Document of The World Bank Report No: ICR2383 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-80040) ON A LOAN IN THE AMOUNT OF US$751.9 MILLION TO THE UNITED MEXICAN STATES FOR A DEVELOPMENT POLICY LOAN TO STRENGTHENING THE BUSINESS ENVIRONMENT FOR ENHANCED ECONOMIC GROWTH July 30, 2012 Finance and Private Sector Development Colombia and Mexico Country Management Unit Latin America and the Caribbean Region CURRENCY EQUIVALENTS (Exchange Rate Effective July 30, 2012) Currency Unit = Mexican Pesos (MX$) MX$1.00 = US$0.07553 US$1 = MX$13.2392 FISCAL YEAR January 1 — December 31 ABBREVIATIONS AND ACRONYMS BANOBRAS Banco Nacional de Obras (National Bank for Public Works) BANSEFI Banco del Ahorro Nacional y Servicios Financieros (National Bank of Savings and Financial Services) CCDs Certificado de Capital de Desarrollo (Equity Development Certificate) CFE Comisión Federal de Electricidad (Federal Electricity Commission) CFC Comisión Federal de Competencia (Federal Competition Commission) CMs Contratos Marco (Framework Agreements) CNBV Comisión Nacional Bancaria y de Valores (National Banking and Securities Commission) COFEMER Comisión Federal de Mejora Regulatoria (Federal Commission for Regulatory Environment) COFETEL Comisión Federal de Telecomunicaciones (Federal Telecommunications Commission) CONSAR Comisión Nacional del Sistema de Ahorro para el Retiro (National Commission for the Retirement Saving System) CESF Consejo de Estabilidad del Sistema Financiero (Financial Stability Council) CPS Country Partnership Strategy CY Calendar Year DPL Development Policy Loan FONADIN Fondo Nacional de Infraestructura (National Infrastructure Fund) FSAP Financial Sector Assessment Program FY Fiscal Year GDP Gross Domestic Product GoM Government of Mexico IADB Inter-American Development Bank IBRD International Bank of Reconstruction and Development ICR Implementation Completion Report IFC International Finance Corporation IL Investment Loan IMF International Monetary Fund LAC Latin America and the Caribbean NDP National Development Plan (Plan Nacional de Desarrollo) OECD Organization for Economic Co-operation and Development OSDs Ofertas Subsecuente de Descuentos (Reverse Auctions) PND Plan Nacional de Desarrollo (National Development Plan) PPP Public-private Partnership (Asociación Pública Privada) SAT Servicio de Administración Tributaria (Revenue Administration Service) SCT Secretaría de Comunicaciones y Transportes (Ministry of Communications and Transport) SE Secretaría de Economía (Ministry of Economy) SFP Secretaría de Función Pública (Ministry of Public Administration) SHCP Secretaría de Hacienda y Crédito Público (Ministry of Finance and Public Credit) SIEFORES Sociedades de Inversión de Fondos para el Retiro (Pension Funds) TA Technical Assistance TAL Technical Assistance Loan U.S. United States VAT Value Added Tax VUCEM Ventanilla Única de Comercio Exterior Mexicano (Single Trade Window) Vice President: Hasan A. Tuluy Country Director: Gloria M. Grandolini Sector Manager: Lily L. Chu Task Team Leader: Eva M. Gutierrez ICR Primary Author Claudio A. Pardo   MEXICO Strengthening the Business Environment for Enhanced Economic Growth DPL CONTENTS Data Sheet ........................................................................................................................ i  A. Basic Information ........................................................................................................ i  B. Key Dates .................................................................................................................... i  C. Ratings Summary ....................................................................................................... ii  D. Sector and Theme Codes........................................................................................... iii  E. Bank Staff .................................................................................................................. iii  F. Results Framework Analysis ..................................................................................... iv  G. Ratings of Program Performance in ISRs ............................................................... viii  H. Restructuring (if any) .............................................................................................. viii  1. Program Context, Development Objectives and Design ............................................ 1  1.1 Context at Appraisal ............................................................................................. 1  1.2 Original Program Development Objectives (PDO) and Key Indicators (as approved) .................................................................................................................... 4  1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification ............................................................................................ 4  1.4 Original Policy Areas Supported by the Program (as approved) .......................... 4  1.5 Revised Policy Areas .......................................................................................... 11  2. Key Factors Affecting Implementation and Outcomes ............................................ 11  2.1 Program Performance ......................................................................................... 11  2.2 Major Factors Affecting Implementation: .......................................................... 16  2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: ... 17  2.4 Expected Next Phase/Follow-up Operation (if any): .......................................... 18  3. Assessment of Outcomes .......................................................................................... 18  3.1 Relevance of Objectives, Design and Implementation ....................................... 18  3.2 Achievement of Program Development Objectives ........................................... 20  3.3 Justification of Overall Outcome Rating ............................................................ 21  3.4 Overarching Themes, Other Outcomes and Impacts .......................................... 22  4. Assessment of Risk to Development Outcome ......................................................... 22  5. Assessment of Bank and Borrower Performance ..................................................... 23  5.1 Bank Performance ............................................................................................... 23  i 5.2 Borrower Performance ........................................................................................ 24  6. Lessons Learned.................................................................................................... 25  7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners........... 26  Annex 1 Bank Lending and Implementation Support/Supervision Processes.............. 27  Annex 2. Beneficiary Survey Results ........................................................................... 29  Annex 3. Stakeholder Workshop Report and Results ................................................... 30  Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 31  Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 32  Annex 6. List of Supporting Documents ...................................................................... 33  MAP .......................................................................................................................... 34  ii Data Sheet A. Basic Information Strengthening the Business Environment Country: Mexico Program Name: for Enhanced Economic Growth DPL Program ID: P112264 L/C/TF Number(s): IBRD-80040 ICR Date: 07/30/2012 ICR Type: Core ICR UNITED MEXICAN Lending Instrument: DPL Borrower: STATES Original Total USD 751.88M Disbursed Amount: USD 751.88M Commitment: Revised Amount: USD 751.88M Implementing Agencies: SHCP, SFP, SE, COFETEL, CFE, SCT, SAT, CNBV, CONSAR, FONADIN, CESF Cofinanciers and Other External Partners: None B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 08/31/2010 Effectiveness: 12/20/2011 Appraisal: 12/07/2010 Restructuring(s): Approval: 01/18/2011 Mid-term Review: 11/15/2011 Closing: 01/31/2012 01/31/2012 i C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory Implementing Quality of Supervision: Moderately satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Satisfactory Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Quality at Entry Program at any time No None (QEA): (Yes/No): Problem Program at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: ii D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 21 21 General finance sector 21 21 General industry and trade sector 33 33 Micro- and SME finance 12 12 Telecommunications 13 13 Theme Code (as % of total Bank financing) Other financial and private sector development 20 20 Public expenditure, financial management and 10 10 procurement Regulation and competition policy 60 60 Tax policy and administration 10 10 E. Bank Staff Positions At ICR At Approval Vice President: Hasan A. Tuluy Pamela Cox Country Director: Gloria M. Grandolini Gloria M. Grandolini Sector Manager: Lily L. Chu Lily L. Chu Program Team Leader: Eva M. Gutierrez Esperanza Lasabagaster iii ICR Team Leader: Eva M. Gutierrez ICR Primary Author: Claudio A. Pardo F. Results Framework Analysis Program Development Objectives (from Project Appraisal Document) The Overall Program Development Objective is to support economic policies that will strengthen Mexico´s business environment and the micro-economic foundations for enhanced economic growth and employment generation. This will be achieved by: (i) strengthening the conditions for competition in crucial markets, in particular the telecommunications sector and public procurement; (ii) streamlining business regulations that will lower trade and other transactions costs and facilitate the adoption of new technologies; (iii) improving the regulatory framework to foster financial sector access, stability and market transparency; and (iv) promoting public-private partnerships in infrastructure to expand core infrastructure services essential to the productivity of Mexican firms. (a) PDO Indicator(s) Formally Actual Value Original Target Revised Achieved at Indicator Baseline Value Values (from Target Completion or Target approval documents) Values Years Competition in Telecommunications and Public Procurement Indicator 1: Increase in internet users (connections, per 100 inhabitants) Value (quantitative or 26.3% 38.0% 36.15% qualitative) Date achieved 12/31/2009 12/31/2011 12/31/2011 Comments Largely achieved. The reported 36.15% increase in the 2-year period came to be (incl. % achieved) 95.1% of the 38.0% targeted value. Indicator 2: Increase in broadband users (fixed lines, per 100 inhabitants) iv Formally Actual Value Original Target Revised Achieved at Indicator Baseline Value Values (from Target Completion or Target approval documents) Values Years Value 9.2% (statistic later (quantitative or 12.5% 11.37% revised to 9.05%) qualitative) Date achieved 12/31/2009 12/31/2011 12/31/2011 Largely achieved. Although the number of fixed-line connections came short, the Comments original target was easily surpassed if new mobile broadband connections are (incl. % achieved) taken into account (7.17%), for an aggregated figure of broadband connections of 18.54% in 2011. Implementation of framework agreements (“Contratos marco�) to streamline Indicator 3: public procurement procedures Value (quantitative or 0 11 8 qualitative) Date achieved 12/31/2009 12/31/2011 12/31/2011 Comments Largely achieved. Implementation of this new purchasing modality has been (incl. % achieved slower than anticipated. One more of these contracts was implemented in 1Q12. Implementation of additional reverse auctions (“Ofertas subsecuentes de Indicator 4: descuento�) Value (quantitative or 6 8 27 qualitative) Date achieved 08/30/2010 12/31/2011 12/31/2011 Comments Achieved. Utilization of this procurement modality was substantially above (incl. % achieved) targeted levels. Streamlining and Improving the Quality of Business Regulations Improvement in the Doing Business sub-index of Time to Comply with Tax Indicator 5: Obligations Value (quantitative or 517 hours 385 hours 347 hours