organization

7. Guanomex is a fully state-owned but financially autonomous publicenterprise. All the shares are in Natiusa's name but the Company is legallyregulated by the Mexican Commercial Code and by its bylaws and in this regardit does not differ from any other private Mexican enterprise. The bylawsof the company stress both its economic and social roles. Guanomex isdefined to be not only a producer and distributor of fertilizers but also animportant policy instrument of the Government of Mexico in the agriculturalsector. The company is also expected to assume a special responsibilitytowards the small and medium farmers. Guanomex is also responsible, togetherwith other government institutions, for the promotion and extension offertilizer usage, research and testing of soils and the regulation andstabilization of the fertilizer market.

8. The organization chart for the company is shown in Annex 2-2.The members of the Board of Directors are appointed by the President ofMexico. The Chairman is Mr. Francisco Javier Alejo, who is also Presidentof Penex and Minister for National Patrimony. Other members of the Boardrepresent Nafinsa and other government institutions, and, in particularthe Secretaries of Agriculture, Industry and Trade, and Finances, PEMEX,CONASUPO, and the public sector agricultural banks. From an overallperspective, the present organizational set-up can be considered effective.Management has full responsibility for day-to-day operations and decisionswithin the company seem in general to be satisfactorily decentralized butthere is room for some improvement. With regards to investment projects,long term borrowing and pricing policies, they are in principle decidedby the Board of Directors in coordination with Secretaria de la Presidencia,Nafinsa and Secretaria de Hacienda.

Staffing and Industrial Relations

9. Industrial relations are regulated by eleven collective contractsand have been satisfactory in the past. Workers participate in profitsthrough a bonus cash payment which the Mexican Government introduced by

ANNEX 2-1Page 3

law in 1966i/ This bonus has been paid out regularly every year and ithas renresented, on the mvernge. about 11% of net profits after taxes.Employment in the ComDany has grown from 1,535 in 1965, just before theconsolidation process began, to 4,322 in October 1974. The breakdownby type of occupation is the following:

Working ForceDec. 1967 Oct. 197

Officers 102 132Technicians 279 361Administrative Personnel 964 1,266Workers 1,992 2.563

Total 3,337 4,322

The Company does not seem overstaffed by Mexican private enterprisestandards and the production/non-production workers ratio (67/33) is notout of line with other large enterprises in Mexico.

10. The proposed project would employ about 492 persons, of which452 are at the plant sites and 40 in the selling force. Distribution ofthese staff by rank and function for the various project units are as follows:

Manning Table

Distribution Itsmo Bajio Salamanca Total

I. By rank:- Executives 11 7 0 18- Technicians 53 23 8 84- Administrative

Personnel 33 3 ° 36- Workers 0 69

Total 322 102 28 452

II. By function:- Administrative 34 0 0 31- Production 77 26 16 119- Laboratory 6 0 0 6- Maintenance 50 26 0 76- Bagging and

Loading 155 5° 12 217

Total 322 102 28 452

1/ Based on Section 123 of the Mexican constitution, dealing with profitsharing by the workers.

industriai- Projects DepartmentFebruary 1975

< _ _ _ _ _ _ _ _ _ ~~~~ANNEX 2-2

X. X

T~~~~~~~~~~~~~~~~~~~~~~~~H-

OHiC 00HZ 00X

_ __ OAtY l X

u 2 f C G I G~~ .

.. -l

. ,S HO fH

S~~~~~~~~~~~~~~~~~~~~~~ HE-,

H ~~~~HH H

H i a:H

lOH> HH HO

0HZ _ _, '

NEICO _ AYIlMR5 FhO90

80150006T55D08 Ud0T9 0F 60020040

______-___ ()oo Tons------ ---- ------- ---- % -------------- _____-_-_ 4400 FW ------------ --------------------------------- -------------- ---------------------------------- ------------------- ------- - --_-_-__-- 000----88------------------6------------- ------- ;----

Oats of Start-op Capooty n0osoo2005. OlOaloNucc Cp1l NOIotP06010______Z7 ____________

uT t -t-2 U 1/9d70of7 99. Ci O T F ) 7/0 127 1975/74 6 /0 21t/5 197/7204 h P Y20 1969/70 1972/73 1973/74 1969/70 1972/75 Y97F7t= 1975 /74 1972/75 1805/74

4Y ea110 II 1965 56.o 39.6 46.9 45.1 70.7 85.8 86.5 23.7 _ _ 18.2 21.6 20.7 - - - - - - 18.2 21.6 20.7

Accnl021 Sulfate 1 1969 60.0 26.9 56.8 48.4 44.8 94.7 80.7 12.3 _ _ 5.5 11.6 9.9 - - - - - - 5.0 11.6 9.9

Chlbu-huc C II 1968 00.0 65.1 82.0 69.0 76.6 96.4 81.8 39.1 _ 29.9 37.7 32.0 _ _ _ _ _ _ 29.9 50.7 52.0

0.scon0o~ Sulate 00 1966 00.0 07.5 49.7 44.4 17. 49.7 44.4 000-- 5. 5.01 23- 102.0I

2 I 1970 l 80.0 W I36 67.4 91.0 4.5 84.2 101.3 14.4 90.8 o .6 12. I 146 1.7 50.0 07.3 - - 32 45 519

Ooa 00,IT 1962 505.0 54.5 257.9 229.0 1.9 78.0 75.1 140.3 - - 25.1 109.4 1C3.3 - -_ _ _ _ 25.1 109.4 19.53

MEiA?oI Nitrate 0 0962 020.0 95.5 81.8 72.2 86.6 74.4 65.6 36. - - 51.9 27.4 24.2 - - - - - - 51.9 27.4 24.2

NOt 00 19 2 140.0 100.1 532.4 138.5 72.2 94.6 98.9 05.2 23.9 19.6 18.2 25.8 24.9 17.2 22.0 25.5 14.2 10.0 09.4 49.6 54.8 67.8

Neoo-o Tolfoto 0 1951 221.0 151.5 166.6 202.5 67.3 74.0 94.4 46.1 - - 31.1 34.2 43.6 - - - - - - 31.1 34.2 45.6

SS?0 005 100 11. 2. 126.5 927.5 00.5 100. - 216 - - -- 09.9 22 .8 2.7 - - - 19.9 2.927Moed F rOllOzere to 196 1 60.o 154.8 72.6 50.1 921. 3 1.0 85.5 09.0 0. 5.0 12.1 16.o 0.0 18.1 24.0 16. 2.7 3.6 2.5 3529 43.6 30.0

7 c 2o.ocoIo 4 e 0 1968 120.0 116.5 1-0.8 93.5 97.0 84.0 77.9 24.6 - - 25.9 20.7 19.2 - - - - - - 29.9 70.7 09.2

s9P 07 1968 120.0 25,2 75.9 71.9 70.0 6. 3 6o.0 - 21.6 - - - - 4.0 03.7 02.9 - - - 4.5 15.7 1.9

002.2 F oOOOSoerc 00 0968 66.0 15.7 7.1 32.4 26.2 00.9 54.0 13.2 19.8 3.0 3.0 1.6 7.1 0.2 253 00.7 0.9 0.4 1.6 9.5 4.5 19.4

Co Nitrate II 1959 68.o 70.0 66.9 68.6 175.1 96.4 100.9 22.8 - . 23.5 22.4 2. 0 - - - - 02.5 20.1 25.0

NP9 I 1965 50.0 50.0 52.0 59.53 00.2 100.6 118.6 9.0 8.0 7.0 9.0 9.5 10.7 8.5 9.0 10.1 7.0 7.4 9.5 24.0 20.9 29.1

Torren ulte II 1966 100.0 45.5 41.5 6d.5 15.5 410. 62.3 27.5 - - 9.3 8.5 - - - 8.5 12.8

Nlxed 200550500., 0 5968 5.0 5.7 8.8 8.8 104.0 076.0 076.0 1.1 1.6 0.5 1.5 1.9 1.9 1.9 2.9 2.9 0.9 4.4 4.4 *.1 9.2 9.2

0. loSe Posoet6 0. L7uteI 1 Potoc17 76l:1 1.6 . 11

S. SI 1947 55.0 55.8 66.5 57.8 97.8 120.5 100.1 - 9.9 - - - - 9.7 11.9 i0.4 - - - 9.7 10.9 00.4

-ooed 20050000cr, I0 1950 5.0 2.1 0.4 1.3 42.0 28.0 26.0 1.1 1.6 0.2 0.5 0.5 0.3 0.7 0. 04 0.0 0.7 0.7 7.2 0 0.4

tot-l Thrtllle-r Platte l254 80.5 85.5 465.9 16so 33. 247.h 568.9 370.3 87.4 140o6 147.4 28.6 35.0 36.9 563.1 54.5 054.6

Total 01oluding 0 losg POcotc 58.2 81.0 94.4 437.7 22.2 26.6 229.7 349.1 350.0 61.5 110.9 oo6.9 71.2 20.9 27.7 512.4 475.9 490.6

Ooaoaloasto taleceoo001F;5i) 110960 4.0 5.1 7.6 7.9 68.9 57.8 64.4

500 1966 0.9 0.4 0.7 0.8 44.14 7.0 88.9Thoapbee (975) 1962 2.5 1.6 4.1 0.8 69.6 90.5 78.5P2,oohioo 01973 7.5 4.i 4.7 - 54.7 67.7

O.b-sotal -oc-ti-eo 05.7 0.0 9.5 10.2 66.2 62.5 67.1

-2oct10 Soda 1979 16.8 8.7 9.1 6.o 47.6 s4.2 36.90-]G 1959 14.8 7.3 5.4 5.5 49.3 36.s 57.2

OOter' 20.0 13.8 15.7 72.7 69.0 78.5 100.0

NNoOoo Eacoteosocti 50 oda 71954 4.0 2.5 2.8 0.7 65.o 70.0 67.5

Chlorine 0954 5.5 7.0 2.6 7.5 76.4 74.3 71.4

hydrG200010r Aoid 0956 6.o 4.6 4.4 3.9 76.7 73.5 lo.o

Eodi= 6al0--1 1974 1.0 00 0 24 8.7 10089 j4 8 8.60010 5UlfOO 9197 5.9 7.0 5.0 5.8 35. 00.8 64.4

74.0 701. 08.9 19.4 87.7 77.1 79.2

FEbrocoy 0970

MEXICO - FERTILIZER PROJECT Page 1

HISTORICAL FINANCIAL STATEMENTSINCOME STATEMENTS

(Mex$ Million)

(Year Ends June 30) 1967/68 1968/69, 1969/70 1970/71 1971/72 1972/73 1974(May) 1973/74

Salesl/- Insecticides - - 13.6 65.4 102.0 141.0 159.1- Urea 193.2 208.7 199.9 220.1 314.6 326.5 390.8- Ammonium Sulphate 21*9 247.0 244.4 248.8 305.9 345.0 303.9- Ammonium Nitrate 187.0 181.5 178.0 177.8 210.8 177.3 179.5- Single Superphosphate 64.8 69.8 63.1 71.2 83.5 92.8 102.8- Triple Superphosphate 51.6 62.7 67.8 66.9 83.2 98.3 107.5- Complex 212.5 240.4 239.3 262.0 321.3 319.6 378.3- Ammenia 120.4 155.5 185.8 198.8 192.8 188.1 248.5- Potassium Fertilizer 5.6 8.0 7.2 8.9 11.8 12.4 13.9- Others 93.6 115.7 117.8 135.8 149.4 148.6 129.2

Less Discounts 6.4 5.7 5.6 5.9 3.0 2.5 15.7

Net Sales 1141.2 1283. 1311.3 1449.8 1772.3 1847.1 1997.8 2353.3

Cost of Goods Sold-'

(including depreciation)- Insecticides - - 10.7 56.5 87.6 114.0 137.6- Urea 142.3 146.1 138.7 165.7 247.2 245.9 247.5- Ammonium Sulphate 174.8 181.7 169.0 175.8 225.4 261.1 248.9- Ammonium Nitrate 131.6 123.1 122.5 120.4 127.0 106.1 106.5- Single Superphosphate 47.9 51.1 46.3 53.7 63.3 72.3 71.5- Triple Superphosphate 44.3 58.6 61.0 51.1 62.2 82.2 82.3- Complex 164.7 170.9 177.0 233.9 266.5 263.3 306.8- Ammonia 92.8 111.7 167.6 160.7 149.7 148.7 250.7- Potassium Fertilizers 3.3 4.8 4.5 6.6 8.6 8.9 9.1- Others 76.7 86.3 87.9 109.3 114.9 108.5 103.0

Total Cost of Goods Sold 878.4 934.3 985.2 1133.7 1352.4 1411.0 1563.9 1859.3(of which depreciation) (52.2) (116.2) (140.7) (37.9) (84.8) (79.2) (n.a.) (93.4)

Gross Profit 262.8 349.3 326.1 316.1 419.9 436.1 433.9 494.0

Non-manufacturing Ecpenses- Bagging and Loading 23.3 29.5 29.4 33.3 34.8 33.2 36.0 40.1- Administrative Expense 32.4 34.6 43.6 55.8 59.1 60.1 66.7 72.0- Selling Exyense 29.5 36.6 47.6 73.1 100.2 109.1 101.3 127.1- Sales Tax- 14.9 20.4 16.2 20.5 29.2 43.5 65.5 77.1- Major Maintenance Work 3.8 3.4 2.2 8.2 4.1 8.8 20.5 18.0

Operating Profit 158.9 224.8 187.1 125.2 192.5 181.4 143.9 159.7

Other Income- net 17.6 27.5 27.7 25.8 24.1 40.5 33.8 78.2

Interest Charges 65.2 74.1 85.6 110.1 96.1 98.8 140.3 153.7

Profit Before Taxes 111.3 178.2 129.2 40.9 120.5 123.1 37.4 84.2

Income Taxes- 23.1 52.5 19.7 3.8 35.4 35.8 11.2 33.3

88.2 125.7 109.5 37.1 85.1 87.3 26.2 50.9Workers'Participation in Profits 9.0 14.5 11.4 1.2 7.5 8.7 3.4 4.4

Retained Profit 79.2 111.2 98.1 35.9 77.6 78.6 22.8 46.5

Cost of Goods Sold/Sales (7) 77.0 72.8 75.1 78.2 76.3 76.4 78.3 79.0Operatiag ProEit/Sales (%) 13.9 17.5 14.3 8.6 10.9 9.8 7.2 6.8Retained Profit/Equity (%) 12.9 12.4 9.3 3.4 6.8 6.6 - 4.0

1/ Sale of goods produced by Guanomex and of goods imported or purchased from other local firmsbut sold in the market by Guanomex.

2/ All factory costs and depreciation.3/ In principle 4% of net sales (Federal Government 2.2, State Government 1.8). Guanomex has

received exemptions on both federal and state taxes for products like urea, ammoniumnitrate and ammonium sulfate which have resulted in a lower percentage tax payment.

4/ Companies with profits above Mex$1.5 million pay a straight 42% on taxable income. Guanomexhas been able to take advantage of different industrial promotion regulations, in particularaccelerated depreciation and full or partial exemption from income taxes for new units forperiods of 5-10 years on the grounds of improving the balance of payments (import substitution)or of contributing to regional decentralization programs.

5/ Decrease in net profits in 1973/74 can be attributed to the higher prices paid for importedammonia while the company re-sells it to the farmers at a lower and fixed price.

Note: Small differences in last digits are due to rounding.


MEXICO - FERTILIZER PROJECT ANNEX 2-4Page 2

HISTORICAL FINANCIAL STATEME5TSBALANCE SHEETS

(Mes) Million)

Yeau Fnding June 30 1968 1969 1970 1971 1972 1973 1974

Assets

Current Assets- Cash and Marketable 1,curities 42.0 91.9 62.1 120.3 94.2 77.4 57.0- Accosets Receivable - 751.0 787.6 778.3 702.3 697.4 816.0 1003.8

- I-penct-ies2' 200.8 300.6 370.9 415.3 460.8 648.8 912.9- Other current Assets 23.0 34.5 35.2 57.4 57-4 65.9 113.0

Total Cornent Assets 1024.8 1204.5 1246.5 1305.3 1317.8 1608.1 2087.5

Fixed Assets- PnJ.ecta Under Cunanroctios 154.1 28.5 145.0 100.4 202.4 39.7 92.7

- Opseetio UniteGrosn Value 1029.4 1288.4 1399.6 1513.8 1589.5 1792.7 1813.4Lus Depreciatiom_' 450.0 566.2 706.9 744.8 829.6 908.8 1602.0

- Net Fixed Asuets 579.4 722.2 692.7 769.0 759.9 883.9 811.4Other Assets 46.7 96.4 89.3 107.9 140.3 137.4 154.5

Isv_tnentt_/ 42.7 272.9 238.5 403L6 374.7 385.5 375.5

Total Ansets 1847.7 2324.5 2412.0 2686.2 2795.1 3054.6 3521.6

Liabilitie- gnd Capital

Current Libilitieu- Accounto Peyable . 146.8 146.6 190.0 185.6 250.9 274.3 459.6-- Shoet teem debt (Banks)-/ 542.9 597.6 583.4 719.9 720.7 951.6 1003.5_ Accrued lXpooses end Other 7

Content Liabilities 78.6 103.2 91.6 68.8 85.0 91.1 280.3- Contest portion of L.T.D. 39.5 33.2 39.2 54.0 67.7 60.9 66.3

Total Content LIabilities 807.8 800.6 904.2 1028.3 1124.3 1377.9 1809.7

Long Tern Debt L/- Foe-igs 132.1 222.2 150.0 177.0 191.1 168.1 246.7- Nafinsa 243.8 241.8 226.2 344.0 283.7 277.7 271.6- Othee Local Loses 52.3 04.2 76.0 65.3 53.2 40.3 26.6

Tota1 Long Tern Debts 428.2 549.2 453.0 586.3 528.0 486.1 544.9

EquitySh-be Capital 460.0 700.0 850.0 925.0 955.0 1000.0 1000.0R.seev-s and Slrplos - 72.4 84.2 106.7 110.7 110.2 112.1 120.5

- Not Proftit 79.2 111.5 98.1 35.9 77.6 78.5 46.5

Tot-l Equity 611.6 895.7 1054.8 1071.6 1142.8 1190.6 1167.0

Total Liabilities asd Eqsity 1847.7 2324.5 2412.0 2686.2 2795.1 3054.6 3521.6

Current Retio 1.3 1.4 1.4 1.3 1.2 1.2 1.2

Loe-Tee Debt/lEoit Ratio 41/59 38/62 30/70 35/65 31169 29/71 32/68

Et-1 D3bt/Ecuity Ratio 67/37 61/39 56/44 60/40 59/41 61/39 67/33

1/ Accoosts e.e.ivables breakdows by nien account categories (Meo$ Millios)June 1973 June 1974

D0r'ct Cli-nt. 200.2 273.0Sug-r Mills 96.0 106.5

-usroinl Bsnts 14.0 26.6Official Busri 172.4 334.0

Brohkrs 316.3 259.9Dispute 43.7 45.4

ass Provinion fot Red Debts 26.6 41.6816.0 1.003.8

2/ Breakdown of Inv-ntoeies by -J.n categories

Jone Den. Juno DSe.1972 1972 1973 197

In Deposit 102.7 154.4 171.5 219.0In CondgEent 165.8 295.7 260.8 332.7In Treait 8.4 IA 12.5 NA

Tote1 276.9 450.1 44b.8 551.7

Gocdos ino -ess 4.3 4.2 3.7 4.3

Inventory sf Maw MetenialsRae w Ialrisls 54.1 63.4 109.8 90.9SUpplleu 62.8 6o.9 64.7 67.1Spa Pats 53.6 53.5 24.1 56.0

Bags and DIns 22.2 28.9 6.9 22.2

Smb-Total 192.7 206.7 205.5 237.0Lass Pr_iuieon forChsesxes ir. InventorY 5.1 5.4 5.2 5.6

Total 468.8 655.6 648.8 787.4

3/ For accenting purposes the compeny dep-ecistes a11 of its fiLod .scots (with the es-optixn of teansportequipent nd inst-neta) over 15 yeara.

4i Guamomes has mejoeity .ont-l over a group of onterpeit-s. The -s.t importat be.ig: Ferticx S.A.

(which operates in Central Amermic) Petr-quixica de Meoico S.A., Products Unimicos & Indostjiallodel Bajio S.A., Mi.eral.o Dubneeinos MeSice-o- S.A. and Tren-portes Centrales S.A. Gu nones alnoholds n minority iLterent in the large Azufre.a Pamn-icane S.A.

1 Aceosets payable imelodes Me-$45 millio- of dividends de-lored but not y-t paid out. Giue..es uargene.texpects that these dividends will be reinveted shortly is the company sa -n i-creane in equity.

6/ At the present tine, the nest important sosr-ss of short-teen credit foe the company are:-in Ioa .. rrs- cy a -evliug line ocof -it iub a leou baa which pmrmits to borro up to ma07S0 oilliooi-n foce currencf g - y the- t ies of cradit to fornigner p to US015 million (Men9187.5 million equivolt)

- tbe company diseeo-ts poet of its ac-ountsre.eivable with private end eovormtnt-ossed cosnrecil banks;- eaten of internet paid reoge from 12.5% in the local boreo-ieg to abet 13.5% for the foreign borrowing.

71/ At the end of 1973, the Goern-est agreed to ehke -vsilable 1o Gam-ne. up to Mn9$500 milliom recover lotseaincrrd is cos_rial operation Lovolfis ioot o fer-tilisor and selling in the local nerrkt at a fiecd prie. In Jan 1974 mex$82,8 nillion had been received from the Goveree ot arb tho- n a rrt

liability sod nut yet as intone. The Company expocts to one Mex$220-250 million befote Dectmbtr 31, 1974, ndthe rest during the fllowiog year.

i/ Of the tortl long-term debt of Meo$544.9 eillio= ootstetdisg as of Jume 1974, sbot Mex$140 o illioo coo becles.lfied ma suppliers -redit, the rest is directly releted to the ooquisitioo of Fertita 0.A. and aminority interest in Aefrore. Paicsna. Mott of the long-term debt with Refi.s. is in foreign -urecy.

Industrixl Proj-cts DepartaentFeb-oary 1975

ANNEX 3-1


CROPS AND THE NEED FOR FERTILIZERS IN MEXICO

1. The agricultural sector] employs around 40% of the country's laborforce but it contributed only an estimated Mex$37.5 (US$3) billion or lessthan 10% to GDP in 1973. Agriculture in Mexico, however, comprises severaltechnological levels. In the States of Sonora and Sinaloa, in the NW, aswell as in some other smaller areas, crops are grown mainly in irrigatedland, multiple-cropping is widespread and very modern technologies are used,including the use of high yielding varieties (HYVs) and high rates offertilizer application. In the Eastern part of the country, mainly in theState of Veracruz, there is a well developed exploitation of sugarcane. Inthe State of Chiapas, in the South, land is generally covered by jungle andshifting cultivation is prevalent. Finally, throughout the Central Highlands,the predominant type of agriculture is the subsistence-level crops, mainly ofcorn, grown in small patches in land whose topography does not favor economictransportation to consuming urban centers.

2. Various e timates of cultivable land in Mexico range between 20and 24 million ha.T/ Large areas in the highlands are left fallow; actualsown area is placed at between 15 and 16 million ha. However, some landmainly in the NW, is multiple-cropped.2/ Corn is by far the most widespreadcrop covering about one half of the total (Table 1). Other important cropsfrom the standpoint of area are beans, sorghum, wheat, sugarcane, cotton,oilseeds and fruit (mainly orange and banana).

