Page  1
PROJECT INFORMATION DOCUMENT (PID) 
APPRAISAL STAGE 
Report No.:  AB3480 
Project Name 
Information Technology (IT) Industry Development 
Region 
LATIN AMERICA AND CARIBBEAN 
Sector 
Information Technology (100%) 
Project ID 
P106589 
Borrower(s) 
GOVERNMENT OF MEXICO 
Implementing Agency 
 
United Mexican States 
Mexico 
 
Secretariat of Economy 
Alfonso Reyes No. 30 
Col. Hipodromo Condesa 
Mexico, D.F. 
Mexico 
Tel: +52 55 5729 9221 
 
Environment Category 
[
]
A
[X] B   [ ] C   [ ] FI   [ ] TBD (to be determined) 
Date PID Prepared 
November 20, 2007 
Date of Appraisal 
Authorization 
December 12, 2007 
Date of Board Approval 
July 10, 2008 
1.  Country and Sector Background 
1. 
In the wake of the 1994 crisis, México implemented impressive reforms that led to a more 
open economic and political system and a better integration within the world economy (México 
belongs to the OECD), and achieved investment grade. However, México still faces substantial 
challenges to reduce poverty, improve competitiveness, reform its institutions and manage the 
environment. The Country Partnership Strategy (CPS) of March 18, 2004 focused precisely on 
these pillars through targeted interventions in strategic sectors and selected areas where “the 
Bank can bring value added expertise and quality support to México while being more selective 
in initiating the preparation of lending operations”
1
.
The Bank is preparing a new CPS that is 
based on Calderon Administration’s National Development Plan five pillars: (1) rule of law and 
public safety; (2) economic competitiveness and generation of jobs; (3) equality of opportunities; 
(4) environmental sustainability; and (5) effective democracy and responsible foreign affairs.  
 
1
Report No. 28141-ME of March 18, 2004. 
Page  2
2. In this context, the global services 
outsourcing offers a distinct opportunity 
for México to improve competitiveness 
and generate employment. (Pillar No. 2). 
According to one estimate, the 
addressable market for global offshoring 
of IT services and IT enabled services 
(ITES) was roughly US$300 billion in 
2005, of which only about ten percent has 
been executed
2
.
While the off-shore IT 
industry grew at 21% annually from 2001 
to 2005, the offshore ITES industry grew 
at an impressive 49%. India, by far the 
biggest player in this field, generated 
export revenues of US$23.6 billion in 
2005-06, and employed nearly 1.3 million 
people in the IT/ITES industry. According 
to some estimates, each job in the IT/ITES 
sector creates 3 to 4 jobs in sectors such as 
transportation, construction, health, 
entertainment and others.   
 
3. 
With the right policy mix and a 
clear Government commitment, the 
IT/ITES sector can be developed in a relatively short time. For example, a focused initiative in the 
state of Andhra Pradesh in India resulted in IT/ITES exports increasing from US$0.45 billion to 
US$2.86 billion between 2001 and 2006. 
 
4. 
Due to its geographical proximity to, and same time zone as the USA, its large labor pool 
and Spanish language (which can give access to the entire Spanish-speaking population in Latin 
America and Spain (405 million) and within the US (45 million) , México has a distinct 
opportunity to develop as a leading hub for IT/ITES in Latin America
3
.
According to the 
AT 
Kearney Global Services Location Index 2007
4
,
Figure 1, México ranked 10th amongst the top 
50 worldwide potential off-shoring destinations for IT/ITES (third best in Latin America). 
 
5. 
However, Mexican firms do not use extensively IT in their business processes: the IT 
industry in México accounts only for 3.1% of the GDP, compared to 5.3% in Latin America, 
2
IT services include application development, software design, systems integration, IT consulting, R&D services, 
hardware and software maintenance, network administration and help desk services. IT enabled services are services 
that can be remotely delivered using ICTs, such as call centers, data processing, reservation and information 
services, accounting services, human resource management, sales contact centers, medical transcription services, 
tele-marketing, etc. 
3
See “Global Outsourcing Report 2005”, Horasis and Going Global Ventures Inc. (Page 4, 8, 43); and 
“NASSCOM-McKinsey Report 2005” NASSCOM (page 163)  
4
The 
AT Kearney Global Services Location Index
 measures the Financial Structure, People and Skills Availability 
and Business Environment in countries around the World. 
Figure 1: Global Service Location Index 
–
2007
Source: AT Kearney (2007) 
Page  3
7.1% in high-income countries and 8.8% in the USA
5
.
IT is an essential ingredient in raising 
productivity in firms and improving the competitiveness of the Mexican firms. In addition, 
Governments (Federal, State and Local) represent only 12% of the IT Sector revenues, because 
most of their IT systems and services are developed in house, lowering their effectiveness and 
impeding transparency. 
 
6. 
Recognizing the potential of the IT industry, the Mexican Government (GoM) requested 
the Bank to support a study of the IT and ITES Industry Sector 
in México. Using FMTAAS 
funding, the Bank accordingly engaged AT Kearney to conduct a study on the “Development of 
an IT and ITES services industry in México”. 
 
