Document 252325
\
Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No. 32248-MX
INTERNATIONAL BANK FOR
RECONSTRUCTION AND DEVELOPMENT
PROGRAM DOCUMENT
FOR A PROPOSED LOAN
IN THE AMOUNT OF US$200.510MILLION
TO
THE UNITED MEXICAN STATES
FOR A
SECOND PROGRAMMATIC ENVIRONMENT DEVELOPMENT POLICY LOAN
August 9,2005
Environmentally and Socially Sustainable Development Sector Management Unit
Colombia and Mexico Country Management Unit
Latin America and the Caribbean Region
This document has a restricted distribution and may be used by recipients only in the performance o f
their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.
UNITED MEXICAN STATES - FISCAL YEAR
January 1 - December 31
CURRENCY EQUIVALENTS
(Exchange Rate Effective as o f August 9,2005
Currency Unit = Peso
10.58 pesos = US$1
WEIGHTS AND MEASURES
Metric System
ABBREVIATIONS AND ACRONYMS
AAA
I Analytical and Advisory Activity
BANOBRAS
National Bank o f Public Works and Services
Banco Nacional de Obras y Servicios Ptiblicos
BANSEFI
National Savings Bank
Banco del Ahorro Nacional y Servicios Financieros
CDM
CFAA
I Clean Development Mechanism
I Country Financial Accountability Assessment
CFE
Federal Electricity Commission
Comisidn Federal de Electricidad
CNA
National Water Commission
Comisidn Nacional del Agua
COMEGEI
Mexican Committee for Projects for Emissions
Reductions and Capture o f Greenhouse Gases
Comite' Mexican0 para Proyectos de Reduccidn de
Emisiones y Captura de Gases de Efecto Invernadero
CONAE
National Commission for Energy Conservation
Comisidn Nacional para el Ahorro de Energia
CONAFOR
National Forestry Commission
Comisidn Nacional Forestal
CONANP
National Commission for Natural Protected Areas
Comisidn Nacional de kreas Naturales Protenidas
CPS
Country Partnership Strategy
~~
~
~
~~~
~~~~~
DOF
Federal Official Gazette - Mexico
Diario OJicial de la Federacidn
DPL
Development Policy Loan
i
~~
~
FOR OFFICIAL USE ONLY
-----_--.----._.I-_
United Nations Economic Commission for Latin
America & the Caribbean
EIA
Environmental Impact Assessment
EMS
Environmental Management Systems
~
I Environment and Na&al
ENRP
Resources Program
ENVDPL
Environment Development Policy Loan
ENVDPLII .
Second Programmatic Environment Development Policy
Loan
ENVSAL
Environment Structural Adjustment Loan
ENVSAL I
,
First Programmatic Environment Structural Adjustment
Loan
ESCO
Energy Service Company
FARAC
T o l l Road Rescue Program
Fideicomiso de Apoyo para el Rescate de Autopistas
Concesionadas
FDI
Foreign L)irec+,Investment
FY
Fiscal Year
-
1 Gross Domestic Product
GDP
GEF
Global Environment Facility
GHG
Greenhouse Gas
I
I Government o f Mexico
GOM
I
IPAB
Institute for the Protection o f Bank Savings
Instituto para la Proteccidn a1 Ahorro Bancaria
IBRD
International Bank for Reconstruction and Development
IDB
Inter-American Development Bank
1 International Monetary Fund
IMF
INE
1
1
ECLAC
National Ecology Institute
InJtituto Nacional de Ecologia
INELEC
National Electric Company
Impulsora Nacional de Electricidad
IS0
International Organization for Standardization
IT WG
Inter-sectoral Technical Working Group
JICA
LAU
--
~
-
Japan International Cooperation Agency
Environmental License
Licenciu ilmbientul Cjnica
I
-7
This document has a restricted distribution and may be used by recipients only in
the performance of their official duties. Its contents may not be otherwise disclosed
without World Bank authorization.
-~
LGEEPA
NAFTA
NDP
~
~-
~
General Law o f Ecological Equilibrium and Environment
Protection
Ley General del Equilibrio Ecoldgico y la Proteccidn a1
Ambiente
I North American Free Trade Agreement
I National Development Plan 2001 - 2006
NGO
Non-Governmental Organization
NO,
OECD
Nitrogen Oxides
OED
Operations Evaluations Department
O&M
Organization o f Economic Cooperation and
Development
I Operations and Maintenance
PCB
Polychlorinated Biphenyl
PCF
Proto-type Carbon Fund
PEMEX
Mexico Petroleum Company
Petrdleos Mexicanos
PDIA
Environmental Institutional Development Program
Programa de Desarrollo Institucional Ambiental
PHRD
Policy and Human Resources Development
PIDIREGAS
Productive Long-Term Infrastructure Projects
Proyectos de Infiaestructura Diferidos en el Registro del
Gasto
PNMARN
National Environment and Natural Resources Program
Programa Nacional de Medio Ambiente y Recursos
Naturales
PPm
PROFEPA
parts per million
PROSENER
Energy Sector Program
Programa Sectorial de Energia
PSBR
Public Sector Borrowing Requirements
PSDFG
Program for Promoting Sustainable Development in the
Federal Government
RBC
River Basin Council
SAGARPA
Secretariat o f Agriculture, Livestock, Rural
Development, Fishing and Nutrition
Secretaria de Agricultura, Ganaderia, Desarrollo Rural,
Pesca y Alimentacidn
-
Federal Attorney General for Environmental Regulation
Procuraduria Federal de Proteccidn a1 Ambiente
~
...
111
SAL
Structural Adjustment Loan
SDP
Sustainable Development Program
SEA
Strategic Environmental Assessment
SECTUR
Secretariat o f Tourism
Secretaria de Turismo
SEDESOL
Secretariat o f Social Development
Secretaria de Desarrollo Social
Secretariat o f Environment and Natural Resources
Secretaria de Medio Ambiente y Recursos Naturales
SENER
Secretariat o f Energy
Secretaria de Energia
SHCP
Secretariat o f Finance
Secretaria de Hacienda y Cre'dito Ptiblico
UNFCCC
United Nations Framework Convention o n Climate
Change
USAID
United States Agency for International Development
WS&S
Water Supply and Sanitation
ZOFEMAT
Federal Maritime Zone
Zona Federal Maritima
Vice President:
Pamela Cox
Country Director:
Isabel Guerrero
Sector Director:
Sector Manager:
John Redwood
Task Team Leader:
Abel Mejia
Ernest0 Sanchez-Triana
iv
MEXICO
SECOND PROGRAMMATIC ENVIRONMENT DEVELOPMENT POLICY LOAN
TABLE OF CONTENTS
.......................................................................................................... i
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.................................................................................................................................. 1
............................................................................................................ 2
United Mexican States -Fiscal Year
Currency Equivalents
Weights and Measures
Abbreviations and Acronyms
Table of Contents
Loan and Program Summary
I INTRODUCTION
I1 THE ECONOMIC CONTEXT
.
.
vi1
A . Recent Economic Developments ..........................................................................................
B. Medium-term Macroeconomic Prospects and Debt Sustainability .......................................
.
..................................................................................................
.
.........................................................
.
................................................................................................................
I11 THE GOVERNMENT PROGRAM
3
7
9
A . Government’s Overall Program ..................................................................
1.........................
9
B. Environmental Challenges in the Tourism Sector and Government Strategy ....................
11
B.1 Actions Supported by ENVDPL I1.................................................................................... 14
B.2 Perspectives for ENVDPL I11........................................................................................... 16
C . Environmental Challenges in the Energy Sector and Government Strategy ......................
16
C .1 Actions Supported by ENVDPL I1....................................................................................
18
C.2 Perspectives for ENVDPL I11 ........................................................................................... 20
D. Environmental Challenges in the Forestry Sector and Government Strategy .................... 20
D.1 Actions Supported by ENVDPL I1................................................................................... 21
D.2 Perspectives for ENVDPL I11........................................................................................... 22
E. Environmental Challenges in the Water Sector and Government Strategy ........................
22
E.1 Actions Supported by ENVDPL I1....................................................................................
24
25
E.2 Perspectives for ENVDPL I11............................................................................................
F. Environmental Management Challenges in Mexico and Government Strategy .................26
F.1 Actions Supported by ENVDPL I1....................................................................................
27
F.2 Perspectives for ENVDPL I11............................................................................................
29
I V BANK SUPPORT TO THE GOVERNMENT STRATEGY
A . Link to CPS .........................................................................................................................
B. Collaboration with the I M F and Other Donors ...................................................................
C . Relationship to Other Bank Operations ..............................................................................
D. Lessons Learned..................................................................................................................
E. Analytical Underpinnings ....................................................................................................
V PROPOSED OPERATION
. .
A . Program Objectives and Prior Actions ................................................................................
B. Additional Key Actions Undertakenby the G O M under ENVDPL I1...............................
C . Loan Amount and Tranching ..............................................................................................
D. Prior Actions for ENVDPL I11............................................................................................
V I OPERATION IMPLEMENTATION
A . Poverty and Social Impacts.................................................................................................
B. Supervision..........................................................................................................................
C . Fiduciary Aspects ................................................................................................................
.
..............................................................................................
V
29
29
30
30
32
34
36
36
37
39
39
40
40
42
42
D. Disbursement and Auditing ,...........................................,.................,................... ............. 42
E. Environmental Aspects ........................................................................................................ 43
F. R i s k s and Risk Mitigation ................................................................................................... 45
ANNEX 1: Indicators of Progress for Key Actions Undertaken by G O M under ENVDPL II...47
.......
ANNEX 2: Triggers for ENVDPL I1and Evidence Submitted by G O M
50
ANNEX 3: GOM’s EnvironmentProgram: Matrix of Objectives, Tentative Progress and Outcome
Indicators
,
52
ANNEX 4: Letter o f Development Policy.
60
ANNEX 5: Fund Relations Note
87
ANNEX 6: Country at a Glance
93
ANNEX 7: Social Indicators......................................................................................
95
ANNEX 8: Key Economic Indicators
96
ANNEX 9: Mexico EnvironmentalIndicators
,
97
ANNEX 10: Selected Indicators of Bank Portfolio Performance and Management
98
ANNEX 11: IBRDEDA Program Summary
99
ANNEX 12: Summary of Nonlending Services
,
”..
100
ANNEX 13: Statement of IFC’s Committed and Outstanding Portfolio
101
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This operation was prepared by a team consisting o f Ernesto Sanchez-Triana, Yewande
Awe, Carolina Urrutia Vasquez, William Reuben, Angela Armstrong, Juan Carlos
Belausteguigoitia, Ricardo Hemhndez, Andrea Semaan, Monique Pelloux Patron, and
Santiago Sandoval (LCSES); Miguel Lopez-Bakovic (LCC 1C); Douglas Olson
(EASRD); Jozef Draaisma (LCSPE); Charles Di Leva (LEGEN); Todd Johnson, Kulsum
Ahmed (ENV); Juan Carlos Alvarez (LEGLA); Efraim Jimenez (LCOPR); Victor
Ordonez (LCOAA); Santiago Enriquez (consultant); Alexandra Zenzes-Cordera
(consultant); Camilla Rossaak (consultant) and Michelle Falck (consultant). The task
team leader i s Ernesto Sanchez-Triana (LCSEN). The team worked under the general
guidance o f Isabel Guerrero (Country Director, LCC 1C) and John Redwood (Sector
Director, LCSES). Peer reviewers were Laura Tlaiye (ENV); Sergio Margulis (AFTSD);
and Muthukumara Mani (ENV).
’
vi
MEXICO
SECOND PROGRAMMATIC ENVIRONMENT DEVELOPMENT POLICY LOAN
LOAN AND PROGRAM SUMMARY
I Borrower:
The United Mexican States
Secretaria de Medio Ambiente y Recursos Naturales
(SEMARNAT), Secretaria de Hacienda y CrCdito Publico (SHCP),
Secretaria de Turismo (SECTUR), Comisi6n Nacional Forestal
(CONAFOR), Comisi6n Nacional del Agua (CNA), Secretaria de
Energia (SENER).
r
I
Amount and Terms:
Tranching:
US$200.5 10 million fixed spread, U.S. dollar-denominated loan,
4.5-year grace period and total repayment period o f 14.5 years.
Front-end fee: 0.25 percent o f the loan amount, capitalized.
The full amount o f the loan will be disbursed in a single tranche
upon effectiveness.
The proposed loan will support the second stage o f the
government's medium-term, outcome-based program to promote
sustainable development. The overarching objective o f the program
i s to balance socio-economic development with environmental
protection and improvement. The program will focus on: (i)
mainstreaming environmental concerns in the development
agendas o f key sectors - tourism, energy, forestry and water - as
prioritized by the Government o f Mexico (GOM); and (ii)
improving the effectiveness and efficiency o f local environmental
management processes in Mexico.
The prior actions completed by the GOM for the proposed
operation include: (i)
establishment and implementation o f a set of
indicators and benchmarks for measurement o f good environmental
performance o f tourist facilities; (ii)a Secretariat o f Energyapproved design o f a national fund for renewable energy
promotion; (iii)
establishment and operational startup o f a Clean
Development Mechanism (CDM) Office, involving at least SENER
and SEMARNAT, according to rules set up at the Marrakech and
Bonn Conferences o f the Parties o f the UNFCCC; (iv) publication
o f water availability data and an improved water rights registry as
foundational steps in the implementation o f a functioning watei
rights market, consistent with the current regulatory framework:
and (v) the initiation o f decentralization efforts (as evidenced by
signature o f ,a convenio, capacity building, or joint operation) bq
over 10 States, including the decentralization o f permit issuance
functions for sustainable wildlife use in three states, for sustainable
use o f forest resources in one state, and the decentralization oj
environmental' licenses for industrial discharges and emission:
vii
(Licencia Ambiental h a ) in two states.
Additional key actions undertaken by the GOM in preparation for
the proposed operation include: (i)
the development o f action plans
in fourteen key tourist destinations to implement local Agenda 21
Programs for Sustainable Tourism; (ii)
the evaluation o f programs
to improve the quality o f transport fuels and establishment o f
incentives to promote energy efficiency and renewable energy; (iii)
the enactment o f a new General L a w for Sustainable Forestry
Development and regulations consistent with the law; (iv) the
passing o f amendments to the National Water Law, publication o f
water availability data, and an improved water rights registry as
foundational steps in the implementation o f a functioning water
rights market; and (v) the decentralization o f environmental
management functions including streamlining the administrative
procedures in the environment sector and continuing to implement
the L a w o n Transparency, which will allow public scrutiny o f
environmental management.
In the tourism sector, the implementation o f cooperative
approaches involving public entities, the private sector and other
community stakeholders for joint action in addressing
environmental problems helps to improve environmental
conditions at tourist sites. Actions supported in the energy sector
contribute to reducing local air pollution and improving
mechanisms for climate change mitigation. In the forestry sector, a
new legal and regulatory framework fosters sustainable forestry
management practices. Actions in the water program promote
decentralization o f water management responsibilities to river basin
agencies to improve the allocation o f water resources and enhance
programs for water pollution control. Actions to improve
environmental management strengthen the capacity of
environment authorities to foster accountability and transparency
and to mitigate potential negative impacts o f investment projects.
Increased public participation in decision-making and transparency
in environmental management processes help ensure that the needs
o f vulnerable persons are taken into account in decision-making on
environmental issues which affect them.
ENVSAL program faces a number o f
macroeconomic, political, social and institutional risks.
The
potential
(i)
Macroeconomic risks could be associated with effects o n the
Mexican economy caused by a sharper slowdown o f the U S (and
global) economy, a stronger than expected tightening o f monetary
policy conditions, and a high volatility o f o i l prices. Recenl
experience shows that such a slowdown most likely will affeci
Mexican economic growth rather than price stability or access t c
...
Vlll
external financing. A sharper tightening o f monetary policy in the
U S will lead not only to an increase o f interest rates on external
financing requirements, but also - and more importantly - to an
increase o f domestic interest rates. Mexico has made important
progress, however, to reduce i t s vulnerability to adverse shocks and
to enhance i t s ability to absorb such shocks.
(ii)Political risks would be associated with the Mexican
presidential election scheduled to take place in 2006 exist. Changes
within the cabinet prior to the election, as well as the change of
administration in December 2006, may result in a loss of
momentum to complete the reforms supported by this program.
These risks are mitigated by the following factors: the legal and
regulatory framework established under ENVDPL I1 through the
enactment o f laws and regulations provides a basis to ensure the
continuity o f the policies, and the design o f the program, which
anchors the formulation o f sectoral environmental strategies on
consensus-building among different stakeholders, further
strengthens the basis for continuity o f policies.
(iii)
Potential barriers to decentralize water resources management
responsibilities to the water basin agencies and to promote a greater
degree o f transparency, accountability and public participation pose
certain social and institutional risks. These risks are addressed by
the actions supported by the program:
(a) an effective capacity building program;
(b) an accountability framework and a tracking system that will
monitor decentralization o f environmental functions and
competencies;
(c) transparent and accessible environmental public infomatior
systems;
(d) an enhanced communication strategy for the sector; and
(e) the development o f financial autonomy plans in the case 01
decentralization to water basin agencies, as well as support foi
capacity building activities supported by other Bank operations
particularly the Integrated Management o f Basins and Aquifer:
Project.
PO79748
ix
I.
INTRODUCTION
1.
This document proposes a Second Programmatic Environment Development Policy Loan
(ENVDPL 11)’ o f US$200.510 million to the government o f Mexico (GOM). This development
policy loan (DPL) i s the second in a series o f three loans, to be disbursed over a five-year period,
and aims to support the government’s efforts to achieve the objectives of: (i)mainstreaming
environmental concerns in the development agenda o f key sectors (tourism, energy, water and
forestry) and (ii)
improving the efficiency and effectiveness o f local environmental management
processes in Mexico. The E N V S A L program and proposed loan directly support actions that
promote environmental sustainability, which, in addition to reducing poverty, inequality, and
increasing competitiveness, i s one o f the four pillars o f the 2004-2008 Country Partnership
Strategy (CPS) for Mexico and the GOM’s Program for Promoting Sustainable Development in
the Federal Government (PSDFG). Progress on key actions completed by GOM up to M a y 2005
under ENVDPL I1 is summarized in Annex 1.
2.
The first loan (ENVSAL I),
completed in FY 2004, supported important initial actions
consistent with the objectives o f the E N V S A L program. These actions included, among others,
the establishment o f mechanisms for inter-institutional coordination among key sectors, the
development o f medium-term targets to guide the incorporation o f environmental concerns in
these sectors, and modifications o f laws to facilitate improvements and increase transparency in
environmental management. The specific achievements o f ENVSAL Iare summarized in the
Implementation Completion Report for the operation.2 The actions and activities to be supported
by the proposed loan build o n the achievements o f E N V S A L Iand represent significant advances
in the government’s medium-term program. A third loan, contemplated for 2007, would support
the GOM’s efforts to consolidate and ensure the sustainability o f i t s environmental
mainstreaming program in the long term.
3.
The prior actions completed by the GOM for E N V D P L I1 include: (i)
establishment and
implementation o f a set o f indicators and benchmarks for measurement o f good environmental
performance o f tourist facilities and destinations; (ii)
Secretariat o f Energy-approved design o f a
national fund for renewable energy promotion; (iii)
establishment and start o f operation o f a
Clean Development Mechanism (CDM) Office, involving SENER and SEMARNAT, according
to rules set up at the Marrakech and Bonn Conferences o f the Parties o f the UNFCCC; (iv)
publication o f water availability data and an improved water rights registry as foundational steps
in the implementation o f a functioning water rights market, consistent with the current regulatory
framework; and (v) the initiation o f decentralization efforts (as evidenced by signature o f a
convenio, capacity building, or joint operation) by over 10 States, including the decentralization
The Program was first presented as a programmatic Structural Adjustment Program in 2002, but has been
redesigned for the proposed operation as a Development Policy Program in accordance with the Bank’s recently
approved Operational Policy 8.60 on Development Policy Lending. ENVDPL I1 previously has been referred to as
ENVSAL 11. The three-phase loan program continues to be referred to as the E N V S A L program.
SimpliJed Implementation Completion Report. United Mexican States: First Programmatic Environment
Structural .4djustment Loan, Loan No. 7136-ME. Washington: DC: ‘The World Bank. 2004.
3GOM’s Environmental Mainstreaming Agenda i s synonymoiis to the Agenda de Tqansversalidad de las Politicas
Plihlicsls Amhientales.
’
1
o f permit issuance functions for sustainable wildlife use in three states, for sustainable use o f
forest resources in one state, and the decentralization o f environmental licenses for industrial
discharges and.emissions (Licencia Ambiental Unica) in two states.
4.
Additional key actions undertaken by the G O M under ENVDPL I1 include: (i)
the
development o f action plans in fourteen key tourist destinations to implement local Agenda 21
Programs for Sustainable Tourism; (ii)
the evaluation o f programs to improve the quality o f
transport fuels and the establishment o f incentives to promote energy efficiency and renewable
energy; (iii)
the enactment o f a new General L a w for Sustainable Forestry Development and
regulations consistent with the law; (iv) passing o f amendments to the National Water Law, the
publication o f water availability data, and an improved water rights registry as foundational steps
in the implementation o f a functioning water rights market; and (v) the decentralization o f
environmental management functions including streamlining the administrative procedures in the
environment sector and continuing to implement the L a w on Transparency, which will allow
public scrutiny o f environmental management.
5.
This report i s organized as follows: Chapter I1 describes the country’s economic context,
including recent economic developments and the macroeconomic environment. Chapter I11
presents the government’s environmental mainstreaming agenda and discusses the measures it
has taken to address the challenges it faces, including specific measures supported by the
operations that constitute the D P L program. In this context, the chapter summarizes the
achievements o f E N V S A L I and details specific actions and activities to be supported by
E N V D P L 11. Furthermore, prospective activities and actions to be supported by a future
operation (ENVDPL 111) are introduced. Chapter I V discusses the rationale for the Bank’s
involvement in the reform efforts in Mexico and the lessons learned from ENVSAL I.
Chapter V
describes the specific objectives o f the E N V D P L 11, including prior actions completed and
triggers met by the G O M for E N V D P L 11. Finally, Chapter V I discusses implementation o f the
proposed operation. The GOM’s Letter o f Development Policy i s presented in Annex 4.
11.
THE ECONOMIC CONTEXT
6.
The Mexican economy gained momentum in 2004 by taking advantage o f a global
economic recovery and strong oil prices. Broad-based economic growth - the highest since
2000 - was achieved within a framework o f macroeconomic and financial stability. Moderate
levels o f inflation, fiscal discipline and a strengthened domestic financial system provide a solid
foundation for economic performance throughout the remaining period o f the current
administration, the upcoming presidential elections (July 2006), and the transition to the next
administration.
7.
Important policy challenges to enhance the economy’s competitiveness and growth
capacity remain. Political pluralism has hampered ambitious reforms in areas such as
broadening the tax base, private sector participation in the energy sector, labor market regulation
and judicial modernization. The fragmentation o f Congress, as well as the upcoming presidential
elections, i s likely to limit progress o n the reform agenda over the next year-and-a-half to less
contentious elements o f the reform initiatives and issues that do not require legislative approval.
2
8.
Strengthened monetary, financial sector, fiscal and debt management policies and
institutions should allow the Mexican economy to cope with market volatilities related to a
period of increased political competition. Heightened political uncertainty in the run-up to the
presidential elections may lead to increased volatility o n financial markets with adverse
implications for the real economy. Mexico has had a particularly bad experience in this regard,
as some o f the country’s worst economic crises took place during periods o f political transition.
With the election o f President Fox in 2000, however, Mexico was able to avoid an economic
crisis due to its flexible exchange rate and prudent monetary, fiscal and debt management
policies, which have been maintained under the Fox administration. In addition to the progress
achieved with the continued implementation o f sound policies and a strengthening o f the
institutional framework, Mexican policymakers will be taking additional precautionary measures
to further reduce economic and market vulnerabilities during the upcoming period o f political
transition.
A.
RECENT ECONOMIC DEVELOPMENTS
9.
Broad-based economic growth during 2004 consolidatedthe recovery from the slowgrowth and recessionary period that started at the end o f 2000. Real GDP for 2004 expanded
by 4.4 percent, a slightly higher rate than earlier expected and a sharp contrast to the weak
growth registered during the previous three years. A strong global economic expansion, high
international o i l prices and export revenue, favorable external financial conditions, and an
increased availability o f domestic credit stimulated aggregate demand in 2004 in all o f i t s major
categories: private consumption, investment and exports, thereby raising the level o f economic
activity and employment.
10.
A significant resumption of non-oil export growth sparked the recovery o f economic
activity and confirms a strong integration of a substantial segment o f Mexican industry
into U.S. industrial growth. Non-oil exports increased by 12.9 percent in 2004, compared to an
average annual decline o f 0.8 percent in the preceding three years. Mexican non-oil export
performance and industrial production are closely related to the U.S. industrial production cycle,
even though Mexican goods lost some o f their market share in U.S. imports, indicating some
structural problems o f competitiveness and productivity.
11.
Continued price stability and an increasing availability of domestic credit
contributed to a further strengthening o f private consumption and a recovery of business
investment demand. Throughout the past economic recession, the expansion o f private
consumption exercised a moderating impact o n the downturn o f economic activity. Despite a
reduction in formal sector employment, the lack o f an erosion in real wages due to a further
reduction in the level o f inflation allowed for such a positive evolution o f private consumption,
The outlook o f continued price stability, as well as policies implemented over the past few years
aimed at a consolidation o f the country’s banking industry and financial sector development, also
allowed for a sound domestic credit expansion. In 2004, for the first time since the 1995 banking
crisis, the amount of commercial bank credit outstanding to the private sector in Mexico showed
an increase in real terms, thereby providing an additional impulse for private consumption and
business investment.
3
12.
Jobs lost in the formal, private sector during the recession were almost fully
recovered in the expansion of economic activity during 2004. Even though the number o f jobs
in the formal private sector i s now back at the level observed before the recession, i.e., end-2000,
the continued expansion o f the economically active population demands a stronger generation o f
employment opportunities. According to a renewed, monthly national employment survey, only
37 percent o f the total working population enjoys access to employment-related social security
benefits.
13.
Headline inflation rising above its medium-term target interval o f 2-4 percent
triggered a cycle o f monetary policy tightening. Annual consumer price inflation increased
throughout 2004, with year-end inflation up at 5.2 percent compared to 4.0 percent at the end o f
2003. The rapid increase in inflation during 2004 has been attributed in part to temporary supply
shocks in areas such as agricultural goods and international commodities. Monetary policy
conditions were nevertheless tightened o n several occasions throughout 2004 and early 2005 in
order to avoid a spill-over into inflation expectations and contractual wage settlements. Monetary
restraint also took place in line with and in anticipation o f a tightening o f U.S. monetary policy.
Domestic interest rates, in particular toward the short-end o f the curve, moved up significantly
after having reached historically l o w levels in mid-2003.
14.
The government managed to keep the deficit within i t s annual budget targets and in
line with its medium-term target o f fiscal consolidation. Higher-than-budgeted o i l revenue
played an important role in achieving the annual fiscal targets, compensating for lower tax
revenue and higher expenditure in public investment and revenue sharing with state and
municipal governments. The increase o f oil-related budget revenue by almost 2 percentage
points o f gross domestic product (GDP) over the past two years thus allowed for a budget deficit
reduction by almost half that amount, though not in addition to the original deficit reduction
target (Table 11-1). This led to a substantial increase o f the public sector reliance on o i l revenue,
raising i t s share f r o m slightly under 30 percent o f total revenue in 2002 t o 36 percent in 2004,
and amplifyingthe vulnerability o f public sector finances to a drop in international o i l prices.
Table 11-1. Budgetary public sector revenue, exp
% o f GDP)
Revenue
Oil
Non-Oil
O.W. Tax revenue
2002
22.1%
6.5%
15.6%
9.8%
2003
23.2%
7.7%
15.5%
9.8%
2004
23.2%
8.4%
14.9%
9.4%
Expenditures
Current
Capital
State and municipal revenue share
Interest
23.2%
13.8%
3.2%
3.4%
2.8%
23.7%
14.7%
2.9%
3.6%
2.8%
23.2%
13.9%
3.4%
3.8%
2.7%
Other (negative means net expenditure)
-0.1%
-0.2%
-0.3%
Budget Balance (negative means.deficit)
-1.2%
-0.6%
-0.3%
Source: Bank staff estimates based on data fiom SHCP
4
..and was broad-based with an expansion
of exports, private consumption and
investment.
Econorricgrov4h recovered fromthe 2001-2003
recession
...
12%
.I!
I
3+
2w
2001
2co2
I
m
2003
Hgh oil prices boosted government
revenue
...
EO%
n
0 Consumption
0 Changes in Stocks
IInvestment
0 Expons
..led to a recovery of formal, private
sector employment.
I
-
I
2001
-m
2002
2004
2003
-Mexican Mx
2000
ZOO1
...
Mi
2000
I
I
(2000=100) - U S
I
(2000=100)
2003
2004
..allowing for a reduction of
public debt to GDP.
Continued strong integration of Mexican industry into
US. industrial production
--Mexico
ZOO2
2001
2002
ExtemaJDebt
I
Domestic Debt
5
2003
2004
15.
Off-budget items continue to contribute substantially to the public sector borrowing
requirements (PSBR) and were reduced less than earlier envisaged largely through the
increased use o f off-budget finance o f public investments in the energy sector (Table 11-2).