3. Calculations based on depletion of nutrients by crops have beencarried out in Mexico as in many other countries; however, the amountsavailable in the soil; incoming nutrients contained in the rain or irrigationwater and fixed by symbiotic micro organisms, and losses oy decomposition,evaporation, leaching or insolubilization are not well known; therefore, theycannot be used as a basis for fertilizer dosages. Mexico has a network ofresearch stations coordinated by the Instituto Nacional de InvestigacionesAgricolas in the Ministry of Agriculture; some of the stations have a largeinput, including financing, received from the farmers. Such is the case, forinstance, of the Centro de Investigaciones Agricolas del Noroeste (CIANG)which receives economic aid from a Foundation for Agricultural Research andExperimentation formed by farmers in the State of Sonora, Guanomex's Agrcnomic

j Including livestock raising, hunting, forestry and fishing.

/ The current country economic report (No. 547-ME dated September 27,1974) states: "the cultivable area is estimated to exceed 20 millionha."; FAO places arable land at 22.5 million ha. in 1960; 23.8million ha. in Anuario EFtadistico 1970.

j Cropped area is estimated at as much as 17.4 million ha. (BancoNacional de Mexico, Review of the Economic Situation of Mexico,Vol. L, No. 583: June 1974).

ANNEX 3-1Page 2

Department has also started technical-economic investigations on iso-fertilization curves for corn crops in various states. They are based onbenefit cost studies for crop responses in the types of soils found in

different parts of the State studied; they include information on the

average availability of water and also on the risk element--mainly in rain-fed areas--obtained from an examination of variability of the water supplyover a period of not less than 10 yearsi/. This work has been carried outonly in a few States in Central Mexico; it has been found that in some areas

application of fertilizer cannot be recommended unless the farmer could have

extensive insurance or some other mechanism of income maintenance.

4. Fertilizer dosages are recommended for various crops and areas by

State Coordinating Boards composed of representatives of the Ministry ofAgriculture's Divisions of Agricultural and Livestock Economics, and of

Extension Services, the Agricultural Research Centers, Guanomex and other

organizations. In irrigated areas, Irrigation District Boards substitute for

the State Boards. Comparative fertilizer dosages and yields for several crops

in some areas--both irrigated and rain-fed are contained in Annex 3-5. Averagedosages in various countries are shown in Table 2.

3/ The needs of water by corn and the rainfall are computed on aweekly basis to avoid "averaging" months with surplus rainfallwith dry months at a time when water has a decisive effect onyields.


ANNEX 3-1Table 1 Page 3


CROPPED AREAS. PRODUCTION AND YIELDS

------Cropped Area (000 Ha.) ------ ------ Production (000 Tons)------- -- Yields (Kg/Ha.)--1970 1971 1973 1974 1970 1971 1973 1974 1970/71 1973/74

Wheat 886 614 602 778 2,676 1,831 2,000 2,764 3,000 3,452Corn 7,440 7,692 7,759 7,840 8,879 9,786 9,800 9,800 1,233 1,256Rice 150 153 171 186 405 369 420 464 2,554 2,469Barley 224 221 253 220 238 270 301 306 1,141 1,283Sorghum 971 937 1,261 1,229 2,747 2,525 2,900 2,950 2,763 2,349Soya 112 128 354 232 215 255 578 418 1,958 1,700Oats 54 55 22 36 43 26 24 21Beans 1,747 1,932 1,610 1,947 925 921 900 915 502 510Chicken Peas 208 215 30 8 186 167 45 18Lima Beans 53 64 53 55 31 40 37 40Peanuts 65 59 40 44 90 80 57 60 1,371 1,393Sunflower 51 9 5 27 5 12Cartamo 175 261 207 205 288 412 335 328Ajoujoli 274 281 247 243 179 180 165 165Potato 48 43 53 54 508 479 600 650 11,400 11,680Sweet Potato 16 12 11 12 155 130 94 123Coffee 329 329 337 350 185 192 200 180 594 710Cacao 76 79 80 70 29 29 30 28 374 387Cotton 411 456 445 553 337 388 366 425 836 792Sugarcane 547 561 506 493 34,651 36,264 33,000 33,000 64 j/ 66 1/Henequen 179 183 193 193 146 141 148 148Tobacco 43 50 35 37 69 76 57 60Onion 17 22 29 25 139 227 282 287Jitomate 64 62 61 71 923 939 1,100 1,150 14,780 17,050Avocado 19 21 18 19 226 250 210 230Chile 55 63 85 65 212 331 371 382Banana 74 82 77 77 965 1,114 1,055 1,070 13,330 13,800Coconut 114 127 127 130 89 112 115 120Orange 154 169 151 158 1,255 1,999 1,700 1,900 10,070 11,650Other Citrics 29 29 54 57 267 246 487 495Peach 15 16 24 30 178 167 260 214Melon 17 18 20 20 163 174 199 239 9,630 10,950Watermelon 20 25 28 26 204 335 288 300Grape 20 19 19 22 178 169 190 225Pineapple 10 8 8 6 249 297 219 229Apple 16 17 17 --- 146 191 191 ---Mango 17 16 18 22 308 307 350 350Papaya 6 6 5 8 125 145 130 140Guava 8 10 11 11 104 109 115 120Strawberry 8 7 6 6 127 103 90 100Other Fruit 25 25 23 26 203 227 215 230Alfalfa 153 164 181 163 9,240 9,689 10,500 10,600Other Foodcrops 90 82 101 91 234 289 302 307Other Crops 39 42 20 22 92 182 113 161

Total Cereals 9,783 9,745 10,400 10,485Other Foodgrains 2,008 2,211 1,693 2,010Oilseeds 565 610 499 519Fruit 533 574 588 599Vegetables 155 168 193 180Other Foodcrops 154 145 165 157Industrial Crops 1,585 1,658 1,596 1,696Ziscellaneous 246 261 223 221

Total Registered 15,029 15,372 15,357 15,867 11

1/ Total cropped area was given in 1974 at 17.4 million ha. (Banco Nacional de Mexico S.A.,Review of the Economic Situation of Mexico, Vol. L No. 583, June 1974). The differencepresumably corresponds to non-registered crops.

Source: Printouts received from Secretary of Agriculture, Direccion General de Economia Agricola.

Industrial Projects DepartmentJanuary 1975

ANNEX 3-1Page 4

Table 2


COMPARISON OF FERTILIZER CONSUMPTION IN VARIOUS COUNTRIES (1971-72)

Average Major Nutrient Consumption Per Capita ConsumptionKg/ha. of Arable Land Kg

N P205 K20 Total 191 l-72

Mexico 21.8 6.o 1.3 29.1 13.2

Canada 7.7 7.7 4.4 19.8 39.8

US 38.3 22.6 20.4 81.3 75.5

N. America Average 31.6 18.4 16.0 66.o 55.0

Argentina 1.7 1.5 0.4 3.6 3.9

Brazil 9.3 15.0 11.8 36.1 11.2

Peru 27.3 5.0 1.2 33.5 7.1

S. America Average 7.4 8.9 5.7 22.0 9.5

India 10.7 3.4 1.8 15.9 4.8

Bangladesh 4.6 2.4 o.8 7.8 0.9

Indonesia 10.9 1.3 0.3 12.5 1.8

Japan 160.8 122.0 107.0 389.8 20.1

Pakistan 11.7 1.8 0.1 13.6 4.1

Turkey 10.2 6.8 0.3 17.3 13.0

Asia Average 17.2 6.7 3.0 26.9 6.o

Egypt 122.7 16.7 0.7 140.1 11.5

Nigeria 0.5 0.3 0.2 1.0 0.4

Africa Average 4.6 3.0 1.3 8.9 5.3

France 79.8 101.1 78.7 259.6 96.8F.R. Germany 139.9 115.7 152.6 408.2 55.8

Italy 50.4 46.3 20.2 116.9 26.8

Romania 41.0 17.1 2.1 60.2 30.9

Europe Average 70.6 55.7 55.3 181.6 56.7

Developing Average 8.6 4.1 2.2 14.9 5.5Developed Average 40.6 31.9 25.6 98.1 53.3

World Average 23.2 14.5 12.0 49.7 19.6

Mexico as a % of- North American Ave. 69.0 32.6 8.1 44.1 24.0

- Developing Average 253.5 146.3 59.1 195.3 240.0

- World Average 94.0 41.4 10.8 58.6 67.3

Source: FAO, Annual Fertilizer Review 1972


ANNEX 3-2


HISTORICAL DEVELOPMENT OF FERTILIZER SUPPLY AND CONSUMPTION

A. Consumption of Fertilizer

1. Consumption of fertilizer grew rapidly in the last 20 years (at anaverage rate of 17.4% annually). The trend, however, slowed down to 11% inthe last decade. Consumption of phosphatic and potassic fertilizers grew alittle less rapidly (Table 1).

2. Consumption of ammonia, urea and complex fertilizers has grown ata faster rate than other nitrogenous fertilizers (Table 2). As a result,ammonia and urea account for 32% and 23% respectively of total Mexican Nconsumption. However, ammonium sulfate, with 26% of the total, is still animportant source of N.

3. Distribution of fertilizer consumption by regions is shown inTable 9. Most of the ammonia (62%) is used in the two States of Sonora andSinaloa. These two States plus Guanajuato and Jalisco are the main consumersof urea (53% of the total). Ammonium sulfate is sold preponderantly in theStates of Jalisco, Mexico, Guanajuato and Michoacan (60%).

B. Production of Fertilizer

4. The production of solid nitrogenous fertilizer grew at an averagerate of 15.4% annually from 1953 through 1973 as shown in Tables 4-8 summarizedbelow:

----------------------- 0OO Tons of N -------------------------Calendar Ammonium Ammonium Complex Total Solid Direct UseYear Urea Nitrate Sulfate Fertilizer Fertilizers Ammonia Total N

1953 - - 13.6 - 13.6 0.7 14.31958 - - 23.3 - 23.3 14.3 37.61963 19.1 41.7 32.6 9.5 102.9 60.0 162.91964 39.8 42.3 34.2 12.5 128.8 73.8 202.61965 44.3 31.6 42.1 20.3 138.3 66.4 204.71966 47.9 49.2 47.1 24.8 169.0 77.9 246.91967 44.3 54.5 49.5 25.3 173.6 91.7 265.31968 54.4 55.0 71.1 25.4 205.9 106.8 312.71969 74.3 53.6 81.9 29.7 239.5 150.6 390.11970 72.9 50.9 79.5 28.9 232.2 174.7 406.71971 98.5 52.8 71.3 38.4 261.0 166.3 427.31972 157.4 50.4 82.7 42.5 290.5 157.8 448.31973 167.3 50.5 101.0 47.4 366.2 176.5 542.7

Ave. 1964-73Ave.. Ann'--l Rates of Growth:

- ~ -175-3-7T7-iE- -~-- -- - 15.4% 19.9%1963-73 13.5% 12.8%1968-73 12.2% 11.7%

ANNEX 3-2Page 2

Urea and ammonia are products whose production has grown most rapidly. N inurea was only 18.6% of total N produced in Mexico in 1963 as compared to45.7% in 1973.

5. In the period from 1968 to 1973, N fertilizer production averaging443,000 TPY, has nearly balanced consumption (456,00O TPY). Produc ion, how-ever, was indirectly based, to a large extent, on imported ammonia* . In thelast five years, Mexico exported, on the average, 38,800 tons annually of Nin urea and imported 157,000 tons of N in ammonia (Tables 3 and 4). All theproduction of solid N fertilizers is made by Guanomex, with the exception ofabout 20,000 tons of N in ammonium sulfate made as a by-product by thefollowing private enterprises: UNIVEX, Altos Hornos de Mexico S.A. andIndustrias Quimicas de Mexico.

6. Potassic fertilizers are not produced in Mexico. Phosphatic ferti-lizers are produced by Guanomex and FFM. Guanomex has been making simplesuperphosphate since 1947 and DAP since 1970; it also manufactured triplesuperphosphate in the Coatzacoalcos unit from 1962 through 1969, at whichtime, the phosphoric acid made in this plant was diverted to the manufactureof DAP. At present, FFM is the main producer of phosphoric acid (capacity:380,000 TPY) and the only one of triple superphosphate (330,000 TPY). Guanomexhas a productive capacity of 76,000 TPY of phosphoric acid. Total capacity ofphosphoric acid exceeds demand for the manufacture of DAP and NPK and, in 1972,Mexico exported 184,372 tons of phosphoric acid to the US, Brazil, The Nether-lands, India and Guatemala. Although Mexico produces some phosphate rockj,the phosphoric acid industry is substantially bas, d on phosphate rock importedmainly from the US, and lately also from Morocco In 1972, phosphate rockimports amounted to 1,147,000 tons; about 300,000 tons were required by theGuanomex plants and the balance was used by FFM, save small volumes used byFosforitas Mexicanas for the production of other chemicals.

7. Production of phosphatic fertilizers developed in the last yearsas shown below. Mexico is practically self-sufficient overall.

3/ In practice imported ammonia is largely used for direct applicationas fertilizer due to the storage and handling facilities located atports near areas where direct application of ammonia is widespread,while domestically produced ammonia is used mainly (but not exclu-sively) for industrial transformation.

j Estimated at 58,000 MT in 1972.

j On the other hand, Mexico has the needed resources of sulfur, andenough productive capacity of sulfuric and nitric acids.

ANNEX 3-2Page 3

- --------------- Tons of P205 ------------------Year SSP TSP DAP NPK Total

1963/64 53,430

1966/67 83,5001967/68 92,8001968/69 45,108 25,030 26,508 18,652 115,2981969/70 41,460 28,470 31,151 14,381 115,4621970/71 37,857 30,237 47,323 15,558 130,9751971/72 46,657 47,071 49,240 18,075 161,0431972/73 53,278 94,760 30,995 31,483 210,9661973/74 51,180 95,000 37,250 33,630 217,060

Source: FAG, Annual Fertilizer Review 1967 and 1972.1973/73 and 1973/74 data from Guanomex.

C. Fertilizer Distribution and Prices

8. Guanomex, the only authorized distributor for the internal market,has divided the country into five sales regions (Table 9) and handles salesthrough four channels: dealers (mostly private), official banks in coordina-tion with cooperatives and agricultural associations, sugar mills, and directclients (generally farmers' associations). Geographical distribution offertilizer sales is shown in Table 9 and distribution by channels, below:

Fertilizer Distribution by Channels 1972/73

Official Sugar DirectDealers Banks Mills Clients Exports------------------ percentages-----------------

Anhydrous Ammonia 25 23 3 49 -Urea 43 15 5 7 30Ammonium Nitrate 59 30 5 6 -

Ammonium Sulfate 67 24 5 4 -Simple Superphosphate 79 17 - 4 -Triple Superphosphate 69 26 2 3 -Potassium Salts 91 6 - 3 -Diammonium Phosphate 69 26 2 1 2Complex Fertilizers 31 10 54 2 3Mixed Fertilizers 60 19 17- 4 -

9. Sales are highly seasonal. About 40% of all fertilizer is soldin two months (May and June) and nearly 60% in four months (between Marchand June).


ANNEX 3-2Page 4

Table 1


FERTILIZER CONSUMPTION 1951-1973(000 Tons)

CalendarYear N P205 K20 Total

1951 22.2 4.3 .6 27.11952 20.5 9.7 .8 31.01953 22.4 15.0 1.1 38.51954 30.6 19.7 1.5 51.81955 52.3 21.2 3.6 77.11956 71.4 28.4 4.5 104.31957 75.9 28.7 5.1 109.71958 93.9 27.0 9.9 130.81959 126.3 31.5 8.1 165.91960 128.6 34.2 6.7 169.51961 128.9 44.9 9.1 182.91962 147.0 45.2 13.4 205.61963 197.1 68.5 13.7 279.31964 240.6 69.1 16.5 326.21965 250.6 75.6 21.6 347.81966 279.6 87.1 20.0 386.71967 309.4 102.9 17.1 429.41968 353.2 120.2 21.4 494.81969 398.0 125.3 19.6 542.91970 405.0 117.8 22.3 545.11971 434.5 148.3 22.8 605.61972 485.1 148.2 31.4 664.71973 559.7 158.6 33.1 751.4

Ave. Annual Rates of Growth

1953/73 17.4% 12.5% 18.6% 16.0%1963/73 11.0% 8.8% 9.2% 10.4%1968/73 9.7% 5.7% 9.1% 8.7%

Source: For nitrogen, Guanomex Feasibility Study for the ProjectFor phosphoric acid and potash, Guanomex 30 A'nos


Table 2


APPARENT CONSUMPTION OF NITROGENOUS FERTILIZERS

(Tons of N)

Calendar Ammonium Ammonium Complex Other Of WhichYear Anmonia Urea Nitrate Sulfate Fertilizer Fertilizer - Total N Solid Fert.

1950 544 - 2,501 3,655 - 1,776 8,476 7,9321951 7,739 17 3,245 8,181 - 3,039 22,221 14,4821952 0 242 2,624 14,005 - 3,607 20,478 20,4781953 738 154 1,392 14,785 - 5,337 22,406 21,6681954 410 318 3,655 15,924 - 10,297 30,604 30,1941955 7,497 1,493 8,570 23,682 - 11,064 52,306 44,8091956 12,934 9,774 11,498 27,441 1,861 7,848 71,356 58,4221957 11,258 12,175 9,689 23,560 2,220 17,035 75,937 64,6791958 14,330 15,404 12,732 27,775 2,817 20,884 93,942 79,6121959 25,228 14,026 11,774 35,028 2,280 37,999 126,335 101,1071960 19,947 19,607 22,666 31,693 2,683 31,960 128,556 108,6091961 32,467 18,609 27,823 32,137 2,089 15,812 128,937 96,4701962 39,567 20,901 38,988 34,309 3,917 9,361 147,043 107,4761963 60,031 38,177 44,973 41,o85 10,158 2,633 197,057 137,0261964 73,781 49,438 45,692 48,323 13,952 9,426 240,612 166,8311965 66,420 54,915 48,260 56,736 20,833 3,483 250,647 184,2271966 77,900 57,147 58,228 58,724 24,400 3,194 279,593 201,6931967 91,706 56,129 68,647 63,903 25,882 3,110 309,377 217,6711968 106,814 66,835 58,364 93,775 27,373 - 353,161 246,3471969 150,635 69,o68 56,961 89,921 31,390 - 397,975 247,3401970 174,677 68,676 52,567 79,539 29,540 - 404,999 230,3221971 166,300 76,927 60,737 94,625 35,926 - 434,515 268,2151972 157,783 99,368 61,185 122,032 44,733 - 485,101 327,3181973 176,537 131,486 57,583 144,403 49,687 - 559,696 383,159

Average Annual Rates of Growth (%)

1953-1973 31.5 40.1 20.4 12.1 Inf. Inf. 17.41963-1973 11.4 13.2 2.5 13.4 17.2 Inf. 11.01968-1973 10.6 14.5 (0.2) 9.0 12.7 - 9.7

j Sodium nitrate, potassium nitrate, etc.Source: Guanomex.

Industrial Projects Department rFebruary 1975

Table 3


PRODUCTION AND APPARENT CONSUMPTION OF AMMONIA(Tons of Ammonia)

__________________--- Uses -------------.----Calendar Apparent Industrial Direct Raw Material forYear Production! Imports EMPorts Consumption Uses Application Other Fertilizer

1950 691 663 - 1,354 53 610 6911951 9,198 1,058 - 10,256 216 1,197 8 ,8431952 16,571 893 - 17,464 341 234 16,8891953 16,798 1,219 - 18,017 315 900 16,8021954 16,610 1,788 - 18,398 31d 500 17,5881955 18,881 10,197 - 29,078 1,260 9,143 18,6751956 22,230 19, 0o0 - 41,230 2,101 15,773 23,3561957 22,799 21,121 - 43,920 2,800 13,729 27,3911958 23,083 29,322 - 52,405 4,511 17,476 30,4181959 23,990 47,485 - 71,475 2,048 30,766 38,6611960 22,598 68,452 - 91,050 4,o66 24,326 62,6581961 40,868 74,855 - 115,723 4,702 39,593 71,4281962 104,335 48,338 - 152,673 4,177 48,252 100,2441963 153,047 59,400 - 212,447 5,000 73,209 134,2381964 178,467 85,456 - 263,923 4,087 89,977 169,8591965 175,187 111,463 - 286,650 3,989 81,000 201,6611966 194,372 152,816 - 347,188 7,886 95,000 244,3021967 184,344 200,003 - 384,347 3,400 111,837 269,1101968 218,216 212,067 - 430,283 3,461 130,260 296,5621969 451,051 107,295 - 558,346 8,60o 183,701 366,o451970 500,354 74,245 - 574,599 9,446 213,021 352,1321971 485,439 116,137 - 601,576 10,050 202,805 388,7211972 530,537 206,568 - 737,105 11 ,443 192,418 533,2441973 555,465 247,238 - 802,703 11,512 215,289 575,902

/ Including production derived from coke gas and used for by-product ammonium sulfate.

Source: Guanomex

Industrial Projects Department CD

February 1975

ANNEX 3-2Page 7

Table 4


UREA FRODUCTION AND APPARENT CONSUMPTION(Nutrient Tons)

CalendarYear Production Imports Exports Apparent Consumption

1950 - - _1951 - 17 - 171952 - 242 - 2421953 - 154 - 1541954 - 318 - 3181955 - 1,493 - 1,4931956 - 9,774 - 9,7741957 - 12,174 - 12,1741958 - 15,404 - 15,4041959 - 14,026 - 14,0261960 - 19,607 - 19,6071961 - 18,609 - 18,6091962 - 20,901 - 20,9011963 19,o67 21,055 1,945 38,1771964 39,797 16,525 6,884 49,4381965 44,261 12,151 1,497 54,9151966 47,875 11,866 2,594 57,1471967 44,329 12,122 322 56,1291968 54,443 15,680 3,288 66,8351969 74,291 4,233 9,456 69,o681970 72,921 3,594 7,839 68,6761971 98,543 10,820 32,436 76,9271972 157,449 _ 58,081 99,3681973 167,310 _ 35,823 131,487

Source: Guanomex


ANNEX 3-2Page 8

Table 5


AGRICULTURAL AMMONIUM NITRATE

PRODUCTION AND APPARENT CONSUMPTION(Nutrient Tons)


1950 - 2,501 - 2,5011951 - 3,245 _ 3,2451952 - 2,62)4 2,62)41953 - 1,392 1,3921954 - 3,655 - 3,6551955 - 8,570 - 8,5701956 - 11,498 - 11,4981957 - 9,689 - 9,6891958 - 12,732 - 12,7321959 3,420 8,354 - 11,7741960 18,203 4,463 _ 22,6661961 23,775 4,O48 - 27,8231962 41,522 589 3,123 38,9881963 41,748 3,225 - 44,9731964 42,349 10,166 6,823 45,6921965 31,597 16,663 - 48,2601966 49,174 9,154 100 58,2281967 54,507 14,274 134 68,6471968 55,0o14 3,350 _ 58,3641969 53,611 3,350 - 56,9611970 50,892 1,675 _ 52,5671971 52,782 7,956 _ 60,7381972 50,434 10,751 - 61,1851973 50,550 7,033 - 57,583

Source: Guanomex.


