Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No: 21583

IMPLEMENTATION COMPLETION REPORT(CPL-38380; SCL-383 8A; SCPD-3838S; CPL-3838 1; SCL-3838B)

ON THE FINANCIAL SECTOR TECHNICAL ASSISTANCE LOAN

IN THE AMOUNT OF US$ 37.4 MILLION

TO

THE UNITED MEXICAN STATES

FOR PROJECT ID: P03416 1

Finance, Private Sector and Infrastructure DepartmentLatin America and Caribbean RegionColombia-Mexico-Venezuela Country Department

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

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CURRENCY EQUIVALENTS

(Exchange Rate Effective DECEMBER 15, 2000)

Currency Unit = Mexican Peso (MXP)MXP 9.5500 = US$ 1

US$ 10.47 cents = MXP 1

FISCAL YEARJanuary 1st December 31st

ABBREVIATIONS AND ACRONYMS

SHCP = Secretaria de Hacienda y Credito Puiblico - Ministry of FinanceCNBV = Comisi6n Nacional Bancaria y de Valores -National Banking and Securities CommissionCNSF = Comisi6n Nacional de Seguros y de Fianzas - National Insurance and Bonding CommissionCONSAR = Comisi6n Nacional del Sistema para el Ahorro del Retiro - National Savings for RetirementCommissionUIDEP = Investment Unit and Privatization of Parastate Entities of the SHCPAFORE = Administradoras de Fondos para el Retiro -Private Sector Worker's Pension Fund ManagerSIEFORE = Sociedad de Inversion Especializada de Fondos para el Retiro - Pension Fund InvestmentCompany associated with the AFORE's.UDI = Unidades de Inversion - Inflation-indexed unit of accountSAR = Sistema de Ahorro para el Retiro - Governmnent managed pension system. Replaced in 1997 by theAFORE/SlEFORE privately managed pension system.GOM = Government of MexicoIPAB = Instituto de Protecci6n al Ahorro Bancario - Institute for the Protection of Bank Deposits.FOBAPROA = Fondo Bancario de Protecci6n al Ahorro -Bank's Savings Protection Fund absorbed in1999 by IPAB.FSRL = Financial Sector Restructuring Loan 3911-MEFSRP = Financial Sector Restructuring Program adopted by the GOM after the 1994 Peso devaluation.CSDP = Contractual Savings Development ProgramBRFL = Bank Restructuring Facility Loan 7003-ME

Vice President: David De FerrantiCountry Manager/Director: Olivier Lafourcade

Sector Manager/Director: Danny LeipzigerTask Team Leader/Task Manager: Fernando Montes-Negret

FOR OFFICLAL USE ONLY

CONTENTS

Page No.I. Project Data 12. Principal Performance Ratings 23. Assessment of Development Objective and Design, and of Quality at Entry 34. Achievement of Objective and Outputs 45. Major Factors Affecting Implementation and Outcome 56. Sustainability 67. Bank and Borrower Performance 78. Lessons Learned 89. Partner Comments 910. Additional Information 10Annex 1. Key Performnance Indicators/Log Frame Matrix I IAnnex 2. Project Costs and Financing 12Annex 3. Economic Costs and Benefits 13Annex 4. Bank Inputs 14Annex 5. Ratings for Achievement of Objectives/Outputs of Components 15Annex 6. Ratings of Bank and Borrower Performance 16Annex 7. List of Supporting Documents 17

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not be otherwise disclosed withoutWorld Bank authorization.

Project ID: P034161 Project Name: FINANCIAL SEC T.A.Team Lieader: Fernando Montes-Negret TL Unit: LCSFFICR Type. Core ICR Report Date: May 25, 2001

1. Project Data

Name: FINANCIAL SEC T.A. L/C/TF Number: CPL-38380;SCL-3838A;SCPD-3838S;CPL-38381;SCL-3838B

CountrylDepartment. MEXICO Region: Latin America andCaribbean Region

Sector/subsector. FF - Financial Adjustment

KEY DATESOriginal Revised/Actual

PCD. 02/14/94 Effective: 07/11/95Appraisal: 06/24/94 MTR:Approval: 01/24/95 Closing: 06/30/98 06/30/2000

Borrowerl'ImplementingAgency: NAFINSA/SHCPOther Partners: None

STAFF Current At AppraisalVice President: David De FerrantiCountry Manager: Olivier LafourcadeSector Manager: Danny LeipzigerTeam Leader at ICR: Fernando Montes-NegretICR Primary Author: Luis Landa

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UNT=Unlikely, HUN=HighlyUnlikely, HU=Highly Unsatisfactory, H=-High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: HL

Institutional Development Impact: H

Bank Performance: S

Borrower Performance: S

QAG (if available) ICRQuality at Entry: S

Project at Risk at Any Time. No

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:The original objectives of the Project were: (i) to improve the safety and soundness of the financial systemby enhancing prudential regulation and supervision through a program of assistance for the NationalBanking and Securities Commission (CNBV) and the National Insurance and Bonding Commission(CNSF); (ii) to support the development of the pension system through a program of assistance for theNational Commission of the Retirement System (CONSAR); (iii) to improve public investment evaluationand budgeting procedures and processes of the Investment Unit and Privatization of Parastate Entities(UIDEP) of the Secretaria de Hacienda y Credito Publico (SHCP).

3.2 Revised Objective:The original FTAL was designed prior to the December 1994 devaluation of the Mexican Peso. After thedevaluation, the priorities of the Government of Mexico (GOM) changed significantly compared to thoseexistent in June of 1994 when the Project was appraised. The negative reaction of financial markets to thedevaluation hit an already weak banking system and exacerbated the financial distress faced by Mexicanbanks. This required the GOM to develop a Financial Sector Restructuring Program (FSRP) in closeconsultation with the Bank. In February 1995, the Bank began preparation of the Financial SectorRestructuring Loan (FSRL) to support the Government's FSRP to restore the solvency and soundness ofthe financial system. The efforts culminated in June 22, 1995 with the approval of the FSRL (No.3911-ME) in the amount of US$1,000 million. The FSRP, supported by the World Bank's FSRL, wasdesigned to: (i) restore the solvency and soudness of Mexico's banking system; (ii) reform the accountingstandards and prudential regulations for banks, and strengthen supervision to prevent future recurrence ofsystemic problems; (iii) improve discipline in the provision of liquidity by the Central Bank; and (iv)initiate reforms in accounting practices and regulation of financial groups and the deposit protectionsystem.