In addition to the traditional budget balance measure, the Secretariat o f Finance (SHCP) started
to publish as o f 2001 a broader PSBR measure, including several off-budget expenditure items,
e.g., the cost to the public sector o f the bank and toll road bail-outs (Institute for the Protection o f
Bank Savings, IPAB, and the toll road rescue program, FARAC) and the private sector financed
projects in the state-owned energy sector companies (PIDIREGAS). The broader or augmented
PSBR (or PSBR without non-recurrent revenue) measure strengthens the need for fiscal
consolidation.
Budget Deficit
PID~REGAS
IPAB, FAKAC
2002
1.2%
0.8%
0.6%
2003
0.6%
1.1%
0.8%
2004
0.3%
1.1%
0.4%
PSBR
2.6%
2.5%
1.9%
Non-recurrent revenue
-0.7%
-0.7%
-0.7%
PSBR without non-recurrent revenue
3.3%
3.2%
2.7%
16.
Public debt-to-GDP ratios started to head downwards in 2004 as a result o f fiscal
consolidation, higher growth and exchange rate stabilization, though remain at a
considerably high level. The total net public debt-to-GDP ratio fell by about three percentage
points to 41.4 percent in 2004, thereby recovering the level attained earlier in 2001 (Table 11-3).
The increase o f the debt-to-GDP ratio in 2002 and 2003 should be attributed mainly to a below
average growth and a depreciation o f the real exchange rate, counteracting the impact o f fiscal
consolidation on the ratio during this period. In 2004, these three basic elements that bring about
changes in the debt-to-ratio were aligned thereby allowing for the reduction in the ratio as
observed.
2000
Total Net Augmented Debt
Domestic
External
Budgetary
PIDIREGAS
IPAB, FARAC and other
I
42.2%
27.6%
14.6%
21.1%
2.8%
1
18.4%
2001
2002
2003
41.7%
43.7%
44.5%
28.2%
28.3%
13.5%
15.5%
21.O%
22.7%
23.3%
2.7%
3.9%
5.1%
17.2%
16.1%
17.9%
17.
'
28.0%
~
16.5%
7
41.4%
25.7%
15.7%
22.4%
-
5.6%
13.3%
The 2001 quarterly publication o f the augmented debt, similar to the adoption o f the
broadened PSBR deficit measure, greatly enhances the transparency o f public finances and
allows for a better understanding and international comparison o f the level and evolution
o f public debt. Mexico manages some public sector liabilities outside o f i t s regular budget. A
6
broad debt measure, including such off-budget public sector liabilities, allows for a more
accurate assessment o f fiscal and debt sustainability and balance sheet vulnerabilities by both the
public and private sector. The Mexican authorities observe and publish the traditional net
budgetary debt as well as the broader net augmented debt, including all government guaranteed
debt. An even broader measure would suggest the use o f gross instead o f net debt, increasing in
the case o f Mexico the debt-to-GDP ratio by another 5-6 percentage points over the past few
years, At a gross augmented debt-to-GDP ratio o f about 47 percent at the end o f 2004, Mexico
maintains a level o f debt slightly below the median o f a group o f comparable emerging market
economie~.~
18.
Mexico has no Purchases and Loans outstanding with the IMF and maintains
periodic bilateral discussions as part of the Fund’s regular surveillance program. The last
Article I V consultation was concluded by the International Monetary Fund (IMF) Executive
Board on October 18, 2004. The Executive Directors commended the Mexican authorities for the
continued pursuit o f sound macroeconomic policies, referring in particular to a track record o f
meeting fiscal targets, the successful implementation o f an inflation-targeting framework, an
effective flexible exchange rate regime, a sound banking sector, and a commitment to reduce
vulnerabilities relating to public debt. Some o f the main challenges going forward include
reinvigorating the program o f structural reforms and establishing mechanisms to reduce the
budget dependency o n volatile o i l revenues. The staff report, a Public Information Notice, and a
statement by the Executive Director for Mexico have been published in December 2004 and are
available on the internet (www.imf.org).
B.
MEDIUM-TERM MACROECONOMIC PROSPECTS AND
DEBT SUSTAINABILITY
19.
The external conditions that provided a favorable economic environment during
2004 are unlikely to prevail over the next few years, while limited progress on the
legislative reform agenda will keep economic growth in Mexico largely subject to the
evolution of U.S. growth. The government’s medium-term growth projection o f 4.0 percent
annual average GDP growth for 2005-2008 may thus result slightly more challenging to attain,
even though the budget assumption o f 3.8 percent GDP growth in 2005 seems well within reach
in view o f the higher-than-expected, broad-based growth performance last year. A moderation o f
US. growth, lower o i l prices, higher international interest rates and increased political
uncertainty in the run-up to the presidential elections and change o f administration are slowing
down economic growth in the medium term.
GDP
Inflation
Current Account
3.8%
3.9%
-1.6%
Source: Bank staff estimates based on data from SHCP
3.6%
3.8%
-2.0%
3.4%
3.5%
-2.2%
Moissinac, Vincent. Mexico: Selected Issues. Washington, DC: International Monetary Fund. 2004.
7
3.4%
3.5%
-2.4%
20.
Sound monetary and fiscal policies will contribute to a continuation o f the broadbased economic growth that will avoid the creation o f major macroeconomic imbalances
and lead to only a gradual and moderate increase o f the country’s balance o f payments
current account deficit. Consolidation o f the progress attained in the reduction o f inflation, the
banking sector, and reforms in the country’s financial sector will continue the healthy expansion
o f domestic credit and financial intermediation contributing to the growth o f domestic
consumption and investment in line with the steady development o f external demand. Financing
o f the country’s external deficit, at about 2.0 - 2.5 percent o f GDP, will continue to take place
largely through non-debt creating foreign direct investment (FDI) inflows, thereby maintaining
the current moderate vulnerability to adverse shifts in market sentiment.
21.
T h e government’s medium-term fiscal framework aims at further fiscal
consolidation and reduction o f the public debt-to-GDP ratio. With the presentation o f i t s
2005 budget in September o f last year, the government updated its medium-term fiscal
projections for the period covering 2005-2008. The projections include ambitious targets o n the
budget balance, consisting o f a small budget surplus as o f 2006, and a reduction o f off-budget
financing incorporating only existing PIDIREGAS projects. The fiscal consolidation effort
envisaged in this framework should reduce the net augmented debt to about 35 percent o f GDP
by 2008. Bank staff estimates o n the basis o f current information, including an adjustment o f
economic growth and o i l price assumptions for the period, points at a more gradual reduction o f
the debt-to-GDP ratio to about 39 percent by 2008. These estimates assume that the government
will be able to attain i t s budget balance target and allow for a slightly higher than envisaged offbudget financing o f publicly guaranteed private sector financed investments in the energy sector
in order to assure future o i l production.
Despite some remaining vulnerabilities, public debt management diminished the
22.
exposure to refinancing, interest and exchange rate risks. A consistent implementation o f the
public debt management strategy aimed at reducing vulnerabilities and long-term financing costs
has led to a significant strengthening o f the government’s debt structure. The increasing use
made o f long-term fixed rate peso denominated bonds (with 3, 5, 7, 10 and 20-year fixed rate
notes now issued on a regular basis) to finance public sector needs contributed to a rapid increase
in the average maturity o f domestic government debt, a reduction o f debt and debt service
payment sensitivity to changes in interest rates or inflation, and the development o f the domestic
yield curve. External financing o f budgetary financing needs has been restricted to the
refinancing o f existing liabilities and repayments, thereby limitingthe increase in external debt to
the off-budget PIDIREGAS debt. As the latter i s used for investment in the energy sector
(primarily oil), generating mainly foreign currency related revenue, this policy has contributed to
a reduction o f exchange rate risk o f public debt. The Hacienda cycle and Transformation
program includes public debt management activities within SHCP in areas such as registration,
accounting and on-line availability o f information o n public debt and debt transactions enhancing
the implementation o f debt and debt service related operations and the formulation o f adequate
debt management strategies.
23.
Mexico’s macroeconomic framework i s solid and i s adequate for the purpose o f this
operation. Progress achieved in attaining macroeconomic stability i s starting to pay o f f with
economic growth stabilizing around the economy’s current growth potential. Improvements in
the country’s sovereign credit risk ratings are yet another reflection o f such progress achieved
8
and provide a reasonable assurance o f continued adequate access to external finance, even at
times o f increased market volatility. The Hacienda Transformation program further enhances the
ability o f the government to implement fiscal policies, including the formulation o f adjustments
in case o f shocks by providing accurate and timely information on the evolution o f public sector
revenue and expenditure.
24.
Environmental degradation and unsustainable use of natural resources can affect
the country’s prospects for long-term economic growth. The tourism sector (which
contributes about 9 percent of GDP) would seriously overlook and compromise its growth by not
incorporating the -environment and i t s potential impact on the sector. In the case o f the energy
sector, environmental impacts o n human health can affect labor productivity. A casual estimation
suggests that a 10 percent reduction in ozone and fine particulate matter levels would be
associated with health and productivity benefits o f US$2 billion per year.5The forestry sector is
affected by continued deforestation, which i s associated with an increased frequency in flooding
and landslides, loss o f agricultural land due to erosion, and loss o f livelihoods for forest dwellers,
most o f whom are impoverished. Finally, water pollution has been estimated by the National
Water Commission (CNA) to result in a significant loss o f social welfare.
25.
Impacts of environmental degradation o n human health, economic activities, and
social welfare indicate that the incorporation o f environmental concerns in key economic
sectors i s crucial to ensure the sustainability o f long-term economic growth. The costs o f
addressing environmental degradation and unsustainable use o f natural resources crowd out other
socially desirable expenses which could undermine long-term macroeconomic stability.
Safeguarding the environment and natural resource base over the long-term serves as a
complement to sound macroeconomic policies in enabling sustained high quality growth. Since
much environmental degradation results from productive sectors, there i s a growing need for
inter-sectoral coordination in order to address them adequately.
111.
A.
THE GOVERNMENT PROGRAM
GOVERNMENT’S OVERALL PROGRAM
26.
Environmental degradation and overexploitation o f natural resources l i e at the very core
o f Mexico’s development challenges. The loss o f social welfare associated with these factors has
been estimated at 10 percent o f GDP, while expenditure in environmental protection has
averaged around 0.5% percent o f GDP6. These estimates underscore significant loss o f
productivity and inefficient use o f valuable resources, which the environment sector can address
adequately only by coordinating its efforts with those o f the economic sectors that are
responsible for the largest share o f environmental degradation.
~~~
~
Evans, John et al. “Health Benefits ofAir Pollution Control,” Air Quality in the Mexico Megacity, Mexico City:
Kluwer Academic Publishers. 2002.
Instituto Nacional de Estadistica Geogrhfica e Informhtica. Sistema de Cuentas Nacionales de M h i c o : Sistema de
Cuentas Econdmicasy Ecoldgicas de MPxico (1993-1 999). Mexico City: INEGI. 2000.
9
27.
The G O M has embarked o n an extensive reform program aimed to enhance the country’s
competitiveness and stimulate economic growth’. At the core o f this program, the G O M
acknowledges significant potential linkages between environment, competitiveness, and
economic growth. These potential linkages are evident in: (i)the opportunity to employ
Mexico’s richly endowed natural environment as a competitive advantage to meet the demands
o f more selective and lucrative markets; and (ii)
the need for governmental interventions to
address the inability o f the market to mitigate the negative impacts o f environmental degradation
on human health, productivity, and competitiveness.
The overarching objectives o f the ENVSAL program were designed specifically to
28.
support the G O M in introducing policy reforms that strategically focus o n the above-mentioned
linkages in order to mainstream the environment in key sectors and improve the effectiveness
and efficiency o f local environmental management. Specific actions accomplished by the G O M
with the support o f E N V D P L I1 are presented in Annex 2. With respect to environmental
mainstreaming in key development agendas, the G O M has selected four sectors in which
environmental issues are closely linked with the country’s broader development agenda: tourism,
energy, water and forestry. Results from analytical work show that environmental mainstreaming
i s crucial in these sectors for the sustainability o f Mexico’s growth,’ particularly since the sectors
play a fundamental role in fostering or constraining economic growth and investment.
29.
In 2001, the G O M presented i t s “National Development Plan (NDP) 2001-2006,” which
outlines the policies and strategies that the Federal Government would pursue to achieve
Mexico’s development goals. The N D P identifies the country’s priorities and provides the basis
for the creation o f three cabinet-level commissions to address them. The commissions focus o n
three strategic areas: Social and Human Development, Growth with Quality (sustainable
economic development), and Order and Respect (governance and rule o f law). The importance o f
the environment and natural resource sector in the N D P is highlighted by the fact that it i s the
only sector that i s included in all three commissions, in recognition of: (i)
the linkages between
environment and social welfare in promoting social and human development; (ii)
the need to
rationally use the country’s natural capital and its environment to stimulate sustainable growth;
and (iii)
the urgency o f environmental problems related to water and forestry that require them to
be treated as national security issues.
30.
The N D P lists the programs to be carried out b y the executive branch and describes the
twelve principles that guide their development and implementation. Four o f these principles are
o f particular relevance for environmental management:
(i)Sustainability means that environmental considerations are to be incorporated in all
government programs;
(ii)Competitiveness calls for increased efficiency and effectiveness in regulation and
governmental services to assist the development o f the productive sector;
(iii)
Federalism calls for greater decentralization based o n efficacy; and
’
Presidencia de la Republica. Plan Nacional de Desarrollo 2001-2006. Mexico City: Gobiemo de 10s Estados
Unidos Mexicanos. 200 1.
The selection o f these priority environmental areas i s based on analytical work carried out by agencies o f GOM,
with the support o f multilateral organizations such as OECD, ECLAC, and the World Bank.
10
(iv) Transparency requires setting clear criteria and procedures for governmental decisionmaking processes and informing the citizenry about the progress o f federal programs and the
resources that they used.
31.
In line with the NDP, the Secretariat o f Environment and Natural Resources
(SEMARNAT) prepared the Environment and Natural Resources Program (ENRP) 200 1-2006.
The ENRP lays out a new environmental policy, which stresses the need to mainstream the
sustainability principle in the actions of ministries and institutions representing various economic
sectors. SEMARNAT developed 16 additional programs to address different environmental
concerns. Among these i s the Program to Promote Sustainable Development in the Federal
Government (PSDFG), which outlined activities to be undertaken by 16 ministries and a encies
to improve the sustainability o f their actions, together with corresponding specific goals. Early
5
in 2004, the ENRP was expanded to incorporate goals for a total o f 32 public institutions in the
Environmental Mainstreaming Agenda for Sustainable Development.
32.
The importance of mainstreaming environmental concerns in key productive sectors o f
the economy is evident in light o f the common underlying objective in each o f the sectors
mentioned above to incorporate principles o f sustainability in their actions and activities. The
GOM has identified the tourism, energy, forestry, and water sectors as key drivers o f economic
growth in the country and i s taking significant steps to guarantee that economic growth does not
occur at the expense o f environmental degradation. Environmental mainstreaming allows the
GOM to ensure that the significant contributions o f these sectors to the welfare o f the country are
not undermined by undesirable impacts on health and productivity.
33.
In 2002, the G O M requested the Bank’s support for the strategic components o f i t s
program described above. E N V D P L I1 aims to deepen and consolidate the reforms that were
initiated under the first operation (ENVSAL I)
by providing assistance to continue the efforts o f
the GOM: (i)
to mainstream environmental considerations in key economic sectors identified as
priorities, namely tourism, energy, water, and forestry, and (ii)
to improve the efficiency and
effectiveness o f environmental management processes. Environmental mainstreaming will help
advance Mexico’s sustainability agenda and will focus o n the four sectors that have been
selected by the GOM. In line with the NDP, improving the efficiency and effectiveness o f
environmental management processes will support the environmental sector’s contributions to
enhancing competitiveness, decentralization, and transparency. The following sections describe
in detail the environmental challenges faced in each o f the four priority sectors and the GOM’s
program to incorporate sustainability in the sectors by addressing the environmental challenges.
B.
ENVIRONMENTAL CHALLENGES IN THE TOURISM SECTOR AND
GOVERNMENT STRATEGY
34.
The tourism sector has been, and continues to be, one o f Mexico’s main drivers o f
economic growth. Mainstreaming environmental considerations into the tourism sector has
allowed Mexico to strengthen its competitive advantages to meet the demand o f high end market
segments and provide a more sustainable basis for all tourism activities. The sector generates
Secretaria de Medio Ambiente y Recursos Naturales. Transversalidadde las Politicas Pziblicas para el Desarrollo
Sustentable, Mexico City: SEMARNAT. 2004.
11
approximately 9 percent o f the country’s GDP and over 5 percent o f paid jobs nationwide.’O The
industry also provides relatively high-paying jobs, with high average annual earnings relative to
the national average. International tourism, largely explains the industry’ s vigor. During 2003 ,
tourism generated foreign currency inflows close to US$ 9,500 million, the third largest amount
after o i l exports and remittances. Tourism in Mexico has significant growth potential, as the
country ranks Sth among world tourist destinations and receives roughly 3 percent o f the world’s
travelers. Revenues from international tourists have grown since 2000 and official sources
forecast a 42.5 percent increase for the period 2000-2006, based on projected U.S. economic
recovery and the comparative advantage o f Mexican destinations.” These figures attest to the
progress that Mexico has achieved in reversing the loss o f competitiveness that characterized the
sector during the 1 9 9 0 ~ ’ ~
35.
The importance o f the liqkages between the tourism sector’s growth and environmental
quality i s evident. A recent customer perception survey o f 18 variables that affect the satisfaction
o f tourists with their travel experiences, conducted by the Secretariat o f Tourism (SECTUR) in
2002 and 2003, indicated that among the key factors that determine the selection o f tourist
destinations in the country are (in order o f importance) security, environmental quality, and
attractiveness o f features at tourist sites. Two o f these factors, however, cannot be manipulated
easily by the sector. The effects o f security are clear from observations o f tourist volumes to
Mexico following September 11, 2001. Increased security measures post-September 11
contributed to renewing tourists’ confidence and attitudes to international travel and resulted in
increased tourist volumes in Mexico. The attractiveness o f a tourist site is typically an
independent variable defined by the presence or absence o f certain intrinsic qualities o f the site
and as such, offers limited opportunity to be affected for the purpose o f influencing tourist
activity. By contrast, the environmental quality factor offers a greater opportunity to be
influenced for the purpose o f strengthening tourist activity and indeed the development o f the
sector.
36.
Environmental quality was rated as barely satisfactory and received the lowest score o f
all variables examined in the 2002 customer perception survey. l3
Environmental deterioration, as
perceived by surveyed tourists, was the direct consequence o f the sector’s development path in
which activities geared toward attracting a larger number o f visitors were not matched with
adequate planning and investment to ensure that tourist sites developed adequate infrastructure to
service visitors. This situation was aggravated by the fact that an increase in the number o f
visitors results in a growth o f the local population, as the industry’s high paying jobs attract
individuals from other locations. Consequently, many local authorities had been unable to
develop adequate infrastructure to dispose o f and treat wastes generated by tourists and local
populations. The importance o f tourism development that i s balanced with adequate
lo
Instituto Nacional de Estadistica, Geografia e Informbtica. Sistema de Cuentas Nacionales de M h i c o : Cuenta
Satdite del Sector Turismo. Mexico City: INEGI. 2003.
l1Secretaria de Turismo. Evolucidn del Turismo 2000 - 2004. Mexico City: SECTUR. 2004.
l2During the 199Os, Mexico’s share o f total revenues generated by international tourism fell from 2.05 percent to
1.7 percent, average international tourist expenditure went from US$7 18 to US$655, and average stay decreased
fiom 3.96 to 3.4 days. By 2000, the country received roughly 3 percent o f the world’s travelers, compared to 3.75
ercent in 1990.
Secretaria de Turismo. hdice de Satisfaccidn, Turismo Internacional Abreo, 14 Destinos, Resultados Anuales
2002. Mexico City: SECTUR. (www.sectbr.gob.mx)
12
environmental management is hrther highlighted given the trend among a growing number o f
consumers to demand sustainable practices in the destinations that they choose to visit.
37.
In addition to the environmental problems described above, Mexico’s tourist industry
faces the challenge o f diversifying in order to remain competitive as some segments o f the tourist
market shift from massive “sun and sand” destinations, which account for 32 percent o f
international travel to Mexico, to “theme” travel. Tourism studies in the region have shown that
international tourists are willing to pay more for, and spend more time in, destinations with
greater diversity, meaning a greater variety o f both in-site activities and types o f natural settings
that can be visited. As a biologically and culturally diverse country, Mexico i s well positioned to
attract a growing number o f tourist^.'^
38.
In 2001, the G O M developed a strategy to increase its market share in the tourism sector
by increasing its competitiveness, which is inextricably linked to the quality and diversity o f the
environment. In that same year SECTUR presented the National Program for Tourism 20012006, which acknowledges the limitations o f the sector’s past development model and
establishes the attainment o f sustainable destinations as one o f the key pillars o f the program.
Starting in 2003, SECTUR developed various programs aimed at increasing the sector’s
Mkxico Limpio y Querido, a program that, among other goals, seeks
sustainability, including: (i)
to reduce pollution in tourist destinations, particularly from solid wastes; (ii)
The Agenda 21 for
Mexican Tourism, which provides a fi-amework for action aimed at sustainable tourism
development with a strong emphasis on implementation at the municipal level; and (iii)a
program to foster the compliance o f tourist facilities with environmental law.
39.
The National Program for Tourism 2001-2006 seeks to establish tourism as a national
priority, anchored to the following inter-related pillars: (i)
achieving satisfaction o f tourists
traveling in Mexico; (ii)attaining sustainable destinations; and (iii)developing competitive
tourism businesses. The program recognizes the inter-connection o f the tourism sector with other
sectors o f the economy, and consequently promotes a model that fosters inter-sectoral
coordination as a means to strengthen the competitiveness o f the sector and achieve lasting
results. With respect to attaining sustainable destinations, the program promotes actions aimed at
strengthening the capacity o f local and regional actors to address the challenges o f tourism
development; creating regional synergies that promote integration and increase competitiveness;
and implementing programs and projects within a framework o f sustainability. In addition, the
program seeks to incorporate state and municipal institutions as integral participants o f the
program’s strategy through the assignment o f adequate financial resources and the definition o f
concrete regional plans according to regional needs.
40.
One o f the main elements o f the National Program for Tourism is the promotion o f
sustainable development o f tourism consistent with the government’s goal o f growth with quality
and in collaboration with the environment sector and other local actors. Efforts to this end
include preparation, consensus-building and implementation o f a Program for Sustainable
Tourism, aimed at ensuring that new tourism developments do not create significant
l 4 Adventure, ecological, and cultural tourism represented less than 1% o f the total revenues generated by the
international tourists in 2000. Source: Secretaria d.: Turismo. Evolucidn del Turismo 2000 - 2004. Mexico City:
SECTUR. 2004.
I
13
environmental problems and at remediating environmental damage in existing destinations
through several activities, including: (i)implementing Agenda 2 1 recommendations; (ii)
preparation with SEMARNAT o f a municipal agenda for environmental management; (iii)
preparation o f an environmental agenda for coastal municipalities; (iv) implementation o f a
monitoring system for sustainable tourism to facilitate the evaluation o f existing environmental
conditions at tourist destinations and the impact o f actions to promote sustainability; and (v)
carrying out a communication program to publicly disseminate information on successful cases.
41.
The E N V S A L Isupported the design o f the Government’s Program aimed at ensuring the
mainstreaming o f environmental concerns in tourism through: (i)the establishment o f
appropriate goals for the medium-term, (ii)
the implementation o f key building blocks to move
towards these goals, (iii)the coordination o f and strengthened consensus among key
stakeholders, and (iv) the systematic measurement o f progress and impact. Specifically, the
G O M moved forward with the design and implementation o f a National Program for Tourism
200 1-2006 that emphasizes environmental mainstreaming. The Intersectoral Technical Working
Group (ITWG) for the tourism sector was established to play a key role in defining the sectoral
agenda and priorities, with input from other sectors. In addition, the ENVSAL Isupported legal
reforms designed to decrease the overexploitation of, and improve the operation o f and
investments in, national tourism resources through direct and indirect charges. These reforms
included Congress’ approval o f articles 198, 198a, and 238-B o f the Ley Federal de Derechos,
which allow for user fees for maritime activities, protected areas, and whale-watching,
respectively, with provisions for earmarking revenue generated by a particular tourism resource
for reinvestment in that resource. As a result, a 200-fold increase in marine park revenues was
achieved under ENVSAL I by rechanneling funds generated from marine user fees from
protected areas back to the sector. To foster increased transparency and improvements in
environmental management, the G O M publicly discloses information o n the amount o f funds
collected from user fees for protected areas.
B.l
ACTIONS SUPPORTED BY ENVDPL I1
42.
During the last three years, SECTUR has established coordination mechanisms with the
environmental sector and other stakeholders to address the tourism sector’s challenges by: (i)
coordinating the public and private sector efforts to ensure that tourism-related activities do not
create significant environmental problems, and that adequate investments are made to minimize
the sector’s environmental impacts; (ii)
developing higher-value tourism products in conjunction
with tourism authorities; and (iii)
ensuring that adequate financing is available for the provision
and maintenance o f public goods that attract tourists, such as beaches, natural protected areas,
and environmental quality. Specific actions completed in the tourism sector with the support o f
ENVDPL I1are described below and summarized in Annex 3.
43.
To promote sustainable tourism development, the GOM has developed pilot local Agenda
21 action plans in 14 key tourism destinations: Acapulco, Cozumel, Bahia de Banderas,
Campeche, Cuetzalan, Guanajuato, Huatulco, Ixtapa-Zihuatanejo, Los Cabos, Manzanillo,
Mazatlh, Oaxaca, Patzcuaro and San Miguel de Allende. The Agenda 21 for Mexican Tourism
proposes strategies and actions in the short, medium and long terms that aim to: (i)
strengthen the
sustainable development o f tourism areas; (ii)
promote participation o f local communities in
tourism-related activities; and (iii)
ensure the preservation o f natural and cultural resources o f
14
tourist destinations in Mexico. Local Agenda 21 Committees in these tourist destinations play a
central role in building consensus among stakeholders for the implementation o f strategies to
maximize social welfare, economic benefits, and environmental quality.
44.
The G O M has established and begun implementation o f a set o f indicators and
benchmarks to measure good environmental performance in tourist facilities and destinations. In
addition, SECTUR, PROFEPA (Procuraduria Federal de Proteccidn a1 Ambiente, Federal
Attorney General for Environmental Regulation) and the Mexican Association o f Hotels and
Motels launched a certification scheme in 2004 to recognize responsible environmental
performance by tourist facilities based on established environmental indicators o f sustainable
tourism. The program provides incentives for full compliance with environmental law, which i s
verified through voluntary audits. As o f M a y 2005, ten large tourist facilities (including hotels,
golf clubs, and marinas) had been certified.
45.
The General L a w for Prevention and Integrated Waste Management (Ley General para la
Prevencidn y Gestidn Integral de 10s Residuos), enacted by the G O M in October 2003, provides
a framework that fosters implementation o f waste management plans, particularly in urban
settings, and i s consequently a much needed tool to foster the development o f mechanisms for
private and public sector participation in the design and implementation o f waste management
plans in tourist sites.”
46.
In addition, SECTUR, SEMARNAT, the Secretariat o f Health and the Mexican N a v y
initiated an Integrated Program for Clean Beaches (Programa Integral de Playas Limpias) in
2003 to monitor and publicly disclose water quality data o f Mexican beaches. Although the
program met initial resistance stemming from concerns o n potential negative publicity caused by
water pollution warnings, it has triggered substantive efforts by national and sub-national
governments for the adequate treatment o f wastewater discharges.
47.
In response to the growing number o f cruises that travel to Mexico, SECTUR developed
a public policy containing provisions to mitigate their environmental impacts. As part o f this
policy, SECTUR conducted a study to assess the carrying capacity o f a tourist destination. Based
on the assessment, SECTUR has continued efforts to limit the number o f cruises to avoid a loss
o f natural capital.
48.
The G O M has found the ITWGs to be a useful mechanism for the delivery o f high quality
products based on collaboration with other sectors. T o underscore this, the President created the
Comisidn Intersecretarial de Turismo in 2004, which provides the institutional framework for
better inter-institutional coordination among federal authorities, private sector and civil society
around the sector’s main challenges and opportunities. Within the framework o f this
l5The General Law for Prevention and Integrated Management o f Wastes has created the conditions for ensuring
that municipalities assume the responsibility for collection, transport and final disposal o f wastes, as well as for the
separation o f solid municipal wastes l?om hazardous wastes. Also, the Law incorporates the private sector in the
provision o f waste management services and in the use o f waste sub-products in activities such as energy generation.
The local Agenda 21 action plans have promoted collaboration among the public sector, private sector, and civil
society to develop investment plans to address sustainable development priority issues in the main tourist
destinations. Local Agenda 21 plans also have facilitated agreements for increases in tariffs for the provision o f
water, wastewater treatment, and waste management services.
