Mexico - Third Small and Medium Industry Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 11484 PROJECT COMPLETION REPORT MEXICO THIRD SMALL AND MEDIUM-SCALE INDUSTRY DEVELOPMENT PROJECT (LOAN 2325-ME) DECEMBER 31, 1992 Country Operations Division I Country Department II Latin America and the Caribbean Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Mexican Pesos (Mex$) = 100 cents Average Exchange Rates 1978 US$1 = 22.8 1979 US$1 - 22.8 1980 US$1 - 230 1981 US$1 - 24. 1982 US$1_ 57.4 1983 US$1 = 1202 1984 US$1 1 167.8 1985 US$1 257.0 1988 US$1 - 811.8 1987 US$1 - 1,378.2 1988 US$1 - 2.273.1 199o US$1 - 2,21.7 1990 US$1 - 2,821,0 1991 US$1 = 3,0205 1992 (March) US$1 = 3070.5 ABBREVIATIONS AND ACRONYMS USED ACF - Index of Average Cost of Funds AMPIP - Association of Mexican Developers of Industrial Parks DGCP - Direccl6n General de Capacitaci6n y Productividad (Department of Training and Productvity) FIDEIN - Fideicomiso de Conjuntos, Parques y Cludades Industriales (Trust Fund for Industrial Parks Development) FOGAIN - Fondo de Garantfa y Fomento a la Industria Mediana y Pequefla (Guarantee and Small and Medium Industry Development Fund) FOMIN - Fondo Nacional de Fomento Industrial (National Fund for Industrial Development) Fl - Financial Intermediary GIRA - General Interest Rate Agreement IDB - Inter-American Development Bank IMF - International Monetary Fund INEGI - Instituto Nacional de Geografta e Informitica (National Institute for Geography and Information) INFOTEC - Instituto de Informaci6n Tecnol6gica (Institute tor Information and Technological Development) NAFIN - Nacional Financiera S.A. (Government's National Industrial Development Bank) NAIOP - National Association of Industrial and Office Parks PAI - Programa de Apoyo Integral a la Industria Mediana y Pequelia (National Program for SMI Development) PCR - Project Completion Report PED - Project Execution Document PIPMI Programa de Desarrollo Integral para la Pequefia y Mediana Industria (Integral Development Program for SMIs) SAR - Staff Appraisal Report SECOFI - Secretaria de Comercio y Fomento Industrial (Ministry of Trade and Industrial Development) SMI - Small and Medium Scale Industry SNE - Servicio Nacional de Empleo (National Employment Service) SOE - Statements of Expenses TA - Technical Assistance FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.SA. Office of Director-General Operations Evaluation December 31, 1992 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Mexico Third Small and Medium Scale Industry Develovment Proiect (Loan 2325-ME) Attached is a copy of the report entitled "Mexico Third SMI Development Project (Loan 2325-ME) - Project Completion Report" prepared by the Latin America and the Caribbean Regional Office, with Part 11 contributed by the Borrower. The original project objectives were to provide financial and technical assistance to small scale enterprises, and to strengthen the financial intermediation role of the institutions concerned. The on- lending objective was met, although with more than two years delay. The impact of the project on institutional strengthening was limited. Overall, the project is rated marginally satisfactory. In designing this project, Bank staff attempted to introduce new appraisal techniques and technical assistance delivery programs--with meager results. Lack of coordination among executing agencies and poor monitoring hindered progress. Bank supervision focused on resource transfer; not enough attention was paid to institutional development and technical assistance. The PCR presents a plausible assessment of project achievements but lacks basic information on financial aspects and subproject benefits. The Region notes that this is due to the Borrower's loss of project files following a major reorganization of the institution in 1989. An audit is planned. Attachment This docunent has a restricted distribution and nmy be used by recipients only in the performnance of their official duties. It contenus mnay not otherwise be disclosed without World Bank authorization.   FOR OMCIAL USE ONLY PROJECT COMPLETION REPORT MEXICO THIRD SMALL AND MEDIUM-SCALE INDUSTRY PROJECT (Loan 2325-ME) TABLE OF CONTENTS PAGE NO. Preface ................................................................ i Evaluation Summary ................................................... ill PART I: PROJECT REVIEW FROM BANKS PERSPECTIVE ...... ............. 1 I. Project Identity ................................................ . 1 II. Background ................................................... 1 III. Project Objectives and Description ....... ....................... ... . 2 IV. Project Design and Organization ....... .................... 3 V. Project Implementation ........ .................................... 7 V'I. Project Results ............................................... . 9 'VII. Project Sustainability ........................................... 12 V'III. Bank Performance .............................................. 13 IX. Borrowver Performance ........................................... 14 X. Project Relationships ... ....................................... . 15 XI. Consulting Services ............................................. 16 XII. Project Documentation and Data .................................. 16 XIIH. Lessons Learned ................................. .............. 17 Part II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE .... ......... 19 I.Background ................................................... 19 II. Project Objectives and Description . . ................................ 