Successful implementation of Mexico's FSRP required an expansion of the assistance provided under theFTAL to the supervisory agencies. Assistance to the CNBV was urgently needed in new areas, notcontemplated in the originial FTAL, such as diagnostic studies of banks and preparation of bankrestructuring plans. The financial crisis also highlighted the need to implement reforms to increase andimprove the allocation of domestic savings. Thus, the GOM established the Reform to the Pension andContractual Savings System as a key component of its National Development Plan. In this context, itbecame necessary to redefine/enhance the types of activities to be supported under the original CNBV andCONSAR sub-components of LN 3838-ME. A supplemental FTAL was deemed as the most appropriatevehicle to assist the GOM in these two new priority areas.

Against this background, a supplemental FTAL, in the amount of US$13.8 million, was approved in June1995 to increase the total Loan amount, from the original US$ 23.6 million, to US$ 37.4 million. Thesupplemental Loan supported the expansion of existing as well as new activities under the original FTALFinancial Sector Regulation and Supervision component. The vast majority of the supplemental financingwas directed to the CNBV to support the important reforms under the FSRP. Supplemental financing toCONSAR, relative to the originally programmed amounts was small, because this component had alreadybeen redesigned to reallocate financing previously provided for goods and services.

3.3 Original Components:The original project consisted of two components: (i) the Financial Sector Regulation and SupervisionComponent implemented by the Government agencies responsible for regulation and supervision of (a)banking and securities market (CNBV), (b) insurance and bonding (CNSF), and (c) the pension system(CONSAR); and (ii) the Public Investment Evaluation and Budgeting component implemented by the

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Investment, Energy and Industry Unit (UIDEP) of the Ministry of Finance (SHCP). The varioussub-components defined in (i) were highly inter-related and highlighted the importance of taking anintegrated approach in Project design. Lack of a consistent approach across Commissions would increasethe possibility of regulatory and supervisory arbitrage and would undermine the credibility of Governmentregulations and supervision.

3.4 Revised Components:The components of the supplemental FTAL remained the same as the ones defined in the original FTAL.However, the project activities were enhanced. Some of the additional activities that the CNBV had toperform in response to the financial crisis, which were not envisaged in the original FTAL, were:

1) Diagnostic studies of troubled banks. The revised FTAL supported the hiring of auditors to assist theCNBV in conducting rapid, in-depth assessments of bank capitalization, provisioning requirements andassessing the viability of specific financial institutions;

2) Hiring advisors for the restructuring of troubled banks: Assistance through specialized consultants toselect investment banks and legal advisors to prepare and execute bank restructuring plans; and

3) Identification and measurement of the fiscal cost: Examine possible means to reduce the fiscal costs ofthe UDI (inflation-indexed units of account) scheme used to restructure troubled bank assets placed in UDItrusts.

In a similar fashion, the original objectives of the FTAL's support to CONSAR were centered around thedevelopment of the information and operation systems for Mexico's Retirement Savings System. Thiswould allow CONSAR to carry out certain primary functions such as the development of itscommunications system and national information network. Despite these being "mechanical needs", it wasabsolutely essential that they were put in place before the newly born Commission could start performingits supervisory functions of the redesigned pension system.

With the 1994 devaluation of the Peso, which was an inevitable price adjustment in an economy with aquasi-fixed exchange rate regime facing non-sustainable current account deficits (8 percent of GDP), theneed to partially substitute extemal for domestic savings became a priority. This was to be achievedthrough a reformed pension system. This required that the emphasis of Bank's assistance to the CONSARextend beyond the "mechanical aspects" to more fundamental and deeper reforms.

The new and extended agenda for the CONSAR included support to: (i) establish the regulatoryframework for the private investmnent management of SAR accounts; (ii) develop a consistent regulatoryframework for voluntary occupational plans offered by private sector and parastatal enterprises; (iii)Develop CONSAR's capacity to supervise and inspect SAR accounts; (iv) design a public communicationsprogram to support the pension and contractual savings reform; (v) develop a program of human resourcedevelopment and training and (vi) conduct a joint study with the CNSF to develop Mexico's annuitiesmarket.

3.5 Quality at Entry:The first priority of the Bank's Country Assistance Strategy (CAS), discussed by the Board on June 9,1994 was to encourage a smooth transition to higher rates of private sector-led growth. The CAS, alongwith the FY94 Country Economic memorandum (CEM) Fostering Private Sector Development in the1990's, identified the strengthening of financial sector supervision, improvements in the pension system,development of Mexico's domestic securities markets, and upgrading basic infrastructure as important

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near-term actions to support private sector-led economic growth in Mexico. The FTAL was thus fullyconsistent with the Bank's Country Assistance Strategy in force at the time. The Project design was madesimple and correctly identified the key issues that needed to be addressed at the time of appraisal.

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:Short-run project objectives: The project provided funding to the Government to carry out activitiesnecessary to fulfill the tranche release conditions for the Financial Sector Adjustment Loan following the1994 crisis (FSRL Loan 391 I-ME, for an amount of US$1,000 million). Thus, in the short-run, the FTALwas a "supportive tool" available to finance the activities needed to ensure implementation of theadjustment operation. The tranche release conditions for the adjustment operation were satisfactorily met.

Long-run objectives: The objectives of the project went beyond the short-run "supportive role". Until theend of the 1980's, Mexico's financial markets were repressed with high reserve requirements, creditrationing and controlled interest rates. Financial liberalization initiated in 1989 and culminated in 1991-92with the privatization of the banking system. However, the process of liberalization and privatization had anumber of flaws, which planted the seeds for the 1994-95 financial crisis. First: liberalization of thebanking system was not complemented by a strong system for banking regulation and supervision. Second:supervisory skills had in general deteriorated in the previous decade, as the banking system degeneratedinto a mobilizer of funds for the government. This created a dis-incentive for modernization of thesupervisory and regulatory frameworks which was further exacerbated because the presidentially appointedbank directors became more powerful than the directors of the regulatory agencies themselves. Third:certain pieces of banking and commercial legislation (such as the norms related to secured lending andbankruptcy) remained untouched.