15
commission, ENVDPL I1supports the G O M with upstream analytical work and direct responses
to mitigate the environmental challenges faced by the tourism sector. Analytical work supported
by E N V D P L I1 will inform consensus-building and provide the basis for adoption and
implementation o f an environmental policy for the tourism sector endorsed by SECTUR. Such
analytical work includes: (i)
the development o f scenarios o f tourism sector expansion; (ii)
the
assessment o f potential impacts o f alternative scenarios, including environmental and social
costs, constraints and benefits; (iii)
the assessment o f effectiveness o f current policy instruments;
(iv) the assessment o f institutional capacity for environmental management; and (v) the
identification o f priority issues and design or revision o f public policy and areas and regions o f
critical developments.
B.2
PERSPECTIVES FOR ENVDPL I11
49.
Building on the achievements o f ENVDPL 11, the G O M has committed in the medium
term to: (i)increase the number o f tourist destinations with local Agenda 21 action plans,
including investment plans, from 14 to 35; (ii)develop a methodology to incorporate
environmental considerations into urban and regional planning within Agenda 21 action plans;
and (iii)
adopt a unified sustainable tourism strategy endorsed by SECTUR based o n findings o f
the strategic sectoral study supported by E N V D P L I1and through high-level workshops aimed at
consensus-building involving all stakeholders.
C.
ENVIRONMENTAL CHALLENGES IN THE ENERGY SECTOR
AND GOVERNMENT STRATEGY
50.
In Mexico, the energy sector is an important pillar o f economic growth with significant
comparative advantages. The energy sector accounts for 3 percent o f GDP, 8 percent o f all
exports, 37 percent o f fiscal revenues, and close to 60 percent o f public investment.16 According
to the World Economic Forum both i t s o i l reserves and natural gas production rank 9th in the
world.
The country’s abundant reserves o f fossil fuels have played a key role in meeting
51.
Mexico’s growing energy demand over the last decade. Hydrocarbons account for close to 90
percent o f primary energy p r o d ~ c t i o n . ’ Both
~
Mexico’s per capita and total final energy
consumption have risen over time, but the country’s energy efficiency efforts have achieved
reductions in terms o f energy intensity per unit o f GDP. Nonetheless, Mexico has an energy
intensity (total primary energy supply/GDP) o f 0.42, which i s well above the 0.29 and 0.19
averages for Latin American and OECD countries, respectively. Consequently, there i s a need
and a basis for the country to implement policies that will increase energy efficiency and
renewable energy substantially. Furthermore, as a member o f the global economy, Mexico faces
the dual challenge a f producing goods that satisfy the needs o f its domestic market and those o f
i t s trading partners,’ which are often govemed by more stringent energy and environmental
standards.
52.
The environmental impacts o f energy sector activities, especially those impacts
associated with energy consumption, are likely to increase as Mexico’s economic growth
%ecretaria de Energia. Programa Sectorial de Energia 2001-2006. Mexico City: SENER. 200 1.
17
Secretaria de Energia., Balance Nacional de Energia. M e x i c o City: SENER. 2002.
16
continues. Analytical work conducted by the Bank found that Mexico’s GDP growth rates would
be the largest determinant of air pollutant emissions in the coming decade.” Energy combustion
has been associated with significant outdoor and indoor air pollution. Ambient air pollution
concentrations in the country’s largest cities often exceed national environmental standards,
partly due to poor fuel quality. In 2002, the percentage o f days during which concentrations o f
air pollutants exceeded environmental standards in major cities was 80 percent in Mexico City
Metropolitan Area, 40 percent in the Guadalajara Metropolitan Area, and 27 percent in the
Monterrey Metropolitan Area.19 Air pollution i s estimated to affect 35 million people and to
cause between 2,000 and 4,000 premature deaths per year.20 Back-of-the-envelope calculations
conducted in 2002 as part of a comprehensive study for air pollution in the Mexico City
Metropolitan Area indicated that a 10 percent reduction in fine particulate matter and ozone
levels would be associated with health and productivity benefits o f US$2 billion per year.21 With
respect to indoor air pollution, as o f the ear 2000, some 17 million people relied on fuelwood
for cooking, particularly in rural areas?’ Typically, women and children are most fi-equently
exposed to high particulate matter concentrations in homes where firewood i s used for domestic
purposes, and consequently are affected by the adverse health impacts such as acute respiratory
infections.
53.
Activities in the energy sector, notably from o i l and electricity producing facilities,
generate significant amounts o f air emissions, wastewater discharges, solid and hazardous wastes
and other precursors o f environmental degradation. In 2000, SEMARNAT identified o i l as one
o f two subsectors that generated the largest costs in terms o f environmental degradation and
depletion o f natural capital. The electricity, gas, and water subsectors taken jointly account for
the third largest costs associated with environmental d e g r a d a t i ~ n .Mexico
~~
i s the ninth largest
emitter o f greenhouse gases in the world, with an emission intensity similar to the world
average24 and 47 percent o f i t s emissions result from energy production and c ~ n s u m p t i o n . ~ ~
Mexico has a clear stake in reducing environmental degradation in the energy sector and in
limiting the emission o f greenhouse gases.
54.
To address the challenges described above, the Secretariat o f Energy (SENER) developed
the Energy Sector Program (Programa Sectorial de Energia, PROSENER) in 2001, which
recognizes the sector’s potential contributions to sustainable development, including the
sustainable use of renewable energy resources, increasing energy efficiency, producing a higher
percentage o f energy from renewable sources, and implementing environmental management
programs in o i l and gas facilities as well as in electricity production, transmission and
‘*The World Bank / UNDP. Mexico Energy Environment Review. Washington, DC: World Bank. 200 1.
l 9 Secretaria de Medio Ambiente y Recursos Naturales. Informe de la Situacidn del Medio Ambiente en M h i c o .
Mexico City: SEMARNAT. 2002.
2o Secretaria de Medio Ambiente y Recursos Naturales. Compendio de Estadisticas Ambientales 2002. Mexico City:
SEMARNAT. 2002.
21 Evans, John et al. “Health Benefits of Air Pollution Control, ’’ Air Quality in the Mexico Megacity. Mexico City:
Kluwer Academic Publishers. 2002.
22 OECW Environmental Performance Reviews: Mexico. Paris: OECD. 2003. (p. 157)
23 Secretaria de Medio Ambiente y Recursos Naturales. Compendio de Estadisticas Ambientales 2002. Mexico City:
SEMARNAT. 2002.
24 OECW Environmental Performance Reviews: Mexico. Paris: OECD. 2003. ,
25 Instituto Nacional de Ecologia. Gobiemo de MBxico. Segunda Comunicacibn Nacional ante la Convencidn Marc0
de las Naciones Unidas sobre el Cambio Climcitico. Mexico City: SEMARNAT. 2001.
17
’
distribution. In 2002, the energy and environment sectors jointly developed the Environmental
Energy Program, which includes sustainability goals for the sector’s commitments per the
Sustainable Development Program (SLIP) developed by SEMARNAT.
55.
The Energy Sector Program developed under the framework o f the NDP, emphasizes
sustainable development by balancing developments in the energy sector with economic, social
and environmental concerns. The program aims to promote environmental sustainability through
strengthening o f the GOM’s capacity to design and apply policies to promote changes in
production and consumption practices in the energy sector, and for all end users. The strategies
o f PROSENER include: (i)the development o f an energy-environment policy; (ii)the
development and strengthening o f policies to promote clean fuels; (iii)the promotion o f
compliance with environmental regulations by businesses in the sector; (iv) the promotion o f
sustainable energy projects; and (v) the mitigation o f greenhouse gases. The program establishes
mechanisms for monitoring and periodic evaluation o f compliance with the goals o f the program.
The Environment Program for the Energy Sector was developed as a cross-component o f
PROSENER and the National Environment and Natural Resources Program (ENRP).
56.
Under ENVSAL I the Government designed and implemented an environmental
mainstreaming program that: (i)established goals for the medium-term, (ii)designed key
building blocks to move towards these goals, (iii)
established and implemented a mechanism for
coordination and consensus building among key stakeholders, and (iv) designed a monitoring
system for measuring progress and the impact o f the mainstreaming program. An ITWG was
established for the energy sector to play a key role toward achieving intersectoral coordination
and consensus-building.
C.l
ACTIONS SUPPORTED BY ENVDPL I 1
57.
Building o n the progress made under E N V S A L I, E N V D P L I1 supports the
implementation and consolidation o f reforms aimed at incorporating environmental concerns in
energy sector activities. In this direction, the energy sector has carried out analytical work to
inform the development o f an environmental policy for the energy sector (energy-environment
policy). A study completed during the first semester o f 2004 evaluated and integrated previous
studies to: (i)
develop scenarios for expansion o f the energy sector, including the emissions
associated with each scenario and the potential for renewable energies; (ii)
estimate the potential
impacts o f the different scenarios, including the social and environmental costs and benefits; (iii)
evaluate the effectiveness o f the existing policy instruments; and (iv) identify priority areas and
issues. Specific actions completed in the energy sector with the support o f E N V D P L I1 are
described below and summarized in Annex 3.
58.
Another initiative supported by E N V D P L I1 isithe energy sector’s efforts to reduce its
contribution to air pollution and the negative impacts it has o n health. T o this end, SENER has
worked with the other energy sector agencies and with environmental authorities to strengthen
the national clean fuels policy. Petrbleus Mexicanus (PEMEX), the state o i l monopoly, has made
advancements in improving f u e l quality by reducing the sulfur content from 1000 to 300 ppm in
Premium gasoline used in the Mexico City Metropolitan Area, Monterrey, and Guadalajara. The
G O M has assessed investment needs to reduce sulfur content in all gasoline and diesel by 2008. ’
18
59.
In terms o f addressing energy and environmental health linkages in rural areas, the G O M
has started to design and implement actions to address indoor air pollution caused by domestic
consumption o f fuelwood, including small rural electrification projects in selected states. The
projects constituted the seed for a National Program for Rural Electrification that is being
designed by G O M with the support o f the World Bank and GEF through the Rural Electrification
project, implementation o f which is expected to begin in late 2005 or early 2006. The projects
are expected to benefit the most vulnerable groups, such as women and children that are exposed
to indoor air pollution and who devote a significant share o f their time to gathering wood for fuel
rather than to other economic activities.
The GOM has taken steps to increase energy generation from renewable sources.
60.
Specifically, the GOM has introduced economic incentives, with the approval in 2004 o f fiscal
provisions for the accelerated depreciation o f renewable energy capital. Also, the G O M has
undertaken further analytical work to guide the development o f additional instruments to
promote the development o f renewable energy sources, such as a study to develop a national
fund for renewable energy promotion, assess the incentives for independent producers o f
renewable energy, and evaluate pricing and transmission policy options for renewable energy.
61,
The GOM’s efforts to promote energy efficiency include the development o f mandatory
standards for equipments, sectoral programs, implementation o f methodologies for measuring
and monitoring energy efficiency baselines by sector, as well as business models and contract
forms for third party delivery o f energy efficiency measures. Furthermore, as a first step in
addressing existing distortions in the electricity sector, CFE has begun publishing the electricity
subsidies in individual utility bills, which i s expected to increase the transparency o f the tariff
and subsidy structures.
62.
Within the D P L framework, the energy and environmental sectors have also taken
significant steps to coordinate their efforts to reduce Mexico’s contribution to climate change.
The Clean Development Mechanism (CDM) Office was established in 2004 in accordance with
the rules set up at the Marrakech and Bonn Conferences o f the Parties o f the United Nations
Framework Convention on Climate Change. In April 2005, SEMARNAT, SENER and other
Ministries modified the agreement which created the Intersectoral Commission for Climate
Change, in charge o f the definition o f the national policies o n climate change. This Commission
includes the Mexican C D M Office that has worked to increase the portfolio o f carbon offset
investments suitable for Carbon Finance.
63.
Another tangible step to reduce the sector’s environmental impacts has been the
implementation o f environmental management systems (EMS) to reduce contamination by
P E M E X and by the Federal Electricity Commission (CFE), which provides electricity to 90
percent o f the population. E M S have contributed to important achievements: (i)
a 63 percent
reduction in flaring o f natural gas (from o i l and gas production); (ii)
an increase from 22 percent
to 37 percent in the contribution o f natural gas to electricity production, mostly displacing f u e l
oil; (iii)
a 15 percent reduction in SO;! emissions associated with electricity generation; and (iv) a
5 1 percent reduction o f waste discharges to water bodies by P E M E X facilities.
19
C.2
PERSPECTIVES FOR ENVDPL I11
64.
Based on the results o f the strategic sectoral study supported by E N V D P L I1 and highlevel workshops that will be conducted under ENVDPL 111, the G O M i s committed to the
adoption by relevant agencies o f a unified energy-environment strategy, endorsed by SENER. In
this context, the G O M expects to continue i t s efforts toward environmental mainstreaming in the
energy sector via three initiatives:
(i)
Building support o f key stakeholders and implementingthe energy-environment policy;
(ii)
Conducting an analysis o f the environmental and economic benefits o f reducing the
sulfur content in fuels; and
(iii)
Developing a package o f legal and regulatory reforms for the promotion o f renewable
energy resources.
ENVIRONMENTAL CHALLENGES IN THE FORESTRY SECTOR AND
GOVERNMENT STRATEGY
D.
65.
Approximately 28 percent o f Mexico’s land area o f 197 million hectares i s covered by
forests and rain forests, and approximately 50 percent o f that surface has the potential for
commercial exploitation. In 1999, Mexico’s forests accounted for over 1.2 percent o f GDP and
generated over 100,000 permanent jobs. An analysis prepared in 2001 found that institutional
weaknesses, such as lack o f clearly defined property rights, inefficient regulations, absence o f
inter-agency coordination, lack o f financial instruments that respond to long maturity periods o f
forestry sector investments, and policy failures (including subsidies to agricultural activities) had
contributed to unsustainable practices that limited the realization o f the sector’s potential.
66.
The forestry sector faces environmental and sectoral challenges that are linked closely
with causes o f poverty in Mexico. Some o f the most serious challenges identified by the 2001
diagnosis included a high deforestation rate o f about 1.1 percent per year or 600,000 hectares per
year26that impacts the livelihoods o f the people that live in forests, most o f whom are poor.27At
the same time, an under-developed forest industry, as indicated by the fact that only 40 percent
o f the forest cover with potential for commercial exploitation i s currently managed for that
purpose, represents a significant loss o f income-generating activities. Sustainable forest
management therefore continues to be essential both to provide opportunities for incomegenerating activities and to reduce the negative impacts o f deforestation o n forest-dwelling
communities.
67.
To address the multiple challenges faced by the forestry sector, the GOM established in
2001 the National Forestry Commission (CONAFOR) by Presidential Decree. In 2002,
CONAFOR prepared the National Forestry Program, based on the sector’s long-term vision for
year 2025. The Program establishes the medium-term priorities o f the sector which include: (i)
regulatory and policy reforms to consolidate decentralization processes in the forestry sector; (ii)
the development o f a reliable and publicly accessible forest information system to facilitate
~
Lack o f accurate data and information preclude accurate assessments o f these indicators. National Forestry
Commission. Programa Nacional Forestal 2001 - 2006. Mexico City: CONAFOR 200 1.
27
According to the World Bank’s 2004 Mexico Poverty Assessment Report, 65% o f the extreme poor live in rural
areas.
26
20
planning and decision-making; (iii)
an increase o f employment and income-generating options
for forest dwellers, reduction o f negative environmental impacts o n water basins and soils, and
fostering o f biodiversity conservation; (iv) the promotion o f the sustainable use o f forest
resources; (v) an increase o f productivity and competitiveness in the sector by fostering
modernization o f industry and technology, and the integration o f productive chains through
increased private sector investments and efficient marketing systems; and (vi) the promotion and
development o f an environmental services market, improved basin msinagement system and
decentralization o f forest management.
68.
The ENVSAL Iprogram supported the GOM’s efforts to (i)
establish appropriate goals
for the medium-term, (ii)
implement key building blocks to move towards these goals, (iii)
ensure coordination and strengthened consensus among key stakeholders, and (iv) systematically
measure progress and impact. An ITWG was established for the forestry sector and continues to
play a key role in intersectoral coordination and consensus-building.
D.1
ACTIONS SUPPORTED BY ENVDPL I1
69.
One o f the GOM’s major achievements in environmental mainstreaming has been the
enactment o f the General L a w for Sustainable Forestry Development and i t s regulations. The
L a w assigns clearly defined roles and responsibilities to the different agencies, sub-national
governments and stakeholders that are directly involved in the sector. The L a w stresses the
separation o f functions between SEMARNAT’s role in formulating a forestry policy that is
consistent with the national environmental policy and CONAFOR’ s responsibilities in the
promotion o f the sector’s productive, protection, conservation and restoration activities. The Law
also allows for the consolidation o f inter-agency collaboration to carry out the sector’s strategies,
including coordination with PROFEPA to strengthen inspection and enforcement activities, joint
efforts with CONANP t o build synergies between biodiversity conservation through the
establishment and management o f natural protected areas and sustainable forest management,
and increased dialogue with SAGARPA (Secretariat o f Agriculture, Livestock, Rural
Development, Fishing and Nutrition) to mitigate the negative impacts o f agricultural activities o n
forest ecosystems.
70.
The L a w incorporates environmental considerations in the national forestry policy that
the protection, sustained provision, and valuation o f environmenta1 goods and
aim to ensure: (i)
services; (ii)
increased social participation in the establishment o f policies and the design and
implementation o f programs through the development o f sector-specific cultural and educational
programs and considerations to address the needs o f indigenous groups; (iii)
mitigation o f
environmental risks and impacts associated with sector activities; and (iv) advancements in
decentralization o f forestry functions and coordination with sub-national entities to integrate
resources.
71.
The new law and regulations are consistent with the Bank’s forestry strategy. In
particular, they: (i)facilitate the participation o f poor communities in sustainable forest
management and incorporate provisions to protect the rights of indigenous communities and
ejiduturios; (ii)
integrate forests in sustainable economic development by focusing on enhancing
the sector’s competitiveness and productivity; and (iii)
protect vital and global environmental
21
services by including provisions for the valuation and payment o f services that include
hydrological services, carbon sequestration, eco-tourism, and biodiversity.28
72.
CONAFOR periodically evaluates existing policies and programs, and uses these
findings as the basis for further policy improvements. As part o f these efforts, CONAFOR
contracted several academic institutions to conduct an independent evaluation o f several
programs, including the Program for Prevention and Control o f Wildfires, the Program for
Forestry Development, the National Reforestation Program, the Program for the Development o f
Commercial Forest Plantations, and the Program for the Payment o f Hydrologic Environmental
Services. Key findings that are consistent across all the evaluations include: (i)
positive social
impacts stemming from j o b creation and support for sustainable forestry management; (ii)
economic benefits, as evidenced by the positive net present value o f each program; and (iii)
increased trust in governmental agencies and satisfaction with government programs. All the
actions described above are summarized in Annex 3.
D.2
PERSPECTIVES FOR ENVDPL I11
73.
The GOM intends to take steps in the future to ensure the continuity and sustainability o f
the environmental mainstreaming program in the forestry sector. These actions would include the
continued implementation o f the new forestry l a w and regulations, along with strengthening the
capacities o f vulnerable groups, such as indigenous peoples and ejidatarios, to take advantage o f
the new legal framework. In addition, the G O M will establish new benchmarks for forestry
sector programs that aim to create income-generating alternatives to improve the livelihoods o f
forest communities. Also, implementation o f the new legal framework for certification will
continue.
74.
With the support o f ENVDPL 11, the G O M recently conducted a study to promote
adequate valuation o f environmental services and establish the fiscal, market, and financial
mechanisms to facilitate payment for the preservation o f forest ecosystems in an effort to
alleviate poverty. The study examines the lack o f adequate funding for sustainable forest
development, as well as the risks that result from the extended maturity periods that characterize
investment in sustainable forest management. Based o n the results o f this study, CONAFOR i s
committed to establish mechanisms to improve access to financial services and products for
forestry sector investment.
E.
ENVIRONMENTAL CHALLENGES IN THE WATER SECTOR AND
GOVERNMENT STRATEGY
75.
Inadequate water quantity continues to be a major source o f conflict2’ in the arid and
semi-arid northern states o f Mexico, as well as in the basins shared with the United States. Three
The establishment o f the new institutional framework increases the fiscal space needed for public and private
investments to finance sustainable forest management. The creation o f CONAFOR and the increased budget
allocations fiom Congress have enhanced the sector’s prominence and visibility. Also, the new regulatory
framework has created an adequate investment climate for increased private investment in the sector. Finally, the
law provides formal mechanisms for the payment o f eavironmental services, adequate valuation o f natural
resources, and the development markets for non-timber products.
29 Becerra, M. et al. Los conjlictos por agua en Mbxico: Diagndstico y Andisis. Mexico City: Instituto Nacional de
Ecologia, 2003.
28
22
out o f thirteen hydrologic-administrative regions are in a situation o f water stress,30 and
continued problems with water quality and quantity in Mexico could constrain economic growth
in the near future. The country has an average natural water availability o f 4,547 m3/person/year.
This figure masks the extreme difference, however, between the country’s southeast region,
where average availability is 13,566 m3/person/year, and the rest o f the country, where water
availability is merely 1,897 m3/person/year. The northern region, which has limited water
availability, i s occupied by 77 percent o f the population and accounts for 85 percent o f GDP.
76.
The severity o f Mexico’s water problem cannot be overemphasized - 50 percent o f the
volume o f water consumed from underground water sources in Mexico is extracted from the
country’s 102 overexploited aquifers. Approximately 77 percent o f the country’s water supplies
are used for agricultural production, but only 19 percent o f the irrigation surface area i s
considered to have efficient irrigation technology. In 2000, coverage for potable water supply
and for drainage and sewerage was estimated at 88 percent and 76 percent respectively, but large
differences prevailed at the state level. According to the 2001 Water Quality Index, 94 percent o f
Mexico’s water bodies are polluted. The problem is most serious in the Valle de Mexico region
where 70 percent o f the water bodies are highly polluted. Treatment o f municipal and industrial
wastewaters is generally inadequate. O n a national level, only 18 percent o f municipal
wastewater and 15 percent o f industrial wastewater are treated prior to discharge to water bodies.
The National Water Commission (CNA) estimates significant loss o f social welfare associated
with water pollution each year.
77.
T o address the challenges in the water sector, C N A developed the National Water
Program 200 1-2006, which describes the investments required to reach a sustainable scenario by
2025. These include investments in technologies to increase water use efficiency and in
infrastructure to expand the percentage o f population covered with adequate water and sanitation
services. The National Water Program establishes the following objectives:
(i)
increasing efficiency o f water use in agriculture by providing assistance to users for
improvements in efficiency and productivity o f irrigation zones, and to install new
technology and make investments in infrastructure for irrigation;
(ii)
improve the coverage and quality o f drinking water, sewerage, and sanitation through
development o f utilities, providing support to local and state authorities for consolidation o f
service providers, gradually eliminate subsidies and recover costs o f services and create
schemes for payment for water rights by utilities and return funds generated to the sector;
(iii)
establishing an integrated and sustainable management o f water in basins and aquifers
through the recovery o f physical losses, water reuse, incorporation o f criteria for efficiency
and equity in water use, improvements in water-related regulations and o f the economic
value o f water;
(iv) the promotion o f technical, administrative and financial developments in the water sector
through strengthening o f institutional capacity, decentralization, creation o f autonomous
organizations for providing drinking water and sanitation services, and the development o f
technological capacity;
(v) establishing mechanisms for public participation in planning, and use and management o f
water through the Water Basin Councils; and
Water availability values below 1,700 m3per capita per year are indicative o f a situation o f water stress and are
considered insufficient to meet human and environmental needs.
30
23
(vi) decreasing risks and effects o f floods and droughts through organizational arrangements,
efficient information and alert systems, and drought management plans.
78.
ENVSAL Isupported the publication and inclusion in the ENRP o f the National Water
Program 2001-2006. Specific activities supported by ENVSAL Iinclude the establishment o f an
ITWG for the water sector, and support for legal reforms designed to increase incentives for
water conservation and increasing resources for investments and management through increase
and rationalization o f water fee collection. Additional achievements under ENVSAL Iinclude:
(i)issuance o f a presidential decree to permit the exoneration o f past debts by federal
government for municipalities that agree to pay water fees in the future and forego federal
funding for water supply and sanitation in the event o f non-payment; (ii)
passage o f the Federal
L a w o n Water User Rights (Ley Federal de Derechos en Materia de Agua) with the provision
that up to 100 percent o f municipal water fees collected may be returned to municipalities
respectively, in accordance with specified criteria. Pursuant to this change, an incentive scheme
was developed under which municipalities need to have an equal amount o f funds invested in
water programs. These changes resulted in: (i)the payment, by the Distrito Federal and
municipalities with greater than 2500 inhabitants, o f water fees corresponding to 58 percent o f
water concession use by volume at the end o f the third trimester o f 2003, compared with a
baseline o f 24 percent in 2002 and (ii)
the return o f over 95 percent o f water fees to the National
Water Commission by the SHCP for use by municipalities for better water management.31
Furthermore, the G O M publicly disclosed information on amounts o f funds returned, on a
national aggregate basis, to municipalities.
E.1
ACTIONS SUPPORTED BY ENVDPL I1
79.
The proposed ENVDPL I1 supports the continued implementation by C N A o f actions
included in the National Water Program. The amended National Water Law, which will support
a sustainable condition o f water resources in Mexico, includes mandates for: (i)the
decentralization o f water resources management functions to Water Basin Agencies; (ii)
tne
definition, creation and implementation o f a Water Financial System (Sistema Financier0 del
Agua, SFA); (iii)
an integrated management o f water resources; and (iv) the improvement o f the
public water rights registry. Specific actions completed in the water sector with the support o f
E N V D P L I1are described below and summarized in Annex 3.
80.
The recently amended legal framework restructures key functions o f C N A at the basin
level. The mandate to decentralize the functions o f Comisibn Nacional del Agua to the water
basin agencies (Organismos de Cuenca) i s one o f the major reforms o f the recently amended
law. In addition to the Water Basin Agencies, the recent amendment o f the National Water L a w
empowers the Basin Councils (Consejos de Cuenca) to be key players in the administration o f
the Water Financial System (SFA).32Currently there are 25 Basin Councils. The Basin Councils’
function is to formulate and decide o n activities to improve water resources management and to
The Federal Law on Water User Rights mandated that up to 100% o f the collected municipal water fees could be
devolved to the municipalities for investment in water programs that include wastewater treatment. This scheme also
contemplates allocation o f budgetary resources that are transferred through CNA.
32 The exact role o f the basin level institutions in the SFA remains to be defined through the regulations o f the
amended National Water Law. (Reglamento).
31
24
develop water infrastructure in their respective basin.33According to the amended Law, the
Basin Councils are expected to guide, together with CNA, the work o f the aforementioned Basin
Agencies.
8 1.
Under the leadership o f CNA, there has been progress toward integrated management o f
water resources. The main efforts o f the new approach attempt to limit the extraction o f water
from the over-exploited aquifers or surface water bodies in order to meet sustainability
objectives. Actions in the water sector supported by ENVDPL I1 contribute to: (i)
implementation o f a measurement system for water-use by parties that have water rights; (ii)
adjustment o f regional water programs based on actual water availability; (iii)
establishment o f
schemes to ensure that water users comply with their water rights and discharge obligations, and
that water rights are consistent with water availability; and (iv) elaboration and start up o f
implementation o f an integrated wastewater strategy to augment the percentage o f wastewaters
that are treated. These actions have been implemented in a pilot scheme in the Valley o f
QuerCtaro, QuerCtaro; Caborca, Sonora; and Santo Domingo, Baja California Sur where
authorities negotiated with water users to limit the extraction o f water from the over-exploited
aquifers and agreed on several actions to meet sustainability objectives.
82.
The newly amended legal framework improves the public water rights registry as part o f
efforts to improve the enforcement o f water property rights and improve the functioning o f the
water market. The public water rights registry i s available to the public at CNA’s w e b ~ i t e . ~ ~
Additional efforts by CNA to increase rational use o f water and foster water markets include the
publication o f water availability data for 188 aquifers and for the country’s largest watershed, the
Lema-Chapala basin, and the disclosure o f data on water availability, which provides authorities
and water users with reliable information for a more transparent allocation o f the resource among
all water users.
E.2
PERSPECTIVES FOR ENVDPL I11
83.
The GOM will enact regulations (Reglamento) for the National Water Law, which should
lead to further improvements in the definition o f the roles o f governmental organizations, the
enforcement o f water property rights, and the decentralization o f water resources management.
Taking into account an economic evaluation o f policy interventions in the water sector (prepared
by the Bank), the G O M will develop and begin implementation o f a unified strategy to promote
sustainable water resources management in overexploited basin and aquifers. The GOM also w i l l
implement an integrated strategy for wastewater treatment. Actions for the water sector in the
future w i l l also strengthen the water basin agencies and councils in order to increase their
participation in the design and implementation o f programs. The G O M intends to prepare
integrated water resources management plans for severely overexploited and contaminated
basins and aquifers. In an effort to foster greater decentralization o f water resources
management, different Bank programs are supporting the GOM’s efforts (Table 111-1). Among
these i s the ongoing Programmatic Analytical and Advisory Activity (AAA), which includes
studies on the economic value o f water.
-~
~
The territory covered by some basin agencies (such as the Lerma Basin) covers up to five states, while on the
other hand some states (such as Sonora) include territory covered by up to five basin agencies.
