Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 11484

PROJECT COMPLETION REPORT

MEXICO

THIRD SMALL AND MEDIUM-SCALE INDUSTRY DEVELOPMENT PROJECT(LOAN 2325-ME)

DECEMBER 31, 1992

Country Operations Division ICountry Department IILatin America and the Caribbean Regional Office

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

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CURRENCY EQUIVALENTS

Currency Unit = Mexican Pesos (Mex$) = 100 cents

Average Exchange Rates

1978 US$1 = 22.81979 US$1 - 22.81980 US$1 - 2301981 US$1 - 24.1982 US$1_ 57.41983 US$1 = 12021984 US$1 1 167.81985 US$1 257.01988 US$1 - 811.81987 US$1 - 1,378.21988 US$1 - 2.273.1199o US$1 - 2,21.71990 US$1 - 2,821,01991 US$1 = 3,02051992 (March) US$1 = 3070.5

ABBREVIATIONS AND ACRONYMS USED

ACF - Index of Average Cost of FundsAMPIP - Association of Mexican Developers of Industrial ParksDGCP - Direccl6n General de Capacitaci6n y Productividad (Department of Training and Productvity)FIDEIN - Fideicomiso de Conjuntos, Parques y Cludades Industriales (Trust Fund for Industrial Parks Development)FOGAIN - Fondo de Garantfa y Fomento a la Industria Mediana y Pequefla

(Guarantee and Small and Medium Industry Development Fund)FOMIN - Fondo Nacional de Fomento Industrial (National Fund for Industrial Development)Fl - Financial IntermediaryGIRA - General Interest Rate AgreementIDB - Inter-American Development BankIMF - International Monetary FundINEGI - Instituto Nacional de Geografta e Informitica (National Institute for Geography and Information)INFOTEC - Instituto de Informaci6n Tecnol6gica

(Institute tor Information and Technological Development)NAFIN - Nacional Financiera S.A. (Government's National Industrial Development Bank)NAIOP - National Association of Industrial and Office ParksPAI - Programa de Apoyo Integral a la Industria Mediana y Pequelia (National Program for SMI Development)PCR - Project Completion ReportPED - Project Execution DocumentPIPMI Programa de Desarrollo Integral para la Pequefia y Mediana Industria

(Integral Development Program for SMIs)SAR - Staff Appraisal ReportSECOFI - Secretaria de Comercio y Fomento Industrial (Ministry of Trade and Industrial Development)SMI - Small and Medium Scale IndustrySNE - Servicio Nacional de Empleo (National Employment Service)SOE - Statements of ExpensesTA - Technical Assistance

FISCAL YEAR

January 1 - December 31

FOR OFFICIAL USE ONLYTHE WORLD BANK

Washington, D.C. 20433U.SA.

Office of Director-GeneralOperations Evaluation

December 31, 1992

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on MexicoThird Small and Medium Scale IndustryDevelovment Proiect (Loan 2325-ME)

Attached is a copy of the report entitled "Mexico Third SMI Development Project (Loan 2325-ME)- Project Completion Report" prepared by the Latin America and the Caribbean Regional Office, with Part11 contributed by the Borrower.

The original project objectives were to provide financial and technical assistance to small scaleenterprises, and to strengthen the financial intermediation role of the institutions concerned. The on-lending objective was met, although with more than two years delay. The impact of the project oninstitutional strengthening was limited. Overall, the project is rated marginally satisfactory.

In designing this project, Bank staff attempted to introduce new appraisal techniques and technicalassistance delivery programs--with meager results. Lack of coordination among executing agencies andpoor monitoring hindered progress. Bank supervision focused on resource transfer; not enough attentionwas paid to institutional development and technical assistance.

The PCR presents a plausible assessment of project achievements but lacks basic information onfinancial aspects and subproject benefits. The Region notes that this is due to the Borrower's loss ofproject files following a major reorganization of the institution in 1989. An audit is planned.

Attachment

This docunent has a restricted distribution and nmy be used by recipients only in the performnance of their official duties. It contenusmnay not otherwise be disclosed without World Bank authorization.

FOR OMCIAL USE ONLY

PROJECT COMPLETION REPORT

MEXICO

THIRD SMALL AND MEDIUM-SCALE INDUSTRY PROJECT(Loan 2325-ME)

TABLE OF CONTENTS

PAGE NO.

Preface ................................................................ iEvaluation Summary ................................................... ill

PART I: PROJECT REVIEW FROM BANKS PERSPECTIVE ...... ............. 1

I. Project Identity ................................................ . 1II. Background ................................................... 1

III. Project Objectives and Description ....... ....................... ... . 2IV. Project Design and Organization ....... .................... 3V. Project Implementation ........ .................................... 7

V'I. Project Results ............................................... . 9'VII. Project Sustainability ........................................... 12

V'III. Bank Performance .............................................. 13IX. Borrowver Performance ........................................... 14X. Project Relationships ... ....................................... . 15XI. Consulting Services ............................................. 16

XII. Project Documentation and Data .................................. 16XIIH. Lessons Learned ................................. .............. 17

Part II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE .... ......... 19

I.Background ................................................... 19II. Project Objectives and Description . . ................................ 21

III. Project Organization and Design ......... . . . . . .................................... . 22IV. Project Implementation ........ ...................... ............ 23V. Project Results ............... ........................ 23

VI. General Comments ................. ................................ 24

Part III: STATSTICAL INFORMATION .............. .. ................... 27

1. Related Bank loans ............................................. 272. Project Timetable ............................... ............ 283. Cumulative Estimated and Actual Dsbursements ..... ................. 294. Project Estimate Financing . ............... .. ................ ...... 30

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

TABLE OF CONTENTS (CONTD)

5. Allocation of loan Proceeds .. ..................................... 316. Status of Covenants ............................................. 327. Use of Bank Resources ........................................... 338. Staff Inputs by Stage of Project Cycle ....... ........................ 349. Project Benefit ....................................... 35

10. Documento de Terminacion de Proyecto (Original Part II In Spanish) ... 36

PROJECT COMPLETION REPORT

MEXICO

THIRD SMALL AND MEDIUM-SCALE INDUSTRY DEVELOPMENT PROJECT(Loan 2325-ME)

PREFACE

This is the Project Completion Report (PCR) for the Third Small andMedium-Scale Industry Development Project in Mexico, for which Loan 2325-ME in theamount of US$175.0 million was approved by the Bank on June 23, 1983. The loan wasclosed on September 30, 1989, two years and three months behind schedule. The lastdisbursement was on October 31, 1989. Twenty one thousand dollars were canceled.

The Project Completion Report (PCR) was prepared by the Country OperationsDivision I of the Latin American and the Caribbean Regional Office (Preface,Evaluation Summary, Parts I and III). The Borrower agreed to prepare Part IIsimultaneously with preparation of Parts I and III by the Bank. This was reconfirmedby NAFIN in February 1992.

Preparation of this PCR was started in February 1991, and it is based Interalis, on data obtained during a three week mission to Mexico in February-March 1991,and on the Staff Appraisal Report, the Loan and Guarantee Agreements, ProjectSupervision Reports, correspondence between the Bank and the Borrower, interviews ofBank staff involved in the implementation of the project, and internal Bank memoranda.

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PROJECT COMPLETION REPORT

MEXICO

THIRD SMALL SCALE AND MEDIUM-SCALE INDUSTRY DEVELOPMENT PROJECT(Loan 2325-ME)

EVALUATION SUMMARY

Obiectives

i. The project objectives vere to continue the Bank's support of Mexico'sintegrated program of assistance to small and medium scale industry (SMI) byproviding credit and technical assistance to enterprises for maintaining orexpanding production and employment levels. The loan mainly consisted ofprovision of credit through the commercial banking system with severalFideicomisos (trust funds) acting as second-tier lending institutions. Theproject was to be coordinated by a high level Program Coordinating Committee(PAI), which included a Technical Secretariat to oversee the operational aspectsof the project. The loan comprised four components, of which three providedcredit to: (i) FOGAIN (Fondo de Garantia y Fomento a la Industria Mediana yPequena - Guarantee and SMI Development Fund) to finance SMIs's fixed assets andpermanent working capital requirements, excluding labor; (ii) FOMIN (FondoNacional de Fomento Industrial - Industrial Development Fund) to support itsequity and quasi-equity investment programs; and (iii) FIDEIN (Fideicomiso deConjuntos, Parques y Ciudades Industriales - Trust Fund for Industrial ParkDevelopment) for the development of industrial parks and buildings. The fourthcomponent consisted of technical assistance and extension services to be providedthrough PAI. This component also included funds for the acquisition of computerequipment and materials by the executing agencies. About 10,000 new jobs wereexpected to be created and a further 20,000-30,000 to be preserved in about 3,000firms to be assisted by the project (para.6.2.).

ImDlementation Experience

ii. The loan was approved on June 23, 1983, signed on August 25, 1983, anddeclared effective on February 27, 1984. The original Closing Date of June 30,1987 was extended twice to September 30, 1989, because of repeated delays inproject implementation. Among the factors affecting project implementation were:(i) adverse economic conditions that prevailed in MNxico throughout projectimplementation, mainly a severe recession combined with high inflation; (ii)NAFIN (Nacional Financiera, the Government Industrial Development Bank)'s 1985reorganization, as well as several organizational changes within the executingagencies; (iii) the severe earthquake that hit Mexico in September 1985, whichresulted in a disruption of PAI's activities and created a large backlog ofpending subprojects for approval; and (iv) deficiencies of some implementingagencies in subproject appraisal and evaluation (paras. 5.6 - 5.9)

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iii. After a relatively slow start in implementation, the Bank approved areallocation of loan proceeds which reduced the FOGAIN and FOMIN components andincreased the industrial parks (FIDEIN) and technical assistance components(PAI). The reallocation was prompted by a stronger-than-anticipated demand forconstruction of industrial buildings, and the need for additional funds under thetechnical assistance component to complete the establishment of a computer systemin the three executing agencies (para. 5.3).

iv. Project implementation was also helped by the strengthening of FOGAIN'sloan approval process, which drastically reduced average subloan approval timeand by improvements in loan appraisal procedures of the participating financialintermediaries made with FOGAIN's assistance (para. 5.6).

v. The Bank agreed to increase FOMIN's "free limit" of autonomousinvestment approvals, given its improved appraisal capability. A similar requestwas denied for FIDEIN because of institutional deficiencies in subprojectappraisal and supervision. During project implementation, FIDEIN receivedtechnical assistance to improve its appraisal capability (para. 5.9).

vi. The project accounts have been audited regularly, and the audits did notreveal any particular problem (para. 5.4).

Proiect Results

vii. When assessing the project from the quantitative lending objectives setat appraisal, there can be little doubt about its positive results. The projectexceeded the targeted number of assisted enterprises by disbursing US$175 millionto 6,162 SMIs through 7,356 subloans. The loan was the main source of scarcelong-term financing for Small and Medium Industries (SMIs) and helped many SMIsgo through the severe economic crisis that prevailed in Mexico during most of the19809. Interviews of subborrowers carried out by NAFIN indicated positiveresults in terms of growth in employment, production, sales, and profits.Participating financial institutions also experienced low default rates andreported that their SMI portfolio is generally sound (para. 6.2). However,little progress was made towards achieving the ambitious objective of developinga secondary market for the shares of enterprises participating in the FOMINprogram (para. 6.7). The SMI IV follow-up operation, based on the implementationexperience of this project, concentrated more on lending through FOGAIN andFIDEIN. It also carried out a financial analysis of 32 subborrowers under thisloan with a view to assessing the impact of the financing provided. The surveyfound that FOGAIN has financed economically and financially sound SMIs.

viii. The technical assistance part of the project was less successful. TheTA program to SMIs was ambitious in terms of allocated amounts, but not welldefined, and was poorly implemented and insufficiently supervised. There islittle indication that the training, assistance and extension services providedto SMIs have made a significant difference in their performance, although it isdifficult to assess any impact precisely. Several studies to evaluate thebenefits and impact of PAI's technical assistance and extension programs agreedduring loan negotiations, which would have helped improve the TA component, werenot carried out by the Borrower. After initial progress in achieving theexplicit objective of strengthening FOGAIN, FOMIN, and FIDEIN, the efforts were

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overtaken by the eventual merger of these institutions into NAFIN, with theexception of FOMIN which was eliminated (paras. 5.6 and 6.13). The improvementof their staff in project evaluation and supervision was not, however, totallylost as most of FOGAIN former staff have continued on the same line of work atNAFIN (paras. 6.13 and 7.2).

ix. In summary, the project had positive results overall and was justifiedby the need to assist SMIs during the severe economic recession and the grossdistortions that were prevailing in Mexico's financial sector, which effectivelyblocked the access of credit to small enterprises. Following the far-reachingreforms undertaken by Mexico over the last few years to liberalize the economyand the financial sector and given the resumption of growth, a narrowly defineddirected credit operation would not be justified any longer (para. 7.3).

