INTERNATIONAL BANK FOR                              CONFIDENTIAL
                                                                                                        75323
                              RECONSTRUCTION A~~ DEVELOPMENT
                                                                                           R .... 301

  DECLASSIFIED                                                               (To be submitted to the
                                                        I/    ,.    , I
                                                                              Executive Directors on
    JAN 2 2 2013                                                              March 9, 1950.)
     WBG ARCHIVES                                  /Y/ .2 o---~--
                                                                              March 7, 1950


                  REPORT AND REC01'~1ENDATION Oli' THE PRESIDENT TO THE BOARD
                  OF EXECUTIVE DIRECTORS ON PURCHASES IN MEXICO TO BE
                  FINANCED OUT OF, THE PROCEEDS OF LOAN TO NACIONAL
                  FTIJANCIERA, S.A., AND COHISION FEDEHAL DE ELECTRICIDAD
                  (MEXLIGHT PROJECT).




       When the $10 million interim loan for The             I~Iexican    IJight and Power Company,

Limited (hereinafter referred to as ntlexlight") was granted, the Bank agreed

that part of the proceeds, not exceeding :;\300, 000, might be used to finance

purchases of electrical equipment from 1\!exican suppliers.                   At the same time

the Federal Electricity Commission was given similar permission with respect to

$4   million of the ~;;:.24.1 nillion loan.     Orders placed, or about to be placed by

                                                                            ~.>276, 817.
                                                                                                                i'
Mexlight in accordance with this authorization amount to                                   Further              L,


substantial orders could be placed in the near future, either with Industria

Electric a de Mexico, S ,.A,, with which all orders have so far been placed, or

with other local manufacturers.         Mexlight has therefore asked the Bank to raise

to ::~;6oo,ooo the limit of $300,000 at present permitted under the interim loan.

       In granting permis sian to apply       ~;~300, 000    to local purchases, the Bank took

into consideration the facts that:

       (a)   The terms of price, quality and delivery date offered by Industria

             Electrica for the equipment in question compared favorably,

             particularly in respect of delivery date, with those quoted by

             non-l'Iexican suppliers.    As Mexlight had insufficient peso

             resources for local purchase of such goods, refusal by the




Sec:4~148
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             Bank to permit them to be financed out of the loan would have
             compelled Mexlight to buy them abroad, thus losing the advantage
             of an early delivery date.
       (b)   Industria Electrica manufactured the goods concerned mainly by
             assembling parts imported from the United States, so that the
             cost of the goods included a 6o% dollar component,

These facts apply equally to the further $300,000 worth of local supplies now

under consideration.
       I recommend that the Bank approve the request of l1exlight that the limit
of the equivalent of 0300,000 at present set on purchases from I1.Iexican suppliers
to be made out of the short-term loan of     ~10   million be raised to the equivalent
of   $600~000,   subject to the same understanding as previously, to the effect that
such local purchases shall be of goods whereof the terms of purchase appear more
favorable than the terms offered by other suppliers.



                                                        Eugene R. Black
                                                           President




Distribution:
  Executive Directors and Alternates
  President
  Vice President
  Department Heads



Sec:4-148