21 III. Project Organization and Design ......... . . . . . .................................... . 22 IV. Project Implementation ........ ...................... ............ 23 V. Project Results ............... ........................ 23 VI. General Comments ................. ................................ 24 Part III: STATSTICAL INFORMATION .............. .. ................... 27 1. Related Bank loans ............................................. 27 2. Project Timetable ............................... ............ 28 3. Cumulative Estimated and Actual Dsbursements ..... ................. 29 4. Project Estimate Financing . ............... .. ................ ...... 30 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  TABLE OF CONTENTS (CONTD) 5. Allocation of loan Proceeds .. ..................................... 31 6. Status of Covenants ............................................. 32 7. Use of Bank Resources ........................................... 33 8. Staff Inputs by Stage of Project Cycle ....... ........................ 34 9. Project Benefit ....................................... 35 10. Documento de Terminacion de Proyecto (Original Part II In Spanish) ... 36  PROJECT COMPLETION REPORT MEXICO THIRD SMALL AND MEDIUM-SCALE INDUSTRY DEVELOPMENT PROJECT (Loan 2325-ME) PREFACE This is the Project Completion Report (PCR) for the Third Small and Medium-Scale Industry Development Project in Mexico, for which Loan 2325-ME in the amount of US$175.0 million was approved by the Bank on June 23, 1983. The loan was closed on September 30, 1989, two years and three months behind schedule. The last disbursement was on October 31, 1989. Twenty one thousand dollars were canceled. The Project Completion Report (PCR) was prepared by the Country Operations Division I of the Latin American and the Caribbean Regional Office (Preface, Evaluation Summary, Parts I and III). The Borrower agreed to prepare Part II simultaneously with preparation of Parts I and III by the Bank. This was reconfirmed by NAFIN in February 1992. Preparation of this PCR was started in February 1991, and it is based Inter alis, on data obtained during a three week mission to Mexico in February-March 1991, and on the Staff Appraisal Report, the Loan and Guarantee Agreements, Project Supervision Reports, correspondence between the Bank and the Borrower, interviews of Bank staff involved in the implementation of the project, and internal Bank memoranda.   - ili - PROJECT COMPLETION REPORT MEXICO THIRD SMALL SCALE AND MEDIUM-SCALE INDUSTRY DEVELOPMENT PROJECT (Loan 2325-ME) EVALUATION SUMMARY Obiectives i. The project objectives vere to continue the Bank's support of Mexico's integrated program of assistance to small and medium scale industry (SMI) by providing credit and technical assistance to enterprises for maintaining or expanding production and employment levels. The loan mainly consisted of provision of credit through the commercial banking system with several Fideicomisos (trust funds) acting as second-tier lending institutions. The project was to be coordinated by a high level Program Coordinating Committee (PAI), which included a Technical Secretariat to oversee the operational aspects of the project. The loan comprised four components, of which three provided credit to: (i) FOGAIN (Fondo de Garantia y Fomento a la Industria Mediana y Pequena - Guarantee and SMI Development Fund) to finance SMIs's fixed assets and permanent working capital requirements, excluding labor; (ii) FOMIN (Fondo Nacional de Fomento Industrial - Industrial Development Fund) to support its equity and quasi-equity investment programs; and (iii) FIDEIN (Fideicomiso de Conjuntos, Parques y Ciudades Industriales - Trust Fund for Industrial Park Development) for the development of industrial parks and buildings. The fourth component consisted of technical assistance and extension services to be provided through PAI. This component also included funds for the acquisition of computer equipment and materials by the executing agencies. About 10,000 new jobs were expected to be created and a further 20,000-30,000 to be preserved in about 3,000 firms to be assisted by the project (para.6.2.). ImDlementation Experience ii. The loan was approved on June 23, 1983, signed on August 25, 1983, and declared effective on February 27, 1984. The original Closing Date of June 30, 1987 was extended twice to September 30, 1989, because of repeated delays in project implementation. Among the factors affecting project implementation were: (i) adverse economic conditions that prevailed in MNxico throughout project implementation, mainly a severe recession combined with high inflation; (ii) NAFIN (Nacional Financiera, the Government Industrial Development Bank)'s 1985 reorganization, as well as several organizational changes within the executing agencies; (iii) the severe earthquake that hit Mexico in September 1985, which resulted in a disruption of PAI's activities and created a large backlog of pending subprojects for approval; and (iv) deficiencies of some implementing agencies in subproject appraisal and evaluation (paras. 