Sustainability

x. With regard to the proiect subborrowers, field interviews conducted bythe PCR mission with beneficiaries under each of the three credit components andwith FIs provided positive feedback on their sustainability as discussed in para.viii above. The project is also sustainable in that SMI financing is now anintegral part of many participating FIs's activities. FIs also reported very lowlevels of default, never exceeding 3% of their SMI portfolio (para. 7.1).

xi. With regard to the executing agencies, NAFIN, as well as FOGAIN, FOMIN,and FIDEIN benefitted from the project institutional development program and,although the later three have been merged into NAFIN, some of their staff(particularly FOGAIN's staff) have continued to work on SMI development. Theproject appraisal and supervision experience acquired under this loan isinvaluable for the implementation of NAFIN's SMI modernization and developmentprogram for 1991-94 (para. 7.2).

Lessons Learned

xii. Proiect DesiRn (para. 13.1). The institutional framework for SMIs wasvery complex in Mexico at the time of the project, with many institutionsinvolved in the provision of credit and technical assistance to the sector. Inretrospect, the question may be asked whether the Bank should not have insistedin simplifying and rationalizing the framework, instead of involving as many asfive institutions in the project, thus, complicating its implementation. Atleast, more attention should have been paid to the coordination issues, whichproved to have hampered project implementation. Under the SMI IV follow-upoperation (Ln. 2858-ME), some remedial measures were taken. To simplifyimplementation and facilitate coordination among various executing agencies, theBank and the Mexican Government agreed on the establishment of a small, but highlevel, Project Coordinating Committee chaired by the Vice Minister of Finance andwith the following members: NAFIN's Director General and the two other NAPIN'sDeputy Director Generals, and the Director General of the Credit and DevelopmentBanking Department in the Finance Ministry. FOGAIN, FOMIN and FIDEIN would alsoparticipate in the Committee, but as non-voting members. The coordination issuewas resolved in April 1989 when the Mexican Government decided to merge all thetrust funds assisting the SMI sector into NAFIN and to convert the latter intoa second-tier institution. The merger is still too recent to allow a meaningful

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assessment of the new set-up in terms of its efficiency to meet SHIs's needs.This assessment vill be done in the PCR for the SMI IV loan tentatively scheduledfor FY94.

xiii. Sector Work tiara. 13.2). The technical assistance program was put intoplace without a sufficient understanding of the institutional, regulatory andpolicy constraints hampering the growth of SHIs. Good sector work would havehelped better d-eigned that component. At least, the Bank should have insistedthat the studies on the PAI's technical assistance and extension programs becarried out and respective improvements be implemented. The SMI IV follow-upoperation addressed the issue by providing financing for a series of studiesaimed at broadening the understanding of the potential and constraints of SHIsto be carried out by SECOFI (S-cretaria de Comercio y Pomento Industrial -Ministry of Trade and Industrial Development.

xiv. Supervision Ipara. 13.3). The TA component, although small (about 1%of loan amount) should have been supervised more closely. Supervision of thecredit components was adequate. However, in retrospect, it appears that Banksupervision was too narrowly focused on the implementation of the credit portionof the loan and did not follow developments in the sector. Supervision missionsshould have devoted some time to assess the non-financial constraints to SMIdevelopment with a view to helping address them through the project's technicalassistance component. The Government's Integral Development Program for SHIs(PIPHI) issued in 1985 should also have been more carefully analyzed and itslinks to the project made more explicit.

xv. PCR Preparation (para. 13.4). Availability of quantitative data isoften a problem for the preparation of PCRi on loans through financialintermediaries. In any possible future similar projects, it is recommended that(i) the second-tier institutions conduct a close monitoring of the participatinginstitutions' portfolios that would permit an assessment of the project results;and (ii) provision be made very early to have the Borrower make the necessaryefforts to compile the required data that will permit a meaningful projectevaluation.

PROJECT COMPLETION REPORT

MEXICO

THIRD SMALL AND MEDIUM-SCALE INDUSTRY DEVELOPMENT PROJECT(Loan 2325-ME)

PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE

I. Proiect Identity

Name: Third Small and Medium-Scale Industry Development ProjectBorrower: Nacional Financiera S.A. (NAFIN)Loan No: 2325-MERVP Unit: Latin America and the Caribbean RegionCountry: MexicoSector: Industry

II. Background

2.1 In 1978, NAYIN established a program of assistance to SMIs, known asProsrema de Aoovo Intetral a 1. Industria Medians v Peauefia (PAIW. Theprogram's major objectives were to: (i) encourage more rapid growth in output andemployment in SMIs; (ii) promote and facilitate the achievement of national plansfor industrial decentralization and regional development; (iii) foster a morecomprehensive and effective system of financial and technical assistance supportto SMIs; and (iv) develop a mechanism which would allow SMI assistance programsto be adapted to reflect national industrial development goals.

2.2 The principal participants in the PAI program were: (i) a credit andguarantee fund (FOGAIN) which channeled resources through the commercial bankingsystem; (ii) a risk capital financing fund (FOMIN); (iii) a credit and technicalassistance fund (FIDEIN) which supported the development of industrial states;(iv) an extension service group which helped SMIs identify their financial andtechnical assistance needs and obtain such assistance from any one of thementioned funds or from specialized institutions and technical institutions; and(v) the Coordinating Committee with the Technical Secretariat, which oversaw theworking of the PAI program as a whole.

1 /PAI was the coordinating oommittee for the project agencies, which was created u part of the integrated program forSMIs. It was govemed by a high level Program Coordinating Committee, headed by the Director General de NAFIN andincluding the heads of aU participating instiutions, as well as representatives from the Ministries of Finance, Commerce andIndustry, and Banco de Mexioo.

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Experience under Previous Proiects

2.3 The PAI program of integrated financial and technical assistance to the SMIsector was initiated and expanded under two previous Bank loans, which were thefirst made in Mexico for SMI development: Ln. 1552-ME of FY79 (SMI I) and Ln.1881-ME of FY80 (SKI II) for an amount of US$47 million and US$100, respectively.Both loans consisted of the following components: Credit through FOGAIN; RiskCapital through FOMIN; Industrial Estates through FIDEIN; and TechnicalAssistance (TA) through PAI. Ln. 1552-HE became effective in January 1979 andwas closed in November 1981, while Ln. 1881-ME was declared effective in December1980 and closed in June 1985.

2.4 The major objectives of both projects were to helped generate growth inoutput and employment and promote regional development. Secondary objectivesincluded the institutional development of the executing agencies, operation ofan industrial extension service and support to other TA and researchinstitutions. According to the combined PCR for the two loans, experience withthe execution of both projects was good; allocation of resources was economicallyefficient, and most institutional development objectives were achieved. Duringimplementation of these loans, financial assistance was given preferably to SMIslocated in less developed areas of Mexico, where employment impact and exportpotential were considered favorable. Greater priority was also given to SMIsthat planned to develop and improve domestic technologies.

2.5 The first two SMI loans were considered successful in accomplishing theprimary objectives of stimulating output and employment growth and in promotingregional development, but had a more limited impact on the institutionaldevelopment since the agencies were already well established when the Bank loansstarted. Also, Bank funds represented only a small portion of total operationalresources for FOGAIN. Yet, with the Bank's advice some important organizationaland procedural improvements were initiated at all three executing agencies.

2.6 The proceeds of the first two loans financed 2,883 subprojects throughFOGAIN, results which were close to appraisal estimates. The economic impact ofFOGAIN subloans was considered positive as confirmed by a post SMI I survey, anda sample of 240 SMI II subprojects, which indicated an average investment costper job of US$3,479 and US$5,369, respectively. Under both loans, 90 subprojectsreceived FOMIN financing, of which over 90Z in the form of equity investments andthe remainder as convertible loans. Most of the funds was used for plantexpansion or restructuring. Finally, the FIDEIN component under both loansfinanced 63 industrial parks and a post-loan survey revealed that most of themwere profitable and that only two had gone out of business.

III. Project Objectives and Description

3.1 The primary objective of the project was to continue support for the PAIprogram and help refocus its activities to respond to the deteriorated economicsituation following the crisis of 1982. In addition to financing fixed investmentin enterprises and industrial parks, the project was to assist SMIs to maintainproduction and employment levels by ensuring access to credit and equity

resources to finance their substantially increased permanent working capitalrequirements.

3.2 The Loan included four components!/:

(a) Credit component: US$150 million for lending by participatingfinancial intermediaries through FOGAIN, of which: (i) US$75 millionfor fixed asset investments by SMIs (including machinery, equipment,civil works, and industrial buildings, as well as common servicefacilities); and (ii) US$75 million for permanent working capitalrequirements for materials, components, spare parts or otherproduction inputs, not including labor);

(b) Risk Capital component: US$18 million for minority equityinvestments and convertible loans by FOMIN, of which: (i) US$8million were to finance the establishment or expansion of productivecapacity, and (ii) US$10 million were for permanent working capitalrequirements;

(c) Industrial estate component: US$4.6 million for credit throughFIDEIN for infrastructure and urbanization investments of industrialparks; and

(d) Technical Assistance component: US$2 million for technicalassistance and extension services through NAFIN and specializedinstitutions and for computer equipment and related materials.

3.3 The project financing plan anticipated substantial contributions from othersources: (i) US$64.5 million from the Mexican GoverDnment; (ii) US$110.0 millionfrom subproject sponsors and participating commercial banks for a total projectcost of US$349.5 million. The Bank loan would cover the project's estimatedforeign exchange component of US$106.0 million, the front-end fee of about US$0.4million, and about US$68.6 million in local costs. The loan would cover about 75%of the financing extended by the PAI program and 50% of its total investmentexpenditures and related technical assistance activities. It was expected thatthe loan of US$175 million would be used to finance: (i) about 2500 enterprisesthrough FOGAIN; (ii) 150 enterprises through FOMIN; and (iii) 10-12 industrialestates through FIDEIN. The technical assistance program was expected to provideassistance through PAI to several hundred enterprises.

IV. Prolect Design and Organization

4.1 The project was identified in June 1982 during supervision of Loan 1881-ME.There was agreement that the PAI program had achieved its objectives, and that

2/ Excluding the frond-end fee of US$0.4 million.

in view of the deteriorating economic conditions in the country, a third projectwould be necessary to help maintain production and employment in the SMI sector.The Bank appraisal took place in two phases: the first phase in September/October1982, and the second phase in January 1983 almost iinediately after the changein the Mexican Administration. Negotiations were completed in April 1983. Theproject was approved by the Board in June 1983 and signed in August 1983, but didnot become effective until February 1984 because of organizational and staffchanges within NAFIN.

4.3 Loan disbursements were projected to take up to four years from mid 1983through 1987. The projected disbursement period, relatively short when comparedto other Bank-supported industrial development finance projects, was based on theexperience with the previous loans and the faster disbursement rate for thepermanent working capital component. However, disbursements were slower thananticipated because of: (i) organizational and staff changes within all threeexecuting agencies; and (ii) deficiencies in subproject evaluation. The severeearthquake that hit Mexico during 1985 also disrupted PAI's operations, resultingin accumulation of credit approvals by the executing agencies. The lastdisbursement took place in October 1989.

4.4 All the procurement was to be done in accordance with prevailing Bankguidelines. NAFIN, together with FOGAIN and FOMIN, would ensure directly orthrough participating FI for financial intermediary operations, that goods andservices financed from the loan would be competitive in quality and price andappropriate for their client's needs. Procurement packages above $500,000requiring LCB would be reviewed by the Bank. The project's accounts were to bekept by NAFIN and, together with those of FOGAIN, FIDEIN and FOMIN, would beaudited annually by independent auditors according to standards acceptable to theBank.

4.5 To facilitate project execution, the Bank agreed to the establishment ofa Special Account (SA) for the Loan and made an initial deposit of US$17.5million and allowed expenditures for subprojects below the free limit to beeligible for disbursement from the SA. The Bank also allowed participatingagencies to use Statements of Expenditure (SOEs) for disbursement of loanproceeds.

4.6 During preparation and appraisal of the project, the following importantissues arose: (i) working capital financing; (ii) foreign exchange risk coverage;(iii) interest rates; (iv) FIDEIN participation; and (v) project executiondocument. These issues are discussed below.

4.7 Workina Cavital Financing: During the preparation of the project, there wasinitial concern that too large a share of the loan, almost half (US$75 million)was being directed toward permanent working capital purposes. However, it wasperceived that the severe foreign exchange shortage, increasing inventory costsresulting from high inflation rates, and growing accounts receivables would hitSMI firms more adversely than large industries and that demand for this type offinancing would remain strong.

4.8 Foreign Exchanze Risk: During project appraisal, the Bank was concerned asto whether NAFIN would be in a position to assume the foreign exchange risk of

the project, and whether the risk should be passed on to the beneficiary trustfunds. However, NAPIN, as the larg-at public sector financial institution, andas the Government's financial agent both in Mexico and abroad, had theGovernment's strong support for the PAI program, and was considered to be ableto assume the loan's foreign exchange risk. Also, PAI subloans were expected tobe small (average about US$50,000) end, therefore, it was not consideredappropriate to pass on the foreign exchange risk to the borrowersa' It wasagreed that NAPIN would carry the foreign risk and repay the loan.