qualitative) v Formally Actual Value Original Target Revised Achieved at Indicator Baseline Value Values (from Target Completion or Target approval documents) Values Years Date achieved 12/31/2010 12/31/2011 12/31/2011 Comments Achieved. Time reduction was surpassed: actual time reduction was 39.9% vs. the (incl. % achieved) targeted decline of 25.5% targeted in the Policy Matrix. Cost savings obtained by the private sector from the implementation of the Zero Indicator 6: Base Business Regulation Program Value (quantitative or 0 0.15% of GDP Not available qualitative) Date achieved 12/31/2009 12/31/2011 12/31/2011 Although official cost savings estimates are not available at this time, indications Comments are that there has been considerable cost savings with the streamlining of tax (incl. % achieved) regulations and new public procurement modalities. Reduction in the number of international trade related processes linked to the Indicator 7: Revenue Administration Service (SAT) and Ministry of Economy (SE) Value (quantitative or 107 processes 60 processes 107 processes qualitative) Date achieved 12/31/2010 12/31/2011 12/31/2011 Not achieved. There were delays in the implementation of the electronic Single Comments Trade Window platform (originally programmed for September 2011 for (incl. % achieved) processes linked to SAT and SE), which was only opened in January 16, 2012. Fostering Access to Finance with Stability Indicator 8: Number of financial transactions conducted through mobile phones Value (quantitative or 0 10,000 0 qualitative) Date achieved 01/31/2010 12/31/2011 12/31/2011 Comments Not achieved. Two operators have announced plans to start offering mobile (incl. % achieved) banking (“cuentas móviles�, as per Art. 325 Bis1of the CNBV regulations), vi Formally Actual Value Original Target Revised Achieved at Indicator Baseline Value Values (from Target Completion or Target approval documents) Values Years although none was operational at end-2011. Increase in the number of entries (credits) present in the credit reporting databases Indicator 9: (Trans Union and Círculo de Crédito credit bureaus data) Value 4% increase over the 41.4% increase, to 376 (quantitative or 265.99 million base (to 276.6 million) million entries. qualitative) Date achieved 09/30/2010 12/31/2011 12/31/2011 Achieved. Indicator does not include the credit entries of a third registered credit Comments bureau, Dun & Bradstreet (13 million entries at end-2011), specialized in (incl. % achieved) commercial credit. Production of Financial Stability Report by Financial Stability Council and Indicator 10: activities completed by the Council Value (quantitative or 0 1 1 qualitative) Date achieved 12/31/2010 12/31/2011 12/31/2011 Comments Achieved. The Council released its first Report on April 2011. Last March, it (incl. % achieved) released its second Report covering the period April 2011 to March 2012. Coverage of delinquent mortgage credit and non-revolving consumer credit from Indicator 11: commercial banks under new methodology A. Mortgages: 24 Both types of loan-loss Currently, and since Value months of losses provisioning in line March 2011, these two (quantitative or B. Non-revolving with the new 12 types of credits qualitative) consumer credits: 7 months-of-expected provision according to months of losses loan-loss rule the new rule Date achieved 09/30/2010 12/31/2011 03/31/2011 Achieved. The new methodology, put in place for these two types of credits in Comments March 2011, requires banks to maintain loan-loss reserves equal to their projected (incl. % achieved) loan losses in the following 12 months. Fostering Private Participation in Infrastructure vii Formally Actual Value Original Target Revised Achieved at Indicator Baseline Value Values (from Target Completion or Target approval documents) Values Years Indicator 12: Average annual private investment in infrastructure (2010-2011) Value (quantitative or MX$7.5 billion MX$15 billion MX$18.8 billion qualitative) Date achieved 12/31/2009 12/31/2011 12/31/2011 Comments Achieved. Figures are based on FONADIN’s disbursements to PPP infrastructure (incl. % achieved) investment projects. Target overachieved by 25.3 percent. (b) Intermediate Outcome Indicator(s) None G. Ratings of Program Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 02/25/2011 Satisfactory Satisfactory 0.00 2 08/13/2011 Satisfactory Satisfactory 0.00 H. Restructuring (if any) Not Applicable viii 1. Program Context, Development Objectives and Design 1.1 Context at Appraisal 1. Following the sharp contraction of 2009, the Mexican economy was experiencing a solid recovery by the second half of 2010, when this DPL operation was negotiated. Output was severely impacted in 2009 (6.3 percent drop in GDP, according to the April 2012 WEO report) by the combination of the unprecedented global financial crisis and the 2009 AH1N1 influenza outbreak. Behind the rapid turnaround of 5.5 percent in real GDP in 2010 were the recovery in the United States, Mexico’s main trading partner, and the capacity of the Mexican authorities to implement broad-based counter-cyclical policies to mitigate the impact of exogenous shocks. Although economic growth in Mexico has been rather disappointing in recent decades despite significant trade liberalization and market-oriented reforms, the authorities have had a consistent track record of implementing prudent macro policies which clearly have strengthened their ability to recover from exogenous economic disturbances. In fact, soon after the onset of the crisis the Mexican authorities implemented measures to mitigate the external shock and protect social expenditures, as well as several actions geared to maintain orderly conditions in foreign exchange and financial markets.1 2. As part of the economic recovery efforts, the Calderon Administration launched a 10-point reform program “to transform Mexico� in September 2009. Its agenda was based on the ideas contained in the National Development Plan (NDP), the medium-term development plan presented to Congress in 2007. The NDP, which also constitutes the basis for the legislative and regulatory actions supported by the operation being reviewed, was the result of extensive consultations, as demanded by the National Planning Law. The new drive for reform contained in the 10-point agenda, to be carried out during the remaining second-half of the Calderon administration, set among other priorities the reduction of poverty, the widening of the tax base and reduction of evasion, the rationalization of federal spending, as well as the deepening of the efforts geared towards improving the business regulatory framework and reforming the country’s telecommunications market. This group of initiatives was of prime interest to this DPL which sought to strengthen the business environment to enhance the prospects for economic growth. 3. Improvements in competitiveness have become increasingly important in Mexico as lack luster growth since the mid-nineties has been mainly the reflection of low productivity gains. Growth decomposition studies show that Mexico’s moderate output growth can be explained mainly by the accumulation of production factors (labor 1 The World Bank made an important contribution to this effort in line with its broader, longer term and active support of Mexico’s efforts to strengthen its foundations for sustained growth. As stated in the Bank’s web site: “The Bank has demonstrated to be a strong partner for Mexico during the global economic recession providing unprecedented resources for crisis response programs. As of June 31st, 2011 Mexico had the Bank’s 4th largest portfolio, comprised of 18 active projects and 22 knowledge-service products.� A summary of recent Bank engagement in the policy areas of interest to this DPL is provided in Box 1. 1 and capital) and not by gains associated with total factor productivity (the later contributing just 0.6 percentage points annually to real GDP growth during 1996-2010, which averaged only 3 percent annually during that period). 2 Improvement in the country’s competitiveness has been a key theme in recent Country Partnership Strategies (CPS). In particular, the current CPS has sought to increase efficiency and accessibility to the financial sector and the promotion of new infrastructure projects through Public- Private Partnerships, both of which are policy areas supported by this DPL. The Policy Matrix of this DPL operation sought to build on years of engagement by the Bank on addressing competitiveness issues faced by the Mexican economy (Box 1). 4. In March 2010, the 2008 CPS had a progress update which added an active financial services program for fiscal year 2011, following the request of the Government of Mexico (GoM). This updated CPS recognized the changing needs of Mexico in the face of a deteriorating global environment, which included higher levels of financing and knowledge support needs. This fast-disbursing operation was in line with the CPS’s progress update and it was part of a broader programmatic Bank effort that included financial, knowledge, and convening services. The added flexibility introduced by the CPS progress update was seen as instrumental not only for assisting Mexico with the financing of its counter-cyclical policy package—thus alleviating somewhat the expected human consequences of the economic downturn—but also for giving more international recognition to the policy actions in the GoM’s 10- point reform agenda, in particular those intended to improve the country’s business environment. Box 1. World Bank Engagement in Mexico: Selected Policy Areas since 2006 Competition Policy Knowledge Services: Policy Notes: Creating the Country Procurement WB Publication: No Growth Follow up TA on Public Foundations for Equitable Assessment Review without Equity: Inequality, Procurement Growth Interests, and Competition in Mexico Convening Services: Regional Competitiveness Conference Financial Services First Programmatic Investment Loan (IL): IT Technical Assistance Loan (TAL): This DPL: Strengthening the Competitiveness DPL Industry Development Results-Based Management and Business Environment for Budgeting Project (Component 1) Enhanced Economic Growth 2 This state of affairs is explained in detail in the Program Document, pages 7 to 10. 2 Streamlining and Improving the Quality of Business Regulations Knowledge Services: FIAS: Business Regulation WB Publication: Does the Fee-based service: FIAS TA: Tax Administration and Simplification Project Investment Climate Matter? Implementation of Doing Business Customs Reforms WB Working Paper: A tale of two species : revisiting the effect WB Publication: Doing business of registration reform on in a more transparent world 2012 informal business owners in - economic profile : Mexico Mexico Financial Services: First Programmatic TAL: Institutional Strengthening This DPL: Strengthening the Competitiveness DPL of Customs Business Environment for Enhanced Economic Growth Financial Sector Policy Knowledge Services: FSAP Update DEC Policy Reports: Finance for Advisory Work on Financial TA: Governance on Growth: Policy Choices in a Infrastructure: Payment Systems Development Banks Policy Notes: Creating the Volatile World and Finance for and Credit Bureau Foundations for Equitable All? Financial Education and Growth Assessment of the Equity Market Consumer Protection Regional Studies: Access to Program (Trust Fund) Finance, SME lending and Housing Finance Strategy Capital Market Development Crisis Preparedness Convening Services: Development Bank Capital Markets Workshop Conference Financial Services: Finance for Growth DPL DPL: Economic Policies in IL: Private Housing Markets This DPL: Strengthening the Response to the Global Crisis Development Loan (SHF) Business Environment for Access to Rural Finance Enhanced Economic Growth Loan (BANSEFI TAL: Savings and Credit Sector development bank) Consolidation and Financial Inclusion Project (BANSEFI) Promoting Private Participation in Infrastructure Knowledge Services: Policy Notes: Creating the TA: Regulatory Framework and TA: Adjusting PPP program to IPER: Federal Toll Road Foundations for Equitable Best Practice Design of PPPs Global Crisis Reforms Growth (Banobras) Financial Services: IL: Urban Transport This DPL: Strengthening the Transformation Project Business Environment for Enhanced Economic Growth 3 1.2 Original Program Development Objectives (PDO) and Key Indicators (as approved) 5. The PDO supported economic policies that strengthened Mexico’s business environment and the micro-economic foundations for enhanced growth and employment generation. Achieving the PDO required the adoption and implementation of mutually reinforcing policy actions in four specific areas. It aimed at: (i) Strengthening the conditions for competition in crucial markets, in particular the telecommunications sector and public procurement; (ii) Streamlining business regulations that will lower trade and other transactions costs and facilitate the adoption of new technologies; (iii) Improving the regulatory framework to foster financial sector access, stability and market transparency; and (iv) Promoting public-private partnerships in infrastructure to help build and expand core infrastructure services essential to the productivity of Mexican firms. 