The "lack of practice" of financial sector regulatory bodies during the period of bank nationalization calledfor a complete overhaul of the system upon financial liberalization. In addition to the need for technologicalmodernization and the re-engineering of regulatory/supervisory policies and procedures, institutionalcapacity building, through human capital development, became essential. (i) The "need to leam"; (ii) thebuilding of the "desire to learn" by means of incentives for civil service in implementing agencies and (iii)the "tools to learn", through training/consulting activities (courses, workshops, seminars, conferences, visitsto sister institutions abroad, consulting work performed by local and international experts, etc. ), were allsuccessfully addressed and supported by the FTAL. The institutional capacity building effort has served asan input for the "production"of updated legislation with stricter enforcement rules. In addition, theimproved institutional capacity has "produced"an improvement of the supervisory roles of the implementingagencies. The ultimate long-run objective of the Loan which is a safer and more robust financial system inMexico began to materialize.

Mexico has achieved great success at overcoming the risk of a systemic collapse of the financial sector.The CNBV has implemented numerous regulations regarding disclosure; accounting principles; loanclassification; provisioning standards; the definition of capital; risk management practices and otherregulations which are IIow consistent with international best practices. Similarly, dispositions governing thecapital markets have improved significantly (a complete list of all CNBV circulars issued since 1970 andcurrent legislation governing Mexico's financial markets can be found in www.cnbv.gob.mx). The Mexicanbanking system and capital markets have "turned around the corner" of the "crisis avenue" and are nowhealthier, more profitable and more importantly, more sustainable.

The new private sector workers retirement pension scheme adopted in 1997, managed by the privately

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owned AFORES/SIEFORES, has been one of the greatest accomplishments of President Zedillo'sadministration. By CY 2000, assets managed by the retirement pension funds amounted to US$15 billionand are expected to reach US$165 billion by 2015. The CONSAR is responsible for their oversight and,through its sustained efforts, has gained recognition as one of the more effective regulators of a privatepension system in Latin America. A complete list of all CONSAR circulars and legislation governing theContractual Savings System in Mexico can be found in www.consar.gob.mx.

The insurance industry in Mexico, though small, continues to grow faster than GDP as measured by directpremium payments. Significant foreign investment has poured into the local industry fueled by an adequaterisk/return tradeoff and the transparency of the regulatory/supervisory requirements under theresponsibility of the CNSF.The annuities market has already been established and is the fastest growingsegment of the insurance industry. These complementary services, which represent the "final leg" to theones supplied by AFORES/SIEFORES, is another one of the long-run benefits pursued by both the WorldBank through the FTAL and by the GOM. A complete list of all CNSF circulars and legislation governingthe Insurance and Bonding Industry in Mexico can be found in www. CNSF.gob.mx.

In summary, the outputs produced by the financial sector regulating agencies, as measured by the quantityand quality of financial sector legislation, have proven themselves satisfactory. The strengthenedinstitutional capacity required to produce this output, which constitutes an additional long-run benefit forboth the implementing agencies and for Mexico's financial sector as a whole, has been greatly supported bythe activities financed by the FTAL.

4.2 Outputs by components:Project Objective: To support the development of the pension system through a program ofassistance for the National Commission of the Retirement System (CONSAR): Through a programsupporting the National Commission of the Retirement Savings System (CONSAR), required actions tocarry out major reforms of the Mexican pension system have been taken. Among these actions are: (i)preparation and enforcement of a new regulatory system for pension funds, (ii) enhancement of CONSAR'ssupervisory capabilities, including training of its staff and the introduction of new office technology; (iii)implementation of main programs of public information of the reforms, disseminated throughout thecountry.

Additional programs included required actions to: (i) develop the legal and regulatory framework to allowprivate management of SAR accounts; (ii) design and implement new operational policies for CONSAR;(iii) strengthen CONSAR's capabilities to supervise AFORES/SIEFORES , including the development ofhuman resources and information technology; (iv) develop public communications campaigns related to thepension reforms, aimed at encouraging participation in the new system.

Project Objective: To improve the safety and soundness of the financial system by enhancingprudential regulation and supervision through a program of assistance for the CNBV and theNational Insurance and Bonding Commission (CNSF): The loan has contributed to enhance thecapabilities of the National Insurance and Bonding Commission (CNSF) by supporting programs aimed atstrengthening its supervision capabilities, improving inspection manuals, training its staff, upgrading theregulatory framework for the insurance industry and disseminating information among the financialcommunity.

The main contribution of the FTAL to the CNSF was the financing of a 12-month external consultantcompany that advise CNSF's senior management and technical staff in: (i) upgrading policies andprocedures, (ii) reviewing the inspection procedures manual; (iii) developing on-the-job training programs;

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(iv) organizing staff training programs and seminars; (v) drafting amendments to existing laws, andregulations related to insurance and re-insurance companies, with a view to achieve consistency withinternational best practices; (vi) enhancing actuarial inspection practices and processes, including actuarialreporting and reserving standards in line with international standards.

The FTAL also financed a number of local seminars and workshops-with participation of well knowninternational experts aimed at dissemination information and carrying out education campaigns on theinsurance industry among the Mexican financial and academic community.

Project Objective: To improve the safety and soundness of the financial system by enhancingprudential regulation and supervision through a program of assistance for the National Banking andSecurities Commission (CNBV): The FTAL provided the technical and financial support to (i) carry outdiagnostic audits of, initially, intervened and troubled banks, and subsequently of all major banks, (ii)implement new accounting rules for banks and other financial intermediaries; (iii) complete studies aimed atimproving the legal/regulatory framework for private debt restructuring, secured transactions and assetbacked securities.

Furthermore, the FTAL has provided technical and financial assistance required by the CNBV inimproving its effectiveness as a supervisor of the banking system. Among the most significant programssupported by the loan, the following could be mentioned:

(i) Training programs implemented by the CNBV. Programs supported by the loan included the CNBV'sown in-house supervision courses, on-the-job training, as well as training sponsored by other supervisoryagencies, especially those from the United States.

(ii) Enhancement of supervision practices: US Bank examiners (from the Federal Reserve, Federal Depositand Insurance Corporation and Office of the Comptroller of the Currency) were second to assist CNBV inconducting detailed CAMEL-style inspections of all 18 privatized banks. This program set the basis for (i)introducing a program of annual inspections of each major bank; (ii) reviewing the Manual for Planningand Administrating On-site Supervision; and (iii) upgrading examination and supervision processes ofauxiliary credit institutions.