ANNEX 3-2Page 9

Table 6

MEUICO - FERTILIZER PROJECT

AMMONIUM SULFATE

PRODUCTION AND APPARENT CONSUMPTION(Nutrient Tons)


1950 542 3,113 _ 3,6551951 6,919 1,262 _ 8,1811952 13,216 789 _ 14,0051953 13,573 1,212 - 14,785

1954 12,965 2,959 - 15,9241955 14,398 9,284 - 23,6821956 17,997 9,444 - 27,4411957 20,353 3,206 _ 23,5601958 23,283 4,492 _ 27,7751959 29,416 5,612 - 35,0281960 30,173 1,520 _ 31,6931961 31,266 871 - 32,1371962 32,238 2,071 - 34,3091963 32,601 8,484 - 41,0851964 34,226 14,097 _ 48,3231965 42,123 14,613 - 56,736

1966 47,136 11,588 - 58,7241967 49,451 14,452 - 63,9031968 71,091 22,837 153 93,7751969 81,937 8,107 123 89,9211970 79,539 8,107 - 79,5391971 71,350 23,275 - 94,6251972 82,728 39,304 - 122,0321973 1 o ,015 43,388 _ 144,403

Source: Guanomex


ANNEX 3-2Page 10

Table 7


COMPIEX FERTILIZERS-II

PRODUCTION AND APPARENT CONSUMPTION(Tons of N)

CalendarYear Production Imports .Exports Apparent Consumption

1950 _ _ _ _1951 -1952 _ _1953 - _ _ _1954 - - - _1955 - _ _ _1956 - 1,861 - 1,8611957 - 2,220 - 2,2201958 - 2,817 - 2,8171959 - 2,280 - 2,2801960 _ 2,683 _ 2,6831961 - 2,089 - 2,0891962 864 3,053 - 3,9171963 9,511 647 - 10,1581964 12,547 1,405 - 13,9521965 20,259 574 - 20,8331966 24,751 - 351 24,4001967 25,327 877 322 25,8821968 25,438 2,694 759 27,3731969 29,662 2,700 972 31,3901970 28,933 2,338 1,731 29,5401971 38,424 11,582 4,080 35,9261972 42,535 2,280 82 44,7331973 47,409 2,278 - 49,687

j/ Including DAPSource: Guanomex


ANNEX 3-2Page 11

Table 8


OTHER NITROGENOUS FERTIZERSI

APPARENT CONSUMPTION2/(Tons of N)

CalendarYear Imports Apparent Consumption

1950 1,776 1,7761951 3,039 3,0391952 3,607 3,6071953 5,337 5,3371954 10,297 10,2971955 11,064 11,0641956 7,848 7,8481957 17,035 17,0351958 20,884 20,8841959 37,999 37,9991960 31,960 31,9601961 15,812 15,8121962 9,361 9,3611963 2,633 2,6331964 9,426 9,4261965 3,483 3,4831966 3,194 3,1941967 3,110 3,1101968 - -19691970197119721973

j Comprising CAN, Sodium nitrate, ammonium nitrate sulfate,sodium potassium nitrate and other nitrogenous fertilizers.

/ There is no domestic production.

Source: Guanomex

In'-,trial Projects DepartmentFebruary 1975

Ubb.t N

Ma500 - ENTN2S2N PRtJNNB

sntTInontnN STASIS 1973174

Onlydrous Urea Ososoo-us oniua Die-unit Comple Ni-d Tota timpin Trpc Nsostu spe Mind Tut- Potass.ium Ptasu Cusle Nine Total TotalAonis (46-0-0) NItrate tu-ao hopite (i-17-14) ortler N Puepu. uprbs osote Urisrs otlsro O iuie Nultte xroliece Omtith.r.i0 Nortot(UN-N-N) _____ (~35.5-0-0) ( 1o--u 8i-46-o) _____ .4~.. - -cu (0- lU-u) (oi4-lU-U) ~ (lU1-1Oi') I/5L ___ (o-o-6o) (0-N-it) (1N-17-liO _____ ____

Baja Yalifori Non 15.7 a. 0.7 U. .2 0t 7. 1.2 0.4 U.N 2.1 -o .4 -04 Nt.?Nis omooonun-- lt Ni- - -:, : i.6 - - - - 1 --- 6.Ninnio4sl. 20.4 1.6 .4 3.3 0.7 69.9 2. N.2 .7 -10. 0.N 6. 0. U1.6

tunors ~~~~ ~ ~~~ ~~~69.0 3. 2.7 0.1- 0.7 0.M 9515 . . UN-9N-0. . . iOU.

nu-os mu -Non.6.3 51.2 5.1 719 4.2 i.N 1539 - u1.N NU.U 1.4 - 4. - 0. 4 N.Y - .U 214.9

Cbihuno 2.2 6.4 4.3 1.2 37 - o9 -i6 9.3 - -10.9 0.2 02 - - 04 3 11Nuranpo L.t 2.0 04. N.U 1.1 0.1 - iNO 0.i 0.0 U.N 0.1 - 1515 - N.i - - 0.i 14.2~~~~~10-- a 35 0. 0.1_14

tub-total N Zoom ~~~~ ~~7.0 11.0 5.7 151 . . 0N 01 21 12201-i9 . . 0.5 45.6

CoaNuila - 0.1 2.1 3.~ ~ ~~~~ ~~~ ~ ~~~~ ~~~~ ~~~~7 1.4 N1 2.1 ll.t u.k 0.7 j.6 0. 3.2 8.0 - 0.2 0. .0 0. 20.3Noeno leon 2.4 2.9 0.1 0.6 0.5 0.0 - U.? - 0.2 1.2 0.1 - i.n - - 0.1 - 0.1 0.0~~~~~~~~~~~~~~~~~~~~~~~~~~~2.42:' 0, o4 05 -0:Tsmauoipaa ~~~~ ~ ~~~~20.6 3.51 0.2 1.2 _o.6 1519 0. 2U.N - 0. 1.6 1.0 1515 1559 - 1-5 1.n4

Nubt-toa Ni Coo 23.1 U.3 2.7 1515 2.5 2.1 2515 16.3 N.4 l.i 6.-4 2.0 3.5 13.4 - 0.2 1.7 1 62.1

Comes - u.6 o.U o.6 0.1 0.0~~~~~~~6 0. 3. - ... 2 0.4 0.13 0.1 N.i 0.4 0. 57Jaiaco.6 13.2 9.4 22.3 1. 0. 0.9 408 47 7.9 3.7 0.9 1.3 iU. N.3 0.2 N.Y 0.2 N4 69.7mielaom 0. 4.6 4.7 15.1 . 2.9 0.1 28.0 4.1 1.6 2.9 2.0 .8. . . .44.0Nap-ant 0.3 1.2 0.1 .21 0.07 N.N 6. .1 .-1 119 1.7 - 0.07 4.4 - - -- NO-1

Nui-tooal unto Zo .i 19.6 10.9 h1.4 3513 915 1.7 88.3 1521 L 11,0 U.1 4.1 2.0 36.1 1519 0.0 3. 4 0457130.2

D.F. 0.4 4.0 2. 3.9 2.2 0.4 2.3 11.3 0.9 0O4 0.1. 0.4 3.5 t.6 - 0.1 0.3 . 92,UG-- ~ ~ ~ ~ ~ ~ 01 0.3 1.9 - 0.5 4:. 6.0 o. - - o. 6.o 6.7 - - 0.4 1. . 4.8

Hidlo- . 0.0 2.8 O ., 0.6 4.2 18 0.3 0.1 010.9 3.2 0.4 0..2 It.Ii7 :=elo 3.6 2. 3.0 19.6 0.8. 0.0 3-. 13.0 2.2 0.2 0.7 1.2 16.1 100.1 0.6 01.22

Norelos - o.~ ~ ~~~~ ~~~~~ ~ ~ ~~4 0.7 315~ 0.7 N.t 10.4 119 0.4 1 .603 O2 -. - 0.2 212.4

too-total Central none ls.o 0.0 7.7 6 3o.6 0.3 0. 13.3 66.t 17.6 1515 N.7 113 2195 43.8 1.6 0.3 1519 1107. 4

Aquaaoalienies ~ ~ ~~~~~- o.6 0.0 1.0 0.0 0.3 - 3.6 0.7 1.i 0.2 0.3 - 2.3 0.1 0. 0.2 .46.5uunoajuoto ~~~~ ~ ~~~~13.1 10.4 9.0 16.4 1.7 1. - N.0 4.0 12.3 6.4 1.0 - 23.0 0.6 0.3 1.4 Us.83 Qusostlro ~~~~ ~~~ ~ ~~0.0 6. 1.1 0. 0.3 0.:-6. 0.3 0.3 0.8 0. -05 - .0.i 0.2 7.0N. SuNs Poiosl ~ ~ ~~~~~- 0. 0. . . . . . N.1 01 04 1.0 2.i1 . 0.3 0.2 o.6 t.6Yboateoan ~ ~ ~~~~ ~~~~- 0.:4 0.0 2.1, - . 315 1.5 .21 1 1519

Put-total osJlul oo 13519 IU.3 12.7 22.1 0.1 o.6 0.7 72.4 7. 10. 5.7 2. 1.0 31.9 `91 0. . 0.2 1516 107.9

Ollapac - ~~~~ ~~~~ ~~ ~~~~~3.6 0. . .0 16 7.17 - .4 1.3 1.6 - 33 - -1.3 - 1.3 112.3Oeuaoa - 3.5 ~~~~ ~~~~ ~~~ ~~~~ ~~~0.2 11 lU .3 0. 7.1 -. 019 1.2 0.5 3. - . . . 11.7

anottoanan - 2.0 0.1 0.1 0~~~~~~~~~~~~~~~~~~~~-2.4 0.9 -3. -I. . 0.04- .31 0.7-0.Us

Ou-onlSth...Non 9.1 00 3.0 0.7 3.8 0. 1U.3 0.1 0219 451 3.4 0.3 915 0.1 -5,5 0. .1 30.1l

Puetla 1.0 1.2~ ~~~~ ~~~~ ~~~ ~ ~ 3.0 7.9 0. 1. 0.3 14.9 0 .700 1.00. 7.13 -090. . 23Plnola- .6 1.9 2.8 . 0.0 0.7 16.9 2.0 1.3t4 t.6 1. 1.4, 0.2 -O0. 0.2 0. 1.

Oeraoron 0~~~~~~~~~~O.2 4.1 319 5.1 119 00.0 1.3 24.1 3.2 1.0 2.41 951 2.0 18.3 1.5 0219 8.0- 0Q- 10.7 53.6

Sub-total NIS--C Zoo 1.4 1519 759 10.0 .103 11.U 2515 46.5 0.7 4.0 3.3 11.i 1515 310 1.0 .0- _2.4 0.5 13.0 pb.f6T-1n -utois 160.0 131.2 NO.2 122.2 20.2 267 20. 009.0 43.6 50.3 02.0 00.4 30.6 203.8 5.9 15 1515 2.6 4/7 36.6 79.

Nn-tor 1.0 23.0 - - 5.5 ---- 25.3

uP5p 501St 0410 ilLg 1--Iii 12. 20.2 20. 081. 2 4Lj. 50.7 2. 215.4 700 10.0 055l2.8*68828

RI Nai-t.d avrgM cmoito. 22-33-NNone, Dsaoepeoo-s in last dgil ar due to -oudin

Oouirs PoeosNaetat Janar 1975

ANNEX 3-3


AGRO-CHEMICAL INPUTS ACCORDING TO AN AGRICULTURAL SECTORMODEL FOR MEXIC0

1. A research project undertaken jointly by the Government ofMexico and the Bank's Development Research Center (DRC) resulted in a highlydisaggregated model of the Mexican agricultural sector,17 which describessupply and demand for 33 crops and inputs associated with them in 20 differenttypes of land. The model permits to simulate alternative paths for the sectorin terms of macro variables (output, prices, employment, etc.) and estimatesshort and long-term sectoral elasticities of supplies. It can also incorporatealternative measurements of capital/labor substitution, changes in sectoralincome distribution, estimates of seasonal employment patterns and allows forthe calculation of demands for key inputs. For capital-labor substitution,the value of agricultural machinery was isolated from other forms of capitalbecause it is thought that irrigation and other long-term capital investmentsare not substitutes for labor. The model does not include data on forestry,livestock and long-cycle crops.

2. The model estimates that with agricultural sector growth rates of4.7% and 5.-% (corresponding to 7% and 8% GNP growth rates respectively),elasticities of agrochemical consumption to sectoral output range between1.74 and 1.77 and fertilizer consumption growth rates (assumed to be propor-tional to total agrochemical consumption) will range from 8.2% to 9.5%annually.

3. The model assumes that farmers will increase fertilizer consumptiononly when it pays them to do so and that there is a time lag in the spread ofinformation. It does not take into account the possible role of stepped-upextension services and other promotional measures which could result in hi4erfertilizer consumption, mainly by small farmers in isolated rainfed areas..!/A well designed and dynamic research and extension program couldincrease fertilizer consumption at an annual rate of as much as 11%.

v A Quantitative Agricultural Planning Methodology (May 1974),by Roger D. Norton (DRC) and Luz N. Bassoco(Office of the President,

Government of Mexico)2/ The model shows that without these promotional measures, 27.5% of the

agrochemicals used in Mexico by 1976 will be used in irrigated lanain the NW, 42.h% in other irrigated land, 29.2% in rain-fed non-tropicalland and 0.9% in tropical areas.

Industrial Projects Department

February, 1975

ANNEX 3-4


RATIO OF UREA NITROGEN TO TOTAL NITROGEN FERTILIZERCONSUMPTION IN SELECTED COUNTRIES

1966/67 1970/71 1971/72 1972/73

Mexico 0.16 1 0.18 0.20 0.23

Nicarague o.67 0.70 o.64 -

Argentine 0.32 0.38 - 0.21Brazil 0.07 0.21 0.15 -Ecuador o.50 0.68 - 0.59Peru 0 o.46 0.55 -

Egypt 0.06 - 0.44 0.23Israel 0.06 0.21 0.19 0.19Japan 0.25 0.31 0.36 -

India 0.32 - 0.63 -

Pakistan 0.26 / - 0.84 Ž' -

Sri Lanka 0.17 - 0.54 o.54Bangladesh - - 0.87 -Indonesia - - 0.89 0.90

1/ For calendar years

/ 1965/66;/ 1972/73

Sources: FAO, Annual Fertilizer Review 1973, except for data onMexico, India, Pakistan, Bangladesh and Indonesia whichare taken from Bank reports.


ANNEX 3-5


FERTILIZER SUPPLY AND CONSUMPTION PROJECTIONS

1. Guanomex has projected a consumption of 1.0 million tons of N and0.25 million tons of P205 by 1980, and 1.5 million tons of N by 1985. Themethodology used has been based on fitting regression equations to thehistorical data and applying them to assumed 1974 base consumption figures.Total projected N consumption levels for 1985 is compatible with the Chac/model for agriculture in Mexico (Annex 3-3) and it could be even higher ifstrong promotional measures were taken to improve fertilizer applicationrates in some (but not all) rain-fed areas not fertilized up to now, andif, as announced, irrigation works benefiting 1.14 million ha. were builtthrough 1980. A slowdown in the growth of ammonia consumption in irrigatedlands in the NW--where there are limitations both in area and in dosages,which are now practically reaching optimum levels--and the shift fromammoniuum sulfate and nitrate to urea because of lower freight costs has beentaken into account in the projections for individual products (Table 1).Furthermore, consumption of ammonium sulfate and nitrate is assumed to beessentially the same as production and therefore they are derived from knownmanufacturing capacity plans.

2. Consumption of P205 has also been modified to result in more balancedN:P205:K20 ratios. The proportion of P2O5 and K20 application rates to thatofNWis iiimuch lower than in otherFcountri'es 7riefIe&tng preence of thosenutrients in the soil of several important agricultural regions. However,as intensity of fertilization with N increases, depletion of other nutrientsbecomes more of a possibility and to counteract their deficiency--Which isnot generally as quickly visible as N deficiency--promotion of consumptionof complex fertilizers is expected to result in higher levels of P20o and K2Oconsumption than those found by simple extrapolation of historical d?ata.Consideration must also be given to the need for micro nutrients. No speci-fic projections for consumption of potassic fertilizer have been made but inthe estimate that follows, it has been assumed that the trend for K2O willfollow that for P205.

- 000 Nutrient Tons -------FY N P205 K20 Total N:P205:K20 Ratios

1978 831 246 62 1,315 14.0:4.0:1.01980 286 338 85 1,520 12.0:4.0:1.01985 1.,496 545 136 29177 11 .0:4-0:1.0

3. Production projections for N solid f6i-fIIzer shown in Table 2 arebased on projects already under way (for which financing has been or is beingarranged), and some other projects still in the planning stage. The balancebetween production and consumption is shown below:

j A model jointly prepared by the Government and the Bank's DevelopmentResearch Center and named after the Mayan rain goddess.

ANNEX 3-5Page 2

Balance of Solid N Fertilizers(000 Tons of N)

-_----------------- Production -- ----------- Consumption SupplyAmmonium Complex Surplus or

FY Urea Sulfate Nitrate Fertilizers Total Total (Deficit)

1975 173.5 115.1 50.4 62.6 401.6 453.0 (51.4)1976 175.0 118.2 51.4 62.1 406.7 498.0 (91-3)1977 177.3 121.3 53.4 62.1 414.1 547.0 (132.9)1978 247.0 152.4 54.4 77.4 531.2 601.0 (69.8)1979 465.2 162.3 54.7 76.5 758.7 66o.o 98.71980 507.2 165.4 54.8 76.2 803.6 725.0 78.61981 526.2 165.4 68.8 76.2 836.6 795.0 41.61982 526.2 165.4 83.3 76.2 851.1 870.0 (18.9)1983 526.2 165.4 84.9 76.2 852.7 952.0 (99.3)1984 526.2 185.4 84.9 92.4 888.9 1,031.0 (142.1)1985 526.2 185.4 84.9 92.4 888.9 1,122.0 (233.1)

The deficit will be met by net imports. The view at present is that theproposed Istmo plant will export part of its production between 1979 and 1982but there will be continued importation of complex fertilizers until a newproject for the establishment of a plant (possibly on the Pacific) is developed.However, it is also possible that some of the urea surplus will be used tomanufacture mixed fertilizers cutting down on the need to import complexfertilizers. Capacity for the manufacture of complex fertilizers will berequired very soon, mainly if demand for P2 05 develops at a somewhat fasterrate than that for N. By 1985, there would be, in all likelihood, need foradditional N fertilizer capacity. The nature of the product to be manufacturedand the plant location should be carefully studied.

5. The ammonia requirements and availability on the basis of knownprojects are projected to be as shown in Table 4.

ANNEX 3-5Page 3

Table 1


CONSUMPTION PROJECTIONS OF NITROGENOUS FERTIUZERS BY TYPE OF PRODUCTS(000 Tons of N)

Ammonium Ammonium Complex Sub-TotalFY Urea Nitrate Sulfatel/ Fertilizers.? Solids AmmoniaY Total

1975 175 58 134 86 453 191 6441976 201 58 134 105 498 203 7011977 231 58 134 124 547 216 7631978 266 58 152 127 601 230 8311979 312 58 162 128 660 245 9051 980 355 58 165 147 725 261 9861981 407 69 165 154 795 280 1,0751982 467 83 165 155 870 301 1,1711983 526 85 165 176 952 324 1,2761984 594 85 185 167 1,031 338 1,3791985 654 85 185 198 1,122 374 1,496

j After 1977, consumption is assumed to equal production ofexisting plants or projects under way (Table 3).

j By difference between total consumption and consumption ofother nitrogenous fertilizers.

j For direct application as fertilizer.

Source: Projections prepared by Guanomex and the Bank after considerationof substitution of urea for ammonium sulfate and nitrate and aslowdown in the trend for ammonia consumption.

Industrial Projects DepartmentAnril 1975

Table 2


NITROGENOUS SOLID FERTILIZER PRODUCTION PROJECTIONS(000 Tons)

----- Capacity ------ ---------------------------------------- N ProductionI/ -------------------------------------Urea Product N 1973 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984/85

Existing Plants 446.0 205.1 167.3 173.5 175.0 177.3 180.6 180.6 184.6 184.6 184.6 184.6 184.6Plants Under Way-j 825.0 379.5 - - - - 66.4 284.6 322.6 341.5 341.6 341.6 341.6

Sub-Total 167.3 173.5 175.0 177.3 247.0 465.2 507.2 526.2 526.2 526.2 526.2

Ammonium Nitrate

Existing Plants 178.0 59.6 50.5 50.4 51.4 53.4 54.4 54.7 54.8 54.8 54.8 54.8 54.8Other Possible Projects 100.0 33.5 - - - - - - - 14.0 28.5 30.1 30.1

Sub-Total 50.5 50.4 51.4 53.4 54.4 54.7 54.8 68.8 83.3 84.9 84.9

Ammonium Sulfate

Existing Plants3/ 806.5 165.3 101.0 115.1 118.2 121.3 124.4 127.5 130.6 130.6 130.6 130.6 130.6Plants Under Way4/ 400.0 83.8 - - - - 28.0 34.8 34.8 34.8 34.8 34.8 34.8Other Possible Projects-/ 20.0 4.1 _ _ _ _ _ _ _ _ _ _ 20.0

Sub-Total 101.0 115.1 118.2 121.3 152.4 162.3 165.4 165.4 165.4 165.4 185.4

Complex Fertilizers6/

Existing Plants 400.0 77.0 47.4 62.6 62.1 62.1 61.2 60.3 60.0 60.0 60.0 60.0 60.0Other Possible Projects7/ 200.0 36.0 - - - - 16.2 16.2 16.2 16.2 16.2 16.2 32.4

Sub-Total 47.4 62.6 62.1 62.1 77.4 76.5 76.2 76.2 76.2 76.2 92.4

Total Solid Fertilizer

Existing Plants 507.0-/ 366.2 401.6 406.7 414.1 420.6 423.1 430.0 430.0 430.0 430.0 430.0Plants Under Way 463.3 - - _ - 94.4 319.4 357.4 376.4 376.4 376.4 376.4

Sub-Total 970.3 366.2 401.6 406.7 414.1 515.0 742.5 787.4 806.4 806.4 806.4 806.4

Other Possible Projects2

/ 301.3 - - - - 16.2 16.2 16.2 30.2 44.7 46.3 82.5

TOTAL 1,271.6 366.2 401.6 406.7 414.1 531.2 758.7 803.6 836.6 851.1 852.7 888.9

1/ Fiscal Years.2/ The project presented to the Bank.3/ Including plants not belonging to Guanomex, with a total capacity of 201,500 TPY (41,600 TPY of N) c4/ UNIVEX's 200,000 TPY by-product capacity from expanded caprolactam production.5/ Guanomex's S. Juan del Rio 200,000 TPY plant, which eventually will replace Cuatitlan's capacity (225 000 TFY)6/ Including mixed fertilizers. Assumed average N content: 18%7/ Two 100,000 TPY DAP trains (probably at Manzanillo).8/ 478,900 TPY net of mixing plants' output.9/ Neither the capital nor the operating costs nor the revenues related to "possible projects" have been considered

in the financial projections.