6. Program outcome indicators were monitored following the closing date of this operation (January 2012), during the ICR mission. The Policy Matrix defined the twelve outcome indicators presented in the PDO Indicators table in page iv. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification 7. The PDO was not revised and the outcome indicators were not changed or revised. 1.4 Original Policy Areas Supported by the Program (as approved) 8. Policy Area 1: Competition Policy. Of this broad policy area, the reviewed DPL supported government regulatory and administrative prior actions targeted to enhance competition in the telecommunications market and make public procurement more competitive, efficient and transparent. The specific prior actions supported by this operation were as follows: A. Telecommunications market. The Borrower, through CFE (the Federal Electricity Commission), SCT (Ministry of Communications and Transport) and COFETEL (Federal Telecommunications Commission), took administrative actions on two fronts: i. The leasing to a consortium of three new private players in July 2010, under a concession agreement with CFE, of a pair of dark fibers in CFE’s 21,208 km fiber-optic network.3 Due to a lack of bidding participants to its original public and open tender call, CFE assigned the lease for the use of this public-owned nationwide network to a single consortium of Telefónica, Televisa and Megacable, known as 3 Dark fiber is unused optical fiber available for use in fiber-optic communications (e.g., the transmission of digitalized data). CFE, a publicly owned entity, uses a small portion of its fiber-optic network for its own purposes managing its nationwide electricity business, which includes the operation and administration of the national power grid which provides electricity to practically all Mexicans. CFE is not in the telecommunications business but it built its extensive fiber optics network taking advantage of its right-of- way along its transmission line grid. 4 GTAC. Previous to the lease of part of CFE’s fiber optic network, the only other nationwide fiber-optic network available for telecommunications was owned by Telmex, by far the largest Mexican operator of telecommunications services. Prior to lightening the fiber for its telecommunications purposes, GTAC needed to make additional investments to connect the fiber to its regional and local loops. ii. The concession by COFETEL of 90 MHz of additional radio spectrum to increase the supply of mobile telephony services to end-users—a 60 percent increase in band width availability—through two open public bidding processes (the so called Tenders 20 and 21, finalized in July 2010). Tender 20 auctioned off 24 regional blocks of 1.9 GHz spectrum in the country’s nine cellular regions to three existing operators (Nextel, Iusacell and Movistar). Tender 21 auctioned off 27 regional blocks in the 1.7 GHz spectrum to Movistar and Telcel, with the same general objective of increasing available spectrum for regional service. At the regional level, single blocks were capped at 10 MHz of band width, which in practice excluded the dominant mobile player, Telcel4, from gaining spectrum under Tender 20. In addition, as part of Tender 21 a national block of spectrum suitable for offering 3G+ services was allocated to the smallest national operator, Nextel. A second national block offered by COFETEL at the time went without takers due to the absence of final bidders. The two national blocks of 30 MHz had been reserved for new and small operators. However, the issuance of several concession titles was challenged in Mexican courts by the incumbent Iusacell, which filed over 100 amparos (injunctions) in connection with spectrum tendered under auction 21. B. Public procurement of goods and services. Mexico has a decentralized procurement system with over 3,200 registered purchasing units, responsible for contracting with suppliers. The SFP has been trying to lower the cost, streamline, and promote competition and transparency in the procurement process via the introduction of new procurement modalities useful to purchasing units—although their procurement choices remain voluntary. 5 In the course of 2010, the government, through the Ministry of Public Administration (SPF), took two sets of actions supported by this DPL to implement the 2008 and 2009 amendments to the Law of Acquisitions, Leases and Services of the Public Sector which were supported by this DPL. More specifically, supported prior actions helped with the implementation of two specific procurement tools promoted by the SFP: i. Enactment of regulations for the use of framework agreements. The regulations for the framework agreements (“Contratos marco� or CMs) allow three or more suppliers the opportunity to pre-register as potential participants in future procurement auctions of a specific and well defined product, which one or more 4 Telcel is the Mexican mobile company controlled by the Telmex group (also known as the America Movil group). Telcel provides service to about 70 percent of mobile phone subscribers in Mexico. 5 Procurement of goods and services by the Federal Government and associated entities was equivalent to 7.7 percent of GDP in 2009. 5 public entities regularly buy. These CMs provide the legal framework that norms such eventual participation in a future procurement exercise. According to estimates of the SFP, around 15 percent of the total procured at the federal level is susceptible to this procurement modality. ii. Enactment of regulations for the use of reverse auctions. These regulations provide critical and practical implementation guidelines to facilitate the adoption of new procurement modalities by the different purchasing units, such as reverse auctions (known in Mexico as “Ofertas subsecuentes de descuento� or OSDs). OSDs are second-price electronic auctions whereby the first price is determined by the lowest first-bid price (as revealed by qualified participants at the beginning of the auctioning process when their sealed envelopes containing their quoting prices are released). The lowest first price sets a ceiling for the second stage, when the original bidders compete by offering the lowest price possible via electronic bidding using the CompraNet platform, the upgraded transactions based electronic platform used for carrying out public procurement. Six reverse auctions, conducted from late 2009 to mid-2010 in the context of a pilot program involving purchases of pharmaceuticals and coal, had shown that this type of procurement modality could bring about substantial savings when compared with purchases done via the traditional procurement method of offering a price in a closed envelope.6 9. Policy Area 2: Streamlining and Improving the Quality of Business Regulations. The Program supported steps taken by the government that took aim at reducing business transaction costs and facilitating international trade. These were important first steps of the Zero Base Regulation program, an ambitious reform effort geared to eliminate unnecessary and redundant commercial legislation. The public entities singled out for taking these first steps were three: the Ministry of Finance and Public Credit (SHCP), the Revenue Administration Service (SAT) and the Ministry of Economy (SE). There was significant room at the time for streamlining business regulation, as many federal government transactions had yet to emigrate to electronic platforms, demanded excessive documentation, and followed outdated processes imposing unnecessary costs and delays on business operations. As a result, Mexico lagged substantially behind best practices applied in most OECD countries. 7 Three specific prior actions were supported by this DPL, as follows: i. Simplification and reduction of the number of tax declarations and payment procedures. A Presidential decree (Box 2) eliminated the need of filing a monthly declaration of the Flat-rate Business Tax and the annual declaration of the Value- added Tax; it also obviated the need of having external audit reports accompanying annual tax payment and social security contribution declarations, and the review of a 6 The price in a closed envelope is a constitutional mandate, which has to be respected by reverse auctions. 7 According to the Global Competitiveness Report 2010-2011 published by the World Economic Forum, Mexico ranked 116 among 139 countries in terms of the Burden of Government Regulation index in 2009- 2010. 6 public accountant to claim a credit reimbursement on the Cash Deposit Tax. Also, the validity of Electronic Signatures was extended from two to four years. ii. Development and operation of an electronic Single Trade Window (VUCEM). Each foreign trade transaction involved a large number of processes, heavy paper work and many participants. According to SAT, there were 30 actors involved in a given transaction, which had to present 40 documents, go through 165 different processes and supply 200 pieces of data, many of which had to be filled out several times over. VUCEM allows presenting requested documentation for foreign trade transactions just once through an electronic platform accessible from a computer. iii. Recognition of the standards and conformity assessment procedures applied in the United States or Canada for electronic appliances and data processing equipment. This was a seminal change in regulation since it initiated the process of harmonization and validation of technical norms with major trading partners, basically certifying the U.S. and Canadian norms for these two types of products as valid under the Mexican technical norm and product standards (“Norma Oficial Mexicana�).The reform simplified procedures for importing such goods. 10. Policy Area 3: Fostering Financial Access with Stability. Although the Mexican financial system was shown to be fairly resilient to the shocks resulting from the 2008-2009 global financial crisis8, access to the financial sector remains low (about 50 percent of the population does not use the financial system). Improvements in this area by fostering responsible access while preserving stability in order to increase productivity were thus prominent in the government’s development agenda. In the course of 2010, the government adopted specific measures to promote responsible access to financial services, four of which ended up being supported by the reviewed operation. The public entities in charge of implementing the Borrower’s policy decisions were principally the SHCP and CNBV, and the supported prior actions were as follows: i. Enactment of regulations for the operation of mobile phone accounts. The new mobile accounts are basically bank accounts of low risk and light transactional volume—as defined by the regulations—that reside in mobile phones. They offer basic financial services such as cash withdrawals, deposits, transfers between mobile phone and other banking accounts, bill payment and consultation of past account transactions and balance. Credit institutions must offer these accounts through administrators (mobile phone network providers acting on behalf of credit institutions) which are wholesalers managing groups of retailers or agents willing to offer and give support to mobile accounts at their point-of-sale on behalf of credit institutions for a fee.9 The central idea behind this new type of banking account is to 8 For example, non-performing loans were 2.5 percent of the banks’ lending portfolios in September 2010 while the capital adequacy ratio of the commercial banking system stood at a healthy 17 percent. 