Report No. 3087-ME

Mexico ~~FILEt COPYOil Impact on Regional Development:A Case Study of the State of TabascoJuly 31, 1980

Country Programs Department ILatin America and the Caribbean Regional Office

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwisebe disclosed without World Bank authorization.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

ACRONYMS

CONASUPO : National Marketing OrganizationCOPRODET : State of Tabasco Economic Development CommitteeCUC : State-Federal Coordination AgreementFIDkIN : Trust Fund for Industrial Cities and ParksIFOGAIN : Trust Fund for Guarantee and Loans for Small and Medium

IndustriesFONEP : Trust Fund for Pre-investment StudiesFOVISSTE : Executive Committee for the Housing Fund of Civil

WorkersINDECO : Community Development InstituteINFONAVIT : National Workers' Housing InstituteNAFINSA : Nacional Financiera, S.A.PEMEX : Mexican Petroleum CompanyPIDER : Investment Program for Rural DevelopmentPRODERITH : Development Program for the Humid TropicsSAHOP : Secretariat of Human Settlements and Public WorksSARH Secretariat of Agriculture and Water ResourcesSPP Secretariat of Programming and Budgeting

CURRENCY UNIT

Since September 1, 1976 the Mexican Peso has been floating and fluctuatedaround Mex $22.60 to the US dollar since mid 1977.

US$1.00 = Mex $22.60Mex$ 1.00 = US$0.442

FOR OFFICIAL USE ONLY

MEXICO

OIL IMPACT ON REGIONAL DEVELOPMENT: A CASE STUDY OF THE STATE OF TABASCO

TABLE OF CONTENTS

Page

SUMMARY AND CONCLUSIONS ........................ i-x

INTRODUCTION .................................................... 1

CHAPTER I: TABASCO AT THE THRESHOLD OF THE OIL BOOM. 4

CHAPTER II: TABASCO AND THE OIL BOOM: A MIXED BLESSING? .. . 9

The State and the Oil Boom: Limited Controland Large Responsibilities . . 9

The Positive Side of the Oil Boom: Investment,Employment and State's Revenue. ... 10

The Other Side of the Coin: UrbanizationInflation and Dualism..... 13

Conclusions: Unavoidable Disruption andInadequate Policy Measures .. 16

CHAPTER III: FACING THE OIL CHALLENGE: THE 1978-1982Development Plan .. 17

CHAPTER IV: THE DEVELOPMENT STRATEGY...... 20

Assumptions, Objectives and Critical Choices . .20

Sector Specific Issues... . 25

Urban Settlements, Housing and Urban Infrastructure 25

(a) Urban Settlements: Facing the Reality ofContinued Urbanization .25

(b) Housing and Urban Infrastructure:An Increasing Deficit in Low-Cost Housing ....... 26

(c) Institutional Aspects: How to CoordinateDecentralization ................................. 28

(d) Recommendations ........................... 29

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

TABLE OF CONTENTS (Continued)

Page

Transport .............................. *. ................... 30

Protection of the Environment ................................. 33

Industry , ...... * .................. ......... **............ 35

(a) Overview .. ....................... 35

(b) Implications for the State of Tabasco ofthe National Industrial and Urban Plans . .37

(c) The Agreement (Convenio) with the PrivateSector .. .. . . . .. .0 .. .. .# .*.. .. .. . .. 39

(d) Recommendations . .......... .. .............. 40

A&griculture .......................... 41

Institutional and Organizational Aspects 43

The Required Investment Effort .46

The Employment Picture ......... * ............... . ...... .. *.... 51

ANNEXES

Annex I - Environmental Impact of Tabasco Industrial Activities 55Annex II - The COPRODES .. .................. 70Annex III - Tabasco: Illustrative Macroeconomic Projections,

1979-1990. . . . ....... 76

STATISTICAL APPENDIX . ......................... 84

This report is based on the findings of an economic mission to theState of Tabasco in March-April 1979. The mission was composed of:

Gabriel Sciolli, ChiefJean Benard, PlanningDanielle Berthelot, Protection of EnvironmentMarisa Fernandez-Palacios, General EconomistJean Louis Forcina, TransportRobert Milford, AgricultureDelbert T. Myren, AgricultureMario Rothschild, UrbanDavid Sarfaty (Consultant), IndustryIsabelle Wieviorka, Research Assistant

The following officials from the Mexican government participated in themission and contributed to the report:

Guillermo Feria, Ministry of FinanceNoha el Askalani, Ministry of Programming and BudgetingFrancisco Guerra, Ministry of Programming and BudgetingGustavo Rodriguez Toledo, Ministry of Programming andBudgeting

Lenin Rojas, Ministry of Programming and Budgeting

SUMMARY AND CONCLUSIONS

Background of the Study

1. Why a regional development study of the State of Tabasco which interms of population and value added accounts for about 2 percent of Mexico'stotal? First of all, Tabasco is one of the states in the South-East region ofthe country which has been more affected by the oil discoveries, hence itssignificance as a case study of the impact of the oil boom on an economy basedon traditional agricultural and livestock activities with a very modestindustrial base. Such impact has been perceived as essentially disruptive interms of price increases, bottlenecks in social and economic infrastructureand deterioration in the quality of the environment. Hence the concernof the Mexican authorities that what is happening at the micro-Tabascan levelmay be an example, or rather a warning signal, of what might happen at themacro level. At the same time the experience in Tabasco is interesting fromthe viewpoint of the emphasis by the government on regional development,,decentralization and planning which the government has recently introduced assome of its main orientations. The State of Tabasco has been one of thefirst, if not the first, to have produced in a very short time a RegionalDevelopment Plan.

The Oil Boom: A Mixed Blessing?

2. In general terms, the broad issue which the experience of the Stateof Tabasco raises is the assessment of the net effect of the oil boom on thesocial and economic structure of the state, especially since the increase inthe overall level of economic activity has been accompanied by a number ofunsettling effects on prices, on income distribution, on availability of basicinfrastructure and social services, and finally on the environment because ofthe polluting effects of the oil activities. The question is whether theState of Tabasco would have been better off without the oil discoveries.

3. The positive impact of the oil boom on the level of economic activityin Tabasco can be seen through two basic parameters of evaluation, namelyinvestment and employment. Gross investment in the state was Mex$ 2.2 billionin 1973 (1.1 billion by PEMEX), it increased to Mex$ 8.6 billion in 1977 atcurrent prices, or 3.2 billion in constant 1973 prices, equivalent to a realincrease of 50 percent which is considerable considering the overall stagnationin 1976-77. Of the total investment in 1977, Mex$ 5.3 billion, or 62 percent,was accounted for by PEMEX. At the same time federal and state investmentmoved from Mex$ 0.8 billion in 1973 to Mex$ 1.8 billion in 1976. The employ-ment picture has been affected remarkably by the activities of PEMEX which in1977 employed about 13,000 people (in addition to about 9,000 working forcontractors of PEMEX works). In the same year, about 15,000 persons wereemployed in manufacturing and some 8,500 in non-petroleum related construction.Workers employed by PEMEX in 1973 were of the order of 3,000 and those inmanufacturing about 11,000. Even though about half of the workers of PEMEXcome from outside Tabasco and a substantial part of the native workers leftexisting agricultural jobs, the demand for labor originated by PEMEX reducedconcealed and open unemployment not to mention the improvement in the average

- 12. -

skill per worker and the increase in the average wage which, in the case ofPEMEX, is at least double the increase in the average wage in the othersectors. Finally, another positive effect has been the very high increase instate revenue resulting from its share in oil taxes which rose from Mex$ 163million in 1975 to almost Mex$ 1,300 million in 1978, thus enabling the stateto expand its investment expenditure.

4. The other side of the oil boom coin shows an impressive list ofdisruptive effects which should come as no surprise when one compares theTabasco experience with that of regions in other countries which have seensimilar booms. The main cause of these negative effects has been the steepincrease in the population of the urban centers more affected by oil activ-ities, i.e., Cardenas and Centro, in which population has grown in the morerecent years at rates well above 10 percent a year. From this populationexplosion derive most of the problems in terms of scarcity of housing andbasic infrastructure, scarcity of food commodities and consequent need forgreater imports from outside the state at prices which have been rising as aresult also of a very poor distribution system.

5. While the national imperative of oil production could certainly notbe adjusted for the benefit of the State of Tabasco, vigorous parallel actionof the state and federal authorities could have mitigated the negative by-product of the "imperative". For example, the problem of adequate imports ofconsumer goods, especially basic foodstuff, could have been alleviated if theCONASUPO intervention had been more efficient.

The 1978-1982 Regional Development Plan: Trying to Face the Oil Challenge

6. The problems originated in Tabasco by expansion related to the oilactivities as well as the new orientations towards development planning at thestate level resulted in the formulation of a regional development plan forTabasco covering the 1978-1982 period. The plan was produced in Tabasco by thestate planning unit with the assistance of experts from the federal government.The first year of the plan, 1978, was considered as an emergency program aimedessentially at satisfying the most urgent needs in terms of basic infra-structure bottlenecks. The Tabasco plan is essentially an investment programand basically does not have the macroeconomic underpinning (at the regionallevel) that a plan should have. Furthermore there is no clear indication ofthe extent to which the federal and major portion of the investment programhad been "agreed" in broad terms with the federal authorities. In itsoriginal formulation the plan was not very clear as to the role which theprivate sector was supposed to play. This gap was filled early last year as aresult of a "frame agreement" between state authorities and a number ofprivate investors which indicated a potential investment program of aboutMex$ 8.6 billion between 1979 and 1982. The main comment on the proposedstructure of the investment program is that the large emphasis on agriculture(the single largest sector) overestimates the absorptive capacity of bothfederal and state agencies and shows a tendency towards over-designing worksconsidering the current availability of crop land. One should stress, however,that the plan was prepared under severe time and qualified staff constraintsand that the absence of a multi-year public investment program at the national

- iii -

level makes difficult the formulation by the states of investment programsimplying the commitment of federal funds beyond the next year budget. What ismore serious is that the preparation of the projects which are included in thevarious sector programs has not advanced satisfactorily.

7. The planning effort in Tabasco has taken place within the COPRODETcommittee for the promotion of economic and social development in the state withrepresentation from all public and private interests, including the federal,state and municipal agencies, as well as representatives of professional andpolitical groups, consumer associations, chamber of commerce, etc. All theserepresentatives convene at a "round" table at the head of whichsits the Governor of the state, assisted principally by the technicalsecretary of the committee who is the federal delegate of the Ministry ofProgramming and Budgeting (SPP). The COPRODET approach is certainly one of themost genuine and valuable characteristics of the planning effort in Tabasco.However, it implies at the same time a difficult task in terms of reconcilingconflicting interests. In any case the participatory approach can only be afirst step towards the subsequent phase of implementing the programs as theywere defined in the Plan. This implies coordinating the efforts of differentfederal and state agencies which often share activities in the same sector andit is on this implementation front that the planning effort in Tabasco has toprove its validity.

The Development Strategy - Objectives and Critical Choices

8. Implementation of a medium and long-term development strategy forTabasco depends to a large extent on the actions taken to solve the mosturgent problems arising from the inadequate supply of basic commodities in theurban centers, of construction and transport materials and of local skilledmanpower. The emergency programs envisaged for the first year of the 1978-1982Regional Development Plan have met great difficulties in their implementationmostly because of delays in the actual spending of authorized funds. Suchdifficulties can be attributed to a large extent to inadequate action inproviding clear and timely instructions to the government agencies responsiblefor carrying out the programs. The need for a package of emergency measuresaimed at reducing the most acute inflationary bottlenecks is still strong andshould be given high priority by state and federal authorities.

9. Improving the standard of living of the people of Tabasco andreducing income disparities are priority goals of the state's authorities.Attaining these goals is dependent on the control of inflationary pressureswhich may result from the expected continuation of the oil related activities.Within this framework, this study suggests that the objectives of the mediumand long-term development strategy for the State of Tabasco -- assuming thatthe oil related construction activities will continue well into the 1980's --should be in order of importance: (a) to create employment opportunities inthe growing urban centers, outside the oil sector, and to reduce underemploy-ment in the rural areas; (b) to provide adequate physical and social infra-structure for the rapidly growing population of the urban centers as well asfor the population in the agricultural areas; (c) to prevent a worsening inthe intraregional disparities through excessive centralization of activitiesin the oil affected areas; and (d) to prevent the deterioration of the environ-ment resulting principally but not exlusively from oil activities.

- iv -

10. While there is general agreement on the objectives listed abovethere is an active debate, especially within the state, on the post oil boomdevelopment strategy, a strategy which is dominated by the public sector, whopresents accounts for almost 90 percent of total investment in the state.Some look at the oil activity as to a passing fact and think the state shouldconcentrate on developing the traditional sectors (agriculture, fisheries,livestock and related agroindustries) on which the economy of Tabasco willeventually have to rely. An alternative strategy to attain those objectivesis one based on the strengthening of the traditional sectors but at the sametime concentrated on capturing the potential benefits of the oil boom bydeveloping the petrochemical and related downstream activities and the smallscale industries which can be linked to them. The anticipated construction ofa petrochemical plant near Villahermosa would be the starting point of thisprocess. A passive attitude towards the oil boom will not protect the stateagainst its direct disruptive effects and will require practically the sameeffort in terms of supply of public goods to accommodate the increasingpopulation.

I1. The discussion of the development strategy for Tabasco implies anumber of issues with national and regional implications. One of them concernsthe industrial sector and more precisely the development of downstream petro-chemicals. On the one hand it is necessary to decide at the national levelwhether and to what extent to continue expanding the sector, while on theother hand, the fact that this sector is already relatively well developed inVeracruz raises the issue of the role reserved to the petrochemical plant tobe constructed near Villahermosa. Nor is the development strategy of theagricultural sector indifferent to regional and national considerations. Thechoice of concentrating or not on tropical crops -- for which Tabasco seems tohave a comparative advantage -- should be made in the light of the possibilityof obtaining basic foods from other regions without deteriorating the criticalsituation which now exists in the state as regards both availability ofproducts and their prices. The regional dimensions of the transport sectorneed little emphasizing. For instance, the choice of Coatzacoalcos as thecommercial port of Tabasco with respect to the possible alternative ofexpanding the project of the port of Dos Bocas and opening it to non-oil usesimplies that road communications with Coatzacoalcos will have to be improvedboth in its Tabasco and Veracruz sections and that bottlenecks such as thebridge on the Coatzacoalcos river will have to be solved.

The Required Investment Effort - Macroeconomic and Employment Implications

12. The strategy proposed by this study leads to the formulation of aninvestment program which, compared with the investment program in the TabascoPlan, implies a modest (about 3 percent) reduction in the level of totalinvestment but a substantial reduction of investment in agriculture -- reflect-ing the postponement of some of the major works because of absorptive capacityconstraints and an equally substantial increase in private investment espec-ially in housing, agriculture and services. A purely illustrative exercisewas carried out. The results indicate that the non-oil Regional Gross Productis increasing at about 11.1 percent p.a. in real terms, mainly as a result ofthe high growth of the industrial sector which started from a very low basis and

v

of the construction and services sectors. In terms of regional expenditure theinteresting result of these illustrative projections is the levelling off ofthe non-oil trade deficit, following a steep rise in 1980, a year of highinvestment level and consequent high level of capital and intermediate goodsimports. The employment implications of the proposed strategy are creation ofadequate jobs (about 45,000 new jobs between 1979 and 1982) with respect to anexpected increase in the labor force of some 50,000 provided the privateinvestment is realized at the indicated level, the participation rate of theactive population rate remains unchanged, and the supply of skilled labor isadequate. Should the high job requirement scenario (assuming an increase inthe participation rate) materialize, the number of jobs to be created wouldmore than double (107,000) leaving an untractable problem. 1/

Recommendations

(a) Curbing Inflation Through Supply Expansion

13. Inflation is likely to be one of the critical issues facing theState of Tabasco in the years to come. In this respect, the proposed develop-,ment strategy raises the issue of the impact of future investment on effectivedemand and of the potential inflationary pressures which it may originate.Since (a) investment by PEMEX cannot be cut; (b) it is by far the largestcomponent of total investment, and (c) represents a major additional demand oflocal resources (from housing to roads), the only feasible strategy is toinvest in those sectors (housing and related urban infrastructure and transport)which increase the supply of the scarcest goods and services. Any cut of thiskind of investment would only make the demand supply gap increasingly largerand the unsettling effects of the oil investment more acute. Investment inagriculture is a more complex case. The comparative advantage of the State ofTabasco lies in the production of export tropical crops rather than of basicconsumption commodities which are scarce on the urban markets and call forsubstantial imports, often at the cost of very high consumer prices due to the"imperfections" of the distribution system. At the same time, investment inagriculture is essential for the long-term development of the state and cannotbe put off after the end of the oil construction boom. The solution is to

1/ Equally, if not more, illustrative projections were made for 1990, on theassumption of a continuation of investment by PEMEX, of a reasonableincrease in the investment in agriculture and general infrastructure andof an increase in private investment sufficient to absorb the additionalwork force not absorbed by the other public sectors. The work forceprojection, assuming a decrease in the growth rate of the population inthe state (3.7 percent p.a. as against 2.9 percent at the nationallevel), but allowing for an increase in the participation rate is crucialfor this scenario. A decline in the non-oil net trade deficit to the1979 level was assumed reflecting a conservative strengthening of theproductive basis for the state. The results show, with respect to the1978-1982 period, an increase in regional product at a more moderatebut still sustained rate of 8 percent. Finally, a "low oil" scenario ispresented to show the implications of a sharp reduction in investment inthe oil sector, as a result of which the growth rate of non-oil valueadded declines to less than 6 percent per annum.

- vi -

concentrate the medium run investment on a package of actions (extensionservices, feeder roads, etc.) which aim at increasing production on existinglands and to postpone new major works at least until after 1982. As to thelevel of private investment, considerations of employment creation and ofgeneral growth strategy for the state call for its expansion as a necessarystep towards capturing the potential benefits of the oil boom. One shouldhowever avoid excessive concentration in a few urban centers, which wouldcontribute to create inflation poles within the state and also a worsening ofthe intraregional disparities in terms of employment and overall economic andsocial growth.

14. Preventing future inflationary pressures in Tabasco cannot dependonly on the expansion of supply related investment: a major bottleneck hasbeen in the past the supply of basic consumption commodities in the urbancenters. Only a drastic overhaul of the present distribution would solve thisproblem. Improving the efficiency in the operations of CONASUPO (the publicmarketing agency) is a priority action but again it may not be sufficient tosignificantly improve the distribution system. This is an area in which thestate's intervention is advisable since it is less a question of availablefunds and dependence on federal agencies than of organizational and admin-istrative decisions at the state level. Measures should be taken by the stateto complement CONASUPO's activities by organizing transportation of basicproducts from outside the state by making them available at "reasonable"prices, and by setting up "selling centers" at selected spots within cities aswell as in the rural centers whose local production of these foodstuff islimited.

(b) Increasing Employment Through Vocational Training

15. If inflation, with its disruptive effects on absolute poverty andincome distribution, is a major problem facing the state's authorities inTabasco, unemployment is an equally important issue which will dominate thepicture in the coming years. Investment provides only a partial answer to theproblem since it has to be matched with an adequately skilled labor supply.If labor force within Tabasco fails to offer the required skills, workers willbe called in from out of state and the unemployment level in Tabasco will notdecline substantially. From this, the need to set up appropriate vocationaltraining programs in order to increase labor productivity of existing andfuture labor force and its possibility of employment. Vocational trainingcenters should not be set up exclusively in urban centers but could be locatedin those rural service centers which the Plan Tabasco considers as one of themain instruments to attenuate the immigration rate into urban centers. Focuson vocational training will require a shift in the allocation of resourceswithin the education budget at the federal and state level.

(c) Concentrating on Maintenance and ModernizationWhile Avoiding Overdesigned Major Works

16. The danger of neglecting maintenance and modernization of existinginfrastructure in favor of building major and often overdesigned new works ispresent in Tabasco as in many other regions. The transport and agricultural

- vii -

sectors provide good examples. In the transport sector the modernization ofthe section Cardenas-Villahermosa (part of the Villahermosa-Coatzacoalcosroad) is a first priority, as much as the maintenance of the highway systemwhich in the Reforma zone is showing signs of advanced degradation, largelyresulting from PEMEX activities. At the same time restraint should be usedin expanding the rural road network except when directly linked to developmentprograms in the agricultural sector (e.g., PIDER). Finally the projectimplying the construction of a new bridge on the Coatzacoalco river should beconsidered against the alternative solution of building a second bridge inparallel to the existing one. This solution is cheaper (one third) andadequate for the coming 10-15 years.

17. Similar considerations apply to the agricultural sector where forthe reasons indicated above, as well as for reasons of absorptive capacity,future programs should contain as little as possible over-designed components,as in the case of the Chontalpa and Balancan programs, and concentrate onextension services, maintenance of existing irrigation schemes and especiallyon moving towards rainfed agriculture within the framework of the ongoingnational project for Rainfed Districts. Realization of the new large workscontemplated in the Tabasco Plan can be justified only if substantial portionsof the existing cattle grazing land is made available for crop land. This inturn is very much a function of the land tenure system which in its presentsituation is a constraint to any such shift in land allocation.

(d) Limiting Intraregional Disparities

18. The sustained growth rate implied in our illustrative scenariosposes the problem of the worsening of economic and social disparities withinthe state. The industrial sector well exemplifies this danger since theindustrial incentive scheme tends to favor the western municipalities whichare already interested by the oil boom in terms of well construction activitiesand of downstream petrochemical activities, as a result of the petrochemicalplant to be constructed in Villahermosa. Serious considerations should begiven to extending the incentive scheme to the urban centers in the ruralareas, especially Balancan, Tenosique and Emiliano Zapata.

19. The urban settlements policy will have an equally important impacton intraregional disparities. The objective is to provide adequate physicaland social infrastructure for both the urban and the rural centers. Theneeds in the urban centers, resulting from the population explosion, are sopressing that they have to be satisfied. At the same time, however, neglectingthe rural areas would lead to such a rapid degradation of their economic andsocial structure that the very attainment of the objectives concerning theurban centers would become much more difficult. The solution of this problemis a concentrated effort in the rural areas, as the one proposed by the UrbanDevelopment Plan through the creation of the "rural service centers."

(e) Strengthening the Planning and Institutional Framework

20. Two areas which require substantial improvement are the coordinationof the activities of the various levels of government operating in Tabasco andits planning mechanism. As to the first aspect, the orientation of the

- viii -

current administration towards a more decentralized system of Government wouldseem to provide the ideal conceptual and institutional basis for strengtheningthe role of the state level coordinating body, i.e., the COPRODET, in whichall federal, state and municipal agencies are represented. A special referenceis needed to the relations between the state and PEMEX for which two basicprinciples should be retained. The first is that the state should receiveadequate and timely information on PEMEX's programs which heavily affect thedevelopment of the state economy. This implies a much greater "integration"of PEMEX into the planning mechanism at the COPRODET level. The second is theparticipation of PEMEX in the costs of investment (roads, schools, healthfacilities) directly or indirectly linked to the oil extraction activity. Therecently signed agreement between PEMEX and the state concerning the sharingin the costs of roads construction specifically related to PEMEX is a goodexample of a satisfactory solution for this type of problem. An importantissue related in part to PEMEX's activity but more generally to the insti-tutional aspects is the protection of the environment. First of all, PEMEX isnot the only significant source of industrial contamination. Sugar plantsplay an equally important role. The main problem in this area is to enfo-rcethe observance of existing standards on the part of the contaminating indus-tries. The idea of creating a Water Contamination Control District is cer-tainly a good first step, but such an agency will require the full support ofstate and federal authorities to make the industries comply with the regu-lations.

21. The planning system in Tabasco has to improve under the followingmain aspects:

- Conceptual Framework. The investment program, resulting from athorough analysis of the ascertained needs for the economic andsocial growth of the state, must take into account the implicationsof such a program in terms of private investment and consumption, ofpublic consumption, of the trade deficit, of employment, etc. Whileit is true that the statistical basis for some of the behavioralvariables of the regional economy (consumption structure and pattern,savings) is currently rather weak, the planning officials shouldavoid the temptation to embark on very time consuming surveys.There are instead critical areas on which further investigation ismore urgently needed. An obvious one is the development of downstreampetrochemicals in terms of alternative location of the plans, i.e.,Villahermosa or Coatzacoalcos, and of specific products. Another isthe study of how low income housing can be best adapted to theclimatic conditions of the state and utilize as much as possiblelocal resources.

Financial Constraint. A realistic view of available financingfrom all sources (Federal, Credit Institutions, etc.) should betaken when putting together the project composition of theinvestment program. This constraint should be introduced at avery early stage to avoid the danger of the plan becoming anempty document at the very moment of its publication. Financialplanning, however, is not the sole responsibility of the stateplanners, in Tabasco as in other states. It requires that federalauthorities move from the present one-year planning system to amulti-year approach, at least in broad indicative terms.

- ix -

- Implementation. It is imperative that project preparation, fromfeasibility to final design, does not suffer from unreasonabledelays. The COPRODET must assume the principal responsibilityfor this aspect of the planning mechanism by making sure that allinterested agencies in a specific project respect the indicatedtimetable. For the COPRODET to perform this function, it has tobe provided with the required skilled manpower and at the sametime, existing procedures to allocate federal funds to the stateprojects must be simplified to avoid that the greater part ofCOPRODET's energy be devoted to bargaining with the variousfederal agencies rather than to planning and supervising theexecution of programs.

Countrywide Implications of the Tabasco Experience

22. Despite the logical limitations of any attempt to generalize theconclusions of the study of an economy such as the Tabascan to a differentsystem, much less open to external factors such as the Mexican, some of theissues raised in this report could indeed apply to the country as a whole.While additional revenues from oil have contributed to dramatically improve theprecarious condition of public finances and to light up the difficult prospectsof the Mexican future welfare, increased investment and production of oil havealso resulted in supply shortages particularly in some sectors such as trans-port and distribution services where the existing bottlenecks have beenaggravated. The combined effect of increased aggregated demand and shortagesin supply have contributed to maintaining inflation at the two digit level.

23. It is worth mentioning here the main issues that would apply to thecountry as well as to the state. First of all, there is a clear interest inreducing in Mexico, as in Tabasco, the economic dualism deriving from theexpansion of the modern and flourishing oil sector. The pressure of bottle-necks constitutes the second set of problems shared by Tabasco and the country.It is quite clear that fast action is required particularly in the case oftransport, urban infrastructure and distribution bottlenecks caused directlyand indirectly by increased oil activity. The shortage of skilled labor alsoendangers any serious attempt to develop non-traditional sectors and thesolution of which will request prompt and effective policy action at thenational level.

24. There is a general acknowledgement of the presence of these diffi-culties in the Mexican economy. The difficulties inherent to the managementof an economy disrupted by the sudden appearance of the oil boom accentuatethe indispensability of having means and goals clearly established at thenational level so that bottlenecks can be detected and quickly removed and thepath to development smoothed.

OIL IMPACT ON REGIONAL DEVELOPMENT: A CASE STUDY OF THE STATE OF TABASCO

INTRODUCTION

1. The issue of the regional development problems and prospects of theState of Tabasco was discussed early this year by Bank officials at thefederal and state level. The Mexican authorities expressed interest in havingthe Bank look at the ongoing experience in Tabasco. A mission, which includedrepresentatives of the Mexican Ministries of Finance and Planning, visitedthe state in March-April and its main findings are presented in this report.A preliminary note summarizing the main issues, prospects and recommendationswas discussed in Mexico in mid-June.

2. What prompted the Mexican authorities to focus their attention onthe State of Tabasco which in terms of population and value added accounts forless than 2 percent of the country's total? First of all, Tabasco is one ofthe states in the South-East region of the country which has been more affectedby the oil discoveries, hence its significance as a case study of the impactof the oil boom on an economy based on traditional agricultural and livestockactivities with a very modest industrial basis. Such impact has been perceivedby the state authorities, and to a large extent by the population of Tabasco,as essentially disruptive in terms of price increases, bottlenecks in socialand economic infrastructure and deterioration in the quality of the environ-ment: From here, the concern of the Mexican authorities that what is happen-ing at the Tabascan micro-level may be an example, or rather a warning signal,of what might happen at the national level once the impact of oil earnings,and of the expectations resulting from them, is felt throughout the economy.

3. At the same time the experience in Tabasco is interesting from theviewpoint of the emphasis on regional development and decentralization whichthe Government claims as one of its main orientations. It would be wrong tothink that the interest of Tabasco's experience lies much more in its oilimpact aspect than in its aspects of regional development in action. Thenature of the oil derived problems represents a very difficult and significanttest for the administrative and institutional structures which are called uponto solve them within a framework of a less centralized decision making process.The coordination effort required by this new framework is equally important inthose states where, in absence of oil, the main problem is not one of harness-ing the pace of economic and social activity but rather of increasing itslevel beyond the poverty threshold.