5.6 - 5.9)  - iv - iii. After a relatively slow start in implementation, the Bank approved a reallocation of loan proceeds which reduced the FOGAIN and FOMIN components and increased the industrial parks (FIDEIN) and technical assistance components (PAI). The reallocation was prompted by a stronger-than-anticipated demand for construction of industrial buildings, and the need for additional funds under the technical assistance component to complete the establishment of a computer system in the three executing agencies (para. 5.3). iv. Project implementation was also helped by the strengthening of FOGAIN's loan approval process, which drastically reduced average subloan approval time and by improvements in loan appraisal procedures of the participating financial intermediaries made with FOGAIN's assistance (para. 5.6). v. The Bank agreed to increase FOMIN's "free limit" of autonomous investment approvals, given its improved appraisal capability. A similar request was denied for FIDEIN because of institutional deficiencies in subproject appraisal and supervision. During project implementation, FIDEIN received technical assistance to improve its appraisal capability (para. 5.9). vi. The project accounts have been audited regularly, and the audits did not reveal any particular problem (para. 5.4). Proiect Results vii. When assessing the project from the quantitative lending objectives set at appraisal, there can be little doubt about its positive results. The project exceeded the targeted number of assisted enterprises by disbursing US$175 million to 6,162 SMIs through 7,356 subloans. The loan was the main source of scarce long-term financing for Small and Medium Industries (SMIs) and helped many SMIs go through the severe economic crisis that prevailed in Mexico during most of the 19809. Interviews of subborrowers carried out by NAFIN indicated positive results in terms of growth in employment, production, sales, and profits. Participating financial institutions also experienced low default rates and reported that their SMI portfolio is generally sound (para. 6.2). However, little progress was made towards achieving the ambitious objective of developing a secondary market for the shares of enterprises participating in the FOMIN program (para. 6.7). The SMI IV follow-up operation, based on the implementation experience of this project, concentrated more on lending through FOGAIN and FIDEIN. It also carried out a financial analysis of 32 subborrowers under this loan with a view to assessing the impact of the financing provided. The survey found that FOGAIN has financed economically and financially sound SMIs. viii. The technical assistance part of the project was less successful. The TA program to SMIs was ambitious in terms of allocated amounts, but not well defined, and was poorly implemented and insufficiently supervised. There is little indication that the training, assistance and extension services provided to SMIs have made a significant difference in their performance, although it is difficult to assess any impact precisely. Several studies to evaluate the benefits and impact of PAI's technical assistance and extension programs agreed during loan negotiations, which would have helped improve the TA component, were not carried out by the Borrower. After initial progress in achieving the explicit objective of strengthening FOGAIN, FOMIN, and FIDEIN, the efforts were  - v - overtaken by the eventual merger of these institutions into NAFIN, with the exception of FOMIN which was eliminated (paras. 5.6 and 6.13). The improvement of their staff in project evaluation and supervision was not, however, totally lost as most of FOGAIN former staff have continued on the same line of work at NAFIN (paras. 6.13 and 7.2). ix. In summary, the project had positive results overall and was justified by the need to assist SMIs during the severe economic recession and the gross distortions that were prevailing in Mexico's financial sector, which effectively blocked the access of credit to small enterprises. Following the far-reaching reforms undertaken by Mexico over the last few years to liberalize the economy and the financial sector and given the resumption of growth, a narrowly defined directed credit operation would not be justified any longer (para. 7.3). Sustainability x. With regard to the proiect subborrowers, field interviews conducted by the PCR mission with beneficiaries under each of the three credit components and with FIs provided positive feedback on their sustainability as discussed in para. viii above. The project is also sustainable in that SMI financing is now an integral part of many participating FIs's activities. FIs also reported very low levels of default, never exceeding 3% of their SMI portfolio (para. 7.1). xi. With regard to the executing agencies, NAFIN, as well as FOGAIN, FOMIN, and FIDEIN benefitted from the project institutional development program and, although the later three have been merged into NAFIN, some of their staff (particularly FOGAIN's staff) have continued to work on SMI development. The project appraisal and supervision experience acquired under this loan is invaluable for the implementation of NAFIN's SMI modernization and development program for 1991-94 (para. 7.2). Lessons Learned xii. Proiect DesiRn (para. 13.1). The institutional framework for SMIs was very complex in Mexico at the time of the project, with many institutions involved in the provision of credit and technical assistance to the sector. In retrospect, the question may be asked whether the Bank should not have insisted in simplifying and rationalizing the framework, instead of involving as many as five institutions in the project, thus, complicating its implementation. At least, more attention should have been paid to the coordination issues, which proved to have hampered project implementation. Under the SMI IV follow-up operation (Ln. 2858-ME), some remedial measures were taken. To simplify implementation and facilitate coordination among various executing agencies, the Bank and the Mexican Government agreed on the establishment