7. 
The study took a disaggregated view of the potential for developing the IT/ITES sector in 
different states of México. The study found that even though México ranks No. 10 in the world 
in attractiveness
6
,
there are important disparities among Mexican States, as shown in figure 2 
below
7
.
5
“ICT for Development”, 2006, World Bank 
6
India is No. 1, followed by China and Malaysia, note that Brazil is 5 and Chile 7. 
7
AT Kearney, Op. Cit. 
Page  4
Figure 2: States Ranking for IT services 
 
8. 
The study specifically analyzed incremental opportunities to boost the current IT/ITES 
industry growth in México. While focusing on 5 states
8
of various sizes and income levels, the 
study found that many other states in México could potentially participate to a lesser or greater 
degree in the IT/ITES sector. However, while the strategy for Nuevo Leon or Jalisco focuses on 
advanced IT services to add high value to exports, the strategy for Zacatecas would be centered on 
entry level BPO for Mexican firms. Table 1 summarizes some of the key issues that would need to 
be addressed by the States: (1) lack of qualified manpower, both in terms of quality and quantity, 
(2) weakness or absence of IT clusters at State level and lack of sources of funding of IT/ITES 
companies. 3) lack of support infrastructure in the form of technology parks, (4) absence of the IT 
sector participation in Government services; and 5) weaknesses in the policy, legal  and regulatory 
framework, 
 
9.  First, the Study found that adequate human resources
in each specialized fields, both in terms 
of quality and quantity, is absolutely key to achieving success in the IT/ITES sector. The World 
Economic Forum placed México in position 81 (out of 122) in the quality of the educational 
8
Nuevo Leon and Jalisco are two large states with higher income, Queretaro and Coahuila are medium-size and 
income level, geographically close to Nuevo Leon y Jalisco, and Zacatecas, a poor state at the center of the country. 
0.6
0.5
0.5
0.5
0.6
0.6
0.7
0.6
0.8
0.6
0.7
0.8
0.7
0.6
1.1
0.9
0.9
1.0
1.1
0.8
0.7
1.1
1.2
0.7
0.9
1.0
0.7
0.7
1.0
0.9
1.1
1.1
0.5
0.6
1.0
1.0
1.0
0.9
0.9
0.9
0.9
1.0
0.9
0.9
0.9
0.9
0.9
1.0
1.0
1.0
0.8
0.9
0.8
0.8
0.5
0.9
1.0
1.0
0.9
0.5
1.0
0.7
0.5
0.5
0.9
1.0
0.8
0.8
0.7
0.8
0.8
1.0
0.8
1.0
0.9
0.9
0.9
1.1
0.9
1.1
1.1
1.0
1.1
1.3
1.5
1.3
1.3
1.6
1.4
1.4
1.4
2.0
1.2
1.7
2.5
5.4
0.1
0.2
0.0
0.0
0.0
0.0
0.1
0.0
0.1
0.0
0.2
0.1
0.2
0.0
0.1
0.1
0.1
0.0
0.2
0.2
0.2
0.1
0.3
0.2
0.1
0.0
0.4
0.4
0.4
0.4
0.6
1.0
0
1
2
3
4
5
6
7
8
9
10
Oaxaca
Tabasco
Tlaxcala
Nayarit
Campeche
Guerrero
Hidalgo
San Luis
Chiapas
Durango
Michoacán
Yucatán
Morelos
Zacatecas
Quintana Roo
Colima
Sinaloa
Baja California
Aguascalientes
Querétaro
Puebla
Tamaulipas
Baja California 
Guanajuato
Coahuila
Chihuahua
Veracruz
México
Sonora
Jalisco
NL
DF
Business environment
Costs
Human Rsources
Market presence
Page  5
system
9
.
In Education in the IT Sector, México faces several issues that need to be addressed. 
First, IT companies spend around US$60,000 and take 18 months to train each new engineer, 
mainly because of the absence of certain specialized courses and English language
10
.
Second, 
there is a shortage of high quality managers in small and medium size IT companies. Third, there 
are not enough network and computer technicians (AS degree equivalent). Finally, there are not 
enough English-speaking operators for call centers. 
 
10. 
Second, States that are being successful in the IT/ITES sector show strong 
agglomerations between Industry, the State’s Government and Academia called “IT Clusters
”. 
These clusters leverage effectively the States’ endowments (human resources, infrastructure, 
industries, etc). However, the A.T. Kearney study found that not all States have these Clusters, 
and that in some cases where they exist, they do not work effectively.  Finally, the IT industry 
complains of the lack of adequate financing. Small and medium enterprises do not have access to 
venture capital funds, and local bank loans terms and conditions are usually neither suitable nor 
affordable. IT companies do not have physical assets that can serve as collateral to Bank’s loans. 
A
PROSOFT program that allows companies to obtain bank loans by providing them with the 
guarantees is still very limited and does not address the lack of systematic analysis of software 
companies. 
 