AINEX 3-5Page 5

Table 3


AMMONIA PLANTS

Existing Plants Date of Start-up Owner Capacity (IPY)as ammonia as N

Salamanca 1967 Pemex 82,500 68,000Camargo 1968 132,000 108,700Cosoleacaque I 1967 " 61,000 50,200Cosoleacaque II 1969 H 297,000 244,800

Sub-total 572,500 471,700

Cuautitlan Guanonex 18,000 l4,800By-product various 30,000 24,700

620,500 511,200

ScheduledProjected Plants Date of Start-up

Cosoleacaque III 1975 Pemex 297,000 244,800Cosoleacaque IV 1977 " 445,000 367,000Salamanca 1977 297,000 244,800Cosoleacaque V 1980 ,, 45,J0) 367,000

1,484,000 1,223,600

Industrial Projects DepartmentApril 1975

ANNEX3-Page6

Table 4


AMMONIA SUPPLY AND USES(000's Tons of N)

Capacity

l9/' 1975 1977 1980 1982 1985

Existing Plants (through Dec. 1974) 511 511 497 497/ 1497 497Projected Plants (Table 3) - 245 857 1,224 1,224 1lfi224

Total 511 756 1,35 4 1,721 1,721 1,721

Production

Existing Plants 458 462 449 4 9 449 49Projected Plants - 148 572 81 1,047 1,101

Total 458 610 1,021 1,320 1,h96 1,550

Uses

Direct Application 178 191 216 261 301 374Processing into other Fertilizers 472 511 542 1,005 1,064 1,112Other Industries 10 17 65 65 65 83

Total in Mexico 662 719 823 1,331 1,430 1,569

Domestic Surplus (Deficit) (204) (109) 198 (11) 66 (19)Required by Central American

Subsidiaries 55 55 55 55 55 55Pemex/Guanomex Surplus (Deficit) (259) (164) 143 (66) 11 (74)

1/ Calendar year for 1973 and fiscal years for all projections.

2/ Assumes Guanomex's Cuatitlan plant discontinues operations.


ANNEX 3-6


IMPORTS OF UREA IN SELECTED COUNTRIES

1967/68 1970/71 1971/72 1972/73

uS 78.0 107.0 119.0 219.0Guatemala 13.6 29.0 13.0 24.0El Salvador 1.1 4.1 --- ---Honduras 12.0 15.0 20.0 14.0Nicaragua 15.9 16.3 11.1Costa Rica 16.o 33.3 26.0 26.0Brazil 16.0 59.5 42.8 82.1Colombia - 7.2 11.8Peru 9.3 33.0 42.5 58.7Venezuela - 4.4 7.1 ---

Source: FAO, Annual Fertilizer Review 1972


ANNEX 3-7


DESCRIOTION 0F CONASUPO

ObJectives

1. Conasupo has the following basic objectives:

i. regulate the market for basic staples;ii. increase the income of poor farmers;

iii. increase the ability of low income consumers to acquirebasic goods.

2. More specifically, the target groups are producers with annualincomes below Mex$12,000 (US$960) and families with monthly incomes of lessthan Mex$2,000 (US$160). A profile of the structure of Mexican agriculturein terms of farm numbers and output is shown in the following table.

Structure and Output of Mexican Agriculture=/

Annual Average % of Total % of Total % of SalesProduction(Mex$) Farmers Output in Market

More than 100,000 °.5 32.3 0.725,000 - 100,000 2.8 22.0 23.35,000 - 25,000 12.6 24.4 23.91,000 - 5,000 33.8 17.1 9.4Less than 1,000 50.3 4.2 2.7

1/ The source of this and other information given in this Annex is"An Analysis of Conasupo's Rural Development Program" t, prepared byDr. James E. Austin for the Bank in March, 1974.

Approximately 9h% of the farms have annual sales of less than M$12,000,and they account for only about 33% of the total agricultural output.

3. In effect, Conasupo is targeting its programs toward thesubsistence and small farmer segments. The low income consumer groupincludes both urban and rural poor and is composed mainly of those withannual incomes of less than Mex$12,000; in 1972 this group constituted 57%of the population.

ANNEX 3-7Page 2

Mexican Income Distribution 1963 and 1972

Percentage of Population Number of People (000)

Family 1963 1972 1972 1963 1972 1972Income (In 1963 (In 1972 (In 1963 (In 1963 (In 1972 (In 1963ex *eYear Pesos) Pess) Pesos) Pesos) Pesos) Pesos)

Less than 3,600 15.9 9.2 12.9 6,707 41,995 7,0303,601 - 7,200 24.1 21.0 23.8 10,159 11,425 12,9597,201 - 12,000 21.9 21.8 20.5 9,241 U1,865 11,131

1:2,001 - 18,000 11.2 15.9 13.8 4,723 8,668 7,49618,001 - 36,000 16.4 14.6 15.5 6,919 7,963 8,46336,001 - 54,000 5.6 9.8 7.1 2,363 5,350 3,88554,001 - 72,000 2.2 3.8 3.0 932 2,060 1,64272,001 - 120,000 1.7 2.0 1.9 729 1,092 1,036More than 120,000 1.1 1.9 1.5 464 1,032 808

42,236 54,450 54,450

Of those families with annual incomes under Mex$7,000, 61% live in the ruralareas; of those with incomes of less than Mex$12,000, 56% are in the ruralsector.

Characteristics of the Farming Sector Targetted for Conasupo's Action

4. The primary target groups on the production side are the subsis-tence and traditional small farmers, especially members of the ejidos.Preliminary data based on a national sample of 3,670 interviews byConasupo of small, traditional farmers, provided guiding data in theformulation of the new strategy for Conasupo's rural development effort.The study revealed that in this tra4itional segment of the agriculturalsector 68% of the land is rrejidal t, 22% privately owned, and 10%communally owned. This constitutes 87% of the traditional segment withthe other 13% being rented land or sharecropped. Modern inputs are usedon a limited basis. Only 13% used herbicides, 16% improved seeds, 23%insecticides, 26% fertilizers. This sector is also relatively neglectedby government agencies: only 19% receive formal credit and a mere 4%receive technical assistance. The bulk of the farmers primarily grownCornI_/(approximately 45% of the land is dedicated to this crop). Of thecorn produced, 70% is for human consumption, 20% for animal feed, 8% forindustrialization, and 2% for seed. The small farmers retain about 69%of their crop for their own consumption. Forty percent of the farmerssell some or all of their crop. Approximately 17% of the corn they sellgoes to Conasupo. Most farmers (79%) said the reason for selling toConasupo was better prices. The main reasons given by these not selling

1/ Ejidal land ceded to individual campesinos in the agrarian reformcannot be sold.

2/ 77% also own animals of some kind.

ANNEX 7Page 3

to Conasupo were distance, crop promised to others, and lack of information.Intermediaties, local store owners, and transporters handle 55% of theportion of the crop that is commercialized.

Buyers of Small Farmer Corn

Buyer % of Volume Handled

Local Markets 24.1Middlemen 21.4Local Merchants 20.9CONASUPO 17.2Transporters 12.6Others 3.8

Conasupo's Strategy

5. Conasupo's rural development strategy has been designed on thebasis of the rural economy structure and the problems shown by the abovestatistics and corroborated in other studies by Conasupo. Structuralfactors in the economic interaction of the campesinos with externalgroups is the primary cause of stagnation in the development of the ruralsectors. More specif'ically the relationship between the price paid bycampesinos for the good they buy and what they receive for the producethey sell is unfavorable. Besides possible structural imbalances in theterms of trade for agricultural and manufactured goods, supplies andbuyers serving small farmers, mainly in isolated areas may be exploitativeor inefficient. Very often the supply and marketing functions may beperformed by inefficient middlemen filling a void in the economic systemand trying to earn a living. The local store owner or corn buyer may wellbe a fellow campesino with an entrepreneurial flair simply trying to ekeout a meager income by means other than tilling the soil. When thecampesinos are able to increase their production, this potential economicgain is drained off by unfavorable prices from store owners or from cornbuyers or from non-productive expenditures, e.g., fiestas.

6. Credit plays a key role in the maintenance of these unfavorableterms of trade. The farmers arc unable to accumulate capital reserves and,therefore, do not have enough funds to support their families for theentire period between harvests. Consequently, the campesinos arefrequently obliged to seek credit for the purchase of staples. The twoprimary sources are either rural store keepers who sell on credit ormiddlemen who lend to the farmers in return for a promise to sell theircrop to the middlemen at a pre-set price lower than the government'sguaranteed price. According to Conasupo studies, approximately half ofthe small farmer sales are in exchange for consumer credit and an estimated40% to 60% of rural purchases are on creditf. Conasupols studies alsoindicate that the average prices of goods in rural stores are 20-23% higherthan the prices charged in Conasupo stores-

1/ Studies by the Banco Agropecuario produced similar figures.2/ This price differential was corroborated by direct observation in the

field by Dr. J.E. Austin in February 1974.

ANNEX -Page 4

7. Credit is not the only mechanism by which middlemen obtain thecampesinos' crop at relatively lower prices. For example, the lack oftransportation, storage, shellers, or bags often push the farmer intoselling to middlemen who have these facilities or service. These economicrelationships represent structural barriers that will not necessarilybe altered by channelling increasing amounts of funds into the traditionalareas of crop financing, production infrastructure, and technicalassistance. The structural weaknesses must be addressed directly ifmaximum benefit is to be obtained from the investments in the other areas.

8. Based on the foregoing analysis, Conasupo has set forth thefollo-wing general strategy for its rural development efforts: enable thecampesino to increase his income, retain it, and invest it in productivemeans. A probable short run effect of this strategy would be the directwelfare benefit accruing through an increase in effective purchasingpower and in consumption. This incremental consumption would most likelybe in food and hence the possibility of enhancing the nutritional level ofthe rural populace. Nonetheless, it is important to emphasize that thethrust of the strategy is toward increasing the productivity of thecampesinos rather than just improving their immediate standard of living.The concept is to generate sustained self-development rather than simplyadjust income distribution.

9. Conasupo has designed an integrated strategy aimed at alteringthe structural relationships in the rural economies by combining variousrelated services and activities in a specific area; the idea is to producea synergistic effect among resources and services of sufficient magnitudeto break some of the key vicious circles constraining rural development.The major components of the Conasupo rural development strategy are thefollowing:

i. selU basic consumer goods (primarily foodstuffs) in ruralareas at prices lower than those currently prevailing;

ii. provide consumer credit to rural consumers;iii. buy farmers' produce at guaranteed prices;

iv. provide auxiliary services needed to alter the unfavorablestructural economic relationships;

v. help market campesinos' nonagricultural products,e.g.handicrafts;

vi. provide productive investauent opportunities for theincremental income gains achieved by the campesinos;

vii. involve the campesinos in decision-making and operationalaspects of the programs.

Induz 4rial Proj ects DepartmentFebruary,, 1975

ANNEX 3-8


THE ROLE OF ORGANO - PHOSPHORUS INSECTICIDES

General Consideration

1. When contemplating the production and use of an insecticide (or otherpesticide), major considerations are:

1) Effectiveness against the target insect(s).2) Effect on benign insects and other living creatures

in the local environment and elsewhere.3) Raw material availability and cost.4) Access to appropriate production, formulation and

application technology.

Effectiveness Against the Target Insect(s)

2. The key factor determining effectiveness is the resistance patternof the target species towards a specific insecticide. Many insects, especiallythose with short life cycles, are remarkably adept at rapidly developingtolerances towards chemicals that initially had proved highly lethal. Hence,the practical effectiveness of an insecticide can only be properly evaluatedafter several years of field application on a commercial scale.

Effect on the Local Environment and Elsewhere

3. Even if a chemical compound is a powerful agent against a specificspecies, its commercial use will be greatly diminished if it also slays awide variety of benign insects and perhaps plant life and animals too.Should this toxicity be persistent, and be carried over in the soil or crop,the commercial use of such a compound may well be banned.

Raw Material Availability and Cost

4. Many insecticides, especially organo-phosphorus compounds, areproduced from complex intermediate chemicals or basic raw materials(e.g., phosphorus and ethyl or methyl alcohol). Such "chemical buildingblocks"are made in large-scale plants involving huge investments, and theirsmall-scale production only for pesticide purposes would be uneconomic.Therefore, the ready availability of such raw or intermediate materialsat reasonable cost is essential.

Access to Appropriate Technology

5. Technical and commercial development of a pesticide can cost$10 million, or more, today and the risk of subsequent failure due toinsect resistance, new legislation or competition is always present.Therefore, in a developing country it is usually prudent to licenseproven production, formulation and application technology from anexperienced overseas company, perhaps under some Joint operation orpar3i,ership arrangement. Such policies have an additional advantagein that potential toxicity hazards arising during manufacture, distri-bution and use can be prevented by appropriate instruction and trainingby the licensor.

ANNEX 3-8Page 2

Principal Features of Organo-Phosphorus Insecticides

6. The organic phosphorus compounds owe much of their efficacy tothe nerve-gas research of World War II. They are rapidly absorbed byinsects and warm-blooded mammals, including man, and upset vital mechanismssuch as the nervous system, by inhibiting the impulse-controlling enzymecholinesterase and results in uncoordinated spasms and death. Some, likemalathion, may be initially safer because the liver or other mammalianorgans act as detoxifiers. Consequently, only lower forms of life withoutsuch protective mechanisms are killed. Nevertheless, some combinations ofthese materials with other organic phosphates or other types of chemicalsmay prove much more toxic than when absorbed alone, which intensifies theprecautions needed. One advantage, however, of many organic-phosphates istheir short persistence time, which can often be tailored to last throughouta critical field period of a few days or weeks before rapid disintegrationinto virtually harmless residues. Another is that immunity build-up intarget insects may be much slower than with chlorinated organics.

Parathion Characteristics

7. Parathion is one of the most toxic compounds used in agriculture.The poison can enter the body by any route. Serious and even fatal poisoningmay occur while eating or smoking, but parathion can also be ingested byinhaling contaminated air or absorbed through the skin. The ability ofparathion to penetrate the skin in fatal doses without prior irritation,warning the person of the exposure to poison, make this insecticideespecially difficult to handle. However, parathion hydrolyses rapidly;analysis of spray residues show only minor remaining amounts within daysafter its application. Parathion is not highly flammable. In the factorieswhere it is manufactured, the processes should be conducted as far as possiblein totally enclosed equipment.

Production of Parathion in Mexico

8. The proposal of Guanomex to expand its production of parathionsatisfies the criteria listed in the previous paragraphs. This insecticidehas proved highly effective in many countries, including Mexico, mainlyagainst cotton crop predators (a major target). Although it is, as mentionedabove, highly toxic it rapidly decomposes into non-lethal products andtherefore, build-up of harmful toxicity is prevented. At the same time,continued exposure of target pests to parathion and the correspondinglikelihood of increasing insect tolerance levels are avoided.

Parathion must be handled taking the greatest precautions becauseof its high toxicity and its capacity to penetrate the skin without causinga warning irritation. During transportation, drums containing this compound

ANNEX 3-8Page 3

should be checked for possible defects and should be loaded into wagons ortrucks in such a way that damage to the drums is practically impossible.No other merchandise should be allowed next to the drums and they, as wellas the railway car or truck used, should be examined thoroughly at thedestination to detect possible leakages. The warehousing of parathionmay also be hazardous as shown by a fatal incident in Tijuana. Goodsthat have been contaminated by parathion obviously should not be releasedand should be handled only by trained personnel.


ANNEX 4-

IEXICO - FERTILIZER PROJECT

DESCRIPTION OF PROJECTED PLANTS

1. Design Specifications of the Urea Plants

Product: Urea

Capacity - 1000 TPD (Bajio)/1,500 TPD (Istmo)Composition -

Nitrogen 46.3% by wtH20 0.2% " t maxbiuret 0.8% i t maxIron 5ppm " " max

Frill size 95% between lmm and 2.4=m

Raw Materials

Ammonia - 600 TPD (Bajio)/ 900 TPD (Istmo)

Composition -NHl 99.9% by wt1128 0.1% " '1Otil 5ppm It I max

Pressure 1.0 Kg/cm2 minimumTemperature -270C

Carbon Dioxide - 770 TPD (Bajio)/1155 TPD (Istmo)Composition -

C02 - 98% by wt minimumInerts - 2% by wt maximumH20 saturated or less

Pressure: 1.5 kg/cm2 minimumTemperature; 200C

ANNEX h-iPage 2

2. Equipment List for the Urea Plant

Ammonia & Carbon Dioxide Feed to Urea Plant

Description: No.

L.P. Ammonia Pre heater 1CO2 Compressor 1Anti-corrosion Air Blower 1 + iSAmmonia Feed Pump 2H.P. Ammonia Pump 2CO2 Compressor Turbine 1

Desorption Section

Description:

Desorber Heat Exchanger 1Desorber Bottom Cooler 1Desorber Feed Pump 2Process Condensate Pump 2Ammonia/Water Tank 1Desorption Column 1

Reaction Section

Description:

H.P. Heat Exchanger 1H.P. Carbamate Condenser 1H.P. Scrubber 1Recirculation Heater 1L.P. Carbamate Condenser 1Circulation System I Water Cooler 1Circulation System II Water Cooler 1Circulation Cooler 1Carbamate Pump 2L.P. Carbamate Condenser Cir. Pump 2Constant Head Pump 2Circulation Pump 2H.P. Scrubber Circ. Pump 2Circ. System I-Head Tank 1Autoclave 1Rectifying Column/Separator 1L.P. Carbamate Separator 1L.P. Absorber for L.P. Carbamate Condenser 1

ANIMEX 4-1Page 3

Frilling Section (Bajio Unit only)

Description: No.

Prill Tower 1Flashtank Condenser 11st Stage Evaporator/Separator 11st Stage Evaporator/Separator 12nd Stage Evaporator/Separator 12nd Stage Evaporator/ist Condenser 12nd Stage Evaporator/2nd Condenser 1After Condenser 1Prill Tower Fan 4Prilling Equipment Plus two Prill Buckets 1Prill Tower Scrapper 1Prill Tower Conveyor 1Prill Tower Lift 1Urea Solution Pump 2Melt Pump 1 + 1S1st Stage Evaporator/Ejector 12nd Stage Evaporator Booster Ejector 12nd Stage Evaporator 1st Ejector 1

Steam and Condensate

Description:

Vent Condenser 1Boiler Feed Pump 2H.P. Flush Water Pump 1Injection Pump 2Steam Condensate Pump 2Diesel Engine Unit 1Steam Condensate Tank 14.5 ata Steam Drum 123 ata Steam Saturator 19 ata Steam Saturator 12nd Stage Evaporator 2nd Ejector 1Urea Storage Tank 1Prill Bucket Wash Tank 1Flash Tank Separator 1


ANNEX 4-1Page 4

3. Utilities

a) Electric Power Consumption Power Demand (Kw)

Kwh/ton Process Offsites Total

Bajio II 38 1,,520 600 2,120

Istmo 39 2,280 900 3,180

Salamanca Expansion 270 300

b) Water m3/ton

Bajio II 6.oIstmo 6.oSalamanca Expansion 9.6

c) Steam TorVTon Products

Bajio II 1.15 at 23 atm pressureIstmo 1.14 t n It nt

Salamanca Expansion 5.24


ANNEX 4-2

MIEXICO - FERTILIZER PROJECT

FEEDSTOCK FOR AMMONIA PLANTS IN MEXICO

1. Mexico had, at the end of 1973, proven reserves of 10.8 trillionSCF or natural gas and 3.3 billion bbls. of liquid hydrocarbons:

Mexican Reserves of Hydrocarbons /Total Equivalent

Petroleum Condensates Gas in Petroleum(million bbls.) (million bbls.) (billion SCF) (million bbls.)

Northern Zone - 330 107 3,590 1,155Augostura 1 - 109 23Roza Rtica 1,592 129 2,786 2,778Southern Zone 924 186 4,327 1,976

Total: 2,847 422 10,812 5,432

The main gas fields are near the northeastern border with the US, in the State ofTabasco in the South (mainly in the area surrounding Pemex City) and in thepoza Rica district in the State of Veracruz. The Government has announcedthat it will spend in three years (1974-76), US$248 million in exploratorydrilling for gas. Exploration costs in the State of Chiapas (for gas andpetroleum) amounted to about us$56 million in 1973/74 and have paid outhandsomely in the finding of new deposits that will change the balance ofpayments in fuels for Mexico.

2. Natural gas production was 660 billion SCF in 1972 and 677 billionSCF in 1973. In the first seven months of 1974, output was estimated at 540billion SCF (i.e. an increase of 20% over the previous year's daily averageoutput). The main producing districts are the NE district in the NorthernZone, Ciudad Pemex in the Southern Zone and Poza Rica in the State of Veracruz:

1/ Pemex, Memoria de Labores 1973.

ANNEX 4-2Page 2

Natural Gas Output!(million SCF)

1963 1973Northern ZoneNorth East Border 149 201Tampico 26 24Total 175 225

Poza Rica ZonePoza Rica 45 74Other: Veracruz 5 11

Total 50 85

Southern ZoneAgua Dulce - 47El Plan - 31Comalcalco - 42Ciudad Pemex - 245Nanchital 1Total 258 366

Total: 483 677

j Pemex, op. cit., and Freda Jean Bullard, Mexico's Natural Gas,The University of Texas at Austin, 1968

3. Of the total output, about 80% is used as shown below, thebalance being losses:

Utilization of Natural Gas Output

Million SCF %

Extraction of Tiquefied Natural Gas 43.1 7.9Reinjected into Ground 4.9 0.9Exports 1.7 0.3Internal Sales 338.3 61.9Feedstock for Pemex, PetrochemicalPlants and Other Internal Uses 158.7 29.0

546.7 100.0====== ~~~ ===

4. The gas is distributed through two main pipeline networks. One,in the north, has a total length of 2,067 km (mostly in pipelines between10" and 24"? in diameter) and it extends from Matamoros, on the Gulf Coast

ANNEX 4-2Page 3

near the border with the US, to Celulosa de Chihuahua, more than 1,000 kmaway. The second one extends from Ciudad Pemex to Guadalajara (at a distanceof 1,287 km) and has a total length of 2,714 km, mostly in diameters between14" and 24". Many segments of the networks, such as Reynosa, Monterrey andCiudad Pemex-Salamanca, are double pipelines. New pipelines are being built,especially a 24" pipe from Cactus to Pajaritos (Coatzacoalcos) and a 30" onefrom Poza Rica to Pajaritos. (Pajaritos is the site of the largest petro-chemical complex planned by Pemex.) Except for the small Camargo ammoniaplant, which is served by one 12" pipeline, all the ammonia plants can besupplied from two different gas pipelines and therefore the risk of theirbeing shutdown by lack of feedstock is negligible.


ANNEX 4-3


PARATHION MANUFACTURE

1. The proposed parathion process to be used by Guanomex at Salamancaunder license from Stauffer will begin with the production of phosphorouspentasulfide from elemental Mexican sulfur and phosphorous imported fromthe US:

10 S + P4 --* 2 P2 S5

The reaction is carried out in inert atmosphere. The pentasulfide is thenreacted with methyl or ethyl alcohol (according to whether methyl or ethylparathion is desired) to yield dimethyl (or diethyl) ditiophosphoric acid:

P2S5 + 4CH30H -. 0 2(CH30)2 P(S)SH + H2S

2S5 + 4C2H5OH -iO 2(C2H50)2 P(S)SH + H2S

These products are then filtered and fed to a reactor where sulfur chlorideis added. The sulfur chloride is also made by Guanomex from Mexican sulfur(Azufrera Panamericana) and chlorine made by Guanomex in the same plant. Inthe case of ethyl parathion, gaseous chlorine is also fed to the reactor.