9 Mexico’s model has some similarities with the type of mobile banking implemented in Kenya, although in Kenya the service is offered through retailers or agents working directly for the leading mobile network provider—Safaricom via its M-PESA platform—without involving a traditional credit institution in the process. As in Kenya, the idea in Mexico is to offer e-money that resides in a mobile phone SIM card, which acts as the individual’s crucial means of identification. 7 offer basic financial services at a lower cost via a widely available channel to the rural poor. ii. Enhancement of coverage, data quality and consumer service provided through credit bureaus. The reforms broadened and made more precise the reasons a bureau could lose its license and increased the incentive to share information among bureaus.10 They also improved the quality of the information disclosed to the bureaus by credit institutions by establishing their obligation to report credit origination and the date a delinquency takes place. Consumer protection was also improved by reducing to five working days the time a bureau had to inform the reporting credit institution of a specific complaint received from a client. iii. Establishment of the Financial Stability Council (CESF). This high level inter- agency council is chaired by the Minister of Finance and comprises all financial regulatory authorities. The CESF, assisted by a Technical Committee, is responsible for making recommendations and coordinating policy actions and their implementation aimed at mitigating financial systemic risks—with the actions implemented by each agency according to their legal mandates. The Council also acts as a consultation group for the Federal Government on financial systemic risk and has to produce and publish an Annual Report with an assessment of the state of the financial system, including diagnostic work done and any other activities of the Council during the previous twelve months. iv. Enactment of prudential regulations strengthening provisioning requirements for mortgage loans and non-revolving consumer credits. In mid- 2009 the CNBV started to modify prudential regulations for loan provisioning from a system based on incurred losses (backward looking) to one based on expected losses. Loan-loss provisioning based on a forward looking models normally do a better job at projecting future losses, increasing lender resilience to portfolio deterioration. This forward looking and paradigm-changing approach in line with Basel Committee guidelines was already applied to credit card loans. 11. Policy Area 4: Promoting Private Participation in Infrastructure. Aware of Mexico’s substantial infrastructure needs11, the federal government adopted a National Infrastructure Plan covering the years 2007-2012 that sought to commit a total of almost US$240 billion in new infrastructure for the country, both publicly and privately financed. The Plan set the private sector share of the financing at 58 percent of that amount; the rest was supposed to come from public resources. This was expected to be Mexico’s greatest infrastructure investment effort in 25 years. Significant progress was achieved in the Plan’s implementation during its first three years, a period when 40 percent of the 10 However, due to the acceptance of injunctions (amparos) presented by Trans Union de Mexico, the largest credit bureau, and Dun & Bradstreet, S.A., the sharing of positive information in Art. 36 Bis of the Law still is not implemented. 11 Excluding hydrocarbons, Mexico invested annually less than 2 percent of GDP in infrastructure over the last three decades ending in 2009. 8 projected investment in infrastructure was put in place. However, despite active private participation about 80 percent of that investment was made with public resources. It was clear that in the remaining three years of the Plan (2010-2012) the private contribution had to be much more substantial if its targeted share of 58 percent was going to be achieved. In that context, the reviewed DPL sought to support prior actions that fostered private participation in infrastructure projects during years 2010-2012, particularly those that promoted public-private partnerships (PPPs) at the national and sub-national levels. There were three prior actions related to this sector that received support under this DPL: i. Enactment of a decree allowing for the extension of a concession at any time during its lifetime. Prior to this decree, the law allowed extensions to the length of concessions under a PPP, such as toll roads, only in the last fifth of the life span of the PPP contract. The amendments to the law recognized the fact that for a variety of reason and circumstances it is often advantageous to have the flexibility to change the terms and conditions of the original contract or the project itself at any time of the concession period.12 ii. Authorization to the more risk-prone Pension Funds (SIEFORES) to allocate up to 15 percent of their investment portfolios in structured securities. This authorization allowed SIEFORES with more aggressive investment strategies targeted towards younger workers to invest in a new type of security, the so-called Equity Development Certificates (Certificados de Capital de Desarrollo—CCDs). CCDs are securities similar to stocks, but with a final redemption date. They are issued by fiduciary trusts created with the purpose of financing projects.13 This opened up a potentially big new source of long term funding for infrastructure projects, given that the SIEFORES industry was managing approximately US$105 billion in June 2010. iii. Participation of the National Investment Fund (FONADIN) as a minority investor in private equity funds. This fiduciary trust fund is managed by Banobras—on behalf of the GoM—and funded with public money for investing in infrastructure—among other activities. The reform aimed at promoting the creation of new private funds interested in investing in domestic infrastructure projects. New guidelines set some basic parameters to guide FONADIN’s selection of investment opportunities in infrastructure-oriented private equity funds: a) a minimum fund size of MX$2,000 million; b) a participation of at least 5 percent of the fund resources by the fund manager; c) maximum FONADIN 12 Concessions for infrastructure projects are long-term undertakings lasting 15 years or longer, so it is very difficult to properly cover at inception for all eventualities (e.g., traffic flows, additional investment needs, etc.) and for the life of a contract. Thus, it usually makes economic and technical sense to have contractual flexibility at any time during the lifespan of PPP contracts. 13 CCDs type A are issued to finance a variety of investments by private equity or investment funds— which issue them as liabilities to get long-term funding. Type B is a single-purpose vehicle issued to directly finance a specific investment project, like a toll highway or other infrastructure project. 9 participation capped at 20 percent of the total and/or 1:1 with other investors different from SIEFORES, and d) fund must be invested only domestically. Box 2. Prior Actions Under the Program As stated in Schedule 1 of the Loan Agreement, prior actions of the Borrower under the Program were as follows: 1. Enhancement of competition in the telecommunications markets and enhancement of competition, efficiency and transparency of public procurement. A. The Borrower, through CFE, SCT and COFETEL, has taken actions to enhance the competition in the telecommunications markets in the territory of the Borrower as evidenced by: (i) the issuance of a concession on July 5, 2010 to use a pair of fibers of the state-owned power utility's fiber-optic network for the provision of telecommunication services; and (ii) the issuance, through Decision (Acuerdo) of COFETEL dated December 14, 2009, of bidding documents (bases de licitación) for public bidding of multiple concessions for the use of radio spectrum in the bandwidths of: (a) 1.9GHz in eight of the nine spectrum regions of the Borrower’s territory, and (b) 1.7/2.1 GHz in the nine different spectrum regions of the Borrower’s territory, all for the provision of mobile telecommunication services. B. The Borrower, through SFP, has taken steps to enhance the competition, efficiency and transparency of public procurement of goods and services as evidenced by the enactment of: (i) a regulation of the Law of Acquisitions, Leases and Services of the Public Sector (Reglamento de la Ley de Adquisiciones, Arrendamientos y Servicios del Sector Público), issued by the President and published in the Borrower’s Official Gazette on July 28, 2010 establishing, inter alia, the regulations for the use of framework agreements; and (ii) Guidelines on Acquisitions, Leases and Services and Public Works and Services related thereto (Lineamientos en Materia de Adquisiciones, Arrendamientos y Servicios y de Obras Publicas y Servicios Relacionados con las mismas), issued by SFP and published in the Borrower’s Official Gazette on September 9, 2010, establishing, inter alia, the rules for the use of reverse auctions (Ofertas Subsecuentes de Descuentos) in public procurement processes. 2. Streamlining and Improving the Quality of Business Regulations. A. The Borrower, through SHCP, SAT and SE, has taken steps for the reduction of business transaction costs and the facilitation of trade as evidenced by: (i) the enactment of a Presidential decree simplifying and reducing the number of tax declaration and payment procedures, published in the Borrower’s Official Gazette on June 30, 2010; (ii) the execution of a contract between the Borrower, through SAT, and a technology integration company for the development and operation of an electronic single trade window, dated November 11, 2010; and (iii) the enactment of four Ministerial Decisions that eliminate redundant certification requirements by recognizing the use, in the Borrower’s territory, of standards and conformity assessment procedures applied in the USA or Canada for electronic appliances and data processing equipment, issued by SE and published in the Borrower’s Official Gazette on August 17, 2010. 3. Fostering Access to Finance with Stability A. The Borrower, through SHCP and CNBV among other entities, has adopted measures to enhance the access to finance and the stability of the financial system as evidenced by the enactment of: (i) a resolution amending the General Provisions Applicable to Credit Institutions (including, inter alia article 325 Bis1 of the said general provisions) to facilitate 10 the supply of financial services using mobile phone accounts, issued jointly by SHCP and CNBV, and published in the Borrower’s Official Gazette on April 15, 2010; (ii) a decree amending the Law of Credit Information Societies including Articles 19, 20, and 42, to support the enhancement of coverage, data quality and consumer service provided through credit bureaus, issued by the President and published in the Borrower’s Official Gazette on May 25, 2010; (iii) a decree establishing the Financial Stability Council, issued by the President and published in the Borrower’s Official Gazette on July 29, 2010; and (iv) prudential regulation strengthening provisioning requirements for mortgage loans and non- revolving consumer credit, issued by CNBV and published in the Borrower’s Official Gazette on October 12, 2010. 