4. The emphasis on regional development and decentralization is beingaccompanied in this same period by a renewed drive towards planning, at thesector, at the national and at the state level. Planning is essentially indi-cative, in accordance with the prevailing ideology in the country, and it isaimed at formulating more consistent action programs on the part of the govern-ment, identifying more clearly the respective roles of the private and publicsectors. At the national level, the planning exercise is still in process andits apparent slow pace should be understood in the light of the difficulty ofthe problems to solve, of the various options which have to be reconciled, and

of the impact which basic choices concerning the oil policy are likely to haveon the future of the country. At the sector level, various plans, includinga National Urban Development Plan, an Industrial Development Plan and anAgricultural Plan have so far been published. At the state level, anyone whohas had experience with regional planning in other developing (or developedfor that matter) countries is able to realize how difficult it is to "mount"a planning process in conditions of scarcity of adequate staff and, even moreimportant, of reduced exposure to planning itself and little "feelings" forthis type of decision-making process. Certainly, the central planning, orprogramming authorities as in the case of Mexico, can help the states informulating their plans by providing both specialized staff and procedures,but experienced manpower is scarce even at the center and procedures, nomatter how well formulated, require time before they can be meaningfullyimplemented.

5. The State of Tabasco has been one of the first, if not the first,to have produced in a very short time a Regional Development Plan. As weshall see later on, it would be too easy to point out the weaknesses of thisplan, but one should acknowledge that, given the time constraints under whichthe plan was prepared, the staff available and, above all, the current stateof regional development thinking in Mexico, the Tabasco Development Plan wasprobably as good as it could be. For all these reasons, the choice of Tabascoas a case study in Regional Development is especially justified and can providevery useful suggestions as to how the overall regional development planningshould be improved, independently from the existence of exceptional naturalresources.

6. It is interesting, at this point, to remember that the present studyis not the first exercise of this nature conducted by the Bank. In 1976 amore ambitious report was published, dealing with the problems of the economicdevelopment of the Isthmic Region of Mexico, including major physical zones ofthe States of Tabasco, Chiapas, Oaxaca and Veracruz. 1/ The most significantdifference between the two studies is probably not the most apparent one,namely the scope, but rather the general economic conditions of the region,and especially of Tabasco. The situation in the early seventies (the periodcovered by the report on the Isthmus) was, according to the authors, one ofstagnation, of failure to make the most of the natural land resources and wascharacterized by the "enclave nature of the urban industrial growth whichhas been associated with the petroleum sector" (page ii). One should add thatit was also a situation of much more stable growth for the country as a whole,unlike the one which has developed starting in 1976. This is a significantfactor in explaining the much more turbulent situation which the oil boom ofthe last three years had brought about in Tabasco. In this period, country-wide inflation has been running above or near 20 percent and, if one adds tothis the additional inflationary pressures in Tabasco resulting from the oilactivities, one can easily see how deep the impact has been on the lower oreven middle non-oil related income groups. In addition, one should keep in

1/ The Economic Development of the Isthmic Region of Mexico, Report No.1080-ME, March 30, 1976.

mind that a large number of problems related to the availability of generalinfrastructure have been aggravated in these last three years by the rapidincrease in population in the urban-oil-linked centers of Tabasco which haveexperienced growth rates above 10 percent.

7. The reference to the report on the Isthmus brings us to what is anobvious and significant limitation of the current study, a limitation result-ing from the agreement between the Bank and the Mexican authorities that thestudy should be conducted in the shortest possible time in order to generatea rapid feedback on the various issues and confined to Tabasco which presentedthe signs of a most acute crisis. In fact, Tabasco is part of a South-Eastregion which, as a whole, is affected by the development of the oilresources, its linkages with the surrounding States of Chiapas and Veracruzare only too clear and its very future, at least in terms of the impact ofoil, depends upon decisions which are best understood and assessed in thebroader regional context (e.g., the development of the downstream petrochemi-cal activities). This being said, however limited a study of this nature canstill cast some light on a number of institutional, organizational and planningaspects; on basic strategies as to the development of the traditional sectorsvs. the modern-oil-linked ones; on formulation of an urban development policyas well as of a policy aimed at strengthening the rural infrastructure; onproblems of inflation, protection of the environment, etc.

8. There is another aspect on which a study of this type is normallyrather weak, i.e., the quality of regional statistics. Again, on the basis ofexperience in most developing countries, one should not be disturbed by thefact that, with the possible exception of the census years (1970 and 1975 inMexico), it is very difficult to find at the regional level consistent, oreven inconsistent, figures on value added by sector of origin, consumption,exports, imports, prices, wages, etc. The fact that there exists a 1973input-output table for Tabasco is to be considered most extraordinary.

9. Finally, the macroeconomic projections presented should be consideredas very tentative and basically aiming at illustrating problems and strategiesrather than at forecasting what is likely to happen. This is due in partto the statistical deficiencies indicated above, but more so to the factthat the annual investment programs of the Federal and State Government cannotbe determined much ahead of time and, furthermore, to the fact that the Stateof Tabasco is such a small entity that it can be significantly affected byrelatively marginal changes in the decisions at the center (either by thefederal government or by PEMEX), and by equally marginal changes in thedecisions of private investors.

-4-

CHAPTER I

TABASCO AT THE THRESHOLD OF THE OIL BOOM

10. The State of Tabasco is located on the Gulf of Mexico on the South-East of the country. It has a surface of 25,338 km (about 1.3 percent ofMexico's surface). It is divided into 17 municipalities. The capital,Villahermosa, is a fast growing place currently holding about 190,000 inhabi-tants and located in the municipality of Centro.

11. Tabasco is geographically divided into four regions, namely,El Centro, La Chontalpa, Los Rios, and La Sierra. El Centro is characterizedby being the administrative and service center for the state and includesVillahermosa, the capital of the state. La Chontalpa is an agriculturalregion, and also contains some of the important petroleum producing areas.The major center of this region is Cardenas. Los Rios is located on theeastern side of the state and borders on Guatemala. This region is character-ized by agriculture and livestock activities, and its center is EmilianoZapata. The Sierra region is located south of Villahermosa, and is increas-ingly becoming the center of petroleum and related activities. The center ofthis area is the city of Macuspana.

12. Tabasco has been traditionally a sparsely populated state holdingonly a relatively small proportion of the Mexican population (1.6 percent).However, its rate of demographic growth has been consistently higher than thatof the country as a whole. Between 1970 and 1977 the average annual increasein Tabasco's population was 4.6 percent, while the Mexican populationincreased at a yearly average rate of 3.4 percent. Total population in 1979is estimated to be about 1,150,000 inhabitants.

13. The rate of growth of the population has been clearly associatedwith oil activity which began in the state in the late 1950s. The most impor-tant increases in population took place in Villahermosa and Cardenas. Theannual migration balance with neighboring states, negative before 1960, hasbeen positive in Tabasco since the 1960s, and increased from 0.3 percent ofthe population in 1970 to about 1.9 percent in 1977. Internal flows ofpeople from rural to urban areas, and particularly to urban centers in oil-related municipalities, have been even more important.

14. Tabasco has a very young population. In 1969 almost 42 percent wereunder 12 years. Only 25.6 percent were considered economically active popula-tion, and this proportion has decreased to 24 percent in 1978. The sectoraldistribution in 1970 was as follows:

Table 1: TABASCO - Sectoral Distribution of Active Population

Tabasco Mexico

(X) (x)

Primary Sector 59 37Industry 13 23Commerce and Services 21 33Other 7 7

rce: P 70 PopuWxaLn Census

15. The evolution of the employment structure in recent years indicatesthat employment in non-primary activities has been growing at an average annualrate of 4.7 percent. Despite the decline in the ratio of active population inthe state, active population is growing much faster in Tabasco than in thecountry as a whole. The net inflow of migrants of working age and the higherparticipation of women in the labor force associated with growing urbanizationare the main reasons explaining the relatively high increase in the labor forcethat takes place in Tabasco.

16. In 1973 Tabasco was contributing 1.2 percent of the country's GDP whileholding 1.6 percent of the Mexican population and accounting for about 37 percentof the national crude oil production. The regional production in 1973 is shownin Table 2.

Table 2: TABASCO: Structure of Value Added, 1973(million Mex$)

%

Primary Sector 1,636 23

Agriculture 905 12Livestock 567 8Forestry 119 2Fishing 45 1

Industry 3,535 49

Food Industry 564 8Oil and Derivatives 2,379 33Other Industries 592 8

Services 1,964 28

TOTAL 7,135 100

Source: Input-Output Table of 1973 prepared by theCentral Bank of Mexico.

17. The main agricultural crops are tropical plantation crops, whichconstitute about 86 percent of the total. Over 90 percent of the nationalproduction of cacao originates in Tabasco, and the state contributes alsoabout 30 percent of the Mexican producion of copra, 4 percent of that ofsugarcane and 13 percent of that of banana. Fairly modern methods are usedin tropical agriculture, yields compare favorable with national levels andthrough cooperatives owned by producers' unions at the state level the goodsreach a fair degree of processing before leaving the state. Food crop produc-tion is oriented towards local market and autoconsumption, the techniques usedremain traditional, and in the case of maize and rice yields are below thenational level.

- 6-

Table 3: TABASCO: Evolution of the Production andCultivated Area of Main AgriculturalCrops, 1973-1978

Yields (mts/ha)Production (mts) Cultivated Area (ha) 1973 1978

1973 1978 1973 1978 Tabasco Mexico Tabasco

Cacao 21,500 31,000 40,000 42,000 0.54 n.a. 0.74Copra 27,300 27,900 25,000 30,000 1.09 1.09 0.93Sugarcane 1,008,200 1,363,000 13,900 20,800 72.40 65.50 65.5Banana 98,700 190,400 7,960 8,500 12.40 n.a. 22.4Corn 71,800 43,800 64,800 42,500 1.11 1.13 1.03Beans 4,180 8,000 4,900 9,000 0.86 0.54 0.89Rice 8,600 1,700 6,900 1,100 1.25 3.00 1.54

18. Livestock accounted for 52 percent of the production of the primarysector in 1978. The importance of the subsector is underlined by the factthat Tabasco supplies about 30 percent of the meat consumed in the FederalDistrict. Beef represents about 80 percent of the total value of the produc-tion of the subsector (Table 4).

Table 4: TABASCO: Livestock Production, 1977Volume Value

(metric tons) (Million Mex$)

Beef 48,100 1,010.1Pork 7,737 154.7Lamb 133 5.0Poultry 2,898 43.5

Total 58,868 1,213.3

19. Outside of oil, the industrial sector is still in an embryonic state.The kind of industries encountered in Tabasco reflect the fundamentally agri-cultural basis of the state's economy. Agroindustries represented almost 80percent of total industrial production in 1973, and consisted essentially ofextraction of vegetable oil (copra), ground coffee and cacao, sugar milling andbeef cattle including a slaughter-house and freezing plant. Industrial activityconcentrates basically in the municipalities of Centro and Cardenas. A varietyof industries supply local and regional demand, among them are constructionmaterials (bricks, concrete blocks, asbestos-cement panels), a milk pasteur-ization plant and facilities for mixing milk-powder, a soft-drink bottlingplant, plastic (fiber-glass) pipes tanks, and boats, etc. The seafood industryhas reached a certain importance for its supply of oysters and fish. In 1970barely 6 percent of the state's labor force were engaged in manufacturing

activity as compared with 17 percent for Mlexico as a whole. Extractive indus-tries including petroleum and gas occupied only 268 persons, or 0.15 percentof the labor force, and this compares with 95,212 persons or 0.74 percentnation-wide. Of the 760 industrial establishments in the state in 1971, 244were located in the capital city of Villahermosa, and of the 4,699 personsemployed in manufacture, 1,332 or 28.3 percent were working in the capitalcity. The establishment of the Industrial City of Villahermosa in 1972 wasa significant step, but less than 10 firms had established themselves in thefirst couple of years of its existence. Since the sharp increase in PEMEX'sinvestments in the area (i.e., since 1976) occupancy of the "Ciudad Industrial"increased to 20 firms, by as many as had been established since its founding,and plans were being implemented for expansion. The range of industriesreflected the broadening of entrepreneurial interest which, although it includedthe expansion of existing agroindustrial activities and of the asbestos-cementplant, also included a polyethylene-film production facility (partly inanticipation of products emanating from the forthcoming petrochemical complexnear Villahermosa), oxygen and acetylene production, furniture, blocks,mosaics, clothing, etc. New industries were also located outside of theindustrial city.

20. The oil and gas industry has acquired an increasing importancewithin the state's economy, as reflected in Table 5. In 1976 Tabasco had27 oil and gas fields in operation and 1,484 wells in production, and theseproduced 55 percent of the nation's crude oil and gas liquids, and 58 percentof the nation's gas.

Table 5: Oil and Gas Productioi in TABASCO, 1972-1976(million m )

Percentage of Percentage ofNational National

Oil Production Production Gas Production Production

1972 9.6 37.5 8,637 46.21973 9.6 37.0 8,946 46.71974 10.5 31.3 9,515 45.11975 18.2 44.0 11,839 53.11976 25.4 55.0 12,416 58.1

Source: PEMEX

21. Commerce and services show the characteristics of traditional sectorswith little modernization and high degree of fragmentation and inefficiency.They consist mainly of small family enterprises. Over 60 percent of thecommercial establishment are concentrated in the six municipalities where oilactivities take place, namely Cardenas, Centro, Huimanguillo, Cunduacan,Camalcalco and Macuspana. There are only 13 small supermarkets, the remainderbeing small business. The average number of workers per service establishmentwas only 2.2 people in 1975, of which half are self-employed. There areserious distribution deficiencies that result in very high prices of basic

- 8 -

goods, particularly in the rural areas. Although distribution problems arecommon throughout Mexico, in Tabasco they are aggravated by the fact that only3 percent of the manufactures commonly consumed are produced in the state, therest being imported from other regions.

22. According to the 1973 input-output Table, the share of domesticconsumption in the regional value added was about 41 percent, while grossinvestment amounted to about 38 percent and the net external trade balance to21 percent. Private consumption amounted to about 87 percent of total consump-tion. The structure of investment was as follows:

Table 6: TABASCO: Structure of Investment - 1973(Percent of total investment)

Public 69(PEMEX) (45)(Federal) (20)(State) (4)

Private 31

23. Of special interest is the external trade picture of the state whichis oriented almost exclusively towards the rest of Mexico and mainly towardsits neighboring states. According to the 1973 input-output table, Tabasco'sexports amounted to 61 percent of its Gross Regional Product and imports to40 percent. As a result, the external trade showed a global surplus of almost1.6 billion pesos, or about 21 percent of its GDP. The trade surplus sectorswere oil and gas (2.3 billion), agricultural sector (0.7-billion) and foodindustries (0.5 billion). All other sectors had trade deficits, particularlymanufacturing industries (1.4 billion), transport (0.3 billion) and services(0.1 billion).

- 9 -

CHAPTER II

TABASCO AND THE OIL BOOM: A MIXED BLESSING?

24. In general terms, the broad issue which the experience of the Stateof Tabasco raises is the assessment of the net effect of the oil boom on thesocial and economic structure of the state. While there can be no doubtthat oil discoveries and related activities have increased the overalllevel of economic activity in the state, this growth has been accompaniedby a number of unsettling effects, especially on prices--through bottlenecksin the supply of basic commodities and housing; on income distribution,through an increased disparity between those occupied by the oil sectorand the rest of the income groups; on availability of basic infrastructureand social services, as a result of the population explosion in the oilaffected urban centers; and finally on the environment, because of thepolluting effects of the oil activities.

The State and the Oil Boom: Limited Control and Large Responsibilities

25. It should not come as a surprise that in the course of the lasttwo years i.e., when the oil activity in Tabasco has picked up dramatically,the state authorities have had a tendency to stress the negative side ofthe oil boom as exemplified in the above listing. This attitude has resultednaturally in requests for a larger share of federal spending in the state aswell as for some form of compensation from PEMEX, the national oil company.The facts are that (a) oil discoveries are by definition an exogenous variablefor the State; (b) population explosion in the urban centers and the relatedgreat demand on existing resources are beyond its control; (c) the state's owninvestment expenditure is no more than one fifth of federal expenditure in thestate, excluding the investment of PEMEX, which in turn is presently two and ahalf times the federal expenditure and finally (d) the investment of theprivate sector, which is a key element in filling the demand supply gap (bothin terms of products and jobs), is also largely outside the direct control ofthe state. Under these circumstances, the transformation of the oil boom intoan oil challenge rather than into an oil curse cannot be left in the hands ofthe state alone: it must be a national, meaning federal and PEMEX, problem interms of the public decision-making process.

26. It would be equally wrong to conclude that there is little whichthe Tabasco State authorities can do for themselves, in addition to callingfor a greater participation of the other levels of government into theirdevelopment effort. The very claim to autonomy by the lower levels ofgovernment has been based historically on the principle that the people livingthere are best placed to determine what their needs are. This principle putsa heavy responsibility on state (and local) authorities in terms of assessingthe nature of their problems as a condition for the formulation of programs,be they financed by their own resources or through transfers from the center.Furthermore, the states bear the responsibility for the use of their ownresources for investment which, even if limited, are never negligible and canaffect more than marginally some key sectors as housing, health and education.

- 10 -

Finally, there is the too often neglected "maintenance" of existing infrastruc-ture: it is a lot easier for the responsible authorities, and not only at thestate-local level, to be identified with major new works than with the effi-cient running of the existing ones.

The Positive Side of the Oil Boom: Investment, Employment and State's Revenue

27. If we now turn to the impact of the oil boom starting in 1976-77in terms of increased level of economic activity we can choose two basicparameters of evaluation, namely investment and employment. Gross invest-ment in the state was Mex$ 2.2 billion in 1973, it increased to 8.6 billion in1977 at current prices, or 3.2 billion in constant 1973 prices, showing areal increase over the period of 50 percent which is substantial consideringthat 1976 and 1977 were two years of general stagnation. Of the total invest-ment in 1977, 5.3 billion, or 62 percent, was accounted for by PEMEX, 1.5billion by the federal, state and municipal authorities, and an estimated1.3 billion by the private sector. The increase for 1978 is even moredramatic since investment by PEMEX increased to more than 12 billion.One should notice (Table 7) that the increase in PEMEX investment did notcome about gradually. After it remained at a level of about 1 billion peryear in 1973 and 1974, it increased to 2.8 billion in 1975, fell below1 billion in 1976 and exploded to 5.3 billion in 1977) and to 12 billion in1978. At the same time federal investment moved erratically from 0.7 billionin 1973, 1.4 billion in 1978, with a peak of 1.6 billion in 1976, while astate investment rose from less than 200 million in 1976 to 1.2 billion in1978. As to private investment, the impact of the oil boom can be best seenthrough the high increase in the occupancy of the industrial city ofVillahermosa, that between 1977 and the first part of 1978 increased by20 firms. At the same time, new industries were also located outside theindustrial city.

Table 7: Public Investment in TABASCO, 1973-1977(Million Mex$)

Year State Federal /1 PEMEX /1 Total

1973 84.4 727.4 1,094.6 1,906.41974 n.a. 1,273.3 1,037.9 2,311.2 /21975 n.a. 522.8 2,801.1 3,323.9 /21976 179.7 1,613.7 421.2 2,214.61977 689.2 1,316.9 5,332.5 7,338.61978 1,197.8 1,440.9 12,804.4 15,443.1

/1 Authorized expenditure/2 Does not include state investment, which was not available.

Source: SPP, Direccion General de Inversiones, and State Department ofFinance.

- 11 -

28. The employment picture has been affected essentially by the activi-ties of PEMEX which in 1977 employed about 13,000 people (in addition to about9,000 working for contractors of PEMEX works). In the same year, about 15,000persons were employed in manufacturing and some 8,500 in non-petroleum relatedconstruction. Since the persons employed by PEMEX in 1973 were of the orderof 3,000 and those in manufacturing about 11,000, it follows that between 1973and 1977, during which period the active population increased from about 195,000to 220,000 persons, PEMEX alone absorbed about one third of such increase andmanufacturing about 15 percent. Even though about half of the workers ofPEMEX have come from outside Tabasco, and a substantial part of the nativeworkers left existing agricultural jobs, the demand for labor originated byPEMEX reduced concealed and open unemployment, not to mention the improvementin the average skill per worker and the increase in the average wage which, inthe case of PEMEX, is over three times the average wage in the other sectors.

29. Furthermore, most of the additional incomes generated by PEMEXinvestment and production have been spent in Tabasco and contributed to developother activities mainly housing construction, transportation and distribution.It is estimated that about 20 percent of the workers directly or indirectlyemployed by PEMEX come from the northern region of the State of Chiapas(Reforma), a region which commercially depends on Villahermosa. One shouldfinally mention, on the positive side of the oil boom, the externalitiesrepresented by those basic infrastructure works, especially roads, whichhave been constructed to satisfy PEMEX's demand, following an initial periodof congestion and of controversies concerning indemnification to privatecitizens and additional costs for the state budget.

30. Another positive impact of the steep increase in oil productionin Tabasco has been the enormous Jump in the state revenues, mainly throughthe 10 percent state share in the federal tax on oil production but also,although to a lesser extent, as a consequence of additional domestic activityin other sectors. Tables 8 and 9 show the evolution of state revenues inrecent years. Total state revenues increased by 241 percent in real termsbetween 1973 and 1978 (see Table 9). The increase filtered down to themunicipalities, whose revenues grew by over 30 percent in real terms in 1978.The share of the oil production tax in total state revenues grew from 1 percentin 1973 to 64 percent in 1978.

- 12 -

Table 8: TABASCO: State Revenues, 1973-1978(Million Mex$)

1973 % 1975 % 1976 % 1977 % 1978 %State Tax 69.1 33 91.0 21 105.1 17 136.8 13 260.2 13

Shares in Federal Taxes 49.8 24 275.2 62 403.3 67 848.8 81 1609.7 81

(Production of oil) (1.6) (1) (162.6) (37) (250.0) (41) (674.3) (64) (1266.1) (64)(Commercial tax) n.a. n.a. (52.1) (12) (66.3) (11) (77.2) (7) (145.2) (7)(Other) (48.2) (23) (60.5) (13) (87.0) (15) (97.3) (10) (198.4) (10)

Non-tax Revenues 90.1 43 74.2 17 97.9 16 61.2 6 110 6

Total 209.1 100 440.9 100 606.4 100 1047.0 100 1980.0 100

Source: State Department of Finance.

Table 9: TABASCO: Annual Rate of Growthl.1 in State Revenues, 1973-1978(in percent)

1973-1975 1975-1976 1976-1977 1977-1978 1973-1978

State Taxes -9.3 -5.6 -1.2 61.3 35.6

Shares in Federal Taxes 59.4 19.8 58.7 60.8 387.3

(Production of oil) (6897.2) (25.7) (103.4) (59.2) (2893.5)(Commercial tax) n.a. (4.0.) (-12.2) (59.5) n.a.(Other) (-65.0) (17.6) (-15.7) (72.9) (-39.1)

Non-tax Revenues -42.9 7.1 -52.9 52.4 (-56.1)

Total 44.0 12.4 30.2 60.4 241.0

1/ Based on 1972 constant prices, using the national GDY deflator.

- 13 -

31. The steep increase of state expenditures during the period can beseen in Table 10. This is mainly the result of the higher demand for publicgoods and services brought about by oil and urbanization. Given the highdemographic growth already taking place in Tabasco since the early 1960's,the state would have faced serious financial problems to satify the growingneeds of the population without the additional revenues generated by oil.The improvement in the revenue situation put the state in a position toincrease its expenditure, particularly on much needed investment.

Table 10: TABASCO: Evolution of State Expenditures andShare in Oil Revenue, 1973-1978

(million in Mex$)

1976-781973 1976 1977 1978 % Increase

Total Expenditures 209.4 589.5 1181.3 1800.0 205

Current 125.0 399.6 483.5 594.0 48Capital 84.4 189.9 697.8 1206.0 500

Oil Revenues 1.6 250.0 674.3 1266.1 406

Source: Mission estimates and State Department of Finance.

The Other Side of the Coin: Urbanization, Inflation and Dualism

32. The other side of the oil boom coin shows an impressive list ofdisruptive effects which should come as no surprise when one compares theTabasco experience with that of regions in other countries which have experi-mented similar phenomena. The first cause of these negative effects relatesto population. The main demographic variables that have been affected bythe recent oil boom are not so much total population growth but urbanization.In fact, total population of Tabasco grew at about 4.5 percent per year in1960-1970 and 4.6 percent in 1970-1978. Oil activities started in the statein 1958 and their initial impact on demographic growth was reflected in thefact that from the early 1960's Tabasco became a net recipient of migrants andstarted growing at a much faster pace than the national average of about3.3 percent. Growth rates accelerated since 1960 in all municipalities.

33. The rural-urban distribution of the population (as shown in Table 11)has been affected by the oil activities. Urbanization in Tabasco has beenaccelerating in recent years, when some of the urban centers grew at rateswell over 10 percent per year, particularly Cardenas, the second largest cityin the state, and Villahermosa, where the problems entailed by urbanizationare very serious.

- 14 -

Table 11: TABASCO: Annual Rate of Growth of Population in SelectedMunicipalities and Cities, 1950-1970 *

1950-60 1960-70 1970-78

CENTRAL REGION 3.6 4.5 7.3Villahermosa 4.5 6.7 10.1

CARDENAS 2.2 10.1 5.9Cardenas 4.3 13.1 13.8

MACUSPANA 2.9 3.4 2.4Macuspana 6.3 6.4 8.7

COMALCALCO 3.9 3.6 3.4Comalcalco 6.0 6.8 4.4

HUIMANGUILLO 4.6 6.2 3.9Huimanguillo 3.9 4.5 6.9

CENTLA 1.9 2.7 3.1Frontera 0.1 1.9 5.7

NACAJUCA 2.6 1.7 4.5Nacajuca 1.7 5.8 17.6

JALPA 3.3 2.9 2.1Jalpa 5.2 1.5 4.2

TABASCO 3.1 4.5 4.6

Source: Mission estimates and SPP.* Municipalities include rural and urban areas.

34. Besides these larger towns, other smaller centers have experiencedeven more rapid growth. For example, Nacajuca, a town of 2,500 people in1950 and just over 3,000 in 1970 almost doubled (5,900 people) by 1978.Ciudad Pemex, a town built expressly to accommodate employees and workersof the sector, has already more than 12,000 people. At the same time, many ofthe towns that are related to agriculture or to other non-petroleum activitieshave not grown at the same pace. For example, the country population ofJalapa has only been growing at about 1 percent, of Tacotalpa at about 2.2percent, and of Paraiso at less than 3 percent. On the average the oil-relatedmunicipalities have been growing at an annual rate of about 5.2 percent, whilethe non-oil municipalities at an average 3.3 percent.

36. Fast growing urbanization has resulted in important gaps in thesupply of housing, related infrastructure and urban services in general.The current housing deficit for the state is estimated at 100,000 units

- 15 -

(31,000 of which in the urbanized areas). The situation regarding infrastruc-ture has been badly deteriorating in recent years since, in addition to theincrease in demand caused by the rapid growth of the urban population, oil-related construction activities absorbed much of the productive capacityof the construction sector in Tabasco, thus precluding any possibility ofsmooth adjustment of supply to demand.

36. A second negative effect of the recent oil boom, not unrelatedto the rapid increase in population and urbanization it entailed, is thecreation of inflationary pressures in Tabasco which have resulted in high pricelevels in an area where they used to be much below the national average.Although there are no official price statistics for the state, it is estimatedthat during both 1977 and 1978 inflation in Tabasco has been running at ratesbetween one fifth to one third higher than i-n Mexico. This is the combinedeffect of the sudden pressure on demand added by PEMEX investment activities,both directly and indirectly through the effect of higher wages, rigidities insupply due mainly to the lack of dynamism of the Tabasco economy and theresulting heavy dependence on imports from outside the state that makes itextremely sensitive to deficiencies in the transport facilities and distribu-tion channels which were likely to appear given the suddenness of the boom.Moreover, by its very nature the oil activities resulted in an increase in thedemand for non-tradeables, mainly construction but including also services.The main bottleneck in the commerce sector refers to lack of storage facilitiesand a very bad intrastate distribution of commercial establishments thataggravates the inflationary pressures in the rural areas. This is particu-larly important because it causes an uneven distribution of the consequencesof inflation. Food prices also increased but the main beneficiaries were notthe farmers but the intermediaries. Wages also grew relatively faster in oilrelated activities and for skilled labor.