(CH O) P(S)SH + SC12 - (CH O)2 PS Cl + 2S + H Cl(Co2 5o32 P(S)SH + SC12 -. (C2 5O)2 PS C1 + 2S + H Cl

The last reaction is the combination of these products with sodium paranitro-phenolate in the presence of sodium carbonate:

(CH30)2 P C1 + N20 C6 H4 NO2 -. # (CH30)2 PSOC6HhNO2 + NaCl

The product obtained is methyl parathion which is washed and then the solventsused in several of the steps removed. The process for ethyl parathion issimilar. In the case of methyl parathion, xylene is added to obtain 80%concentration.

2. The proposal to expand parathion production at Salamanca in conjunc-tion with Stauffer Chemical Co. of USA has many advantages. For example, itwill ensure the availability of elemental phosphorus which is easily transportedfrom USA, until its eventual production in Mexico. This liaison also providesfor the use of latest Stauffer technology. The proposed expansion embodies animproved process for the obtention of sodium paranitrophenolate.In addition, the production, distribution and application experiencealready acquired by the Guanomex pesticide group can be supplemented, as required,by their counterparts in Stauffer Chemical Company.

Industrial Projects DepartmentFebruary, 1975

MEXICO - FERTILIZER REPORT

TOTAL CAPITAL COST ESTIMATES FOR THE PROJECT(U5$ Million)

Direct Freight Direct Foreign Exch. Foreign Total Duties Local Local Cur- Local Cur- Total TotalImports and Imports of ICB won Exchange Foreign % CIF Freight rency Part rency Part Local Project

FOB Insurance CIF by Local Component Exchange Direct and of ICB of LocalSuppl. of Local Import Insurance won by Procurement

Procur. _ Loc. Sup.

1. Land Acquisition - 1.00 1.00 1.00

2. Site Development2.1 Site Preparation - - - - - - - 1.16 1.16 1.162.2 Port Dredging - 1.92 1.92 1.92

Sub-total - - - _ - _ _ - - 3.08 3.08 3.08

3. Factory Equipment(Including 1 year spare parts)

3.1 Urea Plants 9.98 0.90 10.88 0.76 1.70 13.34 0.46 0.75 1.03 8.30 10.54 23.883.2 Bagging Plant 0.61 0.06 0.67 - - 0.67 - - - - - 0.673.3 Expansion Parathion Plant 1.50 0.08 1.58 0.25 0.05 1.88 0.15 0.05 0.10 0.50 0.80 2.68

Sub-total 12.09 1.04 13.13 1.01 1.75 15.89 0.61 0.80 1.13 8.80 11.34 27.23

4. Offaite Facilities(Including 1 year spare parts)

4.1 Cooling Water Systems 0.65 0.06 0.71 0.83 0.17 1.71 0.04 0.20 1.39 0.40 2.03 3.744.2 Product Storage - - - 0.95 0.16 1.11 - 0.24 1.10 0.63 1.97 3.084.3 Power Generation & Distribution 0.19 0.02 0.21 - 0.72 0.93 0.02 0.18 0.03 2.74 2.97 3.904.4 Water Supply and Treatment 0.21 0.02 0.23 - 0.31 0.54 0.01 0.07 - 0.90 0.98 1.524.5 Steam Generation and Distribution 0.62 0.04 0.66 0.82 0.25 1.73 0.03 0.10 0.20 1.64 1.97 3.704.6 Transport and Handling Equipment 1.10 0.11 1.21 - 0.47 1.68 0.04 0.17 - 2.48 2.69 4.374.7 Port Equipment 1.04 0.10 1.14 - 0.14 1.28 - 0.03 - 0.42 0.45 1.734.8 Effluent Treatment - - - - 0.07 0.07 - 0.02 - 0.23 0.25 0.324.9 Other Area Facilities 0.64 0.06 0.70 - 0.15 0.85 0.02 0.03 - 0.43 0.48 1.33

Sub-total 4.45 0.41 4.86 2.60 2.44 9.90 0.16 1.04 2.72 9.87 13.79 23.69

5. Construction Equipment - 0.34 0.34 - 0.06 - 0.91 0.97 1.31

6. Civil Works6.1 Urea Plants - - - - 0.23 0.23 - - - 2.04 2.04 2.276.2 Bagging Plants - - - - 0.01 0.01 - - - 0.11 0.11 0.126.3 Parathion Plant - - - - 0.03 0.03 - - - 0.29 0.29 0.326.4 Soil - 0.34 0.34 - - - 3.10 3.10 3.446.5 Other Offsite Facilities - 0.13 0.13 - 1.16 1.16 1.29

Sub-total - - - _ 0.74 0.74 - - - 6.70 6.70 7.44

7. Erection and Supervision 0.29 - 0.29 - 0.57 0.86 - - _ 5.09 5.09 5.95

8. Licensing and Engineering8.1 Process Engineering 5.49 - 5.49 - - 5.49 - - - - - 5.498.2 Detailed Engineering and Procurement - - - 0.50 - 0.50 - _ 4.12 - 4.12 4.62

Sub-total 5.49 - 5.49 0.50 _ 5.99 - - 4.12 4.12 10.11

9. Pre-operating Expenses 0.04 - 0.04 - - 0.04 - - - 0.32 0.32 0.36

10. Total Before Contingency andPrice Escalation 22.36 1.45 23.81 4.11 5.84 33.76 0.77 1.89 7.97 35.77 46.40 80.16

11. Physical Contingency (10%) 2.44 0.16 2.60 0.41 0.58 3.59 0.08 0.23 0.94 3.90 5.15 8.7412. Total Before Price Escalation 24.80 1.61 26.41 4.52 6.42 37.35 0.85 2.12 8.91 39.67 51.55 88.9013. Price Escalation 5.95 0.40 6.35 1.20 1.76 9.31 0.21 0.72 2.26 13.97 17.16 26.4714. Total Fixed Asset Cost 30.75 2.01 32.76 5.72 8.18 46.66 1.06 2.84 11.17 53.64 68.71 115.3715. Working Capital - - - - - - - - - 18.14 18.14 18.1416. Total Project Cost 30.75 2.01 32.76 5.72 8.18 46.66 1.06 2.84 11.17 71.78 86.85 133.51 >17. Interest during Construction - - - - - 6.81 - - - 9.87 10.66 16.68 Si18. Total Financing Required 30.75 2.01 32.76 5.72 8.18 53.47 1.06 2.84 11.17 71.78 96.72 150.19


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ISTi4 FERTILIZER PLANT CAPITAL COST ESTIMATE(US$ million)

Direct Freight Direct Foreign Enohenge Foreign lochange Tetni DStite h Locl Lo..I Locsl Total TotalImports end Inpocrt of ICS -oc by Component of Foeign o of CO'f 1o Freight tnd Correocy of Corrency Local ProjectF. 0. B. Ien.rnoce CIF Local Seppl. Local Pr-oureent Enchooco Direct Ineortt- T-eoranc- ICB eon by Port of Loc-l

Local Inept. 0'socoreannt

1. Lend Acqoinitin _- - -_ - 1.00 1.00 1.002. Sit.e Deve lopeet - - -2.1 Site Preparation _ - - _ _ _ _ _ _ 0.74 0.74 0.742.2 Pert Dredging - - 1.92 1.92 1.92

Sob-Total 2.66 2.66 2.66

3. FSerecy Eqoipnent (toltdiog1 year Spare Parte) - - - - - - - -

3.1 Urea Pleet 5.31 0.52 5.83 0.36 0.96 7.17 - 0.47 0.58 5.01 6.06 13.233.2 Begging Pleot 0.61 0.06 0.67 _ - 0.67 _ _ 0.67

Sub-Total 5.92 0.58 6.50 0.38 0.96 7.84 - 0.47 0.58 5.01 6.06 13.90

4. Offsite Fsc. (itcl. 1 yr. spore pasta) - - - - - - - - - - -4.1 Cooling Water Syateis 0.29 0.03 0.32 0.49 0.10 0,91 0.13 0.79 0.25 1.17 2.084.2 Preduct Icostge - - - 0.51 0.09 0.60 0.15 0.64 0.41 1.20 1.804.3 Power G.nerat io nod Distrtbution - - - 0.41 0.41 - 0.12 - 1.61 1.73 2 144.4 Water Supply end T-eat-met 0.11 0.01 0.12 - 0.18 0.30 - 0.04 - 0.53 0.57 0.874.5 Steen. ienre.tin and Distribution 0.24 0.02 0.26 0.32 0.16 0.74 _ 0.07 0.08 1.06 1.21 1.954.6 Tranepo-t & Dendlig Eqip.sent 0.74 0.08 0.82 - 0.37 1.19 - 0.13 - 1.74 1.87 3.064.7 Port Equip_ent 1.04 0.10 1.14 - 0.14 1.28 - 0.03 - 0.42 0.45 1.734.8 Effleent Treatment _ - 0.04 0.04 _ 0.01 0.13 0.14 0.184.9 Other Auxiliary Facilitine 0.44 0.04 0.48 _ 0.08 0.56 -002 0.22 0.24 0.80

S.b-Tto.l 2.86 0.28 3.14 1.32 1.57 6.03 - 0.70 1.51 6.37 8g5g 14.61

5. Construotion EquipEnot - - - - 0.181 0.18 - 0.05 - 0.46 0.51 0.696, Civil Wnk- - --6.1 Urea Pleet - - - - 0.14 0.14 - - - 1.22 1.22 1.366.2 Bagging Plant - - - - 0.01 0.01 - - 0.11 0.11 0.126.3 Soil - - - - 0.34 0.34 - - - 3.10 3.10 3.446.4 Other Offsits Fecilitien _- - - 0.11 0.11 - - - 0.95 0.95 1.06

Sob-Total - - - - 0.60 0.60 - - 5.38 5.38 5.98

7. Irecttion ad Superviaioa 0.15 - 0.15 - 0.33 0.48 - - - 3.01 3.01 3.498. Ltceneing end Engineering

8.1 Pr.cens Bngin.erlng 2.75 - 2.75 - 2.75 - - - 1/ - - 2.758.2 Detail Engineering and Procor.ecnt - - - 0.30 - 0.30 - - 2.46- - 2.46 2.76

S.b-Tot.l 2.75 - 2.75 0.30 - 3.05 - - 2.46 - 2.46 5.51

9. Pre-epecataig Expense - - - - - - 0.14 0.14 0.1410. Total BfoSo Contingency and

price E.celetion 11.68 0.86 12.54 2.00 3.64 18.18 - 1.22 4.55 24.03 29.80 47.9811. Phynicol Contingency (107.) 1.26 0.09 1.35 0.22 0.36 1.93 - 0.14 0.54 2.62 3.30 3.2312. Total Bfore Price E.c-latien 12.94 0.95 13.89 2.22 4.00 20.11 1.36 5.09 26.65 33.10 53.2113. Prise Escaleti"n 3.45 0.23 3.68 0.69 1.02 5.39 - 0.47 1.47 9.08 11.02 16.41 ;g >14. Total Ftied Aenete Loet 16.39 1.18 17.57 2.91 5.02 25.50 - 1.83 6.56 35.73 44.12 69.62 e 15. Working Capital - - - - - - - - - 10.26 10.26 10.26 0

16. Total Project Coat 16.39 1.18 17.57 2.91 5.02 25.50 - 1.83 6.56 45.99 54.38 79.88 t k

1/ Inve-t=oots in the Isthrsum of Tehoontepic receive o particola-ly favorable treatment with re-gad to fiocel inventives end tax .en.eptiona. G.anoc., on the gro-ods of promoting tho Teho-nteperregion (Deloen April 5, 1973), will be able to apply for a fall 1007. ene-ption on all icported eqoip=ent end sparee.

Indostriel Projects DeperteentApril 1975

MEXICO - FERTILLZER PROJECT

SALAMANCA ImsEcTICrI PTA.r EnrANSIoN CAPITAL COST ESTIHATES(00$ mill

10-)

Direct Freight Direct Fo-aigo fScbhese Foreign Utohange Total Duties . Local Local Currency Local oCrcency Total TotalIrports and Inpecte of ICB woo by Ctnpotnot of Foreign of COD of Freight cod of TCB won by Pert of Local Local ProjectP.OB. Lostreot CIF Local Suppl. Local Frocurerent Exchange Direct Imports- Ocooracc Local Suppl. Proceat

1. Land Acquisition _ _ _ _ _ _ - _ _ _2. Site Davelopns -t3. Factory Eqtip-nt(t-nctsding I ye-r Sp-Fe PFrte) - - - - - - -3.1 Expansaon Parethion Plant 1.50 0.08 1.58 0.25 0.05 1.80 0.15 0.05 0.10 0.50 0.S0 2.184. Offeite Facilitisa - - - - - - _ _ _ _ -4.1 r-ower Oer-tio 0.03 - 0.03 - 0.03 0.06 _ 0.01 0.03 0.07 0.11 0.174.2 Prodect Storage - - 0.03 - 0.23 0.01 0.03 - 0.04 0.074.3 Other Aux. Facilities 0.00 O.D2 0 - - 0.06 0.06 0.08

Sob Totel 0.03 - 0.03 0.03 0.05 0.11 - 0.02 0.06 0.13 0.21 0.325. Cocetr-otio Equqiprsct - - - - 0.03 0.03 - 0.01 - 0.10 0.11 0.146. Civil Works - - - - 0.03 0.03 - - - 0.29 0.29 0.327. Erection and oS5pecviaio - - - - 0.03 0.03 - - - 0.23 0.23 0.268. Licensig nd Engin.eering 3.48 - 0.48 - - 0.48 - - 0.08 - 0.08 0.569. Fra-op-rat1eg Erpase3s 0.04 - 0.04 - - 0.04 - - - 0.04 0.04 0.0810. Total Befo. Contifg nny nd

Frico Escalation 2.05 0.00 2.13 0.28 0.19 2.60 0.15 0.08 0.24 1.29 1.76 4.3611. Phyoi-ul Contingency (10%) 0.23 0.01 0.24 0.02 0.03 0.29 0.02 0.02 0.03 0.15 0.22 0.3112. Total Betoce Price Esc.letion 2.28 0.09 2.37 0.30 0.22 2.89 0.17 0.10 0.27 1.44 1.98 4.8713. Prica Ecalation 0.48 0.03 0.51 0.10 0.14 0.75 0.05 0.03 0.11 0.70 0.89 1.6414. Total Fixed Asn. t Lost 2.76 0.12 2.88 0.40 0.36 3.64 0.22 0.13 0.38 2.14 2.87 6.5113. Working Capital - - - - - - - - - O.95 0.95 0.9516. Tota1 PFojeot Cost 2.76 0.12 2.88 0.40 0.36 3.64 0.22 0.13 0.38 3,09 3.82 7.46

/ Partial exonoo-tiro ceeultin8 in trxire dutie of 107. on the CIF vais of ispocta ia a..-ned applicable to this *hb-pcojoct.

Industrialc P-ojcts DOparinentApril 1975

ANNEX 5-3


SCHEDLULE OF CAPITAL EXPENDITURES AND ESCALATION FACTORS

A. General Annual Inflation Rates (%)

Average RateCalendar Year of Inflation

1975 13.01976 9.71977 9.71978 9.7

B. Annual Escalation Rates for Equipment and Civil Works (%)

ICB Equipment and all Civil Works andCalendar Year Foreign Exchange Other Local Currency

1974 1h.0 20.01975 12.0 16.01976 10.0 14.01977 8.0 12.01978 8.o 12.0

C. Schedule of Capital Expenditures

I. In Percent of Base Cost Estimate

Istmo (Urea) and Sala-Fiscal Year manca (Parathion) Pl-nts Ba,jio II (Urea) Plant

1974/75 -- %1975/76 35 LO%1976/77 40% 40%1977/78 25% lo%

II. In Current Mex$ Million

Istmo and Working Interest DuringFiscal Year Salamanca Ba,jio II Capital Construction

1974/75 -- 4o.5 -- 2.61975/76 308.3 182.3 -- 31.81976/77 391.3 201.7 -- 77.81977/78 263.8 54.2 226.7 96.4

Total 963.4 478.7 226.7 208.6

Industrinl Projects DepartmentApril 1975

A:N'EX 5-4


ESTIMATION OF PERMANENT WORKING CAPITAL

A distribution has been made between the Company's operational

working capital requirements, and additional requirements imposed upon it

by a Government policy to hold large inventories and grant long payment

terms. Only operational working capital requirements are included in the

project cost to be covered by long-term finance, while it is assumed that

the additional working capital requirements would be covered by short-term

financing from the banking system.

Mex$ Million -Charged to For AdditionalProject Cost Marketing Needs

A. Istmo Plant (Urea)

Receivables:- Operational requirements (1 month) 56.4- Additional requirements (4 months) 225.7

Inventory:- Finished goods, operational 27.9- Finished goods, additional 27.9

- Raw materials 13.6

- Spare parts (included in capital cost) -

Minimum Cash 7.6

lo5.5 253.6Less- Payables 20.0

Net Working Capital Requirements, Istmo 85.5 253.6

B. Bajio Plant (Urea)

Receivables:- Operational (1 month) 37.6- Additional (4 months) 150.5

Inventory:- Finished goods, operational 18.7- Finished goods, additional 18.7

- Raw materials 4.0

- Spare parts (included in capital costs) -

Minimum Cash 5.365.6 169.2

Less:- Payables 7.7

Net Working Capital Requirements, Bajio 57.9 169.2

ANNEX 5-4Page 2

- Mex$ Million -------Charged to For AdditionalProject Cost Marketing Needs

C. Salamanca Plant (Parathion)

Receivables:- Operational 3.3- Additional 9.8

Inventory:- Finished goods, operational 2.1- Finished goods, additional 2.1- Raw materials 1.9- Spare parts (included in capital costs) -

Minimum Cash 2.8

10.1 11.9Less:- Payables 2.1Net Working Capital Requirements, Salamanca 8.0 11.9

Total Net Working Capital Requirements 151.4 434.7

Total long-term working capital requirements for the project in prices ofDecemberl974, are estimated at Mex$151.4 million. In nominal prices (i.e.escalated at the expected annual rate of inflation) this is equivalent toMex$226 million.


ANEX 5-5


DISBURSEMENT SCHEDULE FOR I1RD LOAN(US$ Million)

Fiscal Year and Quarterly CumulativeQuarter Disbursement Disbursement

1974/75 III_III-IV

1975/76 I 4.7 4.7II 3.6 8.3III 3.7 12.0IV 4.0 16.0

1976/77 I 4.0 20.0II 4.0 24.oIII 4.5 28.5IV 5.0 33.5

1977/78 I 6.o 39.5II 5.5 45.0III 5.0 50.0IV

Industrial Projects DepartmentADril 1975

ANNEX 6-1


ASSUMPTIONS USED FOR FINANCIAL PROJECTIONS

All prices and their respective changes discussed in this Annex,except where indicated otherwise, are expressed in December 1974 terms. How-ever, proforma financial statements (Annexes 6-3, 6-5, 6-7 and 6-8) have beenmade in current terms, reflecting expected changes in relative prices untilmid-1978, and no further changes thereafter. Projected prices in thefinancial statements are inflated using the expected general rate of inflationas shown in Annex 5-3.

1. Start of Operations and Capacity Utilization

Plants built under the project are assumed to start commercial operationsin April 1978. During the first three months of operations, corresponding tothe last three months of FY78, the project will operate at 70% capacity.Capacity utilization will increase to 75%, 85%, and 90%, in the second, third,and fourth year, remaining constant thereafter. Capacity utilization ofexisting plants is expected to improve from the present level of about 83%to about 90% at the time of commercial start-up of the project.

2. Output prices (domestic market, delivered)Prices

Product (Constant _19171Mex$ Per Ton)

Urea 1,520Parathion (1975-77) 16,500

(1978-onwards) 17,370Other Insecticides (1975-78) (weighted average) 10,500

(1979-onwards) (weighted average) 7,277Amx,onium Sulphate 786Ammoniuw Nitrate 1,369Single Superphosphate 762Complex and Mixed Fertilizers (weighted average) 1,497Other Chemical Produc+ (weighted average) 2,266Bags (per 1,000 bags)-1 2,732

The domestic price of parathion stood at Mex$16,ooo/ton (delivered toany train station in the country) at the end of 1974. To enhance the profit-ability of parathion production, a price increase to Mex$16,500 has been

2/ Bags will be produced in the Istmo plant and will satisfy the requirementsof the project and of all other units of Guanomex. For purposes of analyz-ing the project by itself, it has been assumed that all bags not used inthe project are sold to other units at a transfer price of Mex$2,732 perthousand bags (the present market price).

ANNEX 6-1Page 2

anticipated for 1975 through 1977, and to Mex$17,370 for 1978 onwards.

3. Output Prices (export market f.o.b.)

The Istmo plant (urea) will be the only plant to export a part of itsproduction until local demand fully absorbs the new production capacity:

Exports % of IstmoFY Tons of Urea Production

1978/79 330,400 891979/80 330,h00 791980/81 258,700 581981/82 128,300 291982/83 onwards -- --

Assumed Exort Prices (fo.b.)

Calendar Year MeUton US$/ton

1978 1,312.5 105.01979 1,187.5 95.01980 1,137.5 91.01981 1,187.5 95.o1982 1,312.5 105.01983 1, 387.5 111.0

4. Commercial Activities of Guanomex

Commercial activities (sale of products not manufactured by Guanomex)change from year to year and depend on prices in international markets,availability of foreign and local supplies, level of activity in theagricultural sector, availability of foreign exchange, credit policies,etc. In the financial forecasts, gross revenues from commercial activitieshave been assumed to be as follows:

1,000 tons Mex$/ton Gross Revenues(Mex$ million)

Ammonia 720 1,680 369.6kAmonium sulphate 151 786 118.7Potassium 20 1,100 22.0D.A.P. 95 1,574 149.7

660.0

ANNEX 6-1Page 3

Cost of purchase by Guanomex have been assumed as 90% of gross revenues.The subsidy received by the Company in FY1975 and FY1976 from the specialfund of Mex$500 million will enable Guanomex to maintain this margin.

5. Sales Tax

Sales tax is normally 4% of revenues. However, in the past, Guanomexhas occasionally been granted certain sales tax reductions. The currentreduction for existing plants to 3.5% will end in 1977. It has been assumedthat it will not be renewed, i.e. that sales tax will be 4% after 1977.

6. Production Costs

Historical production cost per ton of product and projected costs forthe new plants are shown in Annex 6-2.

7. Depreciation

Existing plants are being depreciated over 14 years, but the new plantswill be depreciated over 12 years. The annual depreciation charge for theproject is calculated below:

Annual Depreciation Charge for the Project

A. Non-Depreciable Assets Mex$ Million

(a) Land Acquisition and Site Development 51(b) Spare Parts 35(c) Additional Working Capital 227

Total Non-Depreciable Assets 313

B. Depreciable Assets

Total Project Cost 1,877Less Non-Depreciable Assets 313

Depreciable Assets 1,564

C. Annual Depreciation Charge 1,564 Mex$130.4 million12 ,== =====

(12 years, straight line)

,xL& 6-1Page

8. Selling and Distribution Costs

Sellirng expenses for the project have been assumed at Mex$ 1.82 millionplus 5.5% of revenues, and for the existing facilities at Mex$ 20.0 millionplus 5.5% of revenues. Average freight costs have been assumed at Mex$ 110per tori of fertilizer, 14e$ 370 per ton of insecticide and Mex$ 140 per tonof other chemicals.