of a small, but high level, Project Coordinating Committee chaired by the Vice Minister of Finance and with the following members: NAFIN's Director General and the two other NAPIN's Deputy Director Generals, and the Director General of the Credit and Development Banking Department in the Finance Ministry. FOGAIN, FOMIN and FIDEIN would also participate in the Committee, but as non-voting members. The coordination issue was resolved in April 1989 when the Mexican Government decided to merge all the trust funds assisting the SMI sector into NAFIN and to convert the latter into a second-tier institution. The merger is still too recent to allow a meaningful  - vi - assessment of the new set-up in terms of its efficiency to meet SHIs's needs. This assessment vill be done in the PCR for the SMI IV loan tentatively scheduled for FY94. xiii. Sector Work tiara. 13.2). The technical assistance program was put into place without a sufficient understanding of the institutional, regulatory and policy constraints hampering the growth of SHIs. Good sector work would have helped better d-eigned that component. At least, the Bank should have insisted that the studies on the PAI's technical assistance and extension programs be carried out and respective improvements be implemented. The SMI IV follow-up operation addressed the issue by providing financing for a series of studies aimed at broadening the understanding of the potential and constraints of SHIs to be carried out by SECOFI (S-cretaria de Comercio y Pomento Industrial - Ministry of Trade and Industrial Development. xiv. Supervision Ipara. 13.3). The TA component, although small (about 1% of loan amount) should have been supervised more closely. Supervision of the credit components was adequate. However, in retrospect, it appears that Bank supervision was too narrowly focused on the implementation of the credit portion of the loan and did not follow developments in the sector. Supervision missions should have devoted some time to assess the non-financial constraints to SMI development with a view to helping address them through the project's technical assistance component. The Government's Integral Development Program for SHIs (PIPHI) issued in 1985 should also have been more carefully analyzed and its links to the project made more explicit. xv. PCR Preparation (para. 13.4). Availability of quantitative data is often a problem for the preparation of PCRi on loans through financial intermediaries. In any possible future similar projects, it is recommended that (i) the second-tier institutions conduct a close monitoring of the participating institutions' portfolios that would permit an assessment of the project results; and (ii) provision be made very early to have the Borrower make the necessary efforts to compile the required data that will permit a meaningful project evaluation.  PROJECT COMPLETION REPORT MEXICO THIRD SMALL AND MEDIUM-SCALE INDUSTRY DEVELOPMENT PROJECT (Loan 2325-ME) PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE I. Proiect Identity Name: Third Small and Medium-Scale Industry Development Project Borrower: Nacional Financiera S.A. (NAFIN) Loan No: 2325-ME RVP Unit: Latin America and the Caribbean Region Country: Mexico Sector: Industry II. Background 2.1 In 1978, NAYIN established a program of assistance to SMIs, known as Prosrema de Aoovo Intetral a 1. Industria Medians v Peauefia (PAIW. The program's major objectives were to: (i) encourage more rapid growth in output and employment in SMIs; (ii) promote and facilitate the achievement of national plans for industrial decentralization and regional development; (iii) foster a more comprehensive and effective system of financial and technical assistance support to SMIs; and (iv) develop a mechanism which would allow SMI assistance programs to be adapted to reflect national industrial development goals. 2.2 The principal participants in the PAI program were: (i) a credit and guarantee fund (FOGAIN) which channeled resources through the commercial banking system; (ii) a risk capital financing fund (FOMIN); (iii) a credit and technical assistance fund (FIDEIN) which supported the development of industrial states; (iv) an extension service group which helped SMIs identify their financial and technical assistance needs and obtain such assistance from any one of the mentioned funds or from specialized institutions and technical institutions; and (v) the Coordinating Committee with the Technical Secretariat, which oversaw the working of the PAI program as a whole. 1 /PAI was the coordinating oommittee for the project agencies, which was created u part of the integrated program for SMIs. It was govemed by a high level Program Coordinating Committee, headed by the Director General de NAFIN and including the heads of aU participating instiutions, as well as representatives from the Ministries of Finance, Commerce and Industry, and Banco de Mexioo.  - 2- Experience under Previous Proiects 2.3 The PAI program of integrated financial and technical assistance to the SMI sector was initiated and expanded under two previous Bank loans, which were the first made in Mexico for SMI development: Ln. 1552-ME of FY79 (SMI I) and Ln. 1881-ME of FY80 (SKI II) for an amount of US$47 million and US$100, respectively. Both loans consisted of the following components: Credit through FOGAIN; Risk Capital through FOMIN; Industrial Estates through FIDEIN; and Technical Assistance (TA) through PAI. Ln. 1552-HE became effective in January 1979 and was closed in November 1981, while Ln. 1881-ME was declared effective in December 1980 and closed in June 1985. 