4.9 Interest Rates: Interest rates had long been an issue in Mexico,particularly with FOGAIN, which was still using fixed rates at the beginning ofthe first SKI loan. In 1979, following Bank advice, rates were made flexible andlinked to the ACF indexi1 . However, adjustments were made with a lag and, withrampant inflation in the early 1980s, lending rates generally were substantiallynegative in real terms. Under the project, it was agreed that: (i) adjustmentsof lending rates would be based on a three-month average of the ACF, instead ofa twelve-month average; (ii) all lending under the project would be at variablerates; and (iii) FOGAIN would implement a comprehensive interest rate adjustmenton the fixed interest rate portion of its outstanding portfolio. With regard torelending rates, it was agreed that Bank funds would be passed on to FOGAIN andFIDEIN at a variable interest rate linked to the ACP and which would allow thema spread of two percentage points on their lending to participatingintermediaries (FOGAIN) or borrowers (FIDEIN). Funds channeled to FOMIN forequity investments would be repaid as follow: net amount recovered from divestingequity investments, plus 502 of any capital gains realized, and a percentage ofinterest received on convertible loans. These arrangements resulted insubstantially subsidized interest rates to SKI beneficiaries until the GeneralInterest Rate Agreement (GIRA) was introduced in August 1989 which, short ofensuring fully market determined rates, has been used to eliminate directGovernment subsidies for most onlending through financial intermediaries.

4. 10 FIDEIN Participation: Serious considerations were given whether to includea FIDEIN component, given its poor performance during the first two projects.However, following FIDEIN's reorientation of its activities by: (i) phasing outdirect construction and first-tier financing of factory buildings and commonservice facilities, and discontinuing leasing; (ii) concentrating on providinginformation on industrial estates, advisory and promotional service support todevelopers, including project evaluation, and specialized TAI and (iii) limitinglending to infrastructure and urbanization of industrial estates, the Bankdecided to continue supporting FIDEIN.

4.11 Proiect Execution Docusment During processing, there was concernthat the project might face some risks since the institutions involved could beundergoing reorganization and experiencing changes in management as a new MexicanAdministration took over in December 1982. Also, the Bank was concerned that

3 / Under the Loans 1551-ME and 181-ME the foreign exchange risk wu asumed by the Mexican Govemment.

A/ The average cost of funds (ACF) index is caulated as a weight avnege of intemst rate paid on al term funds anddeposits by the Mexican banking system.

social and political pressures, together with unforeseen external shocks, mightprevent the Mexican authorities from taking the necessary stabilization measures,thus retarding recovery and reducing investment demand. To minimize thesepossible adverse effects, a number of measures were agreed and incorporated intoa Project Execution Document (PED) to guide implementation of the project. Thesemeasures included: (i) establishment within NAFIN of a Small and Medium IndustryDevelopment Department to coordinate the project activities; (ii) development ofa portfolio control system by FOGAIN; (iii) conclusion of TA agreements betweenthe PAI's Technical Secretariat and the Institute for Information andTechnological Development; and (iv) establishment of a staff training program byFOMIN. The PED also stipulated three studies to be completed by the PAITechnical Secretariat: (i) evaluation of the major TA programs; (ii) ex-postanalysis of a representative sample of FOGAIN sub-loans to measure programimpact; and (iii) survey of FOGAIN assisted enterprises to assess the impact ofthe depressed economic situation on SMIs.

4.12 The design and organization of the project were identical to the first twooperations, but the Bank could have devoted more attention into its preparation.As in both previous SMI loans, Loan 2325-ME was executed by FOGAIN, FOMIN, FIDEINand PAI, which was also assigned the task of coordinating the project. However,there were major changes in the activities of most of the executing institutionsand the Bank should have carried out a comprehensive assessment of theirinstitutional capabilities before granting the loan. FOGAIN had been a second-tier institution for quite some time and was in general considered a goodinstitution. However, FOMIN had difficulties with its portfolio; FIDEIN was toperform a completely new task of provider of technical assistance and evaluationof subprojects and PAI was embarking on a massive training program. An fullevaluation of FOMIN's capabilities as a risk capital investor and of itsinvestment policies (entry and exit mechanisms, shares valuation, divestiturepolicies, etc.) as well as an assessment of FIDEIN and PAI's programs andobjectives would have been warranted. At negotiations, agreement was reached ona plan of action to be presented to the Bank for the reorganization of FOMIN andits manpower requirements. It was also agreed that PAI would carry out a cost-benefit analysis of its programs. These actions were included in the PED butnever implemented and there is no evidence that the Bank had taken any remedialaction to ensure compliance. Furthermore, no monitoring system of projectimplementation was established to assess results and take corrective actions, ifnecessary (Annex VI). In retrospect, the institutional capabilities of theexecuting agencies and the coordination difficulties have contributed to slowdown project implementation. In the SMI IV the follow-up operation, anassessment of the executing agencies was made with a view to simplifying projectimplementation arrangements. Under that loan, a small, but high level, ProjectCoordinating Committee chaired by one of the Vice Ministera of Finance was alsoestablished to coordinate project's activities.

4.13 On the positive side, the inclusion of working capital financing proved tobe a good decision, contributing for much to the relatively fast disbursement ofthe FOGAIN component. Also, the introduction of the GIRA in August 1985 at thebeginning of project implementation helped reduce the risk of providing subloansat substantially subsidized interest rates under the project.

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V. Proiect Implementation

5.1 Economic Environment. Implementation of the project took place during aperiod of deep recession. With the economic crisis industrial growth came to anabrupt halt in 1982. Industrial production dropped 11% in 1982 from its 1981peak, and gross domestic investment as a proportion of GDP fell from its peak of29% in 1981 to 17% in 1982. In 1983, industrial production dropped another 9%.The recovery of industrial output in 1984 and 1985 was initially made possibleby major improvements in macroeconomic policies, notably a sharply reduced fiscaldeficit and a major real depreciation of the exchange rate. A prematurereflation of the economy in early 1985 gave further impetus to industrialrecovery, but soon led to balance of payments difficulties. Industrial outputdropped by about 5% during 1986, aggravated by the collapse of oil exportearnings. Problems caused by the severe recession in the domestic market wascompounded by the deterioration in the financial structure of many industrialenterprises. The crisis was felt more among medium to large-scale enterpriseswhich had to reduce output considerably. SMIs were generally more able to adapttheir output to the reduced demand situation. However, more than largeenterprises, they suffered from the general shortage of finance.

5.3 Overview of Prolect Implementation. The loan was approved in August 1983,but did not become effective until February 1984 because of organizational andstaff changes within NAFIN. After a slow start, disbursements moved faster and,by June 1986, US$138 million (78% of project amount) were committed and US$125million (71%) were disbursed, despite the September 1985 earthquake, whichdisrupted loan processing and created a backlog of project approvals. In orderto help project implementation, US$10 million in loan proceeds were reallocatedin September 1985 to finance: (i) the increased demand of FIDEIN credits, mainlyconstruction of industrial buildings; and (ii) increased TA activities, primarilyrelated to the establishment of computer systems for the three participatingagencies. This was the first of six loan reallocations.

5.4 In late 1986, project implementation slowed down, due to reduced investmentdemand brought about by extremely high nominal and real interest rates resultingfrom the deceleration of inflation (as adjustment started to yield positiveresults) and the downward stickiness of interest rates. The commitment and theclosing dates were both extended twice. The final disbursement took place inOctober 1989. In retrospect, the project implementation period was perhaps toooptimistic. It was based on the Bank's experience with the previous projects,but did not take into account the particular implementation environment of thisloan, which were characterized by economic depression and reorganization of allexecuting agencies. The project accounts were regularly audited, and the auditsdid not reveal any particular problem.

5.5 Interest rates of subloans were to be linked to the ACF and were to beadjusted quarterly to reflect movements on the ACF index. The rates were highlysegmented because FOGAIN, FIDEIN and FOMIN had different interest rate structureswhich were mostly negative in real terms. This situation was corrected with theintroduction of GIRA, which established generally acceptable rates for continuedBank lending through the financial sector (para. 4.9).

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5.6 Credit Comuonent (lOCLUN). During project implementation, FOGAINintroduced several major changes in its organization to improve projectexecution, including the creation of the Juridical Bureau and the Bureau of LoanSupervision. At the beginning of project implementation, FOGAIN, although beinga second tier institution, appraised all sub-projects above Mex$3.0 million(US$10,000) prior to approval. This process resulted in backlogs as long as ninemonths, causing many subborrovers to withdraw their credit applications from theparticipating FIs. In 1985, FOGAIN with Bank approval, introduced an automaticfree limit for loans below Mex$15. 0 million (US$48,000) for all FIs except CreditUnions. This change along with the 60 day automatic authorization of creditpolicy accelerated loan processing and introduced fluidity and standardizationinto the approval system. Average loan approval was reduced from 90 to 15 days.In early 1986, FOGAIN was requested by the Bank to calculate the IRR for sub-projects above US$100,000, but FOGAIN did not comply. Remedial action by theBank was thought difficult as by mid-1986, about 802 of the loan were alreadycommitted. The issue was taken up again under the SMI IV follow-up operation(Ln. 2858-ME) when the Bank again requested that a FRR be calculated forsubprojects above $50,000. However, FOGAIN was merged into NAPIN beforeimplementation of SKI IV. Under RAFIN, participating FIs generally comply withthis requirement and calculate IRR for subprojects above $50,000. This will bereviewed in the context of the SMI PCR tentatively scheduled for FY94.

5.7 Risk Capital Comwonent (FOMIN). The implementation of the FOHIN componentwas slow at the beginning, due to the severe economic recession, instabilitycaused by the earthquake, and difficult information requirements for approval ofequity investment proposals. In addition, delays occurred in obtaining Bankapproval, usually because of incomplete information submitted by FOMIN. The freelimit was also set too low, resulting in the Bank having to review and approvealmost every subproject submitted to POMIN. In 1986, to accelerate projectimplementation, and given PONIN's improved project appraisal capability, the Bankapproved an increase in the free limit from US$400,000 to US$600,000. FOHIN alsointroduced a new organizational structure to reduce the number of manageriallevels, thus permitting greater delegation of authority to middle management.It established separate units to evaluate technology and venture capital projectsand to monitor its portfolio. Finally, POMIN increased its administrative stafffrom 80 to 106 to handle the increased workload.

5.8 Industrial Estate ComDonent (YIDEIN). As mentioned above, because oftechnical and managerial difficulties, FIDEIN's role had changed to only includerationalization of industrial estates development and operation and provision oftechnical assistance. Under the loan, its lending was limited to infrastructureand urbanization projects. To carry out these responsibilities, FIDEIN firstretrained its staff using own resources and foreign experts and established closeworking contacts with the newly formed Association of Mexican Industrial Paiks(AMPIP). The technical assistance provided by FIDEIN to industrial estates camefrom its own resourceas funding from the project was only for lending forinfrastructure development in both public and private estates.

5.9 FIDEIN often encountered Bank delays in having its subprojects approvedbecause the documentation submitted were incomplete or insufficient. In 1987,a foreign consultant was provided by the Bank under the TA component to help

improve FIDEIN's appraisal capability. Subsequently, subproject approvalaccelerated, reflecting FIDEIN's improved appraisal capability.

5.8 Technical Assistance. Under SHI I and II, the Technical Secretary of PAIadministered an industrial extension service and other TA programs that helpedclients of FOGAIN, F0MIN and FIDEIN. During project implementation, the Banksuggested that an assessment be made of the effectivenoss of the TA receivedthrough the extension services, partly in preparation for the follow-up loan(2858-ME). However, no assessment was made and the SMI IV appraisal mission hadto do part of the work itself. Under the project, PAI carried out seminars on awide variety of subjects all over the country, but these seminars were unfocussedand did not have a clear objective. In 1987, when the PAI was abolished, its TAprogram was integrated within the Industrial Promotional Directorate of NAFIN,which transferred suitable staff from its headquarters to the regional officesto manage it. By the end of 1988, there were more than 150 agents operating inmore than 50 NAYIN regional offices.

VI. Proiect Results

6.1 When assessing the project from a resource transfer point of view, thereis little doubt the loan did achieve its objective of providing financial supportto SMIs. Despite adverse macro-economic conditions, all the funds were disbursedto the targeted group (SMIs), albeit with some delays, especially during thelater years. Term financing to SMIs for investment and permanent working capitalwas made available, providing resources at a time of great liquidity scarcity.Efforts were made to strengthen the institutions in charge of assisting SMIs andsome progress was achieved in terms of improvements in project appraisal andsupervision. The project, by providing funds during a period of adverse economicconditions to generally viable enterprises, helped preserve jobs and alleviatethe deterioration of the SMI sector.

6.2 The employment creation expected from the project was estimated at 10,000jobs. In addition, an estimated 20,000 to 30,000 jobs were preserved throughhelping firms with adequate working capital. Although no exhaustive assessmentof the project results was made, preliminary analysis of the four projectcomponents showed that targets were generally met; some were even exceeded. Asample survey of 49 subprojects indicated that 4,300 new jobs were generated atan average cost of US$9,000 in 1982 constant prices. Another sample of 10industrial subprojects with Mexican public utilities as the main market completedin December 1989 showed: (i) employment generation effects almost equal toestimated individual subproject goals; (ii) product sales increases of 42.51 onaverage; and (iii) production increases that reached an average of 64% ofestimated levels. The latter sample is particularly interesting as suppliers topublic entities were more adversely affected by public sector budget reductionsthan SMIs in general.

