Mexico achieves medium overall compliance with international standards and codes, with a score of 48.33 out of 100 in our Standards Compliance Index. Mexico's compliance in the area of macroeconomic fundamentals is high, exhibiting high levels of transparency. In contrast, it does not fare too well with the standards that make up the institutional and market infrastructure category. In this category, the highest level Mexico achieves is "enacted" for Corporate Governance and it is assigned "intent declared" or "insufficient information" levels for the rest of the standards. With respect to accounting, auditing, and payment systems, the Mexican authorities are committed to conforming to international standards in the near future. In spite of the recent positive measures undertaken by the Mexican authorities on anti-money laundering, there is a dearth of publicly available information evaluating these measures in the context of compliance with internationally accepted standards on the issue. Mexico achieves a "compliance in progress" level with the Banking Supervision and Securities Regulation standards, but falls short with regards to Insurance Supervision and is marked as "intent declared." The common thread observed in most standards is that there is a strong commitment to reforms on the part of the Mexican authorities.

Macroeconomic Policy and Data Transparency

The Special Data Dissemination Standard (SDDS) website of the International Monetary Fund (IMF) discloses that Mexico has subscribed to the Standard since 1996 and first met SDDS specifications in 2000. According to the website, Mexico meets nearly all SDDS specifications for the coverage, periodicity, and timeliness of data, and provides advance release calendars and summary methodologies for all applicable datasets. Mexico avails itself of timeliness flexibility options for both its general and central government operations data. However, the SDDS site notes that Mexico falls short with regard to SDDS requirements on integrity and quality of data. For example, changes in methodology are not always preceded by advance notices for several of the data categories, and there is no documentation on methodology provided for central government debt, balance of payment, or international investment position data. Similarly, the 2007 IMF Article IV Consultation report states that some work remains to be done regarding data dissemination, particularly in the area of timeliness in the reporting done by sub-national government operation and debt data and the consolidated statistics of the general government. More »

According to the 2006 Oxford Analytica (OA) Monetary Transparency report, Mexico has been accorded an overall rating of "compliance in progress," unchanged from the previous year. OA finds that improvements in transparency and communications are ongoing. The Bank of Mexico (BdM) retains its traditional monetary policy tool, the corto, although for the past years it has been relying on the overnight interbank interest rate to implement monetary policy. The OA report notes that the BdM uses its website to disclose detailed monetary-policy related information, along with a presentation of the policy instruments in use and the targets that have been set. Mexico is guided by both the Special Data Dissemination Standard of the IMF and the provisions of its own Federal Law on Transparency and Access to Public Information. It offers public access to advance release calendars. Immediately following the BdM's board of governors meeting, the bank announces monetary policy decisions via press releases and its website. It provides explanations for that policy in the same release or online publication. It has been suggested that transparency might be further increased by the publication of minutes of monetary policy meetings. OA notes an increasing tendency toward detailed information on inflation forecasts, although the BdM does not yet provide such forecasts for multiple horizons. More »

In its 2006 report on fiscal policy transparency, OA assigns Mexico a rating of "compliance in progress." The report notes improvements in Mexican fiscal transparency and attributes much of this to the approval of the new Federal Law on Budget and Fiscal Responsibility in March 2006, whose primary goal is the enhancement of public oversight of government spending. The law increases the role of parliament in the budget process, while other provisions call for greater public disclosure of the government procurement process, increased public access to financial management information, and greater transparency regarding public services. The new fiscal framework created by the law also sets clearer guidelines according to which unspent allocations and excess oil revenues are to be handled. Furthermore, provisions of the Law imply an expanded role for the Federal Institute for Public Information Access. It also changes reporting practices, once carried out only annually by the Secretariat of Finance and Public Credit. There is now an established schedule of reporting dates on which information must be presented to the legislature. In contrast to this positive assessment by OA, the 2006 Open Budget Index (OBI) points out well-known difficulties in Mexico with respect to the availability of information. The OBI, however, does not reflect the implementation of the new law, and rates Mexico's performance at only 50%, suggesting that much more detail could still be made available in the budget documents, and that there was room for improvement in achieving citizen participation in the budget process. More »

Institutional and market infrastructure

In May 2000 a new commercial bankruptcy law, Ley de Concursos Mercantiles, was enacted by the Mexican Congress. The new law provides for a two-stage insolvency procedure, beginning with conciliation and moving forward, if required, to liquidation. The goal is to facilitate preservation of the bankrupt firm when possible. This legislation also adopts, with minor changes, the Model Law on Cross-border Insolvency developed by the United Nations Commission on International Trade Law. Most of Mexico's insolvency provisions are harmonized with U.S. bankruptcy law, although there are a few areas of divergence. Principal among these is the prioritization of wage claims over all other creditors. The International Monetary Fund reports in 2007 that an effort is being made to improve creditor protections and strengthen contract enforcement, a process that may include legislative changes. Nevertheless, there is no further publicly available information that directly addresses Mexico's compliance with the World Bank's Principles and Guidelines for Effective Insolvency and Creditor Rights Systems. More »