2.4 The major objectives of both projects were to helped generate growth in output and employment and promote regional development. Secondary objectives included the institutional development of the executing agencies, operation of an industrial extension service and support to other TA and research institutions. According to the combined PCR for the two loans, experience with the execution of both projects was good; allocation of resources was economically efficient, and most institutional development objectives were achieved. During implementation of these loans, financial assistance was given preferably to SMIs located in less developed areas of Mexico, where employment impact and export potential were considered favorable. Greater priority was also given to SMIs that planned to develop and improve domestic technologies. 2.5 The first two SMI loans were considered successful in accomplishing the primary objectives of stimulating output and employment growth and in promoting regional development, but had a more limited impact on the institutional development since the agencies were already well established when the Bank loans started. Also, Bank funds represented only a small portion of total operational resources for FOGAIN. Yet, with the Bank's advice some important organizational and procedural improvements were initiated at all three executing agencies. 2.6 The proceeds of the first two loans financed 2,883 subprojects through FOGAIN, results which were close to appraisal estimates. The economic impact of FOGAIN subloans was considered positive as confirmed by a post SMI I survey, and a sample of 240 SMI II subprojects, which indicated an average investment cost per job of US$3,479 and US$5,369, respectively. Under both loans, 90 subprojects received FOMIN financing, of which over 90Z in the form of equity investments and the remainder as convertible loans. Most of the funds was used for plant expansion or restructuring. Finally, the FIDEIN component under both loans financed 63 industrial parks and a post-loan survey revealed that most of them were profitable and that only two had gone out of business. III. Project Objectives and Description 3.1 The primary objective of the project was to continue support for the PAI program and help refocus its activities to respond to the deteriorated economic situation following the crisis of 1982. In addition to financing fixed investment in enterprises and industrial parks, the project was to assist SMIs to maintain production and employment levels by ensuring access to credit and equity  resources to finance their substantially increased permanent working capital requirements. 3.2 The Loan included four components!/: (a) Credit component: US$150 million for lending by participating financial intermediaries through FOGAIN, of which: (i) US$75 million for fixed asset investments by SMIs (including machinery, equipment, civil works, and industrial buildings, as well as common service facilities); and (ii) US$75 million for permanent working capital requirements for materials, components, spare parts or other production inputs, not including labor); (b) Risk Capital component: US$18 million for minority equity investments and convertible loans by FOMIN, of which: (i) US$8 million were to finance the establishment or expansion of productive capacity, and (ii) US$10 million were for permanent working capital requirements; (c) Industrial estate component: US$4.6 million for credit through FIDEIN for infrastructure and urbanization investments of industrial parks; and (d) Technical Assistance component: US$2 million for technical assistance and extension services through NAFIN and specialized institutions and for computer equipment and related materials. 3.3 The project financing plan anticipated substantial contributions from other sources: (i) US$64.5 million from the Mexican GoverDnment; (ii) US$110.0 million from subproject sponsors and participating commercial banks for a total project cost of US$349.5 million. The Bank loan would cover the project's estimated foreign exchange component of US$106.0 million, the front-end fee of about US$0.4 million, and about US$68.6 million in local costs. The loan would cover about 75% of the financing extended by the PAI program and 50% of its total investment expenditures and related technical assistance activities. It was expected that the loan of US$175 million would be used to finance: (i) about 2500 enterprises through FOGAIN; (ii) 150 enterprises through FOMIN; and (iii) 10-12 industrial estates through FIDEIN. The technical assistance program was expected to provide assistance through PAI to several hundred enterprises. IV. Prolect Design and Organization 4.1 The project was identified in June 1982 during supervision of Loan 1881-ME. There was agreement that the PAI program had achieved its objectives, and that 2/ Excluding the frond-end fee of US$0.4 million.  in view of the deteriorating economic conditions in the country, a third project would be necessary to help maintain production and employment in the SMI sector. The Bank appraisal took place in two phases: the first phase in September/October 1982, and the second phase in January 1983 almost iinediately after the change in the Mexican Administration. Negotiations were completed in April 1983. The project was approved by the Board in June 1983 and signed in August 1983, but did not become effective until February 1984 because of organizational and staff changes within NAFIN. 