37. The fact that the oil company is not financially constrained and istherefore able to outbid local agents when competing for scarce inputs hasonly worsened the impact of the oil activity on prices. This is particularlytrue in the case of skilled workers. Although about half of the workersemployed by the oil company come from outside the state, the disruptive effectof its activities on the labor market seem to be quite patent. It is estimatedthat the increase in the average salary paid by PEMEX in Tabasco between 1976and 1978 was above 50 percent (as against an increase of 24 percent in theminimum wage). Even allowing for changes in the structure of the employment,the size of the jump provides a clear indication of the potential impact ofoil on local wages for skilled labor, and of the pressing need to solve theproblem of the lack of adequately trained manpower, a problem already seriousat the national level but more obvious in the state. The negative impact ofhigh wages in the oil sector is accentuated by its fuelling effects oninflation on the one hand and by the fact that the shortage of skilled laborhas to be borne by non-oil firms with the subsequent adverse effects on thedomestic supply. Moreover, any change in the current situation of relativelylow wages in Tabasco, frequently quoted as one of the factors linked to thedecisions of private firms to locate in the state, might prevent the beneficialside effects that would accompany the oil boom.

- 16 -

Conclusions: Unavoidable Disruption and Inadequate Policy Measures

38. Ex post it is only too easy to say that the measures taken tocope with the problems originated by the oil boom were inadequate. Thestarting point is that PEMEX investment went from less than 1 billion pesosin 1976 to 5 billion in 1977 and to 12 billion in 1978. What economic system,micro or macro, could take such a blow without cracking? If Tabasco were acountry, one would be tempted to make the usual remark that investmentincreased too fast given the possibilities of the country. Anyone can see howodd such a remark would sound when applied to Tabasco. The national imperativeof oil production could certainly not be adjusted for the benefit of the microsystem of the State of Tabasco, and this is a reality which should lead to theconclusion that only a vigorous parallel action of the same federal authoritieswho decide on the oil policy could have mitigated the negative byproduct ofthe "imperative". For example, the problem of adequate supply of consumergoods, especially basic foodstuff, could have been alleviated if the CONASUPOintervention had been more efficient and if the state authorities had beenmuch more effective in preventing excessive profits resulting from speculationby the trade sector in dealing with the local market. Also, greater efforts.could have been made to strengthen the commerce sector and measures could havebeen taken to correct some specific problems such as the lack of storage faci-lities. But the main conclusion is that the brutal impact of oil discoveriesin Tabasco was basically unavoidable. The issue is now what can be done inthe future to absorb the shock especially since the basic oil activity is likelyto continue at a very sustained level of construction investment for the comingyears, not to mention the expected expansion of the related petrochemicalactivities.

- 17 -

CHAPTER III

FACING THE OIL CHALLENGE: THE 1978-1982 DEVELOPMENT PLAN

39. The problems originated in Tabasco by the very rapid expansionrelated to the oil activities as well as the new orientations towards develop-ment planning at the state level resulted in the formulation of a regionaldevelopment plan for Tabasco covering the 1978-1982 period. The plan wasproduced in Tabasco by the state planning unit with the assistance of expertsfrom the federal government. The first year of the plan, 1978, was in factconsidered as an emergency program, aimed essentially at satisfying the mosturgent needs in terms of basic infrastructure bottlenecks. The plan, which hadto be prepared in a very short time and with rather limited availability ofexperienced people, left relatively unspecified, in its original formulation,the role which the private sector was expected to play. During the first halfof the current year, this gap has been filled at least from an indicativeviewpoint, through the signature of a frame agreement with a number of privateinvestors who have indicated their interest in a number of projects to becarried out in Tabasco over the coming four years.

40. The following considerations on the general characteristics ofthe Tabasco plan should not be interpreted as a too easy criticism of whathas been done for, as already stated in the introduction, given the time andstaff constraint and the current state of the "regional planning" art inMexico, the Tabasco Development Plan was as good as it could be. Further-more, and this is not a secondary factor, the authors of the plan are thefirst to be aware of its weaknesses and over the last several months have putin a very considerable effort, with the help of the federal authorities, toimprove the quality of the plan and to sharpen its focus'. It should also beconsidered as a very positive fact that the plan has not remained a simpledocument marking the end of a conceptual effort but has represented theinitial step towards programming for development in the state and has beenused as a basis to provoke discussions and to obtain the help of all theparties interested in the development of the state.

41. The Tabasco plan is essentially an investment program. The plannersin Tabasco could not investigate, basically for lack of adequate information,the impact of the investment program on the main flows of production, consump-tion and external trade with the purpose of checking both the internal consis-tency of the plan and its implied growth effects. These consistency checks,which can show potential significant supply-demand gaps and severe financialdisequilibria, are especially important in the case of Tabasco which is nowgoing through a very unbalanced growth path while at the same time some of themajor investment decisions affecting the state remain, as already mentioned,outside the control of state authorities.

42. Another weakness, or may be a peculiarity, of the Tabasco Plan isthe inadequate spelling out of its financial resources, and sources offinancing. In order to understand the process better, one should keep in mindthat to a certain extent this is justified by the way investment decisions

- 18 -

are made in the federal context in which Tabasco operates. The level ofinvestment expenditure by the federal government in Tabasco is the resultof a bargaining process with the state within the overall financial constraintof the federal budget and subject to an agreement on the specific program.When such agreement is reached the authorization to carry out the programsand the allocation of federal funds will ensue automatically. In otherwords, what is really missing from the Tabasco Plan, at least in its originalformulation, is the indication of the extent to which the federal portion ofthe investment program had been "agreed" in broad terms with the federalauthorities. This aspect is even more important if we consider that inMexico, at the national level, there is really no multi-year public investmentprogram, which makes it very difficult for any lower level territorial unit toformulate investment programs implying the commitment of federal funds beyondthe next year budget. It remains true, however, that no clear indication isprovided of how the state and municipalities' own investment will be financed,and there is equally no explicit reference to agreement reached with thepublic financial institutions which are supposed to contribute financing,especially in agriculture.

43. There are also uncertainties built-in in the plan, which are notthe result of imperfect planning but rather of the unknown which theactivity of the single largest source of investment in the state, PEMEX,represents. One has to accept the fact that the national oil policy isdetermined on the basis of considerations which do not have as firstpriority the welfare of Tabasco, or for that matter, of any other oilregion. This may be unfortunate for the specific region concerned, butone can only realistically expect that certain decisions are made knownto the state as early as possible; one cannot expect that they are madeas early as possible because they are of interest to the state. It isobvious that the decisions of PEMEX have an important feed-back on theprogram, federal and state, in Tabasco in terms of major infrastructure,housing, and also of the basic supply-demand equation which affects theincome groups throughout the state.

44. An additional aspect under which the Tabasco plan is rather weak isthe current degree of preparation of the projects which is included in thevarious sector programs. We are not referring here to a plan which simplyallocates global amounts to the various sectors: in fact the sector chaptersof the plan present an extremely detailed listing of actions to be taken withindication of the amounts involved, and this is already more than one can sayof most investment program when they are first formulated. Neither should onebe too critical of the fact that when the plan was put together, feasibilitystudies for at least the first year of implementation were not yet available--the problem is becoming serious now that we are already well into the firstyear of the post-emergency plan period--and it is especially important asregards the agricultural sector, which plays such a large role in thetotal investment program.

- 19 -

45. The problems of implementation indicated above raise the issueof the impact that any major delay in the realization of significantportions of the investment program may have on the implicit developmentstrategy of the plan. By way of example, substantial delays in plannedagricultural investment cannot remain without consequences for the rateof urban congestion and will require a much more substantive interventionin this sector. The fact, recognized by everyone, that there is no way tostop immigration into the cities, cannot lead to the conclusions thatwhatever happens in the agriculture sector has no impact on its pace.

46. The development strategy of the Tabasco Plan, as exposed in termsof the specific amounts allocated to the various sectors, will be discussedin the following section and will constitute the basis for our presentation ofthe possible alternatives and related policy recommendations. How thisstrategy has been arrived at, in terms of decision making process, is howeverone of the most interesting features of the Tabasco planning mechanism andcertainly should be considered as a very positive aspect. The planning effortin Tabasco has taken place within the COPRODET, 1/ which is the committeefor the promotion of economic and social development in the state with repre-sentation from all public and private interest, including the federal, stateand Municipal agencies, as well as representatives of professional and poli-tical groups, consumer associations, chamber of commerce, etc. All theserepresentatives convene at a "round" table at the head of which sits theGovernor of the state, assisted principally by the technical secretary of thecommittee who is the federal delegate of the Ministry of Programming andBudgeting (SPP). This participatory approach to planning has made it possibleto listen to the problems and requests of all the interested parties in thestate. These issues and requests have then been translated into objectives,priorities and actions required to realize them.

47. The COPRODET approach is certainly one of the most genuine andvaluable characteristics of the planning effort in Tabasco. As all effortsbased on participation, it is at the same time a difficult one. In theformulation of objectives and priorities the contribution of some interestedparties are not always in direct proportion to their weight. For example,PEMEX, for higher oil policy reasons, has not always been able to comeforward with the required information on its programs and/or with the requiredactions to compensate for the somewhat negative secondary effects of itsactivity. At this stage, and leaving aside the macro-consistency checksmentioned above, actions may have been taken without adequate investigation onthe economic efficiency of the decision. Finally, the participatory approachcar. only be a first step towards the subsequent phase of actually carrying outthe agreed programs: the process at this point may become very difficult andslow since it implies coordinating the efforts of different federal and stateagencies which often share activities in the same sector. It is on thisimplementation front that the planning efforts in Tabasco have to prove itsvalidity.

1/ See for a detailed description of the COPRODET, Annex II.

- 20 -

CiAPTER IV

THE DEVELOPMENT STRATEGY

Assumptions, Objectives and Critical Choices

48. The development strategy for the State of Tabasco depends essen-ially on the assumption concerning the future level of the oil extractingactivities. What is really important, however, is not the level of theoil production obtainable from existing reserves which may hopefullycontinue beyond the year 2000, but rather the level of the constructionactivities related to the new wells. This clarification is needed becausethe discussion on the future of Tabasco is often presented in terms of whatwill happen in the "post oil" era which might be such a distant one tomake any serious and realistic planning irrelevant. It is the impact of theconstruction activities related to oil exploitation which really mattersand lends itself to a meaningful debate on the development strategy forTabasco, which does not rule out the need to look at the problems with abroad vision on the more long-term implications of the development strategy.

49. The existing development plans of PEMEX for the 1979-1982 periodare a sufficient base for assuming that the rules of the oil game arepretty much established up to 1982. It is therefore the post-1982 period,let us say until 1990, that might open the issue of some basic alternativesin the level of the oil construction activities. Based on current indica-tions on the future level of oil related activities in Tabasco, the mainscenario which we are proposing is one in which the construction activitieswill continue well into the 1980s, that is for the coming 6-8 years.

50. The development strategy for the State of Tabasco, as in the caseof the national strategy formulated by the new Administration, should con-template a "stabilization" stage aimed at reducing the most severe gapsbetween demand and supply as a condition for tackling the more structural andlong-term problems of the state. In fact, the Tabasco Regional DevelopmentPlan considered that 1978, the first year, should be an emergency year callingfor special programs aimed at satisfying the most urgent needs in terms ofinflationary bottlenecks at the infrastructure and basic commodities supplylevel. The actions contemplated under the emergency program have proved to bevery slow mostly because of problems arising in connection with the actualspending of authorized funds. These problems are generally attributed todifficulties in obtaining the cooperation of interested agencies and notbecause of disagreement on the merit of the programs but rather as a result ofinadequate information and instructions. During 1979, supply of basic commodi-ties, of construction and transport materials and of local skilled manpowerhas fallen behind the continuously increasing demand. Implementation of anymedium and long-term development strategy will be put in serious jeopardy bythe failure to take effective action aimed at reducing current supply-demandinbalances.

- 21 -

51. The objectives of the development strategy for the State of Tabascoare in order of importance:

(a) To create employment opportunities in the growing urban centers,outside the oil sector, and to reduce underemployment in therural areas;

(b) To provide adequate physical and social infrastructure for therapidly growing population of the urban centers as well as forthe population in the agricultural areas;

(c) To prevent a worsening in the intraregional disparitiesthrough excessive centralization of activities in the oilaffected areas; and

(d) To prevent the deterioration of the environment resultingprincipally but not exclusively from oil activities.

52. Control of inflationary pressures--in excess of the national trend--which may result from the exposed continuation of the oil related activitiesis also dependent on the actions considered under (b), since shortage ofhousing has been in Tabasco one of the major sources of inflationary pressures.The other aspect which has a direct bearing on the inflation issue is thesupply of basic consumption commodities. Only a drastic overhaul of thepresent distribution system of these supplies, mostly imported from otherstates, can solve this problem. The only alternative action would be, asindicated later on in the section on the agricultural sector, a stepping up ofthe production within the state itself of such commodities at the expenses ofa pure economic comparative advantage in tropical crops which Tabasco seems tohave.

53. Central to the problem of employment is the qualification of manpower.It would be a serious mistake to assume that job creation through investmentwill solve the problem. A serious program of vocational training is badlyneeded to avoid that the increasing labor supply in the urban centers remainexcluded from the labor market because of inadequate skills. Increase inlabor productivity is essential for a higher employment level since themarket for unskilled labor will expand at a much lower rate than the marketfor skilled labor.

54. The objective regarding provision of adequate physical and socialinfrastructure for both the urban and the rural centers calls for a criticalchoice in terms of relative emphasis. On one side, the needs in the urbancenters, as a result of the population explosion, are so pressing that theyhave to be satisfied. At the same time, however, neglecting the rural areaswould lead to such rapid degradation of their economic and social struicturethat the very attainment of the objectives for the urban centers would becomemuch more difficu'lt. It 's probably true that it is impossible to stopmigration from the rural into the urban areas but its pace can be. affectedby programs benefitting the rural areas.

- 22 -

55. The objectives underlying the development strategy of Tabasco arebasically those established by the Government for the country as a whole.Their attainment, however, is likely to be more difficult in Tabasco thanin the rest of the country, especially with respect to decentralization,"dualism" and protection of the environment. The problem of decentralization,which for the country as a whole is put in terms of excessive concentrationof activities in Mexico City, Guadalajara and Monterrey, is especially acutein Tabasco where the oil linked urban centers of Villahermosa and Cardenasare growing at a much faster pace than the other urban centers. Thepossibility for Tabasco to control the location of activities is much lessthan nationwide for the obvious reason that the location of oil activitiesis not a decision variable. This aspect is made more acute by the fact thatpetrochemical industries and the related downstream activities are alsolikely to cluster around the main oil settlements. The high wage differentialbetween those employed in the oil sector and the others is causing a degreeof "dualism" in the economic structure of Tabasco which is probably one ofthe highest in the countrv and thus the effort required to attenuate itsconsequences, is much greater than for the country as a whole. Similarconsiderations apply also to the issue of the environmental protection becauseof the high concentration of oil and in the future, oil related industries.

56. While there is general agreement on the objectives listed abovethere is an active debate, especially within the state, on the post oilboom development strategy on the assumption that oil at some point in thefuture will no longer be there. Some think that one should look at theoil activity as a passing fact and that the state should concentrate ondeveloping the traditional sectors (agriculture, fisheries, livestock andrelated agroindustries) on which the economy of Tabasco will eventuallyhave to rely. There is an alternative strategy based on the strengthening oftthe traditional sectors but at the same time concentrating on capturing thepotential benefits of the oil boom by developing the petrochemical and relateddownstream activities and the small scale industries which can be linked tothem. The anticipated construction of a petrochemical plant near Villahermosawould be the starting point of this process. The greater reliance on themodern sectors while not an easy target to attain, is the only way for bringingthe State of Tabasco to an acceptable level of economic and social activity.A passive attitude towards the oil boom will not protect the state against itsdirect disruptive effects, will require practically the same effort in termsof supply of public goods to accommodate the increasing population, but willcause much more serious problems of employment, income distribution and socialstability.

57. A development strategy as the one described above leaves openthe issue of the distribution of investment over time, especially if oneconsiders the impact of investment on effective demand and the additionalinflationary presures which might derive from it in a context which isalready marked by excessive demand with respect to some basic commoditiesand services. This issue has to be looked upon considering the peculiarity ofthe investment decision-making process in Tabasco where the future level ofinvestment by PEMEX is not a decision variable for the state authorities, andat the same time, as indicated below, is going to be by far the largest

- 23 -

component of total investment in the state. If Tabasco were a country, onewould be tempted to recommend, for the sake of a more stable growth, a reduc-tion in the level of total investment, including investment by PEMEX to theextent that it requires the use of domestic scarce resources. Since investmentby PEMEX cannot be cut and it represents a major additional demand of localresources (from housing to roads), the only possible strategy is to invest inthose sectors which increase the supply of the scarcest goods and services.Any cut of this kind of investment would only make the demand supply gapincreasingly larger and the unsettling effects of the oil investment moreacute.

58. More specifically, the investment which is required to expandvital supply is public investment in housing and related urban infrastruc-ture, and in transport for certain key existing bottlenecks. Investmentin agriculture is a more complex case. The comparative advantage of theState of Tabasco lies in the production of exportable tropical crops ratherthan of basic consumption commodities which are scarce on the urban marketsand call for substantial imports, often at the cost of very high consumerprices due to the "imperfections" of the distribution system. At the sametime, however, investment in agriculture is essential for the long-termdevelopment of the State and cannot be put off after the end of the oilconstruction boom i.e., 7-8 years from now. This being said, it remainstrue that on the basis of past experience in Tabasco, there is a dangerof overdesigning some of the major irrigation works as well as ofconcentrating in general on the construction of new works rather thanon a package of actions (extension services, feeder roads, etc.) which mightbe more effective in increasing production on existing lands. The need,in macroeconomic terms, to avoid an excessive level of investment whichis not directly related to increasing supply within the State should forcethe responsible authorities into a careful examination of the proposedprograms in agriculture. This also means that for any given level of invest-ment in agriculture a restructuring in favor of programs aimed at expandingbasic consumption commodities in short supply will make that level morecompatible with the macroeconomic constraint.

59. As to the level of private investment, a potential candidatefor reduction in the name of "stable growth," considerations of employmentcreation and of general growth strategy for the state make it hard torecommend that as a first step towards capturing the potential benefits ofthe oil boom one should start by cutting back the private investment effort.The issue here, as discussed later on in the section on industry, is ratherone of avoiding excessive concentration in Villahermosa and Cardenas in orderto prevent the appearance of "spot" inflationary pressures within the stateand also a worsening of the intraregional disparities in terms of employmentand overall economic and social growth.

60. A final comment on the wider implications of a development strategyfor Tabasco. It was announced in the introduction that one of the limitationsof this study was its being confined to the purely administrative dimensionof the state as such without any analysis of regional or national implica-tions. This means implicitly that we are assuming that priorities have beenbet out which provide the necessary guidance for decision-making at the

- 24 -

state level. However, a number of issues with special regional implicationsshould be mentioned here in order to clarify some of the implications ofthe strategy carried out by the state. By raising this point we are notimplying that the local interests should be disregarded, but rather that theinteraction between Tabasco and other states is a real one of which maximumadvantage should be taken.

61. Regarding the industrial sector, the most relevant point is thedevelopment of downstream petrochemicals. Two different interactionsare involved here, since on the one hand it is necessary to decide atthe national level whether and to what extent to continue expanding thesector, while on the other hand the fact that the petrochemical sector isalready relatively well developed in the neighboring State of Veracruzadds inevitably another set of variables that go beyond purely domesticconsiderations. In the first case the decision will have to be based oninternational market conditions, internal demand for petrochemicals,analysis of intra- and intersectoral linkages, etc., while the secondset of interactions would have to see to questions such as whether touse the petrochemical output of Tabasco as intermediate materials to befurther processed in other states (Veracruz) or rather to develop anintegrated downstream petrochemical sector that would more fully takeadvantage of the availability of oil but would also compete with existingor potential activities in the neighboring areas.

62. The development strategy of the agricultural sector is also notindifferent to regional and national considerations. For instance, thechoice of concentrating or not on tropical crops should be made in the lightof the possibility of obtaining basic foods from other regions without deter-iorating even further the critical situation regarding prices. This is aclear case where the lack of consideration of interregional relationshipscould lead to either a loss of economic efficiency (if greater self-sufficiencyin food production was taken as effective goal at the expense of tropicalcrops for which Tabasco has a comparative advantage) or to a deterioration ofthe living conditions, particularly of the poorest group, if the concentrationon production of tropical crops led to shortages in the supply of basicfoodstuffs.

63. The regional dimensions of the transport sector needs littleemphasizing. By way of example we could mention here the use of theCoatzacoalcos port by existing and future industries in Tabasco as particularlyrelevant for its implications on other subsector elements. The fact thatCoatzacoalcos be the commercial port of Tabasco implies a choice, probablycorrect in our view, with respect to the possible alternative of expanding theproject of the port of Dos Bocas and opening it to non-oil uses. The choicein turn requires that road communications with Coatzacoalcos be improved bothin its Tabasco and Veracruz sections and that bottlenecks such as the bridgeon the Coatzacoalcos river be solved. All these options and actions cannot behandled except by using a clear regional strategy.

- 25 -

Sector Specific IssuesUrban Settlements, Housing and Urban Infrastructure

(a) Urban Settlements: Facing the Reality of Continued Urbanization

64. IT terms of future developments in the structure of urban centersin Tabasco, the State's Secretariat of Human Settlements has prepared aTabasco Urban Development Plan. The preparation of this plan has followedthe general guidelines and objectives spelled out in the National UrbanDevelopment Plan, the Tabasco Plan Estatal de Desarrollo, and the State'sLaw of Urban Development. The plan is essentially a normative framework;it provides a general analysis of the present and expected situation inthe urban sector, and proposes a strategy for the distribution of urbanpopulation in the state. The various urban development plans prepared forthe state are all consistent in their emphasis on promoting the growth ofalternative centers to Villahermosa, while continuing to improve theliving conditions in this largest city of the state. The alternative centersconsidered are primarily municipal capitals of areas rich in agriculturalpotential (some also in fishing and tourism), and which are at the sametime the centers of petroleum activities. This approach, as far as thestructure of urban settlements is concerned, appears to be basicallysound, although it is questionable how successful the plan will be inlimiting the growth of Villahermosa.

65. A major objective underlying this strategy is to reducemigration from the rural areas to the capital of the state. It proposesto do so by improving the supply of housing, urban infrastructure andservices in a few secondary towns. At the same time, the plan continuesto assign high priority to Villahermosa and, to a lesser degree, toCardenas. It is doubtful whether the state will succeed-in its effortsto reduce migration from the rural to the urban centers to any significantdegree. This skepticism is prompted by the absence of an explicit strategyor actions planned to accomplish this shift in urban growth to the othercities and towns of the State. To encourage urban growth in secondarycities and rural services centers it will also be necessary to develop anintegrated set of additional programs and actions such as the promotionof employment generation (including small-scale enterprises), establishmentof a competitive income and wage structure in the agricultural sector,special fiscal and financial incentives, vocational training programs, 1/ etc.

66. In summary, it is doubtful that the migration issue and the patternof human settlements, as much as it is derived from migration flows, will beaffected much by investments in housing and public works. Public investmentswill probably continue to be heavily concentrated during the coming years inVillahermosa and in a few additional larger towns. As mentioned, these issuesrequire a more sophisticated and integrated approach, and even then, it isquestionable how successful or recommendable such efforts will or should be.

1/ No effective vocational training program exists yet in the State,although some preliminary discussions have been held with the federal"Adiestramiento Rapido de Mano de Obra" program.

- 26 -

67. The activities of PEMEX in Tabasco are crucial in terms of theirimpact on both the structure of urban settlements and on the housing (includ-ing urban infrastructure) deficit question, and of course, in terms of theirdirect and indirect financial and economic contributions to the state. In thecontext of physical works, PEMEX has been mainly engaged in those aspects thatdirectly affect its operations, that is, in the construction of their owninstallations and of crucial highways. Their contribution to the housingsector and related urban infrastructure has been, according to availableinformation, only marginal.

68. The Tabasco experience suggests that the multiplying effects ofthe petroleum industry on migration and urban growth, housing and infrastruc-ture needs, wages and prices, etc., is probably much larger than the impactcaused directly by the relative small number of people actually employedby this sector. Some preliminary analysis suggests that for every job inthe petroleum or related industries, two more jobs are presently generatedin other sectors (mainly tertiary), and two more families migrate to themain centers of petroleum activities (including Villahermosa and the othermajor towns in the state) on the expectation of finding a better job thanin the rural areas.

69. The growth of all urban centers has been and is bound to besignificantly affected by PEMEX's expansion plans in the coming years. Animmediate factor in this context is the proposed creation of a new petro-chemical plant by PEMEX, probably in the vicinity of Luis Gil Perez.This action is likely to influence the pattern and size of urban settle-ments in the state, and by implication, also affect the urban-rural balance.Additional actions of this type, even if extended over longer periods oftime, will have similar effects. Lack of reliable information on PEMEX'sexpansion plans could thus lead to substantial distortions in the state'splan of urban development and inefficiencies of investment in the sector.

70. The provision of more housing and better access to services suchas water supply, electric power and health facilities in the rural areasis probably a necessary, but not a sufficient condition for halting migrationfrom these to urban areas, if not coupled with a real lift in the incomereceived by farmers through an increase in agricultural production. Thenational character of such an approach requires the active participation ofother forces, and escapes the limited power of the State of Tabasco and of its"planning" institutions as defined now. Critical would be the participationof federal agencies (e.g., Secretaria de Patrimonio y Fomento Industrial,SAHOP, SARH, etc.), PEMEX, and the private sector, all under one coordinatingbody to establish a consistent programming, financial and implementing struc-ture.

(b) Housing and Urban Infrastructure: An Increasing Deficitin Low-Cost Housing

71. Parallel to the sudden increase in the growth of the key citiesand towns in the state, a corresponding increase of the deficit in housing,related infrastructure and urban services has developed. As a result of

- 27 -

this rapid growth, the housing deficit in the state is now estimated ata total of over 100,000 units. Only about one third (31,500 units) ofthis deficit relates to the urban centers, but housing needs in the ruralareas are more often solved through self-help, and here, the greatest needis for individual improvement programs and the extension of basic infrastruc-ture. In the city of Villahermosa alone, the present housing deficit hasbeen estimated between 13,000 and 16,000 units, most of it for householdsthat are financially and economically excluded from the available market.Gross estimates indicate that the investment necessary to wipe out this deficitin Villahermosa only would be about Mex$ 4.5 billion excluding the relatedinfrastructure costs.

72. About 42 percent of the mentioned deficit is for families thathave no housing of their own and live in provisory or rented quarters;about 30 percent of the deficit is related to existing but old and deterio-rated stock; and about 28 percent of the units are required to reduceserious conditions of overcrowding in the city. Furthermore, and assumingthat urban centers will continue to grow at an annual rate of about 8-10percent, about 7,000 new units will be required every year in the state. Asan example, and assuming specific population growth rates of 11 percentand 14 percent for Villahermosa and Cardenas, respectively, new housingrequirement in these cities may amount to about 4,000 and 1,000 units annuallyfor the next four to six years. These figures may vary significantly asa function of what the future operations of PEMEX will be, which will alsoaffect the growth pattern of other towns near the petroleum areas.

73. If one discounts the option of mobile home as a real alternative(although it should possibly be considered in some cases), housing is not a"good" that can be "imported" into the region, and shortages in supply, ifnot resolved quickly, will necessarily lead to higher rents and prices.This is indeed what has happened in Villahermosa and a few other major townsof Tabasco, and the situation does not seem to be improving at the presenttime. The price of housing and rents in Villahermosa and Cardenas is often50 percent to 75 percent more expensive than 5omparable accomodation in MexicoCity or elsewhere. Monthly rents for a 100 m apartment are about Mex$ 3,500(about US$150) in Mexico City, while the comparable apartment in Cardenaswould rent for about Mex$ 4,500 (US$225), and for Mex$ 6,000 (US$260) inVillahermosa. It is not uncommon for rents for prime houses and apartmentsto go up by 100 percent from year to year.

74. INDECO and the corresponding State of Tabasco Agency, the Institutode Vivienda, are the institutions in charge of solving housing and infrastruc-ture problems of the lower income groups. A policy is now evolving to basethese programs on a system of sites and services and self-help construction.In Villahermosa alone, the Instituto has received about 6,700 individualrequests for such units, and has plans to implement about half of them in1979. If one assumes that the city will grow at about 11 percent annually forthe coming years, and that only 50 percent of the population will require thetype of shelter solutions offered by the Instituto, this means (at least)about 2,000 new sites and services units annually for the coming five years,without considering the deficit accumulated so far.

- 28 -

75. In summary, a substantial increase in the provision of low-costhousing and the expansion of city-wide urban infrastructure is requiredto cope with the existing and the future demand for these services.Although some form of subsidies for the lowest income groups may bejustified, public support should initially concentrate on a forcefulprogram to increase the supply and distribution of construction materialsand equipment, the provision of serviced urban land, the establishment ofa vocational training program, and increasing the accessibility toappropriate credit channels. The direct construction by the state ofhousing for higher income groups (already beginning a small scale) isprobably not going to do much to eliminate the structural rigidities andthe overall deficit that exists in the sector. It is certainly not anefficient way (through some form of "trickle-down" effects) to solve thehousing needs of the middle and lower income groups, which constitutethe vast majority of those seeking a solution to these problems.