9. Other Income

Other income represents 12% p.a. interest charged by Guanomex forreceivables outstanding in excess of 60 days.

10. Income Tax and Workers' Participation

Income tax has been assumed as 39% for 1975 through 1977, and 42%thereafter. 11% of income after tax is for workers' participation.

11. Terms of Long-term Debt for the Project

The terms of the long-term debt raised for the project as follows:

Source Amount Terms Grace Period Interest Rates(Me4Timillion)

IERD 625 14 yrs. 3½ yrs. 12%/Foreign Loans 43 9 yrs. 2 yrs. 13.5%Local Loans 459 9 yrs. 3 yrs. 13.5%

12. Accounts Receivable

It is estimated that the Company will hold an average of 5 months ofsales as accounts receivable.

13. Inventory

It, is estimated that at the end of FY1975 the finished goods inventorywill be as follows:

Mex$ Million

Inventory of goods produced by Guanomex 275.0Inventory of goods for merchandising activities 364.5

Total 639.5

71 including 3s on-lending fee for NAFINSA

A1VEX 6-1Page 5

For 1976 and later, the inventory of goods produced by Guanomex isassumed to remain constant at a level of about 2 months of production.

Inventory of finished goods for merchandising activities are expectedstill to be rather high at the end of 1975 (about 7 months of activities).This reflects a deliberate policy to insure steady availability of ferti-lizers under present conditions of uncertain world markets. Guanomex intendsto revise this policy from 1976 onwards when it expects a stabilization ofworld markets. In the long run, it has been assumed that Guanomex will holdfinished goods inventory for its merchandising activities of about 3 months.



HISTORICAL UREA MANUFACTURING COSTS

OF DIFFERENT PRODUCTION UNITS OF GUANOMEX(Mex$ per Ton of Urea)

(Year Ends June 30)

1972/73 1973/74

Production Unit Camargo Bajio Minatitlan I Minatitlan II Camargo Bajio Minatitlan I Minatitlan II

(Tons of Urea Produced) (81,732) (46,873) (49,606) (189,923) (68,445) (45,110) (42,890) (186,122)

Variable Costs

Raw Materials:- Ammonia 411.6 410.4 429.8 421.0 376.4 367.6 395.5 377.2

- Carbon dioxide 60.7 60.5 68.8 58.9 61.2 64.2 72.2 58.2

Utilities:- Water, Power, Steam 61.3 77.3 27.9 46.4 79.0 110.3 46.5 72.1

Other Direct Costs 18.8 25.9 17.8 14.4 14.4 46.5 18.2 17.5

Total Variable Costs 552.4 574.1 544.3 540.7 531.0 589.0 532.4 525.0

Fixed Costs

Salaries and Wages 11.5 30.3 25.4 8.8 17.9 41.2 41.8 11.8

Maintenance 24.6 86.9 60.1 26.2 49.3 103.7 70.6 40.0

Factory Overhead 32.0 80.3 31.2 21.7 49.3 105.5 40.6 32.0

Depreciation 51.5 77.1 36.7 41.2 61.5 80.5 42.5 46.0

Total Fixed Costs 119.6 274.6 153.4 97.9 178.0 330.9 195.1 129.8

Total Factory Costs/Ton (Bulk) 672.0 848.9 697.7 638.6 709.0 919.9 727.5 654.8

Bagging Costs/Ton

Bags 64.0 66.8 82.7 82.7

Overhead 16.0 14.6 15.7 15.7 CD

Wages and Salaries 17.0 14.4 23.0 23.0 l

Total Bagging Costs 97.0 95.8 121.4 121.4

Total Costs/Ton (Bagged) 806.0 1,015.7 848.9 776.2

ANiNEX 6-2Page 2


IIISTORICAL PARATHION MUNUFACTURING COSTS(at Salamanca plant)

1973/7-1/

Production (tons) ,556Capacity (tons) 7,5Oo

Variable Costs Nex$/ton Mex$ Million

Raw Materials:

Paranirophenol 6,116 27.86Others_. 6,003 27.35

Sub Total 12,119 55.21

Power, WaterSteam 193 0.88Other Direct Costs 94 0.43

Total Variable Costs 12,1406 56.52

Fixed Costs

Salaries and Wages 189 0.86Maintenance 245 1.12Overhead 154 0.70Depreciation 737 3.36

Total Fixed Costs 1,325 6.o4

Total Factory Costs (Bulk) 13,731 62.56

/ I'4ay 1973 to May 1974j Includes Xylene, Sodium Carbonate, Cetone, DI1PCT

NU,5X 6-2Page 3

ISTMO UREA PLANT

ESTIMATED OPERATING COSTS AT 90% CAPACITY UTILIZATION(Production 445,500 tons per year)

Unit/Ton Mex$/Ton Mex$Units MexV/Unit of Urea of Urea Million

Variable Costs

- Anmcnia Tons 600.00 0.60 360.00 160.38

- Carbon Dioxide Tons 50.00 0.77 38.50 17.15- Power KWH 0.20 120.00 24.00 10.69- Steam Tons 15.75 1.63 25.67 11.4I- Water M3 0.31 30.00 9.25 4.12- Other Direct Costs - -- 21.70 9.67

Total Variable Costs 479.12 213.45

Fixed Costs

- Salaries and Wages 10.30 4.59- Malltenance 34.25 15.26- Overhead 16.21 7.22

- Insurance and Taxes 7.12 3.17- Depreciation 170.71 76.o5

Total Fixed Costs 238.59 106.29

Total Factory Costs (Bulk) 717.71 319.74

- Loading Costs 30.00 13.37- Freight Cost 115.00 51.23- Selling Expenses 65.54 29.20- Central Admin. Expenses 37.71 16.80

Total Operating Costs (Bulk) 965.96 430.34

ANNEX 6-2Paged

BAJIO II UREA PLANT

ESTIMATED OPERATING COSTS AT 90% CAPACITY UTILIZATION(Production 297,000 tons per year)

Unit/Ton Mex$/Ton Mex$Units Mex$/Unit of Urea of Urea Million

Variable Costs

- Ammonia Tons 600.00 0.60 360.00 106.92- Carbon Dioxide Tons 50.00 0.77 38.50 11.43- Power KWH 0.20 120.00 24.00 7.13- Steam Tons 15.75 1.63 25.67 7.62_ Water 0.31 30.00 9.25 2.75- Other Direct Costs - - - 21.70 6.LA

Total Variable Costs 479.12 142.29

Fixed Costs

- Salaries and Wages 10.50 3.12- Maintenance 33.74 10.02- Overhead 19.26 5.72- Insurance and Taxes 6.06 1.80- Depreciation 151.92 45.12

Total Fixed Costs 221.48 65.78

Total Factory Costs (Bulk) 700.60 208.07

- Loading Costs 30.00 8.91- Freight Costs 85.oo 25.24- Selling Expenses 65.52 19.L6- Central Admin. Expenses 36.53 10.85

Total Operating Costs (Bulk) 917.65 272.53

ANNEX 6-2Page

SALAMANCA PARATHION PLANT

ESTIMIATED OPERATING COSTS AT 90% CAPACITY UTILIZATION(Production 2,250 tons per year)

Unit/T of Mex$/t of Mex$Units 4ex$/Unit Parathion Parathion Million

Variable Costs

Raw Materials:

- Phosphorus Tons 6,471.0 .152 983.6 2.21- Paranitrophenate of

Sodium Tons 7,635.o .5h1 h,130.5 9.29- Chlorine Tons 1,705.0 .438 7h6.8 1.68- Other __ 1,976.0 -45

Total Raw Materials 7,836.1 17.63

Power, Water,Steam -- -- -- h 81.2 1.08Drums Unit (25OKg) 300.0 1,200.0 2.70Other Direct Costs - - 91.2 0.21

Total Variable Costs 9,609.3 21.62

Fixed Costs

Salaries and Wages 253.3 0.57

Maintenance 58.2 0.13

Depreciation 3,435.6 7.73

Total Fixed Costs 3,747.1 8.43

Total Factory Costs 13,356.2 3o.o5

Loading and Freight Costs 370.0 0.83

Selling Expenses 730.2 1.6L

Central AdministrationExpenses 390.1

Total Operating Costs (in Drums) 1h,846.7 33.L0


MEXICO - FERTILIZER PROJECTPROJECTED INCOME STATEMENTS FOR THE PROJECT ALONE

1 2 3 4 5 6 7 3 10 11 12 13

1975 1976 1977 1978 1979 19o0 1891 1 92 1903 1934 1985 1986 1987

PRODUCTION & SALESFOR FISCAL YEARENDIl4G JllNE 30

PROJ CAP. UTIL.% 3.0 0.0 0.0 70.0 75.0 35.0 90.0 90.0 93.0 90.0 90.0 90.0 90.0

GROSS OUTPUT Itl1000 METRIC TONSUREA 0.0 0.. oo 1I.I) 613.3 701.3 7112.5 7412.5 742.5 742.5 742.5 742.5 742.5

PARATHIONl 0.0 0.0 0.0 O.*1 1.9 2.1 2.3 2.3 2.3 2.3 2.3 2.3 2.3

BAGS(MILLION UNITS) 0.0 0.0 0.0 10.5 45.0 51.0 511.0 511.0 54.0 54.0 54.0 54.0 54.0

INCREASE IN INVENTIN' 000 MlETPIC TOiNSUREA 0.0 0.0 0.0 61.9 20.0 11.3 11.5 9.3 9.3 0.0 0.0 0.0 0.0

PARATHIOJ 0.c a.o. 0. 0.2 0.2 0C.0 0.0 0.0 0.0 o.0 .0 (J.0o 0.

BAGSO11LLION UNITS 0.0 0.0 0.0 2.0 1.5 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

PROJ UJREA PRICE Hl$ 1520.0 1793. 1060.0 12011.14 1745 .0 1`52.8 2032.0 21213.2 21113.2 2143.2 21143.2 2143.2 2143.2

PARA.PRICE M1$/TONl 16510.o 134170.0 21235.0 2141101.7 24491 1.7 2141191.7 244931.7 24491.7 214491.7 24491.7 241491.7 24491.7 24491.7

GROSS SALES PEVENlUEIN II$ tlILLIOTNSUREA SALES 0.00 0.00 0.00 1140.06 101411.03 1272.07 14.5.31 1571.146 1571.37 1591.33 1591.33 1591.33 1591.33

PARATillON 0(.00 0 .00 0 .00 6.11 4 41.32 52.04 55.11 55.11 55.111 1 551 55.11 55.11 55.11

BAG SALES 0l.00 . o 0. 00 20.51 115.13 133.1 1415.0 9 1JR 0 145.09 145.09 145.09 145.09 145.03

GROSS REVENIUES 0.00 0 .00 0.0 175.50 12()1.23 14;I1.3, 1T7G'.l1 17' 5 1771.57 1791.52 1791.52 1791.52 1701.52

I. tD '

0'

MEXICO - FERTILIZER PROJECTPROJECTED INCOME STATEMENTS FOR THE PROJECT ALONE

1 2 3 4 5 G 7 2 9 10 11 12 131975 1976 1977 197 1973 192( 11)21 1?22 1923 1934 1985 198' 1987

INCOtME STATEMiENTFOR FISCAL YEARENDING JUNE 30INJ t$ HlILLIONS

GROSS REVElNIES 0.o0 0.OO o.0o 175 50 1201.23 1461I C 1830.11 1771.65 1771.57 1791.52 1791.52 1791 52 1791 52SALES TAXES 0.00 0 .00 0.00 .14 2 43.73 53.41 62.0 f66.21 66.21 'v6f95 6695 6 6NiET SALES REVENUE 0.00 0. 2 0.0 1' 0'rOv"i 1157 50 1407.00 1623.31 17T 5 l 4 17C5.30 1724.57 172T 7 1724.57 l724857

MANUFACTURING COSTIN H1$ iILLIONSUREA 0.00 0.00 J.0^v 11 0 4221.77 514 5.50 573.37 573.37 573.37 573.37 573.37 573.37 573.37PARATIIIOIN 0.00 0. 0 0.00 . 21-7 9 6. 29.70 31.4;7 31.47 31.477 31.47 31.47BAGGItG IIATLS. 0.o0 0o.0 o. 00 2' I 119,29 135.19 1413.1 4 1l03.14 143.14 143.14 143.14 143.14 143.14DEPRECIATIOI C lARGE 0.0 0 o00 0o .0'0 I" 1 0 40 135.40 13.40 - 4o 131 1 40.4G 1zo 4G 130.40 130.4 41 1.24GTOTAL t1F COST 0 00 0 00 o cn - 00 70.39 47.39 3733 33 3783 3 3

C lANGE IiN FINIS SHEDGOODS ItNV. VALUE 0.00 0j'0 0.00 G3. 70 4 2,6 i2.49 12.24 9.034 9.23 0.00 o.ro o.o o .o COST OF GOODS SOLD 0.0n 0.0 0r 74 113.32 741.59 12.32 363.14 8fi2.54 23I5.50 078.339 078.39 378.39 f378.39

GROSS OPER.I1ARGINI 0.00 0).0 OQ. '^0 55.71 415.9 579.50 757.16 0t36.90 336.0r 346.19 346.19 846.19 846.19

SELLING & DIST.EXPFREIGHT EXPENSES 0.00 0.00 0.00 12.93 9375 10 3.05 1141.5r 114.90 114.89 116.34 116.34 116.34 116.34SELLING EXPENSES 0.00 0.00 0o.00 .17 u2.30 75.61 87.32 92.03 92.02 93.12 93.12 93.12 93.12CENTRAL ADIM EXP 0.00 0.00 0 .0 0 10.0 4I 3 40.23 40.23 40.23 40.23 40o2340.23OPERATINJG PROFIT 0n.o00 o.00 0. o 23 . ' 21iuG 355.6, 1 515.0. 579.75 59 .72 596 50 59 r 750596 50 59o550FINANCIAL CHlARGESINTEREST LT DEUT 0 .00 0.00 C 3 124.1 105.20 94.01 78.26 61298 50.. 44.4o 37.43TOTAL FItAtlCIAL C .00 0!.. 0- 0 . 35.72 13'3 124.13 10C.22 94.01 72.26 61.93 50.74 44.49 37.48

OTHER I!NCOME NET 0.00 0.0 0.;00 6.69 l 223 37.22 4i ' l. 51 * 0 rl 10 51-10 51.10 50N4ET FINlANCIAL CHARGE 0 . 00 0 .O0 0.0( 20 .03 117.71 95.90 72.02 4, 1 27.16 1G -0.3 -o.61 -13.62

PROFIT bJlFORE TAX 0.00 0.00 0.00 -5. 47 101.97 259.71 It43 05 58.C/9 1 562.5' 535.63 596.37 603.12 610.13INCOlE TAXES 0.00 0.n1 0.00o 0.20 40.53 10 .08 12,6.03 227.10 230.23 245.96 250.68 253.31 256.25IORKERS PROFIT SIIA 0.00 0.00 0.00 0.001) ' 7 16G 57 22.27 314. 1 35.39 37.36 3G.0 38+48 33.93HiET PROFIT 0.00 0.o0 I).00 -5.47 -5.6 I -- 134.0 J 22.7 0 2 79 22 290.39 3r2.30 30S.10 311.33 314.95

CUtl NET PROF BEGIN 0.00 (.0C 0.00 o.0C -5.47 49.21 123.27 411i.7 691.19 981. 5 1283.88 1591.99 1903.32CUti NET PROF EtNi) 0.00 0.90 0.00 on 57 49 20 12 7 11 .97 691.19 921 .53 1283.88 1591.99 1903.32 2218.26 2

Industrial Projects Department a'April 1975

MEXICO - FERTILIZER PROJEC'T 6-4

PROFIT AND CASH FLOW BREAKEVEN CHARTS

% CAPACITYUTILIZATION

100

90 -

so - -

70 _ - ____ ___ - - -_

5C…

30 - ____

CASH BREAKEVEN

20- - - - - - - - - _ _ _ _ -

10 - - - - - - _ _- - - -

1 2 3 4 5 6 7 8 9 10 11 12 13

(3 MONTHS)1978 1990

OPERATING YEARXrlij0ivt;3 *lnjeC ts De.aviteent

H eurv.+rvl , 1 ? .

MEXICO - FPRTILIZER PROJECTPROJECTED BALANCE SHEETS AND CASH FLOW STATEMENTS

FOR THE PROJECT ALONE

1 2 3 14 5 6 7 : 17 11 12 13

1975 1976 19'77 137) 1"97 19°U 19I1 12 1o 3 1914 i1^5 1968 198i7

FUliDS FLOWFOR FISCAL YEARENDING JUNtE 30IN '1$ iilLLIOTIS

SOURCES OF FUNDS1iET PROFIT 0.00 3.21 0.00 -5.147 51 130.26 220.70 279.22 29 3.39 332.30 32^0.10 311.33 314.95

ItiTEREST LT DE,T 0.00o 0.n00 .0(0 35.72 136 .30 124.13 10C.23 594.01 73.26 61.9° 50.74 44.49 37.48

DEPRECIATIOl 0.00 0.00 0 .n0 32.0 n 13.0It 13'.140 13.440C 130.142f 130.130 130. 4 1 4 34 130.144

INCREASE Itl EQUITY 35.00 250.00 250.0)2 215.20 . 0 0 0.00 0.o3 0.s0 0.00 0.00 0o.0o 0.0 0o.0

INCREASE LT DEBT 26 0C 31:5 1 402. 6! 01 0. 0 0o 0. or, 0.00 .00 0. 0 0o 0 o 0.00 0. 09 o0.

TOTAL SOURCES 61f.00 5o 5 -0 u 52. ( 561. 55 321 33 33n5 1462.33 503.6O 43 5 1414.60^ 433.24 486.22 43273-

USES OF FUNDSCHANGE IN ACCT R[:C 0.00 0o.no .00 63.21I 112.53 01.;7 o5.141 74.33 56 .07 0.00 0.00 0.00 0.00

CA-ANGE IIJ FG ItNV 0.0o 03.0-0 0.00) 6'0).70 214.26 12. 9 12.214 3.(34 9 .3, o. 0.00 0.03 0.00 0.00NET CHANIGE OTHERS r.0c 0o.0 0.9 -11.5' 1. 2- -4.144 0.0 0.00 0o.00 0.0 0o.00 0.00 0.00

TOTAL FINANCIAL CH ).00 3.00 0 .003 35.72 13C.30 124.13 109.23 914.01 70.26 1.90 50.74 44.4c9 37.4°,

LT DEiNT PAYIE.14T 0.o0 0.00 0. 0.30 no r) . 1 117.4I5 120.99 1214.97 129.42 1314.44 56.27 62.52 69.53

FIXED ASSET IiCRiA 4 10 52212 IJ 7 67. 20 4114 3 0 .00 o.oo o0.0 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL UJSES 343 922.14 6770 30 570 316 372 .40 3400 3G 327 .)2 303 C5 27363 19.12 107.01 107 .01 107.01

NET CASiHFLOU 17.90 42.60 -10.20 91.09 -51.02 147.7) 1140 .14 199.90 225.42 293.2G 332.23 379.21 375.32

BEGINJNlIING CASHI 0).00 17.90 60.50 42.30 133.39 32.37 139.17 270.63 470.60 696.02 994.28 1376.51 1755.72

ENDING CASHi 17.90 60.50 142.30 133.39 32.37 13C.17 270.63 470.60 696.02 9914.28 1376.51 1755.72 2131.54

LT DEBT SERVICE 0 .00 0.(0 0U.0(1 35.72 2314.14l 2141.50 230.27 213i.93 207.68 196.142 107.01 107.01 107.01

DEBT RATIO CAS.l 0.00 0.(o 0.00 6252.05 321.32 33.'59 I46..33 3 503.63 499.05 4914.68 1489.24 486.22 432.83

LT DEBT SERV COVER ).0 0).0 0. 1.0 1. 1 1.6 2.0i 2.3 2.4 2.5 4.6 4.5 4.5


eQ>

, 0

MEXICO - FERTITIZER PROJECT

PROJECTED BAIANCE SHES AND cASH FIW STATEMES

FOR THE PR~OJECT ALONE 21 2 1- 7 A 1 1 12 131975 197.! 10,77 11 7, _ 37) 1000 !-) I_ 2o 1? 3 l,l s 5 OG 1937

bALANCE SHEETAS OF UNlE 30Itl rs$ MILLIOt0

ASSETSCURRENT ASSETSOPERATING CAS;1 0.00 0.00 0.00 16.62 13.72 15.72 15.7, 15.72 15.72 15.72 15.72 15.72 15-72ACCTS RECEIVABLE 0.00 0.00 0.00 63.24 175.77 2 66 .9 352.35 427.10 433.25 4P3.25 433.25 433.25 483.25FINISH GOODS INV 0.00 0.00 0.00 6,i3.7Q 32.36 1C5.1s 117.70 127.5'1 137.4J2 137.42 137.42 137.42 137.42MISC CUR.ASSETS 0.00 0.00 0.00 0 .0 0 0.0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 C.00RAII MATERIALS 0.00 0.00 C.00 20.22 24.24 2.L . 27.48 327.4ll3 13 27.4 27.43 27.43 2z.48TOTAL CUR.ASSETS 0.00 o 000 0.o0 1.79 30.G3 415.59 513.25 597.92 6r6.37 G66 7S7 G53.8; 7 - r.3

ACCUtlULAT E)INVESTABLE FUNDS 17.90 Go.5o 42.30 116.77 66.5s 114.45 254.91 4564. 30 690.30 378r56 1360 72 1740.00 2115.32

GROSS FIXED ASSETS 43.10 565.50 1236.30 1650 .0 , 1650.0 1650 vo 1650.60 1650-.0 1650.60 1650.60 1650.60 1650.60 1653.63

ACCUll DEPRECIATION 0.00 0.00 o.on 3260 IC.0 2)3. 0.0 42 o 524.20 - 6-4.60 315Q00 qz5.40 1075*v0 12o6.20tET FIXED ASSETS 43.10 565.50 123i.30 1612.02 127. 1 2 T2CC 10)G.40 95G,GO 3. 705.20 6574.30 042EC1

TOTAL ASSETS 6:.oo 626.0n 1270.60 13903.55 1036 .91, 123£.211 1) 9)4.95 2149.20 2310.17 2473.03 2729.837 2978.67 3224.0o

LIABILITIESCURRENT LIAlIlLITIEACCTS PAYABILE 0.00 0.00 0.r00 31.72 34.511 42.23 42.23 42.23 142.23 142.23 42.23 42.23 42.23CUR PART LT DEBT ).00 _ 0.00 0.0 117.15 1 124.97 129.42 34J.44 50.27 6f 22 69.53 77.36TOTAL CUR LIAL. 0.00 0.00 0.00 122.3 15.) I3.'22 1,7.22 171.65 176.67 93.50 10t7- 111.70 119.59

LOtNG TERM DEfiT 26i.00 341.00 74 3.60 ) 102 ) ')I -1.71l 79)0.7 b C5.7? 536.36 401.92 345.65 283.13 213.60 135.24