4. Promoting Private Participation in Infrastructure A. The Borrower has taken measures to foster private investment in infrastructure as evidenced by the enactment of: (i) a decree amending the Law on Federal Roads, Bridges and Auto Transport to allow extensions of concessions during any of its stages, issued by the President and published in the Borrower’s Official Gazette on November 4, 2010; (ii) a circular letter issued by CONSAR amending the investment regime of SIEFORES to authorize them to invest in structured securities up to 15% of their portfolio, depending on the risk profile of the relevant SIEFORE, published in the Borrower’s Official Gazette on June 11, 2010; and (iii) guidelines issued by the board of FONADIN allowing it to participate as a minority investor in private equity funds specialized in infrastructure with the purpose of promoting the creation of such funds, dated May 14, 2010. 1.5 Revised Policy Areas 12. The original policy areas of this DPL were not modified. 2. Key Factors Affecting Implementation and Outcomes 2.1 Program Performance 13. The program substantially achieved its objectives; nine of the twelve outcome indicators were met or close to it; two were not achieved and the ICR team was not able to obtain information for one. On the basis of the most recent statistics available, the status and values of the twelve outcome indicators in the Policy Matrix are presented in Table 1 below:14 14 See also the PDO Indicators table in the Data Sheet on page iv. 11 Table 1: Program Outcome Indicators Outcome Indicators Baseline Target Value by End-2011 Status (As stated in Policy Matrix) Policy Area 1: Competition Policy A. Telecommunications market Indicator 1: Increase in the Percentage of internet Percentage of subscribers in number of users of internet subscribers in the the population: 38 percent, at Largely services (per 100 population: 26.3 end-2011 achieved: 36.15% inhabitants). percent—end 2009 Indicator 2: Increase in the Percentage of broadband Percentage of broadband in the users of broadband services subscribers in the population (fixed-line Largely (per 100 inhabitants) population: 9.2 connections): 12.5 percent, at achieved; 11.4% percent—end 2009 end-2011 B. Public Procurement Indicator 3: Number of 0 at end-2009 11 at end-2011 framework agreements in Largely place achieved: 8 Indicator 4: Implementation 6 carried out from July 8 carried out from September of additional reverse 2008 to August 2010 2010 to December 2011 Achieved: 27 auctions Policy Area 2: Streamlining and Improving the Quality of Business Regulations Indicator 5: Reduction in 517 hours (Doing 385 hours (Doing Business the time to comply with tax Business 2010) 2012) obligations as measured by Achieved: 347 the relevant Doing Business hours sub-index Indicator 6: Cost savings 0 percent of GDP in 0.15 percent of GDP in 2011 obtained by the private 2009 sector from the implementation of the Zero Not available Base Business Regulation Program (as measured by the OECD methodology) Indicator 7: Reduction in Number of processes Number of processes linked to Not achieved: the number of international linked to SAT and SE: SAT and SE: 60 at end-2011 107 (due to trade related processes 107 in 2010 delays in linked to SAT and SE VECUM implementation) Policy Area 3: Fostering Access to Finance with Stability Indicator 8: Number of Number of transactions: Number of transactions: financial transactions 0 as of January 2010 10,000 as of end-2011 conducted through mobile Not achieved: 0 phones (Art. 325 Bis1 of transactions credit institutions’ provisions) Indicator 9: Estimated 265.99 million (2010) Increase of 4 percent over the Achieved: number of entries (credits) base by end-2011 (to 276.6 41.4% increase, present in the credit million) to 376 million reporting databases (Trans entries 12 Union and Círculo de Crédito bureaus only) Indicator 10: Production of At least 1 report by end-2011 Financial Stability Report Achieved: by the Financial Stability Annual Report Council and activities released in completed by the Council March 2011 by end-2011 Indicator 11: Coverage of In Sept. 2010, actual Both types of loan-loss delinquent mortgage loans loan-loss provisions provisioning in line with the and non-revolving were covering: new 12 months-of-expected Achieved: New consumer credit from 24 months for mortgage loan-loss rule rule in place in commercial banks under loans and 7 months for March 2011 new methodology (forward non-revolving consumer looking and risk based) credit Policy Area 4: Promoting Private Participation in Infrastructure Indicator 12: Average MX$7.5 billion (2007- MX$15 billion annual average annual private investment in 2009) 2010-2011 period infrastructure (FONADIN’s Achieved: participation in the MX$18.8 billion financing) 14. In the area of Competition Policy, one of the outcome indicators was easily achieved (reverse auctions) and the three others were largely met. Moreover, in the case of Indicator 2 although the number of fixed-line broadband connections came slightly short of the set target, this could have been easily surpassed had new mobile broadband connections been originally included in the indicator (7.17% of population subscribed to this type of service at end-2011). When this is done, the aggregate figure for broadband connections (fixed plus wireless connections) goes up to 18.54 percent at year-end 2011. There were no broadband mobile users at end-2009, but now this is the fastest growing market segment, a trend that is likely to continue with the expansion of 3G and the introduction of 4G wireless services around the country, which will be facilitated by the policy actions supported by this DPL—and which just now start to have a noticeable effect on the supply of telecommunications services. It must be said, however, that the overall impact of the supported policy actions on these outcome indicators was probably minor, given the legal and technical obstacles encountered for their effective implementation and the short time span previous to Program closing. 15. Outcome indicators measuring improvements in the business regulation environment showed mixed results—although much progress continues to be made on this front. On the positive side, since the streamlining in mid-2010 of the business tax filing and reporting system (supported by this operation) the time required for complying with tax obligations came down substantially. Indicator 5 showed a 25.5 percent time reduction. However, that figure actually underestimates the gains made in the last couple of years due to the lag in the data captured by Doing Business 2012 (it just covered the period January-December 2010). The average time required in 2011 continued to drop 13 vis-à-vis 2010 since last year was the first full year of operation of the new streamlined tax filing system. 15 Besides, time saving continued to make gains in 2011 with the intensification of the use of electronic means to complete tax-related operations. The latter now account for 99 percent of tax-related transactions—internet access plus tax payments made using the electronic platforms of commercial banks. 16. The shortcomings with the indicators monitoring progress in the area of commercial regulation were related to absence of official data (Indicators 6) and technical delays (Indicator 7). While there are still no official figures for Indicator 6 (according to the Federal Agenda, COFEMER and SE are supposed to produce figures at the latest by the end of September), targeted cost savings associated with the implementation of the Zero Base Business Regulation program could very well have been met. First, SAT estimates of time reductions to comply with tax obligations by businesses (Doing Business methodology) under the new scheme could have brought about cost savings equivalent to roughly two-thirds of the targeted 0.15 percent of GDP set for Indicator 6.16 Second, SFP figures estimate the accumulated cost savings of using the new procurement methods (reverse auctions, framework agreements and consolidated bidding) at MX$8,122.4 million during 2009-2011. In addition to the two already identified cost saving sources, which are part of the Zero Base Regulation program, the SE identified and reviewed six other high economic impact activities subject to highly regulated processes which are due for regulation and compliance streamlining. All federal agencies involved with these sectors are now working on simplifying associated filing procedures required of the private sector. 17 One area well advanced in its efforts to streamline is international trade. Due to technical delays in the launching of the Single Trade Window, originally scheduled for an official opening in September 2011 (initially only for SAT and SE-related processes), Indicator 7 was not met, although by now it has become operational for some trade related processes.18 This new electronic platform was expected to provide the bulk of the 44 percent reduction in the number of international trade processes targeted for Indicator 7. 15 For example, due to streamlining in filing requirements the number of monthly Business Flat Tax (IETU) filings dropped 38.7% in 2011 alone, following the 17.9% decline registered in 2010 (SAT figures). 16 These preliminary estimates are based on 170 hours saved by businesses to meet their tax filling/paying obligations with the new scheme. Currently, SAT estimates it takes (on average) four minutes to complete a tax related transaction. 17 The economic activities that will see a streamlining in their regulations and compliance are: imports, exports, tax compliance, labor hiring, starting a new business, government procurement, infrastructure investment and access to financing. SE estimates place future cost savings from the streamlining of business regulation in these high economic impact activities at the equivalent of 0.4 percent of GDP. See SE’s Quinto Informe de Labores (Sept. 2010-Aug. 2011). 18 The Single Trade Window finally became operational for the 21 trade processes linked to the General Customs Administration (part of SAT) in mid-January 2012, with at least some other 39 processes still pending to meet the target set under Indicator 7. 14 17. Measures to foster access to finance with stability largely achieved their targets, but one indicator presented design issues. While three of the indicators (9, 10 and 11) targeting the financial sector achieved their goals, it should be pointed out that Indicator 9, which takes inventory of credit reporting in databases of credit bureaus, was set at too low a level (4 percent increase in entries). In contrast, in the previous four years the pace of compounded annual growth in credit entries had been 24.7 percent. More importantly, Indicator 9 was not a good measure of improvement since the databases of credit bureaus are long due for a thorough cleanup—which is high in the CNBV’s priority list. This need is clearly illustrated by end-2011statistics that show 117 million debtors (expedientes) in the databases of the two largest credit bureaus, a figure greater than the population of Mexico—a country where the financial sector is admittedly small relative to the size of its economy.19 Indicator 8 measuring the number of low-risk, small- transaction mobile bank accounts did not meet its targeted value by the end-2011, mainly since institutional and technical issues have delayed the introduction of this new type of bank accounts. 20 The main institutional and technological challenge has been in the design of a platform able to offer a reliable service at an affordable price to low income people in a massive way to thousands of remote, relatively small communities.21 18. The indicator monitoring private participation in infrastructure achieved its targeted value, although the design of the indicator could have been improved upon. By measuring the average annual contribution of FONADIN to the funding of PPP infrastructure projects, Indicator 12 actually provides a reading of public funding going to such privately managed investment initiatives. 