11. 
Third, the supporting infrastructure
needed by the IT Industry is generally not available in 
México, with few exceptions. IT firms normally operate using shared infrastructure in the form 
of IT Parks providing all the needed communications facilities and services, usually located in 
urban areas where there is abundant labor force and universities that can provide training for 
their employees, and close to major airports. A recent study funded by infoDev found four 
factors critical for success of IT Parks: (1) private management and anchor investor; (2) location 
of the Park near airports, large urban centers, universities, housing and recreational facilities; (3) 
qualified and skilled manpower; and (4) availability of angel investment, venture capital and 
private equity
11
.
12. 
Fourth, a recent study by Evalueserve
12
 confirmed that Governments (Federal, State and 
Local) develop most of their IT systems and services in house
and do not use the IT industry as 
much as in other countries.  Experience in many countries has shown that the Government, being 
the largest user of IT Services, could promote the development of the IT Industry, and at the 
same time improve its efficiency and effectiveness by subcontracting these services, or 
outsourcing them to the private sector. This modality has the added benefit of increasing the 
transparency of the Governments, as Government processes, purchases and information becomes 
available online to the benefit of all the population. The Austerity Decree established by 
9
World Economic Forum and INSEAD “The Global Information Technology Report 2006-2007” by Soumitra 
Doutta, Irene Mia, Editors, 2007. 
10
 Only a few Universities require students in IT careers to learn English language to graduate;  public universities 
do not. Changing the program in public universities requires 4 years, a very long time for the need of the dynamic IT 
Industry. 
11
 Price Waterhouse Coopers, “International Best Practice for Establishment of Sustainable IT Parks”, April 2007 
(forthcoming publication). 
12
 “Country Assesment Report for Identifying Potential Public Private Partnerships in e-Government” Evalueserve, 
2007.  México ranked 56
th
 globally and 7
th
 in the LAC Region in the e-Services adoption index, even though the 
outlook of the Mexican Government towards e-Government is favorable. 
Page  6
President Calderon in December of 2006 has recently mandated federal government entities to 
purchase services as opposed to equipment, opening the door for Public Private Partnerships for 
the provision of E-Government services by the private sector.   
 
13. 
Fifth, we commissioned a Study to identify and analyze obstacles posed by the current 
enabling legal and regulatory framework
to the development of IT and IT Enabled Services 
(ITES) industries. The review included an assessment of the current framework, taking into 
account, but not limited to, risks, advantages, loopholes, overlaps and development detrimental 
laws and regulations and a proposal to improve current regulatory and institutional schemes. This 
Study found that Mexico should modernize its comprehensive IT-ITES enabling regulatory and 
legal framework
13
.
In doing so, the Government should raise awareness within public and private 
sectors, academia and civil society in order to facilitate general consensus and smooth approval 
process. Given the disparity or lack of regulations technical assistance from local and foreign 
experts should be sought in order to obtain high-skill input on regulatory reform issues ranging 
from trade barrier analysis to harmonization of electronic signature regulations. Simultaneously, 
Mexico is in need to train its Judiciary sector, legislators, trial experts, law enforcement, 
government officials and practitioners in the regulatory treatment and legal interpretation of new 
technologies. The Mexican Government jointly with the private sector and academia has pursued 
many valuable initiatives to foster internet security, online trust, combat cybercrimes and raise 
awareness on piracy issues. Those initiatives along with new programs should be granted 
continuous support along with other new initiatives such special IP courts, or the creation of 
online dispute resolution mechanisms. 
 
14. 
  In general, Mexico possesses an established legal environment that allows public private 
participation
and collaboration. This environment includes laws governing concessions and/or 
privatizations, clear processes for dispute resolution and the ability to enforce contracts, as well 
as lender remedies under bankruptcy and insolvency. Most of Mexico’s PPPs deal with 
infrastructure, however, the Mexican Government recognized the provision of services by the 
private sector. The so-called Project for the Supply of Service model was introduced in Mexico 
as a means of achieving the objectives of sustainable development that are stated in the National 
Development Plan. Even though all procurement contracts require an internal governmental and 
budgetary approval, the PPPs must pass a specific and rigorous criteria mentioned under the 
Rules and the Guidelines, consisting mainly of a cost-benefit analysis at a profile level and at a 
pre-feasibility level. The process seeks to address and ensure that the PPP option is less costly to 
government than a regular procurement contract funded through direct payment of capital 
expenditures in the federal budget. However, this regulation is complex and discourages civil 
servants from using PPPs for Government services.  
 
2. Objectives 
 
15. The objective of the Project is to assist the Government of Mexico to implement an 
alternative strategy for PROSOFT to foster the creation of jobs in Mexican IT Companies by 
improving their competitiveness and efficiency through access to: (a) a larger supply of trained 
13
 Bendersky, Matias, “Legal and Regulatory Barriers in the Development of Information Technologies and 
Information Technology Enabled Services (“IT/ITES”), November 3, 2007 
Page  7
personnel; (b) technologies, quality standards and global marketing networks of multinational 
corporations; and (c) private debt finance.  
 
16. The Project would initially focus on States that have better potential to grow the IT industry. 
The success of these States is likely to have a strong demonstration effect, benefiting Mexico as 
a
country and improving the competitiveness and efficiency of the Mexican economy and 
fostering the development of SMEs. 
 
17. The following indicators would be used to monitor progress toward achieving the Project 
objective. SE would hire an independent  firm to monitor the results and report progress every 
year: 
 
·
IT/ITES jobs created by the IT Industry as a result of training programs (jobs) 
·
IT Companie
s’ satisfaction rating with the IT Links Program (percentage of good and 
better responses) 
·
Increased overall debt portfolio of IT Companies in the financial system (US$ million) 
 
3.  Rationale for Bank Involvement 
 
18. The Mexican Government has requested the Bank’s support to help improve and expand 
PROSOFT in order to foster the development of the IT and ITES industries. Specifically, the 
Mexican Government strategy is to support the IT Industry growth in the short term, while 
reducing the subsidies to the Industry over the long term. The design of the present Project builds 
on the achievements of the PROSOFT program. The project would support PROSOFT to 
implement an alternative strategy to expand the number of jobs in the Industry from 80,000 to at 
least 100,000, address several critical human skills deficits, link Mexican companies with 
multinational corporations, develop solutions for financing IT companies, and provide technical 
assistance to continuously monitor, evaluate and improve PROSOFT, among other things. 
 