6.3 FOGAIN (Oritinal allocation: $150.0 million: Utilization: $144.4 million).The FOGAIN credit component developed as expected. FOGAIN's loan discountoperation provided financial support at a critical time whan many firms werefacing financing problems and enabled the SMI sector to continue receiving

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long-term credits, not available elsewhere. During project implementation,FOGAIN activated a guarantee program with its own resources solely for use bymicro-enterprises. The program helped encourage participating FIs to lend tomicro-enterprises.

6.4 A total of 7,235 subloans were made to 6,041 industrial enterprises for atotal of US$144.4 million. As expected, 58% of the subloans were for permanentworking capital and the remaining for fixed assets financing, excluding buildingconstructions (Annex IX). In dollar terms, however, working capital financingwas below appraisal expectations, with only $63.1 million disbursed as comparedto an estimate of $75 million (Annex V). NAFIN was the main participatingfinancial institution with 1,203 subprojects, or 19S of total approvals under theloan. A total of 4,934 micro and small enterprises received subloans, whichrepresented over 80% of the total enterprises. While financing was provided tothe entire industrial sector, the bulk of subloans were channeled to traditionalSMI industries: food processing, textiles and apparel, leather products, rubberand plastics, and metal products industries. The largest number of enterprisesfinanced were in Mexico City, Monterrey and Guadalajara. In spite of thedisruptions and adverse economic conditions during project implementation,FOGAIN, which had losses in 1981 and 1983, rebounded strongly, posting profitsfor each year from 1984 through 1987. As of September 1987, FOGAIN hadaccumulated reserves amounting to US$130.9 million, including funds received fromGovernment.

6.5 FOMIN (Oritinal allocation: S18.0 million: Utilization: S12.6 million).During the early years of project implementation, few FOMIN financed industrialfirms made profits. In 1984 and 1985, FOMIN sold off for Mex$660 million itsshare holdings in 17 companies for which it had originally paid Mex$300 million,making a more than 100Z nominal profit and about breaking even in real terms.FOMIN showed operating profits of between US$1.3 million and US$3.3 million in1984-86. The value of its portfolio at the end of 1986 was US$12.7 million withparticipation in 110 firms. Only 14 of the 110 companies reported profits; ninewere in bankruptcy proceedings (though these represented only 1.1% of FOMIN'sportfolio), and the remaining firms reported losses during 1986 as result of thedifficult financial conditions of the country. By November 1987, FOMIN had fullycommitted its reallocated amount of US$12.6 million, of which US$7.9 million waschanneled to 44 subprojects for fixed assets investments and US$4.7 million to34 subprojects for permanent working capital purposes. About 70% of thesubprojects were equity participation and the remainder 30% convertible loans.Before liquidation in December 1989, FOMIN had outstanding investments in 102enterprises. Of these, 44 were classified as in "normal condition", 23 were tobe sold at a loss, 5 required an audit, and 30 were in companies undergoingjudicial proceedings. These overall results reflect the great difficulty ofequity investments and venture capital in SMIs and are not very different fromthe experience of other countries. However, FOMIN did not have any cash flow orprofitability problems as it reimbursed PAI only what it recovered insubordinated credit and sale of shares, but kept 20% of interest collected and50% of profits accrued through share sales. To provide an incentive for activeinvestment promotion, FOMIN did not pay PAI for the funds invested in equity norfor the interests generated by the installment sales.

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6.6 FOMIN investments covered a wide range of industrial subsectors fromfood processing, basic metals, pulp and paper, wood products, to chemicalindustries. The geographical distribution of FOHIN's portfolio showed that manyof its investments were made in support of the Government's policy of promotinginvestments outside the high concentration zones.

6.7 Two secondary objectives in the FOMIN component were not achieved.These were: (i) the emergence of new minority investors; and (ii) theestablishment of a secondary market for the share equity portfolio. As agreedunder the project, FOMIN would liquidate its investment by selling back to theoriginal enterprises within 3 or 4 years. This buy back period was, however,probably too short for this kind of investment. In any case, FOMIN-financedcompanies interviewed by the PCR mission declined to buy back the shares,invoking financial difficulties and inflated share values as calculated by NAFIN.

6.8 FIDEIN (Oriainal allocation: S4.6 million: Utilization: S14.6 million).The loan helped FIDEIN finance 43 infrastructure subprojects for a total ofUS$14.6 million, of which 76% were privately-owned estates and 24% publicly-ownedestates. From 1983 through 1988, FIDEIN sponsored activities in 113 industrialparks that included: (i) feasibility, pre-investment and engineering studies;(ii) technical assistance; (iii) financing of infrastructure projects; and (iv)development of an information bank on industrial location. FIDEIN's program gavepriority to industrial centers that met decentralization criteria, promote exportindustries and were located in border towns. By the end of 1985, FIDEIN hadcomitted the entire original US$4.6 million assigned to this component, and wasallocated another US$10 million to enable it to meet the strong demand forindustrial buildings.

6.9 A total of 94 prefeasibility studies were performed by FIDEIN during the1983-88 period in 26 different states. In many cases FIDEIN carried outprefeasibility studies free of charge as a promotional activity to generateindustrial parks development interest. Another 35 feasibility studies wereconducted in 17 states. The agency also carried out 49 engineering studies inindustrial parks, many leading to financing, and performed special studies on astate-wide basis to define criteria necessary for state government participation.FIDEIN provided TA for the administration and supervision of industrial townsconstructed by state governments, and for the supervision of 126 differentconstruction works in 19 States. Based on data from its subproject supervisionfiles, FIDEIN estimates that its industrial parks promotion and developmentprogram, under this five year period, helped generate approximately 65,000 jobs.

6.10 In 1986, FIDEIN developed an Operating Manual for industrial parks, whichbecame a key publication for industrial parks management in Mexico. By the endof that year, there were 93 industrial parks in operation, some of whichsupported by the project, which demonstrated that the decentralization objectivesof this program had been met. FIDEIN lending program was not as successful.When FIDEIN was merged with NAFIN in November 1988, the quality of its portfoliowas relatively poor: two companies totalling 8% of the portfolio were in arrearsand eight enterprises totalling 23% of the portfolio were awaiting judicialproceedings.

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6. 11 Technical Assistance (Ortainal allocation: S2.0 million: Utilixation: S2.7million). This component financed 115 separate TA subprojects through variousentities, which benefitted hundreds of SIs. Thirty-seven subprojects went toINFOTEC (Inatituto de Informacion Tecnologica - Institute for TechnologicalInformation) for US$0.9 million, vhich played a key role throughout the entireproject implementation period by providing consulting services for industry,technical information, financial, production, and technology assistance to SMIsthrough its various programs. SKI Training and industrial extension activities(20 subprojects), along with training of the three trust funds' staff (26subprojects), and miscellaneous PAI program activities (25 subprojects) accountedfor most of the other technical assistance services. This component also providedfinancing for computer equipment, software and training for the PAI program,along with consultant services. In addition, it financed a national survey ofSMIs (US$0.6 million), conducted by Instituto Nacional de Geografia * Inform6tica(INEGI). The results were used in the preparation the Loan 2858-ME.

6.12 The benefits derived from the technical assistance program are verydifficult to evaluate, since no monitoring mechanisms were developed to followand evaluate the program, and the Bank during supervision missions did neithermake a preliminary assessment of the program, nor insist on any correctivemeasures. The TA provided under the project was unfocused, lacked a clearobjective and a long-term strategy. Many enterprises benefitted from directassistance given by extension agents in the field and technology servicesprovided by INFOTEC without a comprehensive assessment of their needs or attemptsto recover costs. A technical assistance program of the type carried out by PAIhas had little success in other countries (Ecuador and Colombia) and was verycostly.

6.13 Proiect Coordination Overall coordination of the project was to becarried out by PAI. However, institutional rivalries, constant changes in staffand, more importantly, the lack of coordinator's authority made this taskimpossible to achieve. In April 1989, the Mexican Government decided to mergeall the trust funds assisting the industrial sector into NAFIN and to convert thelatter into a second-tier financial institution. The merger is too recent toassess whether the new set up responds better and more efficiently to the needsof SMIs. This assessment will be made in the PCR for SMI IV scheduled for FY94.

VII. Proiect Sustainabilitv

7.1 As mentioned above, no comprehensive ex-post evaluation of enterprisesfinanced under the project was made, therefore, their sustainability would haveto be assessed differently. Field interviews conducted by the PCR mission withbeneficiaries under each of the three components and with participating FIsprovided overall positive feedback on subproject sustainability as discussed inpara. 6.2 above. The project is also sustainable in the sense that SMI financingis now an integral part of many participating FIs's activities. FIs alsoreported a very low level of defaults, which never exceeded 3Z of their SMIportfolio.

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7.2 NAFIN benefitted from the project institutional development program, aswell as FOGAIN, FOMIN, and FIDEIN and, although these three executing agencieshave been merged into NAFIN, many of their staff (particularly those of FOGAIN)have continued to work on SMI development. The project appraisal and supervisionexperience acquired under this loan is invaluable for the implementation ofNAFIN's SMI modernization and development program for 1991-94.

7.3 With regard to the Bank, the project was justified by the need to assistSMIs during the severe economic recession of the early 1980. and the grossdistortions in Mexico's financial sector at that time, which effectively blockedthe access of credit to small enterprises. The situation has drasticallychanged. Mexico has implemented far-reaching reforms to liberalize the economyand the financial sector, and growth has resumed. NAFIN has also embarked on amulti-billion dollar program of technical and financial assistance to SMIs.Thus, any potential role of the Bank in the sector would now be to deemphasizeprovision of directed finance and concentrate on helping Mexico identify andaddress regulatory, institutional and other non-financial constraints to SMIdevelopment.

VIII. Bank Performance

8.1 The Bank's performance has been satisfactory overall. There is evidencethroughout the implementation of the loan that the Bank kept a constant andcareful monitoring of the project financial aspects, acting promptly at earlyproblem signs emanating from the executing agencies. Generally, the Bankprovided sound advice and took adequate actions to smooth implementationproblems. A particular case in point wva the Bank's recommendation to FIDEIN tointroduce a competitive bidding proces for contractors for its industrial estatesubprojects, rather than have the subborrowers choose any firm without clearcriteria. This was successful and became a standardized procedure throughout thecountry. Also, in mid-1985, the Bank helped NAFIN and PAI-FOGAIN establish acomputer program with software and analytical system compatible with those of theBank to facilitate loan disbursement monitoring. This proved very useful duringproject implementation.

8.2 In general, the Borrower agreed with Bank suggestions. However, there wereseveral instances where Bank advice was not followed. Thus, under the TAcomponent, the Bank suggested that TA activities be provided to clients on acollective rather than on an individual basis, and that the TA programs beconsolidated from PAI's central office rather than directly from the regions. TheBank also recommended that an extension agent impact evaluation be carried outin conformance with Section 3.11 of the Loan Agreement. Both recommendationswere not acted upon, but the Bank did not follow up on its advice nor takeremedial measures. NAFIN continued to expand its regional TA office andextension agents kept on providing assistance on an individual basis, as NAFINbelieved that effective extension work must be tailored to the individualentrepreneur's problems. The Bank also did not insist on the carrying out of anumber of agreed actions and studies, such as the TA program evaluations and theassessment of FOGAIN borrowers. Annex VI provides a list of covenants notcomplied with. The appraisal mission of SKI IV, however, did carry out an

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assessment of a sample of 32 FOGAIN subjects, as well as 17 others provided byPAI and follow up on some of the other shortcomings observed above. Accordingto that sample, FOGAIN has been financing economically and financially soundinvestments.

8.3 The amount of supervision was adequate. Supervision efforts were sustainedthrough an average of two missions per year (full or partial) during the firstyears of project implementation, decreasing to about one mission per year in theproject's last two years. The major supervision weakness was an excessiveemphasis on loan disbursement, subproject visits, and financial aspects of theproject at the expense of issues such as the overall content, goals andobjectives of the training program, or coordination and conflict between theexecuting agencies. The Bank may also have been rather lenient in acceptinginadequate/incomplete subproject reports and other less than satisfactoryinformation submitted by the executing agencies.

8.4 Besides these weaknesses, Bank supervision missions have been an importantfactor in the implementation of the project. The staff of the former executingagencies generally expressed appreciation for the flexibility and for thetechnical advice provided by the Bank staff, especially on issues such asimprovement of subproject evaluation criteria and increases in the free limit ofsubproject approvals.