(iii) Introduction of methodology to monitor liquidity of the banking sector. The loan financed externalconsultants to assist CNBV in upgrading methods for valuation of financial debt instruments, improvingthe quality of financial information and its analysis.

(iv) The loan also financed programs to (a) upgrade the information systems; (ii) restructure the processesand flows of information; (iii) modernize the CNBV's information technology systems program.

Project Objective: To improve public investment evaluation and budgeting procedures and processesof the Investment Unit and Privatization of Parastate Entities (UIDEP) of the Secretaria de Hacienday Credito Publico (SHCP): The contribution of the FTAL in achieving these objectives has been lowerthan originally envisaged. This fact was due to the following factors: (i) following a shift in Governmentpriorities, during 1995 and 1996, the UIDEP concentrated its efforts on privatization of state propertyrather than in evaluation of new public investment; and (ii) the lack of budget assigned to the UIDEP tocarry out the programs to be supported by the loan. The only activity financed by the FTAL was acomprehensive study of pricing of potable water and sewerage treatment for 18 municipalities of the Stateof Mexico.

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4.3 Net Present Value/Economic rate of return:

Not Appl-icable

4.4 Financial rate of return:Not applicable

4.5 Institutional development impact:In addition, and beyond the programs supported by the FSRL and the CSDP I and II for which the FTALprovided critical and financial support to prepare and implement reforms agreed with the Mexicanauthorities, the FTAL has contributed to enhance prudential regulation and supervision. The CNBV, inparticular, became the most active implementing agency and was the one which benefited the most by theFTAL.

The institutional development impact can grossly be measured by the number of activities financed by theFTAL and by the number of beneficiaries of these activities. The CNBV undertook 165 training activities(courses/workshops/seminars/conferences) in different areas of financial knowledge attended by 138 of itsstaff-members of which, 93 (67 percent), continue to work at the CNBV. In addition, the FTAL supported48 externally hired consultants many of which provided the critical background for subsequent regulatoryrules issued by the CNBV. In addition, consultants also prepared studies related to: (i) improvedmethodologies of supervision and inspection; (ii) Information technology and (iii) development banks andcapital markets among others.

In addition to external consulting work, the CNSF organized 16 courses/workshops/visits which benefited42 staff-members and organized 6 external/internal seminars with 911 participants benefiting from theactivity. These external seminars allowed insurance and bonding companies in Mexico to have directcontact with their regulator to discuss both operative and regulatory issues relevant to the industry. Moreimportantly however, the seminars fostered communication thus improving the transparency andunderstanding of the actions taken by the CNSF.

The CONSAR organized 7 courses/visits as well as a number of externally hired consultancies which haveallowed the strengthening of the institution. Its performance can be judged by the success of the new privatesector workers pension schemes (AFORES) who are slowly becoming the prime institutional investors inMexico's capital markets.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:In Mexico, oil revenues represent approximately 30 percent of the Federal Government's total income.Because of this, Government expenditures have to be continously adjusted in response to the volatility in oilprices. This was the case in CY's 1999 and 2000 when the severe decline in international oil prices forcedthe Ministry of Finance (SHCP) to announce strict budget cuts which immediatly translated into areduction of fund allocations for the implementing agencies (in CY 2000, over US$4 billion were cut fromcurrent and investment expenditures). Especially hurt was the CNBV which was the most activeimplementing agency. Budget constraints had a direct negative effect on the implementation of the FTAL.Activities financed by the Loan declined in 1998, dwindled in 1999 and, disappeared in 2000. This offsettthe reasonable pace of activities that was held during 1995-97.

5.2 Factors generally subject to government control:After some start up delays, project implementation progressed satisfactorily. It was only during FY 96 thatthe FTAL became active (with some retroactive financing allowed for activities realized in 1995), with the

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executing agencies, particularly the CNBV and CONSAR, being able to divert some attention from thebanking crisis and from the processing of the new Social Security Law, respectively, into the programssupported by the Loan.

5.3 Factors generally subject to implementing agency control:See 5.2 above

5.4 Costs andfinancing:Out of the total approved amount US$37.4 million, only US$28.7 million were used with a cancelledamount of US$8.75 million.

6. Sustainability

6.1 Rationale for sustainability rating.For the implementing agencies:

Given the high degree of success acheived by the Government of Mexico in implementing and sustainingthe program of structural reforms in the financial sector, project sustainability is strong. With strongsupport of the incoming administration, which took office in December 1st 2000, the reforms andinstitutional development of the Commissions financed by the Loan will consolidate themselves and willprovide a solid basis for the future operations of the regulatory and supervisory institutions involved.Sustainability of the project is supported by the large number of activities undertaken and is notcompromised by completion since the financing provided by the World Bank represents only a very smallportion of the overall budget of each entity.

For Mexico 's Financial Sector Reform Process and Financial Sector Stability:

(a) Macroeconomic Instability: Is prominent among the obstacles for stable and sound financial systemsand reform. High inflation and excessive government deficits put enormous pressure on the financial sectorand impede reform. Mexico has made important progress against this odd. Since the critical year of 1995,macroeconomic instability and inflation have been reduced. Annual GDP growth for the period 1996-2000averaged over 5 percent with inflation declining from over 50 percent in 1995 to less than 10 percent in2000.

Mexico's strong economic perfonnance in 2000 has exceeded both government targets and private sectorexpectations. Economic growth for 2000 was 6.9 percent, considerably above the country's annual growthtrend of approximately 5 percent. Inflation continues its downward trend with a year-end rate of 8.9 percentfor 2000, consistent with the annual objective set by the monetary authorities (below 10 percent). Thebalance of payments current account deficit is estimated at 3.1 percent of GDP, only slightly up from 2.9percent in 1999 and within manageable proportions. The year-end fiscal deficit stood at 1.1 percent ofGDP just within the annual target of 1.0 percent of GDP.

The strong economic performance can be attributed to a combination of sound macroeconomicmanagement and a favorable extemal environment. Sound macroeconomic management, largely consistingof (i) tight and independent monetary policy, (ii) a flexible foreign exchange regime and (iii) a generallyconservative fiscal stance, continues to provide the basis for a respectable rate of growth, single-digitinflation and a viable extemal balance. The extraordinary favorable extemal developments, in particularstronger than expected growth of the US economy and the sharp increase of intemational oil prices sincemid-1999, enhanced the economic performance of Mexico in 2000. The risks remain of Mexico's reaction

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to the expected slowdown of the US economy during 2001 as well as to the permanent/transitory declineand volatility of oil prices.