19. The Bank is particularly qualified to do this, thanks to the experience that its staff gathered in 
supporting similar initiatives in a number of countries including India, Russia, and Sri Lanka
14
.
The development of the sector requires a multi-dimensional approach and the Bank has a wide 
range of expertise in relevant areas.  Furthermore, the World Bank Group offers unique 
synergies, as it can bring to the table private sector financing through its IFC arm, and public 
funding through World Bank loans to the Government. Even though the proposed Project is 
small compared to the larger PROSOFT Program, the Mexican Government wishes to expand 
the initiatives that the Project would support in the medium term in order to catalyze a  new and 
improved PROSOFT Program. 
14
 See section “D. Lessons Learned and Reflected in the Project Design” for detail explanation on the Bank’s 
experience in each of the components of the Project. 
Page  8
Figure 3. PROSOFT Program: Main Initiatives 
 
The program for the development of the Software industry 
(ProSoft) is the institutional strategy of the Federal 
Government for the development of the information 
t
echnologies sector.
Strategies:
Ê
Promote exports and investment attraction
Ê
Train and form competent personnel in software 
development, in the required number and with adequate 
capacity
Ê
Establish a legal framework to promote the industry
Ê
Develop internal market
Ê
Strengthen local industry
Ê
Reach international process capacity levels
Ê
Promote the construction of physical and 
telecommunications infrastructure (enterprise clusters and 
state efforts)
PROSOFT
Promotional efforts of the 
federal government to position 
Mexico as an IT/ITES services 
p
rovider
Activities:
Ê
Mexico IT promotional campaign
Ê
Industry and potential providers 
information gathering
Ê
Investor attention
Software development quality 
certification for SMEs, more 
affordable than CCMI.
Ê
Industry data gathering effort 
Ê
Supports companies in their 
promotional efforts
Ê
ProSoft Fund
Created to support projects in 
the information technologies 
sector, and to foster the use of 
IT in other economic sectors of 
the country
Ê
Together with PROSOFT, 
e
stablished a guarantee fund 
f
or IT companies
Ê
Financial intermediaries 
offer credits to IT companies 
using the fund as guarantee
 
Source: ProSoft, AT Kearney, 2007 
 
20. 
The Bank is already supporting the GoM through the “Innovation for Competitiveness 
Project” (I&C Project), which provides policy-related support to enhance innovation, finances 
CONACYT program to promote business innovation through the use of innovative technology, 
and funds scholarships for improving México’s science and technology skill base. This Project 
and the proposed one are complementary and would mutually reinforce each other. The growth 
of the IT/ITES sector under the ongoing I&C Project would open up new technological and 
business possibilities for innovation, which would in turn bring the benefits of using new 
technologies to Mexican companies trying to move up the value chain. The I & C project would 
also help prepare the ground for the growth (economic and in number) of businesses engaged in 
KPO (Knowledge Process Outsourcing) type of activities. Details are in Annex 2. 
 
4. Description 
 
21. The project is designed in response to a strong demand from State Governments
15
,
and 
strongly reinforces previous efforts made by the 
Secretaría de Economía
 through the PROSOFT 
program. The project would cost
 US$80.0 million, 
financed by the Bank. It is expected that the 
State Governments and the Private Sector (including Universities) would contribute to these 
funds, as explained in Annex 1 (Table A1.2). Assuming similar proportions in their collaboration 
to those shown in previous years, State Governments and the private sector should add $38.0 and 
$122.1 million, respectively. 
 
15
 
Initial requests were presented to the Bank by the States of  Nuevo Leon and Zacatecas, followed by Jalisco, 
Coahuila, and Queretaro. Other States have expressed interest though they have not formally requested support.  
Page  9
22. To achieve its objectives, the Project would: (a) build an institution to ramp up the 
availability of skilled manpower for the IT Industry; (b) create a program to develop and 
improve linkages between Mexican companies and global corporations; (c) help companies to 
improve their managerial skills to obtain financing for their projects, (d) assist the State 
Governments to attract private companies to invest in IT Parks; (e) assist federal, state and 
municipal governments to outsource services to the private IT Industry; and (f) improve the IT 
Policy, Legal and Regulatory Framework. The project would include the following components 
with Bank financed amounts in parenthesis (more detail in Annex 4): 
 
A.  Human Skills Development (US$38.3 million)
23. This component would help the IT/ITES industry to compete globally by increasing the 
quantity, and improving the quality of skilled manpower. The Project would support establishing 
the 
M
éxico Federal Institute for Remote Services and Technology
 (MexicoFIRST), using a PPP 
approach that would bring together leading corporations, industry organizations, global standards 
bodies, academia and government entities. MexicoFIRST is conceived as an apex institution 
focusing on inte
rnationally recognized certification, mentoring and ‘training the trainer’ 
programs, in keeping with industry needs. It would facilitate the design of courses and skill 
development programs for niche specializations in areas having good market potential, and in 
line with industry requirements. It would complement existing university programs thereby 
overcoming the lack of flexibility in adapting academic curriculum to industry needs. The 
component would also assist English language training programs for the IT and ITES sector. 
 