IX. Borrower Performance

9.1 Considering the adverse economic situation experienced by Mexico duringproject implementation, including a serious economic contraction, monetary andcredit restrictions, high inflation, reorganization and frequent changes of staffin all the executing agencies, the Borrower performed as well as could have beenexpected under the circumstances. The three credit/equity investment componentsof the project were all implemented in accordance with agreed upon terms, andloan categories were reallocated as conditions warranted. A criticism of NAFINwould be its non-performing of several studies, evaluation, appraisals and impactanalyses agreed upon at negotiations and included in the Loan Agreement and inthe PED, not to mention the ex-post evaluation of a sample of a dozen subprojectsrequested by the PCR mission to estimate the impact of the project on SMIs.Obviously, the Borrower gave greater attention and provided more managementresources to credit and TA delivery and performance by the executing agenciesthan to the assessments needed to measure impact and quality of the assistanceprovided, a typical weakness of development banking institutions.

9.2 The three trust funds developed institutionally and established improvedproject appraisal and supervision procedures as the loan progressed. FOGAINpassed through a trial and error phase with the use of outside consultants tohelp carry out loan supervision and follow-up activities on its subborrowers.After less than a year of implementation, however, it appeared that thesesupervision evaluations, paid for by FOGAIN on a piece-meal basis, lackeduniformity and objectivity and they proved unsuccessful, generating complaintsfrom both, the subborrowers and the FIs, that the evaluations had become

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self-serving to the consultants. An agreement was reached whereby the FIsthemselves would perform the supervision tasks, with FOGAIN (as a second-tierinstitution) carrying out an ex-post analysis on a sample basis, which includedsanctions against the FIs for non-compliance. This change helped establishprofessional supervisory departments in the participating FIs and the systemstill exists today. This was a fundamental innovation that introducedstandardized supervisory practices into the Mexican banking system, whichpreviously had promotional rather than supervisory departments. Compliancesupervisory criteria are now codified in operating rules and regulations that areupdated periodically, the latest in 1989. In 1986, the information and computersystem were improved with the purchase of adequate computer hardware andsoftware, and linkage between the central and regional offices. The expandedcomputer network fell short of providing FOGAIN with information on portfoliodefault rates, which remained with the FIs.

9.3 Following Bank recommendation, FOMIN adequately revised and expanded thedata submitted to the Bank for subprojects above the US$600,000 free limit, andthis accelerated Bank reviews and approvals. FOMIN also took adequate measuresto mitigate the impact of its tight personal budget on project implementation asa result of limited program promotion and subproject identification. Thesemeasures were: (i) use of INFOTEC resources for subproject appraisal, with costsassumed by the beneficiaries; (ii) use of outside consultants for supervision andcontrol tasks in subprojects above Mex$150.0 million, paid for by the recipients;and (iii) use of State Fund risk capital programs by FOMIN, thus expandingprogram promotion.

9.4 Of the three executing agencies, FIDEIN absorbed the largest reallocationof the loan proceeds and demonstrated growth as a specialized financing agency.It went through a transformation both in its role and objectives, and emerged inthe process with a more professional and technical staff than it had atappraisal. FIDEIN designed operational criteria for financing industrial parksinfrastructure credits, which were approved for national applicability inNovember 1987 by the Mexican Treasury. On the negative side, FIDEIN did neithertransfer its credit control operation to FOGAIN for its management, nor transferits loan portfolio to an intermediary bank trust fund for collection andadministration, as agreed upon during negotiations.

X. Prolect Relationships

10.1 By and large, relationships between the Bank and the Borrower were close,candid and, both were generally in agreement concerning identification of anissue or problem and the mechanism to be used for solution or improvement.Similarly there was a good cooperation between Bank staff and the three executingagencies. An example of good relationship was the timely request by the Borrowerand the quick response by the Bank for a US$1 million reallocation from theFOGAIN component to the TA component to reestablish computer installationsdestroyed in the 1985 earthquake. Both the Bank and the Borrower tended to havesimilar views regarding the project, emphasizing fluid and timely loan commitmentand disbursement on the part of the three executing agencies, with less concerngiven by each to: (i) the TA needed by the subborrowers, especially in the

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technically more difficult and specialized FO7IN and FIDEIN programs; and (ii)the specific requiromnto of the O1IN risk capital program at a time of highinflation. These two areas should have attracted more of both the Bank's and theBorrower's attentioni,-long vith greater efforts to establish the institutionalframework for a venture capital market. As mentioned earlier, both the Bank andthe Borrower tondod not to follow up vigorously on the respective studies andavaluations which vere not completed.

10.2 The SKI III project represented a comprehensive program for the developmentof Mexico's SKI sector at a time when Government policy tended to favor large-scale industry. It was only in April 1985 that an official Government SMI policywas made explicit vith the Integral Development Program for SMIs (PIPMI) whoseobjectives dovetailed with this project. Yet, there were no known linkagesestablished between the project and PIPHI either by the Bank or the Borrower.

XI, Consultina Services

11.1 Performance of the consultants and the results obtained under the projectwere mixed. The consultants used by FIDEIN to help design a Project PlanAnalysis perform d vwll and gave good recommendations t a time that FIDEIN wasaltering its role. They vwre highly qualified industrial estate experts whofocused their time on transferring their specific expertise onto FIDEIN staff.On the other hand, the consultants hired by FOGAIN for subprojects supervisionand follow-up monitoring activities had problems with both the subborrowers andthe Fla and were eventually removed from the project. A team of consultants wasalso recruited to deviset (i) a guarantee mechanism for risk capital investment;and (ii) a long-tern echanim for financing industrial'plant construction inindustrial estates. The results were not conclusive and were not used.

XII. Progect Documentation and Data

12.1 Project documentation and data includes the legal documents, the staffappraisal report (SAR), missions back-to-office reports and supervision reports,and progress reports provided by the Borrower.

12.2 The legal agrements and the SAR were adequately prepared andsatisfactorily guided project start-up and implementation. Supervision reportsgave a good idea of the project evolution, and the issues addressed duringimplementation. However, ome of the reports--and other relevant projectdocuments available at the Bank- were not sufficiently detailed and did notprovide all the quantitative data needed for the preparation of the PCR.

12.3 NAFIN *etended ample assltance to the PCR mission in facilitating meetingswith staff from the three former executing agencies, who provided availableinstitutional Information. Unfortunately, the PCR mission was conducted morethan a year after loan closing and two years after NAFIN's reorganization whichmade access to remaining Institutional memory more difficult. As indicated

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earlier, no comprehensive ex-pout documentation on the financed subprojects wasprovided. In addition, NAPIN had little data on the present status of thesubloan/investment portfolios of the participating financial intermediaries.

XIII. Lessons Learned

13.1 Proiect Desian. The institutional framework for SHI. was complex in Mexicoat the time of the project, with many institutions involved in the provision oftechnical assistance and credit to the sector. In retrospect, the question maybe asked whether the Bank should not have tried to simplify and rationalize theframework, instead of involving so many institutions in the project, thus,complicating its implementation. At least, more attention should have been paidto the coordination issues, which proved to have hampered project implementation.Under the SMI IV follow up operation, some remedial measures were taken. Tosimplify implementation and facilitate coordination among various executingagencies, the Bank and th Mexican Government agreed on the establishment of asmall, but high level, Project Coordinating ComiIttee chaired by one of the ViceMinisters of Finance and with the following members: NAFIN's Director General andtwo other NAFIN's Deputy Director Generals, and the Director General of theCredit and Development Banks in the Finance Ministry. FOGAIN, FOMIN, and FIDEINalso participated in the Committee, but as non-voting members. The coordinationissue was resolved in April 1989 (before effectiveness of SMI IV) when theMexican Government decided to merge all the trust funds assisting the industrialsector into NAFIN and to convert the latter into a second-tier institution. Themerger is still too recent to allow a meaningful assessment of the new set-up interms of its efficiency to meet SMIs's needs. This assessment will be done inthe PCR for the SMI IV.loan tentatively scheduled for FY94.

13.2 Sector Work. The technical assistance component was put into place withouta good understanding of the institutional, regulatory and policy constraintshampering SKI growth. Good sector would have helped better design thiscomponent. At least, the Bank should have insisted that the studies on the PAI'stechnical assistance and extension programs be carried out and the resultsimplemented. The SMI IV follow-up operation addressed the issue by providingfinancing for a series of studies aimed at broadening the understanding of thepotential and constraints to SHI development to be carried out by SECOFI.

13.3 SuDervision. More attention--and staff resources--should have been devotedto the supervision of the TA component, which although small is very complex andlabor intensive. Supervision of the credit components was adequate. However,in retrospect, it appears that Bank supervision was too narrowly focused on theimplementation of the loan and did not follow developments in the sector.Supervision missions must have devoted some time to assess the non-financialconstraints hampering the development of SMIs with a view to helping address themthrough the project technical assistanc- resources. Also, the Government's PIPMIprogram should have been carefully analyzed and its links to the project madeexplicit.

13.4 PCR Preparation. Availability of quantitative data is often a problem forthe preparation of PCR., particularly those on loans through financial

- 18 -

intermediaries. In any future similar projects, it is recommended that (i) thesecond-tier institutions conduct a close monitoring of the participatinginstitutions' portfolios that would permit an assessment of the project impact;and (ii) provision be made to have the Borrower make the necessary efforts tocompile the required data that will permit a meaningful project evaluation.

- 19 -

PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE

I. Background

1.1 In 1978 the Federal Government, acting through Nacional Financiera, S.A.(NAFIN), established the Programs de Apoyo Integral a In Industria Mediana yPequefiAs (PAI), which was intended to strengthen and promote actions to bringabout modernization and growth in the industrial sector through improved use ofits human, financial and technological resources.

1.2 As one step in this direction, PAI sought to minimize the dispersal ofprograms and support efforts for SMIs by instituting a number of technicalassistance programs and giving full support to the development funds set up bythe Federal Government to assist small and medium-scale industries -- forinstance, Fondo Hacional de Estudios y Proyectos (FONEP), Fondo Nacional deFomento Industrial (FOMIN), Fondo de Garantis y Fomento a In Industria Mediansy Pequefia (FOGAIN), Fidelcomiso pars el EstudIo y Fomento de Conjuntos, Parques,Cludades Industriales y Centros Comerciales (FIDEIN), and Fondo de Informaci6n

y Documentscifn pars In Industris (INFOTEC).

1.3 In addition, PAI became the central point for processing the externalresources obtained through loans signed with the World Bank to finance SMIs.Such operations included two earlier Bank loans for a total of US$147 million(Loan 1552-ME for US$47 million, and 1881-ME for US$100 million), which weresatisfactorily concluded -- as confirmed in the respective PCRs -- despite veryserious macroeconomic problems that were already beginning to emerge and whichbecame fully apparent by the early 1980s.

1.4 Throughout the period 1982-88, in fact, Mexico was confronted with aserious economic crisis, provoked mainly by such factors as: the FederalGovernment's huge domestic and external debt burden; the steep plunge, in 1982,in world prices for petroleum, the country's principal export; and the resultanthigh rates of inflation, which caused domestic markets to collapse and reducedgrowth in the national productive sector.

1.5 In view of the change of Federal Government in 1982, at the time this newloan was being appraised, the World Bank suggested a number of measures itbelieved would minimize the impact of the transition on execution of thisproject:

PROPOSAL COMMENTS

1. Creation of an SMI Support Unit NAFIN had its Direcci6n Adjunta deto coordinate activities geared Promoci6n, Filiales y Fideicomisosto satisfactory execution of (Subdirectorate of Promotion,this project. Subsidiaries and Trusts), responsible

for regulating and supervising theoperations of Government trust fundsas far as implementation of its ownpolicies was concerned.

- 20 -

2 Devise a portfolio oversight FOGAIN developed a computer programsystem for FOGAIN. to identify subprojects possibly

eligible for IBRD financing; however,the records vere not kept in aseparate file.

3. Conclude negotiations started During the six year period 1982-88,with INFOTEC to support SMI INFOTEC supported SMIs withneeds in terms of information information and technical assistance,and technical assistance, under arrangements entered into by it

with the World Bank, Mexico's owntechnology information agencies, andthe Asian Organization forTechnological Productivity.

4. Establishment of a training Although such a program neverprogram for FOMIN staff. materialized, FOMIN's results in 1983

were satisfactory in real terms, andin 1984 it sought to guarantee itstemporary participation, in order torecover its resources.

In addition, the Bank obtained a commitment from PAI to carry out variousstudies:

- evaluation of the major PAI programs implemented;

- cost-benefit analysis of PAI programs implemented;

- ex-post analysis of the impact of the loan, based on arepresentative sample of subprojects supported by FOGAIN;

- analysis of a number of enterprises supported by FOGAIN, todetermine the impact of the economic crisis on small and medium-scale industries.

These studies were not carried out, for the following reasons:

In 1985, the Federal Government took a number of steps torationalize the system supporting the industrial sector; one of themwas to merge the development funds with RAFIN.

The first institution to become part of NAFIN was PAI, in 1987, whenthe loan had just been reactivated following the delays mentionedabove.

In addition, while the merger of the development funds with RAEINwas being planned and put into effect, an assessment was made of theadvisability of continuing with the programs they had launched.Based on RABIN's analysis, it was determined that implementation ofthe technical assistance programs had not been as successful asinitially expected, since they were not meeting major SMI needs.