A 2004 World Bank review of the accounting and auditing environment in Mexico concluded that although Mexican Generally Accepted Accounting Principles (GAAP) have been converging with International Financial Reporting Standards (IFRSs) over a number of years, accounting requirements still differ from the international standards. The World Bank noted, however, that the Council for Research and Development of Financial Information Standards (CINIF) was contemplating steps to further reduce the differences between Mexican and international requirements. In his presentation at the September 2007 World Standard Setters Meeting, CPC Felipe Perez Cervantes of the CINIF confirmed Mexico's commitment to converge its accounting practices with IFRSs . Cervantes noted that, having analyzed the different options to achieve convergence, it was decided that the most suitable way is to "adapt" existing standards by incorporating local legal or regulatory requirements. Thus Mexican Financial Reporting Standards are being gradually reviewed, reconciled with the international standards, and then reissued as the converged standards . As of 2007, the CINIF revised the conceptual framework which is effective since January 2006, and amended those standards that were significantly non-compliant with the new framework. More »

The 2006 release of the new Securities Market Law and the revised version of the Mexican Corporate Governance Code, incorporating lessons learned from implementation of the original 1999 Code as well as international developments, bring Mexico a step closer to a well-developed corporate governance framework. Back in 2003, a Report on Standards and Codes by the World Bank benchmarked Mexico's observance of corporate governance against the Organization for Economic Co-operation and Development's Principles for Corporate Governance. According to the report and a report by the Institute of International Finance released the same year, major progress had been achieved in establishing a successful structure and culture for good corporate governance. However, both reports cautioned that real progress in Mexican corporate governance has to account for the concentrated ownership and control structure of many Mexican firms. The 2006 Securities Market Law strengthens the responsibilities of directors and boards for publicly traded companies. It addresses minority rights protections and emphasizes the independence of boards vis-a-vis the controlling shareholders. Its successful implementation will be crucial to lift Mexican corporate governance to a new level and broaden its investor base. More »

Based on its own observations and consultations with market participants, the World Bank observed in 2004 that Mexican Generally Accepted Auditing Standards (GAAS) are "broadly comparable" with International Standards on Auditing (ISAs) promulgated by the International Auditing and Assurance Standards Board. The 2006 self-assessment prepared by the Mexican Institute of Public Accountants, the auditing standard-setter, as a part of the International Federation of Accountants' Member Body Compliance Program, stated that the policy of the Institute is to eliminate differences between national pronouncements and ISAs. Although acknowledging the progress made by Mexico in moving toward compliance with international standards, the World Bank made a number of recommendations to improve the existing practices. Among other issues, it recommended establishing an independent oversight body for audit practitioners that will enforce compliance with accounting and auditing standards and the code of ethics, strengthening enforcement mechanisms and educational requirements, and finally considering the full elimination of differences between Mexican GAAS and ISAs. More »

In 2005, the IMF published the findings of a mutual evaluation on Mexico's compliance with the Financial Action Task Force's (FATF) recommendations on anti-money laundering (AML) and combating the financing of terrorism (CFT). According to the report, although Mexico was compliant or largely compliant with some of the FATF recommendations, it still had significant shortcomings in its AML/CFT regime; the most significant being the lack of legislation criminalizing terrorist financing. However, in 2007, according to a 2008 U.S. Department of State report, Mexico passed a law criminalizing terrorist financing. This law amends the Federal Penal Code to link terrorist financing to money laundering, and defines international terrorism as a predicate crime if and when committed in Mexico to inflict damage on a foreign state. Despite the passage of this new law, there were other concerns raised by the IMF in its 2005 report, relating to inadequacies in the confiscation regime and in the preventive measures adopted by financial institutions, which the authorities need to address. Moreover, the 2005 IMF report was based on the findings of a mutual evaluation conducted per the 2002 FATF methodology for assessors. The methodology was revised in 2004, and there is little information publicly available assessing Mexico's compliance with the new and revised FATF methodology. More »

The three systemically important payment systems (SIPS) in Mexico, as designated by the Central Bank of Mexico (Banco de México, or BdM), are the Banco de México Account Holders Service System (Sistema de Atención a Cuentahabientes de Banco de México, or SIAC), the Electronic Interbank Payment System (Sistema de Pagos Electrónicos Interbancarios, or SPEI), and the Interactive Security Deposit System (Sistema Interactivo para el Depósito de Valores, or SIDV). In 2001, the IMF assessed the SIAC, the Extended Electronic Payments System (Sistema de Pagos Electrónicos de Uso Ampliado, or SPEUA), and the SIDV and concluded that Mexico did not fully comply with the Committee on Payment and Settlement Systems' Core Principles for Systemically Important Payment Systems (CPSIPS). However, the IMF assessment acknowledged that reforms were underway in Mexico at the time, with the aim to make Mexican SIPS compliant with the CPSIPS. Subsequently, several reforms have been implemented such as the adoption of the 2002 Payment System Law and the replacement of the SPEUA with the SPEI. The IMF released a Financial Sector Assessment Program (FSAP) Update in 2007, in which it did not reassess the SIPS in Mexico but did review the reforms undertaken. According to the 2007 FSAP Update, most deficiencies reported by the IMF in its 2001 assessment of Mexico's payment systems that related to the legal framework and the management of credit and liquidity risks were eliminated through reforms undertaken after the 2001 report. For example, the 2002 Payment System Law addressed the issue of finality of payments in SIPS and gave the BdM more explicit powers to regulate the SIPS in accordance with the CPSIPS. Furthermore, the BdM on its website indicates that it undertook several operational and legal modifications that have enabled the Mexican SIPS to comply with international best practices. However, despite the rather positive outlook projected in various reports on payment systems in Mexico, there is insufficient information publicly available addressing Mexico's actual overall compliance with the CPSIPS. More »