4.3 Loan disbursements were projected to take up to four years from mid 1983 through 1987. The projected disbursement period, relatively short when compared to other Bank-supported industrial development finance projects, was based on the experience with the previous loans and the faster disbursement rate for the permanent working capital component. However, disbursements were slower than anticipated because of: (i) organizational and staff changes within all three executing agencies; and (ii) deficiencies in subproject evaluation. The severe earthquake that hit Mexico during 1985 also disrupted PAI's operations, resulting in accumulation of credit approvals by the executing agencies. The last disbursement took place in October 1989. 4.4 All the procurement was to be done in accordance with prevailing Bank guidelines. NAFIN, together with FOGAIN and FOMIN, would ensure directly or through participating FI for financial intermediary operations, that goods and services financed from the loan would be competitive in quality and price and appropriate for their client's needs. Procurement packages above $500,000 requiring LCB would be reviewed by the Bank. The project's accounts were to be kept by NAFIN and, together with those of FOGAIN, FIDEIN and FOMIN, would be audited annually by independent auditors according to standards acceptable to the Bank. 4.5 To facilitate project execution, the Bank agreed to the establishment of a Special Account (SA) for the Loan and made an initial deposit of US$17.5 million and allowed expenditures for subprojects below the free limit to be eligible for disbursement from the SA. The Bank also allowed participating agencies to use Statements of Expenditure (SOEs) for disbursement of loan proceeds. 4.6 During preparation and appraisal of the project, the following important issues arose: (i) working capital financing; (ii) foreign exchange risk coverage; (iii) interest rates; (iv) FIDEIN participation; and (v) project execution document. These issues are discussed below. 4.7 Workina Cavital Financing: During the preparation of the project, there was initial concern that too large a share of the loan, almost half (US$75 million) was being directed toward permanent working capital purposes. However, it was perceived that the severe foreign exchange shortage, increasing inventory costs resulting from high inflation rates, and growing accounts receivables would hit SMI firms more adversely than large industries and that demand for this type of financing would remain strong. 4.8 Foreign Exchanze Risk: During project appraisal, the Bank was concerned as to whether NAFIN would be in a position to assume the foreign exchange risk of  the project, and whether the risk should be passed on to the beneficiary trust funds. However, NAPIN, as the larg-at public sector financial institution, and as the Government's financial agent both in Mexico and abroad, had the Government's strong support for the PAI program, and was considered to be able to assume the loan's foreign exchange risk. Also, PAI subloans were expected to be small (average about US$50,000) end, therefore, it was not considered appropriate to pass on the foreign exchange risk to the borrowersa' It was agreed that NAPIN would carry the foreign risk and repay the loan. 4.9 Interest Rates: Interest rates had long been an issue in Mexico, particularly with FOGAIN, which was still using fixed rates at the beginning of the first SKI loan. In 1979, following Bank advice, rates were made flexible and linked to the ACF indexi1. However, adjustments were made with a lag and, with rampant inflation in the early 1980s, lending rates generally were substantially negative in real terms. Under the project, it was agreed that: (i) adjustments of lending rates would be based on a three-month average of the ACF, instead of a twelve-month average; (ii) all lending under the project would be at variable rates; and (iii) FOGAIN would implement a comprehensive interest rate adjustment on the fixed interest rate portion of its outstanding portfolio. With regard to relending rates, it was agreed that Bank funds would be passed on to FOGAIN and FIDEIN at a variable interest rate linked to the ACP and which would allow them a spread of two percentage points on their lending to participating intermediaries (FOGAIN) or borrowers (FIDEIN). Funds channeled to FOMIN for equity investments would be repaid as follow: net amount recovered from divesting equity investments, plus 502 of any capital gains realized, and a percentage of interest received on convertible loans. These arrangements resulted in substantially subsidized interest rates to SKI beneficiaries until the General Interest Rate Agreement (GIRA) was introduced in August 1989 which, short of ensuring fully market determined rates, has been used to eliminate direct Government subsidies for most onlending through financial intermediaries. 4. 10 FIDEIN Participation: Serious considerations were given whether to include a FIDEIN component, given its poor performance during the first two projects. However, following FIDEIN's reorientation of its activities by: (i) phasing out direct construction and first-tier financing of factory buildings and common service facilities, and discontinuing leasing; (ii) concentrating on providing information on industrial estates, advisory and promotional service support to developers, including project evaluation, and specialized TAI and (iii) limiting lending to infrastructure and urbanization of industrial estates, the Bank decided to continue supporting FIDEIN. 