The banking industry as a whole, hard hit by the 1994-95 crisis, has also gone through a noticeableimprovement in terms of quantity and quality of capital, profitability and risk management practices.Financial information for the banking industry by June 2000 showed signs of improvement. Past-due loansdecreased to MXP$57.7 billion from MXP$84.5 billion in 1999, reflecting a decline in the non-performingloan index from 8.9 percent in 1999 to 6.4 percent in June 2000, the lowest level since the new accountingprinciples were implemented (January 1997). However, some of these improvements were at the expense ofbalance sheet writeoffs reflected in the capitalization index which, adjusted for market risk, declined to 14.3percent by June 2000 from 16.2 percent in 1999. Operating profits increased substantially, and theindustry's coverage ratio (substandard loans over loan-loss provisions) rose to 110.8 percent.

(b) Support Programs Averting a Systemic Collapse of the Banking System: Similarly, since the crisisyear of 1995, the Mexican government has implemented a number of support programs that provedinstrumental in averting the collapse of the banking system. These programs included:

(i) A number of bank support programs, including liquidity support to provide banks with foreigncurrency to pay their foreign debt; actions to recapitalize the banks in exchange for non-performing loans;the intervention and sale of a number of weak domestic banks to foreign investors; and programs torestructure, sell, or liquidate banks intervened because their owners could not provide additional capital tomeet the new regulations. These measures were implemented through the Bank Savings Protection Fund(FOBAPROA)

(ii) Debtor support programs to help families and corporations service and repay their debts(iii) Reform of Mexico's deficient accounting principles, banking regulations, and supervisory and

enforcement practices.

The support programs were effective in avoiding widespread bank failures and deposit runs on banks, whilemaintaining the course of the tough stabilization program. However, they generated a substantial fiscalcost, estimated at about 19.3 percent of GDP with only a small part of this total cost having been coveredby fiscal transfers between 1995 and 2000.

(c) Legal Reforms to Improve Incentives in the Banking Sector. New banking legislation approved inDecember 1998 created a new deposit insurance agency, the Institute for the Protection of Bank Savings(IPAB). This law provides a legal framework and a clear timetable to sell the mountain of bad assetsacquired by FOBAPROA and to improve incentives in the financial sector, and creates a mechanism for thetransparent resolution of undercapitalized and insolvent banks, allowing full participation of foreigninvestors in existing Mexican banks.Measures taken include: (i) approval in December 1998 of the lawcreating the Institute for the Protection of Bank Savings (IPAB). The IPAB Law established a gradualphase-out of the universal deposit insurance scheme, replacing it with one with limited coverage, to behandled by IPAB; and (ii) the adoption of a final debtor relief program ("Punto Final").

(d) Regulatory Reforms to Improve Banks' Capitalization and Soundness. In September 1999, theregulatory authorities announced a series of regulatory reforms to change the definition of regulatorycapital and require the disclosure of its composition; improve the definition of risk weighted assets;establish classification and new provisioning rules based on repayment capacity; improve accountingpractices and standards; and improve disclosure.

(e) Bank Capitalization and Resolution Program. The IPAB Law gave IPAB the mandate to handle the

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restructuring and resolution of troubled banks. It has under its purview the banks that had been assisted bythe old bank restructuring fund (Trust Fund for the Protection of Bank Savings - FOBAPROA).

(I) Sound Fundamentals in Creditor-Borrower Relationships: There must be incentives for allparticipants in the financial sector to obey the rules , and have confidence that others will obey them too.Well drafted laws on contracts must be enforced by an effective judicial system. In this respect, theMexican authorities have made major strides in the implementation of sound legal fundamentals with theapproval of the Commercial Reorganization and Bankruptcy Act on April 27, 2000; and of the Miscellanyof Secured Lending on April 30, 2000. Passage of these legal reforms will help the banking sector resumethe provision of real credit which has been contracting since the banking crisis of 1995. These reforms willsignificantly broaden the access to bank credit to groups so far excluded. In addition, the new BankruptcyLaw will facilitate the recovery of assets and the redeployment of corporate assets of failed firms. Acomplementary reform to the other two major initiatives includes other reforms to the Commercial Code inorder to modemize Mexico's registries to convert to electronic form, improving the efficiency and safety forpledging commercial assets.

Congress also passed new legislation on loan guarantees, with some amendments to the Commercial Code,the General Law on Negotiable Instruments and Credit Transactions and the Credit Institutions Law. Thelegislation introduces the new principles of collateral without the transfer of ownership and the guaranteetrust.

6.2 Transition arrangement to regular operations:

Not Applicable

7. Bank and Borrower Performance

Bank7.1 Lending:The FTAL was initially conceived as a US$23.6 million operation which was later supplemented by anadditional operation of US$ 13.8 million for a total amount of US$37.4 million. The supplement wasdeemed essential as discassed in Section 3.2. While the government requested an extension of the Loan fortwo years (with June 2000 as the extended closing date), most of the loan funds were disbursed by FY 98.As discussed in Section 5.1, the extension of the loan did not materialize in significant additional activitiesgiven the government budget constraints in 1999 and 2000 that translated into reduced expenditures forthose years.This resulted in a cancellation of US$ 8.75 million. There were no rejected withdrawalapplications in this loan.

Prior to the banking crisis, the Bank's dialogue with the regulators of Mexico's financial sector was limited.It was the preparation of the original FTAL that initiated the beginning of a long and sometimes difficultbut respectful relationship with Mexico surrounding financial sector issues. The FTAL was the buildingblock that allowed the Bank and the Mexican authorities to re-take the dialogue to design and prepareadditional financial sector adjustment loans which culminated in: (i) the 1995 Financial SectorRestructuring Loan for US$1,000 million; (ii) the 1996 Contractual Savings Development Program(CSDP) for US$400 million; (iii) CSDP II in 1998 for US$400 million; (iv) the Bank RestructuringFacility Loan (BRFL) for US$500 million in 1999 and (v) the BRFL II for US$500 million with expectedBoard approval by late FY 2001 or early FY 2002.