24. Under this component, the Project would finance: 
 
(a)  Technical assistance to start up MexicoFIRST, establish global alliances for the 
Institute, recruit
 
its key staff, design of first year programs and operational costs of 
the entity (US$2.8 million); and 
(b) Training grants for technical, managerial, and English courses, certifications, 
seminars and workshops for faculty, students, industry professionals, and potential 
recruits for the IT Industry (US$35.5 million).
 
B.  Strengthening of IT Clusters (US$9.0 million)
25. This component would help existing IT Clusters and associations in promising States having 
high potential in the IT/ITES sector. It includes the following sub-components: 
 
(a) The 
IT.Link 
(
Information Technology Linkages Network
)
would provide Mexican 
SMEs with access to technologies, processes and markets by linking up with global 
IT companies.  The Project would finance several IT experts who would serve as 
liaison between the Mexican IT Industry and global corporations, their travel and 
operating costs. (US$1.5 million) 
(b) 
This component would also provide technical assistance to the IT Clusters that have 
developed strategies and have the needed resources to develop the IT/ITES sector. 
This technical assistance would provide support for the implementation of specific 
activities aimed at increasing their maturity and competitiveness, to help them grow 
Page  10
their local industry and give them access to international markets, including 
awareness and dissemination campaigns. For those IT Clusters that have not yet 
developed a strategy but have enough resources to develop the industry
16
,
the project 
would support them with the design of their IT/ITES strategy. (US$1.2 million) 
(c) 
Workshops aimed at raising awareness on the benefits of outsourcing and the usage 
of information technology in business and production processes will be carried out. 
The main audience for these events is composed of local businessmen in every State, 
and they would be organized in close coordination with local IT Clusters. (US$1.3 
million) 
(d)  In order to increase the competitiveness and maturity of IT Clusters through the 
improvement of quality, this component will award certification grants through the 
PROSOFT fund. Internationally recognized certification programs will allow cluster 
companies to engage in more ambitious projects and to participate more actively 
abroad. (US$5.0 million) 
 
C.   Financing of the IT Industry (US$2.9 million)
26. 
This component will create the “Financing of IT Companies Accreditation Program” (FIT). 
This program will seek to reduce the information asymmetry between Financing Intermediaries 
(FI) and enterprises and thus facilitate credit to the sector. Business schools and other training 
centers would be invited to participate in the FIT program. 
 
27. This component would provide: 
 
(a)  Technical assistance to design the Financing of IT Companies Accreditation 
Program “FIT” that would improve management, project management and 
implementation capacity of IT companies, including the selection of a reputable 
institution to manage the program. (US$0.3 million); 
(b)  Certification Grants to IT companies to participate in the FIT Program. (US$1.4 
million) 
(c) 
Technical assistance to FIs and Banks to develop capacity to appraise IT projects 
and IT companies (US$1.2 million); 
 
D.  Supporting Infrastructure (US$10.1 million)
28. Experience in other countries shows that the IT industry can develop faster through 
agglomeration and clustering of small, medium and big companies in close proximity  to 
research centers, universities, financial institutions and incubators. Linkages between demand 
and supply, skill development and industry, and between financing and entrepreneurs, can 
produce the so-called “Silicon Valley” effect. The establishment of IT Parks is one of the most 
effective vehicles to promote such agglomerations. In México, ProSoft has supported the 
establishment of small IT Parks and some of them are in the middle of their design phase. 
However, the process of attracting IT/ITES companies to these parks requires a new approach by 
16
 These requirements include, inter alia, a critical mass of human capital, a constant flow of students from local 
universities and a relatively big local industry. These States were identified as part of the study undertaken by the 
Bank. 
Page  11
leveraging Public-Private Partnerships (PPPs) to channel investments from the private sector. 
Further the relative strengths of the private sector in marketing, management and operating the 
facilities for IT/ITES companies would be tapped to capture the benefits of agglomeration.  
 
29. This component would finance:  
 
(a) 
Technical assistance to prepare feasibility studies, design, and bidding specifications 
based on a PPP model for IT Parks in selected locations (US$0.9 million); and  
(b)  The Federal Government part of the investment required for each PPP for the IT 
Parks. (US$9.2 million). 
 
E.  Outsourcing of Government Services (US$2.7 million)
30. Experience in many countries has shown that the Government, being one of the most 
important users of IT and IT services, can help promote the development of the local IT industry 
by strategically sourcing its requirements from the private sector. The increased use of IT in 
government can also help improve efficiency, transparency and accountability within the public 
sector besides delivering better services to citizens.
 In México, most e-Government services in 
the past have been developed in-house, at all levels of government (Federal, State and 
Municipal). The recent Austerity Decree, will however bring about a radical departure from this 
approach. The Decree prohibited Federal Government departments from purchasing computers 
and hardware in general, forcing them to purchase IT services from the private sector instead. As 
a
result of this Decree, there is an opportunity for the Government to use PPP models to tap the 
private sector to invest in development and operation of those services for the Government.  
 