4.11 Proiect Execution Docusment During processing, there was concern that the project might face some risks since the institutions involved could be undergoing reorganization and experiencing changes in management as a new Mexican Administration took over in December 1982. Also, the Bank was concerned that 3 / Under the Loans 1551-ME and 181-ME the foreign exchange risk wu asumed by the Mexican Govemment. A/ The average cost of funds (ACF) index is caulated as a weight avnege of intemst rate paid on al term funds and deposits by the Mexican banking system.  social and political pressures, together with unforeseen external shocks, might prevent the Mexican authorities from taking the necessary stabilization measures, thus retarding recovery and reducing investment demand. To minimize these possible adverse effects, a number of measures were agreed and incorporated into a Project Execution Document (PED) to guide implementation of the project. These measures included: (i) establishment within NAFIN of a Small and Medium Industry Development Department to coordinate the project activities; (ii) development of a portfolio control system by FOGAIN; (iii) conclusion of TA agreements between the PAI's Technical Secretariat and the Institute for Information and Technological Development; and (iv) establishment of a staff training program by FOMIN. The PED also stipulated three studies to be completed by the PAI Technical Secretariat: (i) evaluation of the major TA programs; (ii) ex-post analysis of a representative sample of FOGAIN sub-loans to measure program impact; and (iii) survey of FOGAIN assisted enterprises to assess the impact of the depressed economic situation on SMIs. 4.12 The design and organization of the project were identical to the first two operations, but the Bank could have devoted more attention into its preparation. As in both previous SMI loans, Loan 2325-ME was executed by FOGAIN, FOMIN, FIDEIN and PAI, which was also assigned the task of coordinating the project. However, there were major changes in the activities of most of the executing institutions and the Bank should have carried out a comprehensive assessment of their institutional capabilities before granting the loan. FOGAIN had been a second- tier institution for quite some time and was in general considered a good institution. However, FOMIN had difficulties with its portfolio; FIDEIN was to perform a completely new task of provider of technical assistance and evaluation of subprojects and PAI was embarking on a massive training program. An full evaluation of FOMIN's capabilities as a risk capital investor and of its investment policies (entry and exit mechanisms, shares valuation, divestiture policies, etc.) as well as an assessment of FIDEIN and PAI's programs and objectives would have been warranted. At negotiations, agreement was reached on a plan of action to be presented to the Bank for the reorganization of FOMIN and its manpower requirements. It was also agreed that PAI would carry out a cost- benefit analysis of its programs. These actions were included in the PED but never implemented and there is no evidence that the Bank had taken any remedial action to ensure compliance. Furthermore, no monitoring system of project implementation was established to assess results and take corrective actions, if necessary (Annex VI). In retrospect, the institutional capabilities of the executing agencies and the coordination difficulties have contributed to slow down project implementation. In the SMI IV the follow-up operation, an assessment of the executing agencies was made with a view to simplifying project implementation arrangements. Under that loan, a small, but high level, Project Coordinating Committee chaired by one of the Vice Ministera of Finance was also established to coordinate project's activities. 4.13 On the positive side, the inclusion of working capital financing proved to be a good decision, contributing for much to the relatively fast disbursement of the FOGAIN component. Also, the introduction of the GIRA in August 1985 at the beginning of project implementation helped reduce the risk of providing subloans at substantially subsidized interest rates under the project.  - 7 - V. Proiect Implementation 5.1 Economic Environment. Implementation of the project took place during a period of deep recession. With the economic crisis industrial growth came to an abrupt halt in 1982. Industrial production dropped 11% in 1982 from its 1981 peak, and gross domestic investment as a proportion of GDP fell from its peak of 29% in 1981 to 17% in 1982. In 1983, industrial production dropped another 9%. The recovery of industrial output in 1984 and 1985 was initially made possible by major improvements in macroeconomic policies, notably a sharply reduced fiscal deficit and a major real depreciation of the exchange rate. A premature reflation of the economy in early 1985 gave further impetus to industrial recovery, but soon led to balance of payments difficulties. Industrial output dropped by about 5% during 1986, aggravated by the collapse of oil export earnings. Problems caused by the severe recession in the domestic market was compounded by the deterioration in the financial structure of many industrial enterprises. The crisis was felt more among medium to large-scale enterprises which had to reduce output considerably. SMIs were generally more able to adapt their output to the reduced demand situation. However, more than large enterprises, they suffered from the general shortage of finance. 