EO,U ITYSHARE CArITAL 35.00 2 35.00 535.0 0 75q.O0 7'03. 0 79,.02 751.0 750.00 750.00 750.00 750.00 750.00 750.00RETAINED EARtIltNGS 0.00 0.0n 0.0n -5.47 4.21 15,3.27 411."7 691.19 931.58 1283.88 1591.99 1903.32 2218.26OF llillCi R[ESERVES (..00 0.n0 0.00 0 U0 3.2. 10.032 25.05 41.0 o 53.22 3585 11.53TOTAL tOUITY 33.00 235.no 535.00 7114 53 739.21 9339,7 11, 1.97 1441.13 1731.50 7733.8 2419 3 32 29

TOTAL LIAUILITIES f01.00 626i.00, 1272.(0n 1X000 5 lt'.f2.34 12/0,0.0 ' 1930 .9 35 2149.20 2310.17 ?473.Q3 2723.37 2978.53 22 24.0)

-)UICI. KATI() ).t) 0.0 1. 3 .! 2.) 3.3 3.6 6;.5 5.1 5.7 5.3CUPREtIT R"ATIO 09.0 29 0 _ 2. 3.5 3.? 6.7 6.3 5.-9 5.6 DE2T/); T+fl-JITY . 3 r2 5T Y 20 27 12 15 .1 7 4 I)Ei,T/lvE'.Tl';i CAF", 4? 5,!1 ;" ;P D' ,_ 4'7 '1,2 25 32 27 22 15

P,ROJ. OR OI'. I,LP C Ar'S .. 2 K 2 ,, 31 3 29 >PR'OJ.CASO.I L0E2 C,A . ' . .. 1 3. 15 ItS 17


ANNKX 6- 6

MEXICO - FERTT LIZER PRIZOJECT

COST AND BENRFIT STRLUlS FOR FINANCIAL RATE OF IIETURN CALCULATJiONS

(197L Mex$ Million)

Incone Tax& WorkersI

Fiscal "' Capacity Capital Ammonia Other Profit Partic-Year Utilization Costs_/ Cost s costa2/ ipation Net a]les

1975 0 40.5 0 0 C)

1'?76 0 415.8 0 O O1977 (4 59.7 0a 0 197T 70 386.3 52.0 76.8 0 19.71.970 75 C 222.8 3677.1 33.5 82:L.01980 )50 h.<lO.2 89.1 998.51Q81 90 0 267.3 l34.8 152.1 1,L51.31S82 90 0 267.3 438.5 185.6 1, 209.51953 990 0 267.3 438.5 193.0 1,209.919814 90 0 267.3 440.2 200.9 1,223.11985 90 0 267.3 640.2 204.o 1,223.11986 90 0 267.3 440.2 207.0 1,223.11.98'7 90 0 267.3 4140.2 209.4 1,223.1.1 988 90 0 267.3 1440.2 215.1 1,223.1

80 9 267.3 h40.2 220.2 1,37b - 3/

SENSITIVITY ANALYSIS OF FINA4CIAL RATE OF RETURN

CapacitvV4/Case Utilization Capital Costs Ammonia Costs Other CostsZ/ Net Sales Rate of Return-

........... of expected value, shown above ........ U

Base Case 90 100 100 100 100 14.552 9 0 100 110 100 100 13.753 90 100 120 100 100 12.85

)0 '()100 130 100 100 11.95'j 90 100 100 100 110 18.056 90 100 100 100 90 10.757 90 115 100 100 100 12.158 90 130 100 100 100 10.05

35 100 100 100 100 12.15LO 80 100 100 100 100 10.15

1/ Excluding interest during construction,

2/ Excluding depreciation and financial charges,and income tax and workers' profitparticipation.

3/ Including recovery of working capital.

14/ From fourth year of operations onwards0

5/ After income taxes.


MEXICO - FERTILIZER PROJECTPROJECTIONS FOR THE EXISTING rACILITIES

2 5 2 7 9 1 213

PROLDUCTIOlN & SALESFOR. FISCAXL YEAREND ING JUNE. 30

GROSS OUTPUT IN1003 MiETRIC TONSUREA 377.2 380.'4 33 5. 39.) 5 3 92.5 r421 -. 2L " 2 1.2 !I',4 401. II 031. 4 40. 421. 4n!. Ii4IX-D FERTILIZER 32 3 345 3 3 4~ ( ~33 .0 337~ 33?. 3331 3 33 .1 333. -1 333 .1 ~333.1 33 3.A1111ONIUM SIJLPliATE 4 C 3 472.7 '193 24 "02 1 0 53. 5 539. 5 539.5 3 39.- 5 339.-5 5 .5AMIIOiIUM 1.ITRATE 153.) 1)53., -1 11 " iS'jr I'' ( < C 63 6 1 63.6 16C,3.5 16 3.6 163.6 1 63. 6S SUPERPtIOSPiIATE ~ '2 2 r3.2 25rr .,7 2 272 27-' 2S2.5 .2 5 5 252.5 253.5 258.5 253S.5 2 5 8.5.PAIIATHi I ON12 a2 a 0 ~7 2. .7 6.7 6).7 6.7OT1P. INSECTICIDE F-, " 2., 2) . 222. .OTHOER CHEtlICALS 9~. "I-5 C. 175 19) 2 % - 1' 29 I1 129,.1 1Ci9.1 1 0 9.1 109.1 109. 1

INCREASE Iri INVENTIII 000) METIIC TONS

GROSS SALES RE7VENUEI N N) HI1LLIOI SUREA SALES 1533 31 2 2~ 7 )~ '4 2 3'' 1 2 "5 2 2cS 36928 "a", 2 8~ 2" 91 36-0.23 S r 203 111901) FERTILI~~~~~~~ ~ "~~ 4.~ 6 K' 717.? ''12.12~!- 7`3.10I 703.10 703.10. 73.l72XVI1ONIIJ3I SULPiAT 3 T 3 34 '' 1' II ~ r_' .j 5"' `'57 )I ') 97.91 9' 7(7 9' )7.9 527 1 97 '1

AIVIOVLIU1I NI TI' ITO 2" ~3 247 17 201 212 '' "" 315.20 ,~r '15 "1530 315.33 32).7 7 7 7II

OT!IER I:SECTICIDE '77 22 [1 71 '1 7? ~2) 7", 7 2 ? 22 .7' 2' - 2 7(OTE C;EN IICAL 2" r " "n 5 r ' P "2 " _0r- 71 'II" 1' 1 " "' 125 495 4 4 '4 NEIRCIAHIDIS IMG REV. 6 C 0L C) 77", "M ',- )In 112 7"1 (C, 23 L' 3 (

1CL" 9" n" . 0o(96r190 62 (9 99GROSSC fIZUVENJE 82.81 g 22KQ2 2 77 (0 t 7 2" ' 0 O 7770

122~~~~ 4' 4 7, 4227. 34 4 2 27~~~~~~~~~c~u-J

MEXICO - FERTILIZER PROJECTPROJECTIONS FOR THE EXISTING FACILITIES

1' 7 7,, 1 127 13

14401)2H STATLM4I4TFOR' FISCAL Yf'AAOE;,tD1)1G dJUNE 33

GROSS REVENUEUS 2835.36 345t2.36C 3329.9-':? 43 41~ i i 4227 2!, 4227. 34 42~27.34 422 7. 34 41227.3'4 4227. 134 1)227. 34 4227.34SALES TAXOE!; 34 .1I5 102 41 111 . 3~ 113 3 j .9 143. 31 10 "< 7 00 17. 3 157 , 531

RTSAL)>. HE'/L200 23P01. 71 '3351. 43 3 " .947.34" 3)''" 1 ".31473 4703 47 1 3% 1

)IAiUFACT(JR1I:G COSTI)) H4$ IOILLIONJSUJREA 263. 23 313 114 - 352 43 391.-3 " 39.- I97 3 .3.>31 .5 33% 3.5 337 til"ED FERTILIZER 336. -59 417, 4% 3 )77 49~2.21. t~ 4r4( 4 33. I )09 V0 3 "".9 430 433 4 31 : 4 3 AtilOHIUM SULPHIATE 2 (66.417 323 1 36.4 1 4 403?.2. 1)20l3 4 31.40 4o 4~ "21 4 101.4 4 317. 44 '4 31. 4 4314 4 314 4A,UI0HIU!1 tITRATF )37 3 1 1. 6 3 1 34.3 3 149.33 150.21 153 30 150 0 1rq '- 30 3.32 1503 152.01%30 150.3 ip^ 30SSUPERP.IOSPiATE 131.02 154 < 'IC5 2.3 37 "1314 1~ 1' 14 .1 4 1 C.2n i23 l 4 3199.4 1 1 1)PARZATl IO373 1.0 10 10 13 216 'i94 0"' 1>) ., 3*9 r 4 1 K45 10. " P3 lbC 'li 4oOT;IER IIISECTICIDE o2.6(4 73. ,)2 3 .321 33.3- )FIC2 2' .20 C .6 25-. 63 2 5.-63 2" 1'13 2' 5 (IT,iER C,IE'!IICALS 167.1) 100 001. I' 072.0 2) 02" 7" 01' . 29" 1 3 o" 4-)' 2 0"t 1 .3 2 3 4 . 1 32 34 10 I 24 1 t3 234.1~PUPC4iA!200 J;A(4 Q4 7' 114 .2)1207 oC 11)0 Ofl 14 7~ l' "i) 7 1" 4 140',7411? "3 74 14 3. 7L, 43 7 1 43. 7 4 i43 744ILRC;AAOOISE COST 77 4"C1~ '" '0 0 ~ O 0 0 33 33.3 32 90 4 0OEPRI):CIATIVor CIIAPC, ))5 0 0 .30 35. 3 ) 331AJ)OP IVAIOTi2X~A!CE 4io) !0 0,.! ' V' 1" 10 ) ~. 13 4 .1 __r___ 41" 1

TOTAL 1400 COST :217 '4 DO 0" 1017 77? 7707 -L 7 "1." 7 1'7 7 1.

GC1,ODS IC'!. V/AL!JLC 204 '7 .3 *0 03,

COST OF GOOD)03 COLID 217501 L)'-' 0"0' "'D f7 '"'.1 31 .7~~3 1'53 '

GROSS OrPER!.IARCIR 6,2!f,. 5!4)( 79.1 24.3 91.32 99.1 33.7 992.92 9 .19 9 3 15 939. 15 '291 ?l 98 1,

SEILLIt4G & DIST .EU'-FREIGAT EXPEUiSES 1)32.27 231.37i1 23F7. 44 23,4 .737 2533.79 2'3.4.1 23.4.l 233.)6 1 29 ul 261 23. 2 3, 01 0411SL:LLI!iG 20:5 11242 -i21 73. '3 1I9.22 221.1 2,07. 5 2% .9 I 23.59 239~.352> p :20) 21 )OPtIIAT IL AD; L)')O)I 2111) 37" "

Fli4AlICIAL CIfARCL.S1:'TZRICST LTi 102Crj 27. 3jr2" 2.114T.-2R25T ST Di-i,T 11.2 0' .3 13. ' .7? 2 ~ 3.3 ~ ~Q~3 3." 143 3TOTAL F I !A; C I L (,'I 177.7)79 5. 13" 4 0 12> 2.3 5 ~ 4~ 0020 92 00 D 33 9.2

UTt 4)2;? ICOIK: JO,'T 12. 31. 128 3.0 1~ 1 3 ., <. i, 1:1.i C. 4 .41 132. 41 41 12. 1,.NET F1I%AU:CIAL CHIAR 773.43 7 34. 19 -. " -4.2 -3~,-32 9.2 ~.. 7 77, ~ 2 -93.3 it I -900

PR'OFIT i!FR:TAX 122. 220-7 2030- 01 42".. 4.2 12).> ' 4. 4...' 4'C.44 :46., i 1I;002c2 TAX,i>. 7v.9 . ;),I 112. 71' .'u 13.71152 2) '30 (I '2, i.1!1 ''' ~00 9..20125PROFIT Si)A 2.37 :20 .0 21 1 23.6. 23 70'3 40142T PROFIT 12145 .77?~ 2 1 0. 0'3 1" 7 4 ~t -7- 07~5!7- ' -

CU))l COT PROF L;(It 1 -7 .'232' 3,3 ' 17.0 2 4 *'3. 211 a') (,~ .4 i : ~4 C!))) :~~2T PRO)' 0140 .232.29 353.74 513.92 732.411 2,4.'~~~~~, i..~~... 'D~~ '1" 1 <'3 0130 0 .31'~ 2 114 , 32.32

MEXICO - FERTILIZER PROJECTPROJECTIONS FQR THE EXISTING FACILITIES

1 .' 3~ 11 51.X2 1i 21037' qrl7(; l?7T ]7 1)7l 19' 3- 31 1'-2 1' 13'3I 193i5 1O36 137

___________

FUNIDS FLOYIFOR FISCAL YEARENDING JUNiE 30IN ll$ HILLIONIS

SOURCES (F Fli?NDSNET PR.OFIT (. 1' i.l J 14'1 '-1' . '1. 2'. 3 2'i ij 49 23.r '141 '-" -2

IiTEREST LT DELT T )450 4oT5 I c 3- 332 57 '* '1 1 2- 5'C 0 .20 ' rin 0A '- r.onNITERl-EST ST D)EDT 1 2' )) 7 7A )1 ). r.) .0 _3 3.,r9I 3 3DLPi LFCIATI(, 00 5 5. 5. ! j5. 5 .0 ° -5. r r * 0 0rI ¢l CL E SE II,[ )lJI TY D k !. ( () ' !- r, r < (1 / ( r . , . ., .O , . , . . .. .li CREASE 1I U,'U I TY ;45 ""''

I C,E,SSL ST iDiENT 12 1 " " " 0 0 __ 4__)rJ_rTOTAL SO(iCES ' 7 3 7' 7 t '-.7 3'-1.73 7 7 3 3j .- 777 - 3

USLES OF FlJ.D'iCHANGE. Iii ACCT E-C 17 ,3 . I ) 32.n' 1 1 -I ! 1 7 1. 7 /j 2. ! A i-A . 9 . ,on 3 'O1

CHIANGE IN! FO, IEV 0.Q00 - 58 '- -2;3.73 7 - 9 - - -5 0 c.so0 0 .o00 3.0. 0 .0 0900 993NET CHANGE OT;HERS 56.70 -399 '- 2 G 26 213 17 '-" 2" 2.29 A'0� 0 A 09 " 0 A 03 A1 30 0. .30TOTAL FI!NANCIAL Gi 177 7(. 159 .5(' 14 ' . rn 1- VI. r2 "' 4' a -(' 3903 lC0.20 35F 7" )O 00. 20 0.10 0 V 0 a.10LT DE',T PAYiNlEiT l7.00 2 7"' ? 5.1) 3, 6 7 7 9 4 o r7 A 2`.5 2r " A -: r 0 * 4 4 C.O C( JrST DEBT PA+'lEtlT o. l3 o 3 C 0 4. 3 " '10 75Pr)l7 1.20 0 .JO o. cr; .9 ' 0 3. 0 ^ i c9.' 00FI,-ED ASSET MiUCREA f.0) 1. _ 13 5 5 3r' I', F3 _ ,, 3') -r? O _r

TOTAL USES il;1 .12 *3 3' .-1 1._-2 3 5 17 , 1 7 1 2 'J 17'- ' .70 7G575 14 v3 1 1 V,

NET CASHiFL()II -_3.644 _ 2 3 3. ''-" 41 2 3.0 223').2 2 '99.43 24i.0) 240.00BEG; INNINGq CASH 0.oxi; 1 v7 . i 41 3. "" W" -~ ?i . -3 ,ir r A - l 3.'#1 lS?.S3 3'1.? ?;i7 72.4 7 9 5 . 7G 119 .3 14 34 . 1 75.311

OtNDIN(G CASH I . I 3, - 4 ` -3r) . ,_ -4 31. '7['2. 37 9 . 1195.03 1434.4i 1679.34 191.*23

LT DEiT SERVICE 131. 50 1112 123 2 2 1.'- '10 1 7- 1.9 0 .C C 0.30DE,IT RATIO CASH 11 0. l?" P 22 ,2 3 3',j p 4i 31'- 317 2)j" .'!; 2n "'1 5. 9 295-93 295.03 295.00

LT DEBT SERV COVER 1.41 2 n '.5 2. 7 v ,' 42 171. 1 1937.3 0. 0.0

OQ

n?

rs.

MEXICO - FERTILIZER PROJECTPROJECTIONS FOR THE EXISTING FACILITIES

1 23 7 3 2 13 11 12 131379 1976 177 _7, 137, 1)3 i _ 1 32 1 1904 1935 19 836 1987

[,ALAiMIC _ SJiC TAS OF dJa-E: 3CIii~ ll' llILLIOi!

ASSETSCUP.REt!T A'SETSOPERAT IIIm CAS; I 49.16 -50.13 -46*o 3, n -.. 0 95. 2 ?1.7 9o 5.0 .00, 9'.2r 95.00 95. 30ACCTS RECEIVABLE 1177.43 149'.)44 15)2.61 172-'. A 11' .21 1297.6 172'.( 7?2.? 17.244 3 1724.?ti 1724. 4 1724.96 1724.96FIiJISH 0, ); I;i/ ) 3 5 . 1..1 917.9 "9 <'2.17,72 _, -" - _72 .1 7 37. 17 37 .1 7 37 1.7 373 . 17 373. 17' IISC Cl)i'. A'iSS TS 12 .2 0o 11. 1.2? 1"'" 19 .24 ,1 .2 1< ?2I" 1C3.20 irP3.23 lC)-.20 P- 3r.20 169.20' 19.20PA'TIOTATERIALS 2204 3C '; ) 332.2 ji4G 32149 232.00 232.03 232.00 232.00 232.00 282.00 282 .00 2832.90T()TAL CUR.ASSETS 22 ?t: "t) 241() 1' 2[S20.'11 Fin '? '.0J 2 C'I 3.33 7724.3 3 ' 33 2 2,49.33 2f49.33 2r 4. 33

ACCMWiULATEDIViESTAiL_ FO)OS r..C, 2 2' 2 43,.- , '347.6-r7 3o Q. 7 0, 1100.03 1321.23

i-CMo ASSET 170 .50 201 .19 21' 2 44 t' 20 . ! 0 24-0.40 21i 0. 13 2 4 4.I 240.43 240 .40 240.L00 240C .4l 242 .4.OTHIER I'V/E iST,iLkT 3 35.90 3.C 5.9 32 5.-90 3379.- 35 .90 39 .GC 33. )2 335.90 335.90 335.93 3 r35.90 3°5.90 335.'90

GROSS FIXED ASSETS 1912.10 19325.60 133.10 1364'L.10 19'9 .10 2014.1I 2039.10 2094.10 2149.10 2204.10 2259.10 2314.10 2369.10

ACCUJI DEPR'LCIATIOIJ 1O57.0n 1112.00i 117.02 1222.00 1277. 0C 1332.02) 1 37 7 .00 11442.00 1497.00 1552.00 13 l7.00 l62.0'0 1717.0'0JET FiXt D ASSETS ~55.10 313.I;0 772.10 7112.1^ 712.10 2) 2.l0 5.7.10 5 2.10 652.10 652.10 652.10 552.10 652.10

TOTAL ASSETS 3706 h.390 31.30 33. 35 40)10.2;6 4121.39 4174.23 4366.96J 4575.40 47383.4) 5027.77 5267.20 5508.07 5748.96

LIABILITIESCURRENT LIABILITIESACCTS PAYABLE 752.00 36ui 3.76 924. . 3o1 922.14 ,92r2.14 922.11. 9) 2 2 .2 9 22.1I 922.l4 922.14 9 22.19 922.14SHORT TERl DtBLT 1132.90 1096.30 10 47.00 971.20 919.00 900.003 930.0 qo9 .00 30i3.00 900.00 9a00.093 900 .30 900.00CUR PART LT DCL,T 0)' '0 !I5.1O0 86.60) 37.70 7 .40 .530 9 p226 ro 1 F-O 1.40 0.00 0.00 0.00TOTAL CUI' LLAB. 197.e029) 5o!s76) 2053.53 20 1 . 7 2 i37-3.22 1 375.'j 1 1:,51.'- -I 12 15 T 17 Tv.3 1823.54 1822.17 1322.14 1822.14

LONJG TLR;1 DEl5T 451.50 366 .410 279.30 1'12.10 112.70 53.0 2'.-40 2.92 1.40 3.-00 0.00 0 .00 0.00

EQU ITYS;iARE CAPITAL 20c45.00l l .0 10450 010c 4 5.0 1045.2 1 0B.oo 4,.00 io4ts.oo 1045.00 1()45.0o 1045.00 1045.00 il45.oo 1045.00RETAINED EARNIG;S 232.23 353.74 515.52 732.44 (63f4.43 1204.39 1443.93 16f73.36 113.45 2159.23 2400 .06 2640.94 2331.82OF VIBICil RESERVES 123.2' 127.21 1. .40 1 449.20 157.22 171.14 Zes _3. 21 4 .00 22P3P 242.82 2TOTAL EQUITY 1277.29 1393.74 l560.32 1777.44 2092?.13 i229 . 24r35.33 '72.PC 2933.45 320 4. 34'15.06 75 4 3926 .2

TOTAL LIABILITIES 3706.393 3310.30 3390.05 4012.26 41i1.35 414. 23 4366.93 4 7575.40 91738.49 5027.77 5267.20 5503 5748.96

3UICK RATIO 0.9 0.9 1.0 1.0 1.1 1.2 1.2 .2 1.2 1.2 1.2 1.2 1.2CUPRENT RATIO 1.2 1.2 1.2 1.3 1.4 1.4 1.4 1.4 1.5 1.5 1.5 1.5 1.5DENT/D)EUT+EQUITY-. 26 21 15 10 5 3 1 0 0 0 0 0D[EUT/DEB,T+S11 CAPO '3 26 21 1f 10 5 3 0 0 0 0 0

Industrial Projects Department J.April 1975 )I

IMEICO - FERTILIZER PROJECTCONSOLIDATED FINANICAL PROJECTINS

1 2 3 4 5 v 3 3 1C 11 12 131 9 7 5 197; 1937 7 19372 197, 1937 1 ' , 12 133 192 1985 1985 1987

PRODUCT ION & SALESFOP FISCAL YEARENDiNG JUNE 30__________________

PROJ CAP. UTIL.03 O.0 0.0 0.0 70.0,3 75.2 35.0 90.0 90. 0 n.0 ')30.0 90.0 90.0 30.0GROSS OUTPUT IN1000 i1ETRIC TONSUREA 377.2 330.24 3i5.4 j37.3 1011.3 11C2., 11433.9 11243.9 143.9 1143.9 1143.9 1143.3 1143.9MIXED FERTILIZER 343.0 3115.0 345.0 34 .,^, 335.0 333.1 333.1 333.1 333.1 333.1 333.1 333.1 333.1AMIMONIUM SULPHATE 463.5 2478.7 493. 50 9 .1 524.3 539.5 53J.5 539.5 533 .5 539.5 539.5 539.5 539.5AMllON2IUMd N4ITRATE 150.5 153.5 159.5 1l2.5 1635 6 13.6 103.6 103.6 103.0 163.0 163.6 163.6S SUPERPHiOSPIIATE 253.2 253.9 255.0 257.2 257.2 253.5 258,.5 25°.5 258.5 258.5 258.5 258.5 258.5PARATHION 6.2 6.2 6.it 6.9 8.6 I3. 3.9 3.9 3.9 8.3 °.9 3.9 3.9OTHIER IINSECTICIDE 5.3 5.8 5.8 5.3 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9OTIHER CHEMICALS 90.5 100.5 105.6 1024.0 10O.2 109.1 139.1 1 9.1 109.1 109.1 109.1 109.1 109.1BAGS(IIILLION UNITS) 0.0 0.0 0.0 12.5 245.0 51.0 524.0 524.O 545.0 54..0 524.0 54.03 54.c