31. This component would finance:  
 
(a)  Technical Assistance to review the legal and regulatory framework of PPPs for 
Government services and to propose and draft new changes and regulations and/or 
rules to simplify the implementation of PPPs (US$0.3 million);  
(b) Technical Assistance to carry out feasibility studies, design and bidding 
specifications preparation for PPPs to outsource selected Government services to IT 
companies (US$1.0 million);  
(c) 
Training of Government officials on the design and implementation of PPPs for e-
government (US$0.9 million); and  
(d)  Technical Assistance and equipment to support the creation of an Integration 
Competency Center to help government agencies and private sector players to adopt 
a
flexible, agile and highly modular approach to e-government including the 
adoption of Service Oriented Architecture (SOA), and setting up of cost-effective 
Technology Escrow arrangements to improve the prospects of SMEs in securing 
business within and outside of the government (US$0.6 million). 
 
F.  Strengthening of the IT Legal and Regulatory Framework and Institutions ($6.1 million)
32. This component would include:  
Page  12
(a)  Technical assistance to draft changes and/or improvements to the IT legal and 
regulatory framework
17
 (US$1.2 million);  
(b)  Awareness raising campaigns for specific programs such as the Trustmark Seal 
Program and other improvements of sector laws and regulations and their 
enforcement (US$1.1 million); 
(c)  Tailor-made professional training for legislators, judges, public servants, law 
enforcement officers, technical experts in trials, and professors and lawyers in 
general on IT issues, regulations and enforcement best practices (US$1.9 million); 
(d)  Creation of a Dispute Settlement Center within the Mexican Software Consortium 
(US$1.0 million); and 
(e)  Support the creation and/or strengthening of local Masters programs in IT Law, 
training professors of Law on IT issues, regulations and enforcement best practices 
(US$1.0 million). 
 
G.  Strengthening of PROSOFT and Project Management ($3.6 million)
33. This component would create an International Consultative Commission in PROSOFT to 
advice SE on new developments in the global IT industry to formulate new policies for the 
sector. It would finance: 
 
(a) 
Operational costs including travel and logistics of the members of the International 
Consultative Commission in PROSOFT (US$0.6 million); 
(b) 
Technical assistance to carry out studies on the IT sector in México, as requested by 
PROSOFT’s International Consultative Commission, and to bring international 
experts to México to organize lectures, carry out workshops, consultations and other 
learning events (US$1.5 million); and  
(c) 
Operational costs of the Team (“
Direccion de Economia Digital
”) in 
Secretaria de 
Economi
a
to manage, implement, monitor and evaluate the Project. (US$1.5 
million). 
 
5. Financing 
 
Source 
Local 
Foreign 
Total 
International Bank for Reconstruction and 
Development 
79.8 0.2 80.0 
6. Implementation 
 
34. The 
Dirección General de Comercio Interior y Economía Digital
 (the “Team”) in 
Secretaría 
de Economía
 (SE) would be the implementing agency.  This is the same Team that has managed 
the PROSOFT Fund, since 2003 and in 2008 has a budget of $61 million. This Team is a very 
effective group and the Bank has appraised its capacity to implement the Project.  The Team 
17
 The areas are described in Annex 4, and based on M. Bendersky report. 
Page  13
would be assisted by a small number of individual consultants to manage and implement the 
Project.  
 
35. The PROSOFT Fund Operation works as follows: IT companies or universities (the 
“beneficiaries”) request support to projects to PROSOFT through a Promotion Agency 
(CANIETI, AMITI or a State Promotion Agency). During appraisal, the Bank found that the 
Fund is the ideal vehicle for project implementation because it delegates the implementation of 
sub-projects to the beneficiaries. The following table summarizes the implementation by 
component. To minimize the implementation costs, the Team in SE will provide technical 
assistance to the beneficiaries indicated in the table to implement their respective activities. 
 
Table 3. Project Implementation Arrangements by Component 
 
Component Implementation 
/
Beneficiary 
Mechanism for 
Funds Transfer 
Promotion Agency 
1. Human 
Skills 
Development: 
(a) Start up of MexicoFIRST 
CANIETI PROSOFT 
Fund 
AMITI 
(b) Operations of MexicoFIRST 
SE/Mexico FIRST
1
8
PROSOFT Fund 
State Promotion 
Agencies, AMITI 
2. 
Support to IT Clusters 
 
 
 
(a)  IT.LiNks 
CANIETI, AMITI 
PROSOFT Fund 
AMITI, CANIETI 
(b)  Support to Clusters 
IT Clusters 
PROSOFT Fund 
AMITI, CANIETI 
(c) Awareness raising workshops 
IT Clusters 
PROSOFT Fund 
AMITI, CANIETI 
(d)  Certification programs 
IT companies 
PROSOFT Fund 
State promotion 
agencies 
3. Financing 
 
 
 
(a) Design of Accreditation 
Program 
CANIETI, AMITI 
PROSOFT Fund 
AMITI, CANIETI 
(b)  Accreditation grants 
IT companies 
PROSOFT Fund 
State promotion 
agencies 
(c)  Technical Assistance (TA) to 
FI 
SE Direct/PROSOFT 
Fund 
TBD 
4. IT 
Parks 
 
 
 
(a)  Studies, design of PPP 
State clusters 
PROSOFT Fund 
CANIETI, AMITI 
(b) Construction, finishing, 
equipment. 
Real Estate 
developer 
PROSOFT Fund 
State promoting 
agencies 
5. 
Outsourcing of Government 
Services 
 