34 http://www.cna.gob.mx
33
25
Table 111-1. Bank Pro tams Supporting Decentralization0' Water Resources Management
Management,
Integrated Management o f
Basins and Aquifers
Project.
Modernization.
Technical Assistance.
Policy Interventions in the
Water Sector - AAA.
M a i n Objective
To assist the GOM in its effort to create the
basic conditions to carry out integrated
water resource management.
Actions Contributing to Decentralization
Issuing o f water rights.
Assessment and improved measurement
o f water resources.
Establishment o f river basin councils.
Development o f regional water
management plans (both for surface and
oundwater).
To assist the G O M in i t s effort to develop
* s:ue regulations for basins and aquifers
and implement integrated water resources
to achieve reductiob in water use to
management plans in basins and aquifers
sustainable levels.
with serious over-exploitation problems.
Coordinate integrated investment actions
in irrigation modernization and water
supply and sanitation.
Implement on a trial basis proposed
changes in policies, programs, subsidies.
Support implementation o f the National
Water Law including strengthening o f
water basin agencies and councils.
Implement the Sistema Financier0 del
Agua in pilot areas.
To assist the G O M in i t s effort to improve
Consolidation o f the transfer o f irrigation
the competitiveness o f irrigated agriculture
infrastructure to water users in irrigation
and the efficiency o f irrigation water use.
districts.
Institutional strengthening o f water users
organizations to enhance their
participation in the operation and
maintenance o f irrigation infrastructure
as well as in investment decisions.
To assist the G O M in its effort to modernize
Support State Water Commissions in the
the water supply and sanitation sector
strengthening o f planning, technical
through strengthening the sector policies at
assistance and oversight capacities.
the federal, state and municipal level.
Support and strengthen municipal
utilities to improve water supply and
sanitation activities.
To develop a framework for holistic
Review policies, subsidies and pricing
evaluation o f water sector interventions in
interventions as they relate to the
order to promote consistent and coordinated
economic value o f water and propose
policy decisions.
changes to improve and rationalize the
allocation and valuation o f water
resources.
F.
ENVIRONMENTAL MANAGEMENT CHALLENGES IN MEXICO AND
GOVERNMENT STRATEGY
84.
Until recently, environmental protection has been perceived as an obstacle to economic
growth. By 1996, a procedure such as environmental licensing, could take up to 245 days.
Environmental management was characterized by an extremely large number o f permits and lack
o f transparency in the decision-making process, which created perverse incentives to comply
with environmental legislation. At the same time, responsible entities were understaffed to cope
with the administrative work that was required to provide a license.
26
85.
T o increase the effectiveness and efficiency o f environmental management processes,
SEMARNAT created in 2001 a new position for an Undersecretary o f Environmental
Management to oversee the elimination o f unnecessary permits and procedures, provide new
guidelines that reduced discretionary application o f criteria for decision-making, and reduce the
probabilities o f corruption. The main actions identified by the G O M to foster effective and
efficient environmental management in Mexico included: (i)
the development o f a regulatory
framework governing decentralization o f environmental management; (ii)strengthening
procedures for processing ,of environmental impact assessments; (iii)financing for capacity
building and investments in states for improvement o f environmental management; and (iv) the
establishment o f procedures and mechanisms for public participation and transparency in
environmental management.
86.
The need for reforms in environmental management to improve efficiency in responding
to client needs and focus o n strategic areas became apparent during diagnostic study conducted
by SEMARNAT. E N V S A L I supported initial actions to decentralize environmental
management functions to the state level:
(i)
Approval by Congress o f changes to four laws, including the Ley General del Equilibrio
Ecoldgico y la Proteccidn a1 Ambiente, Ley General de Bienes Nacionales, Ley Forestal and
Ley General de Vida Silvestre to enable decentralization o f federal environmental
management functions to sub-national levels;
(ii)Development o f criteria (with respect to personnel and goods) necessary to assume
environmental management functions to be decentralized in 2002 that were under federal
jurisdiction, relating to selected toxic wastes, selected environmental impact assessment
administration, conservation o f soils, flora, fauna and forest resources and coastal
management;
(iii)
I S 0 certification o f environmental impact assessment (EIA) and permits that were to be
decentralized by SEMARNAT’s Sub-secretariat for Environmental Management;
(iv) Preparation o f decentralization plans by at least 20 states; and
(v) Public disclosure o f all State decentralization plans approved by SEMARNAT.
87.
Actions supported by ENVSAL I to ensure adequate financing for environmental
management and strengthening o f environmental institutions included the establishment o f an
Environmental Institutional Development Program (PDIA) to finance capacity-building in those
States with plans to assume new environmental management functions, through a federal pilot
matching grants scheme. Through the PDIA, transfers were made to 24 states for technical
assistance and capacity building based o n environmental performance agreements. E N V S A L I
also supported actions to improve public participation and transparency, such as modifications o f
existing regolations to allow for public access to information o n EIA and permits, and
implementation o f the modified regulations by public disclosure o f processing information on a
pilot basis o f some EIA and permit issuance functions carried out by SEMARNAT.
F.1
ACTIONS SUPPORTED BY ENVDPL I1
88.
The ENVDPL I1has been instrumental to the Mexican Secretariat o f Finance (Secretaria
de Hacienda y Crbdito Pz2bZico, SHCP) efforts to strengthen environmental management through
the development o f economic instruments to improve financing o f environmental management at
federal and sub-national levels. In line with these efforts, SHCP developed: (i)
a set o f criteria for
27
environmental fees as a guide for fiscal discussions in federal Congress; (ii)
specific guidelines
for local environmental taxes, fees, and charges; and (iii)
a proposal for fiscal instruments to
promote sustainable development. Specific actions supported by E N V D P L I 1 to improve
environmental management are described below and summarized in Annex 3.
89.
ENVDPL I1 also supports continued implementation o f reforms initiated under E N V S A L
Iwith respect to decentralization o f environmental management functions, improvement o f
public participation and further improvement o f transparency in environmental management. The
L a w on Transparency, enacted in 2002, allowed decision-making by the G Q M on environmental
management to be opened up to public scrutiny. To further improve public participation and
transparency in environmental management, SEMARNAT has initiated a yearly publication o f
environmental data to inform citizens about the state of the environment and potential risks to the
public, and the programs that the government i s carrying out to improve environmental quality.
90.
Environmental management also has been strengthened according to the competitiveness
principle. SEMARNAT has streamlined the administrative procedures for permits by eliminating
55 out o f the 145 permits previously requested by environmental authorities, reducing the
procedural time lag by up to 80%, and created an Integrated Service Center that decreases the
probability o f corruption by eliminating direct contact between the client and the official that
determines permit issuance or rejection. These improvements have considerably reduced
discretionary application o f requirements by public officials and provided strong incentives for
the regulated community to follow all the appropriate procedures, as is exemplified by the rising
number o f projects that are subjected to EIA prior to their development. EIA i s considered an
area where the G O M has achieved concrete results. SEMARNAT has published new guidelines
for EIA to minimize the processing time for licenses, identify and assess cumulative impacts,
increase public disclosure o f information and foster public participation.
91.
SEMARNAT has continued to provide important economic resources for capacity
building at the sub-national level through the PDIA. Furthermore, SEMARNAT is pursuing
additional improvements o f i t s decentralization model and has recently completed the first part
o f an evaluation o f the approaches that the sector has followed over the past decade, including a
review o f relevant international experience in decentralization, which i s expected to guide future
decentralization efforts.
92.
Between 2001 and 2004, only one function was transferred to one state (permit issuance
functions for sustainable use o f forest resources were transferred from the Federal Government
to the environmental authorities o f the Estado de Mkxico). Since the decentralization o f
environmental management responsibilities did not achieve substantial progress, SEMARNAT
conducted an evaluation o f the decentralization program in late 2004. The evaluation found that
the most prominent obstacles that hindered the transfer o f functions to the states were the lack o f
priority-setting with respect to functions to be transferred and the relative weakness o f state and
local authorities. Based o n this assessment, SEMARNAT set priority environmental management
functions to be transferred relating to forests and soils, the Federal Maritime Zone (Zona Federal
Maritima, ZOFEMAT), and wildlife. In addition, SEMARNAT introduced mechanisms to
monitor and evaluate the performance o f state environmental authorities in their handling o f the
decentralized functions. The newly-established monitoring and evaluation systems eliminated the
need for certification and therefore SEMARNAT decided to de-link certification from the
28
decentralization process. The new approach has already produced positive results. Permit
issuance functions for sustainable wildlife use have been transferred to the state authorities o f
Tamaulipas, Nuevo Leon, and Coahuila, and the permit issuance functions o f sustainable use o f
forest resources have been transferred to the Estado de Mkxico. In addition, the states o f
Guanajuato and Chihuahua have begun decentralization o f the Licencia Ambiental Unica.
Furthermore, SEMARNAT has increased the number of states to which P D I A resources have
been allocated to 27 states, for capacity building in order to begin decentralization.
F.2
PERSPECTIVES FOR ENVDPL I11
93.
The GOM’s program to improve the efficiency and effectiveness o f environmental
management in the future includes: (i)
the preparation o f an initiative for fiscal instruments for
environmental management; (ii)
the continuation o f the decentralization program based on the
outcomes o f the ongoing evaluation by SEMARNAT; and (iii)
strengthening public participation
schemes.
IV.
A.
BANK SUPPORT TO THE GOVERNMENT STRATEGY
LINK TO COUNTRY PARTNERSHIP STRATEGY
94.
The proposed operation i s included in the portfolio for the base case lending scenario and
i s one of two policy-based loans contemplated under the theme o f environmental sustainability in
the FY 2005-2008 Country Partnership Strategy (CPS) for Mexico. The CPS presents a program
of operations to support the GOM’s development objectives as detailed in the National
Development Plan 2001-2006, based on four pillars: (i)
reduce poverty and inequality; (ii)
increase competitiveness; (iii)strengthen institutions; and (iv) promote environmental
sustainability. With respect to environmental sustainability, the loan responds to the main
challenges identified by the CPS, as i t contributes to the improvement o f environmental
governance by increasing the sector’s transparency and accountability, and creates incentives for
more efficient and decentralized environmental management. Also, the loan supports policy,
legal and institutional reforms in the forest and water resources sectors to address key
environment-livelihood linkages, and contemplates actions to mitigate environmental and health
impacts, particularly those that stem from the energy and tourism sectors.
The E N V D P L I1 operation will be a key tool in delivering Bank support to the
95.
government to strengthen institutions and promote environmental sustainability in the current
CPS report (Report No. 28141-MEYdated March 18,2004). The report refers to the E N V D P L I1
operation as supporting CPS objectives by promoting the mainstreaming o f environmental
concerns and improved local environmental management processes. Building o n the first
operation, E N V D P L I1 will provide continued support to Mexico’s five-year program, focusing
on addressing the developmental challenges o f environmental mainstreaming in four priority
sectors: tourism, energy, forestry and water, and o n environmental governance (in particular, by
increasing transparency and accountability).
29
96.
Given that the operation’s central thrust i s to promote environmental sustainability, it is
also fully consistent with, and will contribute to, the achievement o f the goals o f the remaining
three pillars o f the CPS. For instance, with respect to increasing competitiveness, the operation
supports strategic policy reforms in economic sectors, such as tourism or forestry, where Mexico
has important comparative advantages and where the incorporation o f environmental
considerations will increase the country’s ability to maintain those advantages in the long term.
By supporting activities and actions that promote the reversal o f the overexploitation o f natural
resources, such as groundwater aquifers, the proposed operation will help to remove existing
constraints to growth. Furthermore, ENVDPL I1 will have an important impact o n poverty
alleviation as the burden o f environmental degradation falls disproportionately on the
who depend o n natural resources for their livelihoods. With respect to institutional strengthening,
the project will clearly respond to some o f the environment sector’s weaknesses through
activities aimed to strengthen environmental governance. Other sectors are expected to benefit
from institutional strengthening also, particularly water resources management, where the Bank’s
involvement has facilitated the building and expansion o f coordination mechanisms.
97.
Furthermore, the CPS also stresses that to satisfy the needs o f the most vulnerable groups,
the Bank will have to focus on areas where it can create value. In this regard, the operation takes
advantage o f the Bank’s robust capacity to provide high quality policy, legal and institutional
analysis to support the GOM’s program, and can leverage the Bank’s convening power to
promote inter-sectoral coordination.
B.
COLLABORATION W I T H THE IMF AND OTHER DONORS
98.
Mexico currently does not have a financial support program or outstanding loans with the
IMF. In view o f the country’s healthy finances, it i s not expected that the G O M will request IMF
support over the CPS period (FY05-08). The Mexican government does maintain an active
policy dialogue with the Fund, however, through the Fund’s bilateral and global surveillance
activities. In addition, Fund and Bank staff maintain a regular exchange o n macro policy.
99.
There are no areas o f overlap between the Bank’s and the IDB’s work in Mexico.
Nonetheless, the Bank will continue to collaborate with the IDB - one o f the Bank’s main
development partners in Mexico - with respect to environmental issues and related sectors such
as the water, sanitation, and housing sectors. In addition, the Bank recently initiated contacts
with two other institutions to remain informed o f developments in their work and vice-versa: the
U.S. Agency for International Development (USAID), which has a grant program to support
natural resource management, and the Japan International Cooperation Agency (JICA), which
has a technical cooperation program in health and environmental protection.
C.
RELATIONSHIP TO OTHER BANK OPERATIONS
100. The proposed loan i s the second o f three operations that constitute the Mexico
Environment Structural Adjustment Program. The first operation, E N V S A L ‘I,
consisted o f two
35
Giugale, M., 0. Lafourcade and V.H. Nguyen (editors). Mexico Policy Notes: A Comprehensive Development
Agendafor the New Era. 200 1.
30
tranches o f $101.01 million each and was completely disbursed in December 2003.36ENVSAL I
successfully supported the initial stage o f policy reforms, which the proposed operation will
build upon in order to ensure sustainability and to deepen the reforms to mainstream
environmental concerns in key sectoral development agendas and improve the effectiveness and
efficiency o f environmental management processes in Mexico. At the sectoral level, this
operation will complement the ongoing dialogue in priority sectors identified by the GOM,
namely tourism, energy, forestry and water.
101. The reforms supported by the ENVDPL I1 will be fundamental t o create an enabling
environment in which various planned projects included in the current CPS can take place. In the
water sector, the ENVDPL I1 will continue to build on the achievements o f the Bank’s Water
Resources Management Project, which has helped to promote conditions for environmentally
sustainable, economically efficient and equitably allocated rights for use o f water resources in
Mexico, and to support the integrated management o f water resources. In addition, the sector
reforms supported by ENVDPL I1 will be complementary to: (i)
the Water Programmatic AAA,
which will include studies on the economic value o f water; (ii)
the Integrated Management o f
Basins and Aquifers Project, which will help improve conditions for sustainable integrated water
resource management, contribute to increased efficiency o f water use and fair allocation o f water
rights, consolidate water management institutions and promote stakeholders’ participation in
decision-making; (E)the Mexico Water Rights Adjustment Program (PADUA), which promotes
aquifer stabilization in water-stressed areas through retiring water concessions where demand for
water exceeds sustainable supply from surface and groundwater sources; (iv) the Water and
Sanitation Technical Assistance Loan which will seek to implement reforms in the delivery o f
services in water and sanitation sectors; and (v) the Integrated Irrigation Modernization Project,
which is supporting the GOM’s efforts to improve competitiveness o f irrigated water use in
selected irrigation districts and regions, through public-private partnerships, institutional
collaboration and strengthening the demand-driven approach to investment decisions and
financing.
102. Activities under E N V D P L I1 that will support environmental mainstreaming in the
energy sector are fully consistent with several climate change projects and will reinforce the
sustainability o f project results by promoting an adequate framework that includes required
sector policy reforms. These activities include: (i)the PCF-financed Comexhidro/INELEC
Hydro Umbrella project, which replaces fossil-fired electricity generation with a package o f
mini-hydro developments associated with existing irrigation schemes; (ii)the PCF-financed
PEMEX Refinery Cogeneration project that will use carbon finance t o promote the use o f
refinery wastes for high-efficiency production o f steam and power; (iii)the PCF-financed
Bagasse Co-generation project, which will support the use o f bagasse for high-efficiency
production o f steam and power with Mexican sugar factories; (iv) the Netherlands Carbon
Development Fund-financed Wind Umbrella project that will support the displacement o f fossil
energy through grid-connected wind farms; (v) the GEF-financed Large-scale Renewable Energy
Development project that will support the development o f grid-connected renewable energy
resources and facilitate a financial mechanism offering competitively-based tariff support for
wind, hydro, biomass, and other renewable technologies; and (vi) the IBRD/GEF-financed Rural
36 Simplified Implementation Completion Report. United Mexican States: First Programmatic Environment
Structural Adjustment Loan, Loan No. 7136-ME. Washington, DC: World Bank. 2004.
31
Electrification project that will promote the expansion o f electricity services to poor households
in dispersed or remote areas, where connection to the electricity grid i s not financially or
logistically feasible.
103. Similarly, the activities that will be supported by E N V D P L I1 in the forestry sector will
have clear synergies with the Community Forestry I1 and Community Forestry I11
(PROCYMAF) projects. The latter will assist indigenous communities and ejidos that own
forests in priority areas to improve the management and conservation o f their forest resources
and to generate alternative sources o f income in a sustainable manner. Also, ENVDPL I1 will
complement projects that promote conservation and sustainable use o f biodiversity such as the
GEF-financed Indigenous and Community Biodiversity Conservation project (COINBIO) and
the Consolidation o f the GEF-financed Protected Areas System project (SINAP 11). E N V D P L I1
will enhance sustainability o f the results o f the IBRD/GEF-financed Environmental Services
project, which will support the development o f economic incentives to promote conservation and
sustainable forest management in priority watersheds.
D.
LESSONS LEARNED
104. Some o f the most relevant lessons learned derive from the first operation (ENVSAL I).
The primary challenges faced and successes achieved under E N V S A L Iwere associated with the
nature and requirements o f inter-institutional coordination. In particular, inter-institutional
coordination requires the unwavering commitment o f participating agencies to undergo a
profound learning process and adopt significant behavioral changes. Although this learning
process i s complex and time-consuming, it also proved effective in enhancing the quality o f
products in instances where inter-institutional coordination was successful. In order to overcome
the difficulties and enhance the benefits associated with inter-institutional coordination, the
proposed operation incorporates various learning mechanisms whereby lessons learned are
captured, distilled, and fed back into the process in a step-wise manner to promote continuous
improvements o f outputs and smooth the learning process for this and future operations.
105. In light o f the above, various mechanisms have been put in place and continue to function
to provide the opportunity for social learning in a cross-sectoral setting. In the energy sector,
high-level meetings between SENER and various governmental agencies have been
institutionalized in the Intersectoral Committee for Projects for Emissions Reductions and
Capture o f Greenhouse Gases (Comite' Mexican0 para Proyectos de Reduccidn de Emisiones y
de Captura de Gases de Efecto Invernadero). Objectives o f this Committee are to identify
opportunities, facilitate, promote, disseminate, evaluate and approve projects for emission
reduction and greenhouse gas capture. This committee i s composed o f representatives from the
environment, energy, economics, agriculture, rural development, fishery, communication and
transport sectors. Also in the energy sector, a technical advisory team comprised o f Mexican
experts in environment and energy policy issues will provide technical advice to inform the
development o f the sector's environmental policy. In the tourism sector, the G O M seeks to
achieve lasting results in environmental mainstreaming and to consolidate intersectoral
coordination at a high level through such vehicles as the Intersectoral Commission o n Tourism
(Comisidn Intersecretarial de Turismo) established o n September 28, 2004. In addition, to foster
learning and enrich ongoing efforts to ensure sustainable tourism development, SECTUR is
planning to organize a workshop in the first semester o f 2005 with the participation o f municipal
32
authorities and c i v i l society. The workshop will disseminate experiences o n the implementation
o f Agenda 21 locally in Mexico. A regional workshop planned for the second semester o f 2005
will elicit and disseminate lessons learned from successful cases o f tourism development in the
region. The findings o f this workshop will provide input to inform the development o f a tourismenvironment strategy.
106. Under Mexico’s fiscal policy, the proposed loan does not increase aggregate fiscal
resources available to environment and other sectoral agencies since the fiscal envelope i s
defined by the binding primary fiscal surplus targets. Nonetheless, G O M i s ensuring that levels
of human and budgetary resources are adequate to ensure institutional capacity. Although GOM
has enough resources to finance reforms for the environmental sector, the results o f Bank support
have underscored the added value o f the operation both in terms o f the technical assistance
provided and the institutionalization o f spaces for intersectoral cooperation and dialogue which
probably would not have been created otherwise. The Japan Policy and Human Resources
Development Fund (PHRD) provided key resources that allowed for the development o f key
analytical work and stakeholder participation for the preparation o f E N V D P L 11. The use o f
PHRD grant funds provided a positive incentive for mainstreaming environmental concerns in
key economic sectors.
107. Another important lesson from ENVSAL Irelates to the loan’s conditionalities and
triggers, which covered a broad range o f development areas. Consequently, implementation and
supervision covered a wide range o f topics, presenting challenges in terms o f sufficient human
and budgetary resources and the constant and intense nature o f the dialogue between the G O M
and the Bank throughout the period o f implementation. T o address these challenges, the number
of triggers or prior actions completed for the proposed operation has been limited to five key
actions.
108. Under ENVSAL I,partial waivers were requested for three loan conditions. One o f the
requests was necessitated by changes in titles o f the members o f the Intersectoral Technical
Working Groups (ITWG), since the Loan Agreement specified titles for the members o f the
groups. This request for a partial waiver was purely circumstantial and showed that it would have
been sufficient for the Loan Agreement to specify the names o f the organizations to be included
in the ITWG and not the titles o f the members. The second request related to the requirement for
SEMARNAT to certify, using ISO-900 1-2000, certain environmental management and permit
issuance functions that were to be decentralized to the state governments. Three o f these
functions were not certified because they were transferred from SEMARNAT to CONAFOR.
Furthermore, the assessment conducted by SEMARNAT o f i t s experience with decentralization
concluded that certification was not necessary to assure the quality o f decentralization and that it
in fact presented considerable obstacles to the decentralization process. Based o n this
assessment, SEMARNAT decided to de-link certification from the decentralization process. A s
noted previously, this new approach has produced positive results including the decentralization
of permit issuance functions for sustainable wildlife use to three states and for sustainable use o f
forestry resources to one state. The third partial waiver request related to the condition for public
disclosure o f Environmental Impact Assessment (EIA) review and certain permit issuance
processes. The need for this request also was related to the transfer o f functions from
SEMARNAT to CONAFOR. Recent evidence obtained from the G O M indicates that the
33
processing information on EIA and control permits i s publicly disclosed through governmental
websites.
109. In relation to the second partial waiver request for E N V S A L I,an additional lesson from
the decentralization experience i s evident from the inadequacy o f “supermarket” approaches to
the devolution o f permitting functions, whereby states can pick and choose which permitting
functions they want to assume via certification. This model results in an anomalous situation
where the least desirable functions are left to the federal government, and the states take over
only the easy or popular ones. Thus, it i s important to ask whether the permits make sense in the
first place, after which i t may be more practicable and cost effective to cluster permits and
transfer them as a package rather than one by one. Alternatively, various approaches with
different incentives could be tried, as they have proven to be successful in cases such as the use
o f “fast-tracking” for the Licencia Ambiental Unica.
E.
ANALYTICAL UNDERPINNINGS
110. The policy reforms that the G O M will undertake with the support o f the Second
Programmatic Environment Development Policy Loan are founded o n sound and rigorous
analyses conducted by federal agencies, the Bank, OECD and ECLAC. The most recent work
includes several studies financed under the Japanese PHRD grant to prepare the second
operation. These studies support the development o f new environmental fiscal instruments, a
sustainable tourism strategy, proposals for improved inter-institutional coordination in the water
sector, a tourism-environment strategy and options for medium and long-term use o f renewable
energy sources. Other related work includes the Bank’s Public Expenditure Review, the Bank’s
Infrastructure Public Expenditure Review (currently underway), and the Bank’s assessment o f
poverty conditions in Mexico (Poverty in Mexico: an Assessment of Conditions, Trends, and
Government Strateay).
111. Analytical work carried out by the G O M and other development partners, such as the
United Nations’ Economic Commission for Latin America and the Caribbean (ECLAC) in 2002
and the Organisation for Economic Co-operation and Development (OECD) in 2003, provides a
solid foundation for the program. The E C L A C document identifies various symptoms o f
environmental problems and their causes in Mexico.37 The Second Environmental Performance
Review o f Mexico concluded recently by the OECD provides an independent assessment o f the
country’s environmental challenges, which correspond with those identifiedjointly by the G O M
and the Bank.
112. The 2001 World Bank Policy Notes for Mexico3* found that water resources
management, forestry, air quality management and solid waste management among
environmental priority areas. With respect to water resources management, the main challenges
identified included the overexploitation o f aquifers due to over-allocation o f water users’ rights,
inefficient irrigation, and water pollution. Furthermore, the Policy Notes stated that Mexico’s
37 Tudela, Fernando. Los Sindromes de Sostenibilidad del Desarrollo: El Cas0 de Mkxico. United NationsECLAC.
2004. (The study was presentedin the Seminar “Sindromes de Sostenibilidad del Desarrollo en America Latina” in
Santiago de Chile, Chile in 2002. Fernando Tudela i s Under Secretary o f Planning and Environmental Policy in
SEMARNAT, and i s responsible for coordinating and monitoring ENVDPL I1activities).
38 Mexico: A Comprehensive Development Agenda for the New Era. Washington, DC: World Bank. 200 1.
34
land and forest base were threatened by land degradation and deforestation. Other problems
associated with the forestry sector included the need to ensure that poor communities capture the
full market value o f timber and non-timber products, and environmental services. With respect to
air quality management, problems identified included large, adverse health impacts from air
pollution associated with poor fuel quality, and legal barriers to energy efficiency gains and to
development o f renewable energy resources. Lastly, with respect to solid waste management,
inadequate treatment and final disposal posed environmental challenges, stemming from lack o f
a regulatory framework and its enforcement. The reforms being supported by E N V D P L I1
address a number o f the environmental challenges identified above that are associated with the
four priority sectors targeted by E N V D P L 11.
113. The 2004 E C L A C document identified environmental problems and their causes in
Mexico. These problems included inadequate water quantity and quality, overexploitation o f
natural resources, habitat change and air pollution. The document cited changes in vegetation
cover as a key factor in environmental degradation in Mexico - a consequence o f a vicious cycle
o f deforestation, intensive land-based farming practices and erosion. With respect to water, the
document predicted a sustainability crisis in a 15 - 20 year time frame in the sector relating to
inefficient water use and inadequate management o f pressures on existing water resources. The
problems in the water sector were attributed to unequal spatial and temporal distribution o f water
resources in the country, unsustainable management o f water resources through overexploitation
of existing resources, depletion o f groundwater bodies and pollution o f surface waters. Other
an inability to satisfy demands
problems that were associated with the water sector included: (i)
for water for distinct municipal uses; (ii)
the slow growth o f basic water services (drinking water,
basic sanitation) compared to the rate o f development; (iii)the use o f water for low-value
products rather than for high-value products; and (iv) inadequate public and private investment
in the sector. Hazardous industrial emissions, inadequate disposal o f industrial and municipal
wastes and air pollution in municipal zones were cited as precursors to environmental
degradation in the country.
114. The 2003 OECD review concluded that Mexico had yet to achieve significant decoupling
of environmental pressure from GDP. The review showed that Mexico continued to face
challenges with respect to adequate management o f air, water, waste, and nature and
biodiversity. Rapid economic growth has placed increased pressure o n the environment, through
pollution and use o f natural resources. The review identified seven priority environmental issues:
(i)water and forestry management; (ii)integrated management o f natural resources; (iii)
environmental management and environmental planning at the watershed level; (iv)
decentralization o f environmental management and decision-making; (v) increased public
participation and the right o f access to environmental information; (vi) ensuring that users o f
natural resources pay for the environmental cost o f resource use; and (vii) strengthening o f
environmental legislation, inspection and compliance rates. One o f the key recommendations o f
the review in order to meet the identified challenges was that G O M further integrate
environmental concerns into economic and social decisions. This recommendation is consistent
with the objectives o f E N V D P L 11.
35
V.
A.
THE PROPOSED OPERATION
PROGRAM OBJECTIVES AND PRIOR ACTIONS
115. The main objective o f the E N V S A L program since i t s inception in 2002 has been to
support the Government’s efforts to: (i)
mainstream environmental concerns in the development
agenda o f key sectors, and (ii)
improve the efficiency and effectiveness o f local environmental
management processes in Mexico. The first operation, ENVSAL I,supported initial actions to set
medium-term targets to mainstream environmental concerns in key sectors and create favorable
institutional conditions for the implementation o f reforms. The proposed operation, E N V D P L 11,
will support the development o f legal and regulatory frameworks and the continuation o f the
GOM’s efforts to consolidate and deepen the impact o f reforms through implementation. A
listing o f all actions supported by ENVDPL I1i s summarized in Annex 3.