Financial Regulation and Supervision

In 2001, the IMF released its findings on Mexico's compliance with the Basel Core Principles (BCPs) for Banking Supervision, in which it identified several significant shortcomings in the country's regulatory framework. However, subsequently, several laws were amended and substantial changes were made resulting in stronger banking supervision as reported by the IMF in its 2007 FSAP Update. The 2007 IMF report concludes that Mexico is now compliant with 19 BCPs, largely compliant with 5, and is non-compliant with 1. Prudential regulations, on-going banking supervision, information requirements, remedial measures and cross-border banking are all being adeptly handled by the supervisory authorities per the IMF assessors. The problem, according to the 2007 FSAP Update, is in the lack of clear regulatory powers for the primary banking sector regulator, the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, or CNBV), rendering the CNBV less independent and autonomous than as required by the BCPs. According to the IMF assessors, the CNBV lacks the power to control the activities of banks fully, from inception to demise. Instead, the Secretartiat of Finance and Public Credit (Secretaría de Hacienda y de Crédito Público, or SHCP) is given the authority to set regulatory policy and license banks in the country and as such holds precedence over the CNBV in regulatory policy-making. However, the authorities recognize this dichotomy in functions and the problems it pose, and accordingly, have started to gradually transfer some of SHCP's regulatory powers to the CNBV. More »

The IMF's 2001 Financial System Stability Assessment (FSSA) of Mexico found that its securities regulation framework was in broad observance with the Objectives and Principles of Securities Regulations promulgated by the International Organization of Securities Commissions (IOSCO), although it noted a number of shortcomings. Following the initial assessment, in April 2001, Congress enacted a series of legal reforms to address many of the identified shortcomings. Among the changes was the extension and strengthening of the authority of the CNBV, the legalization of cooperation with foreign regulators, and the reform of essential corporate governance issues. In 2006, a new the Securities Market Law was enacted, further strengthening the CNBV's authority. As a result, a 2007 FSAP update by the IMF rated 27 of the 30 IOSCO principles as "implemented," with the remaining three judged to be "broadly implemented." More »

The operation of Mexican insurance and surety companies and the verification that such operation is in accordance with applicable regulations, is the responsibility of the National Insurance and Sureties Commission (CNSF), a decentralized agency of the Secretariat of Finance and Public Credit. According to the 2001 IMF FSSA, insurance regulation and supervision in the country broadly complied with Insurance Supervisory Principles (later renamed as Insurance Core Principles and revised in 2003) promulgated by the International Association of Insurance Supervisors (IAIS). The IMF commended the Mexican authorities for their ongoing efforts to reform insurance sector supervision, especially noting the qualified stuff of the CNSF, strong supervisory process, strict regulation of changes in control, and extensive on-site inspections. Nevertheless, certain shortcomings -- including the autonomy and powers of the CNSF, corporate governance, as well as the legal protection of supervisory staff -- were identified. As indicated in the 2001 FSSA, Mexican authorities agreed with the conclusions of the IMF's mission and, based on its recommendations, developed a detailed action plan to improve compliance with the IAIS principles. In 2006, the IMF published an Update of the FSSA which praised the CNSF on the progress made in strengthening insurance sector in line with the recommendations of the 2001 FSSA. However, the CNSF still was not politically, budgetary, or operationally autonomous. The 2007 IMF report on effective financial system regulation proposes a building-block approach to the reform of the financial sector in Mexico, which, among other issues, entails improving inter-agency cooperation, and achieving full autonomy of the regulators, including the CNSF. More »

Legend:

Credit Ratings

Moody's Baa1/Stable

Fitch BBB+/Stable

Standard & Poor's BBB+/Stable

Macroeconomic Data

2007 GDP (Current Prices): 893.365 billion USD (IMF)

2007 GDP (Per Capita): 8,479 USD (IMF)

2008 GDP (Growth Forecast): 2% (IMF)

2008 Inflation (CPI): 3.8% (IMF)

2007 Unemployment: 3.7% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 19.037 billion USD (UNCTAD)

FDI (Outward): 5.758 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): 247 million USD (OECD)

ODA (Disbursed): N/A million USD (OECD)