(c) Institutional Aspects: How To Coordinate Decentralization

76. The responsibility to provide housing urban services and publicutilities in the State of Tabasco is divided among a very wide number ofagencies. Among these are public, semi-public and private agencies, bothfederal and state agencies, PEMEX, and a variety of semi-autonomousagencies. 1/ The head of the sector, at the federal level, is the Secretary(Minister) of Human Settlements and Public Works (SAHOP), operating at thestate level through its state office, and INDECO, which is the agency incharge of promoting housing for the lower-income groups. Also federal innature, although not controlled directly by SAHOP, are INFONAVIT, which isthe agency responsible for providing housing to wage earners (workers) ingeneral; and FOVISSTE, which is responsible for providing housing topublic employees. Controlled by the State of Tabasco ate: (a) the StateSecretariat of Human Settlements; (b) the State's version of INDECO, whichis called Instituto de Vivienda; and (c) the local (state and municipal) publicworks committees and water agencies (Juntas de Agua). Housing is also builtby PEMEX for some of its employees and workers (besides the construction ofa few roads, schools and other public facilities), while the private sectoris supposed to cover the remaining gaps.

77. Looking at the future, there are two significant policy questionsat stake. The first one is the debate between the supporters and theopponents of the decentralization efforts now being endorsed by the Federaladministration. The other concerns the respective role of the federalministries themselves, and specifically the efforts by the new Ministryof Programming and Budgeting to coordinate the activities of the individualsectorial ministries. The conflicting positions on these matters centeraround the role of an institutional framework specifically established tosolve the issues, namely the COPRODET.

1/ Without considering federal highways, electric networks, schools andmany other public facilities which are the responsibility of otheragencies.

- 29 -

78. COPRODET has brought together for the first time in Tabasco(and probably for the first time in any state) all the agencies and insti-tutions involved in public works. The institutional achievements of COPRODETare particularly important in connection with issues such as implementationcapabilities, cost recovery, and maintenance-operational procedures. Tradi-tionally, most public works in the urban sector have been programmed, financed,and implemented directly or under the control of some federal departmentof SAHOP. In many cases, the works were carried out by one of these depart-ments and upon their completion, have then been transferred to and becomethe property of a state or municipal entity. Little continuity was estab-lished in the financing cost recovery stream, and the same was true formaintenance and operational responsibilities.

79. In summary, improvements of the planning process in Tabasco interms of proper programming can only be accomplished if the state, throughCOPRODET receives more control and coordination power over individual(federal) sectoral programs. Only then could COPRODET initiate a moreappropriate planning process based on real development objectives. Thisobservation surely applies also to other states, where the correspondingCOPRODET are even less established.

(d) Recommendations

80. COPRODET should examine in more depth the developmental objectivesof the state beyond the 1979-1982 period. Only on that basis will itexpand its present concern with short-term investment needs to that ofdefining long-term development objectives. Better and updated informationon the future expansion plans of PEMEX is also essential to prevent possibledistortions of development efforts in the state. Such information would alsoprovide the state and other public agencies with a sound-basis for the estab-lishment of investment programs to cover some of PEMEX's own requirements.PEMEX, at the same time, should expand significantly its housing and urbanservices program.

81. COPRODET should make a thorough analysis of the implementationrequirements and available capacity in the state to carry out the investmentplan it has programmed. It should also identify the measures that need tobe taken to ensure proper maintenance, operations, and cost recoveryprocedures. This analysis should specifically deal with the possible impact(over time) of the programmed investments in the construction sector, andparticularly with questions such as to the availability of construction inputs,transport and storage facilities, as well as the estimated effects on laborcosts and pricing.

82. One of the most serious bottlenecks in the construction industryin general and in housing in particular, is the scarcity and high pricesof construction materials and equipment. It will become increasinglyimportant to improve this situation, and it may even become necessary forthe State itself to establish a separate public purchasing and distributionsystem for such materials and equipment.

- 30 -

83. Of primary importance to the housing sector is also the issue ofland availability. Urbanized land in most of the state's urban centers isscarce and very expensive. This is a major constraint on the expansion ofthe housing stock, and the state should therefore consider the possibilityof providing by itself urbanized areas in order to reduce the pressures onthis input. In some cases, and where it would support the state's prioritiesand objectives regarding the structure of human settlements question, theselands could be provided at less than market prices.

84. The most serious and largest part of the housing problem relatesto the urban low-income groups. The state's INDECO-Instituto de Viviendais the best suited organism to deal with this problem and should receiveevery possible support.

Transport

85. Tabasco relies mainly on the road sector for its communicationswith the outside world: the port sector is practically non-existent and thereis only one railway line (300 km) through the state, linking Veracruz and thecentral network to Merida and the Yucatan peninsula. This line bypassesVillahermosa and Cardenas, the two major towns and has had no significant roleto play in the development of Tabasco. As to the aviation sector infrastructure,a new international airport has been opened to replace the existing airport atVillahermosa, which was too close to the city, and presented approach problems,and it should provide adequate facilities until at least the mid 80s. In1978, some 390,000 passengers arrived in and departed from Villahermosa;traffic is growing at over 15 percent per year.

86. The road network is centered on Villahermosa. The main federalhighway runs west to Cardenas and Coatzacoalcos, and is the state's lifelineand at the same time the only one with an advanced degree of congestion,particularly in the section Villahermosa-Cardenas. The other importantfederal roads have a lesser importance for Tabasco. In a number of selectedzones under the PIDER programs, efforts have been made in recent years toexpand rural infrastructure with minimum standard roads. PEMEX has alsocontributed an increasing share of the state's road budget and built on itsown the access roads necessary for its drilling and production programs.

87. In recent years, the vehicle park has increased tremendously andthe highway infrastructure around Villahermosa has been experiencing increasinglevels of congestion, particularly the road to Coatzacoalcos (Table 14).On the section Cardenas-Villahermosa, traffic has reached a level of some7,500 vehicles/day, including truck traffic of some 4,000/day, and isgrowing by some 10 percent every year. A number of state and local roads,concentrated in the Reforma area, have not been able to cope with highlevels of truck traffic, poor drainage and minimum maintenance. Maintenanceon other important federal roads also appears to have been modest in recentyears, and certainly below the minimum level required to achieve a satis-factory upkeep of the existing infrastructure.

Table 14: Vehicles Regis-tered in Tabasco

Vehicle 1970 1971 1972 1973 1974 1975 1976 1977

Auteinobiles 5,116 4,828 6,112 6,890 6',848 6,964 13,726 13,563

Buses 332 282 358 378 391 1,193 n.a. 2,330

Trucks 4,258 4,373 3,840 4,168 6,844 7,368 10,985 8,565

Source? SPP

- 32 -

88. There is an urgent need to upgrade the road to Coatzacoalcos. Thefirst priority is the modernization of the section Cardenas-Villahermosa.This highway is for practical purposes the only link between Villahermosa andthe outside world, and is critical for the development of the Reforma fields.While SAHOP does envisage to go ahead with this work, its proposal calls forcompletion in 1982 when traffic should be well over 10,000/day. An acceleratedconstruction schedule should be considered to expand the Cardenas-Villahermosasection to 4 lanes by 1981. Additionally, and in the same time frame, theaccess roads to Reforma from this highway must be reconstructed. Any departurefrom this schedule will constrain to some extent the development potential ofthe Cardenas/Villahermosa zone by slowing down the expansion of existingactivities and diminishing the relative attractiveness of locating newindustries in or around Villahermosa instead of the Coatzacoalcos/Minatitlanarea in Veracruz. This would be unfortunate because this area is alreadyexperiencing worse "oil boom" induced problems than Tabasco, even though itenjoys more natural advantages such as the existence of port facilities and arailway connection to the central network.

89. As a second priority, maintenance efforts on other importantlinks in the federal and state networks should be stepped up; more consider-ation should be given by the state to the maintenance requirements ofhighway investments particularly for roads built with the support of otherentities, such as PEMEX, the local municipalities or federal agencies.These entities have an incentive to provide resources to build highwaysproviding access to facilities they have the responsibility to build (suchas a petrochemical plant). At this writing, however, they do not provideresources to maintain this infrastructure, to the detriment of the veryeconomic development induced by the establishment of the facilities theyare building. The advanced degradation of the highways in the Reforma Zoneis directly traceable to this and a repetition of this problem should beavoided.

90. This brings up the issue of PEMEX participation in highwayinvestment financing. In the past PEMEX has provided up to one third ofthe funds needed to build state highways of interest for oil explorationor development programs with an equal share coming from the state and federalhighway budgets. It has now been agreed to raise the PEMEX share to onehalf of the total, with the other half being split equally between thestate and federal governments. However, this will not lighten the burdenimposed on state finances by investments undertaken for PEMEX's sole benefit,since oil development activities--and the complementary highway infra-structure--are being stepped up substantially. Financing highway invest-ments fully with PEMEX funds when PEMEX is the sole or major beneficiary(as in the case of the access road to Reforma from Villahermosa for instance)would lead to a greater relief of the state's finances and the "internaliza-tion" of development infrastructure costs in PEMEX.

91. Outside of the specific cases in para 96 above, infrastructureexpansion should be maintained at the bottom of the priority list. Thisis especially true for rural roads except in those instances when roadbuilding is associated with development programs (e.g. PIDER) leading toproductivity improvements and economic, as opposed to social, benefits.

- 33 -

Opening too many new areas with poor access to the existing network isa costly proposition compared to the economic benefits one can reasonablyexpect in return and a prohibitively expensive one if achieved withpostponement of critical investments in the Villahermosa-Cardenas area.

92. Finally, a review of the investment priorities in the highwayfield would not be complete without a mention of the bridge on theCoatzacoalcos river on the road Villahermosa-Coatzacoalcos. Even thoughthe bridge is located in the State of Veracruz, a review of the optionsfor its necessary expansion is called for by the critical role played byreliable communications between Tabasco and the Coatzacoalcos-Minatitlanarea. The existing two-lane movable bridge is one of the weak links inthe primary highway system of Mexico: it is the only bridge above theCoatzacoalcos river in Veracruz and traffic (now 10,000 vehicles per day)is rapidly approaching maximum capacity. Furthermore, the facility islocated upstream of the Coatzacoalcos port but downstream from theMinatitlan oil refinery and is insufficiently protected against collisionsby medium size tankers. Traffic delays are already substantial andimpressive bottlenecks appear every time the bridge is opened to lettankers through. Traffic will double in another five years because ofthe continued economic growth in Tabasco and the coming on stream ofpetrochemical and other plants now being built in the industrial complexacross the river from Coatzacoalcos. Thus, in less than five years theexisting bridge will definitely be a bottleneck; if the facility isput out of commission because of a tanker collison, huge detours acrossOaxaca and Chiapas will be necessary to reach Tabasco by land. SAHOP hasstudied the possibility of building a new bridge and some 30 km of connectingroads on both sides of the river; the bridge would be in prestressed concrete(because of the high sulphur content in the atmosphere) with a clearance of35 meters above the water level and a 200 meters span, one of the largestin the world. It is estimated to cost about US$50 million yet its awesomedesign presents inherent construction risks. Because the new alignment isdistant from the existing traffic flows, it is to be expected that asizeable portion of total traffic will not be diverted from the existingbridge, which reduces considerably the economic merits of SAHOP's proposal.The alternative of building a second bridge parallel to the existing oneshould cost only one third as much and reduce congestion to an adequatelevel for the coming 10-15 years; at that point, building a new bridgecould be reconsidered, depending on development. The merits of thisalternative appear to be such as to justify a more thorough investigationthan has been the case up to now.

Protection of the Environment I/

93. The principal sources of industrial contamination in Tabasco aresugar plants and PEMEX. The present state of environmental deterioration inTabasco is not alarming except for a few limited but critical areas. Oneof them is the river San Felipe, whose waters are so poor in oxygen that

1/ For a more detailed discussion of this aspect, see Annex I.

- 34 -

it will soon endanger Tabasco's main oyster beds located in laguna Machunawhere the river San Felipe flows in. Another area is the river Grijalva(or Mezcalapa) which shows alarmingly low levels of oxygen at some pointsof its course, mainly upstream from Villahermosa. Considering that twothirds of Villahermosa's water supply comes from an intake at the Grijalvariver, the situation is rather critical. This situation can only worsenafter the planned implantation of sugar and petrochemical industries alongthe river. A new sugar plant, of a capacity equivalent to the total sugarcapacity already installed in Tabasco, is currently under construction inthe Municipality of Huimanguillo. It will discharge its waste waters inGrijalva. Tabasco first petrochemical plant to produce monomers (ethene,butene and the like) from gas, will probably be located on the Grijalvariver at Luis Gil Perez, some 20 kms upstream from Villahermosa.

94. This is however, the part of Grijalva which has the smallestvolume of water since the river forks into one main stream, called RioCarrizal, and a smaller stream which keeps the name of Grijalva (Mezcalapa)some 80 kms upstream from Villahermosa. Therefore, the exposure ofVillahermosa's primary source of water is very high. In this specificcase, part of the solution could be to change either the plant site or theriver intake. But in general, preventive steps should be taken in view ofthe intensified activities of PEMEX in the state: development of oilfields and program of secondary recovery. The latter consists in forcingoil out of the reservoir rock by direct displacement with another fluid:the fluid chosen by PEMEX in Tabasco is water. The implementation ofwater-oil separation processes will then become a first priority; otherwise,water contamination will reach unacceptable proportions.

95. There is a rather fair knowledge available at present both on thelevel and localization of the pollution created by Tabasco's industrial develop-ment owing to the many studies undertaken by or at the request of govern-mental institutions in charge of environmental protection. Nevertheless,the evaluation of the degree of degradation of the state's natural resourceshas remained so far highly qualitative. The same holds true for the fewreferences made in these studies to ecological costs (wetlands life), andto economical costs, (most of the oyster and shrimp breeding grounds ofTabasco's coastal lagoons).

96. It is admittedly difficult to line up series of hard figures onthe environmental cost of economic activities and even more so to set definiteand definitive limits to the degradation of natural resources which can eitherbe tolerated in view of a net economic benefit or be found unacceptable dueto the detriment caused to other activities. In any case, natural resourcesare finite in quantity as well as in capacity for self-regeneration. Conse-quently, their usage calls for some sort of central and organized control.In that respect, the Mexican legislation has not been strikingly successful.The existing legislation on atmospheric pollutants is rather scanty. It hasbeen quite elusive on the issue of petroleum industries' free emissions intothe air. This gap is apparently going to be filled by a new legislationpresently under preparation in Mexico. Legislation attempts at controllingaqueous pollutants have led so far to rather disconcerting results, probably

- 35 -

due to a lack of central enforcement of the law and of concertation betweenthe various institutions in charge of implementing it.

97. Yet, there is a matter of urgency in deciding which steps shouldbe taken to protect Tabasco environment, when it is still time to do it.It has been suggested to the Governor of Tabasco to create a Water Contamina-tion Control District, a semi-public organization regrouping representativesof all major private and public entities of Tabasco, in order to controlthe common usage and respective degradation of natural resources. It isdefinitively a good starting point. Such an organization should, however,not be restricted to controlling aqueous effluents, but be extended to thedischarge of flue gases as soon as the new Mexican legislation on airquality is issued. To function properly, it also needs quantitative informa-tion on the economic benefits of Tabasco's industrial development in relationto the economic costs of deteriorated natural resources. And more thananything else, it ought to receive full support from the government to bein a position to prevail over local disputes. Whatever the institutionalsetting will be, an action is to be started soon, otherwise it will barelycatch up with the present rate of state and PEMEX planned industrial develop-ments. The resulting effect on the environment will probably be as dramaticas that of the neighboring State of Veracruz if not worse since most ofTabasco petrochemical activities will be implanted inlands and not on thecoast like at Coatzacoalcos (Veracruz). In that case, Tabasco's naturalresources will not be readily available for the post oil boom era of thestate.

Industry

(a) Overview

98. In addition to the agricultural, fishing and seafood processingactivities, a great potential for the industrial development of the Stateof Tabasco lies in the range of downstream petrochemical activities such asresins, plastics, paints, synthetic fibres, organic chemicals, variouspolymers, and insecticides. Another areas for growth are the supportingand auxiliary activities related to the production of oil and gas: asteel-forming plant to turn out sheets, profiles, rods, wire, and mesh;various construction materials (a cement plant is already under construc-tion); tools of various kinds (virtually all of which are now beingbrought in from the outside); sulphuric acid (based on the local avail-ability of sulphur obtained from the gas-sweetening operations) 1/;machinery and equipment and replacement parts (from nuts and bolts andvalves to pumps and compressors); plastic molding operations producingarticles for use in the home, agriculture, fishing and other marine opera-tions; workshops including soldering, welding, turning, grinding, forging,etc.

99. Much will depend on the scope, composition and destination ofthe products of the petrochemical complex. Although we have little informa-

l/ PEMEX's requirements are seen as rising from 40,000 tons in 1978to 90,000 tons in 1979 and to 125,000 tons in 1982.

- 36 -

tion on the matter (beyond its probable location at Luis Gil Perez), theimportant thing is to know what feedstocks will be issuing from the Tabascopetrochemical complex and what downstream products will be derived from them.If the decision is that the Tabasco petrochemical complex will be a mere"annex" of the Coatzacoalcos/Pajaritos/Minatitlan complex and that it willbe little more than a raw materials supplier, then obviously little can beexpected from it. But if the decision is something more than that, then someor much benefit can flow from it.

100. The current indications are that in any case PEMEX's expendituresin Tabasco, will lead to some development of petrochemical activities, inaddition to a number of supporting activities. PEMEX's projected totalinvestments for the 1977-1982 sexenio in Tabasco are Mex$ 60,000 million.In the year 1977, Mex$ 4,076 million were expended in the drilling of wellsand in the construction of facilities for the extraction and transport ofoil and gas in the state. In 1978, the authorized expenditure in the statewas about Mex$ 12 billion of which 35 percent was destined for the drillingof wells, 40 percent for processing facilities, 22 percent for the construc-tion of petrochemical installations, and 3 percent for works of service andsocial utility. By the end of 1978, crude oil production was raised to1,000,000 bbl/d compared to 754,000 bbl/d at the end of 1977, and naturalgas production rose to 1,649 million CFD from 924 million CFD in the sameperiod. This required the construction of collection mains, compressorstations, and gas pipelines for the recovery of liquids in Cactus, La Venta,and not to be overlooked is the fact that the Tabasco leg of the NationalGas Trunkline System will have been built. In Dos Bocas, near Paraiso, aservice and supply port will be built to support the drilling and productionactivities in the Gulf of Campeche. Besides transport equipment and storagefacilities, the port will have a monoboya or floating deck for loading shipsup to 250,000 tons of dead weight for handling the crude oil and otherpetroleum products to be exported from the plants and installations ofTabasco and Chiapas. In Cardenas, there will be installed a storage terminalwith 22 tanks of 500,000 barrels each from which crude oil will be exportedfrom the present port at Pajaritos and from Dos Bocas. For the marketingof future quantities of distilled and petrochemical products in the region,a storage and distribution plant will also be built in Villahermosa (Tables3, 4, 5 and Annexes 2, 3).

101. Looking further ahead, Tabasco's rich energy base, not only inoil and gas, but also in the production of electrical energy, can be thebasis for the location of industries which require relatively large quantitiesof this form of energy. According to the Federal Commission on Electricity,Tabasco is at the top of the list among the Mexican States in its potentialto produce electrical energy. Presently, the hydro-electrical installationsat Malpaso and at La Angostura (about 40 kilometers from Villahermosa) havea joint capacity of 2.0 million kw, and it is projected to add another2.0 million kw at two other sites within a radius of 50 kilometers or soof Villahermosa during this administration, which would bring the state'scapacity to almost 20 percent of that of the nation. The commission'slong-term projections include the quintupling of the generation of electricalenergy from the Grijalva and Usumacinta Rivers watersheds from 5,000 million

- 37 -

kwh to 25,000 kwh over the next 20 years. In Mexico, the principal branchesof industry in the consumption of electrical energy are: chemicals,textiles, cement, steel, paper and pulp, aluminum refining, and mining-metallurgical. In 1973, these consumed 41 percent of the total in theindustrial sector. Hardly any of these industries are located in the stateat this time. In coming years, this situation can change as increasingpercentages of private and public sector investments are placed outside ofthe three main metropolitan areas in accordance with the National Urban/National Industrial Development plans and when the comparative advantagesof locating near abundant and advantageously priced energy sources becomeincreasingly evident. 1/ Furthermore, the availability of relativelylow-cost electricity and natural gas (source of hydrogen and sulphur) putsthe State of Tabasco among the nation's favored locations for an ammoniaplant. Indeed, the possibilities for increasing substantially thestate's -- and the nation's -- use of fertilizer on its farms open upnew vistas for the agricultural sector (see also Annex 11).

(b) Implications for the State of Tabasco of the National Industrialand Urban Plans

102. The National Industrial Development Plan (March 1979) names theindustrial activities which have priority for the periods 1979-1982 and1983-1990. The list is subdivided into two groups. In category 1 areagroindustries and the capital goods industries. The highest incentivesare reserved for these industries. There is a 20 percent credit on thevalue of the investment 2/ and a 20 percent credit on the sum of the wagespaid out resulting from the additional employment attributable to the newinvestment. 3/ These incentives apply wherever the investment takes placewithin the national territory. In Category 2 are selected groups of durableand nondurable consumer goods, intermediate products, and a miscellaneouslist. The highest incentive in this category is reserved for thoseindustries which are established in Zone I. These consist of a 15 percentcredit on the value of the investment and a 20 percent credit on wages andsalaries as explained above. In Zone II, the allowed credits for investmentand employment are 10 percent and 20 percent, respectively. In Zone III,no credits are allowed for the subzone of "controlled growth" (the FederalDistrict). For the subzone of "consolidation" (the outskirts of the FederalDistrict), the credits are 20 percent for investment and employment forindustries in Category 1, but they are restricted to plant expansions.

1/ According to the Instituto Mexicano del Petroleo, the average annualprojected demand for energy for the period 1974-1985 is: hydrocarbons7.0 percent, electricity 12.1 percent, coal and coke 9.2 percent,averaging out to 7.5 percent for all sources.

2/ The credit may be used on any taxes due to the Federal Governmentwhich do not have an assigned use.

3/ The credit is calculated against the annual minimum salary of theeconomic zone in which the plant is located multiplied by the numberof new posts created directly by the investment or by the creationof additional shifts according to the given case. The credit islimited to two successive years.

- 38 -

For industries in Category 2, the credits are 10 percent and 20 percent,respectively, limited to cases of plant expansion.

103. The State of Tabasco fares well within the context of the regionaland industrial priorities. In respect to regional priority, the western partof the state is favorably situated in that it falls in the category of ZoneI-B with incentives only somewhat less than those granted to the fourindustrial ports. Of the 16 municipios in the state, 7 of them are includedin the preferential incentives of Zone I-B, and this includes the State'smain cities of Villahermosa, Cardenas, Huimanguillo, and Cunduacan. It alsoincludes the port city of Dos Bocas (now in construction). From the stand-point of industrial priority, it also fares well in that agroindustries fallinto Category I. Local industries such as the processing of copra, coffee,cacao, cattle, poultry, rice, sugar, and fruits and vegetables are included.Location and industrial incentives thus reinforce each other. Incentivesfor small and medium industry, for purchasing capital goods manufactured inthe country, and for incremental increases of the work force apply in Tabascoas in other parts of the country. Small industry receives a 25 percent crediton its investment throughout the Federation except for Zone III-A (TheFederal District). The purchase of capital goods nationally produced allowsa 5 percent credit throughout the republic. And the generation of addedshifts in industrial employment allows a 20 percent credit against the addedpayroll except in the Federal District.

104. Still another benefit for Tabasco is the Federal directive to allministries to give priority in their planning to the priority regions. Federalpublic investments authorized for the State of Tabasco, for example, for theyear 1979 are Mex$ 3,000 million, well above that of the preceding year.These do not include the expenditures projected for PEMEX which reach aboutMex$ 12 billion, double of that of the preceding year.

105. What remains uncertain at this writing are the prospects of the16 municipios not included in Zone I-B--those which are located mainly inthe eastern part of the state, and whose main industry is livestock andagriculture. Presumably, their needs will be taken care of under the agri-culture and rural development programs of Plan Tabasco including the PIDERprograms and the credit programs carried in the convenio with the privatesector. On the other hand, this may not be enough, and it may be worthwhileto consider the possibility of identifying one, two or more market towns(possibly Balancan-Tenosique or Emiliano Zapata) for agroindustrial developmentand as subregional supply and service centers. The municipios approved forthis role by the state and the federal government would be placed in Zone II,and fiscal incentives would also be available for firms establishing themselvesin these areas.

106. In the light of the explicit priorities and targets, and of theaccompanying incentives, Tabasco should fare rather well. Tabasco'scapabilities already rank high in the nation with respect to productsof animal origin (livestock and seafood), and few will question that itspotential is two to three times its best recent annual production. TheFederal-State-Private Sector CONVENIO contains a number of agroindustrialprojects which will become beneficiaries of the incentives accorded to

- 39 -

this priority industry. Not to be overlooked is the inclusion ofcellulose where stands of timber in the southern and eastern parts of theState of Tabasco can be processed under the incentives program.

107. While the production of capital goods in what has been a pre-eminently agricultural state may appear to be an exaggerated possibility atthe present time, it is not at all to be excluded from consideration; and notleast because the estimated demand is high (two and three times that in theagroindustrial sector). To be sure, the advantage is now all with the in-dustries in the three metropolitan centers of Mexico City, Monterrey, andGuadalajara. Nevertheless, the soon-to-be established Tabascan petrochemicalcomplex will undoubtedly look favorably on the factors of proximity andindustrial relatedness where local suppliers are concerned. Intermediategoods, including those of petrochemical materials, fall into Category 2. InZone I, the fiscal credit is 15 percent, the highest in geographical terms.Thus, the Tabascan municipalities so included will enjoy the highest incen-tives applicable to Category 1 and 2 among the industrial products.

(c) The Agreement (Convenio) with the Private Sector

108. The Convenio represents a significant effort on the part of theprivate sector to establish a solid base of projects for the Plan Tabasco.Eighty three projects are listed with an overall value of Mex$ 8,563 million.A number of positive features may be noted. There is a varied representa-tion of projects. Among the agricultural and agroindustrial projects are:credits for increasing the number of subloans to farmers to increase thecattle population and for increasing productivity, 2 coconut processingplants, 5 cacao fermenteries, 3 chicken-processing operations, a slaughter-house and meat-freezing operation. Construction materials include cement,bricks, plaster, and concrete-mixing. Some of the manufacturing productsare directly related to serving the oil and gas industry: parts for drillingrigs, steel cables, diesel pumps, industrial gases, and a machine shop andwelding operation. Other manufactured products seem to reflect the spreadingperception of western Tabasco's increasing importance as an urban/regionalservice center, such as home and office furniture, paints, shoes, retreadingof tires, etc. Also included are 8 hotels to serve the increasing businessand tourist traffic and housing for low-income and middle-income families.

109. Other observations are warranted. The largest project is thecement plant (Cementos Apasco) which will have a capacity of 2,200 tons/day. It will cost Mex$ 2,300 million and will hire 400 persons. This willmake possible other secondary industries, a couple of which are alreadyincluded such as the asbestos-cement plant, 2 rock-crushing plants, and2 premixed concrete plants. Clearly, the availability of cement in thevicinity will have a favorable bearing on the construction of industrialplants, roads, culverts, bridges, housing in general, and the rest ofit. Petrochemical projects in the list are very few, but this is not amatter of surprise in the light of the fact that the Tabasco petrochemicalcomplex has not yet been built. But this clearly will be a matter of closerattention--and promotion--to the extent that the petrochemical complexbecomes a reality. We have already noted that several plants have been

- 40 -

established in anticipation of the future needs of the petrochemical industry(polyethylene bags, paints, etc.) The credits pledged by the private bankswill require some clarification. The purpose of the credit is most praise-worthy--to improve the capacity of the cattle industry--but it is notat all clear what is the source of the funds. To what extent are thesecredits from Government trust funds, on the one hand, and from privatebanks' own resources, on the other?

110. From this point on, monitoring the implementation of the Convenioand a continuing process of promotion take on increasing importance. Ifone subtracts the value of the cement plant (Mex$ 2,300 million) and theagricultural credits (Mex$ 1,450 million), and the sum of the proposed hotels(Mex$ 1,798 million), the remainder is approximately Mex$ 3,000 million orabout a third of the total for various agroindustrial and industrial projects.These are mainly small to medium industries, and undoubtedly they will needtechnical and financial assistance. What is urgently needed is a strengthen-ing of the capacity of the local authorities to assist these firms (and othersto come) in the coming months. An immediate task would be the eliminationof the confusion that exists with respect to the precise meaning of thenew decrees on decentralization and industrial incentives, including entitle-ment to state and municipal benefits when they utilized those of the FederalGovernment. Meanwhile, it can be said that the Convenio is a good beginning,and hopefully it will serve as a prelude to further additions in the courseof time.