I NCREASE IN INVENTIN 000 MIETRIC TONSUREA 0.0 (.0 0.0 1__ 20.0 11.°, 11.5 9.3 9.3 0.0 0.0 0. 0 0PARATIHIOIt 0.0 0.0 0.0 0.2 0.2 0.;0 0.0 0.0 0.0 0.0 0.0 0.0 0.0BAGS(MILLION UNITS) 0.0 0C.0 0.0 2.0 1.5 1.C r0.r3 0.0 0.0 0n.o0 o. 0 0.0 0.0

PROJ UREA PRICE M$ 1520.0 1793.6 1960.3 180II.24 17245.0 13,50 . 2032.° 2143.2 2143.2 214 3.2 2143.2 2143.2 21243.2PARA.PRICE 11$/TON 1i6500.9 192470.0 21235.0 3244.i 7 244911.7 24491.7 242491.7 2242491.7 2242491.7 24491.7 242491.7 2242491.7 2121491.7

GROSS SALI:S REVENUIN II$ MtILLIONISUREA SALES 573.32l 6312.2) 755.G9 990.2° 1330.25 2135.35 232;4.19 22431.74 22431.65 2451.01 22451.61 2451.61 2451. 61MI,XED FERTILIZER 520.9G 509. 43 665.224 717.GG 707.11 703.1C 0 703.10 703.10 703.10 703.1^ 70 3.10 703.10 703.10A2IONIUPI SULPHATE 364.31 41j43. 3 500.73 5 ,4.21 531.06 597.91 597.91 597.91 597.91 537.91 5i7, 11 597.91 537.-1AM10MiIUI1 NITRATE 20(.03 247.97 231.30 313.67 315.60 315.3f0 3'5 00 315.853 315.80 315.80 315,80 3153 80 315 80S SUPEPPilOSPiIATE 19 2.921 223.30 250. 66 276.324 27G.34 277.7 277. 277.734 272 7.777 24 27 .7) 277.74 277.74PARATIHIOIN 102.30 120.71 133.22 135.33 205.41 21r.14 219.23 219.20 219.2(0 219.20 219.20 219.20 219.20OTHiER ItiSECTICIDE GP.90 71.;, 7.53 35 .27 29.737 2-.7 29 7 29.76 29.70 29.76 29.70 23.7! 29.76OTiER C,IL1tICAL 205.07 2L,3.72 303.33 33"1.20i 3115.71 340.33 340. ' 324 .53 343. 53 348. 58 3438,53 3248.50 3248.58L2AG SALES 0.00 0.00 0.00 O.. 0.o o.0c 1' 1.3 1.35 1.35 2.35 1.35 1.35L1EfC;iANDISING RE-V. 6(;0.00 778.80o 351.4l 930.49 930.r3 inO.6G2 - __ oo ti3 6 6 , ,60GROSS REVE/NUES 2005.035 3252?.0) 3,,23.92 T.3 5277. 3 9555-9 577. -7. 5775-72 5 75


MEXICO - FERTILIZER PROJECTCONSOLIDATED FINANCIAL PROJECTIONS

1 2 3 4 5 6 7 o 9 10 11 12 131975 19 7 177 1972 1i97) 1'3°20 1331 1982 1983 1984 1985 1986 1987

__________________

INCOMIE STATEtiENT

FOR FISCAL YEAR

END I NG JUNE 30ItJ Ml IIILLIOMiS

GROSS REVEllUES 2885.36 3452.06 3329.92 41378.17 5277. 23 j5555.36 5770.2' 5355.75 5855.C6 5875.62 5875.62 5875.62 5875.62SALES TAXES 34.15' 10.64 111.C6 145.92 177.67 18. 4 5 212.37 21C.05 218.05 218.79 213. 2 218.79 2'8 ZNET SALES Ri VEIJUE 2301.71 3351.l3 3713.32 1l232.26 513.16 3G7. 5557.33 7.70 .3 5656.333 556.33 56.8

llANUFACTURING COSTIN l$ MILLIONSUREA 2;o.20 313.424 352.43 506.77 3021.,7 94 .2I 972.12 572.12 972.12 572.12 572.12 972.12 972.12tIX ED FERTILIZE1. 356.59 417.46 4G5.37 492.21 4II 5. C0 4'3.c9 4?,3.09 4I3.09 483.09 483.o0 483.093 483.09 483.09

A1M10JIIUi SULi1HATE 266.47 323.76 364.14 405 .15 420.30 431. 44 431. 44 431.44 431.4;4 431.44O 431.44t 431.44 431.44A11tO;:IUI tlITRATE 98.73 110.23 134l.33 14? 7 150.21 15C0.30 12.30 152.30 152.30o 150.32 150.30 150.33 150.3JS SUPERRIOSP:iATE 131.0- 154.6 172.c5 12 7.32 127.32 192.14 18.12 122.14 12.1-4 188.14 188.14 188.14 138.14PARATIIIW 33.70 72 G1 4 1' 102 '77 172.I3 13r "27 1".9' 7 ±,) 7.7, 137.57 1 37.5 137.96 137.92OT:iEF Iii,ECTICIDE .;2.i !2 27- ^ s. 2F.' 25."6 25. C -5 68 25.56, 25.63 25. IS8JTJlr- Ci1E:11CALS 1( 7. 1 "1' .i 4 2, ., ) 74 22.13 2n 13 2'11.13 224.13 284.13 284.13 284.13PURCHASED NAGS 9 71 114..20 127.20, 122.23 26.(2 1C .sc 0c 00 0.00 0.0 0.00 0.80 0.00BAGGIHG IIATLS. 0 .00 () 2) 0 .2)0 27.03 11.2 9 135.19 143. ll 143.14 143.14 143.14 143.14 143.14 143.14llElC;IAIJDISi COST 57C .20 615 37 u72 73 732.

6t 7-3 Cf 5820. 32 00.32 " 3o 32 '"0. -32 300.32 300.32 300.32 300.32

DEPRECIATION C.IARG 55 .0 Ij'l' 55.0'" 18)7. 12.4 1. , l4' ) 42', 125. 40 125.4C 13 5.40 185.42 185.40 135.40llAJOR MlAINITENiANJCE 4.oo n,ATIQ 12 2" 11 20 1± 2- 1 .i'C 14 . 1J4.10 14.10 4 14.10 1 4.1 14.10 14.1lTOTAL MlF(; COSiT 2175517 072 'C2,3 3192.97 3G 3 0 o7 -7 3.' "1 -3"715 .T ° T 3 315.81 5 31 3' I31 5.81 3815.81

CHANGE IlN FliNIISlEDGOODS INV. VALUE 0.20 -583.2) -63.73 -0.55 -145.35 12.45 12.24 5.84 9.88 8.00 0o.0 0.00 0.00

COST OF GOODS SOLO 2175.17 255i4.27 2869.73 31)3.92 3u03.47 3776.37 3 3003. 57 32305.97 3,05.-33 3815.31 3815.81 3815.81 3815.81

GROSS OPUPR.f1ARGIl o.6.511 757.1f. 484. 5 1032°.3 4 1 41.6 ) 15)1.13 1753.76 1831.73 1831.69 1841.01 1841.01 1841.01 1841.01

SELLINiG & DIST.EXP

FREIGHT EXPEiNSlSES 12.27 231.01 257.411 257.G7 375!.53 397.66 C 404.16 404.51 404.50 405.54 405.34 40o5.94 405.94SELLlING EXPENSES 142.42 170.63 189.62 212. 416 26 5.36 285.16 256.37 301.57 301.57 302.67 302.67 302.67 302.67CEN4TRAL ADtl EXP 32.10 lo 6 li531 1( :25.3 1 155.995 155.99 1____OPERATliiG PROFIT 209.74 2583.64+ 2g5.63 39G6.39 611.31 752.33 . d g (,.74 g6g .G6 969.63 976.419756.419 -- 6 1 9 76.41FINANJCIAL CHARGESINTEREST LT DEBIT 64.5C 49.9( 14410 72.62 163.80 143.13 119.48 59.71 30.76 62.18 50.84 44.49 37.48IN4TEREST ST DEL3T 113.29 109.(0 104.7f) 27.12 3)0 9. __'0.0G 0 90.00 93.00 W.00 90-?0 TOTAL FItJAllCIAL CAI 177-1-9 7 17 7. 731254.10 23313' 205-.0 .13 2 9.71 170 .7G152.18 4' 13'. 3 127-43

OTHER IlCOMlE ilET 38 1211.5 11.13 182..44 210.64 21.G7 275 23 233.52 N3ET FIM3AtIIIAL CllAP 3'3.43 3l4.r-33 -2.33 -123.1G6 55.°G 22.43 -10.19 -377, -72.76 -81.34 -9.03 -7

PROFIT uEFORE TAX 120.26 223.70 29.921 415.55 555. 3; 729.84 906.941 1007.53 1G32.39 1357.75 10690'3 10 75.44 1082.45IJCOME TAXES 46.90 37.24 116.22 174.53 233.53 306.53 380.91 423.16 433.60 444.26 44-3.02 451.68 454.63IOP.IZERS PR(OFIT SiA 8.07 150 1 20. 0 2G.13- j 4L55 57.36 64.28 G5. 3 7 6 7.43 6.21 68.61 59.06

iiET PROFIT 65.2) 121.45 161. 71 214 51 23.'. 37C74 463.16 520.05 532 .92 546.O1 551.u5 555.14 558.76

CUlI N[ET PROF ULGIti l67.05 232.25 353.74 '1l.52 730.d3 1017.01 1393.76 1361.92 2382.01 2914.'33 3460.94 4012.80 4567.94Ull NETI fP(F EiiD 232.29 353.74 515.52 7320.3 1317.031 3)3.76 1861.92 2332.01 2c14.93 3460.94 11012.80 4567.234 5126.70ndustr a Projects Depar ment

April 1975

MEXICO - FERTILIZER PROJECTCONSOLIDATED FINANCIAL PROJECTIONS

J9 v 9 10 11 12 13107 . 7,( 177 i ) 7 1 l9 7 s 1 9334 1935 1 83 193 7

FU JDS FLOUFOR FISCAL YEAREi;][I,G dUII: 30IN ill iliLLIONlS

SOURCES OF FUiDSNET PROFIT '5.23 121. 45 1C1.7 i 21l4. 1 236.33S 376.74 4f 16 520 .09 532.92 546.01 551.86 555.14 558.76IN,TEREST LT DEBT 64 4.50 4 .390 44.1o 72.(2 163.30 143.13 119-. 43 99 71 30.76 62.18 5s.84 44.4 9 37.483INTEREST ST DEBT 113.2 2 109 63 104.70 7.12 91.00 99.0c 90.0 900 9 I o 90.00 90.00 90.00 90.00DEPPECIATION 55.03 5 .0n 55.0 00 37 6 0 125 .0 13 . 40 l Qr 4 1>5.40 1 "o .4o 185.40 18r.40 135.40IN CREASE IN EQUITY 80.n0 o 2 r( 250.0c 251 0 c 0.0 10.90 .i 3 0 r^. o o.c .oo 0.0 0.00 0.00IfiCREASE LT [tiT 26.00 31.00 402.,r,0 3 0.00 0 . 0 qO O0C.00 0.00 0.00 0.0INCREASE ST D-NT I-) 4 i. 0 0 . o( o. ,c O.oo V OO 0.00 . i " coC 0 .0 o0. 0o. 0.00 0.0TOTAL SOURCES 533.47 901.(3 1013.19 170. 5 727.1 795.27 s 3 4 3r 20 P 3. .7. 9 37,77 8=705.03 371.74

USES OF FUNDSC:IA GE I)! ACCT REC 173.63 231. 9L 154 .17 223. 3 9 ut 105.9 2 60 l 74 3 07 0.00 0.00 0.00 0.00CilAiGE IN FG I iV 0. 00 -5 .29 -63.73 0o.953-4.3) 12.49 4 12 .2 9. 4 9.8 . 0o.o .00 0o.n00 0.0oNET CHANIGE OTHERS f

6,.70 -39 .2 -25.38 24 -7.1C0 23.7 0 o^ 0 c 0 0.00 0.20 0.00 0.00

TOTAL FlIlANCIAL Cil 177.73 15;.5, 140.00 r1J,.74 254. 3. 233 29 .3 1,9.71 173 7 152.1I 140.84 134.49 127.43LT DEbT PAY11ENT 6 7.0 92.70 85.10 ,.Go l 12531 196.05 174.73 15 7 155.92 135.04 57.67 f2.52 63.53ST DEBT PAYMENT 0.00 3v.o 40 Oo 7 5h 61.2 . J a 0 o..00 0 0. 0 Q. 0.G0 0.00 0.00 0.00FIXED ASSET I1]CREA 449.10. 5. f,d4.30 '!3 3.9 2 130 25.t 0 2 . r 5- o *Q° 55.oo 5 5-5.00 55.oo 55 03TOTAL USES 524.22 9t 7.71 1033.^(6 36! .0 554. 1C 607. so t35, 447.63 243.12 253.51 252.01 252.01

NET CASHFLO'l 9.26 -56.63 -14. 37 101.05 173.08 13 3. 2 356.12 411.35 441.44 5'o0.47 624. 35 623.02 6.9.63BEGINNIING CASHl 57.80 67.06 10.37 -4.5°0 <96.5 269. 63 457.76 313.82 1229.23 1666.67 2207.14 2831.73 3454.75ENDING CASii 67.06 10.37 -4.50 96.55 2G6.63 457.76 0131.0 1225.23 1666.67 2207.14 2831.73 3454.75 4Q74.38

LT DEBT SERVICE 131.50 142. 60 129.20 159.22 349.6 1 339.9 2 294.27 27 4.14 23f,.6°3 19 6.12 108.51 107.01 107.01DEBT RATIO CASH 184.79 226.35 260.89 374.73 6,36.1E 705.27 773.04 305.20 7)?.03 793.59 738.10 735.03 781.64

LT DEBT SERV COVEP 1.4 1.6 2.0 2.4 1.3 2.1 2.6 3.2 3.4 4 .0 7.3 13 7.3

Industrial Projects Department XApril 1975

a a,

fenCO - FITILIZEk CTCONSOLIDATED FINA*NCIAL PROJECTIONS

1 . 3 5; , L; 7 4 10 11 12 131?75 1975 1977 1978 1379 1983 1)31 193,2 1933 1334 1935 196 1387

__________________

!1ALA14CE S' ELTAS OF JUIJE 30Ili ;1. ;NILLIOrB

ASSETSCURREOiT A\SLSTSOPERATIii'G CASiO t7- 137 1...50 96 .!,5 110.72 117 1 "3.72 117.72 110.72 110.72 110.72 11C.72 110.72ACCTS RE(.IVA,I L- 117744 3 ';.22 156,2.'.N1 1v°(2 1<.97 13)1 )2 3,7.3 2752.14 2200.21 22i02.21 2203.21 2208.21 2203.21FDI;ISII GOOOS I1IV 03 , ,C 991.21 517.10 rl r" 171. 14 IVJ 3. 63 453 535.71 515 .6C 515.60 515.60 515 .G0 515.69illSC Cur.ASS.Ts 12 , n . 11.61 154.2 .10 .2 1.; ) 12'1 ± .2 1.f20 1'9.20 169.20 169.20 169.20 169.230RAU 1iATLBIALS 3r} .,40o -,23. ')2i 332.P,2 36' . -i l4i.72 j l'il 30 ), 0 9.40 309.43 4 O 3 30^4. I0 3C-9.482 3TOTAL CUR.ASSETS 2312.79'7 .0. 1 25u3. '1 3 3.L;7 29, 3 f! . 9 2 3313.20 3313.20 3313.20 3313.20 3313.20

AC CUM ULAT EL)INVESTALLE FUJ-DS 00 0.00 0.OO 0 .02 13.2 91 -47. 0,4 7) 15 111!,.50 1555.95 20 3.42 2721.01 334.4 03 3963.66

OT:i ilOH-CUR ASSET 17.' 5 .0 201.19 21. 22 220.4-) 220.20 2 V. ; 2400 40 24.4 240.40 24;).20 240.40 220.40 240.40OTliER INVESTtIENT 335.590 385.90 3S5.30 3,5.30 3 0,55.i) 32'5. iO 305.90 3&5.90 3°5.90 385.90 385.90 335.90

GROSS FI,BE)D ASSETS 1955.2n 2421.10 317 5.410 3614.70 36331.70 36624.70 3639.70 3744.70 3799.70 3C511.70 3909.70 3964.70 4019.70

ACCUlI DEPRECIATIOJJ 1057.00 1112.00 llf,7.00 1254.60 ili40.o 1J25) J 1210.30 1096.20 21S1.60 C26 2552.0 2737.30 292.2B,ET FIXE) SSETS 139).20 1373.10 200n.40 2360 .10 21')i.70 2039.30 13V73 .30 1783.50 1r10.10J 1 *,7.70 1357.30 1226.93 109 .50

TOTAL ASSETS 376;7.3) 4436 .79 51 77. 592r 2 .3 5 6K7.6 J 56 6370.93 6736.55 7113.55 7523. 62 3017. 3i 8510.43 3999.66

LIABIL IT IESCURREliT LIAiIILITILACCTS PAYABLE 752.00 ,,63.76 92lj.33 1021.54 1024.30 964.37 64 -.37 52.37 964 .37 9G6.37 964.37 964.37 964.37SilORT TERl1 DEBT 1132.90 1096.00 1047.00 971.20 930.00 3)3G.00 930.0?0 900.00 990.00 900.00 900.00 900.00 99O.OOCUR PART LT DEBT 9 0 &o 36.6o 105.31 1)'._5 174.79 144, . 155.92 135.94 57. 2.2 69.53 77.36TOTAL CUR LIAO. 19,77.60 205.6 2J53.53 217,;.55 2131.21 1 201',.34 2020.29 2000.31 1922.02 1933.90 1941.73

LOUNG TERN DEBT 277.50 707.240 1023.2409 1221.2? 102/l.44 43).65 6f5.1a 539.26 403.32 325.65 233.13 213.60 136.24

EQUITYSiiARE CAPITAL 1302.00 1330.00 1580.00 173 5.0 175.0 0 17)5.00 17'5.00 1795.00 1795.00 1795.00 1795.00 1795.00 1795.00RETAIIIEI) EAR,I;IGS 232.20? 353.72l 515.52 7-0,0.03 101".C1 13)3.76 1561.52 2302.01 29?14.93 3460.94 4012.30 4567.94 5126.70OF M1IIJCI Rl-SERVES 12.20 127.21 132.4) 1l1I1 't1 137 07 1742 2 106,.90 22,499 256.10- 28 8.1 3200.33 354.04 307.TOTAL EQUJITY 1312.20 1TT33.74 2095.52 2520,03 2l" 01 3T7J jT3T92 .0 7 255.93 2,",12 D7 30)Z52.9 6921.73

TOTAL LIAGILITIES 37t7.39 42236.79 17'7.2 00921 59GL.G7 o377.5 ';3,0.94 G736.55 7113.55 7523.62 8017.32 3510.44 u999.o7

QUICR' RATIO 1. 1.0 1.r 1.' 1.2 1.3 1.3 1.4 1.4 1.5 1.5 1.5 1.5CUPRENT RATIO 1.2 1.2 1.2 1.3 I1 1.5 1.5 1.6 1,7 1.7 1.7 1.7 1.7DLOT/DEDT+E(IUITYS 27t 30 33 3 27 21 16 11 0 6 j 3 2DEI0T/IDE,LII+S11 CAPj 31 35 39 4? 36 32 23 23 15 16 14 11 7

PROJ.PF',OF."ELP CAPS 0 0 0 9) 5) 51 122 37 35 32 31 30 29PROJ.CASII LEP CAP%a 0 ° 0 5 0 47 40 35 33 15 16 17


ANNEX 7

IT2EXICO - FERFTILITZER PROJECT

COST UID BENEFIT STREAMS FOR ECONOMIfC MRTE OF RETURN CAXLCUTLATIONiS

(19724 Iex8 Millinn)

F1scal ,_ Capacity Capital Ammonia Otheryear TUtiIizatfon Cost,s 1/ Costs Costs Benefits

19> 0 39.4 0 0 0

12,76 0 411.4 0 0 019_(7' 0 455.6 0 0 01972 70 385.0 95.3 61.2 152.912q2 75 ° 14O8.- 256.6 931.1 2/

-°f9 , 85 C 462.8 280.1 1,099.1 /12981 90 0 2490.1 291.8 1,210.2 2/1982 90 0 2490.1 291.8 1,2724.0 7/1983 90 0 490.1 291.8 1,333.41984 90 0 493.1 291.8 1,3128.519 8Q, 90C- 0 490.1 291.8 1,3148.51986 9.0 0 490.1 291.8 1,3148.51987 90 0 2490.1 291.8 1,3248.5198:3 90 0 490.1 291.8 1,348.5

1989 90 0 490.1 291.8 1,499.9

SENSITIVIPY MIALYSIS OF ECONOMICR4TE OF RETJRII

C apacitty Capi tal Ammonia Other Net Rate ofCase Utiliznt- or/ Cost s Costs Costs Sales Re tuwr

(I I- % of expected value, shoim above - (,)> seCase 90 100 130 130 100 214.05

2 90 100 110 100 130 21.6590 100 120 100 100 19.1590 100 130 100 100 16.5590 100 1D0 10( 1103 29.55

6 90 100 130 i00 90 17.857 90 115 130 100 100 21.25

8. 90 130 100 130 100 18.85'7 85 100 100 100 100 22.15-5 80 100 100 100 100 20.35

1/' Excluding duties end in,ierost during oonstruction.7/ Based on weighted average of FOB price for exports and CIF price for

] oc a1 s.a1es.i.' TncIudin, recovery of working capital.' E romn C ou7'h year of operatlens onwards.

rd us,tr al Projects DepartmentApril 1975

N O R T H E S T AAIAAFJA~~~~~~~ON ,A ,-S

br Johoch2SUllS> '°'SSedbn <\ X >Z ! <FERTILIZER PROJECT SdnCcrloft\ loGoloirpo- 52 TeFhuenes ~ ~,

A; f Location Of Plants And Marketing Areas

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I SAlT ANLIITTNIS A AISAALT~L caio O Pans nd Makein A ea

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XA ;LIAS T 0;t:

SG LLA AA4FEAS OI SAN EASrALAA|\9 i i4 . i U> . ;z D MA -t * < , J C i A ''L'AN'A ft~~~~~****~~~~ 2, ATAATIO ZONES A AS MAA2 0;Tz::i0' :; 0 osl" . \,. , AN'''A______~~13 4ABlc 9 AIASC

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Documents

FILE COPY Appraisal of Fertilizer Project · Report No. 734-ME FILE COPY Appraisal of Fertilizer Project Mexico May 5, ... 3-4 Ratio of Urea Nitrogen to Total Nitrogen Fertilizer