22 Even though FONADIN’s financing plays an important catalytic role attracting private funding to PPP projects, statistics on the size and nature of the private contribution to such investments were not available to 19 Individual debtors often have more than one expediente, so that credit institutions may sometimes be unable to identify and thus underestimate the level of credit exposure of individual debtors. Although creditors may use the unique individual identifier, the CURP number issued to individuals by the Ministry of Interior, there is no obligation to do so or to report it to the credit bureaus. Furthermore, there is an issue with duplication when trying to consolidate the information reported by the two credit bureaus covering individual debtors. To address this problem, credit bureaus rely heavily on privately developed algorithms to consolidate credit data and avoid file duplication. Unfortunately, these algorithms and their results are currently not been shared by the credit bureaus. 20 Recently released public information suggests that a joint effort between Telcel and Banamex is close to start offering this new type of mobile services. After six months of operation, Telcel will be free to offer its new wireless platform to other banks wishing to offer this type of accounts (regulated by Art. 325 Bis1 of the CNBV’s prudential regulations). 21 For example, Telecomm is designing first a pilot project to service the rural municipality of Nuyoo in Oaxaca. Mobile service in Nuyoo is spotty at best. The number of potential customers is less than 500 individuals. The technological platform has to service seven small separate population centers via a single radio station connected to the center via satellite, and all this has to be done at an affordable cost. 22 FONADIN’s trust manager, Banobras, also provides direct financing (credits) to PPP initiatives on its own account, which are not included in the figure reported for Indicator 12. 15 the ICR mission.23 More directly related to prior actions supported by this DPL, one of the new long-term structured securities designed to fund new PPP infrastructure projects, the CCCs, registered an issuance of some US$494 million equivalent in 2011.24 Also, FONADIN was authorized by the end-2011 to invest up to MX$ 5,973 million in nine private equity funds of the type that received support via one of the prior actions. These infrastructure funds were at that time at different stages of securing funding in the capital markets, for a projected total of some MX$ 38,535 million. 2.2 Major Factors Affecting Implementation: 19. The above mentioned difficulties with some of the outcome indicators should not cloud the fact that the GoM and its implementing agencies have remained highly committed to implementing the Program. This was confirmed by the ICR mission, which corroborated that the Mexican government has continued to make solid advances in the implementation of its agenda for change. Good examples are the enactment of the Law on Public-Private Partnerships in January 2012 and the recent and broad reaching amendments to the Federal Competition Law. The Law on PPP provides a renovated framework for PPPs, touching on all phases (conception, construction and operation) that these public-private partnerships go through during their lifetime. This new legislation applies only to new infrastructure projects but it is clearly a solid complement to the three actions that were supported by this DPL operation. The amendments to the Federal Competition Law (enacted in 2011 and 2012) better defined the “market power� concept and clarified procedures for addressing mergers and acquisitions and their reporting by those engaged in such activities. Technical and operational autonomy and independence of the Federal Competition Commission (CFC) was also improved through ample investigative powers in the fight against obstructions to market competition and monopoly practices, and necessary powers and instruments for resolving on the matter. 20. Program performance was affected by legal and technical challenges to the implementation of some of the adopted measures. Unfortunately, the use of amparos often has been abused by those that feel negatively affected by policy actions of the Borrower. As a result, injunctions have been powerful antidotes to badly needed changes in the legal and regulatory framework in all sectors. Legal injunctions in practice stopped the implementation of radio spectrum under auction 21 (recently resolved) and the application of measures on the sharing of positive information by credit bureaus (still pending). Also, unexpected delays in the illumination of the fiber optic leased by the SCT and technical and institutional glitches in the launching of the single trade window and the introduction of mobile bank accounts also impacted Program performance. 21. In retrospect, the amount of time allowed for Program implementation was too short. The closing of this DPL (January 2012) came much too soon following its 23 Recent FONADIN’s estimates place induced private investment in PPP where they participate at about 2.5 times their level of past disbursements. 24 Two foreign banks were behind the six issues of CCCs placed in the local market; the raised funds went to fund fiduciary trusts investing in real estate and other long-term projects. 16 approval (January 2011) and effectiveness (December 2011). Basically, the short implementation period did not allow sufficient time for the policy package to fully bear fruit. Both, specific actions, such as the leasing of dark fiber-optic by CFE or the creation of the Single Trade Window, and legal and regulatory measures, like the resolution that introduced mobile bank accounts or the authorizations that promoted private participation in the financing of infrastructure, will likely have a sizable impact on the business environment, but it will take time to accomplish their full potential. The purpose of the supported policy package was to strengthen specific aspects of the micro-economic foundations of specific sectors, and it is in their nature that some time will pass before the private sector can take full advantage of them. Thus, the benefit to the economy is likely to materialize fully only in the medium term. 22. In addition to strong implementation efforts by the authorities, achievement of ultimate PDO objectives of supporting growth and employment benefited from external demand recovery and implementation of domestic countercyclical policies. Following the global recession of 2009, global output growth and US output growth recovered in 2010-11 (average growth of 4.6 percent and 2.4 percent respectively compared to GPD contraction of 0.6 and 3.6 in 2009). In addition, the expansionary monetary policy implemented by the Mexican authorities and exchange rate depreciation helped support internal demand as well as external competitiveness. Such factors, contributed, in addition to the package of microeconomic reforms supported by this operation, to achieve the ultimate objectives of supporting economic growth and employment generation. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: 23. While the Policy Matrix included a comprehensive set of outcome indicators, not all indicators were relevant to measure program impact. As already highlighted (see program performance discussion), some of the indicators were either not quite relevant to measure impact or their expected values were set at levels that did not impose much of a challenge, thus impacting Program monitoring and evaluation. This was exacerbated by a short period of Program implementation (the cutoff date for taking stock of the outcome indicators was set at the end of 2011). 24. The monitoring of this DPL could have benefitted from a more robust and clear-cut progress review mechanism. The Program Document stated (par. 48) that “A framework with the SHCP and other agencies involved in the program has been developed so that they will provide information on the outcome indicators on a regular basis.� However, this did not materialize. The ICR mission found out that agencies in Mexico responsible for the implementation of supported actions were mostly unaware of their responsibilities towards Program implementation and their need to supply information on the outcome indicators. Moreover, this operation became effective in late December 2011, about a month prior to its closing date, which did not leave room for the originally planned mid-term review.25 25 The delay in effectiveness of the loan was at the request of the GoM. SHCP indicated that they needed to identify the appropriate executing agent at the time, thus causing the delay. In addition, the authorities were 17 2.4 Expected Next Phase/Follow-up Operation (if any): 25. There are no follow ups or next phases to this DPL currently in Mexico’s lending pipeline but the Bank remains engaged in reform on the policy areas supported by this operation through knowledge services. On the one hand, the needs of the Borrower to secure additional foreign funding from multilaterals has declined in the current global financial environment and have become less pressing since the 2009 crisis. On the other, the Bank’s outstanding Mexican portfolio has increased rapidly in recent years, leaving little room for large and fast-disbursing operations similar to the one being reviewed. The Bank’s remaining lending capacity in Mexico is today focused more on social areas.26 All the same, the continued monitoring of themes and policy actions covered by this DPL remains quite relevant, so active Bank monitoring of most areas identified as part of this DPL is expected to actively continue as part of a broad reaching agenda of knowledge services, including the Financial Sector Assessment Program (FSAP) and the preparation of policy notes for the upcoming Administration—some of which focus on issues covered by this DPL such as sound financial sector development, fostering competition, enhancing business environment and procurement reform . 27 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 26. The four policy areas supported by the reviewed operation were key to addressing Mexico’s poor productivity performance and relevant to the stated PDO. Not only has there been strong government commitment and Bank involvement in these policy areas, but there is also plenty of analytical evidence that justified the targeting of these areas as highly relevant for the strengthening of Mexico’s business environment and its micro-economic foundations. For example, several Bank (Box1) and independent studies (some mentioned in the text) have argued in favor of acting decisively to enhance competition in the telecommunications and public procurement markets; improve the quality of business regulations and sustainable market access to financial markets; and the need to accelerate the pace of infrastructure investment via a comprehensive PPP program. 27. The fourteen supported prior actions constituted a strong reform package, providing an appropriate set of measures to properly cover the selected four main busy finalizing the end of their fiscal year (November/December) and chose to make the loan effective in December 2011 so that the associated funding could better complement their budget. 26 For example, the Bank will continue in 2012 and 2013 helping with the funding of the operational costs of Oportunidades, a well-performing program of the Federal Government making conditional cash transfers to vulnerable families, and which is one of the central pillars of Mexico’s social safety net. 27 IFC also has an active agenda of knowledge sharing services in Mexico that is helping to improve the investment climate relevant to the policy areas covered by this operation. For example, IFC is supporting the SE in the context of its Doing Business Advisory program and helping with the implementation of the fourth round of the Sub-national Doing Business benchmarking. 