(d) Recommendations

111. Consideration should be given, in any future updating of thePlan Tabasco, to the possibility of including eastern municipios in Zone II.(Incentives are also offered to industry locating in Zone II, althoughthese are less than those in Zone I.) This would complement the situationin western Tabasco where 7 municipios in Zone I-B provide somewhat higherincentives. It would also provide an opportunity for urban centers inrural areas ("market towns") to attract new plants (including agroindustrialplants which have the highest incentives regardless of location). Amongthem might be the urban centers of Balancan, Tenosique, and Emiliano Zapata.

112. The future relationship of the industrial port of Coatzacoalcos(Veracruz) and the petrochemical complex to be built at Luis Gil Perez (only afew kilometers from Villahermosa) needs elucidation--from the standpoint oftechnological complementarily (if any), incentives, and urban/industrialdevelopment. In the industrial port area of Coatzacoalcos are the petro-chemical complexes of Pajaritos and La Cangrejera, the refinery at Minatitlan,and a number of downstream plants related to the output of these plants. Whatsort of downstream plants may be expected from the petrochemical plants inTabasco? Will the Veracruz and Tabasco complexes be complementary and ofmutual benefit or self-contained and mutually exclusive? What will be theprobable effect of the higher incentives in Zone I-A as compared to Zone I-B?Are there any implications in this for the urban/industrial growth ofVillahermosa and western Tabasco? In light of this, what should be Tabasco'spromotional approach?

- 41 -

113. Tabasco's requirements for skilled labor--short term, medium term,and by type of industry--need to be defined. The state should make a rigorousanalysis of the problem and establish or secure appropriate vocational trainingprograms that would incorporate the needs not only of the industrial sectorbut also of other sectors. Many firms, including PEMEX, will undoubtedly usetheir own training programs, but very likely this will not be sufficient. Atally needs to be taken of the relative contribution of the public and privatesectors in meeting specific needs. The efforts should include the requirementsin the rural hinterland as well as in the urban areas.

114. Small and medium industry will need technical and financialassistance on a constant and steady basis from the well-known public andprivate sectors organizations dedicated to this task (NAFINSA, FOGAIN,FIDEIN, FONEP, the local trade associations, and private banks) and fromCOPRODET, the coordinating body. This assistance cannot be taken forgranted.

115. The incentives offered under the National Urban/National IndustrialDevelopment Plans should be given the widest publicity. This should includeclarification as to the availability of state and local incentives (if any),once the federal incentives are accepted.

Agriculture

116. The overall concepts for the short-, medium- and long-term strate-gies as outlined in the agriculture development plan are essentially to:(i) strengthen production support activities for present crop and livestockareas including the completion and conservation of civil works; (ii) promotea combined crop-livestock approach in new areas of development adapted tolocal ecology and needs for hydraulic infrastructure; (iii) bring into produc-tion presently marginal areas through low cost civil works which can be com-pleted rapidly; (iv) plan for multiple uses in design of hydraulic works,especially flood control combined with power generation; and (v) carry outintegrated development by stages which will permit minimizing risks of failureof water control projects and reduce the maturation periods of the projects.

117. The proposed strategy implies to:

(a) improve yields on present crop and grazing area, through an inte-grated agro-livestock plan which will be based principally on extensionactivity;

(b) open up new lands to intensive crop production and grazing begin-ning with those which have only minor drainage problems but low yields;nevertheless, infrastructure would include surface drainage, flood control,possibly supplementary irrigation, and road building.. Supplementary irriga-tion needed in certain areas would be provided through the use of low liftpumps located in the drainage system to provide water in brief periods ofdrought;

- 42 -

(c) establish a method for local planning and implementation of agro-livestock development based on expanding and strengthening the Bank-fundedProgram for Integrated Rural Development of the Humid Tropics. The PRODERITHapproach consists of development by stages to reduce the risk of failure andassure the maturation of projects in the shortest possible time through aprocess of learning and rapid expansion based on experience gained. Thus thepilot projects: (i) would be large enough to include all the components sothat they may sbrve as bases for modular expansion; and (ii) would combinefrom the beginning the infrastructure work and the technological changes whichare indispensable for bringing the project area into high level production.This permits a rapid increase in production at the same time that the farmerassimilates the changes necessary into his productive organization;

(d) for the intermediate and long-term, initiate planning now forintegral development of the water resources based largely on civil workscombining the generation of electrical power with flood control.

118. The orientation of the Tabasco crop and livestock plan is to workfirst with the most productive soils and those crops which are high consumersof water but can be produced without irrigation. In oil crops this wouldinclude industrial scale production of perennials such as African oil palmand coconuts. It would call for installing new sugar plantations and millsin phase with projected market demand. In cereals it would mean promotingrice, under irrigation, rainfed and flooded conditions. In cacao, this wouldrequire improved technology and new plantings to produce the maximum thatcan be absorbed by the national market and for export. In livestock, betterpastures and production technology would make possible higher yields of meatand milk without expanding acreage.

119. There is great potential for increasing productivity of most per-ennial and annual crops and livestock production based on existing informationand experience in the State. This is well recognized by both state andfederal experts, all of whom point to improved technical services (both quali-tative and quantitative) as the basic element in any future realization ofthis potential. Given these services, which also imply organization andeducation of producers, plus the necessary physical inputs and credit/marketingservices, we have little doubt that the State of Tabasco would be able toproduce all the basic foodstuffs needed to meet the demands of its rapidlyincreasing population. However, the comparative advantage that the state hasfor production of the perennial tropical crops and livestock is such thatthe returns to the State's producers from these efforts will always over-shadow those from basic crops, for which, except perhaps for rice, the statedoes not have this comparative advantage. As already mentioned, the issue ofthe adequate supply of basic foodstuffs in the urban centers of the state hasa direct bearing on the choice of the most appropriate strategy. Should thestate authorities fail to bring about the organizational changes required tosolve this crucial problem (through a major overhaul of the import-cum-distribution system), it will become necessary to increase the scope of basiccrops in the agricultural strategy of the state.

- 43 -

120. Given that the basic priorities in the Tabasco Agriculture Plan aresound, we consider that for successful implementation of the plan the follow-ing points need to be taken into account:

(a) Individual projects need to be more carefully appraised takinginto account all costs (direct and indirect). These costs should be phasedover the project life and should be detailed in terms of manpower, infra-structure, credit, inputs and marketing/processing (where appropriate).Further, cost/benefit projections in addition to quantification of socialand other benefits must be calculated and priority for project executionallocated mainly on the basis of these analyses.

(b) With reference to (a) we consider that the present approach ofthe Grijalva Commission in its area cum regional agricultural developmentprograms is too strongly biased to "gold plated" infrastructure works manyof which may not be necessary or at least suffer from being over-designedand thus too expensive. In our opinion, both the Chontalpa and the Balancanprograms have been over-designed with respect to infrastructure, althoughwe acknowledge that the agriculture/livestock development has been satis-factory. The annual investment in agriculture proposed in the Tabasco Plan(US$100 million by 1980, or about US$500 per ha on existing arable land) isexcessive for the existing availability of crop land, and the risk of over-investing on non-essential or inefficient infrastructure work is high.However, the conversion of present grazing areas into crop production couldallow the efficient absorption planned investment. This would be a reasonablestrategy, particularly in some regions like the Huimanguillo area near theborder with Chiapas, where extremely valuable potential crop land is used forcattle grazing.

(c) Future planning efforts for agriculture/livestock/forestry devel-opment in Tabasco should take full advantage of the new structure providedby SARH through its General Directorate for Rainfed Districts.

(d) Although it is a national problem of very difficult politicalsolution, it should be mentioned that the present land tenure system, particu-larly for private land owners, which distinguishes between livestock and cropproducing areas is in the mission's opinion a major bottleneck in land utiliza-tion. This applies particularly to those areas designated as being suited forlivestock, as the one mentioned in (b). Many of these could be cropped and/orexploited under a mixed farming system. However, livestock producers are notgoing to be induced to diversify production activities and grow crops commer-cially, under the present system which immediately puts their ownership injec.pardy of expropriation under the Agrarian Reform Law.

Institutional and Organizational Aspects

121. It is not surprising that problems at the institutional andorganizational level have been in the recent past cause of inefficiencieswhich in turn have been magnified by the unbalancing effects of the oilboom. The type of problems referred to here is well exemplified by whathas been happening in the area of housing urban services and public utili-ties. The responsibility in this sector is divided among a wide number

- 44 -

of public, semipublic and private agencies, both federal and state agencies,including PEMEX and without considering federal highways, electric networks,schools and other facilities which are the responsibility of the agencies.The multitude of agencies involved has led to considerable coordinationdifficiencies. Furthermore, the responsibility for operating and maintain-ing the investments has also been divided among various federal, state andsometimes municipal institutions. This situation, which is characteristicof the investment process in other sectors, has to be substantially improved,otherwise the strategy outlined in the previous section will not have manychances to be carried out.

122. The solution to these problems implies modifying substantiallytime honored practices of independent and centralized actions by the manyagencies and technical ministries which are functionally responsible forthe various sectors and subsectors. The orientation of the present admin-istration towards a more decentralized system of government would seem toprovide the ideal conceptual and institutional basis for strengthening therole of the state level coordinating body, i.e., the COPRODET in whichthe technical federal agencies are very adequately represented while thedelegate of the Ministry of Programming and Budgeting, who works closelywith the Governor in Tabasco, exerts a very much needed coordinating role.It is clear that the success of the coordinating effort at the state levelis very much dependent upon the success of such effort at the national level,where the Ministry of Programming and Budgeting is engaged in the difficulttask of not only maintaining the overall level of public expenditure withinthe nationally established financial ceiling but also of allocating thefunds among the various sectors and the different states. The strengtheningof the coordination effort at the state level certainly meets the demand ofthe state authorities. At the same time, it increases substantially theirburden and responsibility for an efficient implementation of the variousprograms. This additional effort should not be underestimated since ineffi-ciencies can come not only from inadequate coordination mechanism but alsofrom coordination "indigestion."

123. The preceding discussion concerned the implementation of programswhich have already been agreed upon by the Federal Government. However,as mentioned earlier, the state has direct control only over a fraction oftotal public investment within the state itself, and in the case of Tabasco,when one considers investment by PEMEX this fraction becomes extremely small.This implies on the part of the state a very substantial bargaining effortwith the federal authorities to determine the level of federal funds allo-cated to the state. As in the recent two years, the State of Tabasco islikely to increase its request for funds quite substantially in order tosatisfy the increasing demand for public goods resulting from the expectedrapid increase in population and economic activity. If one considers thatthe share of Tabasco in federal public expenditure is currently well below2 percent, we are here in a situation in which any increase in federal alloca-tions is more likely to depend from the absorptive capacity of the state thanfrom any Tabasco specific ceiling dictated by the availability of funds atthe national level. If this interpretation is accepted, the burden of present-ing well thought out programs remains essentially with the state. But this

- 45 -

means that the state will be required to make all efforts, through its coor-dinating and programming services, to stimulate the interested ministries andagencies into formulating such programs. There is here a risk for the Stateof Tabasco, as for any other state, namely that funds are obtained on anappropriation basis but then the level of authorized expenditure may fallshort drastically because of the poor preparation stage of the specificprojects on which the funds are actually spent. In other words, stateauthorities should not overestimate the results of their bargaining effortwhen measured in terms of obtained "programmed allocations" by the federalGovernment.

124. The federal Government is not the only "partner" which the Stateof Tabasco has to deal with in its development effort. PEMEX, the oilcompany, is another and a formidable one in terms of its weight in thesocial and economic structure of the state, not to mention its contributionto the state budget through the participation of the latter in the oilproduction tax (e.g., for 1979, the share in the oil tax is equal to almostone half of a total state budget expenditure of 2.5 billion). The relationsbetween the state and PEMEX raise two basic issues. The first, alreadymentioned, is for the state to receive adequate and timely informationon PEMEX's programs which heavily affect the development of the stateeconomy. This is not an area where procedures can be established: It isleft essentially to the goodwill--spontaneous or stimulated--of PEMEXbut there is no doubt that PEMEX should consider it a duty to keep thestate authorities informed, as far in advance as possible, of its plannedactivities. The second issue is that of compensation by PEMEX, or rather,of participation of PEMEX in the costs of investment (roads, schools, healthfacilities) which are directly or indirectly linked to the oil extractionactivity. Early this year, an agreement was signed between PEMEX and thestate concerning the sharing in the costs of roads construction specificallyrelated to PEMEX's heavy transportation activities. It is a good exampleof a satisfactory solution for similar problems which might arise in thefuture. A related issue, is that of the protection of the environment againstdeteriorations provoked by the oil activity. Observance of adequate standardsby PEMEX is not easy to obtain and will require quite some doing by both thestate and the federal authorities.

125. There is also a significant role to be played by the state, whichhas institutional implications, namely the reduction of intrastate disparitiesamong the various municipalities considering that the oil boom is affecting alimited number of the existing urban centers while many of the others have amuch weaker economic basis. The fact that all municipalities sit around theCOPRODET round table is not a guarantee that all demands are met on an equi-table basis especially in view of the very pressing problems which the statemust solve in the faster growing centers. Furthermore, it is very likely thatthe weaker municipalities are also the least equipped to formulate on theirown well prepared programs which serve as a basis for fund allocation. Thestate will have to make an additional effort in providing the less favoredmunicipalities with the required technical asistance and funds to prevent adisruptive degradation of some subregions within the state.

- 46 -

126. There is finally the aspect of the relations between the stateand the private sector. This area requires first of all a strengtheningof the state agencies responsible for the promotion of private investment.They should not assume an exceedingly bureaucratic approach to their task,as it happens in other countries, providing, in the best of circumstances,some assistance in moving within the intricacies of the incentive and "settle-ment" legislation. Secondly, state authorities should be aware of the factthat private investors are obviously profit oriented and in search of compara-tive advantages in terms of location. A serious assessment of these aspectswithin a broader regional context is a precondition for a flexible and aggres-sive policy of promotion of private investment. At the same time, as againshown by the experience in other countries, the state authorities will have toresist the temptation, under the "pressure" of private investors, to assumecosts, especially in terms of infrastructure requirements, which are out ofscale with respect to the effective needs of the private sector. By way ofexample, one could mention the water supply infrastructure for industrialpurposes, where one can often observe large investments which are only partiallyutilized for a number of years and which were built on the basis of inflateddemand forecasts by private investors. The signature of the frame agreementmentioned in para. 115 between the state and a group of private investors for amassive investment effort over the coming four years is certainly a veryinteresting and promising step, but should not leave the state authoritieswith the idea that the medium-term future of Tabasco private investment isalready granted and that it will not impose a burden on the state finances.

The Required Investment Effort

127. The conclusions from the discussion of the broad outline of theappropriate development strategy and of the sector specific issues can besummarized as follows in terms of priority investment decisions: as faras the productive sectors are concerned, the anticipated private investmentin industry (some Mex$ 9 billion between 1979 and 1982, Table 15) should beconsidered a minimum requirement in order to modernize the economy and ensurean adequate increase in the employment level. Investment in tropical agricul-ture should be carefully revised to avoid excess demand on existing resourcesfor capital formation which might remain idle for a number of years. Greatemphasis should be put on rainfed agriculture and, more generally, on exten-sion services, as well as on rural development programs. Fisheries shouldalso receive substantial support in view of the potential of the area andthe high employment content of the sector and measures should be taken toprevent contamination effects of industrial activities. Tourism shouldnot be neglected but creation of excess capacity should be avoided by notencouraging the construction of too many luxury hotels which might be forcedto deal with tour operators at cut-rates. As to the basic infrastructure, asustained program of low cost housing and related urban infrastructure isrequired within a policy of urban settlements which does not neglect therural areas by pushing the service centers approach. In transport theupgrading of the road to Coatzacoalcos with the modernization of theCardenas-Villahermosa section is a priority intervention; maintenance ofexisting network is also crucial.

- 47 -

128. How does the investment program put forward in the Plan Tabascofares with respect to the program outlined above? As mentioned earlier, theoriginal formulation of the investment program under the Plan has been goingthrough a revision process, the first major element of which was the inclusionin the investment program of the investment under frame agreement with theprivate sector. It should be stressed here once again that the apparentsluggishness of the revision process is to a large extent the result ofthe slow pace at the federal level, of the formulation of federal investmentprograms but also of the limited ability, at the state level, to come upwith well thought out programs. For discussion purposes it is interestingto comment first on the investment program of the Tabasco's Plan in itsoriginal formulation. This will enable us to comment on its adequacy withrespect to the accepted goals of the development strategy and to arrive,subsequently, to what we consider a more realistic program based on theeconomic and social requirements of the state.

129. In the original investment program under the Tabasco Plan, asshown in Table 15 and 16, investment in agriculture and fisheries is thesingle largest component if we exclude both oil extraction activities andpetrochemicals. Irrigation accounts for almost 40 percent of investmentin agriculture. If one looks more closely at the investment package foragriculture one finds that another 10 percent has ben allocated to the con-struction of an agricultural college, and about 13 percent to various sup-porting programs for which it is not always clear how much investment andhow much current expenditure is involved. Fisheries account for 11 percentof the total.

130. As to the Urban and Housing Sector, more than 40 percent of the fundshave been allocated to urban related infrastructure and more than 30 percentto housing. Finally, in Transport and Communications, the largest component(40 percent) is for main highways, followed by feeder roads (33 percent) andrural roads (18 percent). More than 80 percent of private investment isexplained by the projects included in the convenio which in turn, as discussedabove, include a substantive amount (20 percent) of hotel construction whichmight be excessive when compared with the real possibilities of this sectorin the medium term.

131. A number of considerations call for a revision of the originalinvestment program in the Tabasco Plan. These considerations refer tothree main areas, namely, allocation of federal funds, implementationcapacity at the state level and development strategy. On the basis of whathas been happening since the mission first visited Tabasco, and going back towhat was mentioned earlier in this report on the procedures followed inpreparing the investment program, it is clear that by and large the federalcomponent of the proposed investment program remains well above what thefederal authorities are willing to allocate. It is also clear that any discus-sion on the amount of federal allocations for the outer years is not reallypossible since federal authorities are in a position to discuss only the nextyear program and, this too, well into the second half of the current year.Furthermore, the authorization for expenditure during the current years is alsosubject to mid-year revisions depending upon the overall budgetary policy of

- 48 -

Table 15: Plan TABASCO - Investment Program

1979 - 1982

(million Mex$)

PUBLIC INVESTMENT 26,710

Agriculture and Fisheries 12,740Irrigation (4,516)Housing and Urban Infrastructure 5,749of which Water and Sewerage (2,551)Housing (1,817)

Transport and Communications 4,025of which Red Troncal (1,609)

Red Alimentadora (1,322)

Red Rural (794)

Education and Health 2,118Others 816Municipalities 1,500

PEMEX 61,000

of which Petrochemicals (16,000)

Private Investment 10,752

Total 98,462

Table 16: Plan TABASCO - Structure of Investment Program (X)

1979 - 1982

Excluding Oil But

Including Oil Including Petrochemicals

PUBLIC INVESTMENT 27 51

Agriculture 13 24Housing and Urban Infrastructure 6 11

Transport and Communications 4 8Education and Health 2 4Others 2 4

PRIVATE INVESTMENT 11 21

PEMEX 62 -

Petrochemicals (16) 28

Total 100 100

- 49 -

Table 17: TABASCO: Revised Investment Program

(in 1979 million Mex$)

1979 - 1982

1979 1980 1981 1982 1970-82

PUBLIC IN'TSTMENT 4,300 4,750 5,350 5,100 20,213

- AGRICULTURE 1,300 1,500 1,70C 2,000 6,50O

Forestry and Fisheries

- Housing and. Urban Infr. 970 1,150 1,400 1,700 5,200

- Transport and Ccmm. 1,030 1,100 1,150 1,200 4,481

- Others 1/ 1,000 1,000 1,000 1,000 4,200

P4MEX 12,800 1600o 16, 000 .6,ooo ft,ooo

- Petrochemicals 4,000 4,000 4,000 4,000 16,000

PRIVATE _INVS^EQINT 2,700 3,500 3,500 4,500 14,600

- Industry and Toarism 1,200 2,000 2,400 3,000 8,600

Housing 1,000 1,000 1,000 1,000 4,000

Agricultural Trade 500 500 500 500 2,000

TOTAL 19,800 24,250 25,150 26,400 95,740

1/ Includes Education, Health and public infrastructure for Industry,Tourism and Trade.

- 50 -

the federal government. A second consideration relates to the implementationcapacity for the specific projects included in the program and this is parti-cularly true of the agricultural sector in which the original program for1979, not to mention the outer years, is still lagging behind schedule forlack of adequate project preparation as well as for lack of agreement with thevarious federal agencies on the specific nature of some of the programs.

132. Thirdly, as mentioned in the sector discussion, some of the largestinvestment in irrigation of tropical products areas are probably excessive,even if there were no implementation constraints, because the present landtenure system would not allow an efficient use of the invested capital.In order to test the adequacy of the investment program in agriculture somecalculations have been made on the basis of the proposed investment programand taking into account reasonable assumptions on the growth rate of themajor crops. These calculations have given ICOR's 1/ of 12 and 8 depending onthe time lag adopted, clearly an index of very low or, if one wants to beoptimistic, very deferred efficiency.

133. These considerations have led us to propose a somewhat differentinvestment program for the 1979-1982 period which is indicated in Table 18.The figures indicated there should be considered much more an indication ofthe structure of an acceptable package than for the specific amounts indi-cated since any real attempt to forecast investment in Tabasco would be ashot in the dark. The main differences between the two investment scenariosare not so much in the total level of investment (95.7 billion against theoriginal 98.4) but rather in its composition. While the investment alloca-tions for the basic infrastructure sectors have not changed substantially,public investment in agriculture has been cut by half at the advantage ofa 40 percent increase in private investment. The reduction in publicinvestment for agriculture would be in reality less drastic since theoriginal Tabasco Plan probably included a portion of private investmentfinanced by public financial institutions. In our scenario we allow anamount for private investment in this sector. As to private investment,in addition to agriculture, explicit allowance is made for private invest-ment in housing to complement the public effort in urban infrastructure.

134. As a purely illustrative exercise given the weak statistical baseat the state level, some medium-term projections of the main macroeconomicaggregates have been made and are presented in Annex III.

1/ ICOR: Incremental capital-output ratio, calculated as the ratio ofinvestment in a given year to the increase in output assumed to arisefrom that investment.

- 51 -

Table 18: Structure of Proposed Investment Program

1979 - 1982

(Excluding Oil but Including Petrochemicals)

Public Investment 40.0

Agriculture 13.0Housing and Urban Infrastructure 10.0Transport and Communications 9.6Others 1/ 8.0

Petrochemicals 31.0

Private Investment 29.0

Industry 16.0

Other sectors 13.0

TOTAL 100.0

1/ Including education, health and supportinvestment for the Industrial and Tradesectors.

The Employment Picture

135. The discussion of the development strategy for Tabasco would notbe complete without a discussion of its implications in terms of the employ-ment problem which is crucial for the social and economic development of thestate. A first calculation for the 1979-1982 period assumes that the popula-tion for the state as a whole will increase at the same rate as between 1970and 1977 (i.e. 4.6 percent).

136. For the six municipalities more affected by the oil (Cardenas,Centro, Comalcalco, Cunduacan, Huimanguillo and Macuspana) the assumed growthrate is that of the 1970-1977 period or of the state, whichever higher.Assuming that the activity rate remains at the 1978 level of 22 percent (aconservative estimate), the number of jobs to be created 1/ between now and1982 would be 50,000, as shown in Table below:

1/ We are discussing here only the jobs necessary to absorb new additionsto the labor force. Existing underemployment (i.e., people engaged inactivities of very low productivity reflected in incomes below minimumstandards) is not dealt with except to the extent that the primary sectoris assumed to have no potential for job creation, all new investmentsresulting in higher productivity for existing jobs.

- 52 -

Table 19: New Jobs Required (Low Variant)

(Thousands)

A. Municipality Population Population Active Population Assumed1978 1982 1978 1982 Growth Rate

Cardenas 125.6 158.0 27.9 35.1 5.9Centro 287.2 380.8 63.8 84.5 7.3Comalcalco 92.1 110.2 20.3 24.3 4.6Cunduacan 57.7 70.0 12.8 15.5 4.6Huimanguillo 97.1 116.9 21.6 25.9 4.6Macuspana 89.3 109.3 19.8 24.3 4.6Other 348.6 379.0 76.7 83.3 2.1TABASCO 1,097.6 1,324.2 242.9 292.9 4.6

137. With the same population growth but assuming that the participationrises to the national average of 28 percent in the oil affected municipalities,the number of jobs to be created by 1982 would be 107,000, while it remainsat its 1978 level (22.2 percent) in the remainder of the state.

Table 20: New Jobs Required (High Variant)

Active Population1978 (Thousands) 1982

B. Cardenas 27.9 44.2Centro 63.8 106.5Comalcalco 20.3 30.8Cunduacan 12.8 19.6Huimanguillo 21.6 32.7Macuspana 19.8 30.6Other 76.7 86.2TABASCO 242.9 350.6

138. These projections for 1990, assuming a population growth rate forthe state of 3.7 percent and a participation rate of 30 percent in the fivemunicipalities and 28 percent in the rest of the state indicate a numberof new jobs to be created of about 176,000 between 1982 and 1990 (see Table 21).

Table 21: Jobs to be Created (1982-1990)

Population Annual Growth Active Population1982 1990 Rate 1982 1990

Cardenas 158.0 216.2 4.0 44.2 64.9Centro 380.8 584.4 5.5 106.5 175.3Comalcalco 110.2 145.1 3.5 30.8 43.5Cunduacan 70.0 92.2 3.5 19.6 27.7Huimanguillo 116.9 153.9 3.5 32.7 46.2Macuspana 109.3 143.9 3.5 30.6 43.2Other 379.0 447.6 2.1 86.2 125.3TABASCO 1,324.2 1,765.0 3.76 350.6 526.1

- 53 -

139. An estimate of job creation has been attempted only for 1982. Theconvenio between the private sector and the Government foresees the creationof about 6,000 jobs, in the secondary sector and some tertiary activities suchas tourism. PEMEX activities will generate about 5,000 additional employmentpositions, while public investment and private activity will generate about2,000 additional jobs in the construction sector. Existing evidence showsthat between 2 or 3 employment positions are created in the state per everynew PEMEX job. 1/ If a ratio of 2.5 is applied to the 13,000 jobs mentionedabove, we get a total of about 45,000 jobs which can be created in 1979-1982. This figure assumes that all investment planned in the conveniowill actually take place during the period under study. Private investmentnot included in the convenio is not specifically accounted for, but it isassumed to be reflected in the 2.5 ratio.

140. The current distribution of employment and output by sector indi-cates that agriculture and primary activities have little potential foremployment generation. In effect, the primary sector generates only about24 percent of total value added, while it accounts for almost 50 percentof the employment (compared to 20 and 32 percent respectively for thesecondary and tertiary sectors). Agricultural investment is not likely tocreate additional employment but rather it will increase the productivityof jobs already existing. The considerable potential for development ofprimary activities in the state cannot be denied but the solution to theemployment problems does not lie only with the agricultural and relatedsectors. The flow of people from rural to urban areas will continue in theimmediate future. The efforts planned regarding the increase of cultivatedland, implementing improved technologies, rationalizing crop patterns, etc.,will contribute to the alleviation of poverty and to increasing the incomeof those engaged in primary activities.

141. It would seem, from the above discussion, that the contemplatedinvestment program for the 1979-1982 period should be adequate to absorbalmost the entirety of the additional work force assuming that the lowvariant will materialize--the rather conservative assumption concerningthe ability of the agricultural sector to create additional employmentcan be considered a safety valve of this scenario. It is implicit inthis scenario which sees employment being generated essentially by privateand oil sector investment (with an appropriate multiplier effect) thatthe ongoing public investment outside agriculture is basically preventinga fall in the existing employment level. It is also clear that shouldthe high variant materialize, and therefore some additional 60,000 jobsbe created in order to keep employment at its present level, a doublingof the investment by PEMEX and the private sector would be necessary toabsorb it, which is totally unrealistic.

1/ This ratio includes "informal" activities such as street vending andother jobs where self-employment and traditional techniques prevail.

- 54 -

142. If the 176,000 new jobs indicated by the figures in Table 27are to be created between 1982 and 1990 a significant private and publicinvestment effort will have to be made. Only if the oil activity levelindicated in our basic scenario prevails and if it is accompanied by theappropriate public investment in infrastructure will the employment problemsof Tabasco remain reasonably under control.