116. During ENVSAL Inegotiations, the G O M and the Bank defined a l i s t o f proposed
actions to be implemented by the G O M prior to appraisal o f E N V D P L 11. These triggers focused
on the four key productive sectors: tourism, forestry, energy and water, and in environmental
management. Advances in each one o f them reflect the overall efforts o f the G O M to implement
the ENVSAL program. Examples o f actions include: (i)
the publication o f water availability data
and an improved water rights registry as foundational steps in the implementation o f a
functioning water rights market, consistent with the current regulatory framework; (ii)the
establishment and implementation o f a set o f indicators and benchmarks for measurement o f
good environmental performance o f tourist facilities; (iii)
Secretariat o f Energy-approved design
and preparation for implementation o f a national fund for renewable energy promotion; (iv) the
establishment and start operation o f a Clean Development Mechanism (CDM) Office, involving
at least SENER and SEMARNAT, according to rules set up at the Marrakech and Bonn
Conferences o f the Parties o f the UNFCCC; and (v) the initiation o f decentralization efforts (as
evidenced by signature o f a convenio, capacity building, or joint operation prior to certification)
by six States o f at least one or more environmental management functions, based on
SEMARNAT-approved decentralization plans. Since these five triggers have been met, they will
be presented to the Board o f the Bank as the prior actions for this operation. Table V-I below
presents the triggers for E N V D P L I1and actions taken by the G O M to meet them.
36
Table V-1. ENVDl
Area
Energy
Improving the
efficiency and
effectiveness o f
environmental
management
processes
B.
t
I1TRIGGERS AND CURRENT STAT1 3.
Original Trigger
Status
Publication o f water availability data and an
improved water rights registry as foundational
steps in the implementation o f a functioning
water rights market, consistent with the
current regulatory fiamework.
Met
CNA has publishedwater
ivailability data and improved
water rights registry.
Establishment and implementation o f a set o f
indicators and benchmarks for measurement
o f good environmental performance o f tourist
facilities.
Met
SECTUR AND PROFEPA
designed and implemented a set
o f indicators and benchmarks for
measurement o f good
environmental performance o f
tourist facilities
Secretariat o f Energy-approved design and
preparation for implementation o f a national
fund for renewable energy promotion.
Met
SENER has completed a study
with the design o f a national fund
for renewable energy promotion
Establishment and operational startup o f a
Clean Development Mechanism (CDM)
Office, involving at least SENER and
SEMARNAT, according to rules set up at the
Marrakech and Bonn Conferences o f the
Parties o f the UNFCCC.
Met
G O M established and started
implementation o f a Clean
Development Mechanism (CDM)
office according to rules set up at
the Marrakech and Bonn
Conferences o f the Parties o f the
UNFCCC.
Decentralization by six states (as evidenced
by signature o f a convenio, capacity building,
or joint operation prior to certification) o f at
least one or more environmental management
functions, based on SEMARNAT-approved
decentralization plans.
Met
Three states have completed
decentralization o f wildlife
management responsibilities; one
state has completed
decentralization o f forestry
management responsibilities. One
state completed decentralization
o f forestry functions. In addition,
over ten states have begun
decentralization based on
environmental performance
agreements with SEMARNAT.
Action
ADDITIONAL KEY ACTIONS UNDERTAKEN BY THE GOM UNDER
ENVDPL I1
117. ENVDPL I1 focuses on advancing the reform efforts that were initiated under the first
operation. In addition to the triggers, key actions supported by the second operation include
among others: (i)the development o f action plans, in fourteen key tourism destinations, to
implement local Agenda 21 Programs for Sustainable Tourism; (ii)
evaluation o f programs to
improve the quality o f transport fuels, and establishment o f incentives to promote renewable
energy; (iii)enactment o f a new General Law for Sustainable Forestry Development and
regulations consistent with the law; (iv) amendments to the National Water Law, publication o f
water availability data, and an improved water rights registry as foundational steps in the
implementation o f a functioning water rights market; and (v) streamlining o f administrative
37
procedures in the environment sector and continued implementation o f the L a w o n Transparency
in order to allow environmental management to be opened up to public scrutiny. These key
actions and their outcome indicators are summarized in Table V-2. Also, Annex 1 presents a full
listing o f these and other key actions undertakenby the GOM under ENVDPL 11.
Table V-2. Additional Ley Actions Undertaken by the GOM unde ENVDPL I1
Key Issues and Objective
Actions supported by ENVDPL I1
Outcomes Indicators
Promotion o f sustainable
tourism.
Develop pilot Agenda 21 action plans in 14 key
tourism destinations: Acapulco, Bahia de Banderas,
Campeche, Commel, Cuetzalan, Guanajuato,
Huatulco, Ixtapa-Zihuatanejo, Los Cabos,
Manzanillo, Mazatlh, Oaxaca, Patzcuaro and San
Miguel de Allende.
Increasednumber of tourism
destinations with Agenda 2 1
Action Plans.
Improve environmental
conditions - especially
wastewater and solid waste
disposal - at existing tourist
sites.
Passage o f the new legal framework for solid waste
management “Lev General uara l a Prwencidn v
Gestidn Intewal de 10s Residuos” in 2003.
Improved waste management
in tourist destinations.
Improve fuels quality with
respect to sulfur content.
SENER, SEMARNAT and PEMEX reached
consensus and reduced sulfur content in Premium
gasoline to 300 ppm.
Reducedsulfur content in
Magna gasoline from 1000 to
500 ppm by weight, and in
Premium gasoline to 300 ppm
by weight.
Promote renewable energy
potential in Mexico.
Fiscal provisions were approved in 2004 for the
accelerated depreciation o f renewable energy
capital.
Increase renewable energy
capacity to 1,470 MW.
Long-term vision for sector
developed through the
Strategic Forest Plan 2025
to address range o f forestry
issues including high rates
o f illegal logging due to
inappropriate regulatory
framework and
enforcement.
Enactment o f a law (General Law for Sustainable
Forestry Development) and regulations for
sustainable forestry management.
Enactment o f law and
regulations to promote
sustainable forestry
management in Mexico.
Need for clearer consensus
on solutions to the water
problem, given large
number o f existing
uncoordinated proposals.
Passage o f amendments to the National Water Law
in 2004.
Amendment of legal
framework and issuance o f
regulations (Reglamento)
aimed at promoting
sustainable water
management.
Ensure adequate public
participation and
transparent processes in
environmental
management.
(i)
SEMARNAT has implemented and maintained a
website on EIA and permits at the federal level.
(ii)
GOM has developed and further implemented
legal framework for public disclosure o f documents,
including licensing processes and permits.
(iii)SEMARNAT publishes an annual statistics and
reports on the Environment.
Guidelines issued for public
participation in environmental
management; and increased
public disclosure o f
information on environmental
management.
Studies have been conducted on full cost pricing o f
water, block pricing in urban locations and wa&r
quality in coastal zones.
38
C.
LOAN AMOUNT AND TRANCHING
118. The proposed US$200.5 10 million loan will be made to the United Mexican States. The
loan i s expected to be disbursed in a single tranche immediately upon effectiveness. The
proposed loan does not increase resources available for public sector spending. Under Mexico's
fiscal regime, a D P L from the Bank substitutes financing from alternative, more expensive debt
sources. The proposed loan does not increase aggregate fiscal resources available to environment
and other sectoral agencies since the fiscal envelope i s defined by the binding primary fiscal
surplus targets.
D.
PRIOR ACTIONS FOR ENVDPL I11
119. The Bank partnership with the G O M on the ENVSAL Program will continue into the
third operation, assuming a continued sound macroeconomic framework is in place and the
following triggers have been met: (i)
increase the number o f tourist destinations, with local
Agenda 21 action plans, including investment plans, from 14 to 35; (ii)
develop a package o f
legal reforms and regulations needed for promotion o f renewable energy sources; (iii)
establish
mechanisms to improve access to financial services and products schemes to provide financing
for investments in sustainable forestry management; (iv) develop a package o f regulations which
are consistent with the newly amended National Water Law; and (v) develop and publish new
methodologies and guidelines for incorporation o f public participation in environmental
management, including Environmental Impact Assessment. These triggers are summarized in
Table V-3 below.
Table V-3. Triggers for ENVDPL I11
Area
Tourism
Energy
Forestry
Water
Improving the efficiency and
effectiveness o f environmental
management processes.
Trigger
Increase the number o f tourist
destinations with local Agenda 21 action
plans, including investment plans, from
14 to 35.
Develop a package o f legal reforms
(Reglamento), programs and
methodologies for promotion o f
renewable energy sources.
Establish mechanisms to improve access
to financial services and products
schemes to provide financing for
investments in sustainable forestry
management,
Develop a package o f regulations
(Reglamento)which are consistent with
the newly amended National Water
Law.
Develop and publish new guidelines for
public participation in environmental
management.
39
Outcome Indicator
Increased number o f tourism
destinations with local Agenda 2 1
Action Plans.
Increase renewable energy capacity to
1,470 M W .
Increased amount o f investments in
sustainable forestry management.
Amendment o f legal framework and
issuance o f regulations (Reglamento)
aimed at promoting sustainable water
management.
Guidelines issued for public
participation in environmental
management.
Increased public disclosure o f
information on environmental
management.
VI.
A.
OPERATION IMPLEMENTATION
POVERTY AND SOCIAL IMPACTS
120. The provisions o f OP 8.60 apply to ENVDPL 11. In general terms, improvements in
environmental sustainability are expected to benefit the poor. The Bank’s recent assessment o f
poverty in Mexico3’ points out the adverse effect environmental degradation has o n the poor,
particularly in terms o f health. Water and air pollution result in illhealth, especially o f the poor;
soil degradation and unsustainable agricultural and forestry practices adversely affect
livelihoods, as well as increase the vulnerability o f the poor to natural disasters. Therefore, it i s
expected that the ENVSAL program will enhance environmental and health conditions that
improve the potential opportunities for more productive workdays and a better l i f e for the poor.
Those vulnerable population segments that depend o n natural resources for their livelihoods,
such as indigenous peoples and ejido communities, would benefit also through the promotion o f
sustainable environmental management practices. These positives impacts on poverty and social
development vary, however, according to the specific set o f actions promoted by each o f the
policies and have different effects depending on the stakeholder.
121. The actions supported by the E N V D P L I1 targeted at attaining sustainable development
o f the tourism sector help building the capacity o f municipalities as well as o f local citizens and
o f the poor to increase their access to information and decision-making. In addition, establishing
new destinations and promoting new investments in tourism will contribute to creating new j o b
and income opportunities for the poor. Different kinds o f tourism, such as cruises, ecological and
cultural tourism that are encouraged by the sustainable tourism strategy supported by this loan,
have demonstrated strong distributive impacts and social implications.
122. The actions supported by the loan in the energy sector will contribute to reducing air
pollution and mitigating its impacts on human health. In urban centers, people living in lowincome areas are the most exposed to adverse environmental impacts. The most vulnerable and
the poorest, therefore, will benefit from these measures. Workers in the energy sector and
neighborhoods close to P E M E X and CFE facilities will benefit from measures leading to the
reduction o f pollution in these facilities. In addition, rural electrification will contribute to
reducing indoor air pollution and provide better living conditions for the population.
123. The actions supported by E N V D P L I1 in the forestry sector promote increased
opportunities for the development o f income-generating activities and the generation o f
employment opportunities for forest dwellers, ejidatarios and indigenous peoples living in
forested areas. The implementation o f these activities will foster the capacity o f these
communities and cooperatives to take greater advantage o f sustainable and productive uses o f
forest areas. The new Forest L a w puts in place specific mechanisms for cost recovery, nontimber forest production, ecological services valuation, small-scale user permits, and intellectual
property rights - all o f which can apply to indigenous communities and other poor forest
dwellers. It also establishes a forest fund and a commission that can help build capacity in these
areas. The GOM is implementing mechanisms to foster accountability in the decentralization
39
Poverty in Mexico: An Assessment of Conditions, Trends and Government Strategy. Washington, DC: The World
Bank. June 2004.
40
process by ensuring a stronger involvement o f the communities, ejidatarios and local c i v i l
society organizations in sectoral decision-making.
124. The water program designed by the G O M envisages the provision o f adequate water
quantity and quality for a large number o f people in Mexico. The amended National Water L a w
makes particular reference to ejidatarios, small farmers, and indigenous communities. The law
prohibits extraction of water from parceled ejidos or community lands without authorization o f
ejidatarios, small farmers, and indigenous communities with the exception o f water for
subsistence or domestic use.4o
125. Simultaneously, SEMARNAT i s strengthening i t s environmental management capacity
to foster accountability, transparency and to ensure mitigation o f potential negative impacts
associated with tourism, energy, water, and forestry development. The program supports the
establishment o f effective mechanisms for channeling voice and building consensus, which are
important for ensuring successful and inclusive public participation in environmental
management and increased accountability o f public organizations. New Environmental Impact
Assessment guidelines, issued during the second operation, place particular emphasis o n opening
up decision-making processes to public scrutiny.
126. In accordance with OP 8.60, consultations were held in the process o f preparing
E N V D P L 11. Several public hearings and workshops were held that focused o n the key aspects o f
Mexico’s Environmental Mainstreaming Program (Programa de Transversalidad), and on the
design and discussion o f the new forestry law and the amendments to the water law. These
events included a workshop o n the Programa de Transversalidad,held in March 2005 in Mexico
with the participation o f various stakeholders, including social and environmental NGOs; a
workshop held in Patzcuaro in 2005 that focused on control o f indoor air pollution caused by
domestic use o f fuelwood; and public consultations held o n the environmental mainstreaming
program in the tourism sector through workshops held in January 2005 and in M a y 2005 with the
participation o f over 200 mayors, other representatives o f state and municipal governments, and
other stakeholders.
127. The uneven effect o f reform implementation o n different stakeholders and sectors o f the
population i s one o f the main challenges that the G O M will have to face, concerning the social
and poverty impacts o f the environmental reforms. As stated above, all the measures supported
by the operation have positive outcomes for most o f the population. The opportunities to take
advantage o f these outcomes, however, are not the same for every one. It i s predictable that, if
appropriate institutional arrangements are not made and specific actions are not taken,
indigenous communities might not have access to potential benefits resulting from the costrecovery system, intellectual property rights and small scale user permits included in the new
Forestry Law. This would occur simply because they do not have the power to demand
accountability over their entitlements, the capacity to prepare management plans or to deal with
the cumbersome procedures in place to access these facilities. In order to enhance the
opportunities o f vulnerable groups to take advantage o f the new legal regulatory framework, the
G O M with Bank support is implementing various programs specifically targeted towards
indigenous communities and independent forestry workers. The Community Forestry Project
40
CNA. Ley de Aguas Nacionales y su Reglamento, Seccibn Segunda, Art. 55. Mexico City; CNA. 2004.
41
assists indigenous communities and ejidos in five states to improve the management and
conservation o f their forest resources and to generate sustainable alternative sources o f income.
The Indigenous and Community Biodiversity Conservation Project will strengthen and promote
community conservation initiatives on communally owned lands in areas o f high biodiversity in
three states. Finally, the G O M with Bank support i s conducting analytical work on the poverty
and social impacts o f reforms. The analytical work underway will identify policies whose
impacts on distribution, inclusion and other social issues would be studied as part o f the
preparation o f the subsequent operation.
B.
SUPERVISION
128. Each one o f the sectoral ministries and agencies involved in this operation (SHCP,
SEMARNAT, SENER, SECTUR, CONAFOR and CNA) will be responsible for implementation
o f the proposed components o f the operation and for reporting progress. The Environment and
Natural Resources Secretariat (SEMARNAT) will be responsible for coordinating actions among
the aforementioned agencies.
129. The Bank team will supervise the ENVDPL I1 with a particular emphasis to ascertain
whether the government o f Mexico i s carrying out the program with a focus o n development
impact and due diligence to achieve development objectives in conformity with the legal
agreements. Bank staff will assess and monitor the adequacy o f the institutional arrangements by
which the government o f Mexico implements the actions indicated in the Policy Matrix, and
verify fulfillment o f program conditions and compliance with legal covenants. The Bank team
will focus on the impact outcomes o f the program and the adjustments that need to be made to
the operation as it evolves, to take into account the latest country developments, stakeholder
support, and feasible options for realizing the program development goals. The Task Team will
monitor actions and review progress o f the implementation o f E N V D P L 11, as well as the
subsequent actions o f the government’s program. Before proceeding with the E N V D P L 111, the
Bank team will assess the government o f Mexico’s progress in implementing the expected
actions for the second operation, with a particular emphasis on the triggers presented above.
C.
FIDUCIARY ASPECTS
130. The Mexico Country Financial Accountability Assessment (CFAA, Report 29155-MX,
September 5, 2003) examined the GOM’s implementation o f measures intended to improve the
financial management o f the federal public sector. The CFAA found that the G O M has adequate
mechanisms in place to record and report public expenditures. The budget management o f the
Federal Government has several management instruments and defined objectives, standards and
procedures, fostering an accountable and transparent management o f State expenditures. The
main strength observed was the existence o f clear and complete rules that govern the Federal
Government’s administrative financial transactions.
D.
DISBURSEMENTAND AUDITING
13 1. Disbursement and Implementation Arrangements. The proposed loan will follow the
Bank’s disbursement procedures. N o procurement requirements will be needed. Once the loan i s
approved by the Board and becomes effective, the proceeds o f the loan will be disbursed by the
42
IBRD. If, after disbursement, the proceeds o f the loan are used for ineligible purposes as defined
in the Development Loan Agreement, the Bank will require the Borrower to either: (i)
return the
amount for use for eligible purposes, or (ii)
refund the amount directly to the Bank.
132. The administration o f this loan will be the responsibility o f the Banco del Ahorro
Nacional y Servicios Financieros S.N.C (BANSEFI) as financial agent o f the Federal
Government through the Mandate Agreement between the Secretaria de Hacienda y Cre‘dito
Pdblico and BANSEFI. A unit o f BANSEFI, the Subdireccidn de Financiamiento Internacional
will be in charge o f the coordination and fulfillment o f the terms and conditions set forth in the
Loan Agreement. Although an audit o f the deposit account will not be required, the Bank
reserves the right to require audits at any time.
E.
ENVIRONMENTALASPECTS
133. The provisions o f OP8.60 on Development Policy Lending apply to ENVDPL 11. The
raison d’itre o f the operation i s to support policy reforms and actions that embody the principle
o f environmental sustainability by promoting economic development that i s not derived at the
expense o f the environment and natural resource base. In other words, economic development
that i s balanced with protection and improvement o f the quality o f the environment and natural
resources. The operation seeks to achieve this dual objective through the incorporation o f
environmental considerations in key productive sectors o f the economy, and by improving the
effectiveness and efficiency o f local environmental management processes. Consequently, it i s
expected that the proposed operation will have positive effects on the country’s environment or
natural resources. The operation and indeed the program offer significant opportunities to
positively affect the environment and natural resources o f Mexico. Consistent with OP 8.60, this
section will discuss the argument that informs the expectation o f positive effects o f the operation,
drawing upon preparatory activities and aspects o f the operation and program design aimed to
ensure sustainability o f those effects.
134. The actions included in the matrix for this operation have been designed based o n a
strong foundation o f analytical work. A recent piece o f analytical work and a key component o f
the analytical foundation for this program i s the 2003 OECD Environmental Performance
Review, which concludes that rapid economic growth in Mexico has occurred together with
increased pressure o n the environment. This operation focuses o n four sectors - tourism, energy,
forestry and water - key drivers of economic development in Mexico. As discussed in preceding
sections o f this document, the environmental challenges associated with each o f these sectors are
significant and allude to the need and opportunities that exist to incorporate environmental
sustainability considerations into the sectors in order to achieve the overarching goal o f growth
with quality that underlies the country’s National Development Plan. Furthermore, the G O M
recognizes that environmental sustainability is a key factor to maintain the competitiveness o f
these sectors at national and international levels accordingly.
135. The reforms supported by E N V D P L I1 will seek to build upon the achievements o f the
previous operation which focused principally on initial actions to create an environment
conducive to the facilitation o f the policy reforms and actions that are supported by subsequent
operations. These reforms and actions have been selected to directly respond to the
environmental challenges identified with each o f the sectors. As an illustration, a key challenge
43
in the tourism sector is to manage the environmental problems associated with the existing
tourism industry and minimize damage from future growth. In this context, the proposed
operation supports actions that will improve environmental conditions at tourist sites, decrease
overexploitation o f natural resources and protected areas, ensure new tourism developments are
designed and tourist facilities are operated in a sustainable manner, and lastly to promote
sustainable tourism. O n one hand, the proposed actions will seek to promote protection o f the
environment and natural resources, while on the other they also may bring about the effect o f
increasing infrastructure development activities to promote tourism that could potentially have
negative environmental impacts. Studies under this program, such as the strategic sectoral study
and the strategic environmental assessments (SEAs), will be key tools in anticipating such effects
and outlining measures upstream to address them.
136. In addition, the strategic environmental assessments and studies that are supported by the
operation will provide input to the development o f sector environmental policies in tourism and
energy sectors, which often entail productive/sector activities that could contribute to
environmental degradation. It i s important to point out that although the GOM’s plans for
development o f the tourism sector contemplate considerable development o f infrastructure to
boost the sector’s growth, the proposed operation will not support investments in infrastructure.
The potential adverse environmental impacts o f infrastructure developments are recognized. I t is
anticipated that such impacts will be identified through the pilot SEAs supported by the
operation, including proposals for policy options to address them. In the water and forestry
sectors, actions and reforms will increase the competitiveness o f the sectors by improving
efficiency o f sector activities and utilizing opportunities for growth in a sustainable manner. In
the case o f the water sector for example, inadequate water quantity stemming from water loss
from inefficient or wasteful use in some areas and scarcity in others i s among the key challenges
o f the sector. In this context, the first operation supported actions that helped to increase the
efficiency o f collection o f water fees, and gradually i n s t i l l changes in user behavior toward the
resource. To consolidate the benefits o f the first operation, the subsequent operations will
support actions aimed to better align water fees with the economic value o f water.
137. Lastly, the inter-sectoral approach o f the program will provide a unique opportunity to
ensure that the reforms supported by the program will be sustained. This document recognizes
that inter-sectoral collaboration i s difficult and time intensive. The previous operation showed,
however, that where it did work, it resulted in higher quality products. The formation o f the
Intersectoral Technical Working Groups and their continued functioning have been a key vehicle
to promoting such coordination. As discussed in previous sections, the G O M i s on i t s own
increasingly using intersectoral coordination to approach cross-cutting environmental issues. The
establishment o f intersectoral fora such as the Comisidn Intersecretarial de Turismo (Tourism),
Comite‘ Mexican0 para Proyectos de Reduccidn de Emisiones y de Captura de Gases de Efecto
Invernadero (Energy), Consejo Consultivo del Agua (Water), Consejo Consultivo Forestal
(Forestry) allude to this development and indicate that the G O M i s advancing in the right
direction to address the country’s environmental challenges by directly addressing them and by
continuing to create the requisite institutional and policy framework to support the delivery o f
results in a sustainable manner.
138. A s illustrated in preceding sections o n the environmental challenges in the four sectors, it
i s clear that the severity o f effects o f environmental degradation may be localized as in the case
44
o f water where the arid areas o f the northern region are occupied by 77 percent o f the population
and account for 85 percent o f GDP. Consequently, it is important that the G O M i s sufficiently
capable to undertake environmental management at the local level where it is most needed. The
proposed operation incorporates actions to improve the effectiveness and efficiency o f
environmental management processes. The benchmarks that have been realized by the G O M
indicate that the country i s headed in the right direction with respect to protecting the
environment and improving environmental quality. Improved quality o f environmental
management, and increased transparency and availability o f information to the public attest to
this accomplishment.
F.
R I S K S AND R I S K MITIGATION
139. The main macroeconomic risks to the ENVSAL program could be associated with effects
o n the Mexican economy o f a sharper slowdown o f the US (and global) economy, a stronger
than expected tightening o f monetary policy conditions, and a high volatility o f o i l prices. In
terms o f a sharp slowdown o f U S economy, possibly related to high o i l prices, the impact o n
Mexico has been demonstrated by the experience over the past three years. Such a slowdown
will take its toll most likely in terms o f Mexican economic growth rather than price stability or
access to external financing. A sharper monetary tightening by the U S monetary authorities will
lead to an increase not only o f interest rates o n external financing requirements but more
importantly o f domestic interest rates as well. Mexico has made important progress, however, to
reduce i t s vulnerability to adverse shocks and to enhance i t s ability to absorb such shocks.
Although gross external financing requirements remain substantial at US$5 1.8 billion or 8
percent o f GDP, the country’s investment-grade on sovereign debt and the integration o f the
Mexican business sector into the US. and global financial markets should continue to provide
access to finance. The moderate current account deficit, at 1.5 percent o f GDP, also contributes
importantly to the mitigation o f the country’s external financing risk.
140. Political risks would be associated with the presidential election o f 2006. Mexico’s
multiparty democratic system is currently dominated by three political parties, all o f which stand
a reasonable chance o f winning the election. Changes within the cabinet prior to the election, as
well as change o f administration in December 2006, may result in a loss o f momentum to
complete the reforms supported by this program. This risk i s mitigated by the following factors:
(i>
a recently-passed law established a c i v i l service in the federal public administration, which
will likely result in lower official turnovers; (ii)
secondly, the third operation o f the program i s
scheduled to take place during the first year o f the incoming administration to provide continuity
and ensure sustainability o f the policy reforms; (iii)the legal and regulatory framework
established under E N V D P L I1 through the enactment o f laws and regulations provide a basis to
ensure the continuity o f the policies; and (iv) the design o f the program, which anchors the
formulation o f sector environmental strategies o n consensus-building among different
stakeholders, further strengthens the basis for continuity o f policies.
141.
Social and institutional risks could be associated with the implementation o f institutional
changes included in the reforms or that would have to take place during i t s implementation.
There are two sets o f institutional changes that involve a number o f risks: (i)
decentralization o f
core functions o f policy implementation to states and lower levels o f government; and (ii)
the
promotion o f a greater degree o f transparency, accountability and public participation. Although
45
decentralization creates opportunities for’policy implementation that takes into consideration the
specificities o f sub-national contexts and the needs and priorities o f the population, it brings with
it risks linked to the absence o f upstream accountability frameworks, and weak local institutional
capacity and experience.
142. Concurrently, the promotion o f participation o f stakeholders in decision making and
monitoring o f environmental policy generally supports the credibility, sustainability and
effectiveness o f policy actions. However, participation could also entail risks that need to be
addressed by designing risk management and mitigation measures. The main risks associated
with increased participatory management are: (i)
frustration due to unrealistic expectations; (ii)
incoherent and l o w quality feedback due to lack o f clear channels o f voice and information; and
(iii)
capture o f participatory processes by elites or use o f them with political or manipulative
purposes. These risks are addressed by the following measures included in the policies supported
by the loan or by complementary measures to be discussed in the context o f the third operation:
(i)
a well funded and effective capacity building program; (ii)
an accountability framework and a
tracking system that will monitor decentralization o f environmental functions and competencies
(iii)
transparency and accessibility o f environmental public information systems; (ii)
an enhanced
communication strategy for the sector; and (iii)
the development and dissemination o f guidelines
for public participation in EIA process and other participatory mechanisms.
143. Additional risks that could result from the decentralization process in the water sector
include: (i)
insufficient budgetary allocations to river basin councils to finance their effective
C N A and the RBCs’ capacity to implement the functions associated with greater
functioning; (ii)
decentralization may be constrained by scarce human resources. The operation will contribute to
the mitigation o f these risks by supporting the preparation o f detailed plans for financial resource
autonomy, which constitutes a necessary element for RBCs’ self-management. Moreover, the
Bank-financed Integrated Management o f Basins and Aquifers Project, which is currently under
preparation, will further mitigate these risks as it will help to build the capacity o f stakeholders,
including RBCs, to assume responsibilities relative to water resource management in order to
improve the conditions for sustainable integrated water resources management and use.
46
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ANNEX 4: LETTER OF DEVELOPMENT POLICY
60
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Anexos:
1.
2.
3.
4.
El Plan Nacional de Desarrollo y el Compromiso de Mexico con el Desarrollo Sustentable
El Programa Nacional de Medio Ambiente y Recursos Naturales
Principales Logros de la Primera Operacion (acciones detalladas de la primera etapa)
Componentes generales de la segunda etapa del Programa de Ajuste Estructural Ambiental
(EnvsSAL II)
61
ANNEX 4: LETTER OF DEVELOPMENT POLICY (cod.)
ANEXO 1. EL PLAN NACIONAL DE DESARROLLO Y EL COMPROMISO DE
MEXICO CON EL DESARROLLO SUSTENTABLE
La actual politica ambiental de Mexico es un reflejo del compromiso de la presente
administracion con el desarrollo sustentable del pais. Csta emerge directamente del
Plan Nacional de Desarrollo (PND) 2001 - 2006, que fija las prioridades, objetivos y
estrategias de la Administracion Publica Federal (APF) para el periodo. El PND sienta
las bases para la politica ambiental, entre otras, en 10s siguientes campos:
i)
El Desarrollo Sustentable como un tema transversal. El PND reconoce a la
sustentabilidad como uno de 10s cuatro criterios centrales para el desarrollo de la
nacion. En congruencia con lo anterior, el sector de medio ambiente y recursos
naturales sobresale como el ljnico sector que participa en las tres comisiones
creadas por el Poder Ejecutivo Federal para lograr la coordinacion
interinstitucional en el disetio y ejecucion de politicas publicas en 10s temas de
Desarrollo Social y Humano, Crecimiento con Calidad y Orden y Respeto.
ii)
Una gestion ambiental que responde a 10s retos del desarrollo economico y la
gobernabilidad democratica. El PND incluye a la competitividad como otro de 10s
criterios centrales para el desarrollo de la nacion y setiala que la transparencia y
la rendicion de cuentas son parte de las cinco normas de accion gubernamental.