18 policy areas. All these actions taken by the GoM were well thought out and reasonably within the capacities and capabilities of the implementing agencies. As a group, the mutually reinforcing choice of policy actions has contributed to the strengthening of competitiveness and the business environment in Mexico. While not all policy actions were of the same caliber, promised the same level of material impact or contributed equally to the enhancement of the business environment, their combined outcome should end up making a sizeable contribution in the medium term. 28. The choice of policy actions was restricted mainly to regulatory and administrative measures, given the practical restrictions legislative action faces in Mexico. This state of affairs often slows down the pace of structural change in Mexico, where reform tends to advance in small incremental steps. Thus, trying to make of Mexico a more competitive economy has often proved to be a difficult task. As a result, the competition policy framework still presents important gaps. For example, the country’s competitiveness rating is particularly poor from the perspective of its markets being dominated by a few business groups.28 This is important since recent empirical evidence strongly suggests that the prevailing degree of monopoly power in the Mexican economy is quite a relevant factor when trying to explain its growth underperformance and persistent inequality. 29 It was then quite pertinent of this DPL to include policy actions that strengthened Mexico’s competition in the Policy Matrix, even when the option of legal reform was not realistic, such as in the case of the telecommunications market where, according to the OECD, this absence imposes a high cost on the Mexican economy and heavily burdens the welfare of its population. 30 However, considerably more needs to be done, particularly via the enactment of important legislation that goes beyond the telecommunication sector.31 29. Project design provides a good example of the Bank’s capacity to respond promptly and flexible to the needs of an important partner in development. Indeed, Mexico had to reconcile the need to strengthen the private sector so as to support economic growth and employment—badly affected in 2009 by the global crisis—with 28 For example, Mexico ranked 127 among 139 countries in the Extended Market Dominance Index as reported in the latest Global Competitiveness Report (2010-2011 version) of the World Economic Forum. 29 See, for example: Arias, Javier, Azuara, Oliver, Bernal, Pedro, Heckman, James J. and Villarreal, Cajeme (2009), “Policies to Promote Growth and Economic Efficiency in Mexico,� IZA Discussion Paper No. 4740; Chiquiar, D. and Manuel Ramos-Francia (2009); “Competitiveness and growth of the Mexican economy,� Banco de Mexico, Working Papers, No. 2009-11, November 2009; Levy, Santiago and Michael Walton (2009), “No Growth without Equity?: Inequality, Interests, and Competition in Mexico�, Washington, DC: The World Bank. 30 According to the recent (Jan. 2012) “OECD Review of Telecommunication Policy and Regulation in Mexico�, the loss of benefit to the economy is estimated at US$129.2 billion (2005-2009) or 1.8 percent of GDP annually. 31 For example, the lifting of the current restrictions on foreign investment in the fixed-line segment of the market. 19 demanding fiscal financing requirements in 2011. At the request of the Government of Mexico, the 2008 CPS was complemented with the already mentioned progress update of March 2010, which added the financial services program for FY 2011. This made it possible for this fast-disbursing operation to simultaneously assist Mexico with the financing of its fiscal budget in calendar year 2011while providing support for the actions it had already taken in 2010 to strengthen private sector policies and competition. All this was done in the context and as part of a broad programmatic Bank effort that included a rich agenda of knowledge-sharing services and an active development policy and investment lending program. In addition, the Bank coordinated its support program with other multilaterals (IMF, IADB) which also contributed sizably to Mexico’s effort to consolidate its economic recovery. 3.2 Achievement of Program Development Objectives 30. The implementation of actions in all four policy areas has contributed to strengthen the micro-economic foundations of Mexico’s business environment. While more time will be needed to fully appreciate the effect of the reforms supported by this operation, there have been already improvements in the business environment in Mexico. For example, the most recent Global Competitiveness Index of the Global Development Forum showed that Mexico advanced eight places in the global ranking in one year (GCI 2011-2012 vs. GCI2010-2011), to reach place 58 among the 146 countries in the sample. Mexico’s gains were among the best in the sample, particularly among those countries already with an equal or better place in their overall competitiveness ranking. IFC’s latest Ease of Doing Business Ranking (Doing Business 2012) also registered an improvement in the case of Mexico in 2011, when its overall index ranked 53, one place better than in Doing Business 2011.32 31. Strengthening Mexico’s business environment and improving its competitiveness are actually moving targets. This means that Mexico, as other countries, has to engage in sustained, long-term efforts to improve its business environment just to keep its economy competitive. Relative gains are hard to come by simply because other countries are trying to do the same in an ever more competitive global business environment. A good example of why absolute improvements are often not sufficient is illustrated by Mexico’s Paying Taxes Index, which for Mexico brought about an improvement of only one place in the global ranking from the previous year according to Doing Business 2012, even after Mexico was able to reduce significantly (14.1 percent) the time required by businesses to comply with tax regulation—an action which was supported by this operation. 32. Improvements in the business environment, as well as the external environment, contributed to sustain economic recovery and employment generation, 32 There is basically a one year lag in the data, so that Doing Business 2012 reflects mainly the situation prevailing in year 2011. 20 as sought by the Program’s original PDO. While it is not possible to measure the impact of supported prior actions on Mexico’s GDP growth, their contribution to an improved business environment supported the macroeconomic expansion and the creation of employment, as expected by the PDO. Indeed, the Mexican economy entered into a period of economic recovery following the sharp drop in economic activity of 2009. The global recovery helped in this respect, particularly the gains experienced by Mexico’s main trading partners, but beyond this factor, Mexico was able to do this while maintaining a rather conservative fiscal stand—registering a drop in its fiscal deficit in 2011. Moreover, the country experienced substantial gains in employment levels, which helped to arrest the rapid increase in the unemployment rate that started in the fourth quarter of 2008 and lasted until end-2009. Since then, the unemployment level has come down slightly, with the latest reading (April) showing an unemployment level of 5 percent. Perhaps more interesting, the gains in employment have been in the formal economy. Figure 1: IMSS Insured Workers1/ (million) and National Unemployment Rate (%) Source: Banco de México 3.3 Justification of Overall Outcome Rating Rating: Satisfactory 33. This rating is based principally on the still highly relevant PDO, strong package of prior actions, and on the opportunity and flexibility of this lending operation, in a manner relevant and consistent with Mexico’s development priorities. In addition, the objectives and implementation of this operation have been complementary to the Bank’s various other activities in Mexico, in a manner consistent with the current CPS and the country’s National Development Plan. The shortcomings 21 observed in some of the outcome indicators are considered at this point to be minor since most indications are that they will comply with the set targets, most likely within the course of this year. Thus, it is expected that in due course the supported policy actions will have a chance to express their full and significant contribution to Mexico’s private sector development. 3.4 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 34. This operation has the potential for having a noticeable social development impact. Supported actions would contribute to enhance competitiveness and productivity of the Mexican economy, in turn fostering growth and reducing inequality. At the micro level, the social impact of the policy package should be more direct and easily measurable. For example, because of their massive reach, the cost savings of streamlining the tax compliance system and the activation of the Single Trade Window and other electronic platforms are likely to end up being proportionally more beneficial to small and medium-sized businesses and to individuals. Other policy actions such as the introduction of mobile bank accounts and the increased supply of cheaper wireless communications (the result of enhanced competition) are likely to deepen financial inclusion, particularly in predominantly rural and remote municipalities which today do not have a direct banking presence (1,584 as of September 2010) or have poor and expensive mobile phone services. All this should help reduce inequality and give a noticeable lift to consumer welfare of vulnerable groups. No short-term impact was envisioned in this operation on gender aspects. (b) Institutional Change/Strengthening 35. This operation supported several actions which will have a longer-term development impact on Mexico’s capacities and institutions. The list below summarizes institutional changes with a probable lasting impact and which were discussed in more detail in previous sections:  The establishment of the Financial Stability Council  The creation of the Single Trade Window  The implementation of reverse auctions and framework agreements in public procurement  The acceptance of homologation of technical norms and product standards with the United States and Canada (starting with electronic appliances and data processing equipment)  The introduction of low risk, small transaction mobile bank accounts (c) Other Unintended Outcomes and Impacts (positive or negative, if any) 36. None 4. Assessment of Risk to Development Outcome 22 Rating: Moderate 37. At present, there is a perception of moderate risk that the development outcome of this operation will not be sustained. To start with, the perceived macroeconomic risks at loan approval in late 2010 appear to have subsided, particularly the threat to the PDO of the materialization of a sharp weakening of the U.S. economy, a major trading partner of Mexico. Similarly, access to financial markets has remained reasonably stable for Mexico, judging by the relatively mild sovereign credit spreads Mexico faces today on its public debt in international financial markets. Domestically, the need for demanding and expensive security arrangements continues to negatively impact the cost of doing business while threatening the materialization of investment opportunities in some part of the country, particularly among small and medium-sized businesses with fewer location options. Of the originally perceived risks directly related to this operation, some materialized, like the use of legal injunctions to hinder competition in the telecommunications sector. Fortunately, as in the case of potential risks that did not materialize, like obstructions or serious delays in the implementation of the Single Trade Window or the modernization of the PPPs framework, these risks appear now to be greatly subdued. Perhaps the biggest perceived risk now is if the economic and financial crisis in Europe were to materialize into a major deterioration of the global economy and emerging economies, in particular. The risks associated with the upcoming change in Administration in Mexico appear at this time manageable from the viewpoint of this operation. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 38. The quality at entry rested on the solid foundations of a long sustained Bank engagement in the areas covered by the Policy Matrix. This assured the selection of relevant and recent prior policy actions worthy of support by this DPL. Clearly this set of actions had a high degree of ownership and were priorities for the Borrower, being aligned with its National Development Plan. They also fit well with prior sector work of the Bank and the recently updated CPS. The project design also showed the capacity of the Bank to be flexible and responsive to the pressing needs of an important partner in development like Mexico, which was seeking to sustain an incipient economic recovery imposing pressing fiscal financing demands while keeping focused on the longer term objective of upgrading the environment for the development of a stronger private sector. The Bank also closely coordinated and exchanged views with other contributors like the IMF, assisting Mexico in its efforts to leave behind the recession triggered by the global economic and financial crisis.33 Independently of the shortcomings in the monitoring of outcomes, advances are considered to have been satisfactory so far. 33 The Fund in 2010 renewed a commitment to provide contingent financing to Mexico for SDR31.5 billion under its Flexible Credit Line arrangement. 23 (b) Quality of Supervision Rating: Moderately satisfactory 39. The monitoring and evaluation framework presented opportunities for improvement. This operation included a comprehensive set of monitoring indicators, albeit some could be improved upon. Moreover, the monitoring system did not work as expected and the tracking of the outcome indicators by the authorities did not take place. In addition, the implementation phase was too short for a set of outcome indicators better suited for measuring impact in a medium term context, and the originally planned mid- term review never took place since loan effectiveness came about one month prior to closing—supervision was done during to the ICR mission. Nevertheless and despite of the noticed shortcomings, the ICR team was able to complete a thorough review of this operation and assess its development outcome to date. Dialogue with authorities will continue in these issues in the context of ongoing programmatic engagement on the areas supported by this operation, which will allow to continue monitoring the impact of the implemented policy reforms. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory 40. The mutually reinforcing four policy pillars of this operation—and the supporting Policy Matrix that guided this DPL—continue to be highly relevant for improving Mexico’s business and financial environment. Supported prior actions built on lessons learned from the Bank’s long-term relationship with Mexico. In addition, progress has been made on all fronts of the Program although it will be some time before having a more definite reading of the development outcome from each of the fourteen policy actions that were supported. Project design struck a proper balance between Mexico’s short term financing needs and the structural changes the country and the Bank wanted to advance. While more time will be necessary for some of the outcome indicators to get to their targeted values, this does not diminish the significant progress made to date across the board and from the longer term perspective. 5.2 Borrower Performance (a) Government Performance Rating: Satisfactory 41. Ownership by the Borrower of the policy actions supported by this operation has been essential for the advances seen in their implementation. In fact, the policy package responded to initiatives in the mid-term 10-point reform plan announced by the Calderon administration in September 2009, which was based on the medium-term NDP sent to Congress in 2007 following extensive consultations, as demanded by the National Planning Law. (b) Implementing Agency or Agencies Performance Rating: Satisfactory 42. The Mexican government has continued to make solid advances on all fronts of the broad-based agenda seeking to strengthen the business environment. The 24 slower than anticipated progress shown by some of the outcome indicators should not cloud the fact that the drive to achieve the PDO has remained strong, as confirmed by the ICR mission. In fact, all implementing agencies continue their work not only to advance the implementation of the actions supported by this DPL but also of others more recently taken for the benefit of improving the business environment. In particular, special notice should be made of the recent progress made in the implementation of important new legislation, which greatly reinforced the policy actions supported by this operation, such as the recently enacted Federal Law on Public-Private Partnerships and the amendments to the 2006 Federal Competition Law. A better empowered CFC has reactivated its efforts to open up the telecommunications and other highly concentrated markets to more competition and transparency. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory 43. This rating is based on the Borrower’s overall Program ownership which can count on the delivery capacity and support it receives from a large number of dedicated implementing agencies. Independent of this quality effort, there is still an important challenge at the level of the legal framework, which appears necessary to solidify gains already made and advance structural change for the benefit of the Mexican business environment to a new level. 6. Lessons Learned 44. Strong country ownership and commitment to achieving the Program’s objectives was essential to the success of this fast-disbursing lending operation. This operation benefited from the fact that it originated from a direct request from the Borrower seeking additional financial support and backing for its long-term objective of strengthening the business environment. Solid country ownership of the supported policy agenda will continue to be crucial as Program implementation continues to move forward under a new Administration although the risk of policy reversal at this point appears to be manageable. 45. Prior strong analytical work and sustained policy engagement by the Bank contributed crucially to quickly putting together a policy operation of this magnitude and complex design. The fruitful policy dialogue maintained by the Bank with the Borrower over the years also allowed the former to contribute with its rich baggage of global knowledge and analytical work on the four policy areas covered by this DPL. 46. Project design should always incorporate a solid and well-structured monitoring system while the implementation phase should follow a systematic and agreed on progress review agenda appropriate to each implementing agencies. This becomes crucial in policy operations like the one being reviewed that require to follow up and keep up with the implementation of a large set of policy actions. In this context, it becomes essential that the implementation period prior to the closing of an operation gives proper consideration to the need of those policy actions and areas that take the longest to reach maturity. 25 47. Outcome indicators are crucially important ingredients for supervision and the final assessment of the developmental achievements of any operation, so it is well justified to spend time justifying their relevance and viability in the Program Document. Closely linked with the lesson in the previous paragraph, the proposed monitoring system should thoroughly discuss the nature and justification of the chosen outcome indicators as well as sources of information to be used for their eventual evaluation. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies Pending (b) Cofinanciers Not applicable (c) Other partners and stakeholders Not applicable 26 Annex 1 Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Claudio Rodrigo Garcia Verdu Economist LCSPP Team Member Diomedes Berroa Sr. Operations Officer LCSPT Procurement Esperanza Lasagabaster Service Line Manager FIEEI Task Team Leader Jane Hwang Financial Sector Specialist LCSPF Team Member Jose Luis Guasch Consultant LCSPF Team Member Jozef Draaisma Sr. Country Economist LCSPE Co-TTL Lily Chu Sector Manager LCSPF Sector Manager Mark Andrew Dutz Sr. Economist PRMED Peer Reviewer Mariangeles Sabella Sr. Counsel LEGLA Lawyer Paloma Anos Casero Lead Economist & Sector Leader LCSPR Sector Leader Rekha Reddy Economist LCSPF Team Member Tomas Serebrisky Sr. Infrastructure Economist LCSSD Team Member Xiomara Morel Sr. Financial Mgmt. Specialist LCSFM Financial Mgmt. Supervision Eva Gutierrez Lead Financial Sector Specialist LCSPF Task Team Leader Jane Hwang Financial Sector Specialist LCSPF Team Member Claudio Pardo Consultant LCSPF ICR Author 27 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY11 40.18 257.78 Total: 40.18 257.78 Supervision/ICR FY11 0.0 0.68 FY12 5.73 62.48 Total: 5.73 63.16 28 Annex 2. Beneficiary Survey Results None 29 Annex 3. Stakeholder Workshop Report and Results None 30 Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR The report was circulated for comments to SHCP and the financial agent, BANSEFI, who in turn distributed it for comments to the implementation agencies. CNBV, SFP and BANOBRAS provided comments correcting figures and clarifications on some technical issues that were incorporated in the document. The Borrower, SHCP, indicated it did not have comments regarding the report conclusion with respect to the operation relevance, design, supervision and performance. 31 Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders Not applicable 32 Annex 6. List of Supporting Documents - Program Document for a Proposed Development Policy Loan to Strengthening the Business Environment for Enhanced Economic Growth in the Amount of US$751.9 Million to the United Mexican States, December 14, 2010, Loan Report No. 54831-MX, Document of the World Bank - Arias, Javier, Azuara, Oliver, Bernal, Pedro, Heckman, James J. and Villarreal, Cajeme (2009), “Policies to Promote Growth and Economic Efficiency in Mexico� - IZA Discussion Paper No. 4740; Chiquiar, D. and Manuel Ramos-Francia (2009); “Competitiveness and growth of the Mexican economy,� Banco de Mexico, Working Papers, No. 2009-11, November 2009 - Levy, Santiago and Michael Walton (2009), “No Growth without Equity?: Inequality, Interests, and Competition in Mexico�, Washington, DC: The World Bank. - “Quinto Informe de Labores�, período Sept. 2010-Aug. 2011, Secretaria de Economía - “Global Competitiveness Report 2010-2011�, Global Economic Forum - “OECD Review of Telecommunication Policy and Regulation in Mexico�, January 2012 33 To Los Angeles 115°W 110°W 105°W 100°W 95°W 90°W 85°W To Albuquerque To To Alamogordo Gila Bend Tijuana Mexicali UNIT ED STAT ES O F A MER I CA Ensanada Sonoita San Ciudad Juárez To Felipe Midland Nogales Ri o Rio rav Agua BAJA oG Prieta ra n MEXICO 30°N Br o d To a 30°N CALIFORNIA San Antonio e Gu SONORA CHIHUAHUA Yaqui To lf Ojinaga San Antonio Hermosillo To of S Si Houston e er Chihuahua Sal C a ra r Sie Guaymas al d do Santa e if Rosalia rra M Con chos or ad a Laredo BAJA Navojoa d COAHUILA ni re r Fue CALIFORNIA r te Frontera a Ma SUR a NUEVO O O Loreto dre cc LEON Gu l f of M e xi co r c Los Mochis 25°N id Monterrey Matamoros d 25°N Torreón en e Saltíllo ta SI a ll N Or Or Culiacán DURANGO PAC IF IC La Paz TAMAULIPAS ie A A A Durango nt LO LO LO OCEAN ZACATECAS t Ciudad a ll Victória A A A Mazatlán Cabo San Lucas Zacatecas SAN LUIS AGUASCALIENTES POTOSI Tampico QUERÉTARO San Luis This map was produced by the Map Design Unit of The World Bank. NAYARIT Aguascalientes Potosí The boundaries, colors, denominations and any other information YUCATAN Cancun Ler VERACRUZ em shown on this map do not imply, on the part of The World Bank Tepic a Merida Group, any judgment on the legal status of any territory, or any GUANAJUATO Guanajuato HIDALGO endorsement or acceptance of such boundaries. 110°W Cozumel Puerto Vallarta Guadalajara Querétaro DISTRITO FEDERAL Pachuca TLAXCALA Campeche 20°N JALISCO QUINTANA MEXICO MEXI C O MEXICO Jalapa Bay of Campeche Morelia CITY ROO Toluca Tlaxcala Veracruz Chetumal Colima Citlaltépetl (5,747 m) Cuernavaca COLIMA MICHOACAN Puebla CAMPECHE SELECTED CITIES AND TOWNS PUEBLA TABASCO Balsas Villahermosa Gulf of STATE CAPITALS GUERRERO Chilpancingo Us BELIZE Honduras NATIONAL CAPITAL um Sie Oaxaca CHIAPAS ac in RIVERS Acapulco rra OAXACA Tuxtla ta Mad re de Gutierrez MAIN ROADS l S u r Tehuantepec MORELOS Puerto 15°N RAILROADS 0 100 200 300 Kilometers Escondido Gulf of GUATEMALA HONDURAS NOVEMBER 2008 Tehuantepec IBRD 33447R 15°N Tapachula STATE BOUNDARIES To San Salvador 0 50 100 150 200 Miles INTERNATIONAL BOUNDARIES EL 105°W 100°W 95°W SALVADOR