(a)  Legal and Regulatory Review 
SE 
Direct/PROSOFT 
Fund 
TBD 
(b)  Feasibility Studies, design of 
PPPs:  
(i) 
to Federal Entities 
 
(ii) 
To State Entities 
 
SE 
 
States 
 
Direct/PROSOFT 
Fund 
PROSOFT Fund 
 
TBD 
 
CANIETI,AMITI 
(c)  Training of Gov. Officials 
SE 
Direct/PROSOFT 
Fund 
TBD 
(d)  Integration Competency Center 
SE 
Direct/PROSOFT 
Fund 
 
TBD 
18
 SE will carry out this component until MexicoFIRST has a financial management system in place in a manner 
satisfactory to the Bank. 
Page  14
6. 
Legal and Regulatory 
 
 
 
(a)  Review of regulatory 
framework in the country 
AMIPCI 
PROSOFT Fund 
CANIETI, AMITI 
(b)  Trustmark Seal program 
AMIPCI 
PROSOFT Fund 
CANIETI, AMITI 
(c) Training 
UNAM 
Direct/PROSOFT 
F
und 
TBD 
(d)  Dispute Settlement Center 
Consorcio Mexicano 
de Software 
PROSOFT Fund 
CANIETI, AMITI 
(e)  Creation of a Masters 
program in IT Law 
ITAM 
PROSOFT Fund 
CANIETI, AMITI 
7. 
PROSOFT strengthening and 
Project Management 
SE Direct 
n.a. 
7. Sustainability 
 
36. The aim of this Project is to implement actions that would be sustainable in the future, 
reducing the need for Government subsidies to the industry in the long run. Therefore, each 
component has been designed with sustainability in mind, reducing transfers of public funds to 
the industry in the long term.  All components have elements that try to ensure future 
sustainability.  The majority of the components were designed using Public Private Partnerships. 
The Private Party would own the majority share and manage the PPP, thereby ensuring proper 
operation and future sustainability of the initiative.  Another principle used in the Project design 
is that the public funds be used to support public goods, for example in the training components. 
The reason for this support is to compensate for the gap between the level of education of the 
young graduates and the level required for their employability.  In this case, the role of 
MexicoFIRST
 would be reduced over time, as universities in México gradually modify their 
programs and adapt faster to industry needs.  
 
8.  Lessons Learned from Past Operations in the Country/Sector 
 
37. The major components of this project – Human Skill Development, Cluster Support and 
Infrastructure are based on the international experience in countries like India, China, Malaysia 
and the Philippines to develop a pool of skilled manpower for the IT/ITES sector. These 
experiences indicate that the best outcomes are obtained when the private sector participates in 
the design and implementation of the programs to develop the Industry.  Therefore, the Project 
has been designed with strong private sector participation. The government’s role would be 
limited to PPP concept design and promotion and also contributing minimum public funds to 
mitigate risks for private sector investments.  
 
a.  Development of Skills 
 
38. There are a number of international examples of attempts to develop skills for the IT/ITES 
sector. Prominent among these have been (i) China’s ‘Thousand – Hundred – Ten’ initiative
19
 
that hopes to train nearly half a million people for the BPO sector, (ii) Penang Skills 
Development Center
20
 in Malaysia has forged a close linkage with industry to develop skills, (ii) 
19
 
http://www.chnsourcing.com/article/thousand/Index.asp
(site accessed on November 21, 2007) 
20
 
http://www.psdc.com.my/
(site accessed on November 21, 2007) 
Page  15
Nasscom’s efforts in India include an assessment of competency
21
 
for benchmarking of skill gaps 
in BPO. A common lesson from all these examples is that it is necessary to have close linkages 
with the private sector for skills development initiatives to succeed. The IT/ITES skills 
development initiative for Mexico under the present project is therefore anchored in an 
institution that is largely private sector driven. 
 
b.  English language Training 
 
39. The availability of a talent pool that is conversant with the English language is one of the key 
drivers of investments in the IT/ITES sector. Countries like India and the Philippines have 
benefited greatly from this advantage, while even a potentially major player like China has been 
handicapped by the low availability of English speaking workers. Consequently a component 
focusing on the development of English language skills has been thought necessary for inclusion 
in the project.  
 
c. 
Importance of Global Networks 
 
40. In an increasingly globalized world, much can be gained from forging partnerships with 
diverse international players. For example, global co-innovation networks (COINS) are being 
increasingly used by the private sector for innovating new products and services. Investment 
promotion agencies like CORFO in Chile have attempted to make strategic use of transnational 
networks for attracting investments in high technology
22
.
The concept of MexicoFIRST aims to 
establish a network of global partnerships focused specifically on developing skills. Using best in 
class organizations and expertise for skills development can compress time along the learning 
curve, and also build a brand for Mexico that can capture the mindshare of potential investors.  
 
d.  Leveraging the Private Sector for Development of IT Infrastructure 
 
41. A global study carried out for infoDev on the international experience in the development of 
IT Parks found four factors critical for success of IT Parks: (1) private management and anchor 
investor; (2) location of the Park near airports, large urban centers, universities, housing and 
recreational facilities; (3) qualified and skilled manpower; and (4) availability of angel 
investment, venture capital and private equity
23
.
Parks that were developed solely with funding 
from the government e.g. in Hubli - India
24
,
did not succeed as compared to parks developed 
through private sector investments. Consequently the funding model proposed for the 
development of IT Parks under the project is one that leverages private sector investments for 
developing Park infrastructure.  
 
e. Integration 
Competency 
Center 
21
 
http://chdit.nic.in/nac_test.pdf
(site accessed on November 21, 2007) 
22
 Nelson, Roy C, Transnational Strategic Networks and Policymaking in Chile: CORFO's High Technology 
Investment Promotion Program, 1 July 2007, Journal of Interamerican Studies & World Affairs, Volume 49; Issue 2. 
 