Desde esta optica, la gestion ambiental se concibe una herramienta que permite
definir claramente 10s derechos de propiedad y acceso a 10s recursos naturales,
asi como crear instituciones ambientales robustas, con el proposito de dar
certeza a las decisiones de inversion y asi, fortalecer la competitividad del pais y
sus empresas. De igual forma, las autoridades ambientales tienen la obligacion
de abrir sus procesos de toma de decisiones al escrutinio publico. Finalmente, la
rendicion de cuentas implica que las autoridades sectoriales son responsables
de informar a la ciudadania acerca de la eficiencia con que administran 10s
recursos publicos para ejecutar politicas y programas de gobierno, asi como la
efectividad de estos para mejorar la calidad de vida de 10s mexicanos.
62
ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
ANEXO 2. EL PROGRAMA NACIONAL DE MEDIO AMBIENTE Y RECURSOS
NATURALES
La politica ambiental de Mexico se encuentra plasmada en el Programa Nacional de
Medio Ambiente y Recursos Naturales (PNMARN) 2001 - 2006, integrado por la
Secretaria de Medio Ambiente y Recursos Naturales (SEMARNAT). El PNMARN fue
resultado de un proceso de participacion pljblica que incluyo la realizacion de 125 foros
estatales de consulta ciudadana, asi como la recopilacion e integracion de las
aportaciones de 10s Consejos Consultivos Nacional y Regionales de Desarrollo
Sustentable.
La politica ambiental parte del reconocimiento de la estrecha relacion entre el medio
ambiente y la competitividad global. El deterioro del capital natural implica la
destruccion o agotamiento de 10s recursos naturales que pueden aprovecharse para
promover el desarrollo y colocar bienes y servicios en 10s mercados nacionales e
internacionales. Tambien, la degradacion ambiental amenaza la salud humana y 10s
ecosistemas, por lo que contribuye a la ineficiencia de la produccion. El modelo de
crecimiento economico observado en Mexico es evidencia de lo anterior, ya que las
pautas de desarrollo del pais han llevado a una perdida significativa del capital natural
que afecta a 10s mas pobres y pone en riesgo el desarrollo economico de Mexico en el
corto, mediano y largo plazo. En este contexto, la politica ambiental actual se
constituye como el principal instrumento con el cual la SEMARNAT busca influir las
decisiones de 10s sectores economicos para alinear sus actividades con 10s objetivos
de desarrollo sustentable del pais.
La politica ambiental esta basada en seis pilares, a saber:
i) lnfegralidad. El manejo de 10s recursos naturales se realiza mediante un enfoque
integral de cuencas, tomando en cuenta la interrelacion entre agua, aire, suelo,
bosques y diversidad biologica e incorporando consideraciones sociales y
economicas.
ii) Compromisos de /os secfores del Gobierno Federal. El compromiso con el
desarrollo sustentable representa una tarea compartida por la SEMARNAT y
diversas secretarias e instituciones federales responsables de 10s distintos
sectores de la economia. Est0 se refleja en la agenda de la transversalidad de
politicas pljblicas ambientales, en la que diversas dependencias del Gobierno
Federal adoptan metas ambientales.
iii) Gesfion. La estructura organica de la SEMARNAT fue transformada para que
sus unidades y 10s organos desconcentrados y descentralizados integren sus
esfuerzos para la atencion de 10s problemas ambientales. La gestion impulsa la
colaboracion de las autoridades estatales y municipales bajo un nuevo
federalismo; el us0 eficiente de 10s instrumentos de gestion ambiental; el
desarrollo de indicadores de desempetio ambiental; y la consolidacion del marc0
normativo y de foment0 para inducir un buen comportamiento ambiental.
63
ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
iv) Valoracion de 10s Recursos Naturales y Servicios Ambientales. Se pretende
asegurar que el us0 de bienes y servicios ambientales refleje el verdadero costo
ambiental, asi como que las comunidades e individuos que son propietarios de
10s recursos naturales reciban un pago tanto por 10s bienes que producen como
por 10s servicios ambientales que mantienen.
v) Apego a la legalidad y combate a la impunidad. La ley se aplicara sin
excepciones y se hara un combate irrestricto frente al crimen ambiental y la
impunidad.
vi) Participacion social y rendicion de cuentas. Los ciudadanos tienen el derecho
de acceder a la informacion acerca del estado del medio ambiente y 10s efectos
de este en su bienestar social y economico. Ademas, la SEMARNAT ha
establecido indices y metas de desempetio para que la ciudadania pueda
evaluar la gestion ambiental.
A partir de esos pilares, la SEMARNAT y sus organos desconcentrados y
descentralizados elaboraron 17 programas que se agrupan en 10s siguientes rubros:
i) Programas Sectoriales e Institucionales: Programa Nacional Hidraulico,
Programa Nacional Forestal, Programa de Procuracion de Justicia Ambiental, y
Programa de la Comision Nacional de Areas Naturales Protegidas.
ii) Cruzadas Nacionales: Cruzada por 10s Bosques y el Agua y Cruzada por un
Mexico Limpio.
iii) Programas Estrateaicos: Programa para Detener y Revertir la Contaminacion del
Aire, Agua y Suelo; Programa para Detener y Revertir la Perdida de Capital
Natural; Programa para Conservar 10s Ecosistemas y su Biodiversidad; y
Programa para Promover el Desarrollo Sustentable en el Gobierno Federal.
iv) Programas Regionales v Multisectoriales: Programa Frontera Norte, Programa
Estrategico para el Sur - Sureste, Programa del Mar de Cortes y Corredor
Biologic0 Mesoamericano.
v) Programas Especiales: Programa para 10s Pueblos Indigenas; Programa de
Equidad de Genero, Medio Ambiente y Sostenibilidad; y Programa Ambiental
para la Juventud.
Entre estos programas, cabe destacar el Programa para Promover el Desarrollo
Sustentable en el Gobierno Federal, el cual constituye el principal vehiculo para
asegurar la incorporacion del principio de sustentabilidad en el quehacer de la
Administracion PIjblica Federal. El Programa inicio como un foro interinstitucional de
acercamiento, discusion, interaccion y establecimiento de acuerdos a favor de la
sustentabilidad entre 16 instituciones de la APF.
64
ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
Hasta enero del 2005 la SEMARNAT ha logrado la incorporacion de 32 instituciones,
que, junto con sus acuerdos y compromisos, conforman la Agenda de Transversalidad
de Politicas POblicas Ambientales. La Agenda agrupa metas medibles y verificables a
las que cada dependencia se comprometio con el proposito de mejorar su desempeiio
ambiental y promover el desarrollo sustentable de Mexico.
De manera complementaria a 10s programas seAalados anteriormente, el PNMARN
identifica tres mecanismos e instrumentos necesarios para aterrizar 10s principios
rectores de la politica ambiental en todos 10s ambitos y sectores que participan en la
construccion del desarrollo sustentable.
El primer0 se refiere a una reforma legal que ha impulsado la SEMARNAT para
garantizar el acceso efectivo a la justicia en materia ambiental, aplicar el enfoque de
manejo integral de cuencas, valorar social y economicamente 10s recursos naturales y
servicios ambientales, aportar 10s elementos necesarios para la descentralizacion
efectiva y en general, adaptar 10s instrumentos legales existentes a las necesidades
cambiantes del pais.
El segundo comprende el financiamiento y la realizacion de una reforma fiscal que
permitan alcanzar las metas de la politica ambiental. Esta ultima comprende establecer
cobros por el us0 de recursos naturales y servicios ambientales que Sean propiedad de
la nacion, incluso con la posibilidad de dar un destino especifico a las recaudaciones
para invertirlas en el mantenimiento del recurso natural que es la base de la actividad
economica a la cual se le cobra el derecho.
El tercer0 es el relacionado con la participacion publica y la necesidad de establecer
vias y mecanismos que garanticen la participacion responsable de 10s miembros de
todos 10s sectores sociales y ordenes de gobierno interesados en la proteccion del
medio ambiente y el equilibrio ecologico.
65
ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
ANEXO 3. PRINCIPALES LOGROS DE LA PRIMERA OPERACION DEL EnvSAL
El primer prestamo del ENVSAL (conocido como ENVSAL I) busco apoyar la
instrumentacion de 10s componentes estrategicos del PNMARN y sus programas
orientados a: a) impulsar la transversalidad del tema ambiental mediante la
incorporacion de consideraciones ambientales en las politicas y actividades de cuatro
sectores fundamentales para el desarrollo sustentable de Mexico: turismo, energia,
bosques y agua; y b) fortalecer la capacidad interna del sector medio ambiente y
recursos naturales para cumplir con sus responsabilidades de manera mas eficiente y
eficaz.
De manera general, puede afirmarse que el ENVSAL I contribuyo al desarrollo
sustentable de Mexico al constituirse en un foro para que diferentes sectores y
subsectores pudieran atender de manera coherente e integral problemas de interes
comlin en 10s que tradicionalmente cada sector habia trabajado de manera aislada. La
metodologia de trabajo de ENVSAL I, basada en una matriz de politicas y en la
constitucion de grupos de trabajo intersectoriales, permitio que 10s diferentes sectores
orientaran sus esfuerzos al desarrollo de soluciones para la atencion de problemas y la
obtencion de resultados claramente definidos. Esta metodologia permitio la integracion
de consideraciones ambientales en 10s procesos de toma de decision de sectores que
juegan un papel fundamental en el desarrollo de Mexico. Cabe destacar en este sentido
el papel del Banco como catalizador para la coordinacion interinstitucional.
En terminos del fortalecimiento de la gestion ambiental, 10s esfuerzos del ENVSAL I
estuvieron encauzados a incrementar la transparencia del proceso de toma de
decisiones del sector ambiental y consolidar 10s instrumentos para la rendicion de
cuentas, asi como para apoyar 10s esfuerzos de la SEMARNAT para avanzar en el
proceso de descentralizacion.
A continuacion se presentan algunas de las actividades especificas que fueron
apoyadas por el ENVSAL I.
Turismo. El prestamo apoyo en la formulacion e inicio de la ejecucion del
Programa Nacional de Turismo 2001 - 2006, mismo que enfatiza la necesidad
de integrar esfuerzos y politicas para lograr la sustentabilidad de 10s destinos
turisticos. Adicionalmente, se consiguio la reforma por parte del Poder
Legislativo de 10s articulos 198 y 198a de la Ley Federal de Derechos, con lo
cual se establecio el cobro de derechos para la visita a las Areas Naturales
Protegidas, parques marinos y observacion de ballenas. Los ingresos generados
por estos derechos fueron asignados a derechos especificos para ser invertidos
en la conservacion de 10s mismos sitios que generaron el ingreso. Este esquema
permitio incrementar 10s ingresos en una magnitud de mas de 500 veces del
monto original de las areas naturales.
66
ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
ii) Energia. Con el apoyo del ENVSAL I, la Secretaria de Energia (SENER), en
colaboracion con otras instituciones, elaboro y comenzo la ejecucion del
Programa Medio Ambiente del Sector Energetico. Ademas, se integro el Grupo
Tecnico de Trabajo intersectorial en el que participan diferentes dependencias
con el objetivo de construir consensos en torno a la politica ambiental del sector.
iii) Bosques. El ENVSAL I facilito el establecimiento de un grupo intersectorial para
el sector forestal que permitio el establecimiento de las metas del sector en el
mediano plazo y la construccion de consensos en torno a las politicas
sectoriales a cargo de SEMARNAT y de la Comision Nacional Forestal
(CONAFOR).
iv) Agua. Los logros del sector agua en el marco de ENVSAL I incluyeron la
preparacion del Programa Nacional Hidraulico en coherencia con el PNMARN.
Adicionalmente, se publico un Decreto Presidencial por el cual el Gobierno
Federal condono la deuda ocasionada por la falta de pago de las tarifas del agua
a aquellos municipios que aceptaran utilizar las asignaciones futuras del
Gobierno Federal para agua y saneamiento como garantia de pago en el futuro.
Asimismo, se aprobo la Ley Federal de Derechos en Materia de Agua, misma
que contempla la posibilidad de que la totalidad de 10s ingresos recaudados por
el concept0 de tarifas de agua Sean devueltos a 10s municipios, a cambio del
compromiso de estos de destinar esa cantidad y un monto equivalente adicional
a la inversion en programas hidricos. Como resultado de estas ultimas dos
acciones, el porcentaje de municipios con poblaciones mayores a las 2,500
personas que junto con el Distrito Federal pagan sus tarifas de agua se
incremento del 24% en el 2002 al 58% en el 2003. Por su parte, la Secretaria de
Hacienda y Credit0 Pliblico (SHCP) devolvio el 95% de las cuotas de agua a 10s
municipios, conforme a lo previsto por la Ley. El Gobierno publico la informacion
concerniente a 10s montos totales que fueron canalizados a 10s municipios bajo
este esquema.
v) Gestion Ambiental. En materia de descentralizacion, el ENVSAL apoyo el
establecimiento del Programa de Desarrollo lnstitucional Ambiental (PDIA), a
traves del cual se transfirieron recursos para la asistencia tecnica y el desarrollo
institucional de 27 estados, con base en acuerdos de desempefio ambiental. En
terminos de transparencia y rendicion de cuentas, ENVSAL apoyo al Gobierno
de Mexico en las modificaciones que se hicieron a la normatividad relacionada
con la Evaluacion de lmpacto Ambiental (EIA) y otros tramites con el objetivo de
abrir espacios a la participacion publica.
67
ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
ANEXO 4: COMPONENTES GENERALES DE LA SEGUNDA OPERACION DEL
PROGRAMA DE AJUSTE ESTRUCTRAL AMBIENTAL (EnvSAL II)
1. Antecedentes
La primera etapa del Programa de Ajuste Estructural Ambiental (EnvSAL I) apoyo la
instrumentacion de 10s componentes estrategicos del PNMARN y sus programas
orientados a: i) impulsar la transversalidad del tema ambiental mediante la
incorporacion de consideraciones ambientales en las politicas y actividades de cuatro
sectores fundamentales para el desarrollo sustentable de Mexico: turismo, energia,
bosques y agua; y ii) fortalecer la capacidad interna del sector medio ambiente y
recursos naturales para cumplir con sus responsabilidades de manera mas eficiente y
eficaz.
El apoyo del Banco Mundial ha contribuido a consolidar las bases del desarrollo
sustentable en Mexico, a traves del EnvSAL I, pues 10s sectores participantes iniciaron
la construccion de consensos y el impulso a reformas de politica, y comenzaron a
atender, de manera coherente e integral, asuntos ambientales de interes comun en 10s
que tradicionalmente cada sector habia trabajado de manera aislada. La metodologia
de trabajo establecida por el Gobierno de Mexico se bas6 en la construccion de una
matriz de politicas y en la conformacion de grupos de trabajo intersectoriales, que
facilitaron la inclusion de consideraciones ambientales en 10s procesos de toma de
decision de 10s sectores que participaron en el EnvSAL I. Cabe destacar en este
sentido el papel del Banco Mundial, como impulsor y de la Secretaria de Hacienda y
Credit0 Publico, como garante para la coordinacion interinstitucional.
En terminos del fortalecimiento de la gestion ambiental, 10s esfuerzos del ENVSAL I
estuvieron encauzados a incrementar la transparencia del proceso de toma de
decisiones del sector ambiental y consolidar 10s instrumentos para la rendicion de
cuentas, asi como para apoyar 10s esfuerzos de la SEMARNAT para avanzar en el
proceso de descentralizacion.
II. Justificacion de un segundo prestamo
La asistencia del Banco Mundial permitio lograr reformas en 10s marcos de politicas y
normativos que constituyen avances sin precedente en 10s esfuerzos de Mexico para
alcanzar el desarrollo sustentable. Sin embargo, dichas reformas representan apenas
10s cimientos sobre 10s cuales se habra de consolidar un marco institucional que
proporcione certeza a 10s inversionistas, asegure la internalizacion de 10s costos
ambientales y asegure el us0 eficiente del capital natural para fortalecer la
competitividad del pais. Es por ello que el Gobierno de Mexico considera necesario
continuar con la segunda operation contemplada por el ENVSAL.
68
ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
En particular, esta segunda operacion estaria orientada en apoyar un conjunto de
acciones que permitan profundizar y asegurar la sustentabilidad de las reformas
realizadas en el marco del primer prestamo. Este apoyo estaria canalizado hacia las
acciones estrategicas que cumplan con 10s siguientes criterios:
i)
Contribucion al aprovechamiento sustentable del capital natural del pais para
utilizar la riqueza de 10s ecosistemas mexicanos como fuente de ventaja
competitiva para satisfacer la demanda de nichos de mercado mas selectivos y
lucrativos.
ii)
Definicion de acciones de gobierno encaminadas a atender fallas de mercado y
distorsiones de politicas que resultan en el deterioro de la calidad ambiental, asi
como afectaciones a la salud pliblica y por ende, a la productividad y
competitividad del pais.
iii)
Adopcion de estrategias para la creacion de un clima propicio para la
competitividad del sector productivo, incluyendo la definicion de reglas claras,
sencillas y permanentes, asi como la oferta de servicios gubernamentales de
gran calidad.
111.
Principales Acciones de la Segunda Operacion
Con base en estos criterios, a continuacion se sefialan 10s objetivos y principales
acciones que conforman la segunda operacion, 10s cuales reconocen 10s importantes
avances que Mexico ha logrado en la elaboracion y ejecucion de politicas que
contribuyen al desarrollo sustentable y ademas, son coherentes con 10s principios,
objetivos y lineas de accion trazados en el PND y el PNMARN:
i)
Asegurar la insercion de consideraciones y criterios ambientales en las
agendas de desarrollo de 10s sectores prioritarios (turismo, energia,
bosques y agua)
Turismo
0
'
0
La adopcion e implementacion de Agendas 21 locales en 10 destinos
turisticos, que reflejen 10s acuerdos de 10s distintos sectores y ordenes de
gobierno, para llevar a cab0 acciones que promuevan la proteccion del
medio ambiente y el aprovechamiento de 10s recursos naturales como
elementos necesarios para incrementar la competitividad y asegurar la
sustentabilidad de la actividad turistica.
Con base en 10s consensos logrados por el Grupo de Trabajo
lntersectorial de Turismo, se llevaran a cab0 10s estudios necesarios para
la consolidacion de la estrategia nacional de desarrollo sustentable,
coordinada por la Secretaria de Turismo (SECTUR) conjuntamente con el
69
ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
resto de las dependencias que participan en el Grupo de Trabajo de
Turismo.
a
a
a
La consolidacion, mediante Decreto Presidencial, de la Comision
lntersecretarial de Turismo, como mecanismo de coordinacion
intersecretarial del mas alto nivel, que permitira la integracion de politicas
pljblicas para alcanzar 10s objetivos del Plan Nacional de Turismo 2001 2006, incluyendo la promocion de destinos turisticos sustentables.
La consolidacion del Programa de Calidad Ambiental Turistica por parte
de SECTUR y PROFEPA, que reconoce el buen desempetio ambiental
de las instalaciones turisticas y se constituye en un incentivo para lograr
el cumplimiento de la normatividad ambiental. La certificacion en el marco
del Programa es otorgada a partir del resultado de una auditoria
ambiental que las instalaciones turisticas realizan actualmente de forma
voluntaria.
La consolidacion del Programa Integral de Playas Limpias, el cual
comprende un sistema de indicadores y lineas base que permiten
monitorear la calidad del agua en 10s centros turisticos. Los indicadores
son accesibles al pljblico en general, a fin de que puedan tomar
decisiones informadas para la seleccion de 10s destinos turisticos que
visitan.
a
La implementacion de una politica pljblica para 10s Cruceros Turisticos,
que reconoce el crecimiento de esta actividad en el pais y que busca
asegurar que el nljmero de cruceros que visitan el pais no sobrepase la
capacidad de carga de 10s ecosistemas. Asimismo, busca fomentar la
provision de servicios para 10s cruceros que resulten en una experiencia
mas placentera para 10s turistas y en la mitigacion de impactos
ambientales.
a
Asegurar la aplicacion de la nueva Ley General para la Prevencion y
Gestion Integral de 10s Residuos, que aporta el marco juridic0 para el
manejo apropiado de 10s residuos en centros urbanos, asi como el
desarrollo de mecanismos para la participacion del sector privado y del
pljblico en general con el proposito de desarrollar y poner en marcha
planes para el manejo integral de 10s residuos.
Energia
a
Realizacion de acciones concretas que reduzcan 10s impactos
ambientales del sector de energia en la salud publica. Entre estas se
puede destacar el mejoramiento de la calidad de combustibles y en
particular, la disminucion del contenido de azufre de 1000 a 300 ppm en
70
ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
la gasolina que se comercializa en la Zona Metropolitana del Valle de
Mexico. Asimismo, la realizacion de proyectos de electrificacion rural que
permitira sustituir 10s combustibles que actualmente se utilizan en
comunidades rurales y que tienen impactos negativos en la salud,
afectando principalmente a grupos vulnerables como 10s niiios y las
mujeres.
e
El desarrollo, a partir de 10s acuerdos logrados por el Grupo de Trabajo
lntersecretarial de Energia, de 10s estudios de prospectiva del sector
energetic0 que permitan guiar las politicas sectoriales de Mexico para
alcanzar objetivos economicos, sociales y ambientales.
e
El impulso al us0 de energia proveniente de fuentes renovables, asi como
de una Norma Oficial Mexicana que regule la energia geotermica. De
manera complementaria, desarrollar 10s mecanismos institucionales que
permitan establecer incentivos economicos y mecanismos de mercado
que propicien la inversion en este tip0 de energias.
e
Reduccion de 10s impactos ambientales de las empresas paraestatales
del sector, en particular PEMEX y la Comision Federal de Electricidad
(CFE). Ambas empresas han adoptado sistemas de manejo ambiental
que han permitido alcanzar resultados importantes en el corto plazo y
continuaran ayudando a mejorar el desempeiio ambiental en el futuro.
e
Como parte de 10s esfuerzos del sector para mitigar sus impactos a nivel
global y en congruencia con la participacion de Mexico en las
negociaciones internacionales sobre cambio climatico, apoyar la
operacion de la Oficina del Mecanismo de Desarrollo Limpio, cuyas
funciones incluyen la implementacion de metodologias que permiten
medir y verificar las reducciones de carbono, asi como el fortalecimiento
del portafolio de proyectos de inversion que tienen potencial para ser
financiados a traves de ese mecanismo. La oficina fue establecida de
conformidad a 10s lineamientos acordados por la comunidad internacional
en las Conferencias de las Partes de la Convencion Marco de Cambio
Climatic0 realizadas en Bonn y Marrakesh.
Bosaues
Aplicacion de la Ley General para el Desarrollo Forestal Sustentable e
impulso a la creacion de su reglamento. La ley representa un componente
fundamental de las reformas que el sector ha emprendido para fortalecer
el marco legal del sector y asegurar que el desarrollo de la actividad
forestal se realice conforme a reglas bien definidas que fomenten la
inversion. La ley asigna funciones y responsabilidades a 10s distintos
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ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
ordenes de gobierno para la conservacion, proteccion, restauracion,
produccion, cosecha y manejo de 10s recursos forestales del pais.
e
Aprobacion del Reglamento de la Ley Forestal que define el marco
regulatorio para lograr el pago por 10s servicios hidrologicos ambientales
que proporcionan 10s bosques dentro de las cuencas hidrograficas, entre
otros objetivos.
e
Elaboracion de estudios para el desarrollo de mecanismos fiscales,
financieros y de mercado para generar recursos economicos que
fomenten el aprovechamiento sustentable de 10s recursos forestales y
remuneren 10s servicios ambientales que proveen.
Aqua
e
Enmiendas a la Ley de Aguas Nacionales para avanzar en el manejo
integrado de 10s recursos hidricos. Las enmiendas se orientarian a la
definicion de mecanismos para la operacion de organismos de cuenca
descentralizados en 10s que 10s distintos usuarios del agua pueden
discutir 10s temas relevantes sobre el us0 del recurso, el fortalecimiento
del sistema de derechos de agua y modificaciones que contribuiran a un
mejor funcionamiento del mercado de agua.
e
Como medidas complementarias a las enmiendas de la Ley de Aguas
Nacionales, se realizan acciones orientadas a asegurar que 10s usuarios
del agua cumplan con sus obligaciones en terminos del us0 de agua
conforme a 10s derechos adquiridos y de descargas de sustancias
contaminantes, ajustar 10s programas de las regiones hidricoadministrativas para que reflejen la disponibilidad real del recurso y la
elaboracion de una estrategia para aumentar la cobertura de tratamiento
de aguas residuales a lo largo del territorio nacional.
e
La puesta en marcha de medidas para racionalizar el us0 del agua y
contribuir al mejor funcionamiento del mercado de agua, que incluyen la
publicacion de la disponibilidad de agua en 10s principales acuiferos del
pais, asi como la implementacion de un proyecto piloto en el Valle de
Queretaro para la negociacion entre autoridades y usuarios de medidas
que resulten en una menor extraccion de agua de 10s acuiferos sobreexplotados.
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ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
ii) Mejorar la eficiencia y eficacia de 10s procesos de gestion ambiental en
Mexico.
0
0
Avance en la consolidacion de espacios para la participacion publica y
rendicion de cuentas, conforme a las disposiciones de la Ley Federal de
Transparencia. Las medidas concretas para avanzar en este frente
incluyen la publicacion anual de estadisticas ambientales y de informes
de gestion ambiental que permiten dar a conocer a la ciudadania las
tendencias en terminos de la calidad del medio ambiente, asi como 10s
resultados de 10s esfuerzos de gestion ambiental que lleva a cab0 el
Gobierno Federal.
Adecuacion 10s marcos normativos y procedimientos administrativos para
establecer reglas claras que favorezcan la inversion y fomenten el
cumplimiento de la normatividad ambiental. En este sentido caben
destacar las modificaciones a las guias de impact0 ambiental que han
logrado reducir la duracion de 10s tramites, identificar 10s impactos
acumulativos y abrir espacios para mejorar la participacion de las
comunidades que podrian ser afectadas por 10s proyectos en
consideracion.
Fortalecimiento del proceso de descentralizacion a traves de un esquema
de monitoreo y evaluacion del desempetio de las autoridades ambientales
estatales con relacion a las funciones que les han sido transferidas. Con
base en este modelo, se han identificado funciones prioritarias para ser
transferidas a 10s estados que estan relacionadas con el manejo de
ZOFEMAT, bosques y suelos, asi como vida silvestre. Este esquema
busca responder a las limitantes del modelo de descentralizacion que se
habia adoptado al inicio de la administracion y que ha sido modificado en
esta segunda etapa de la administracion ambiental.
Apoyo a las discusiones para la aprobacion de instrumentos fiscales y de
mercado que generen recursos para financiar la gestion ambiental en 10s
ambitos federal y estatal. En este contexto, la Secretaria de Hacienda y
Credit0 Pljblico (SHCP) ha desarrollado 10s criterios para la fijacion de
derechos ambientales, 10s lineamientos para 10s impuestos, tarifas y
sobrecargos ambientales a nivel local y un borrador de la Ley de
lmpuestos Ambientales.
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ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
Mr. James Wolfensohn
President
World Bank
The government o f Mexico has concluded the First Phase o f the Program for Structural
Adjustment o f Public Policies (EnvSAL) in support o f the National Program for Environment
and Natural Resources 200 1-2006 (PNMARN).
The proposal to enter into a loan agreement with the World Bank for EnvSAL was presented
M a y 26, 2002, by Official Note 00953, signed by the Secretary o f Environment and Natural
Resources, to which a positive reply was granted with the signing o f Loan Agreement No. 7136ME.
A s a result o f this Environment Structural Adjustment Program, the present administration o f the
government o f Mexico has implemented environmental public policies at the federal level in the
subject areas selected for this purpose (water, forestry, energy, tourism, decentralization, and
fiscal policy instruments). The continuation o f these efforts would be guaranteed by a second
phase o f the program (EnvSAL 11).
During the first two years in which the program came into effect, the regulatory and
environmental policy frameworks were reformed, and progress was made to integrate
environmental management in the aforementioned sectors. These advances contribute to the
consolidation o f an institutional framework that gives confidence to investors and ensures the
internalization o f environmental costs and the efficient use o f natural capital to strengthen the
country’s competitiveness. For these reasons, the government o f Mexico considers it necessary
to develop a second phase o f the program.
This operation will be directed at the consolidation o f actions carried out within the framework
o f the first phase and drive other identified activities to continue the strategic actions in the
aforementioned sectors.
The Secretariat o f Environment and Natural Resources (SEMARNAT) is convinced o f the need
to build bridges between different sectors in order to advance toward sustainable development.
The already constituted Intersectoral Working Groups have contributed decisively to the
intersectoral coordination and the shaping o f the mainstreaming agendas, which constitute a
Presidential priority.
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ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
For the preceding reasons, the Ministry o f Environment and Natural Resources (SEMARNAT)
requests the assistance o f the World Bank to develop the second phase o f the program and to
obtain the corresponding loan within the EnvSAL framework.
Without any other particulars, I reiterate the assurance o f my attentive and distinguished
consideration to you.
Effective Suffrage. N o Re-election.