- 55 - ANNEX IPage 1

ENVIRONMENTAL IMPACT OF TABASCO INDUSTRIAL ACTIVITIES

I. BACKGROUND

The State of Tabasco has a rather sensitive tropical ecologicalsystem.

1. Water bodies are numerous, abundant and form an intricate system ofhighly interconnected rivers, marshes, swamps and lagoons, which certainlyincreases trisks of dissemination of water contamination. Tabasco hydrologicalsystem counts with two main basins which are among the largest of Mexico--theeastern wasin of Coatzacoalco-Tonala, covering 15 percent of the state, or3,600 km , and the western basin of Grijalva-Usumacinta which includes thetwo major rivers of Tabasco (Grijalva-Usumacinta), and covers the remaining

285 percent of the state or 21,000 km . Most of Tabasco rivers flow from thesouth, the mountainous part of the state, with high annual precipitationsranging from 3,500 mm to 4,000 mm, to the north where the annual level ofprecipitation can reach 2,000 mm. Consequently, Tabasco rivers have animportant flow. This characteristic, coupled with the mild temperature, an

annual average of 280 centigrade, explains the good self-regeneration capacityof the basins.

2. Tabasco presents the most original and compact sequence of ecosystems:tropical forests, savannas, freshwater herbaceous and shrub marshes, mangroveswamps and saltwater lagoons. From south to north, these systems are conti-guous on a fairly small stretch of land between the parallels 170 and 18030,and each one of them has its own balance, which makes the general ecologicalequilibrium of Tabasco rather delicate and certainly complicates the task ofpreserving it.

3. Finally, during the winter months, from October to March, Tabasco isfrequently exposed to strong winds, "los Nortes," whose normal speed ranges from80 to 100 km/hour. Since Tabasco can be considered as a flat tropical state,80 percent of its land being between 0 meters and 200 meters above sea level,winds can dissipate industrial smokes faster but at the same time extendsignificantly their range of impact. "Los Nortes" come together with heavyrains which can easily bring into solution the most dangerous components ofthe industrial smokes, like the sulfhydric acids, and fix them into soilsunder the form of highly corrosive acides, one of them being sulfuric acid.

II. STANDARDS

4. Mexican federal regulations have fixed tolerable levels of contamina-tion of water bodies according to their final uses. The 1977 revision of the

- 56 -

ANNEX IPage 2

federal law deals with five categories of water bodies:

DA - Reserves for drinking water which will be simplydisinfected before urban use.

DI - Reserves for drinking water which will be the objectof a conventional treatment before urban use.

DII - Water bodies appropriate for recreation (tourism) andadequate for aquatic life.

DIII - Water used in agricultural and industrial activities only.

DIV - Water used only by industries at the exception of thoseprocessing food.

5. Without going into the details of the regulations pertinent to eachclass of water bodies, one could summarize the Mexican standards of waterquality as outlined in the table below:

Table 1: Acceptable Maxima and Minima of Water Quality

- Solids which can sediment Less than 1 milligram per liter

- Dissolved oxygen More than 4 milligrams per liter

- oil and grease Less than 70 milligrams per liter

- Floating materials None which could be retained bya 3 mm mesh screen

- Temperature 35 centigrade at most

- PH 4.5 to 10.0

6. The existing legislation on air quality is rather scanty in that itonly regulates the concentration of solids in suspension. This is of a limitedinterest to Tabasco, which only has a cement plant at present although thereare plans for another one in the near future. The larger scale industrialdevelopment of Tabasco refers to agro- and petrochemical industries which havean atmospheric impact by far not confined to the sole emission of solids. Aproposal of ECO-INGENIERIA, a consulting firm which studied the environmentalimpacts of Tabasco industries 1/ at the request of the Secretary of Agriculture

1/ "Estudio para la Evaluacion Inicial del Deterioro Ambiental del Estadode Tabasco y Establecimiento de un Programa Continuo de Monitoreo endicha Entidad" - Enero de 1979.

- 57 - ANNEX IPage 3

and Hydrological Resources (SARH), is to fix the following limits on theconcentration of chemicals in the emission of industrial smokes.

Table 2: Proposed Atmospheric Standards

Components Concentration Time Span

(mg/m ) (Hr)

- Carbon monoxide 30.000 24- Sulfur oxides 0.365 24- Nitrogen oxides 0.200 24- Hydrocarbons 10.000 24- Solids in suspension 0.150 24

7. There is no indication yet as to when the above regulations or otherson the tolerable levels of chemicals in the air will be accepted. However,once the government agrees on appropriate standards, it will still have toimplement some sort of procedures to force the industries to comply to them.This is a critical issue which keeps on being overlooked in the successiverevisions of the Mexican environmental law. At present, the responsibilityfor implementing this law is shared by the Secretary of Health and the Secretaryof Agriculture and Hydrological Resources (SARH); so far the duplication ofthe studies that they or other governmental institutions in charge of theprotection of the environment have sponsored is more striking than the coor-dinated results of their joint field activities. In fact, their main taskseems to have been the calculation and collection of fines from pollutingentities. One must admit, however, that the law itself does not include anysort of measures to deter industries from contaminating or to encourage themto restore the environment. These sorts of measures could very well befostered by regional governmental agencies like basins agencies, which wouldcertainly be in a better position than the central government to balance theregional needs for economic development with the economic costs of localenvironmental resources.

III. SOURCES

8. The discovery of major oil fields in the State of Tabasco and theneighboring State of Chiapas has given a definite thrust to the local economicactivity. Both states account for 75 percent of the natural oil productionthis year. However, hasty industrial and urban developments have caused somealready discernible damages to the environment. They were identified by anIBRD's mission which visited Mexico in July 1978. The mission also looked atthe components of urban development relevant to the environment like watersupply, sewage disposal, solid waste disposal, drainage and flood control. 1/

1/ Refer to Mr. Eigen's report, dated August 11, 1978.

- 58 - ANNEX IPage 4

The present report will therefore deal with the direct effect Tabasco indus-trial activities have on the state natural resources.

A. Traditional Industrial Activities

Description

9. The industrial vocation of Tabasco originated in its traditionalagricultural, cattle raising and fishing activities. It was and still is anindustry of transformation centered on the manufacturing of food products andbeverages. Most of the undertakings are small, except for a few plants eitherprocessing sugarcane and cacao or packing meat. For this reason, the Ecoplan,published by SAHOP in October 1978, reckons with 145 plants represented thenabout 50 percent of Tabasco's industrial investments, half of which beingimparted to the sole sugar industry. SAHOP classifies them in four groups:

- food industries: 78 plants- sugar industry: 6 plants- construction materials: 47 plants- others: 14 plants

10. The main centers of activities are listed below, in a decreasingorder of importance (also, see Map 1):

- Villahermosa- Cardenas - Huimanguillo- Tacotalpa - Jalapa- Comacalco - Paraiso- Frontera- Jonuta- Balacan- Tenosique

11. The distribution of activities by centers is best illustrated byMaps 2 and 3. Most transformation centers are located on the main productionareas which actually surround an enclave of the State of Chiapas in Tabasco,apart from the fishing and fishcanning centers of Frontera in the north ofthe state as well as the agricultural centers of Balancan and Tenosique inthe east.

Nature of Ecological Impacts of the Traditional Industries

According to SAHOP, the major environmental problem created byTabasco traditional industries is water pollution.

12. Food and sugar industries are mainly contributing to decrease thelevel of oxygen dissolved in rivers or water bodies in the vicinity of their

- 59 - ANNEX IPage 5

sites by discharging effluents rich in organics and solids which generallyare not biodegradable. Also, these effluents often have a temperature muchhigher than that of the receiving bodies. The difference of temperaturehinders the natural water regeneration process by inactivating the bacteriaswhich are naturally present in the water bodies and have the capacity ofpurifying water.

13. It is, however, the sugar industry which has, by far, the worstimpact on Tabasco rivers. The reason for it is threefold. First, it ownsthe largest industrial units, more than one third of today's Tabasco indus-trial investments. Second, it consumes massive amounts of water, which ofcourse multiplies the risk of contamination. Third, its polluting capacity,mainly through the discharge of organics, is high. In addition to the generalcharacteristics mentioned above, sugar plants effluents contain also highquantities of sub-products of bagasse and honey which cannot crystalize, hencecannot be cleared from water by simple sedimentation. They require a moreelaborate treatment through coagulation by chemicals or resins prior tosedimentation.

14. To our knowledge, sugar plants, if not other food transformationplants, are equipped to carry out this sort of waste water treatment. Themission visited the installations of one of the largest sugar plants ofTabasco, at Benito Juarez, in the industrial development of Plan Chontalpa(Municipality of Cardenas). But their degree of operating inefficiency isquite alarming, as it will be shown later in the report. It was impossibleto establish whether the inefficiency was due to the undersizing of theinstallations, to their lack of maintenance, or to their being simply by-passed since they constitute a cumbersome and non-productive operation.

15. Among the two last groups of industries listed by SAHOP under con-struction materials and others, the impact quarries have on their environmentis only worth mentioning. The rapidly increasing need for constructionmaterials in the state has hastened the pace of quarry exploitation, result-ing in the destruction of the local vegetation and eventually in variousdegrees of ground erosion which modifies both the stability and fertilityof soils to the extent of making any attempt to restore the land doomed tofailure. Also, the preparation of the extracted materials ready for construc-tion is generally done near quarries' sites in elementary calcination plantsemitting smokes containing high concentrations of solids in suspension andtoxic gases like carbon monoxide and sulfur dioxide. Quarries are mainlylocated in the south (Tacotalpa) and in the east of the State (Tenosique).Both Tacotalpa and Tenosique are rather well developed agricultural areasproducing corn, rice, beans and sugarcane.

Localization and Evaluation of the Pollution Created by Traditional Industries

16. ECO-INGENIERIA was requested by SAHOP, in the course of 1978, togive an initial estimate of Tabasco level of pollution. The report they pub-lished in January 1979 confirms the high polluting capacity of sugar plants.In fact, some of the state rivers, which collect their industrial effluents,have reached such a low concentration in dissolved oxygen that the aquatic and

- 60 - ANNEX IPage 6

sub-aquatic life is already endangered. If their present degree of degradationdeteriorates further the rivers will become soon unsuitable for urban watersupply. The existing situation is summarized in the table below.

Table 3: Environmental Impacts of Sugar Plants and Food Plants

Location ofOrigin: Sugar Plants Endangered Rivers Potential Economic/Social Costs

Santa Rosalia Santana Laguna Machona = fish +oyster beds

Benito Juarez Naranjeno Laguna El Carmen = fish +oyster beds

Industrial Plan Chontalpa San Felipe Laguna El Carmen = fish +oyster beds

Huimanguillo Grijalva (or Mezcalapa) Villahermosa = urban development

Dos Patrias - La Union) Tacotalpa Rich agriculture land +Progreso - Santa Rosa ) Villahermosa = urban development

17. Lagoons Machona and El Carmen are linked by another lagoon parallelto the coast, lagoon Pajonal. Water samples of the three lagoons wereanalyzed by ECO-INGENIERA. Their concentration in dissolved oxygen wasrather low, some 5 milligrams per liter, yet above the minimum (4 milligramsper liter), recommended by the Mexican ambiental law. It would therefore notbe so alarming if it were not for:

(i) The size of the lagoons which is large enough to supposedly allowfor a good self-regeneration capacity (water samples wereapparently taken in the center of the lagoons).

(ii) The state of the three main rivers draining most of the effluentsof the industrial site of Plan Chontalpa into the lagoons.

18. The river Santana which flows in lagoon Machona, and rivers SanFelipe and Naranjeno which flow in lagoon El Carmen, leave the Plan Chontalpaarea with oxygen concentrations ranging from 1 milligram/liter to 0 milligram/liter. 1/ Also, their regeneration capacity has become extremely low contraryto what is currently stated by the management of the industrial development ofPlan Chontalpa. Thus, a few miles upstream the junction between rivers and

1/ The standard methods of measuring dissolved oxygen concentrations do notallow to detect any oxygen in the river Santana between Plan Chontalpaand the village Santuario, 10 kilometers downstream.

- 61 - ANNEX IPage 7

lagoons, measured oxygen concentrations are no higher than 1.5 milligram/liter.As a result, besides lowering the overall oxygen concentration in the lagoons,the flow of insufficiently oxygenated waters is bound to change their normalcurrents as well as cycles of exchange, modifying then the general ecologicalbalance of the lagoons. The mission, however, was neither able to assessthe dynamics of the lagoons' degradation process nor was it in a position tocost the damage in their breeding grounds for commercial fish (shrimp) andshells (oysters), which are directly impaired by the industrial activities ofPlan Chontalpa. Both above-mentioned points are of critical importance sincethe lagoons have an economical as well as ecological significance and anywater contamination process, once too far advanced, is rather difficult andcostly to reverse.

19. The Tacotalpa and Grijalva rivers are somewhat less polluted althoughat some points the second one is very poor in oxygen, mainly in that part ofits course called Mezcalapa, upstream Villahermosa. Anyway, a worsening ofthe present degradation of both rivers would rapidly have dramatic economicand social repercussions since Villahermosa, the main urban center of Tabasco,is located at the junction of Grijalva and Tacotalpa and two-thirds ofVillahermosa's water supply comes from an intake at the Grijalva river. TheTacotalpa river has proven so far to have a flow abundant enough to drain theindustrial effluents of food and sugar plants without registering too drastica drop in oxygen concentration. It is not foreseen that the planned industrial-ization of Tabasco will further endanger the Tacotalpa river.

20. The same does not apply to the Grijalva river which will soon becomethe state river the most exposed to industrial contamination. It first flowsacross the industrial sites of Huimanguillo and Cardenas, that concentratemostly in food, fruits and sugarcane transformation activities. The municipal-ity of Huimanguillo, which is an already important sugar producing center inTabasco, will soon count with another sugar plant of a capacity equivalent tothe total sugar production capacity already installed in Tabasco. In fact,some Mex$ 530 million worth of machinery and equipment have already beeninvested in the new plant. It is rather difficult at present to estimate thetoll to be levied on Grijalva waters by the expansion of Huimanguillo sugaractivities. It certainly will be a function of the stand taken by Huimanguillomunicipality as to the tolerable increase in local pollution, and the reachedcompromise between the municipality and the National Organization of SugarIndustries to construct the new plant with some kind of waste water treatmentequipment.

21. Before reaching Villahermosa, the Grijalva river drains waste watersand spills from the developing oil fields of Reforma and from PEMEX petrochemi-cal plant of Cactus. Although PEMEX is still completing its construction, thisplant has already been in operation for a few years, fractioning gas intobasic hydrocarbons monomers like metane, etane, propane, butane, and pentanewithout disposing of its effluents in sewage basins. Reforma and Cactus areboth in the State of Chiapas, but must not be located more than 20 kilometersaway from Grijalva river's bed.

- 62 - ANNEX IPage 8

22. PEMEX plans on erecting soon, at Luis Gil Perez, the same type ofpetrochmical plant as in Cactus. Assuming the choice of Luis Gil Perez as apetrochemical site is irrevocable, the municipality of Villahermosa will haveat least to change its water intake, presently at the Grijalva river. Thereasons for it are numerous. Luis Gil Perez is located some 15 kilometersupstream Villahermosa, on that branch of the Grijalva river which has retainedthe lower flow after the river has forked into one main stream called Carrizalriver and a smaller stream which keeps the name of Grijalva (also calledMezcalapa on some maps). This part of Grijalva already contains very littleoxygen, 0.9 milligrams per liter, at the level of Reforma. Further dischargesof industrial effluents between Reforma and Villahermosa do not give a chanceto the river to regenerate before reaching the state capital, as confirmed bythe analysis of water samples taken by ECO-INGENIERA a few kilometers awayfrom Villahermosa. By the time the petrochemical complex is erected at LuisGil Perez it will be hardly possible to treat its effluents to the extent ofeliminating all potential sources of contamination of Villahermosa's mainwater supply. Also, one should always reckon with accidental oil spillsespecially in regard to the present operating efficiency of PEMEX. Therefore,the exposure of Villahermosa's primary source of water supply to pollution isvery high and ways of protecting it should be devised soon.

B. New Industrial Activities - Petroleum and Gas

Description

23. The activities of the government-owned petroleum company, PEMEX(Petroleos Mexicanos) in the State of Tabasco dates back to 1958, whenthe exploration of the coastal lagoons of the Tonala basin (eastern part ofTabasco) and of the Usumacinta basin (western part of Tabasco) was initiated.Since most of the oil was closely associated with gas, PEMEX installed separa-tion units 1/ in La Venta (Tonala basin) and in Ciudad PEMEX (Usumacintabasin). Gas and oil thus separated were then transported by pipelines out ofthe state.

24. Since then, there has not been any fundamental changes in PEMEX'sactivities in Tabasco. They remain oriented primarily towards oil explorationand production. Recent discovery of major oil fields have ranked Tabascoamong the main sources of oil and gas for the Mexican states. The major oilfields identified by PEMEX at present are listed below.

- Zone La Venta (Eastern Tabasco)

- Axis Barra de Tupilco - Sitio Grande (Center of Tabasco)

1/ In Tabasco, they are referred to as petrochemical plants although they donot produce basic hydrocarbon monomers. They simply condition gas andoil to be readily used as feedstock by refineries and petrochemicalcrackers.

- 63 - ANNEX IPage 9

- Axis Nuevos Lirios - Ciudad PEMEX (Wlestern Tabasco)

They account for some 50 percent of the Mexican production of oil and gas (seeTable 4). The main pipelines stretch east-west, from Ciudad PEMEX to Veracruzrefineries and petrochemical plants of Coatzacoalcos via Villahermosa, Cardenasand La Venta.

25. PEMEX drilled some 2,300 oil wells in the sixties and only about 150in the seventies. The recent discoveries of the Reforma oil fields (enclave ofnorthern Chiapas into Tabasco State) will necessitate the installation of 300to 500 oil drilling rigs per year. PEMEX's intensive drilling program concernsa diamond-shaped area cornered on west and east by the cities of Cardenas andVillahermos-, and on south and north by Sitio Grande and the to-be-created oilport of Dos Bocas. In this area, PEMEX intends also to intensify its trans-formation activities. A petrochemical plant producing basic monomers (likeetane, butane, etc.) from gas is under completion at Cactus, between SitioGrande and Reforma--in northern Chiapas. A similar plant will soon be erectedin Tabasco, near Villahermosa (Luis Gil Perez). Both plants will constitutean important source of basic monomers readily available to private enterprises 1/eager to undertake on the production of secondary petrochemicals. Therefore,the area, defined earlier, is bound to attract transformation industries ofpetroleum products unless it is decided by the state authorities not to fosterthe implantation of secondary petrochemistry on its grounds. 2/

1/ A Mexican law, existing since 1959, has divided the 'etrochemical industryin two branches of activities. One, called basic petrochemistry and pro-ducing the main hydrocarbon monomers and some intermediates, is exclu-sively controlled by the Government, through its company PEMEX. Theother one, called secondary petrochemistry, is open to the privatesector, to the extent that the private enterprises venturing in thisfield of activities have at least 60 percent of their share owned byMexicans.

2/ As said earlier in the report, the centers of Cardenas, Cunduacan,Comalcalco, Villahermosa and Sitio Grande, situated on the so-called"diamond shaped area," are already active at transforming food products,fruits and sugarcane. It is not yet clear whether traditional andpetroleum activities can develop harmoniously on the same grounds, orwhich activities will prevail upon the others in case of incompatibility.

Table 4: TABASCO: Oil and Gas Daily Production (PEMEX figures)

OIL GAS

Oil Fields Number of Wells Cubic Meters Barrels (lB142 gal) 100 Cubic Meters Millions Cubic Feet

Samaria 33 49,436 310,952 107,528 380

Cunduacan 21 35,392 222,610 56,990 201

.'gave 7 4,708 29,613 51,035 180

Iride 7 7,915 49,785 11,540 42

^xiacaque 10 11,461 72,089 18,021 64

Platanal 1 118 742 354 1

Paredon 1 402 2,529 1,077 4

Giraldas 2 1,128 7,095 8,657 30

Rio Nuevo 2 1,595 10,033 5,235 18

Total 84 112,155. 705,448 860,617 920

NOTE - NATIONAL PRODUCTION - Crude Oil - 1,383,278 Barrels per dayAssociated Gas - 1,961 Million cubic feet per dayNon Associated Gas - 815 Million cubic feet per dayTotal Cas Production 2,776 Million cubic feet per day

- 65 - ANNEX IPage 11

Nature of the Ecological Impact of Tabasco Petroleum Industry

26. Since at present PEMEX is only extracting oil and gas from Tabascoundergrounds, its operations could very well have a relatively small impacton its surroundings if only they were to be carried out in an orderly fashionand were also the object of a concerted action with Tabasco authorities.Unavoidable, of course, are the direct and indirect uses of the land forexploration and exploitation: implantation of oil rigs, access roads, oil/gasseparation batteries, pipelines, etc.

27. Although PEMEX says to be under Mexico's constant pressure toincrease its production, it should be compelled to position its new oil rigssuch as to avoid contaminating the aquifer by perforating the protectivegeological strata, or cau 3ing too disastrous interferences with lakes andmarshes systems in Tabasco wetlands which have a high ecological and economi-cal significance.

28. In the meantime, PEMEX could easily avoid some of the direct degrada-tion caused on its operating grounds by the improper construction and use ofcatchment basins for oil spills and lubrification liquids during drilling, bythe hasty laying of oil and gas pipelines proned then to rupture and at lastby the inadequate restoration of drilling sites and pipelines routes.

29. Oil spills especially can bear striking, long-lasting effects bothon land and fresh water bodies, considering that one cubic meter of oil canform a thin film on an area of 20,000 square kilometers. At the surface of alake, such a film acts as a porous membrane and slows down considerably theoxygen exchange between air and water; this phenomenon can endanger a lake'saquatic life by lowering its overall oxygen concentration. An oil film hassuch a long lifetime that it should rather be removed mechanically by "skim-ming," "sponging" or "vacuuming" equipments. PEMEX does handle such equipmentsin case of important oil spillage during extraction, but the team which is incharge of protecting Tabasco environment is clearly understaffed as well asunder-equipped to face the repeated occurrence of spillage, endemic to PEMEXoperations.

30. When oil is spilled in rather turbulent waters, it is almost impossi-ble to prevent oil emulsification, and rather difficult then to separate oilfrom water. With sufficient holding time, the oil can rise to the surface andform a film to be skimmed off eventually. There are also separators whichare based on sound hydrodynamic principles like that developed by the AmericanPetroleum Institute. It is, however, a widely accepted fact that the mosteffective, while least costly, way of separating oil from water is to preventthem coming into contact! Considering PEMEX plans to multiply the number of

- 66 - ANNEX IPage 12

wells to be drilled in Tabasco and to implement a program of second re-covery, 1/ the State should imperatively get governmental support to forcePEMEX to observe the Federal regulations on water pollution that otherwisewill soon reach unacceptable proportions.

31. Among other future planned activities of PEMEX in Tabasco, petro-chemistry is the one which will have the most pervasive effect on its surround-ings unless its industrial effluents discharge is strictly controlled. Theprimary pollution problem in petrochemical plants today is sulphur oxides (SO2)emitted by furnaces burning residual fuel oil and by catalytic desulphurisationunits. Mexican oil and gas are highly associated with sulphur, yet there isno legislation in Mexico restricting the amount of So2 desulphurisation unitscan emit. Consequently, it would almost be within PEMEX discretion to installsulphur recovery plants to convert hydrogen sulphides into elemental sulphurand decrease the amount of pollution, rather than burning them into So2 if itwere not for the corrosivity of the gas which is detrimental to PEMEX's owninstallations.

32. Another polluting aspect of petrochemical plants is the smallquantities of cyanamides phenols and mercaptans (derivatives of hydrogensulphides) that are present in the liquid effluents of the catalytic desul-phurization units. Although in small amounts, they clearly endanger fishwaters and urban waters, and cause noxious odors. This danger is apparentlyconsiderably reduced when the effluent is discharged into an open estuary orin the sea which has a high dilution effect and contains many types of bacteriacapable of oxidizing hydrocarbons, an enormous capacity for self-purification.Nevertheless, this capacity is limited as witnessed by the estuary petroleumsites of Coatzacoalcos-Miniatitlan, in Veracruz, where PEMEX's refinery andpetrochemical plants caused dramatic levels of pollution.

33. In the inland areas, like at Cactus in Chiapas and possibly at LuisGil Perez in Tabasco, aqueous effluents will most probably require processessuch as sulphide oxidation and biological oxidation. At the time of our visitto Cactus' petrochemical plant, PEMEX was proceeding with the construction ofsewage basins, although the plant had already been operating for a few years.We could not find out whether Cactus was going to be equipped with a waste

1/ A time comes in the life of an oil field when the natural pressure of thereservoir has declined to an extent where it is no longer sufficientlylarge to force the oil out of the pores of the rock into the bottom of thewell. This stage can be reached long before the greater part of the oilhas been recovered from the reservoir (in some cases, 80 percent of thetotal quantity originally present in the reservoir can be left behind inthe ground). This state of affairs has led to the development of artifi-cial means of forcing oil out of the pore spaces of the reservoir rock,for example, using direct displacement with another fluid. The oil whichis forced out is called "second recovery" and the fluid chosen by PEMEXin Tabasco is water.

- 67 - ANNEX IPage 13

water treatment plant, utilizing some sort of oxidation process. In any case,when PEMEX comes to erecting a petrochemical complex near Villahermosa, thehandling of SO2 emissions and of the aqueous effluents will obviously be twocritical issues which will have to be discussed with Tabasco EnvironmentalOffice in order to spare the urban or economic life of the capital of Tabascoany disastrous consequences.

Localization and Evaluation of the Pollution Water byTabasco Petroleum Industry

34. To date, some 5,000 hectares or 25 percent of Tabasco superficieshave been directly or indirectly taken over by PEMEX for its exploration andexploitation activities. As said earlier, their main polluting effect hasbeen on water. The concentrations in dissolved oxygen, oil and grease measuredby ECO-INGENIERIA on the sides mentioned below are quite unacceptable, con-sidering the limits fixed by the Mexican environmental legislation.

Table 5: Sites Polluted by PEMEX Activities

Site Polluting Source

Laguna el Limon Ciudad PEMEX (Separation Units)Laguna Mecoacan )Rio Chocozapote )Rio Cuxcuchapa ) Oil wells in wet landsArroyo de La Venta

Two other sites, namely Rio Puxcatan and Rio Tonala, have already been affectedby PEMEX operations but not to the same extent than the other sites. Detailsof water samples analysis performed by ECO-INGENIERIA are displayed in Table 6.The important oyster beds and fish breeding grounds of Mecoacan Lagoon are.clearly endangered. The situation can only worsen with the construction ofPEMEX oil port, at Dos Bocas.

C. Costs

35. PEMEX and the National Organization of Sugar Industries have not sofar shown the highest concern for environment protection. Hence they shouldbe forced to build (and operate) their newest plants according to federalregulations since it has proven to be less costly to equip plants with allnecessary devices to prevent industrial contamination at the time of construc-tion rather than a posteriori. It is nevertheless doubtful that either PEMEXor the National Sugar Organization agrees to do so, regardless of the compara-tive cost of investing in non-productive equipments or of being fined, on thegrounds that they are already the main contributors to the economic developmentof Tabasco.

- 68- ANNEX IPage 14

36. As a matter of fact, there has been too few attempts at quantifyingthe economic benefits of industrial development in Tabasco and the correspond-ing economic costs of deteriorated natural resources. To my knowledge, theonly study, existing on this matter of critical importance, was done in 1974by the Subsecretary of Plannification of SARH. It was calculated then thatthe annual costs of industrial and urban centers 1/ waste waters treatment inTabasco would amount respectively to 12 and 15 million pesos, summing up to27 million pesos or about 0.4 percent of the total gross value added (includingcommerce) at the time. The calculation was based on unit costs of water treat-ment which had been developed hy the General Direction of Water Uses andPrevention of Contamination. There were probably straight engineering coststhat did not account either for particularities of local situations or forpotential contamination between industrial sites and municipalities' wastewater collectors. These costs should be updated, and especially should takeinto account aqueous effluents from oil fields and petroleum industries.

37. The same study suggested that the State of Tabasco could provide forthe necessary water treatment plants and prorate both investment and operatingcosts to the volume and quality of the waste waters discharged by industriesand urban centers. The whole set-up was to be supervised by a WaterContamination Control District, a semi-public organization located inVillahermosa. This organization is apparently still in the process of beingdeveloped. It would theoretically present the advantage of having on thesame board representatives of all the major private and public entities ofthe state. Board members could thus discuss environmental problems specificto Tabasco and negotiate the relative price of protecting or regenerating theenvironment, assuming that the benefits and costs of the state industrialdevelopment will have been examined by them.

1/ They include small- to medium-size industries implanted on urban areas,hence using urban facilities.