23
 Price Waterhouse Coopers
,
“International Best Practice for Establishment of Sustainable IT Parks”, April 2007 
(forthcoming publication). More details in Annex 4. 
24
 infoDev, March 2007, International Best Practice for Establishment of Sustainable IT Parks (report prepared by 
PWC). 
Page  16
42. It has been the experience of many governments that a strong system of governance is 
essential to benefit from interoperability and from economies in the use of shared infrastructure 
and services. In the case of the US the Office of e-Government is located within the Office of 
Management and Budget, while in Canada it is the Treasury Board that exercises oversight for e-
government. It will be important that the proposed Integration Competency Center should be 
properly plugged into the decision making processes and hierarchy of government. 
 
f. 
Public Private Partnerships 
 
43. While PPPs in e-government can be highly successful, they also pose a number of 
challenges. These challenges are largely centered on unfriendly government regulations and 
problems in structuring financial arrangements and risk sharing mechanisms. It is important 
therefore that a cautious and well sequenced approach is adopted for PPPs in Mexico. The 
project would therefore first conduct feasibility studies duly identifying issues that need to be 
addressed for each of the e-government PPP candidates. Only if the approach is found feasible 
would actual funding of PPPs be taken up. 
 
9.  Safeguard Policies (including public consultation) 
 
Safeguard Policies Triggered by the Project
 
Yes
 
No
 
Environmental Assessment
(
OP
/
BP
4.01) [X] 
[ 
] 
Natural Habitats (
OP
/
BP
4.04)
 
[
]
[
]
Pest Management (
OP 4.09
)
[
]
[
]
Physical Cultural Resources (
OP/BP 4.11
)
[
]
[
]
Involuntary Resettlement (
OP
/
BP
4.12)
 
[X] [ 
] 
Indigenous Peoples (
OP
/
BP
4.10)
 
[
]
[
]
Forests (
OP
/
BP
4.36)
 
[
]
[
]
Safety of Dams (
OP
/
BP
4.37)
 
[
]
[
]
Projects in Disputed Areas (
OP
/
BP
7.60)
*
[
]
[
]
Projects on International Waterways (
OP
/
BP
7.50)
 
[
]
[
]
10. List of Factual Technical Documents 
 
44. ATKearney. 
2006
.
“Development o fan Information Technology and Information 
Technology Enabled Services (IT/ITES) Offshoring Industry in Mexico: Funding Mechanism for 
Technical Assistance and Advisory Services – FMTAAS# 548505.” Financial Proposal. Mexico: 
ATKearney. 
 
45. ——. 2006. “Desarrollo de la Industria de Servicios de TI y EPN en México.” Reporte de 
Avance – Etapa 1. Presentación. 7 de diciembre. México, D.F.  
 
*
By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the 
disputed areas
 
Page  17
46. 
——. 2006. “Desarrollo de la Industria de Servicios de TI y EPN en México.” Reporte 2. 21 
de diciembre. México, D.F. 
 
47. ——. 2007. “Desarrollo de la Industria de Servicios de TI y EPN en México.” Reporte 3 – 
Estrategias y Planes de Inversión. Presentación.  9 de febrero. México, D.F. 
 
48. ——. 2007. “Development of an IT/ITES Industry in Mexico.” Background Document for 
Subject Matter Expert Discussion Summary of 3rd. Report – Strategy Definition and Investment 
Plans. Powerpoint Presentation. February 15. Mexico, D.F. 
 
49. Bendersky, Matías. 2007. “Legal and Regulatory Barriers in the Development of Information 
Technologies and Information Technology Enabled Services (IT/ITES).” Recommendation for 
the Project. Washington, D.C. 
 
50. Environmental Resources Management. 2008. “Environmental and Social Management 
Framework for IT Projects involving IT Parks”. Final Report. January 10, 2008. 
 
51. InfoDev. 2007. “Financing Technology Entrepreneurs and SMEs in Developing Countries: 
Challenges and Opportunities.” Report. Washington, D.C. 
 
52. 
PriceWatersHouseCoopers. 2007. “International Best Practice for Establishment of 
Sustainable IT Parks: Review of Experiences in Select Countries, Including Three Country 
Studies.” Washington, D.C. 
 
11. Contact point 
 
Contact: Eloy Eduardo Vidal 
Title: Lead Telecommunications Engineer 
Tel: (202) 458-2694 
Fax:  
Email: Evidal@worldbank.org 
 
12. For more information contact: 
The InfoShop 
The World Bank 
1818 H Street, NW 
Washington, D.C. 20433 
Telephone:  (202) 458-4500 
Fax:  (202) 522-1500 
Email: pic@worldbank.org 
Web: http://www.worldbank.org/infoshop