Similarly, the quick preparation of the supplemental FTAL demonstrated the flexibility of the World Bankto adjust to changing conditions to deliver a fast-track, well diagnosed and quality product. The Bankresponded in a timely fashion to the GOM's request for financial and technical support for a comprehensive

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reform and the strengthening of its basic financial infrastructure.

7.2 Supervision:The project was supervised in the traditional way until the fall of 1996 when FPSI assigned a sector leaderto the field. Since then, direct supervision was carried directly from the field with the responsibilities of taskmanagement, procurement and financial management falling on the specialists located in the CountryOffice. Decentralization of responsibilities away from Washington DC proved adequate since closercontact with the implementing agencies allowed the Bank to provide considerable technical support, both inthe form of advice on relevant training needs and by providing views on terms of reference for consultingwork. In addition, direct supervision from the field allowed the buildup of a "more intense" relationshipwith the clients who are just "across the street". Thus, the FTAL is a good example of some of the positiveeffects of the recent decentralization efforts of the World Bank. This is further supported by the OverallQuality of Supervision Assessment of the FTAL performed by QAG for FY00 which was ratedsatisfactory.

7.3 Overall Bank performance:Satisfactory, particularly in the non-lending services area where direct on-off site supervision allowed forBank's assistance in planning activities. This positive externality for the Mexican Government alsomaterialized at the project preparation stage (see Section 7.4 below).

Borrower7.4 Preparation:The GOM, through the financial sector regulating agencies, participated actively in the preparation stage ofthe loan. In particular, they made substantial efforts to determine "the best road to follow" in terms ofdefining what the required training for executives and for the operating personnel should be, as well as howto build a consensus among market participants to understand and support the needed legislation requiredto be passed. The World Bank collaborated extensively with the regulating agencies by transferring theknow-how of best international best practices which served as benchmarks especially for legislationimplementation. The regulating agencies were very responsive to the World Bank's advice which made theworking environment for both institutions a satisfactory one.

7.5 Government implementation performance:Satisfactory

7.6 Implementing Agency:Levels of activity among the four implementing units (UIDEP, CONSAR, CNSF and CNBV) variedsignificantly. In particular, the activity of the UIDEP of the SHCP was practically insignificant as it hired asingle consulting activity whose cost absorbed only one percent of the total disbursed amount of the loan(US$293,000). However, this was offset by the dynamic activity of the CNBV which utilized 78 percent(US$22.4 million) of the disbursed amount. The CONSAR was the second most active player absorbing 19percent (US$5.5 million) while the CNSF only used US$476,000, representing slightly less than 2 percentof the total disbursed amount.

7.7 Overall Borrower performance:Satisfactory

8. Lessons Learned

This project highlights the following lessons: (i) A high degree of Government commitment is essential forsuccessful implementation; (ii) Well-defined Project objectives overall and within sub-components must

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accurately assess the country's needs and absorptive capacity to increase the possibility of a successfuloperation, (iii) Regular monitoring of Project performance indicators and supervision executed directlyfrom the field offer substantive, issue-oriented support; (iv) Supervision undertaken directly form the fieldallows closer contact with clients and allows relationships to build under more solid foundations.

Financial sector reform cannot be reached overnight. Time is needed to improve the laws on collateral andbankruptcy, the accounting system, the regulatory and supervisory framework and the capital markets andpension systems. Improvement in the enforcement of the laws and regulations take even longer and needtime for consolidation. The conclusion of the 1998 OED report Financial Sector Reform (#17454) clearlystates the challenges ahead: "a well-functioning financial sector is an ongoing process, not an event. Such asystem requires a long-term view". The inescapable lesson is that reform of financial sectors will require along-term commitment by the Bank and its clients, and the Bank's key role and comparative advantage is tostay as a policy advisor for the long terrn.

9. Partner Comments

(a) Borrower/implementing agency:Literally translating from the CNBV's project completion report: "It is important to mention the importanceit had for the CNBV to count with the technical as well as financial support of the World Bank. At thesame time, we must highlight the positive achievement of the objectives reached with this TechnicalAssistance Program. Improved supervision and bank inspection methodologies, improved bank analysistechniques, updated computer platforms and the strengthening of its human capital through local andforeign training activities, have all contributed to the CNBVs modernization process".

Literally translating the comments from the Bank's financial agent (NAFIN) delivered to the Bank aftertheir positive review of this ICR: " From the point of view of NAFIN, in its role of financial agent, projectexecution by the CNBV, CNSF, CONSAR and the UIDEP of the SHCP, adequately achieved the plannedobjectives and established the fundamentals for a stronger and safer financial system in Mexico. This,through the establishment of more adequate regulatory and supervisory methods combined with strongerincentives to the financial market participants. At the same time, the FTAL supported the development ofthe pension system and the strengthening in the evaluation of government spending and budgetarytechniques.

It is worth mentioning that the activities realized by the CNBV and the CONSAR were the ones that hadthe highest financial impact on the project (US$22.4 million and US$5.5 million respectively), representing97 percent of the total disbursed amount of US$28.6 million.

This Loan demonstrated the willingness of the World Bank to provide financial and technical support to theGOM in its continued efforts to strengthen Mexico's financial system, particularly after the financial crisisthat initiated at the end of 1994.

(b) Cofinanciers:No cofinanciers

(c) Other partners (NGOs/private sector):No other partners

10. Additional Information

Relationship with other Bank Operations. Prior to the actions taken by the authorities inDecember, 1994 which precipitated the collapse of the Mexican peso (i.e.; widening of the

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foreign exchange band) and the loss of confidence in the country by foreign investors, the Bankwas aware of the serious legal and regulatory shortcomings and institutional weaknesses underwhich the Mexican banks were operating. Responding to the request of the authorities in 1994 theBank prepared the FTAL as a precursor of the adjustment operation (FSRL) approved by theBoard in mid-1995.

While both operations were seen as complimentary, the FSRL fell well short of the ambitiousstated objectives of "restoring the solvency and soundness of Mexico 's banking system,restructure banks and improve confidence in thefinancial system" and "initiate reforms indevelopment bank lending, accounting practices and regulation offinancial groups, and thedeposit insurance system", among others. The over-ambitious objectives set for the FSRLunderestimated the depth of the crisis and the complexity and broad scope of the measuresrequired to restore the health of the system, as well as the humongous fiscal cost of the crisis forthe government (i.e.; estimated at 20 percent of Mexico's GDP). For the above reasons the FSRLwas overall rated as unsatisfactory (see ICR: Mexico- Financial Sector Restructuring Loan,Report No. 18012, May 26, 1998).