Secretary
Ing. Albert0 Chrdenas JimCnez
Cc:
Dr. Fernando Tudela Abad, Undersecretary o f Planning and Environmental Policy
Dr. Mauricio Lim6n Aguirre, General Justice Coordinator
Annexes:
1.
2.
3.
4.
National Development Plan and the Mexican Commitment to Sustainable Development
National Environment and Natural Resources Program
Principal Achievements o f the First Operation (detailed actions o f the first phase)
General Components o f the Second Phase o f the Environment Structural Adjustment
Program (EnvSAL 11)
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ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
Annex 1. The National Development Plan and Mexico’s Commitment to Sustainable
Development
Mexico’s current environmental policy i s a reflection o f the present administration’s
commitment to the country’s sustainable development. This policy stems directly from the 200 12006 National Development Plan (NDP) which establishes the priorities, objectives, and
strategies o f the Federal Public Administration (APF) for this period. The N D P sets the stage for
environmental policy in the following areas:
i. Sustainable Development as a cross-cutting issue: The P N D recognizes sustainability
as one o f the four key criteria for the nation’s development. In line with the above, the
environment and natural resources sector stands out as the only sector that
participates in the three commissions created by the Federal Executive Authority to
achieve inter-institutional coordination in the design and execution o f public policies
on the issues o f Social and Human Development, Growth with Quality, and Order
and Respect.
ii. Environmental management that responds to the challenges o f economic development
and democratic governance. The PND includes competitiveness as another o f the key
criteria for the nation’s development and indicates that transparency and
accountability are part o f the five norms o f government action. From this standpoint,
environmental management i s conceived as a tool that makes it possible to clearly
define rights o f ownership and access to natural resources, as well as to create robust
environmental institutions, to give certainty to investment decisions and thereby
strengthening the competitiveness o f the country and i t s enterprises. Likewise,
environmental authorities are obliged to open their decision-making processes to
public scrutiny. Finally, accountability implies that sectoral authorities are
responsible for informing citizens about the efficiency with which they administer
public resources in order to carry out government policies and programs, as well as
their effectiveness in improving the quality o f l i f e o f Mexican citizens.
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ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
Annex 2.
The National Environmentaland Natural Resources Program
Mexico’s environmental policy i s articulated in the 2001-2006 National Environment and
Natural Resources Program (PNMARN), developed by the Secretariat o f the Environment and
Natural Resources (SEMARNAT). P N M A R N was the result o f a public participation process
that included 125 state forums for citizen consultation, as well as the collection and integration o f
inputs from National and Regional Consultative Councils o n Sustainable Development.
Environmental policy stems from the recognition o f the close relationship between the
environment and global competitiveness. The deterioration o f natural capital implies the
destruction or depletion o f natural resources that may be used to promote development and place
goods and services in national and intemational markets. Environmental degradation also
threatens human health and ecosystems and thus contributes to inefficient production. The
economic growth model observed in Mexico is evidence o f this, since the country’s development
models have led to a significant loss o f natural capital which affects the poorest people and
places Mexico’s economic development at risk in the short, medium, and long terms. In this
context, the current environmental policy constitutes the key instrument with which
SEMARNAT seeks to influence the decisions o f economic sectors so as t o align their activities
with the country’s sustainable development objectives.
The environmental policy is based o n six key elements:
1.
..
11.
...
111.
iv.
V.
Comprehensiveness. Natural resources management i s carried out by means o f a
comprehensive watershed approach, taking into account the inter-relationship among
water, air, soils, forests, and biodiversity and incorporating social and economic
considerations.
Commitments of Federal Government sectors. Commitment to sustainable development
represents a task shared by SEMARNAT and various federal secretariats and institutions
responsible for different sectors o f the economy. This is reflected in the environmental
mainstreaming agenda, in which various Federal Government agencies adopt
environmental targets.
Management. SEMARNAT’s organic structure was changed to allow its decentralized
units and agencies to combine their efforts in order to address environmental problems.
Management promotes collaboration by state and municipal authorities under a new
federalism; the efficient use o f environmental management instruments; the development
of environmental performance indicators; and the consolidation o f the regulatory and
development framework to promote proper environmental behavior.
Valuation of Natural Resources and Environmental Services. The aim i s to ensure that
the use o f environmental goods and services reflects the true environmental cost and that
the communities and individuals who are the owners o f natural resources receive
payment both for the goods they produce and for the environmental services they
maintain.
Legality and efforts to combat impunity. The law shall be applied without exception and
unrestricted efforts will be made to combat environmental crimes and impunity.
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ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
Social participation and accountability. Citizens have the right to access information o n
the state o f the environment and i t s effects on their social and economic well-being.
Furthermore, SEMARNAT has established performance indexes and targets so that
citizens can evaluate environmental management.
vi.
Based on these key elements, SEMARNAT and i t s decentralized agencies prepared 17 programs
grouped under the following categories:
1.
..
...
111.
11.
Sectoral and Institutional Programs: National Water Program, National Forest
Program, Environmental Justice Mandate Program, and Program o f the National
Commission for Natural Protected Areas.
National Crusades: Crusade for Forests and Water, and Crusade for a Clean Mexico.
Strategic Programs: Program to Stop and Reverse Air, Water, and Soil Pollution;
Program to Stop and Reverse the Loss o f Natural Capital; Program to Conserve
Ecosystems and their Biodiversity; and Program to Promote Sustainable
Development in the Federal Government.
iv.
Regional and Multisectoral Pronrams: Northern Frontier Program; Strategic Program
for the South-Southwest; Program for the Sea o f CortCs and Mesoamerican
Biological Corridor.
V.
Special Programs: Indigenous Peoples Program; Gender Equity, Environment and
Sustainability Program; and Environmental Program for Youth.
Among these programs, the Program to Promote Sustainable Development in the Federal
Government should be mentioned. It i s the key vehicle to ensure the incorporation o f the
principle o f sustainability in the duties o f the Federal Public Administration. The Program began
as an inter-institutional forum to bring together the APF’s 16 institutions for discussions,
interaction, and reaching agreement on sustainability .
As o f January 2005 SEMARNAT had incorporated 32 institutions which, along with their
agreements and commitments, make up the environmental mainstreaming agenda. The Agenda
contains measurable, verifiable targets to which each agency i s committed, for the purpose o f
improving their environmental performance and promoting Mexico’s sustainable development.
Complementary to the above-mentioned programs, P N M A R N identifies three mechanisms and
instruments needed to establish the guiding principles o f environmental policy in all spheres and
sectors that participate in the attainment o f sustainable development.
The first refers to a legal reform promoted by SEMARNAT to ensure effective access to justice
in environmental matters, apply the integrated watershed management approach, socially and
economically evaluate natural resources and environmental services, contribute the elements
needed for effective decentralization, and in general adapt existing legal instruments to the
country’s changing needs.
The second includes the financing and realization o f a fiscal reform in order to meet
environmental policy targets. The latter includes setting fees for the use o f nationally owned
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ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
natural resources and environmental services, with the possibility o f specifically allocating the
resources collected to the maintenance o f the natural resources which are the basis o f the
economic activity for which the fee i s charged.
The third relates to public participation and the need to establish means and mechanisms to
ensure the responsible participation o f members o f all social sectors and government agencies
interested in environmental protection and ecological equilibrium.
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ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
Annex 3.
Principal Achievements o f the First EnvSAL Operation
The first ENVSAL loan (known as ENVSAL I)sought to support the implementation o f the
P N M A R ” s strategic components and i t s programs aimed at: a) promoting environmental
mainstreaming through the incorporation o f environmental considerations in the policies and
activities o f four key sectors for Mexico’s sustainable development: tourism, energy, forests, and
water; and b) strengthening the internal capacity o f the environmental and natural resources
sector to fulfill i t s responsibilities more efficiently and effectively.
In general, it may be stated that ENVSAL Icontributed to Mexico’s sustainable development by
creating a forum to allow different sectors and subsectors to coherently and comprehensively
address problems o f common interest in which each sector had traditionally operated alone. The
working methodology o f ENVSAL I,based on a policy matrix and on the formation o f
intersectoral working groups, allowed the different sectors to aim their efforts at developing
solutions to problems and at achieving clearly defined results. This methodology made it
possible to include environmental considerations in the decision-making processes o f sectors that
play a key role in Mexico’s development. In this regard, the Bank’s role as promoter o f interinstitutional coordination should be highlighted.
In terms o f strengthening environmental management, efforts under E N V S A L Iwere aimed at
increasing transparency in the environmental sector’s decisionmaking process and consolidating
instruments for accountability, as well as supporting SEMARNAT’s efforts to move forward in
the decentralization process.
The following are some o f the specific activities supported by E N V S A L I,
1.
..
11.
...
Tourism. The loan supported the formulation and start-up o f the execution o f the 20012006 National Tourism Program which emphasizes the need to integrate efforts and
policies to achieve the sustainability o f tourist destinations. In addition, reforms articles
198 and 198a o f the Federal Rights L a w were reformed by Congress, allowing for user
fees for visits to Natural Protected Areas, marine parks, and whale watching. The income
generated by these fees was allocated to specific rights to be invested in the conservation
o f those sites that generated this income. This scheme made it possible to increase
income by over 500 times the original amount for natural areas.
Energy. With the support o f ENVSAL I,the Secretariat o f Energy (SENER), in
collaboration with other institutions, prepared and began the execution o f the Energy
Sector’s Environmental Program. The Intersectoral Technical Working Group was
formed, with the participation o f different agencies, to build consensus o n the sector’s
environmental policy.
111.
Forests. E N V S A L Ifacilitated the establishment o f an intersectoral group for the forestry
sector. This allowed the sector’s medium-term targets to be established and consensus
building on sectoral policies under the responsibility o f S E M A R N A T and the National
Forest Commission (CONAFOR).
iv.
Water. The achievements o f the water sector under the framework o f ENVSAL I
included the preparation o f the National Water Program in conjunction with PNMARN.
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ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
In addition, a Presidential Decree was published, by which the Federal Government
forgave the debt caused by lack o f payment o f water tariffs for those municipalities that
agreed to utilize future Federal Government allocations for water and sanitation as a
guarantee of future payment. Likewise, the Federal Water Rights L a w was approved.
This law considers the possibility that all income collected from water tariffs will be
returned to municipalities, in exchange for their commitment to allocate this amount and
an additional, equivalent amount to investments in water programs. As a result o f the
latter two actions, the percentage o f municipalities with populations o f over 2,500 people
which, together with the Federal District, pay their water tariffs, increased from 24% in
2002 to 58% in 2003. In turn, the Secretariat o f Finance and Public Credit (SHCP)
returned 95% o f water fees to municipalities, as stipulated by the Law. The Government
published information concerning the total amounts channeled to municipalities under
this scheme.
v.
Environmental Management. In terms o f decentralization, E N V S A L supported the
establishment o f the Institutional Environmental Development Program (PDIA), through
which funds were transferred for technical assistance to, and the institutional
development of, 27 states, based on environmental performance agreements. In terms o f
transparency and accountability, ENVSAL supported the Government o f Mexico in the
modifications to regulations related to the Environmental Impact Assessment (EIA) and
other processes, with the objective o f opening spaces for public participation.
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ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
General Components o f the Second Operation of the Environment Structural
Annex 4:
Adjustment Program (EnvSAL 11)
I.
Background
The first phase o f the Environment Structural Adjustment Program (EnvSAL I)supported the
promote
orchestration o f the strategic components o f P N M A R N and its programs oriented to: (i)
the environmental mainstreaming by means o f incorporating environmental considerations in
policies and activities o f four sectors fundamental to sustainable development in Mexico:
strengthen the internal capacity o f the environment
tourism, energy, forestry and water; and (ii)
and natural resources sector to fulfill i t s responsibilities in a more efficient and effective manner.
The support o f the World Bank has helped to consolidate the sustainable development bases in
Mexico through EnvSAL I,as the participating sectors began consensus-building and promotion
o f policy reform, and started to address in a coherent arid integrated manner environmental issues
o f common interest, whereas traditionally each sector had worked in an isolated manner. The
work methodology established by the Government o f Mexico was based upon the construction o f
a policy matrix and in the formation o f intersectoral technical working groups, which facilitated
the inclusion o f environmental considerations in the decision-making process o f the sectors
participating in EnvSAL I.In this sense it i s worth emphasizing the roles o f the World Bank, as
the driving force, and the Secretariat o f Finance, as guarantor for the inter-institutional
coordination.
In terms o f strengthening environmental management, the efforts o f EnvSAL Iwere channeled to
increase the transparency o f the decision-making process within the environment sector, and to
consolidate fiscal instruments, such as supporting the efforts o f SEMARNAT to advance the
decentralization process.
11.
Justification for the Second Loan
The World Bank’s assistance allowed the country to achieve reforms in the policy and regulatory
frameworks, representing unprecedented advances in Mexico’s efforts to achieve sustainable
development. Nevertheless, these reforms represent merely the foundations upon which an
institutional framework will be consolidated to provide certainty to investors, ensure the
internalization of environmental costs, and ensure the efficient use o f natural capital to
strengthen the country’s competitiveness. Therefore, the Government o f Mexico considers it
necessary to continue with the second operation contemplated under EnvSAL.
In particular, this second operation will be oriented to support a set o f actions that will deepen
and ensure the sustainability o f reforms achieved during the first loan. This support will be
channeled towards strategic actions that fulfill the following criteria:
i. Contribute to the sustainable use o f the country’s natural capital in order to utilize the
richness o f Mexico’s ecosystems as a source o f competitive advantage to satisfy the
demands o f more selective and lucrative niche markets.
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ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
ii. Define government actions directed at addressing market flaws and policy distortions that
result in the deterioration o f environmental quality, such as public health and therefore
the productivity and competitiveness o f the country.
iii. Adopt strategies to create the appropriate climate for the competitiveness o f the
productive sector, including the definition o f clear, simple and permanent rules, as well as
the provision o f high quality government services.
111.
Main Actions o f the Second Operation
Based o n these criteria, the following demonstrates the principal actions and objectives that make
up the second operation, which recognize the important advances Mexico has made in the
development and implementation o f policies that contribute to sustainable development, and
furthermore are consistent with the principles, objectives and lines o f action outlined by the PND
and the PNMARN.
i.
Ensure the inclusion of environmental considerations and criteria in the
development agendas of the priority sectors (tourism, energy, forestry and water).
Tourism
0
0
0
0
0
The adoption and implementation o f local Agenda 21 in 10 tourist destinations that
reflect the agreements o f various sectors and the government orders to carry out
actions that promote protection o f the environment and natural resources as necessary
elements to increase competitiveness and ensure the sustainability o f the tourism
industry.
Based upon the consensus achieved by the Intersectoral Technical Working Group for
Tourism, carry out the necessary studies to consolidate the national sustainable
development strategy coordinated by the Secretariat o f Tourism (SECTUR) in
conjunction with the other dependents that participate in the Tourism Working Group.
By means o f Presidential Decree, consolidate the Inter-sectoral Tourism Commission
as a mechanism for inter-sectoral coordination at the highest levels, which will permit
the integration o f public policy to achieve the objectives o f the National Tourism Plan
2001-2006, including the promotion o f sustainable tourist destinations.
Consolidation by SECTUR and PROFEPA o f the Environmental Quality Program for
Tourism, which recognizes good environmental performance o f tourist installations
and represents a n incentive to comply with environmental laws. The certification in
the context o f the program i s awarded based o n results o f an environmental audit to
which the tourist installations submit voluntarily.
Consolidation o f the Integrated Program for Clean Beaches, which includes a system
o f indicators and base lines that allow the monitoring o f water quality in tourism
centers. The indicators are publicly accessible, so that the general public can make
informed decisions for the selection o f tourism destinations that they visit.
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ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
0
Implementation o f a public policy for Tourist Cruises that recognize the growth o f
this activity in the country and seeks to ensure that the number o f cruises that visit the
country do not exceed the carrying capacity o f the ecosystems. At the same time, it
seeks to promote the provision o f services to cruises that result in a more pleasant
experience for the tourists and mitigates environmental impacts.
Ensure the application o f the new General L a w for Prevention and Integrated Waste
Management, which provides the legal framework for the appropriate handling o f
wastes in urban centers, as well as the development o f mechanisms for the
participation o f the private sector and the general public with the purpose o f
developing and implementing plans for integrated waste management.
Energy
0
0
Achievement o f concrete actions that reduce environmental impacts from the energy
sector on public health. Among these can be highlighted the improvement o f fuel
quality, in particular the reduction o f sulfur content from 1000 to 300 ppm in gasoline
sold in the Mexico Valley Metropolitan Zone. At the same time, carry out rural
electrification projects that allow for the substitution o f fuels currently used by rural
communities that have negative impacts on health, affecting mainly the vulnerable
groups such as women and children.
The development, according to the agreements reached by the Inter-sectoral Energy
Working Group, o f prospective studies on the energy sector that will guide Mexican
sectoral policies to achieve economic, social and environmental objectives.
Encourage the use o f renewable energy sources, such as by an Official Mexican
N o r m to regulate geothermal energy. In a complementary manner, develop
institutional mechanisms that allow for the establishment o f economic incentives and
market mechanisms that favor investment in these types o f energies.
0
0
Reduce the environmental impact o f parastatal companies in the sector, in particular
PEMEX and the Federal Electricity Commission (CFE). Both companies have
adopted environmental management systems that allow them to achieve important
results in the short-term and continue to help improve environmental performance in
the future.
A s part o f the efforts o f the sector to mitigate i t s impacts o n a global level and
consistent with Mexico’s participation in international negotiations regarding climate
change, support the operation o f the Clean Development Mechanism Office, whose
functions include the implementation o f methodologies that permit the measurement
and verification o f carbon reductions, as well as the strengthening o f the portfolio o f
investment projects that have the potential to be financed through this mechanism.
The office was established to conform to the guidelines established by the
international community at the Conference o f the Parties to the Framework
Convention o n Climate Change held in Bonn and Marrakesh.
84
ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
Forestry
Application of the General Law o n Sustainable Forestry Development and the
promotion o f the creation o f i t s regulations. The law represents a fundamental
component of the reforms that the sector has undertaken to strengthen the legal
framework o f the sector and to ensure that the development o f forestry activity
conforms to well-defined rules that promote investment. The law assigns functions
and responsibilities to different government entities for conservation, protection,
restoration, production, harvesting and management o f the country’s forestry
resources.
0
0
Approval o f regulations o f the Forestry L a w which defines the regulatory framework
to achieve among other objectives, payment for environmental hydrological services
that forests provide within the hydrographic basins.
Elaboration o f studies to develop fiscal, financial and market mechanisms to generate
economic resources to promote the sustainable use o f forest resources and payment
for environmental services that they provide.
Water
0
0
0
ii.
Amendments to the National Water L a w to advance the integrated management o f
water resources. The amendments aim to define operational mechanisms for
decentralized water basin authorities in which different water users can discuss
relevant topics regarding water resource use, the strengthening o f the system o f water
rights and modifications that will contribute to a better functioning water market.
As complementary measures to the National Water L a w amendments, carry out
actions designed to ensure that the water users comply with their obligations in terms
o f water usage according to the acquired rights and the discharge o f contaminant
substances, adjust the regional water administration programs in order to reflect the
actual availability o f the resource, and develop a strategy to increase residual water
treatment coverage nationwide.
Implement measures to rationalize water use and contribute to the improved
functioning o f the water market, including the publication o f water availability in the
principal aquifers in the country, such as the pilot project implemented in the
QuerCtaro Valley to negotiate measurements between authorities and users that
resulted in a lower water extraction o f the over-exploited aquifers.
Improve the efficiency and effectiveness o f the environmental management process
in Mexico.
0
Advance the consolidation o f areas for public participation and accountability in
accordance with the resolutions o f the Federal Transparency Law. Concrete measures
to move ahead o n this front include the annual publication o f environmental statistics
and environmental management reports that allow citizens to know the trends in
85
ANNEX 4: LETTER OF DEVELOPMENT POLICY (cont.)
environmental quality, as weil as the results o f the environmental management efforts
carried out by the Federal Government.
0
0
0
Adaptation o f the legal framework and administrative processes to establish clear
rules that favor investment and promote the compliance with environmental law. In
this context should be highlighted the modifications that have been made to the
environmental impact guidelines in order to reduce processing times, identify
cumulative impacts, and open up areas o f public consultation for communities that
could be affected by projects under consideration.
Strengthening o f the decentralization process through a monitoring and evaluation
scheme for the performance o f the state environmental authorities with relation to the
functions that have been transferred to them. Based on this model, priority functions
to be transferred to states have been identified that are related to the management o f
ZOFEMAT, forests and soil, as well as wildlife. This scheme seeks to respond to the
limitations o f the decentralization model that was adopted at the beginning o f the
administration and has been modified in this second phase o f environmental
management.
Support discussions to approve fiscal and market instruments that generate income to
finance environmental management in the federal and state levels. In this context, the
Secretariat o f Finance (SHCP) has developed criteria for establishing environmental
rights, the guidelines for taxes, tariffs and environmental surcharges at the local level,
and a draft o f the Environmental Tax Law.
86
ANNEX 5: FUND RELATIONS NOTE
Under Article I V o f the IMF’s Articles o f Agreement, the IMF holds bilateral discussions with
members, usually every year. The IMF released the attached Public Information Notice (PIN) on
December 23, 2004 summarizing the views o f the Executive Board as expressed during i t s
discussion o f the staff report that concluded the Article I V consultation. An up-date on recent
developments i s being provided separately.
87
EXTERNAL
RELATIONS
DEPARTMENT
Public InformationNotim (PIN) No. 041140
FOR 1MMEDIATE RELEASE
December 23,2004
InternationalMonetary Fund
700 19'" Street, NW
Washington, D. C. 20431 USA
IMF Executive 8oard Concludes 2004 Article W Consultation with Mexico
On October 13,2004, the ExecutiveBoard of the IntemationaiMonetary Fund (IMF) concluded
the Article IV consultatfanwith Mexico.'
Background
After three years of weak activity, the broad-basedrecovery underway this year provides
encouraging evidencethat the factors hddlng back Mexico's growth were temporary. Business
confidence and investment have risen, foreign direct investment (FDI) inflows are
strengthening, exports have picked up sharply, and market perceptionsof Mexico remain
favorable. While inflation has risen moderately above the authorities' objective, it remains far
below levels historically experiencedby Mexico. Higher oil prices and a recovery in nansil
exports have led to a narrowing in the current account deficit. The current account deficit has
been more than matched by FDI infkom.
Economic activity acceleratedto 3.8 percent In the
half of 2004 OW the previous year.
This recovery is partly attributable to strengthening . industrial production, as reflected in
growth in Mexican manufactured exports of 10% percent {seasonalty adjusted) in the first
seven months of 2004 over the same period in 2003. Inflation accelerated from 4 percent at
end2003 to 5.1 percent in September, boosted by supply shocks, induding a temporary
suspension of some meat imports from t
States, higher oil and commodity prices,
and their impact on administered prices.
tion was lower, standing at 3.8 percent, but
has shown no signs of decelerating since early 2003.
'
Under Artide IV of the IMPSArtides of Agreement, the IMF holds bilateraldiscussions with members,
usually every year. A stalf team visits the country, coilects economic and Rnanclai information,and dlsarsses
with officials the country's economic developments and poldes. On return to headquarters, the staff
prepares a repod, which hthe basis for dwssian by the ExecutbteBoard. At the candusion of the
discussion, the Man
or, as Chairman of the Board, summarizes the views of Executive Diredors,
and this summary is
to &hecountry's authorilies.
Washington, DC, 20431
Telephone 202-623-7100
88
Fax 202-b234?72
wwW.lmfaOrQ
-2.
Net internationalreserves increased to US$!% billion in August 2
USM8 billion at end-2002, reflecting strong PEMEX receipts. A change was made to the
mechanismfor auctioning international reserves in March 2004. The Banco de Mexico
continues to pre-announce the amount of dollars to be sdd in the market, equal to 50 percent
of net reserve accumulation in the previous three-month period. The sale of dollars will now,
however, be spread over the following 12 months, as opposed to three months, to reduce
volatility in the amount sold throughout the year.
Targets for the traditional deficit have been met in recent years. But the pace of fiscal
consolidation, viewed in terms of the augmented public sector deficit, has been slower than
envisaged in the authorities' 2002 medium-term plan. W
this deficit was reduced from
3.7 percent of GDP in 2000 to 3.1 percent In 2003, gro
blic debt rose by about 1.75
percentage points to 51 percent of GDP during those years, reflectingbo# currency
depreciation and slow growth. For 2004, the augmented deficit is expected to remain broadly
unchanged, while the traditional deficit would fall slightly to 0.4 percent of GDP, in line with
budget targets. The draft budget for 2005 calls for a decline in the augmented deficit to 2.2
percent of GDP, while the traditional deficit would fall to 0.1 percent of GDP?
The Banco de Mexico has tightened policy seven times since the beginning of 2004 via
increases in the corto (the borrowed reserves objective), In addition, domestic market
conditions have been affected by the two increases in the US. federal funds target rate. The
ovemight inter-bank (fondeo)rose from about 5 percent in January to slightly over 8 percent in
mid-September. Long-term interest rates rose by slightly less over this period, with the 1Q-year
government bond yield increasing from about 8% percent in January to 10% percent in
September. The peso depreciated by 2 percent through end-September after falling by
6% percent against the US. dollar in 2003.
Market sentiment toward Mexico remains positive, as reflected in its investment-grade status.
After a short-lived spike to 250 basis points in mid-May as US. interest rates rose, Mexico's
EMEW spread has fallen back to about 180 basis points.
The government has made significant progress in strengthening the structure of public debt.
Several liability management operations, including an exchange of giobal bonds in early 2004,
have helped to improve the efficiency of the yield curve. Domestic public debt management
has concentrated on extending meturities, improving the liquidity of benchmrk issues, and
deepening domestic financial markets. Nevertheless, some public debt vulnerabilities remain,
with a large portion of domestic debt either short term or linked to short-term interest rates,
The publlc sector also has a significant gross financing need.
~
Methoddogical differences mean that the figures in this document may differ from those published by the
Ministry of Finance.
89
-3-
Executive Board Assessment
Executive Directors commended the Mexican authorities for their continuedpursuit of sound
macroeconomic policies, and welcomed signs that recently the economic recovery has
gthened and become more broadly based, while business confidence and investment
risen. Meanwhlb, FDI inflows have been strong, exports have picked up, and market
erceptions of Mexico remain favorable. Progress in modemkingthe financial
tinued, and balance.shee
y. The key challenges goin
ance Mexico’s economic
a lasting basis by bringing
g-term objective, reducing debt vulnerabilities, and reinvigorating the
reforms.
On fiscal policy, Directors welcomed the authorities’ continuing commitment to medium-terrn
fiscal consolidation, and commended the authorities’ track record in meeting fiscal targets,
They noted that the budget is dependent on volatile oil revenues. In this context, most
Directors encouraged the authorities to aim at saving significantly m r e of the excess oil
revenues for the medium term, while some considered the use of part of these revenues far
productive investments to be a prudent strategy, Looking ahead, Directors urged the
authorities to estabtish stronger mechanisms to ensure that a substantial portion of the windfall
is saved. This will require redoubled efforts to ensure that medium-ten expenditure reduction
is combined with measures to achieve significant increases in non-oil revenues.
Directors considered that fiscal reforms will have a crucial role to play in achie
consolidation. In particular, formal fiscal responsibility principles based on the
fiscat measures should be helpful in avoiding slippages in meeting medium-term targets.
Directors regretted the setback to efforts aimed at enhancing the efficiency of the tax system
and promoting fiscal stability. They believed that tax reform to raise non-oil revenues will be
needed to avoid budget cuts that could jeopardize spending in social areas and on public
infrastructure. Pension reform will also be required to ensure that the fiscal accounts remain on
a sound path. Directors encouraged the authorities to take actions to enhance the
accountability and efficiency of several public enterprises, including PEMEX, in order to
strengthen the fiscal position and raise the quality of Mexico’s infrastructur
Directors identified several other key elements of the
These indude stepped up efforts to improve governance and enhance flexibility in the labor
market. Directors considered that building a consensus around these efforts, as well as on
actions to enhance competition in the telecommunications sector, will be vital for promoting
Regarding monetary poftcy, Directors recognized the sucmss of Mexico’s inflation targeting
framework in bringing inflation down to low singledigit levels. They noted that, although the
long-term inflation target is dose to being met, sustained achievement of the target is proving
shocks. Directors accordingly viewed
to be problematic in an environment of
priate to ensure the credibility of the
the recent tightening of the monetary s
authorities’ cammitment to lowering inflation. Looking ahead irectors agreed that a tightening
90
-4-
bias in p o k y will remain appropriate until there are clear signs that inflationexpectations are
declining toward the longterm objective.
Directors supported the authorities' efforts to refine monetary cy announcements to signal
the policymakers' views more directly to markets. Steps in this direction have led to more
stable short-term interest rates in recent months well as to more predi
responses to policy actions. Directors generally
ed that there is scop
transparency and predictability in policy implementation over time, includ
interest rate instrument when conditions warrant, Directors were enmu
framework. Many Directors acknowledged the drawbacks
refinements to the i~flation-~r~eting
to moving toward publication of an official inflation forecast in the immediate circumstances,
given the evolving nature of monetary instruments and the risks of adding to uncertainty about
policy intentionsat a critical time. However, this Issue should be kept under review,
Directors observed that MexWs flexible exchange rate regime has been effective in
cushioning the economy from external shocks. They viewed external competitivenessto be
broadly oonsistent with a sustainable balance of payments position, They agreed that the
rules-based mechanism for accumulating foreign reserves appropriately reflects the
authorities' transparent approach to reserves management and their commitment to a marketdetermined exchange rate.