TABLE 6 - TABASCO WATER BODIES AFFECTED BY PEMEX OPERATIONS

Quality Measures, in miligrams per liter

OD Fats and Oils DQO DBO

Type Location Receiving Body MIN AVER MAX MIN AVER MAX MIN AVER MAX MIN AVER MAX

PEMEX Cryogenic In Macuspana,

Petrochemical Plant by CD. PEMEX El Limon Lagoon 1.0 4.9 8.0 2.82 136.5 628 4 70.87 488 1.0 3.23 8.0Plant

PEIMEX Cryogenic In Macuspana,Petrochemical Plant by CD. PEMEX Puxcatan River 3.0 5.53 7.0 5 74.65 466 4 17.7 40 1.0 1.91 6.0

Plant

PEHEX Cryogenic Huimanguillo,Petrochemical Plant Village of La Venta Creek 0 2.92 9.3 1.86 144.5 556.4 8 115.3 332 2.0 6.69 17.0

Plant La Venta

Ma;.allanes Oil F-ields Huimanguillo,| La Venta between La Venta & Chicozapote River 0 0.09 1.0 0.43 75.94 185 55 151.8 764 2.0 6.69 17.0

Sanchez Magallanes

Samaria Oil Fields In Conduacan,Jalpa and Nacajuca Cuxcuchapa River 0 0.5 1.0 226 276 326 12 26.5 41 2.0 3.75 7.0 l

La Venta Cryogenic In Huitmanguillo,Petrochenical Plant Village of Tonala River 1.0 2.92 7.0 2.31 60.4 160 8 48.9 140 1.0 2.73 5.0

Plant La Venta

Oil-Field In Paraiso, on the

road Chichicapa- Mecoacan Lagoon 0 5.57 10.0 0 101.3 422 97 279 781 1.0 3.82 7

Chiltepec

- 70 - ANNEX IIPage 1

THE COPRODES

State Development Committees

As a means of ensuring the integral nature of national developmentfounded on state and regional development, a presidential decree datedMarch 11, 1977 ordered the strengthening of the State Development Committees,thereby creating a state-level planning system which ensures greater consis-tency between state development projects and the national needs and objectives.These committees, which are public financially autonomous bodies, advise on andcontribute to planning and programming at state and regional level in conjunc-tion with the various sectors of the community.

The goal of each of these committees is to promote the balancedgrowth and orderly development of the particular state, in keeping with itspotential and the needs of the various sectors and regions comprising it; eachcommittee also seeks to generate and promote new ideas, programs and projectswhich reflect the needs of the population and focus on meeting requirements inthe spheres of employment, capital formation and economic growth activities.

Each committee, chaired by the State Governor, is made up of:a coordinator appointed by the chairman, whom he represents; a technicalsecretary, appointed ex oficio, who is the state representative of Secretariatof Programming and Budgeting; the highest-ranking officials representing thefederal government in the state; officials of the state Government, appointedby the Governor; representatives of the municipal authorities wishing toparticipate, representatives of the social and private sectors wishing toparticipate; any federal senators or deputies invited to participate by thechairman.

Each committee, which meets at least once a month with its chairman,has the following functions, among others, in the planning sphere:

1. To propose short, medium and long-term plans for the social andeconomic development of the state;

2. To propose to the federal and state governments the agreementsit regards as necessary for the achievement of that development,and to coordinate them so that they lead to the integraldevelopment of a region;

3. To stimulate the rational development of state resources;

4. To make proposals to the federal executive branch regardingthe administrative and financial measures that will enable itto carry out its activities;

5. To resolve on the establishment of sectoral and regional sub-committees and working groups;

- 71 - ANNEX II

Page 2

6. To facilitate and coordinate the execution of works which arethe responsibilities of the various federal agencies operatingin the state.

The functions of the coordinator of each State Development Committeein the planning sphere are the following:

1. To synchronize the formulation and updating of state developmentplans, channeling all necessary work to the committee;

2. To promote and provide the impetus for participation by thefederal agencies, the departments of the state government, themunicipal authorities and the social and private sectors inthe execution of state programs and projects;

3. To identify the production potential of, and the state's need for,public and private investments;

4. To represent the committee before all official entities and privateor public institutions, whether national or international, withinthe framework set by the chairman of the committee.

The functions of the technical secretary of each State DevelopmentCommittee in the planning sphere are the following:

1. To actively facilitate formulation of the state development planby providing the technical support needed, and to shephered itthrough the approval process;

2. To support those tasks connected with the promotion of the projectsbeing carried out within the state through the committee;

3. To facilitate and organize the provision of such advice on aspectsof state development as may be needed by the state government;

4. To ensure that the activities of the technical secretariat arecarried out in accordance with central procedures and guidelines,and to coordinate them so that they are consistent through thestate;

5. To promote and supervise, in conjunction with the coordinator,the execution of such works and the provision of such services asare included in the state's annual public investment program.

In the case of the State of Tabasco, "operational machinery" hasbeen set up whereby the various components of the planning and evaluationprocedure are made the subject of consultation between all agencies and agentsinvolved in that state's development action.

- 72 - ANNEX IIPage 3

The steps which make up this operational process are as follows:

1. All public and private agencies engaged in common pursuits in thesame sector are grouped together as functioning in one of thelimited number of sectors recognized within the framework of thepolicy enunciated by the President of the Republic. (Each squareappearing on the accompanying chart represents one sector.)

2. The above-mentioned policy recognizes ten sectors, and these sectorsform the arena of action of the Tabasco State Development Committee.They are:

Production:

Agriculture and forestryIndustryTourismFisheriesOil

Support:

Commerce, communications and transportation

Social:

HousingEducation, science and technologyHealth and social security -

3. The sector groups meet regularly on Tuesdays and Thursdays ofevery month. When the chairman of the Tabasco Committee, COPRODET(in other words, the Governor of the State) and officials from thecorresponding department of the central government have attendedthese meetings, it means that the criteria of all participants canbe integrated and unified, so that fundamental and operationaldecisions may be taken for the particular sector.

The chairman of Tabasco State Development Committee extended therange of the committee's normal functions by adding the following:

(a) planning, programming and projects of the state government;

(b) coordination of municipal planning, programming and projects;

(c) coordination in the case of certain actions undertaken by theproject and social sectors.

- 73 - ANNEX IIPage 4

Explanation of the Accompanying Chart

The basic elements are: earlier plans formulated by the state,public demands (public consultation), inventory of works and services, presentsituation in the State, national goals, state goals.

A basic information package was devised which, when employed inconjunction with the methodology and general guidelines provided, enabledeach sector, by following the channels laid down, to carry out its planning,programming and project activities.

These activities are spread over a whole-year. For example, theearly months are occupied in drawing up a plan for the period and in definingand recasting the state's objectives, targets and strategies to fit in withnational and state policies (Phase 1).

Subsequently, investment programs are drawn up to reflect the resolu-tions of the Tabasco State Development Committee, and negotiation takes placeat the various decision-making levels. Once this procedure is completed,investment is programmed to reflect resolutions taken at plenary sessions ofthe committee (Phase 2).

Projects flowing from the programs approved by the committee areprepared and then negotiated at the various decision-making levels (Stage 3).

In order to ensure the uniformity of the criteria applied, theTabasco Committee meets in plenary session after each of the sector actionsillustrated in the accompanying chart as Phases 1, 2 and 3, the purpose ofthis being to scrutinize the overall coherence of the work carried out in eachseparate sector. Any necessary adjustments are made before the next phase isstarted.

The plans, programming and projects as approved by the committeefall into the following spheres:

- Normal (or Direct) Federal Program

- Direct State Program

- Direct Municipal Program

- Private Investment Program

- Participation by the Social Sector

- PIDER

- CUC

- 74 - ANNEX IIPage 5

- State-Municipal Agreements (2 types: construction and repair)

- Coplamar System

Subsequently, the investment estimates for each of these spheresare put through the necessary channels of negotiation at the various levelsof authorization.

The works and services authorized in each sphere are those that goon to the implementation stage.

Finally, monthly evaluations are made of all actions--by sector,agency responsible, program, etc.

This process provides information for submission to the plenary andsectoral meetings of the state development committee, which can then rapidlyorder any corrective measures necessary.

The work of evaluation also provides feedback for the entire system.

-75-ANNEX II

Page 6 of 6

Rxatin Public vorks Situatia Naciol Statelas Consult andi Goals Goals

L . _ . tation iServrices J tt

BASIC INFORMATION PACKAGE--. M.$ETHODOLOGY AND GENERAL

S e c t o r s S ec t o r s

UPARY-SESSION OF TABASCOPHASE STATE DEVELOPMT COMMITTE

1~etr . . . _......_

. -~~~~~~~~~~~~~~~~~~I 1.4 Q ~L ANN RINRG -

- STTDHS o e C t o r- -c 5

4> 1' - -. 4

PHAE ! PIIARXY SASS10) OF TABASCO H

2S| STATE -DEVELOPID3NT COMIATTEE-

1_ ,21 _I '. 4 E H

PR O GRA MMTI N G

S e c t o r e c t a r s

Fp .14~~~~~~~~~~~~~~~~

C,PLEiARY SESSION OF ABASCO PSflbAYDESELOPMENT ASCTEE |

PHASE 1 (4

3 ; 0

3~~~~~~~~~~~~~~~~~[

. 1 ~~~~~~~~P R O J E C T S|- f°

IMPLEMENTATION

M-;63TELY EVALUATTION

- 76 - ANNEX IIIPage 1

TABASCO: ILLUSTRATIVE MACROECONOMIC PROJECTIONS, 1979-1990

1. Projections of regional value added and expenditure are presentedbelow. These projections have essentially an illustrative value and whatthey purport to present is a possible medium-term scenario. On the basisof the 1973 regional input-output table and of data collected by the mission,a 1977 base year for value added was constructed and used as the referencepoint for the projections.

Table 1: TABASCO: Illustrative Projections of Regional Value Added

(1979 - 1982)

(Millions of Mex$)

1979 Prices1977 1979 * 1980 1981 1982

Agriculture, Forestry andFisheries 1/ 4,500 5,200 5,500 5,800 6,200

Industry 2/ (excl. oil andgas) 900 1,300 1,700 2,400 3,200

Construction 3/ 5,100 6,200 6,800 7,500 8,200

Commerce and Other Services 4/ 7,700 9,300 10,200 11,400 12,800

Government 5/ 400 500 550 625 700

Sub-total 18,600 22,500 24,750 27,725 31,100

Oil and Gas 6/ 43,700 81,000 107,000 140,000 163,000

Total 62,300 103,500 131,750 167,725 194,100

* The 1979 basis has been obtained by applying to the components of valueadded for 1977 the growth rates at the national level, with the exceptionof government and Oil and Gas (based on direct Tabasco data).

1/ Increasing on the basis of investment with a two-year lag and using anICOR of 4.

2/ Increasing on the basis of investment with one-year lag and an ICOR of 3.3/ Increasing at 10 percent per annum.4/ Increasing at the combined rate of agriculture, industry and construction.5/ Increasing at 10 percent per annum.6/ Projected assuming Tabasco value added is 66 percent of total national

production as projected in latest Bank economic report.

- 77 - ANNEX III

Page 2

2. The illustrative figures presented in Table 1 should not be con-sidered as a forecast of how Tabasco value added expenditures are likely todevelop because too many of the variables present a degree of uncertaintyso high as to make any real attempt to predict the future totally unrealistic.Regional value added, excluding oil and gas, is supposed to grow at a rateof about 11 percent p.a. between 1979 and 1982. In part this apparentlyvery high growth rate is the result of the steep rise in industrial valueadded as a result of the assumed high investment effort and of the ratherlow level in the base year. Value added in agriculture rises at slightlymore than 5 percent per annum which implies a good performance by this sector.On the other side, one should keep in mind that the growth rate for thecountry as a whole is expected to be above 8 percent, which makes the per-formance of Tabasco fairly plausible given the special factors at play inthe state. Finally, as a result of these projections, total regional valueadded in Tabasco which excluding oil and gas was 0.8 percent of the countryvalue added in 1977 (2.7 including oil and gas) would rise by 1982 to 0.94percent (6 percent including oil and gas). The increase for the non-oil valueadded could look very modest but it should be kept in mind that without theoil linked expansion in industry and services Tabasco value added would haveprobably fallen further behind the rest of the country.

3. The expenditure side of the regional product as shown in Table 2,assumes that total consumption increases by less than 9 percent per annum,and investment, excluding oil, gas and petrochemical activities, rises at arate of 15 percent (total investment increases above 10 percent per annum).Excluding oil and gas, the regional accounts show a net trade deficit whichresults from the need to import most consumer goods and even more so capitalgoods. The sharp increase in the trade deficit projected for 1980 is essen-tially explained by the jump in investment, especially in the private indus-trial sector and in the oil sector, while the net trade deficit graduallydeclines in the following years both as a result of increased domestic produc-tion of a number of consumer goods and of increased exports of both agricul-tural and industrial products.

- 78 - ANNEX IIIPage 3

Table 2: TABASCO - Illustrative Projections of Regional Expenditure

(million of Mex$)

1979 Prices

1977 1979 1980 1981 1982

CONSUMPTION 15,000 19,000 20,600 22,300 24,100

Private 1/ 12,700 15,900 17,200 18,600 20,000Public 2/ 2,300 3,100 3,400 3,700 4,100

INVESTMENT 11,900 20,000 24,000 25,000 26,500

TRADE BALANCE 35,400 64,500 87,150 120,425 143,500

Excluding oil and gas -7,500 -16,500 -19,850 -19,575 -19,500

GDP 62,300 103,500 131,750 167,725 194,100

1/ Increasing at 8 percent per annum._/ Increasing at 10 percent per annum.

4. Any projection of what will happen in Tabasco between 1982 and1990 can only be significantly more illustrative than the 1979-1982 scenario,given the high uncertainty affecting most of the relevant parameters. Thescenario summarized in the following tables should in no way be consideredas an attempt to forecast the future but rather a basis for discussing thedevelopment strategy of Tabasco. As regards investment, the main assumptionis that PEMEX investment, including petrochemicals, will decrease from the1982 level of 16 billion to 12 billion between 1983 and 1986 and will thenremain at that level for the rest of the decade. Private and public invest-ment will increase at 8 and 6 percent per annum respectively, between 1982and 1990. As to value added, no attempt has been made to project oil produc-tion and what the figures show is a growth rate of 8.4 percent for non-oilvalue added per annum, with a basic increase in the role of industry at theexpense of agriculture, construction and services. The most interestingfeature resulting from the expenditure scenario is a decline in the net tradedeficit excluding oil which implies an expanded domestic productive basiseither for local consumption and inputs or for export.

Table 3: TABASCO - Illustrative Projection of Investment

1982-1990

(Million 1979 Mex$)

1982 1990 1983-1990 1983-1990

Public Investment 5,900 9,500 59,200 28

Agriculture 2,000 3,000 19,000 9

Housing and Urban Infrastructure 1,700 2,500 17,000 8

Transportation and Communications 1,200 2,000 11,200 5

Others 1,000 2,000 12,000 6

PEMEX and Petrochemicals 16,000 12,000 102,000 49

Private Investment 4,500 8,200 46,900 23

Industry and Tourism and Trade 3,300 5,700 32,000 17

Housing 1,000 2,000 12,000 6

Agriculture and Other 200 500 2,900 1

TOTAL 26,400 30,000 208,100 100

Assumptions:

(1) 8 percent average annual increase in private investment in 1983-1990.

(2) 6 percent average annual increase in public investment.

(3) PEMEX investment gradually decreasing to 12,000 in 1983-1986, and remaining

at that level thereafter.

- 80 -

Table 4: TABASCO - Illustrative Projection of Value Added

1982-1990

(Excluding oil)

(Million of 1979 Mex$) % of Total

1982 1990 1982 1990

Agriculture 6,200 8,500 20 14

Industry 3,200 13,000 11 22

Construction 8,200 13,000 26 22

Commerce and Services 12,800 23,200 41 39

Government 700 1,500 2 3

TOTAL 31,100 59,200 100 100

Note: The calculation is based on assumed annual growth rates as

follows:

Agriculture 4 percent, Industry 19 percent, Construction 6 percent,

Commerce and Services 8 percent, and Government 10 percent.

- 81 -

Table 5: TABASCO: Illustrative Projections of Regional Expenditure

(Excluding Qil)1982 - 1990

(millions 1979 Mex$)

1982 1990

Consumption 24_,l00 43,200

Public 4,l00 1/ 8,800Private 20,000 2/ 34,4oo

Investment 26,500 30,000

Trade Balance -19L500 -14L000(excluding oil)

TOTAL GRP 31,100 59,200

(excluding oil)

_/ 10 percent average annual increase.

2/ 7 percent average annual increase, equivalent to an averageof 3.2 percent increase in per capita term.

- 82 - ANNEX IIIPage 7

5. Finally, an alternative for the 1982-1990 period is presented inTable 6, based essentially on a "low" oil scenario which implies: (a) avery sharp decline in investment in this sector from Mex$ 102 to Mex$ 64billion; (b) a growth rate of the non-oil value added of only 5.5 percentper annum; and (c) a much lower net trade deficit than in the "high" oilscenario on the assumption that the reduced level of activity would imply areduction in exports of finished industrial products which would be nonethe-less more than offset by the corresponding decrease in imports of capitalgoods.

- 83 -

Table 6: TABASCO: Illustrative Projection of Investment and Value Added

under "low" Oil Scenario

(1979 Mex $)

1982 1990 1983 - 1990

Investment

Public 5,900 8.000 55,800

Agriculture 2,000 3,000 20,000

Infrastructure 2,900 3,500 25,800

Others 1,000 1,500 10,000

Pemex and Petroch. i6,ooo 40000 64,000

Private 4,500 6,ooo 41,8oo

Industry 3,300 4,000 29,000

Housing 1,000 1,500 10,000

Agriculture andothers 200 500 2,800

Total 26,4oo 18,000 161,6oo

% of total

1990 1990 1982

GDP (Excl.Oil) 31,100 47,700 GDP (Excl.Oil) 47,700 100 100

Private Consump- 1 3/tion 20,000 30,5001/ Agriculture- 10,700 22 20

Public Consumption 4,100 8,2002/ Industry-/ 10,300 22 11

Investment 26,500 18,000 Construction-/ 8,900 19 26

Net Trace Balance 19,500 9,000 Commerce6 2ndServices- 16,400 34 41

Government-/ 1,400 3 2

1/ Assuming 5.5 percent annual increase2/ Assuming 9 percent annual increase3/ Increasing at 4 percent p.a.vt~ TIcreasing at 16 percent p.a.5/ Increasing at 1 percent p.a.6I Increasing at 3 percent p.a.7/ Increasing at 9 percer.t p.a.

- 84 -

STATISTICAL APPENDIX

List of Tables

Table 1: Tabasco: Population by Municipality, 1970, 19772: Economically Active Population by Age, Sex and Activity3: Population, Number and Size of Settlements by Municipality, 19704: Population by Sex and Age Group, 1960 and 1970-795: Gross Regional Value Added and Production, 19736: Production and Value Added in Industry and Service, 19757: Yields of Main Agricultural Crops, 1970-788: Use of Land, 19789: Cultivated Area of Main Crops, 1971-7810: Production of Main Crops, 1971-7811: Value of Production of Main Crops, 1971-7812: Livestock Population, 1970-7613: Volume and Value of Forestry Production, 1973-7814: Volume and Value of Fishery Production, 1970-7815: Production of Oil and Gas, 1960-7716: Foreign Trade Balance, 1970-7617: Nominal and Real Minimum Wages, 1973-7918: State Revenues, 1975-7819: Structure of State Revenues, 1975-7820: State Revenues and Expenditures, 1973-7821: Gross Municipal Revenues, 197522: Gross Municipal Expenditures, 197523: Authorized Federal Investment, 1970-7624: Actual Federal Public Investment by Sector, 1971-7525: Length and Type of Roads, 1975-197626: Length of Railway Lines, 1975-197627: Registered Vehicles by Type of Service

- 85 -

Table 1: Tabasco: Population by Municipality, 1970, 1977

1970 1977 Rate of Growth

Balancan 28,226 39,350 4.8Cardenas 78,910 118,600 5.9Centla 42,882 52,036 2.8Centro 163,514 267,706 7.3Comalcalco 71,438 89,225 3.2Cunduacan 44,525 55,873 3.3E. Zapata 11,000 14,729 4.2Huimanguillo 70,808 93,347 4.0Jalapa 18,557 20,016 1.0Jalpa 29,799 34,281 2.0Jonuta 14,481 16,999 2.3Macuspana 74,249 87,274 2.3Nacajuca 21,806 29,536 4.4Paraiso 30,189 36,850 2.9Tacotalpa 21,277 24,779 2.2Teapa 20,128 24,678 2.9Tenosique 26,538 43,320 7.3

TOTAL 768,327 1,048,599 4.6

Source: 1970 Population Census and Comision Nacional para laErradicacion del Paludismo.

Table 2: Tabasco: Economically Active Population by Age, Sex and Activity Branch, 1970

Sex and Age Group Electricity Commerce Transport Service Government Other

TABASCO: 505 3,626 19,727 5,455 13,651

12 - 14 2 364 23 667 22 833

15 - 19 52 2,257 244 3,389 555 2,569

20 - 24 109 1,929 435 3,570 1,075 2,01825 - 29 103 1,488 494 2,895 899 1,72930 - 34 76 1,392 579 2,147 695 1,23735 - 39 66 1,452 608 2,041 621 1,30940 - 44 35 1,086 454 1,434 435 87245 - 49 24 866 301 1,096 380 79350 - 54 16 635 189 832 251 52955 and over 22 1,617 299 1,656 522 1,672

MALES 456 10,255 3,500 11,063 4,762 8,633

12 - 14 2 285 21 295 14 424 115 - 19 41 1,387 215 1,520 380 1,415 m

20 - 24 94 1,361 399 1,834 877 1,251 a25 - 29 95 1,192 470 1,727 787 1,17830 - 34 70 1,157 565 1,385 630 67435 - 39 61 1,227 599 1,206 578 91040 - 44 34 935 451 874 400 57145 - 49 23 733 300 675 355 55250 - 54 15 551 187 494 239 33255 and over 21 1,427 293 1,053 502 1,126

FEIALES 49 2,831 126 8,664 593 4,929

12 - 14 - 79 2 372 8 40915 - 19 11 870 29 1,869 175 1,15420 - 24 15 568 36 1,736 198 76725 - 29 8 296 24 1,168 112 551

30 - 34 6 235 14 762 65 36335 - 39 5 225 9 835 43 39940 - 44 1 151 3 560 35 30145 - 49 1 133 1 421 25 241

50 - 54 1 *.4 2 338 12 19755 and over 1 1%0 6 603 20 546

Source: 1970 Population Census

Table 2: TABASCO - Economically Active Population by Age, Sex and Activity Branch, 1970 (Cont.)

Oil

Sex and Age Group Total Agriculture Industry Mining Manufacturing Construction

TABASCO: 196,678 116,147 5,777 268 11,672 6,854

12 - 14 7,322 5,011 13 7 314 6615 - 19 31,582 19,057 517 57 1,942 95320 - 24 30,200 16,750 1,030 59 1,970 1,25525 - 29 25,941 14,485 1,012 44 1,654 1,13830 - 34 20,564 11,155 924 21 1,316 1,02235 - 39 21,318 12,016 849 28 1,370 95840 - 44 14,702 8,393 563 15 876 539

45 - 49 12,278 7,284 393 16 738 38250 - 54 8,431 5,136 194 10 450 18955 and over 24,340 16,855 282 21 1,042 352

1ALES 172,210 111,168 5,460 239 9,980 6,694 l_____ ___ .

-.4

13 - 14 6,007 4,617 11 6 269 63 115 - 19 25,961 18,034 452 37 1,560 92020 - 24 25,696 16,066 935 53 1,615 1,21125 - 29 22,973 13,972 957 40 1,435 1,12030 - 34 18,560 10,797 892 20 1,163 1,007

35 - 39 19,125 11,566 813 24 1,194 94740 - 44 13,205 8,081 853 15 760 531

45 - 49 11,078 7,022 377 16 651 37450 - 54 7,517 4,918 193 8 398 18255 and over 22,088 16,095 277 20 935 339

FEMALES 24,468 4,979 317 29 1,692 160

12 - 14 1,315 394 2 1 45 3

15 - 19 5,621 1,023 65 10 382 3320 - 24 4,504 684 95 6 355 4425 - 29 2,968 513 55 4 219 1830 - 34 2,004 358 32 1 153 1535 - 39 2,193 450 36 4 176 1140 - 44 1,497 312 10 - 116 8

45 - 49 1,200 267 16 - 87 850 - 54 914 218 1 2 52 755 and over 2,252 760 5 1 107 -13

Table 3: Tabasco: TOTAL POPULATION,NUMBER AND SIZE OF (Continued)

SETTLEMENT BY MUNICIPALITY, 1970

Size of settlement TARASCO | BALANCAN [ CARnPFAS CFNTLA CENTRO(inhabitants) - I I

Number Popula. Number Popula. Number Popula. Number Popula. Number | Popula.

I _________________ - - ___ _I______ ___._ I *_

1 141 768 327 76 28 226 93 78 910 62 42 882 164 163 514

1 _ 99 109 6 088 18 843 - - 5 334 12 601

100 - 499 643 179 591 46 11 044 43 14 569 36 8 997 122 32 956

500 - 999 264 182 855 5 3 455 36 25 364 10 6 146 24 17 701

1 000 - 2 499 99 142 456 5 6 596 11 16 027 8 10 849 3 4 344

2 500 - 4 999 13 43 822 2 6 288 2 7 307 2 6 490 1 3 005

5 000 - 9 999 6 39 571 - - - - - 1 5 342

10 000 -19 999 6 74 379 9 _ 1 15 643 1 10 066 - - OD

75000 - 99 999 1 99 565 1 - -- - 1 99 565 1

Table 3: Tabasco: TOTAL POPULATION,NUMBER AND SIZE OF SETTLEMENT BY (Continued)

MUNICIPALITY, 1970

| Size of settlement Con.a1calco Cuj.,.-u:8in Emiliano Zapata Huimanguillo Jalapa

(inhabitants8)., Nu(bers Popula. Number Popula. Number ' Popula. Number -|Popula. Number Popula._~ ~ ~ ~ Nme ______ Po,a .ube Popua

69 71 438 68 44 525 26 11 000 104 70 808 31 18 557

1 - 99 1 4 2 103 13 382 - - -

100 - 499 17 6 148 29 8997 10 2 082 55 16 015 15 4 257

500 - 999 32 22 192 30 20 549 1 784 32 20 761 12 8 434

1 000 - 2 499 16 22 520 6 10 479 1 1 330 15 20 320 .4 5 866

2 500 - 4 999 2 5 611 1 4 397 - - _ . _

5 000 - 9 999 - - - - 1 6 422 2 13 712 _ _

10 000 -19 999 1 14 963 _- - -_ _

.75 000 -_99 999 . _ _ _ _ _ _ _ _ _

co

Table 3: Tabasco: TOTAL POPULATION,NUMBER AND SIZE OF SETTLEMENT (Continued)

BY MUNICIPALITY, 1970

Size off settlement Jalpa Jonuta Macuspana Nacajuca Paraiso(inhabitants) Number Popula. Number Popula. Number Popula. Number Popula. Number Popula.

38 29 799 33 14 481 118 74 249 37 21 806 30 30 189

1 - 99 1 52 1 87 3 258 2 160 - _

100 - 499 23 7 023 23 6 775 87 25 188 13 3 399 11 4 118

500 - 999 11 7 715 8 4 873 19 12 608 17 12 057 11 8 848

1 000 - 2 499 2 10 224 - - 6 10 688 5 6 190 7 9 662

2 500 - 4 999 1 4 785 1 2 746 1 3193 - _

5 000 - 9 999 - - - - - - _ _ 1 7 561

10 000 - 19 999 _ _ . _ 2 22 314 _

75000 -99 999 _- -_

I

_ .~~~~~~~~~~~~~~~~~~~~~~~~~'

0

Table 3: Tabasco: TOTAL POPULATION, NUMBER AND SIZE OFSETTLEMENT BY MUNICIPALITY, 1970

(continued)

Size of settlement TACOTALPA TEAPA TENOSIQUE(inhabitants)

Number Popula. Number Popula. Number Popula.