- 21 -

Given the resulting lack of continuity in PAI programs, it becameimpossible to carry out the studies requested.

- With respect to evaluation of the impact of the loan on small andmedium-scale industries, it should be recalled that in 1989, theyear of loan completion, FOGAIN was in the process of being mergedwith NAFIN, which delayed the studies requested. However, thepossibility is currently being reviewed of conducting them at thesame time as evaluation of the results of loan 2858-HE (PAI IV),since this would allow comparative analyses of results obtained ineconomic contexts as different as those experienced by Mexico overthe period 1980-92.

1.6 It should be noted here that the measures suggested by the World Bank werenot implemented by lAPIN strictly as recommended. Nowever, NAFIN's performancethroughout the execution of PAI III ensured that its component programs operatedadequately, while project implementation in general was satisfactory in thatquantitative and qualitative objectives were met.

II. Proiect Obiectives and DescriDtion

2.1 From the time it was first identified, the projaet was designed as a setof support actions intended to expand the base of the SKI sector in the face ofthe serious economic crisis confronting the country. Loan proceeds were usedpredominantly to build up permanent working capital and finance purchases ofmachinery and equipment, in order to ward off further reductions in sectorproduction and employment levels.

2.2 As with the two previous operations in this field, the proceeds of thisthird loan were deposited with PAI to be administered and channeled to theindustrial sector through the development funds. On the basis of earlierexperience, a disbursement schedule was drawn up for a period not to exceed fouryears (1983-87).

2.3 The loan was signed for US$175 million, of which US$150 million wasearmarked to support credit operations, US$18 aillion for equity investments,US$5 million for industrial infrastructure, and US$2 million for technicalassistance programs.

2.4 Of the amount allocated to the various loan categories, a total ofUS$174,979,354 was disbursed as follows:

Category I: Credit US$ 144,792,000Category II: Equity investments 12,887,354Category III: Infrastructure 14,600,000Category IV: Technical assistance 2,700,000

________________________

TOTAL US$ 174,979,354.. -. r_--rn---,

- 22 -

III. Proiect Organization and Design

3.1 Loan 2325-ME (PAI III) was signed on August 15, 1983 but did not becomeeffective until January 16, 1984. This was because NAFIN and PAI were unable tomeet the agreed conditions of effectiveness, for the following two principalreasons:

- failure by the World Bank to consider Mexico's serious economic andpolitical problems, which meant that the proceeds of PAI III wereapplied very differently from those of PAI I and II;

- the reorganization and restructuring that took place between 1983and 1984, mainly affecting PAI and FOGAIN.

3.2 A few months after PAI started operations in 1978, its TechnicalSecretariat and the FOGAIN Directorate General came under the command of a singleindividual, so that both entities then had to coexist within a singleadministrative structure. Given the differences in the concepts underlying them,it became necessary to establish a dual structure reporting to the same director.

3.3 PAI, as an entity functioning within the FOGAIN organizational framework,had a staff of 300 and was set up as follows:

- Secretaria T6cnica (Technical Secretariat)

- Subdirecci6n General (General Subdirectorate)

- Subdirecci6n de Operaci6n (Operations Subdirectorate)

- Subdirecci6n de Asistencia T6cnica (Technical Assistance

Subdirectorate)

- Subdirecci6n de Promoci6n (Promotion Subdirectorate)

- Subdirecciones Regionales (Regional Subdirectorates) (8).

3.4 However, the fact that these two entities functioned jointly prevented PAIfrom serving effectively as intersectoral coordinator. Consequently, in 1984 itreformulated its objectives and strategies and broke away permanently from theFOGAIN organizational structure, to become the executing agency for integratedtechnical assistance programs.

3.5 The new scheme of organization proposed provided for the elimination,creation and relocation of administrative units, with a view to maximizing PAIoperational effectiveness while keeping its staff down to the authorized figureof 300.

3.6 In that same year (1984), the PAI Technical Committee was set up to approveand oversee implementation of PAI programs. Other units established that yearwere Organization and Methods, Internal Control, and Coordination of RegionalSubdirectorates.

- 23 -

IV. Proiect Implementation

4.1 It should be pointed out that in addition to the initial delay caused bythe time lapse between loan signature and effectiveness, Mexico City wasdevastated by a severe earthquake in September 1985, which destroyed certainbuildings, including the headquarters of NAPIN and the development funds.

4.2 Although alternative arrangements were made as quickly as possible, theyinvolved housing staff in temporary offices, purchasing furniture, searching fornew premises, and reinstalling the computing equipment that handled all of theoperations of NAFIN and the funds. This naturally caused delays in gettingcredit and technical assistance programs into operation.

4.3 Following the PAI-FOGAIN split in 1984 and the earthquake in 1985, FOGAINresumed its normal activities and, in 1986, reorganized itself, adding aJuridical Bureau and a Bureau of Loan Supervision, as a means of speeding upcredit authorization and improving supervision, functions which had normally beenhandled previously by external consultants.

4.4 These changes, together with the introduction of automatic authorization,cut FOGAIN's average subproject approval time from 45-60 days (and occasionallylonger) to 15 days. In any case, a maximum response time of 60 days wasguaranteed, or authorization was to be automatic.

4.5 In addition, as NAFIN's internal operating reports indicate, FOMIN andFIDEIN operations expanded during the period 1983-86, despite the country'seconomic difficulties. However, the World Bank's reimbursement rate slowedbecause of the time needed to prepare the technical information it required forauthorization of subprojects.

4.6 The technical assistance provided, for both individuals and groups, soughtto induce businessmen to change their attitudes and embrace technological,technical, administrative and marketing innovations. As a result, collectivepurchasing centers were set up and credit unions established, among otherachievements.

V. Proiect Results

5.1 Implementation of this project was clearly not easy, and it wasconsequently not completed within the period anticipated at appraisal, which hadserious repercussions where the disbursement schedule was concerned. Despite theslippage in compliance with the disbursement schedule, however, the loan wasalmost fully utilized within a period only 18 months longer than expected. Alladditional disbursement commitments made to the Bank during loan negotiationswere also met.

5.2 In the case of FOGAIN, all targets and objectives set for this period weremet, the only interruption in the rate of disbursement occurring in 1985 for thereasons already indicated. FOGAIN used the proceeds of the loan to assist atotal of 6,041 enterprises. By 1987, it was unable to meet its targets for lackof funds, the amount allocated for this component having already been fullycommitted.

- 24 -

5.3 Where FIDEIN was concerned, the severe economic crisis faced by Mexicosubstantially reduced investment demand. however, the financing channeledthrough this fund helped to create 56,960 jobe during the period 1983-87.

5.4 FOMIN, for its part, assisted a total of 558 enterprises, providing themwith risk capital and capital for minority equity investments, which helped topromote divestiture by FO1IN once the enterprises had reached full developmentand thus to assist efficient enterprises.

5.5 With respect to technical assistance and training activities, PAI assisteda total of 446,608 enterprises from 1984 to 1987, thereby directly contributingto the industrial modernization proce.

5.6 In addition, using World Bank funding, lAPIN comissioned the InstitutoNaclonal de Geografla a Infor=Atlcs (INRGI) in 1987 to conduct a survey todetermine the status of micro, mall and medium enterprises. Although theresults of this study were not actually published until 1989, the informationobtained was used during negotiations for Loan 2858-MH.

5.7 Finally, it should be explained that coordination of programs followedFederal Government policy guidelines for the period in question, and that in 1987action was initiated to merge the various executing agencies with lAPIN, in orderto meet the requirements set by the new period.

VI. General Coments

6.1 Despite the series of problems that arose during the execution of Loan2325-ME, its general objectives were nevertheless accomplished: the number ofenterprises assisted, loans granted and technical assistance activitiesconducted, using the proceeds of the loan, met (or even exceeded, as in the caseof technical assistance) the targets originally set.

6.2 Among the factors which adversely affected the project execution process,one in particular warrants mention, since it significantly delayed the rate ofloan disbursement -- namely the type and quantity of information requested byIBRD for authorization of subprojects.

6.3 This problem could be alleviated in future operations if World Bank staffresponsible for project design were to allow the executing agency greaterparticipation at this early stage. Views could then be exchanged on the quantityand type of information that -- given operating constraints -- should reasonablybe required for authorization of subprojects, while still allowing an adequatedisbursement rate to be maintained during project implemntation.

THIRD SMALL AND MEDIUM-SCALE INDUSTRY DEVELOPMENT PROJECT(LOAN 2325-ME)

PROJECT ACTIVITIES FINANCED BY THE DEVELOPMENT FUNDS AND THE PAI PROGRAM

ACTIVITY NO. OF BENPICIARY KNTERPRISES

1983 1984 1985 1986 1987

1. Extension Services and Technical Assistance 14,549 9,119 5,203 8,084 9,653

2. Working capital financing 4,997 4,815 3,412 4,372

3. Fixed assets financing 3,927 3,327 2,059 2,220

4. Capital works financing 58 73 58 48 46

S. Zquity investment 109 121 115 112 111

THIRD SMALL AND MEDIUM-SCALE INDUSTRY DEVELOPMENT PROJECT(LOAN 2325-HE)

FINANCIAL ASSISTANCE CHANNELED TO MICRO, SMALL AND MEDIUM-SCALE INDUSTRY(Max$ millions)

FUND 1983 1984 1985 1986 1987

1. FOGAIN 2,678.6 6,074.1 18,675.1 14,260.0 8,865.9

2. FOHIN 442.6 1,962.3 666.6 2,672.8 12,143.1

3. FIDEIN 101.5 564.8 2,173.0 4,035.0 5,458.2

4. PAI 9.7 141.4 393.9 473.7 533.2

TOTAL 3.232.4 8,742.6 21,908.6 21.441.5 27,000.4

- 27 -

PART III STATISTICAL IWJORHATIOI

1. RELATED BAD LOANS

1552-ME. Firat Small and To generate growth 1978 Closed Loan of US$47.0Medium Scale Industry in and employment million was closed onDevelopment Project (SMI and promote 11/31/1981.I) regional PCR No. 7552 issued

development, on December 1988.

1881-ME. Second Small and Same aa above. 1980 Closed Loan of US$100.0Medium Scale Industry million was closed onDevelopment Project (SMI 6/30/1985.II) PCR No. 7552 issued

on December 1988.

2858-ME. Fourth Small and Same as above. Also 1987 In Loan US$100.0Medium Scale Industry include pilot progress million. Reduced fromDevelopment Project (SMI micro-industry, original amount ofIV) US$185.0 million.

Became effective3/01/1991.

- 28 -

2. 1X5C TINTABL

Identification 6110/1982 6/10/1982

Appraisal Migglons

let Mission 9120/1982 9/20/19822nt Mission 1/10/1983 1/10/1983

Loan Nogotigtions 4/20/1983 4/20/1983

Board Approval 6/23/1983 6/23/1983

Loan Signature 8/25/1983 8/25/1983

Loan Zffectivenso 9/2711983 2/2711984

Loan Clog"ng 6/30/1987 6/30/19889/30/1989

: . :' ....... :' . ' :':' ' : ' ' j" '"~~~~~~~~~~~~~~.......tS4UO~~~~~~ 9 TOU*OI Tsn,4ov

.... ~ ~~ ~ ~ ~ ~ ~~~ ~ j .. ... .... ........ .... :.ij

......-' :' "..:.