A second lending operation less closely associated to the FTAL was the first Contractual SavingsDevelopment Program (CSDP-I) approved by the Board in December, 1997. The CSDP-Itargeted one of the main vulnerabilities of the Mexican economy resulting from the shallow poolof domestic savings and its "shortermism". The new pension system regulator CONSAR createdby additional legal reforms introduced in May, 1996 was one of the recipients of the FTAL, asdiscussed above. The FTAL contributed significantly to the strengthening of the new supervisoryagency and the very successful implementation of the CSDP-I loan (see ICR: Mexico-Contractual Savings Development Program, Report No. 17771, May 5, 1998).

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Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome / Impact Indicators:

IndlcatorlMatri7x P .7t;d0 in last PSR Actul/Latest Estimate1. CNBV - Evaluation and Improvement of 1. Eighteen acfivities with studies onRegulatory and Supervisory Policies and electronic supervision, creditor-borrowerinspection processes. relationships,bankruptcy and loan

classification, re-engineering of policies andprocedures.

2. CNBV - Methodologies for improved 2. Three consultants prepared separateinspection and supervision. diagnostic studies on the CNBV's intemal

structure and operating processes andimprovement in the knowledge of thefinancial situation of supervised banks.

3. CNBV - Increased capacity of financial 3. Eight consultants prepared separateanalysis studies on liquidity monitOrtng, valuabon,

probability models for non-payment,corporate govemance, risk management andfinancial structure.

4. CNBV - Modemized information systems 4. Nine sub-projects executed including theand budgetng. purchase of office technology, a diagnostic of

CNBVs finance, administrative and legaldepartments.

5. CNBV - Improve supervision of 5. Four consultants prepared studies ondevelopment banks. development bank credit risk limits, current

macro-micro situation, interest rate policiesand a specific diagnosis of BANJERCITO.

6. CNBV - Human resources development 6. Courses offered in the financial andinformation technology areas. 165 activitiesperformed with 138 beneficiaries. System ofrewards developed to encourage civil service.

7. CNBV - Transparency of informabon for 7. Consulting firm prepared study onmarket investors. quantity/quality of information for market

investors.8. CNBV - Self-regulating organizabons 8. Consultant prepared study on feasibility of(SRO's). SRO's in Mexico's financial industry.9. CNBV - diagnostc studies of troubled 9. Detailed diagnostics by extemalbanks and selection of advisors for the their consultants on the following banks: Banpais;restructuring, liquidation and sale Serfin; Inverlat; Confia; Banorte; Bancentro;

Banamex; Atlantico; Promex and Bancomer.Consultants also prepared studies on themethodologies to sell intervened institutions.

10. CNBV - Facilitate voluntary restructuring 10. The IMF providing assistance on feasibleof troubled loans. restructuring processes.11. CNBV .Asset securitization and secured 11. Consultant prepared detailed study ontransactions (feasibility and obstacles). likelihood and issues to be addressed for

successful implementation.12. CONSAR - Develop legal/regulatory and 12. During 1996-2000 CONSAR issued oversupervisory capabilities to manage SAR 100 circulars and dispositions. Assets underaccounts management of AFORES projected at

US165 billion by 2015. CONSAR regardedas one of the most efficient regulators ofprivate pension systems in Latin America.

13. CNSF - Improvement in regulatory and 13. During 1995-2000 CNSF issued oversupervisory capabilities. 300 circulars. Insurance and Bonding house

industry growing faster than GDP since1996. Significant foreign investment by majorinternational insurance firms.

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14. UIDEP - Improvement of evaluation of 14. Poor project implementaton performancepublic investment projehs and budgeting given that UIDEP's ativities and psottiesprocedures. changede tothe privatization of state owned

property.

Output Indicators:

tndicator/Matvix Projected in last PSRi Actual/Latest Estimate1. November 1994: Extemal auditors now 1. Evaluation by a third party eliminatesrequired for banking Institutions. incentives for mis-reporting.2. March 1995: New reserve requirements. 2. Improved provisioning and further hedge

against unforeseen losses.3. July 1996: New capital requirements. 3. Moving in line with intematonal standards.

4. January 1997: New accounting prindiples 4. Moving in line with international standardsadopted.5. February 1998: Revised credit allocaton 5. Updated credit risk methodologies.procedures.6. September 1998: Additional provisioning. 6. Further cushioning against unforeseen

losses.7. December 1998: Elimination of foreign 7. No restrictions on foreign bank entry.participation in Mexico's largest banks.8. December 1998: Creation of the Bank 8. Legal framework established for theSavings Protection Institute (IPAB). restructuring/sale/liquidation of troubled

banks.9. January 1999: Comprehensive and 9. Risk management committee'scentralized risk management practices. established reporting directly to the Board of

Directors.10. June 1999. Corporate govemance rules. 10. Initially voluntary and later made

mandatory in September 200011. September 1999. New capitalization 11. Tier I and Tier 11 capital re-defined closerrules, in line with best international practices.12. October 1999 .Update of general 12. Moving even closer to internationalaccounting principles. standards..13. October 1999. Consumer loan 13. More transparent loan classification.classification re-defined. Takes into account both micro and macro

risks.14. January 2000. Mortgage loan 14. More transparent classification. Takesclassification re-defined. into account micro and macro risks.15. April 2000. Secured lending and 15. Borrower/creditor incentives addressedBankruptcy laws approved by Congress. to improve repossessing of pledged assets

end encourage payment of delinquent loans.16. May 2000. Modemization of Public 16. Critical for the Secured Lending andRegistries. Bankruptcy Laws to effectively operate.17. September 2000. Commercial loan 17. More transparent loan classification.re-classification redefined. Takes into account both micro and macro

risks.

End of project

Note: The output indicators shown above represent some of the most important structural changesimplemented by the CNBV during the period 1995-2000. These changes are applicable to the bankingindustry which represents more than 80 percent of financial assets in Mexico. In addition, during the period1995-2000, the CNBV also issued over 180 Circulars related to the capital markets activity.