63 21 277 33 20 128 90 26 538

1 99 9 624 2 151 40 2 489

100 499 46 12 696 23 6 243 44 9 084

500 999 6 4 067 5 3 729 5 3 572

1 000 2499 2 3 890 2 3 471 _ _

2 500 4999 _ _

5000 9999 _ 1 6 534 _

10 000 19 999 1 _ _ 11 393

75 000 99 999 _

Source: 1970 Population Census

Table 4: Tabasco: TOTAL POPULATION BY SEX AND AGE GROUP. 1960 AND 1970-79

Sex 'and Age Group lSe and Age Group 1960 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979

TABASCO 496 340 768 327 840 628 874 730 910 266 947 307 985 892 1 025 677 1 067 125 1 110 317 1 155 313

Males 251 052 389 396 430 051 446 864 464 370 482 607 501 566 521 446 542 151 563 720 586 184

0- 4 45 442 70 798 83 217 85 606 88 062 90 588 93 183 98 094 103 248 108 659 114 3385- 9 42 734 69 122 72 179 74 213 76 304 78 453 80 653 82 799 84 997 87 250 89 558

- 10 - 14 33 692 55 039 58 470 61 367 64 398 67 570 70 882 72 733 74 630 76 576 78 57015- 19 25 658 41 128 46 465 48 731 51 104 53 590 56 198 58 850 61 621 64 516 67 54220 - 24 20 390 29 894 35 592 37 685 39 890 42 212 44 648 46 690 48 825 51 057 53 39025 - 29 17 884 24 689 28 839 30 026 31 260 32 546 33 885 35 734 37 678 39 722 41 87030 - 34 12 832 19 532 23 320 24 382 25 489 26 643 27 846 28 865 29 921 31 015 32 15035 - 39 12 406 20 036 20 528 23 964 21 407 21 858 22 317 23 234 24 188 25 180 26 21140- 44 8 291 13 823 15 626 16 600 17 620 18 691 19 807 20 168 20 534 20 902 21 27445 - 49 7 189 11 649 11 678 12 285 12 922 13 591 14 291 15 150 16 050 16 995 i7 98550 - 54 5 92-3 7 971 8 561 9 04 8 ¶j S63 10 loG 10 631 11 208 11 7t 6 12 333 12 93855 - 59 4 765 6 250 6 359 6 628 6 906 7 194 7 489 7 914 8 363 8 838 9 33860 - 64 5 156 6 '147 5 842 5 782 5 722 5 661 5 600 5 823 6 054 6 294 6 54165 - 69 2 680 4 G16 4 699 4 798 4 899 5 003 5 108 5 051 4 994 4 935 4 87570 - 74 2 446 3 812 3 620 3 635 3 645 3 650 3 648 3 742 3 838 3 936 4 03775 and over 3 5644 4 890 5 056 5 114 5 179 5 251 5 330 5 393 5 454 5 512 5 567 NO

Females 245 288 378 931 410 577 427 866 445 896 464 700 84 326 504 231 524 974 546 597 569 129 l

0 - 4 44 207 68 808 80 546 82 851 85 220 87 656 90 156 94 907 99 894 105 128 110 6215- 9 41 263 66 052 69 261 71 492 73 794 76 171 78 625 80 671 82 766 84 910 87 105

10 - 14 31 008 52 293 55 854 58 736 61 756 64 921 68 235 70 251 72 327 74 464 76 663* 15- 19 26 842 42 867 45 177 47 249 49 416 51 680 54 055 56 671 59 407 62 270 65 264

20 - 24 23 079 32 079 34 331 36 586 33 965 41 476 44 122 45 949 47 852 49 834 51 89825 - 29 19 185 26 807 28 591 29 616 30 678 31 777 32 922 34 900 36 -984 39 180 41 49230 - 34 12 124 18 276 21 634 23 142 24 725 26 388 28 136 28 987 29 862 30 762 31 68735 - 39 11 679 19 493 19 154 19 511 19 873 20 239 20 612 21 891 23 233 24 640 26 11740 - 44 7 764 12 298 14 048 15 149 16 306 17 522 18 800 19 033 19 365 19 648 19 92845 - 49 6 759 9 989 10 514 11 056 11 626 12 223 12 849 13 828 14 858 15 941 17 08050 - 54 5 735 7 195 7 833 8 289 8 772 9 281 9 821 10 288 10 777 11 289 11 82555 - 59 4 087 5 648 5 961 6 232 6 513 6 804 7 107 7 506 7 926 8 370 6 83960 - 64 4 265 5 527 5 479 5 456 5 433 5 409 5 385 5 609 5 841 6 0o2 6 33165 - 69 2 094 3 880 4 179 4 363 4 552 4 748 4 951 4 912 4 871 4 830 4 78770 - 74 2 118 3 142 3 24a 3 279 3 315 3 348 3 2377 3 516 3 660 3 808 3 96275 and over 3 0794/ 4 577 4 775 4 859 4 952 5 057 5 173 5 262 5 351 5 441 5 530

Source: 1960 and 1970 Population Census. From 1971 onwards, figures are SPP projLections,

- 93 -

Table 5: Tabasco: Gross Regional Value Added and

Production, 1973

Production VA

Crop Production 1,0o6.5 875.7

Livestock 993.0 565.3

Forestry 128.2 119.1

Fishing 69.1 44.8

AGRICULTURE 2,286.8 1,604.9

Food industries 1,462.3 )474.6

Other Manuf. Ind. 247.0 118.2

INDUSTRY 1,709.3 592.8

Oil and Gas 2,641.1 2,341.1

Chemical Industry 2.6 0.8

OIL AND PETROCHEMICAL 2,643.7 2,341.9

Electricity 65.3 28.1

Construction 2,655.2 1,053.8

Transport and Communications 319.0 161.8

Services 1,122.2 897.5

Commerce n.a. 456.2

TOTAL 7,135.0

Source: 1973 Input-output table prepared by the Bank of Mexico

- 94 -

Table 6 Tabasco Production and Value Added in Industry

and Services, l974-1977

(Million Mex$)

Year -IndustU____ Serurices

Production Value added Production Value added

1974 507.3 150.2 335.0 168.2

1975 578.7 165.o 426.7 203.1

1976 623.1 181.4 556.8 262.5

1977 710.6 212.2 749.1 348.0

Source: Secretariat of Programming and Budget.

- 95 -

Table 7: Tabasc " ,ields of Main Agricultural Crops, 1970-1977

(TonE/ha)

1970 19 1972 1973 1974 1975 1976 1977 1978

Maize Mexico 1.19 1.27 1.26 1.13 1.17 1.26 1.28 n.a. n.a.

Tabasco 1.06 1.15 1.07 1.11 1.09 1.04 1.05 1.08 1.03

Beans Mexico 0.53 0.49 0.52 0.54 0.63 0.59 0.56 n.a. n.a.

Tabasco 0.91 0.89 0.89 0.86 1.01 1.01 0.90 0.98 0.90

Rice Mexico 2.70 2.40 2.58 3.00 2.84 3.o6 2.91 n.a. n.a.

Tabasco 1.20 1.00 1.00 1.25 1.91 2.20 2.00 1.35 1.60

Copra Mexico 1.27 1.21 1.13 1.09 1.03 1.o8 n.a. n.a. n.a.

Tabasco 1.30 1.2 .1.24 1.09 0.92 n.a. 0.97 0.89 0.93

Sugar Mexico 63.4 68.0 69.3 65.5 68.2 68.0 n.a. n.a. n.a.Cane

Tabasco 70.0 60.0 70.1 72.4 78.0 69.5 57.4 61.5 65.5

Banana Mexico n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Tabasco 17.5 14.8 20.0 12.4 10.3 n.a. n.a. 21.2 22.4

Cacao Mexico n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Tabasco 0.40 0.39 0.71 0.54 0.58 n.a. 0.72 o.47 0.74

Source: Bank's estimates

NAFINSASARH

- 96 -

Table 8: Tabasco: Use of land 1978

Thousand has. %

Agriculture 220.0 8.7

Pastures 1380.0 54.5

Forests 240.0 9.5

Non productive and 346.3 27.3water bodies

Source: Tabasco State Plan

Table 9: Tabasco: Cultivated Area of main crops, 1971-1978

(Has.)

1971. 1972 1973 1974 1975 1976 1977 1978

CROPS

Maize 65,580 63,587 64,791 67,005 84,900 67,850 66,838 42,545

Beans 5,393 5,o80 4,878 5,822 5,822 6,800 5,200 8,960

Rice 6,663 6,050 6,890 12,925 14,400 12,000 4,657 i,064

Sorghum 500 n.a. n.a. n.a. n.a. 1,800 825 1,185

PERENNIAL

Cacao 37,991 38,000 40,000 42,000 42,000 42,000 42,000 42,000

Copra 24,000 25,000 25,000 30,000 n.a. 30,000 30,000 30,000

Sugar cane 10,617 11,690 13,924 13,343 16,500 22,074 21,506 805

Banana 10,050 6,500 7,962 7,800 8,000 8,500 8,500

Source: Secretariat of Agriculture and Water Resources.

Table 10: Tabasco: Production of main crops, 1971-1978

(Volume Tons)

1971 1972 1973 1974 1975 1976 1977 1978

Annual

Maize 75,482 67,870 71,798 72,752 88,187 71,550 72,267 43,825

Beans 4,800 4,500 4,185 5,857 5,857 6,120 5,096 8,o44

Rice 6,663 6,050 8,612 24,650 31,620 24,000 6,287 1,702

Perennial m

Cacao 14,930 26,866 21,520 24,500 n.a. 30,064 19,593 31,036

Copra 30,240 31,000 27,275 27,500 n.a. 29,019 26,777 27,892

Sugar_cane 637,020 819,469 1,008,236 1,040,434 1,147,500 1,266,441 1,322,862 1,363,000

Fa,nana 148,500 130,000 98,729 80,000 n.a. 143,600 179,996 190,350

Source: Secretariat of Agriculture and Water Resources.

TABLE 11: TABASCO: VALUE OF PRODUCTION OF MAIN CROPS 1971-78 (Thousand of Mex$)

1971 1972 1973 1974 1975 1976 1977 1978

Annual

Maize 67,934 61,326 91,628 122,291 174,610 167,427 226,974 127,092

Beans n.a. 11,117 12,556 29,285 29,285 29,070 24,206 38,209

Rice 8,329 6,837 15,847 64,ogo 89,800 72,000 19,490 5,276

Sorghum 648 n.a. n.a. n.a. n.a. 5,760 2,640 7,698

Perennial

Cacao 104,513 198,271 175,388 325,605 n.a. 526,750 693,350 1,365,408

Copra 71,064 85,560 122,738 148,775 npa. 156,086 252,202 252,144

Sugarcane 50,962 65,558 80,659 104,043 137,700 268,258 317,487 327,120

Banana 69,525 65,000 66,198 52,800 n.a. 71,800 152,997 114,210

Source: Secretariat of Agriculture and Water Resources

- 100 -

Table 12: Tabasco: Livestock Population, 1974-76

(Number of Heads)

. I.1974 1975 1976

National Total

Bovines 27 861 298 28 375 680 28 935 101Porcines 11 466 087 11 694 001 11 986 298Ovines 7 824 375 7 879 845 7 860 436Caprines 8 556 420 8 626 710 8 343 450Horses 6 376 374 6 490 457 6 550 514Donkeys 3 279 038 3 317 941 3 281 526Mules 3 295 272 3 301 537 3 269 944Poultry 141 095 337 144 777 144 147 704 506Beehives 2 036 597 2 059 012 2 080 060

TABASCO

Bovines 692 648 705 115 717 662Porcines 153 944 157 007 160 616Ovines ft 2 371 2 387 2 358Caprines 380 525 500Horses 168 164 171 174 171 260Donkeys 12 042 12 074 12 000Mules 17 318 17 350 16 978Poultry 1 411 037 1 445 622 1 475 371Beehives 23 633 24 000 24 245

Source: Secretariat of Agriculture and Water Resources,Directorate of Agricultural Economy.

- 101 -

,Table 13: Tabasco: Volume and Value of Forestry Production, 1973 - 1978

1973 1975 1976 1977 1978

Volume

Timber 37,396 37,565 30,819 24,690 36,621

Other 2,262,40Q 226,637 471,754 676,910 799,000

Value (thousand of pesos)

Timber 20,898 22,943 23,028 19,169 28,965

Othgr 5,102 265 1,670 2,110 11,808

TOTAL 26,000 23,208 24,698 21,279 40,773

Source: Secretariat of Agriculture and Water Resources

- 102 -

Table 14: Tabasco: Volume and Value of Fishery

Production, 1970-1978

VOLUME (TM) VALUE (thousand Mex$)L.

1972 16,416 34,418

1973 13,275 35,248

1974 12,106 113,316

1975 16,643 155,778

1976 13,019 129,925

1977 13,316 151,931

1978 12,800 182,480

Source: Directorate of Fishery Planning and Development.

- 103 -

Table 15: Tabasco Production of oil and gas, 1960-77

Oil Production Gas Production

(thousand m3) (million m3)

Year Tabasco Mexico Tabasco Mexico

1960 2753.8 15.744.5 3.505.5 9664.8

1970 8757.8 24.835.5 7.599.0 18690.5

1971 9190.0 24.781.8 7.786.8 18219.8

1972 9624.9 25.648.3 8.637.2 18696.0

1973 9634.9 26.213.1 8.946.o 19163.6

1974 10457.0 33.358.7 9.515.2 21087.2

1975 18214.3 41.580.3 11.838.9 22273.0

1976 25409.9 46.595.0 12.415.8 21854.4

1977 1/ 42880.0 62.993.0 15.500.0 21150.0

1/ Estimated

Source: Mexican Institute for Oil

- 104 -

Table 16: Tabasco: Foreign Trade Balance, 1970-1976

(Thousand Mex$)

1/ TradeYear Imports Exports- Balance

1970 15 443 81 461 - 66 018

1971 13 060 61 108 - 48 048

1972' 26 386 157 824 - 131 438

1973 39 570 132 360 - 92 790

1974. 82 641 169 065 - 86 424

1975 154 310 144 933 9 377

1976 116 272 448 109 - 331 837

1/ Excluding Revaluation.

Source: Secretariat of Programming and Budget

- 105 -

Table 17: Tabasco: Nominal and Real Daily Minimum Wages, 1973-1979

General Maximum Wage Rural Areas Minimum Wage

Nominal (Mex$/day) Real (1972$/day) Nominal($/day) Real (1972$/day)

Tabasco Mexico 1/ Tabasco Mexico Tabasco Mexico Tabasco Mexico

1973 32.6 33.1 29.1 29.6 25.4 28.8 22.7 25.7

1974 43.8 45.8 31.6 33.0 34.2 43.5 24.7 31.4

1975 49.8 53.0 31.2 33.2 38.9 46.1 24.4 28.9

1976 63.5 68.4 34.4 37.0 48.3 59.8 26.2 32.4

1977 81.2 87.6 34.0 36.7 63.5 76.5 26.6 32.1

1978 93.0 99.4 33.0 35.3 75.0 88.5 26.6 31.4

1979 108.0 116.0 32.2 34.6 92.0 106.8 27.5 31.9

1/ Figures for the country are based on the average weighted by the economicallyactive population in each state.

Note: The CPI,at the national level has been used, to deflate both Tabasco andMexico figures. Real wages in Tabasco are thus likely to be over estimated.

Source: Comision Nacional de Salarios Minimos (National Commission of Minimum Wages)

- 106 -

Table 18: Tabasco: State Revenues, 1975-1978

(Thousand Mex$)

1975 1976 1977 1978

.State Taxes 90988.9 105110.1 136858.3 260240.5

Urban property tax 14106.1 15977.2 16589.1 24909.3

Rural property tax 6710.7 6484.1 6839.4 7422.6

Cattle production 4884.6 5613.7 6780.3 10783.2

Sales and purchase ofcattle 5603.8 7054.4 10068.5 16492.8

Agricultural Produc-tion 29235.5 34089.6 38555.9 86807.1

Sales and Purchase ofFish and Seafood 881.6 1405.0 2726.3 4063.0

Other 29566.6 34486.1 55298.8 109l 62.5

Fees 18024.5 25545.5 24605.1 50704.9

Fines and Others 51378.1 62746.5 3146144.2 46418.7

Rent, Interest, etc. 5290.8 9687.0 2050.1 12894.4

Shares in FederalTaxes 275234.5 403339.1 848798.4 1609752.6

Sales of oil, gasand derivates 3589.3 4227.0 4640.1 6593.5

Commercial tax 52069.7 66301.3 77210.7 145195.9

Income Tax 26C8.7 4451.3 8157.9 15336.7

Production of oil 162582.1 250046.9 674267.1 1266132.7

Consumption of gas-oline, oil and gas 16022.4 30630.2 32820.2 22201.9

Consumption of beer 18472.3 18800.6 23427.8 36321.8

Other 19890.0 28881.8 28274.6 117970.1

TOTAL _440,916.5 606,428.2 14046.956.2 1,980,011.1

Source: Secretariat of Finance of the State of Tabasco

- 107 -

Table 19: Tabasco: Structure of State Revenues, 1975-1978

(Thousand Mex$)

1975 1976 1977 1978

State Taxes 20.6 17.3 13.1 13.1

Urban property tax 3.2 2.6 1.6 1.3

Rural property tax 1.5 1.1 0.6 0.4

Cattle production 1.1 0.9 0.6 0.5

Sales and purchase of . 121. .cattle 1.3 1.2 1.0 0.8

Agricultural production 6.6 5.6 3.7 4.4

Sales and purchase offish and seafood 0.2 0.2 0.3 0.2

Other 6.7 5.7 5.3 5.5

Fees 4.1 4.2 2.3 2.6

Fines and Others 11.6 10.3 3.3 2.3

Rent, Interest, etc. 1.2 1.6 0.2 o.6

Shares-in Federal Taxer 62.4 66.5 81.1 81.3

Sales of oil, gas andderivates 0.8 0.7 0.1 0.3

Commercial Tax 11.8 10.9 7.4 7.3

Income Tax 0.6 0.7 0.8 0.8

Production of oil 36.9 41.2 64.4 63.9

Consumption of gas-oline, oil and gas 3.6 5.0 3.1 1.1

Consumption of beer 4.2 3.1 2.2 1.8

Other 4.5 4.8 2.7 6.o

TOTAL 100 100 100 100

Source: Secretariat of Finance of the State of Tabasco

- 108 -

Table 20: Tabasco: State Revenues and Expenditures, 1973-78

(Million Mex$)

1973 1976 1977 1978

State Current Revenues 209.0 606.4 1047.0 1980.0

State Tax Revenues 69.1 105.1 136.9 260.2

Non Tax Revenues 90.1 97.9 61.3 110.0

Shares in Federalrevenues 49.8 403.4 848.8 1609.8

State Expenditures 203.8 589.5 1181.3 1800.0 1/

Current Expenditures 125.0 399.6 483.5 594.o

(Wages and salaries) n.a. n.a. n.a. (327.4)

(Purchase of goodsand sources) n.a. n.a. n.a. ( 96.9)

(Transfers) (21.4) (63.2) n.a. (150.6)

(Other) (103.6) (126.7) n.a. ( 19.1)

Current Surplus 84.o 206.8 563.5 1386.0

Investment 78.8 179.7 689.2 1197.8

Amortisation ofpublic debt 5.6 10.2 8.6 .8.2

Overall Deficit (-Surplus) o.4 -16.9 134.3 -180.0

1/ Budgeted. Actual expenditures expected to be about 10 per centhigher.

Source: Secretariat of Finance of the State of Tabasco

Table 21: Tabasco: Municipal Revenues, 1975

(Thousand gex$)

MUNICIPALITY TOTAL TAXES FEES RENiT, ETC. FINES, ETC OTHER

TOTAL 134 809 72 406, 12 304} 3 985 i 17 175 29 297

Balancgn 2 038 , 1 534, .30 102 368 ] 2Cardenas 13 629 11 124!, 256 370 1 879 _Centla 3 919. 3 440; 137 341 -

Centro 64 253; ~~~~~~~~~~~25 343Centro 64 253; 22 846 8 828 445 6 788Comalcalco 6 163 3 944' 416 363 1 272 _ 16 =Cunduacan 9 814, 8 273 89 118 1 142Emiliano Zapata 2 303 1 162, 163 296 19 '0lHuimantuillo 7 473 6 875' 143. 39 375 . H

Jalapa 1 476 784' ' 263 62 333: -'Jalpa 2 197' 1 400' 47 , 141 480; 128Jonuta 1 243 660 163 63. 352, 3Macuspana 6 050 2 025; 667 1 449. 1 261 . l6)45Nacajuca 1 251, 556 , 88 199 253 152Paralso 2 932 ' 1 940 116' 173' 276'Tacotalpa 1 286 1 003 "' 119 64 80 148Teapa 3 656 1 624 501! 189. 850 490Tenosique 5 119 2 846 269' 563. 1 438

Source: General Directorate of Revenue Policy, Secretariat of Finance

Table 22: Tabasco: Gross Municipal Expenditures, 1975

(Thousand Mex$)

Administrative Public PublicMunicipality Total Expenses Works Transfers Debt Other

.___ _ _I.__ _ _ ___ ._

Tabasco 134. 809 68 102. 32 273 4 092 19 444 3 894

Balancan 2 038 1 111 587 174 - 163 2Cgrdenas 13 629 7 664. 5 237 297 429 _Centla 3 919 2 908' 870 101 39Cerntro 64 253 27 432' ; 14 951 2 588 18 422 859Comalcalco 6 163 4 499 : 1 276 82 122 182Cunduacdn * 9 814 3 758 i 5 689 146 209 11Emiliano Zapata 2 303 1 235, 1 020 30 _ 17

Huimanguillo 7 473 4 086 1 770 200 - l 416Jalapa 1 476 925 512 37 _

Jalpa 2 197 1 021. 845 11 318Jonuta 1 243 1 084; 120 16 _ 21Macuspana 6 050 3 889. 1 654 70 29 406Nacajuca 1 251 949. 273 5 - 22

Paraiso 2 932 2 257, 604 28 _ 42Tacotalpa 1 286 742w 463 62 18 _

Teapa 3 656 2 356: 615 81 49 553Tenosique 5 119 2 179' 2 779 156 _ 3

Source: Secretariat of Programming and Budget

Table 23: Tabasco: Authorized Federal Investment, 1970-1976

(Million Mex$)

1971&l976 1971 1972 1973 1974 1975 1976

TOTAL 12 543.1 1 585.7 1 956.6 2 236.6 2 311.2 2 581.5 1 871.5

Industry 8 575.9 1 285.3 1 534.7 1 680.7 1 674.4 1 649.0 751.8

Welfare 897.1 37.2 54.9 117.5' 106.1 273.5 307.9

Transport and Communications 1 459.9 87.0 190.6 192.2 250.2 300.5 439.4

Rural Development 1 596.5 J 176.2 168.4 244.2 278.4 358.4 371.0

Tourism 0.4 _ _- - - 0.4

- Administration and Defense 13.2 . 8.0 2.0 2.1 0.1 1.0

* Up to September 30.

Source: Secretariat of Programming and Budget

Table 24: Tabasco: Actual Federal Public Investment by Sector, 1971-1975

(Million Mex$)

C o n c e p t o Total 1971 1972 1973 1974 1975

TOTAL 11 473.4 1 441.7 1 868.7 1 734.9 2 745.3 3 682.8

INDUSTRY 9 183.2 1 164.5 1 .509.2 1 495.3 2 163.9 2 850.3Oil and Petrochemical 8 266.9 1 114.4 1 411.6 1 205.9 2 016.4 2 518.6Electricity 243.1 36.1 52.0 37.7 20.1 97.2Siderurgy _ _ _ _ _ _Other 673.2 14.0 45.6 251.7 127.4 234.5

WELIAtRE - 421.5 27.0 37.8 48.5 93. 0 215.2Urbar a^.-

Rural Services 175.2 9.9 16.4 3.4 49.9 95.6Schools 142.7 16.8 17.9 30.4 21.5 56.1Hospitals and -Health Units . 98.1 0.2 3.5 14.2 19.8 60.4Housing* (2.0) - - (2.0) - -

Other 5.5 0.1 - 0.5 1.8 3.1

TRANSPORTS AND COMMUNICATIONS 915.3 83.3 174.4 155.0 232.7 269.9 HRoads 551.4 61.2 148.8 79.9 122.2 139.3 3Railways 150.1 16.2 20.7 28.5 40.1 44.6 XSea 32.0 2.2 2.3 11.7 6.6 9.2Air 46.9 - 2.6 1.7 5.1 37.5Telecommunications 134.9 3.7 - 33.2 58.7 39.3

AGRICULTURE AMD LIVESTOCK 947.1 166 9 141.5 36.1 255.4 347.2Agriculture 850.4 165.2 140.5 31.9 235.9 276.9Livestock 10. 6 0.7 0.3 1.6 3.2 4.8Forestry 1.3 - - 0.1 0.1 1.1Fishery 29.4 1.0 0.7 2.5 5.8 19.4

PIDER55.4 - - - 10.4 45.0

TOURISM

DEFENSE 6.3 5.8 _ 0 3 0 .2

* Not included in the Total.

Source: Secretariat of Programming and Budget, Directorate of Public Investments.

Table 25: Tabasco: Length and Type of Roads, 1975-1976

(Kms.)

Total Kms. Dirt Roads Surfaced Paved

1975 1976 1975 1976 1975 1976 1975 1976

Total 4,093 4,197 1,015 834 1,548 1,782 1,530 1,581

Main Roads 1,020 985 10 10 3 3 1,007 972

Secondary Roads 1,407 1,416 197 97 816 971 394 348

Access and RuralRoads 1,666 1,796 808 727 729 808 129 261

Source: Secretariat of Human Settlements and Public Works.

Table 25: Tabasco: Length and Type of Roads, 19T5-1976

(Kms.)

Total Kms. Dirt Roads Surfaced Paved

1975 1976 1975 1976 1975 1976 1975 1976

Total 4,093 4,197 1,015 834 1,548 1,782 1,530 1,581

Main Roads 1,020 985 10 10 3 3 1,007 972

Secondary Roads 1,407 1,416 197 97 816 971 394 348

Access and Rural Roads 1,666 1,796 808 727 729 808 129 261

Source: Secretariat of Human Settlements and Public Works.

Table 26: Tabasco: Length of Railway Lines, 1975-1976

(Kms.)

Kms. Population Kms/l00

.____ ____ ____ ____ ____ ______ ___(Million) Inhabitants

1975 1976 1975 1976 1975 1976

Mexico 24,912 24,952 60,145 62,329 0.414 0.401

Tabasco 300 300 1,007 1,053 0.298 0.285

Source: Secretariat of Programming and Budget

Tabl2 27: Tabasco: Registered Vehicles by Type of Service

1 9 7 5 1 9 7 6

Privat PrivatelyVehicles Total Official Rent Owne.-- Total Official Rent Owned

Cars 6,964 60 453 6,451 13,726 161 511 13,054

Passenger Buses 1,193 9 659 525 530 - 426 101

Trucks 7,368 33 ,453 5,882 10,985 61 1,776 9,148

Motorcycles 842 5 - 837 1,383 8 - 1,375

Source:Secretariat of Programming and Budget

._ r UNITED STATES 9 92 3

S c v ~~~~~~_% h/l~~~EXICOD: :\l12>\ SX TABASCO: A CASE STUDY OF REGIONAL DEVELOPMENT UNDER OIL PRESSURE6 > MEX;CO G, Jf M

~,,<-i/ Federtl Roads~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~t herofcXEgtet Rorad& /

_____ _ ___ Gb4T3MAtANs - Rivers-Fr : Stlie Boundwries

I- - - Internhtonal Bouncaries

x ; F uecrtr Reol \'|

[ f 'sca~eess 6 \Ca,oea+m Fea Rea rl-

CaL~ ~ ~ ~ ~ ~ anpco ~ i~+El C.. C rooter/

1~~~~~~~~~~~~~~~~~~~7 ~ ~ ~ ~ ~ ~ ~ 79R~~~~~~~~~~~~~~~~~

/~ ~~~Lzr t-N P araso . ,~ _t X02

<~~~~~~~~--c ¶~ < S _aor/o-, ' . - 4 i'2 -'

N-N ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ E1

8 Coatoacoalcas .~ - <aa~ ,r aImangus V ,g --f '- A t ta

X \ A \ Alvarctd~~~oJ-1

''_,,~~~~~~~~~~~~~~~~~~~tap~ -6- ZZ2iK A. .<2 -;eE'SE -[

R . CR denos 3,1LhERMOS A 9-

F---u N.e. ___ F-.-

1 (^ , 0,-'~~~~~~~ -EV -9 < < Rclyon>5cilis~~~~~~~~~~~t.hu.ccn 0 5 0lG UA rr M A Lt| 9 tVA7ob Aff oYotS' ' x-<=, 81JITOIOI k lLOMcTERS t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1,)MEER

|- 17° ,+ Bc~~~~~~~~~~~~~~~~~~~~~~~~~s Mchi ov ara..e-siw/ La sL,fber rae d20n gD-~~~~~~~-

17-~~~~~1

sr 9To S°Yral~~~~~~~~~~~~Or, l T Tsrahao Cu:rr , I __ ~ ~~~~~~~~~~~ ~ _, N '0 0 _> ~ _ , _ _M _ _T_ _E _ .

- IN ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~B,hle~,,.~, A,.