Directors welcomed the continued improvement in broad indmtors of banking sector
soundness. They noted that the banking system as a whole has a sound level of profitabiti
and capital adequacy. A significant challenge in the period shead will be to deepen financial
activity without excessive risk-taking, and to streamline financial regulation to encourage
innovation and competition. In this regard, Directors encouraged the authorities to review the
operations of the nonbank financial sector and the development banks to ensure that they do
not pose a source of hidden financial risks.
Directors endorsed the authorities' continued commitment to reduce vulnerabilities relatingto
pubficdebt. In addition to sustained progress With fiscal consolidation, they welcomed plans to
improve the debt structure further by continuing to increase fixed-rate domestiecurrency
instruments, extending the domestic yield curve, and diversifying the investor base.
Public Infwmalion No&# (PINSJ form part of the IMF's efforts to promote transparencyof the IMF's
views and analysis of economicdevelopments and policies. With the consent of the country
(or countries) concerned, PINSare issued after Executive Board discussions of Article IV cwrsultations
with member countries, of Its surveillance of developmentsat the regional levef, of post-program
monitoring, and of ex post assessments of member countries with longer-term ptogram engagements.
PINSare also issued after Executive Board disarssions of general policy matters, unless otherwise
decided by the Executive Board in a particularcase.
91
I
Mexico: Selected Economic and Financial Indicators ”
percentage changes, unless otherwise indicated)
National accounts and prices
Reel GDP
Real GDP per capita 2f
trws domestic invesment(in percent of GDP)
Gross national savings (in percent of GW)
Consumer prim index (end period)
3.6
2.6
23.5
20.5
12.3
External sector
Exports, f.0.b. 3
Imports, f.0.b. 41
Externalcurrent account balance(in percent of GDP)
Change in net internationalreseffes (end of period, billions of
US. dollars)
Outstanding extemal debt fin percent of GDP)
Totel debt service ratio 5f
(in percent of exports of goods. services, and transfers)
14.8
10.8
-2.9
6.6
4.8
23.7
20.6
9.0
0.0
-1.5
21.1
18.2
4.4
0.6
-0.9
20.8
18.6
5.7
21.8
23.1
-3.7
-1.7
-2.3
-2.3
-2.1
4.3
1.9
-1.4
-3.1
0.6
1.3
-0.2
19.8
18.4
4.0
0.6
37.0
28.3
2.8
7.3
28.1
7.1
25.2
9.5
26.1
43.2
44.6
38.4
31.1
31.0
Nonfinanelalpublic sector (tn percent of GDP)
Augmented overall balance 6l
Tradilional overall balance
Net augmented public sector debt
-6.3
-1.1
46.5
-3.7
-1.1
42.2
-3.7
-0.7
41.5
-3.3
-2.2
43.3
-3.4
-0.6
45.4
Money and credlt
Monetary base
Broad money (M4) (induding public sector)
Treasury bill rate (28-day cetes, In peroent, annual average)
43.5
19.6
21.4
10.7
12.9
152
8.0
16.0
11.3
7.1
6.2
Sources: National Institute of SlatlsUca and Geography; Bank of Mexico; and Ministry of Finance and
Public Credit.
llMethodoiogicaf differences mean that the figures in this table may differ from those published by the
authorities.
;IIFund staff estimates.
31 Includes exports less imports from in-bond industries.
41 Excludes imports of in-bond industries.
51 Piivate and public sectors,
61The augmented balance is the public sedw borrowing requirement less nonrecurring
revenues.
92
ANNEX 6: MEXICO AT A GLANCE
Mexico at a glance
4/26/05
Access to improved water source
GDP (US$ bi//ions)
Gross domestic investmenffGDP
Exports of goods and serviceslGDP
Gross domestic savingsIGDP
s national savlngs
Present value of debtfexports
Indebtedness
(average annual growthl
~
STRUCTURE of the ECONOMY
(% of GDPJ
Agriculture
Industry
Manufacturing
Services
Private consumption
General government consumption
Imports of goods and services
(average annual growth)
Agriculture
Industry
Manufacturing
Services
Private consumption
General government consumption
Gross domestic investment
lrports of goods and services
1984
1994
2003
2004
9.4
34.9
22.7
55.7
6.0
26.8
18.7
67.2
3.9
25.8
18.0
70.3
2;:
18.1
69.5
63.1
9.2
9.6
71.4
11.5
21.6
68.6
12.4
29.5
68.5
11.7
31.9
1984-94
1994-04
0.8
3.3
3.5
2.7
1.9
3.3
3.6
3.3
3.5
-0.2
-1.3
1.9
4.0
3.8
3.8
4.6
3.6
2.2
5.6
14.6
3.7
1.2
4.8
10.6
2.3
0.8
-4.2
0.7
5.5
-1.2
1.5
10.2
Mexico
1 Growth of exports and imports (Oh)
25
20
15
10
5
0
5
-101
-Eworts
--+"-Imports
Note: 2004 data are preliminatyestimates, Group data are for 2002,
'The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will
be incomplete.
93
Mexico
PRICES and GOVERNMENT FINANCE
1984
1994
2003
2004
65.4
59.1
7.0
8.5
4.5
8.5
4.7
6.1
31.2
-1.2
-6.4
22.7
3.3
-0.3
23.2
2.2
-0.7
21.0
2.4
-0.3
1984
1994
2003
2004
29,100
16,601
1,461
10,499
15,916
60,882
7,445
2,678
50,402
79,346
164,923
18,654
4,664
141,087
170,546
189,159
23,706
5,421
159,093
197,247
2,573
13,322
20,205
22,599
120
79
153
95
95
100
111
105
106
111
107
104
1984
1994
2003
2004
33,926
21,028
12,898
71,184
91,616
-20,432
177,395
187,680
-10,285
202,625
215,718
-13,094
-10,076
1,361
-13,012
3,782
-12,160
13,858
-12,662
17,044
Current account balance
4,183
-29,662
-8,587
-8,712
Financing items (net)
Changes in net reserves
-2,034
-2,149
12,463
17,199
18,420
-9,833
12,774
-4,061
7,355
0.2
6,300
3.4
59,027
10.8
64,241
11.3
Domestic prices
(% change)
Consumer prices
Implicit GDP deflator
Government finance
(% of GDP, includes current grants)
Current revenue
Current budget balance
Overall surplusldeficit
TRADE
(US$ millions)
Total exports (fob)
Oil
Agriculture
Manufactures
Total imports (cif)
Food
Fuel and energy
Capital goods
Export price index (1995.100)
Import price index (1995=100)
Terms of trade (1995=100)
BALANCE of PAYMENTS
(US5 millions)
Exports of goods and services
Imports of goods and services
Resource balance
Net income
Net current transfers
Memo:
Reserves including go!d (US$ millions)
Conversion rate (DEC, locaVUS$)
EXTERNAL DEBT and RESOURCE FLOWS
.
(US5 millions)
Total debt outstanding and disbursed
IBRD
IDA
1984
1994
2003
2004
94,830
2,852
0
138,545
13,038
0
140,391
10,717
0
140,778
9,567
0
Total debt service
IBRD
IDA
16,960
465
0
20,076
1,989
0
34,279
1,972
0
33,568
2,499
0
Composition of net resourceflows
Official grants
Official creditors
Private creditors
Foreign direct investment
Portfolio equity
27
832
791
390
0
47
-583
5,296
10,973
4,064
-372
-418
12,625
-162
1,578
16,602
Wodd Bank program
Commitments
Disbursements
Principal repayments
Net flows
Interest payments
Net transfers
576
682
253
430
233
197
2,380
942
1,065
-123
924
-1,046
688
1,258
1,359
-101
613
-714
1 Inflation (%)
I
L
Export and Import levels (US$ mill.)
98
G3
W
01
Exports
.Imports
I Current account balance to GDP
~
03
02
O4
I
~~
(%)
Composition of 2004 debt (US$ mill.)
G: 9,900 A: 9,567
F 112.001
Development Economics
621
767
1,976
-1,209
524
-1,733
A - IBRD
B - IDA
C - IMF
D - Other multilateral
E - Bilateral
F - Private
G - Short-term
4/26/05
94
ANNEX 7: SOCIAL INDICATORS
Mexico Social Indicators
Same regionlincome group
Latest single year
POPULATION
Total population, mid-year (millions)
Growth rate (% annual average for period)
Urban population (% ofpopulation)
Total fertility rate (births per woman)
1970-75
1980-85
1998-04
Lath
America
& Carib.
Uppermiddleincome
59.1
3.1
62.8
5.8
75.5
2.2
69.6
3.9
103.8
1.4
75.2
2.4
534.2
1.5
76.6
2.5
334.9
1.2
75.8
2.4
1,470
0
2,180
3
6,550
293
3,260
5,340
3.3
4.5
3.7
4.4
POVERTY
(% of population)
National headcount index
Urban headcount index
Rural headcount index
INCOME
GNI per capita (US$)
Consumer price index (1995=100)
Food price index (1995=100)
INCOMElCONSUMPTlON DISTRIBUTION
Gini index
Lowest quintile (% of income or consumption)
Highest quintiie (% of income or COnSUmption)
SOCIAL INDICATORS
Public expenditure
Health (% of GDP)
Education (% of GNU
Social security and welfare (% of GDP)
Net primary school enrollment rate
(% of age group)
Total
Male
Female
Access t o an improved water source
(% of population)
Total
Urban
Rural
Immunization rate
(% of children ages 12-23 months)
Measles
DPT
Child malnutrition (% under 5 years)
Life expectancy at birth
(years)
Total
Male
Female
Mortality
Infant (per 1.000 /ive births)
Under 5 (per 1,000)
Adult (15-59)
Male (per 1,000 p0pUlation)
Female (per 1,000 population)
Maternal (per 100,000 live births)
Births attended by skilled health staff (%)
54.6
3.1
59.1
2.7
3.6
2.2
3.3
83
83
82
100
99
99
100
94
94
95
93
93
94
88
95
69
86
94
65
89
93
77
64
40
96
91
8
91
88
94
90
64
61
67
69
66
72
74
71
77
71
68
74
73
70
77
79
110
56
74
24
29
28
34
19
22
246
188
216
135
180
101
83
222
125
197
103
04/26/05
CAS Annex 85. This table was produced from the CMU LDB system.
Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997 and 1998 due to
change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months who received vaccinations before one
year of age.
95
ANNEX 8: KEY ECONOMIC INDICATORS
Mexico
In&cat&
- Key Economic Indicators
A
a w H I m1
b a t i o n a l accounn (as % of C D P )
Gross domestic producta
Agriculture
100
4
M
2001
Eaimsto
zw 3
2004
2005
ROjd
2008
2007
2006
100
4
100
4
100
4
100
4
100
4
100
4
100
4
100
4
Industry
28
27
26
26
26
26
26
26
26
Services
68
69
70
70
69
70
70
70
70
Total Consumption
Gross domestic fixed investment
Government investment
Private investment
78
21
4
18
81
20
4
16
81
19
4
15
81
19
5
14
80
20
5
15
82
19
2
17
82
20
2
18
82
20
2
18
84
18
2
15
Exports (GNFS)b
Imports (GNFS)
31
33
28
30
27
29
28
29
30
32
30
33
30
33
30
33
30
33
Gross domestic savings
Gross national savingsc
22
21
19
18
19
19
19
19
20
21
18
18
18
18
18
18
16
16
581426
622093
649076
639076
676497
645383
681118
727455
774711
5110
5560
5960
6290
6550
6400
6450
6540
6850
-0.2
0.0
0.8
1.2
1.4
1.1
4.4
3.8
3.8
3.1
4.0
3.8
4.3
4.3
4.0
4.0
-0.6
-0.1
0.1
-0.1
0.6
0.8
2.9
3.2
4.0
2.3
2.6
2.8
2.6
2.2
2.3
2.9
3.2
3.1
2.7
4.9
5.2
Memorandum i r e m
Gross domestic product
(US$ million at current prices)
GNI per capita (US, Atlas method)
Real annual growth rates (%, calculated t o m 1993 prices)
Gross domestic product at market prices
6.6
Gross Domestic Income
7.8
Real annual Der
rates (%, calculated Bom 1993 nrices)
. cauita
. nrowth
Gross domestic product at market prices
5.1
-1.6
0.5
Total consumption
5.9
1.0
Private consumption
6.7
Balance of Payments (USS millions)
Exports (GNFS)b
Merchandise F O B
Imports (GNFS)b
Merchandise F O B
Resource balance
Net current transfers
Current account balance
179833
166121
190494
174458
-10661
6994
-18523
171440
158780
184614
168396
-13174
9338
-17842
173738
161046
185419
168679
-11681
10268
-13410
177395
164766
187680
170546
-10285
13858
-8587
202625
188626
215718
197156
-13094
17044
-8712
192977
177872
210623
191620
-17646
15403
-18065
205214
189128
227054
206816
-21840
16947
-21504
219100
201970
242702
221087
-23601
17796
-23929
233995
215751
256243
233225
-22249
18687
-23 199
16781
-1383
-526
-857
10275
-7150
27635
2517
-669
3186
-4971
-7338
15129
-3906
246
-4152
9563
-7376
11373
-139
-372
233
7186
-9833
16602
4200
-182
4382
-8028
-4061
15276
4438
-35
4474
0
-1650
16040
7683
-198
7881
0
-2220
16842
8932
80
8852
0
- 1845
17684
6613
172
644 1
-1.8
-2.1
-1.8
-1.6
-1.9
-2.7
-3.2
-3.2
-2.9
Publie finance (as % of GDP a t m a r k e t prices)e
Current revenues
21.6
Current expenditures
20.1
Current account surplus (+) or deficit (-)
1.5
Capital expenditure
2.7
Foreign financing
21.9
20.0
1.9
2.6
22.1
20.1
2.0
3.2
-0.4
23.2
21.0
2.2
2.9
-0.2
21.0
18.6
2.4
2.7
0.4
23.1
20.3
2.7
2.9
0.5
23.0
20.1
2.9
2.9
0.4
22.9
20.0
2.9
3.0
0.8
22.8
19.8
3.0
3.0
-0.1
27.3
-4.5
68.9
29.0
12.5
-1289.0
29.3
8.9
80.7
28.5
7.2
35.1
30.0
16.3
-415.9
33.3
6.9
84.0
33.3
7.1
87.6
33.3
7.4
86.6
33.3
7.1
88.3
Price indices( YR93 4 0 0 )
Merchandise export price index
Merchandise import price index
Merchandme terms of trade index
Real exchange rate (US$lLCU)f
69.0
62.9
61.2
67.0
69.1
69.8
70.4
70.4
70.4
Real interest rates
Consumer price index (%change)
GDP deflator (%change)
9.5
12.1
6.4
5.9
5.0
7.0
4.5
8.5
4.7
6.1
3.4
-7.4
3.2
3.0
3.0
3.0
3.0
3.0
Net private foreign direct investment
Long-term loans (net)
Official
Private
Other capital (net, incl. errors & ommission
Change in reservesd
Memorandum ifems
Resource balance (YOof GDP)
Real annual growth rates (YR93 prices)
Merchandise exports (FOB)
Primary
Manufactures
Merchanmse m p o r t s (CIF)
Monetary indicators
M2lGDP
Growth o f M 2 (%)
Private sector credit growth i
total credit growth (%)
a. GDP at factor cost
b. "GNFS" denotes "goods and nonfactor services."
c.
d.
e.
f
Includes net unrequited transfers excluding official capital grants.
Includes use o f IMF resources.
Consolidated central government.
"LCU" denotes "local currency units." An increase in U S S R C U denotes appreciation.
96
0
-1098
ANNEX 9: MEXICO ENVIRONMENTAL INDICATORS44
~~
Environmentalstrategy/actionplan prepared in
Grouo Data
Population (millions)
Urban population(% of total)
GDP ($ billions)
GNI per capita, Atlas method ($)
Agriculture and fisheries
Land area (1,000 sq. km.)
Agricultural land (56 of land area)
irrigated land (% of crop land)
Fertlizer consumption (100 grams/ ha arable land)
Populationdensity, rural (people / sq. km. arable land)
Fish catch, total (1,000 metric tons)
Forests
Forest area (1,000 sq. km.)
Forest area share of total land area (%)
-
Annual deforestationPA chanae. 1990 2000)
Biodiversity
Mammal species, total known
Mammal species, threatened
Bird species, total breeding
Bird species, threatened
Nationally protected area (% of land area)
Energy
GDP per unit of energy use (2000 PPP$ / kg oil equiv)
Country Data
102.3
Latin
America
Caribbean
533
Upper middle
income
333
75.0
626.1
6,230
76.6
1,741
3,280
75.4
1,856
5,440
1,909
56
23.2
690
102
1,475
20,057
39
12.5
892
210
17.804
12,741
48
13.5
796
193
10,082
552
28.9
1.1
9,552
47.6
0.5
2,427
19.1
0.6
491
70
440
39
10.2
11.2
17.3
5.6
6.1
4.3
1,560
5.2
46
1,660
12.1
1,156
14.6
-42
1,506
50
2,232
4.1
-9 1
2,496
23.9
C 0 2amissions per unit of GDP (kgR000 PPP$ GDP)
0.5
C02 emissions per capita (metric tons)
Particulatematter (pop weighted average, pg / w.m.)
Passenger cars (per 1,000 people)
4.3
53
107
0.4
2.7
40
0.6
6.3
29
153
3,998
25,245
10,741
19.0
78
91
2.0
74
89
5.7
71
72
97
77
39
90
28
69
96
74
44
84
33
18.7
10.5
19.5
10.3
4.2
6.4
0.7
0.0
0.5
0.5
5.3
Energy use per capita (kg oil equiv)
Energy from biomass products and waste (36 of total)
Energy imports, net (% of energy use)
Electric power consumption per capita (kwh)
Electriaty generated by mal (% of total)
Emissions and pollution
Water and Sanitation
Internalfreshwater rasources per capita (a.m.)
Freshwater withdrawal
Total (%of internal resources)
Agriculture (% of total freshwater withdrawal)
Access to improved water source (% of total pOpUlatiOn)
Rural (% of rural population)
Urban (%of urban population)
Access to sanitation
Rural (% of rural population)
Urban (%of urban population)
Under five morality rate (per 1,000)
96
22
National accounting aggregates, 2003
Gross national savings (56 of GNI)
Consumption of fixed capital (% of GNI)
5.1
6.1
0.1
0.0
0.5
0.5
6.0
Education expenditure (56 of GNI)
Energy depletion ( % of GNI)
Mineral depletion (% of GNI)
Net forest depletion (% of GNI)
C02damage (% of GNI)
Particulateemission damage (% of GNI)
Adiusted net savinas (% of GNI)
44
The Little Green Data Book 2005. Washington, DC: The World Bank. 2005. (p. 148)
97
22.1
10.7
5.0
11 4
0.3
0.0
0.8
0.6
3.3
ANNEX 10: SELECTED INDICATORS* OF BANK PORTFOLIO PERFORMANCE
AND MANAGEMENT
Mexico
Selected Indicators* of Bank Portfolio Performance and Management
As of April 22,2005
Indicator
Portfolio Assessment
Number of Projects Under Implementation a
Average Implementation Period (years)
Percent of Problem Projects by Number a*
Percent of Problem Projects by Amount
Percent of Projects at Risk by Number
Percent of Projects at Risk by Amount
Disbursement Ratio (%) e
Portfolio Management
CPPR during the year (yes/no)
Supervision Resources (total US$)
Average Supervision (US$/project)
2002
2003
2004
2005
28
3.1
3.6
8.1
3.6
8.1
14.7
26
3.4
11.5
22.6
11.5
22.6
25.5
24
3.2
12.5
21.2
12.5
21.2
20.0
24
3.6
8.3
11.3
8.3
11.3
21.o
No
2,006.0
71.6
Yes
2,625.0
101.0
Yes
2,257.0
94.0
Planned
1,922.0
80.1
*
Memorandum Item
Proj Eva1 by OED by Number
Proj Eva1 by OED by Amt (US$ millions)
% of OED Projects Rated U or HU by Number
% of OED Projects Rated U or HU by Amt
Since FY80 Last Five FYs
139
24
26,219.2
5657.8
26.7
19
17.5
7.6
a.
b.
c.
d.
e.
As shown in the Annual Report on Portfolio Performance (except for current FY).
Average age of projects in the Bank's country portfolio.
Percent of projects rated U or HU on development objectives (DO) and/or implementationprogress (IP).
As defined under the Portfolio Improvement Program.
Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the
beginning of the year: Investment projects only.
* All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio,
which includes all active projects as well as projects which exited during the fiscal year.
98
ANNEX 11: IBRD / IDA PROGRAM SUMMARY
Mexico
IBRDKDA Program Summary
Proposed IBRD/IDA Base-Case Lending Program
As o f April 22,2005
~~
Fiscal year
us$(M)
2004
Community Forestry I1
Irrigation & Drainage Modernization
Decentralized Infrastructure Development
E-Business for Small Enterprises
Mexico Afford Housing & U
Savings & Credit Sec Strength
21.3
303.0
108.0
58.4
100.0
75.5
Result
666.2
Basic Education Development APL I11 (Approved)
State Judicial (Approved)
Housing & Urban Program TAL I(Approved)
Innovation for Competitiveness
Access to Land for Young Farmers
Environmental S A L I1
300.0
30.0
7.8
250.0
100.0
Rmult
887.8
Water Res. Mgmt Project I1 (Integ. M a o f Basins & Aquif)
Rural Electrification Project (GEF)
Lifelong Learning & Training
Water & Sanitation TAL
Property Rights
Tertiary Education Student Assistance
Social Development Policy Loan ( S A L )
Housing & Urban Program S A L I1
Strengthening Public Finances (SAL+TAL)
100.0
40.0
240.0
25.0
100.0
181.1
300.0
100.0
200
~~
2005
2006
200.0
300.0
100.0
200.0
300.0
Health System (Seguro Popular) SWAP
Indigenous Loan
Highway Finance Loan
Education Quality
Environmental Services (GEF)
Access to Financial Services
Access to Justice I1
ENVSAL I11
Water Rights
40.0
300.0
40.0
200.0
100.0
M
M
H
M
M
M
L
L
M
L
M
M
M
H
M
H
M
M
L
M
M
M
L
L
M
M
M
M
M
M
H
H
H
L
L
M
L
L
L
M
H
M
M
H
H
M
M
M
H
M
M
M
M
M
L
L
M
L
L
M
H
H
M
M
M
M
M
L
H
L
L
L
L
L
1.580.0
Results
2008
Implementation
Risks
1.2861
RuruItr
2007
Strategic
Rewards
Decentralized Infrastructure Development I1
Housing & Urban Program S A L I11
Water Policy Development SAL+TAL
Water & Sanitation Modernization
Irrigation & Drainage Modernization I1
Environmental Management
Community Forestry I11
250.0
200.0
350.0
300.0
300.0
100.0
50.0
1.550.0
Results
5 9 70.1
Overall Results
Of which Quick-disbursing is
1750.0
29%
1650.0
31%
F Y 2005-2008 Results
Of which Quick-disbursing is
5,303.9
99
ANNEX 12: SUMMARY OF NONLENDING SERVICES
Mexico
Summary o f Nonlending Services JW05-OS
As of April 22,2005
FY
2005
Product
2007-08
Objective
88
KG,PD
KG, PD
KG,PD
KG,PD
Poverty Programmatic Ill Main Report
a) Social Protection
b) Monitoring & Eva1 tl
c) Health Service Delivery I
I
Quality o f Education Programmatic I
I
Competitiveness
Competitiveness & Trade Programmatic I
I
a) Crops t.! ~ g r Competitibeness
o
Public Finances and Management Program IIGR
Institutionality
Env. Sustainability Water Programmatic II
c) Environmental & Social Standards Review
171
176
91
91
171
171
91
176
171
91
G,B,PD
G, B,PD
G,B,PD
G,B, PD
G,B, PD
G,B,PD
G,B
G,B,PD
G, B
G, B
KG,PD
KG, PD
KG,PD
KG,PD
KG,PD
KG,PD
KG
KG,PD
KG
KG, PS
Poverty Programmatic N
Poverty Programmatic V
Quality o f Education Programmatic Lll
Quality o f Education Programmatic N
Rural Decentralization
Competitiveness
Competitiveness & Trade Programmatic ID
Competitiveness & Trade Programmatic IV
Institutionality
Public Finances and Management Programmatic I
I
I
PFM Programmatic I
I- State Pension Survey
Policy Notes
Country Assistance Strategy
Env. Sustainability Water Programmatic Lll
Water Programmatic IV
171
176
171
176
88
176
176
171
176
G, B, PD
G, B,PD
G, B,PD
G,B, PD
G, B
G, B,PD
G,B, PD
G,B, PD
G,B,PD
G, B
G, B
G, B,PD
G, B, PD
KG, PD
KG,PD
KG,PD
KG,PD
KG
KG,PD
KG, PD
KG,PD
KG,PD
KG
KG
KG,PD
KG,PD
Poverty
-
Poverty
(a) G = Government; B = Bank; PD = Public dissemination
(b) KG = Knowledge generation; PD = Public debate; PS = Problem solving
100
176
176
176
a
G,B, PD
G,B,PD
G,B,PD
G,B, PD
Poverty
Competitiveness
Institutionality
2006
Poverty Programmatic I
I- Main Report
Education Quality I
Competitiveness & Trade Programmatic I
Inftas Public Expenditure Review
cost ( ~ ~ $ 0 0 0 )Audience
238
23 8
171
ANNEX 13: STATEMENT OF IFC'S COMMITTED AND OUTSTANDING
PORTFOLIO
tnternatlonal Finance Corporation
MIS
Statement af tFC's Committed and
&"nts
Countrp MWCQ
ACtQUMIng
20011 2B04
2002
-
1999
GWa
ZOOf
1998
20001 2004
lza"a
.G&wdSm
!2@duuu
Camaaatamas
GSm.&l
2005
2004
2001
2000
l997t 200t
I998
f?lEd
Ealwi
Education
ha&U%w=
-
EorumWw
GEl.lrrrte
Report Run Date. 0412532005
ing Fortiolio
m US &#arh
Data AS Of. 0313112005
Paae 1
20 75
0
0
0
8.40
4.80
0
0
6 75
0
0
0
100
0
100
30 05
066
0
0
0
0
0
0
0
840
480
0
0
0
0
0
0
0
0
0
100
0
0
0
0
0
0
100
3000
066
0
0
0
0
0
557
300
0
0
557
300
0
0
20.52
0
0
0
0
0
0
34 A?
4 25
0
0
0
150
0
0
0
2130
225
0
0
0
150
0
0
0
436
0
0
0
011
650
0
650
300
0
0
5.36
0
El
0
650
335
300
0
0
a
0
6
GEGA
50 00
8.11
0
0
0
5000
0
0
0
19911 1996
D
0
2729
8.11
0
0
2729
199612000
GlBsB
28 93
0
600
143
3857
2893
2600
250
2600
0
600
143
0
3857
2 50
0
0
0
716
0
477
002
0
0
0
716
2001
199812004
$989
1997
1Y92l 1943119!W 194611999
1998
2004
2005
2000
!iBuama
cluaa=h
Haw
kiQrm&
2000
LE
2000
2004
lauMitcfl
2003
1998
2003
199511999
19961193912000/ 2001
2003
2004
2003
2000
2002
li&a?&
Lomuk5I
19eurlalll
bW2lal
k%mwa&a
kEWA
i.?.Uu
eouMx2A
BuuWuai
zi&amls
0
002
4 77
0
o
0
0
500
moo
5
0
500
1000
4 80
0
0
157
4.AO
0
0
0
i 57
101 17
0
0
897
0
0
0
0
If
0
0
897
0
0
0
0
19 71
9 00
0
0
0
0
679
233
0
0
0
0
900
0
0
2.33
0
0
1500
0
0
0
001
0
0
0
1500
001
0
0
0
0
49 23
26 02
0
2000
10403
4923
0
2000
10403
B
0
5721
2602
0
0
5721
0
0
$000
0
0
0
1000
0
0
448
4
3
0
448
3860
2895
0
0
451
0
0
0
0
0
38 60
5
0
999
0
0
0
565
0
0
0
0
0
1058
434
0
0
0
0
0
rot
0
D
28 95
0
0
5 65
999
0
0
10 56
434
0
453
0
0
0
0
0
0
250
350
0
0
2.50
50
0
0
0
5233
48.12
0
0
5233
0
0
0
2002
Gl&a
2000
BILmYQ
46 12
salhwu.
0
0
e
4500
0
0
0
32 61
0
0
3746
3261
0
0
3796
705
1593
1 BO
1062
0
138
621
0
705
2593
190
1062
0
t38
621
0
141
0
296
489
1.41
0
296
489
2004
2000
2000
200112004
1997
.fisuw&
3awKl%
aGa&
w
45 oe
101
Report Run Date. 04Q512005
Internatma1Finance Gorporation
Statement of FC's Committed and Uutstanding Portfolio
2003
50.00
0
2000
107.09
5000
0
2000
10709
2002
0
0
1000
0
0
8.30
0
169
0
0
0
0
1.69
D
0
0
$998
102
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