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Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent)Appraisal VAptualLatest PercentaroEstimatf EiVtimte A00riat

Project Cost By Cmnent U m$ milion US$ million _...___.:_...

1. National Banking and Securities Commission CNBV 19.44 26.10 1352. National Insurance and Bonding Commission CNSF 1.86 0.50 303. National Retirement Savings Commsion CONSAR 1.93 6.00 3114. Consultants to Support Project Procurement Activities 0.44 0.00 05. Public Investment Evaluation and Budgeting Unit 7.69 0.30 0.04(UIDEP)6. Cost of new activities envisaged in supplemental FTAL 23.05 0.00 0to be distributed between CNBV and CONSAR.7. Less total allocation of released funds -5.37 0.00 0

Note: Actual/Latest Estimate of item 6 is distributedbetween items I and 3.

Total Baseline Cost 49.04 32.90

Total Project Costs 49.04 32.90Total Financing Required 49.04 32.90

Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ m.llion equival nt)

Expenditure Category Y Proureen Mh ocoICB f i Other N.t.F. Ttal Cost

1. Works 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

2. Goods 0.00 0.00 0.00 0.00 0.00(3.17) (2.56) (0.00) (0.00) (5.73)

3. Services 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (22.92) (0.00) (22.92)

4. Miscellaneous 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

5. Miscellaneous 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

6. Miscellaneous 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00 (0.00) (0.00)

Total 0.00 0.00 0.00 0.00 0.00_(3.17) (2.56) (22.92) (0.00) (28.65)

"Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies.

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21Includes civil works and goods to be procured through national shopping, consulting services, services of contractedstaff of the project management office, training, technical assistance services, and incremental operating costs related to(i) managing the project, and (ii) re-lending project funds to local govemment units.

Project Financing by Component (in US$ million equivalent)Percentage of Appraisal

Component Appraisal Estimate ActuallLatest Estimate |Bank Govt. CoF. Bank Govt. CoF. Bank Govt. CoF.

T'otal Costs 37.40 11.67 28.65 4.25 76.6 36.4Note: Most of Mexico'scounterpart funds wereused to finance the 15 %VAT on the purchase ofgoods and services.

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Annex 3: Economic Costs and Benefits

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Annex 4. Bank Inputs

(a) Missions.Stage of Project Cycle No. of Persons and Specialty Performanco Rating

(e.g. 2 Economists, I FMS, etc.) j Implementation DevelopmentMonth/Year Count Specialty Progress Objective

Identification/Preparation1994 12 S S

Appraisal/Negotiation1995 8 S S

Supervision1995 7 S S1996 13 S S1997 4 S S1998 6 S S1999 2 S S2000 1 S S

ICR2000 1 S S

(b) Staff:

Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks _US$ ('000)

Identification/Preparation 54.4 120.5Appraisal/Negotiation 62.1 103.9Supervision 85.3 201.7ICR Included in Included in

Supervision SupervisionTotal 201.8 426.1

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components

(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

Rating0 Macro policies O H * SU O M O N O NAL Sector Policies O H * SU O M O N O NAL Physical O H OSUOM O N * NAEl Financial O H * SU O M O N O NAO Institutional Development O H * SU O M 0 N 0 NA

E Environmental O H OSUOM O N * NA

SocialEl Poverty Reduction 0 H 0 SU 0 M 0 N * NAO Gender O H OSUOM O N * NAO Other (Please specify) 0 H 0 SU 0 M 0 N 0 NA

3 Private sector development 0 H O SU O M 0 N 0 NAO Public sector management 0 H 0 SU O M O N 0 NAO Other (Please specify) 0 H O SU O M O N 0 NA

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Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

E Lending OHS*S Ou OHUII Supervision OHS OS OU OHUO Overall OHS OS O u O HU

6.2 Borrowerperformance Rating

O Preparation OHS OS O U O HUO Government implementation performance O HS O S 0 U 0 HUEl Implementation agencyperformance O HS O S 0 U 0 HULI Overall OHS * S O U O HU

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Annex 7. List of Supporting Documents

1. MOP ON A PROPOSED LOAN IN THE AMOUNT EQUIVALENT TO US$23.6 MILLION TONACIONAL FINANCIERA, S.N.C. DECEMBER 22, 1994. REPORT NO. P-645 1-ME.

2. MOP ON A PROPOSED SUPPLEMENTAL LOAN IN THE AMOUNT EQUIVALENT TOUS$13.8 MILLION TO NACIONAL FINANCIERA, S.N.C. MAY 25, 1995. REPORT NO.P-6629-ME.

3. MOP ON A PROPOSED LOAN IN THE AMOUNT EQUIVALENT TO US$ 1,000 MILLION TOBANOBRAS. JUNE 1995. REPORT NO.

4. REPORT AND RECOMMENDATION OF THE PRESIDENT ... ON A PROPOSED LOAN OFUS$400 MILLION TO BANOBRAS. NOVEMBER 13, 1996. REPORT NO. P-7018-ME

5. REPORT AND RECOMMENDATION OF THE PRESIDENT.. ON A PROPOSED SECONDCONTRACTUAL SAVINGS DEVELOPMENT PROGRAM (CSDPII) ADJUSTMENT LOAN OF US$400 MILLION TO BANOBRAS, S.N.C. MAY 13, 1998. REPORT NO. P-7239-ME

6. ICR - MEXICO - CONTRACTUAL SAVINGS DEVELOPMENT PROGRAM (CSDP). LOAN NO.4123-ME. MAY 5, 1998. REPORT NO. 17771.

7. ICR - MEXICO - FINANCIAL SECTOR RESTRUCTURING LOAN. LOAN NO. 3911-ME. MAY26, 1998

8. ICR - MEXICO - SECOND CONTRACTUAL SAVINGS DEVELOPMENT PROGRAM (CSDP II).LOAN NO. 4343 - ME. DECEMBER 22, 1999. REPORT NO. 19676.

9. PROJECT PSR'S 1997, 1998, 1999.

10. IMPLEMENTING AGENCIES CORRESPONDANCE WITH THEMEXICO-COLOMBIA-VENEZUELA CMU.

11. INFORMATION SUBMITTED BY IMPLEMENTING AGENCIES OF ACTIVITIES FINANCEDWITH THE PROCEEDS OF THIS LOAN.

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