-O : - O U 6.. .... j...6 ... .. ......

~~~~~~~~~~~~~~~~~~~~~~~~~~.... .,,,..... ., .. , ... .....i .........:: : : . :: i : :: i~~~~~~~~~~~~~~. ........

-:6:8M: ~~~~~...... .i-v o:...

(uo;tTuzF $sn)

SJIUIZS1l1SIG 'ZDIO 0Wt UZYIIS Z&VL)D

- 6Z -

- 30 -

4. PROJECT ESTIMATE FINANCING(US$ million equivalent)

tComponents-; -R00 4 0Ba:nk GOW M0Total SMI/ftji Totol

*Credit 150.0 56.0 206.0 95.4 301.4

*Risk Capital 18.0 6.7 24.7 11.6 36.3

*Industrial Parks 4.6 1.7 6.3 3.0 9.3

*Technical 2.0 0.2 2.2 - 2.2Assistance

TOTAL 174.6* 64.6 239.2 110.0 349.2

| Participation 50.0 18.5 68.5 31.5 100.0

* Front end fee of US$0.4 million is not included

CONTENT OF FINANCING(US$million)

component. Local Cost 7o:e1 gn- ixcnan ni of

Credit 210.6 90.8 59.2

Risk Capital 25.3 11.0 7.0

Industrial Parks 6.5 2.8 1.8

Technical 0.8 1.4 0.6Assistance

TOTAL 243.2 106.0 68.6

Percentage 70Z 30Z 20Z

- 31 -

5. ALLOCATION OF LOAN PROCEEDS(US$ thousands)

r -- :-- -.... . .. . . . .- Items A ri1d-

FOGAIN

* Fixed assets investments 75,000 81,400 81,323

* Permanent working capital 75,000 63,100 63,046

FOHIN

* Fixed assets and increases 8,000 7,900 7,897

in working capital

* Increase in permanent 10,000 4,700 4,695

working capital

FIDEIN 4,600 14,600 14,596

Technical Assistance 1,964 2,700 2,703

Capitalized Front End Fee 436 436 436

TOTAL 17S000 175,000 174,698

- 32 -

6. STATUS 0F IZGAL COYKEATS

Loan Agreement

Section 3.11 *Cost-Benefit Analysis of lot complied Study was intially put onextension service hold for one year, then

postponed to May 1989.Study not carried out.

Section 5.01 *Consultation vith Bank In Regulations were revised in(b) before changes compliance 1986.

Introduced in FOGAIN'soperating regulations

ProjectExecutlonDocument (PAD)

PAI

*Industrial Survey of In Survey initiated in 1984enterprises compliance and completed in 1986.

els-post evaluation of Not complied Evaluation not carried out.Subprojects under Ln.1552-Mand Ln.1881-ME.

FOGAIN

*Plln of action established in Delay occurred because ofto improvo compliance earthquake. Task completedportfolio control in 1986.

elapllemntation of guarantee lot complied Implemented for micro-program industry only, but not with

Bank funds.

FIDEIN

*leorganization of FIDEIN In Institutional set-upcompliance remained unchanged but

staff upgraded.

elvaluation of its overall lot complied Study not performed.operation

FOKIN

*Two-phase study to determine Not Study not performed.problems its completed

clients

- 33 -

7. UJS 0 SAK REsso3cEs(US$ million)

| FOGAIN 144.4 82.0

Fixed assets 81.3 47.0

Permanent working capital 63.1 35.0

| FOMIN 15.6 8.0

Fixed assets and increases in 7.9 4.0working capital

Increase in permanent working 4.7 4.0capital

FIDEIN 14.6 8.0

Technical Assistance 2.7 2.0

Front end fee 0.4 -

-i TOTAL 174.7 100.0

DISTRIBUTION 0F TOE TICUEICAL ASSISTANCE IUIES(US$ thousands)

| INFOTEC 853.3 32.0

1 INEGI 625.4 23.0

|FPOMIN 68.5 3.0

| FOGAIN 102.1 4.0

Consultants 20.1 1.0

Computer Equipment 37.4 1.0

PAI courses and 786.6 28.0seminars

Industrial extension 205.3 8.0training

TOTAL 2,703.7 100.0

- 34 -

8. STAFF INPUTS BY STAGE OF PlOJECT CYCLE

A. Staff Inputs

Through Appraisal 82.6

Appraisal through Board 24.1Approval

Supervision 125.7

PCR 18.4

B. Missions

AT T M .Ot i- . X4TYEA . -i. i.:S, . N R OF .: -S : ..: -iS- .. C,L,,-IZA . N.U-:B:-E. OP.-: STAFF. DA'MS

- : :f.1 0 ,04 | .L iN i :.iE ,. iv, A, t i, ::! 40 ,0-, S: i ., .. , .: ... i E ... , ,, E .... .,,.E ,E,: ',; ,'-'S -E''.L'. . . . . .... . . . . ... . . . . . .

REPORT

Apprisal 6/1982 4 FNA,LEG,POF,OTH 4 12 5/1983

Post-Appraisal 1/1983 3 FNA, LEG,POF 3 6 5/1983

Supervision* 8/1983 1 POP 2 2 11/1983

Supervision 11/1983 1 POP 1 1 12/1983

Supevision 1211983 1 POP 1 1 2/1984

Supervision 3/1984 1 POP 2 2 6/1984

Supmvision 4/1985 1 POF 2 2 7/1984

Supervision 611985 1 FNA 2 2 10/1985

Supervision 7/1985 2 PNA,POP 2 4 11/1985

Supervision 2/1986 1 POP 1 1 2/1986

Superviuion* 12/1986 1 PNA 2 2 1/1987

Supervision* 9/1987 2 PNA,POP 2 4 11/1987

Supervision* 10/1988 2 FNA,POP 1 2 11/1988

Supervision 2/1989 2 FNA,POP 1 2 2/1989

PCR 2/1991 1 OTH 2 2 4/1991(draft)

* combined with iupviaous of other projectsSpecialities: Project Officer-POP; Pinancial Analyst-PNA; Legal-LEG; Oter-OTH

- 35 -

9. FrAOECIRE-IFIS

A) Direct Benefits

[INDICATORS EPRIA STIMATE: A.. ....R.1SUM-~

Number of Enterprises Receiving Credits 2,650 6,162

*FOGAIN 2,500 6,041

*FOMIN 150 78

*FIDEIN 10- 12 43

Number of Jobs Generated 10,000 20,000 - 25,000 *

Number of jobs Preserved 20,000 - 30,000 Over 100,000 *|

Technical Assistance no estimate Over 500 firmsSource: NAFIN

B) Indirect Benefits

!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. . :: .:. : i~j.--.-. -.. .. ......

FIDEIN Studies

*Prefeasibility 94 in 26 States

*Feasibility 35 in 17 States

*Engineering 49 in industrial parks

*Special Reports over 20

Other Benefits *Industrial decentralization*Follow-up subproject lending-Strengthened NAFIN financial intormediary*Institutionalized TA services within NAFIN-Expanded subproject local market export

Source: NAFIN* NAFIN estimate ** FIDEIN alone estimated 65,000 from its financed projects.

- 36 -

MACIONAL FINANCIERA, S.N.C.

DOCUMENTO DE TERMINACION DE PROYECTOIEXICO

T-CA 1SAPA DEL PitOYTO DE APOYO A LA PEQOURA Y.EDIANAINUSTRA

(Pr&stano 2325-ME)

Junio 1992

1

n&ceola wuM ase

- 37 -

I K D I C U

I. ANTECEDENTES

II. ORGANIZACION Y DISEaO

III. DESCRIPCION Y OBJETIVOS

IV. EJECUCION DEL PROYECTO

V. RESULTADOS

VI. COMENTARIOS GENERALES

VII. ANEXOS

2

nacional fnnca

- 38 -

I. ANTECEDENTES

En 1978, el Gobierno Federal, a traves de Nacional Financiera,S.A., cre6 el Programa de Apoyo Integral a la Industria Medianay Pequenia (PAI) con el objeto de fortalecer y promover lasacciones encaminadas a la modernizaci6n y crecimiento del sectorindustrial, a traves de un mejor aprovechamiento de los recursoshumanos, financieros y tecnol6gicos de que dispone.

En este sentido y como parte de las acciones implementadas parael logro de sus objetivos el PAI busc6 minimizar la dispersi6nde los programas y apoyos a la pequefia y mediana industria, porlo que desarroll6 diferentes programas de asistencia tecnica ypromovi6 integralmente a los Fondos de Fomento constituidos porel Gobierno Federal para el apoyo de la pequena y medianaindustria, tales como el Fondo Nacional de Estudios y Proyectos(FONEP), Fondo Nacional de Fomento Industrial (FOMIN), Fondo deXarantfa y Fomento a la Industria Mediana y Pequefia (FOGAIN),Fideicomiso para el estudio y Fomento de Conjuntos, Parques,Ciudades Industriales y Centros Comerciales (FIDEIN) y el Fondode Informaci6n y Documentaci6n para la Industria (INFOTEC).

Asimismo, centraliz6 la operacion de los recursos externoscaptados de prestamos contratados con el Banco Mundial parafinanciar a estos estratos industriales entre los que figurandos operaciones previas contratadas con este Organismo por 147.0millones de d6lares (pr6stamos 1552-ME por 47.0 y 1881-ME por100.0 millones de d6lares respectivamente), cuya administracifnfue satisfactoria, de conformidad con lo expresado en losdocumentos de terminaci6n de proyecto de ambas operaciones, apesar de los graves problemas macroecon6micos que ya se gestabany que detonaron a principios de la decada de los 80's.

3

nacional financiera

- 39 -

Pr4staao 2325-XE

Sobre este iltimo punto es conveniente sehalar que durante elperiodo comprendido entre 1982-1988, el pals atravesd por unagran crisis econ6mica, provocada fundamentalmente por: el granendeudamiento interno y externo del Gobierno Federal: ladrastica caida durante 1982 de los precios internacionales delpetr6leo, principal producto de exportacion en el PaIs; lasaltas tasas de inflaci6n obtenidas como resultado de esteproceso que colapsaron los mercados domesticos y redujeron elcrecimiento del sector productivo de nuestra economia.

Ante el cambio de administracidn del Gobierno Federal en 1982,el Banco Mundial durante la evaluaci6n de este nuevo prestamosugirio una serie de medidas, que a su punto de vista pudieranminimizar los efectos que este proceso ocasionard en laejecucion del proyecto, tales cono:

PROPUESTA OBSERVACIONES

1. Creaci6n de una Unidad de * Al interior de NAFIN seapoyo a la mediana y pe- contaba con la Direc-quefia industria cuyo ob- ci6n Adjunta de Promo-jetivo seria llevar a ca- ci6n, Filiales y Fidei-bo la coordinacion de las comisos, la cual eraactividades concernientes encargada de normar yal buen desempeho en la supervisar la funcidnejecuci6n del proyecto. de los diferentes fi-

deicomisos del Gobier-no en cumplimiento asus propias politicas.

4

nacional financiera

- 40 -

III ETAPA DEL PROGRAMA DE APOYO AAL PEQUERA Y MEDIANA INDUSTRIA

PROPUESTA OBSERVACIONES

2. Desarrollar un sistsua d * Dentro del sistema decontrol de cartera en cdmputo del FOGAIN, seFOGAIN. desarrollo un mddulo

especifico para identi-ficar aquellos subpro-yectos que pudieran sersusceptibles de redes-cuento ante el BIRF,sin embargo, no se man-tenian en up archivopor separado.

3. Concluir las negociaciones * El INFOTEC durante eliniciadas con INFOTEC para sexenio comprendido en-apoyar los requerimientos tre 1982-1988 apoyb ade inforuacidn y asistencia estratos con serviciostecnoldgica de la pequefta y informaci6n y asistenciamediana industria. tecnol6gica que a su vez

fueron obtenidos de losconvenios suscritos en-tre INFOTEC y el BancoMundial, los ServiciosNacionales de Informa-ci6n Tecnol6gica, laOrganizacion Asiaticade Productividad Tec-nol6gica.

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Pr6stauo 2325-RE

PROPUESTA OBSERVACIONES

4. Establecimiento de un Pro- * A pesar de que dichograma de capacitaci6n para Programa de capacitacionel personal del FOMIN. no fue implantado, los

resultados del FOXINen 1983, fueron satis-factorios en t6ruinosreales y para 1984 elFondo busc6 garantizarSu participaci6n onforma temporal a fin deasegurar la recupera-cidn de sUs recursos.

El Banco Mundial tambien estableci6 como un compromiso por partedel PAI, la realizacion de diferentes estudios, tal como:

- Evaluaci6n de los principales programas implementadospor el PAI.

- Analisis del costo-beneficio de los programasimplementadOs por el PAI.

- Andlisis ex-post del impacto provocado por el prestamoutilizando para ello una muestra representativa de lossuproyectos apoyados por el FOGAIN.

- Andlisis de una serie de empresas apoyadas por elFOGAIN a fin de determinaar e1 impacto de la crisisecon6mica en las pequehas y modianas industrias.

Dichos estudios no fueron realizados en virtud de las siguientescausas:

- Durante 1985 el Gobierno Federal como part. de sus medidasde racionalizaci6n de los diversos instrumentos de apoyo alsector industrial, decidio fusionar las entidades defomento a la estructura de NAFIN.

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III ETAPA DEL PROGRAMA DE APOYO ALA PEQUERA Y MEDIANA INDUSTRIA

En este sentido la prinera institucidn que pasa a formarparte de Nacional Financiera es el PAI, durante el ano de1987, afio en que el prestamo apenas reactivaba suoperatividad debido a los retrasos ya mencionados en puntosanteriores.

Adicionalmente y durante el proceso de planeacion yformalizacion de la fusi6n de los Fondos de Fomento a laInstituci6n, se evalu6 la conveniencia de continuar con losprograma desarrollados por esas instituciones y derivadodel an&lisis efectuado por NAFIN, se comprob6 que laaplicaci6n de los Programas de Asistencia Tecnica no habiaresultado tan exitosa como se esperaba, en virtud de queestos no alcanzaban a responder a las grandes necesidadesde los estratos atendidos, ante lo cual se perdi6 lacontinuidad en los programas ejecutados por el PAI y por lotanto se imposibilito la realizacion de los estudiossolicitados.

- Con relacion a los estudios solicitados para evaluar elimpacto del prestamo en los estratos industriales medianoy pequefto, es conveniente sefialar que durante 1989, aho enque el pr6stamo concluyo, FOGAIN llevaba a cabo su procesode incorporaci6n a NAFIN, lo cual retraso el cumplimientode este compromiso, sin embargo, actualmente se hacontemplado la posibilidad de realizarlos conjuntamente conlos resultados obtenidos del prestamo 2858-ME (PAI IV), afin de poder establecer andlisis comparativos de losdiferentes resultados obtenidos en contextos econfmicos tandiferentes como los experimentados par Mexico durante elperi6do 1980-1992.

En este sentido es conveniente sefialar que las medidas sugeridaspor el BIRF no fueron implementadas por NAFIN en el estrictosentido en que se recomendaron, sin embargo las accionesinstrumentadas por esta Instituci6n a lo largo de la ejecuci6ndel Programa permitieron la adecuada operaci6n de los programasy la implementacion del proyecto en general cumpli6 susobjetivos cuantitativos y cualitativos en un grado ampliamentesatisfactorio.

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Pr6stazo 2325-ME

II. DESCRIPCION Y OBJETIVOS DEL PROYE

El prdstamo desde su identificacion fue concebido como una seriede apoyos para ampliar la base del sector industrial mediano ypequefio ante la grave crisis economica del Pais. Durante laejecuci6n del mismo, presento una tendencia hacia lacanalizacion de recursos para capital de trabajo permanente yadquisici6n de maquinaria y equipo principalmente, con el objetode evitar una mayor reduccion en los niveles de produccion yempleo logrados por este sector.

Al igual que las dos operaciones anteriormente contratadas conel BIRF, los recursos de este prestamo fueron entregados al PAIpara su administracion y canalizaci6n al sector industrial, atraves de los Fondos de Fomento y con base en las experienciasobtenidas, se fijo un calendario de disposiciones para unperi6do no mayor de cuatro ahos (1983-1987).

El prestamo se suscribi6 por 175.0 millones de d6lares de loscuales 150.0 millones fueron etiquetados para apoyar operacionesde credito, 18.0 millones para aportacidn accionaria, 5.0millones para infraestructura industrial y 2.0 millones paraprogramas de asistencia tecnica.

Del total asignado en cada una de las categorias del pr&stamo,se utilizaron 174'979,354.00 d6lares de acuerdo al siguientedesglose:

Categoria I. Crddito 144'792,000.00Categoria II. Capital accionario 12'887,354.00Categoria III. Infraestructura 14'600,000.00Categoria IV. Asistencia Tecnica 2'700,000.00

TOTAL 174'979,354.00

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III ETAPA DEL PROGRAMA DE APOYO ALA PEQUERA Y KEDIANA INDUSTRIA

III. ORGANIZACION Y DISErO DnEL PROYECTO

El pr6stano 2325-HE (PAI III) fue firmado el 15 de agosto de1983 y declarado en efectividad a partir del 16 de enero de1984, dada la imposibilidad de Nacional Financiera y el PAI paradar cumplimiento a las condiciones de efectividad, lo cual fueprovocado por dos razones principalnente:

- la falta de consideracion por parte del BIRF dels graves problemas economicos y politicos delPals, los cuales marcaron una fuerte diferenciaen la manera de aplicaci6n de los recursos conrespecto a las dos primeras operacionescontratadas con el Banco Mundial, y

la reestructuracion organizacional y estructural quedurante 1983-1984 fue experimentada principalmente enlas ostructuras del PAI y el FOGAIN

A los pocas meses de gue el PAI iniciara operaciones en 1978, laSecretaria Tdcnica del PAI y la Direccidn General del FOGAINrecayeron bajo la responsabilidad de una sola persona,circunscribiendo a ambos dentro de una misma estructuraadministrativa, ante lo cual y dado la diferencia en suconcepcidn, result6 necesario el establecimiento de una*structura dual que reportara a la misma direccidn.

La ostructura admisitrativa del PAI que funcionaba dentro delesquena organizacional do FOGAIN, estaba conformada por unaplantilla de 300 plazas y estructurada de la siguiente manera:

- Secretaria Tecnica- Subdirecci6n General- Subdireccidn de Operacidn- Subdirecci6n do Asistencia Tecnica- Subdireccidn de Promocidn- Subdirecciones Regionales (8)

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Prdstauo 2325-NE

Sin embargo, la operacion conjunta de *stos organismos propicioque el PAI no atendiera con la oficiencia requerida mu funcionde congruencia intersectorial, por lo quo a partir do 1984, elPAI replanted sus objetivas y estrat6gias, separ6ndosedefinitivamente de la ostructura organizacional del FOGAIN paratransfornarse en ojecutor do Programas de Asistoncia TecnicaIntegrales.

La propuesta de organizacidn contemplo la eliminacidn, creacidny reubicacidn do unidades administrativas con e1 prop6sito deoptimizar la operatividad del PAI, manejando i1nicamente las 300plazas autorizadas por e1 PAZ.

Durante este mismo afio (1984), so croa el Conit6 T4cnico del PAIencargado de sancionar y supervisar la impleuontacidn de losprogramas desarrollados por osa Institucidn, asi como lasunidades de Organizacion y Ndtodo., la Contraloria Interna, laCoordinacion de Subdirocciones Regionales.

IV. EJEPCUCIO DEL POUT

Es conveniento sehalar quo adicionalmento al rotraso yaprovocado por la distencia *ntr la f-echa do firma y la fecha dodeclaracidn de ofectividad del pr6stamo, on S-ptienbre do 1985un fuerte torr-ooto azat6 a 1 Cd. do N6xico, dorruub6ndoseentre otras cosas, .1 editfcioa n quo Nacional Financiera y loaFondos de Pouento atendian sus operaciones.

Esta situacidn adn y cuando fue solucionada lo ads rapidamenteposible, implicd la adecuacidn del personal on oficinasprovisionales, coupra de zobiliario busqueda do nuovasinstalaciones y la roinstalaci6n del equipo do co6puto quomanejaba toda la operacion do ostas entidades, rotrasandose asila operacion de los prograzas do cr6dito y asistencia t6cnica.

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III ETAPA DEL PROGRAKA DE APOYO A1A PEQUERA Y MEDIANA INDUSTRIA

Posteriormente a la separaci6n del PAI-FOGAIN en 1984 y despuesdel sismo de 1985, FOGAIN continuo normalmente *us actividadese instruuent6 durante 1986 una reestructuracion en suorganizaci6n, incorporando a su estructura las DiroccionesJuridica y de Sequiziento de Cr6dito con el objeto de agilizarsu proceso de autorizacion de cr6dito y mejorar au funci6n desupervisidn, en virtud de que 6stas funciones se venianrealizando normalmente a traves de la contrataci6n deconsultores externos.

Ante estas modificaciones y aunado al Programa de Autorizacionautomitica instrunentado por .1 FOGAIN, es conveniente sefalarque el proceso de autorizacion de proyectos, que era en promedioentre 45 y 60 dias y on algunos casos mayor, fue reducido a unlapso de 15 dias promedio y se garantizo que la respuesta sobreel financiamiento no excediera en ningdn caso de los sesentadias, pues. en caso contrario se procederia a la autorizacionautomatica.

Por otra parte y seg1n los reportes internos de operacion deNAPIN, la operaci6n del FONIN y do FIDEIN observ6 crecimientodurante el peri6do couprendido entre 1983 y 1986, a pesar de ladificil situacion econ6mica prevaleciente en el pals, sinembargo e1 ritmo de reembolso de recursos por parte del BancoMundial disminuy6 en virtud del tiempo utilizado en lapreparacion de la inforuaci6n tdcnica solicitada por el BancoMundial para la autorizaci6n de subproyectos.

La Asistencia Tdcnica en forma individual y colectiva se brinddbuscando un caubio de actitud on ei empresario a fin deinducirlo a la innovaci6n tocnol6qica, t6cnica, administrativay de couercializaci6n. Derivado de estas acciones se obtuvo laconstitucidn de contros do coupras en comdn y uniones de cr&ditoentre otros.

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Pr6stano 2325-NE

V. RESULTADOS DEL PROYECTO

Como se puede observar, el proceso de ejecuci6n del proyecto nofue facil lo cual provoc6 que la ejecuci6n del proyecto no fueraconcluido de acuerdo a lo previsto durante la evaluacidn delproyecto, repercutiendo drdsticamente en el peri6do dedesembolso de recursos ante el Banco. Sin embargo y a pesar delos retrasos en el calendario de desembolsos, el pr6stamo sedispuso practicamente en su totalidad, en un periddo mayor alprevisto en tan solo un aho y medio. Asi mismo, se di6cumplimiento a todos los compromisos de desembolsoadicionalmente contraidos con ese Organismo durante lacontrataci6n del Prestamo.

Con la relacidn a la operacidn del FOGAIN, este cumplio con lasmetas y objetivos planteados para este peri6do, interrumpiendosolamente el ritmo de desembolsos ante el Banco Mundial en 1985,por las causas que ya fueron descritas con anterioridad. ElFOGAIN atendi6 un total de 6,041 empresas con recursos delpr6stamo. Para 1987, este fondo no pudo alcanzar las metasprevistas en virtud de la falta de recursos pues para elprestamo 2325-ME ya se habia comprometido la totalidad delcomponente que se le asign6.

Por parte del FIDEIN y ante la grave crisis econ6mica del pals,sus programas se redujeron sustancialmente por falta de demanda,sin embargo el financiamiento canalizado por esta instituci6nfavorecio la creacion de 56,960 empleos durante el periddo 1983-1987.

Por parte del FOMIN, se atendi6 un total de 558 empresas conaportaci6n de capital de cardcter temporal y minoritario, locual ha favorecido para fomentar la desincorporacidn de lasempresas una vez que 6stas han conseguido su madurez, fomentandoasi el apoyo a empresas eficientes.

Con relacidn a las actividades de Asistencia T6cnica yCapacitacion, el PAI apoyo entre 1984-1987 un total de 46,608empresas contribuyendo directamente al proceso de modernizaci6nindustrial.

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III ETAPA DEL PROGRAMA DE APOYO ALA PEQUHIA Y NDIANA INDUSTRIA

Asimisuo y d-rivado del financiaziento obtenido del BancoMundial, durante 1987 NAPIN encomendo la realizacion de una*ncuesta para deteruinar la *ituaci6n do la micro, pequefia ymediana empresa al Instituto Nacional de GCograf la e Inform6tica(INEGI) cuyos resultados fueron publicados hasta 1989, sinembargo la informacifn obtenida fue utilizads durante lanegociaci6n del prdstamo 2858-NE.

Finalmente es conveniente aclarar que la coordinaci6n de losprogramsas fue realizada de conforuidad con los lineamientos depolitica establecidos por el Gobierno Federal para ese peri6doy para 1987 so inicia la incorporaci6n de las diferentesentidades ejecutoras a NAFIN, con el objeto de responder a losrequerizientos del nuevo periddo.

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Prestamo 2325-NE

1. Es conveniente sehialar que no obstante la serie deproblemas que se presentaron durante la ejecuci6n delprestamo 2325-ME, los objetivos generales del mismo fueronalcanzados; el ndmero de empresas apoyadas, crdditosconcedidos y actividades de asistencia tecnica realizadascon los recursos del pr6stamo alcanzaron (y en el caso deasistencia tecnica superaron), las metas establecidasoriginalmente.

2. Adicionalmente a los factores negativos mencionados queafectaron la ejecuci6n del Programa, es convenientemencionar como un factor fundamental que retrasdconsiderablemente el ritmo de desembolsos del pr6stamo, fueel tipo y cantidad de informacion solicitada por el BIRFpara autorizar subproyectos.

3. Al respecto es conveniente sefialar que en futurasoperaciones, este problema podria disminuirse si lostecnicos del Banco Mundial, encargados del disefho delPrograma a ser apoyado, permitieran que existiera una mayorparticipaci6n del ejecutor en dicha etapa de preparacy6ndel proyecto, con el objeto de intercambiar puntos de vistasobre la cantidad y el tipo de informacidn quooperativamente seria mds conveniente presentar paraautorizaci6n de subproyectos, con el objeto de mantener unadecuado ritmo de desembolsos durante la ejecuci6n delmismo.

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x N E X O S

III ITAPA DEL PROGRAMA DE APOYO ALA PEQUERA Y MEDIANA INDUSTRIA

BALACE D E3cucION MR1 PAT E O ONDOS DE FONENTO YELNATPl

ACTIVIDAD NUMERO DE EMPREAS ATENHIDAS1983 1984 1985 1986 1987

1. Orientaci6n y Asistencia T6cnica 14,549 9,119 5,203 8,084 9,653

2. Credito de Habilitaci6n o Avio 4,997 4,815 3,412 4,372

3. Cr6dito Refaccionario 3,927 3,327 2,059 2,220

4. Crddito Refaccionario para Insta- 58 73 58 48 46laciones fisicas

5. Aportaci6n Accionaria 109 121 115 112 ill

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Pr4staao 2325-M1

APOYOS FINANCIZERO CANALI ZADOS A LA MICRO, PEQUERA Y MEDIANA INDUSTRIA(Millones de Pesos)

F O N p 0 18 94L2 2218

1. FOGAIN 2,678.6 6,074.1 18,675.1 14,260.0 8,865.9

2. FOMIN 442.6 1,962.3 666.6 2,672.8 12,143.1

3. FIDEIN 101.5 564.8 2,173.0 4,035.0 5,458.2

4. PAI 9.7 141.4 393.9 473.7 533.2

TOTAL 3,232.4 8,742.6 21,908.6 21,441.5 27,000.4

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