5.3 Overview of Prolect Implementation. The loan was approved in August 1983, but did not become effective until February 1984 because of organizational and staff changes within NAFIN. After a slow start, disbursements moved faster and, by June 1986, US$138 million (78% of project amount) were committed and US$125 million (71%) were disbursed, despite the September 1985 earthquake, which disrupted loan processing and created a backlog of project approvals. In order to help project implementation, US$10 million in loan proceeds were reallocated in September 1985 to finance: (i) the increased demand of FIDEIN credits, mainly construction of industrial buildings; and (ii) increased TA activities, primarily related to the establishment of computer systems for the three participating agencies. This was the first of six loan reallocations. 5.4 In late 1986, project implementation slowed down, due to reduced investment demand brought about by extremely high nominal and real interest rates resulting from the deceleration of inflation (as adjustment started to yield positive results) and the downward stickiness of interest rates. The commitment and the closing dates were both extended twice. The final disbursement took place in October 1989. In retrospect, the project implementation period was perhaps too optimistic. It was based on the Bank's experience with the previous projects, but did not take into account the particular implementation environment of this loan, which were characterized by economic depression and reorganization of all executing agencies. The project accounts were regularly audited, and the audits did not reveal any particular problem. 5.5 Interest rates of subloans were to be linked to the ACF and were to be adjusted quarterly to reflect movements on the ACF index. The rates were highly segmented because FOGAIN, FIDEIN and FOMIN had different interest rate structures which were mostly negative in real terms. This situation was corrected with the introduction of GIRA, which established generally acceptable rates for continued Bank lending through the financial sector (para. 4.9).  - 8 - 5.6 Credit Comuonent (lOCLUN). During project implementation, FOGAIN introduced several major changes in its organization to improve project execution, including the creation of the Juridical Bureau and the Bureau of Loan Supervision. At the beginning of project implementation, FOGAIN, although being a second tier institution, appraised all sub-projects above Mex$3.0 million (US$10,000) prior to approval. This process resulted in backlogs as long as nine months, causing many subborrovers to withdraw their credit applications from the participating FIs. In 1985, FOGAIN with Bank approval, introduced an automatic free limit for loans below Mex$15. 0 million (US$48,000) for all FIs except Credit Unions. This change along with the 60 day automatic authorization of credit policy accelerated loan processing and introduced fluidity and standardization into the approval system. Average loan approval was reduced from 90 to 15 days. In early 1986, FOGAIN was requested by the Bank to calculate the IRR for sub- projects above US$100,000, but FOGAIN did not comply. Remedial action by the Bank was thought difficult as by mid-1986, about 802 of the loan were already committed. The issue was taken up again under the SMI IV follow-up operation (Ln. 2858-ME) when the Bank again requested that a FRR be calculated for subprojects above $50,000. However, FOGAIN was merged into NAPIN before implementation of SKI IV. Under RAFIN, participating FIs generally comply with this requirement and calculate IRR for subprojects above $50,000. This will be reviewed in the context of the SMI PCR tentatively scheduled for FY94. 5.7 Risk Capital Comwonent (FOMIN). The implementation of the FOHIN component was slow at the beginning, due to the severe economic recession, instability caused by the earthquake, and difficult information requirements for approval of equity investment proposals. In addition, delays occurred in obtaining Bank approval, usually because of incomplete information submitted by FOMIN. The free limit was also set too low, resulting in the Bank having to review and approve almost every subproject submitted to POMIN. In 1986, to accelerate project implementation, and given PONIN's improved project appraisal capability, the Bank approved an increase in the free limit from US$400,000 to US$600,000. FOHIN also introduced a new organizational structure to reduce the number of managerial levels, thus permitting greater delegation of authority to middle management. It established separate units to evaluate technology and venture capital projects and to monitor its portfolio. Finally, POMIN increased its administrative staff from 80 to 106 to handle the increased workload. 5.8 Industrial Estate ComDonent (YIDEIN). As mentioned above, because of technical and managerial difficulties, FIDEIN's role had changed to only include rationalization of industrial estates development and operation and provision of technical assistance. Under the loan, its lending was limited to infrastructure and urbanization projects. To carry out these responsibilities, FIDEIN first retrained its staff using own resources and foreign experts and established close working contacts with the newly formed Association of Mexican Industrial Paiks (AMPIP). The technical assistance provided by FIDEIN to industrial estates came from its own resourceas funding from the project was only for lending for infrastructure development in both public and private estates. 5.9 FIDEIN often encountered Bank delays in having its subprojects approved because the documentation submitted were incomplete or insufficient. In 1987, a foreign consultant was provided by the Bank under the TA component to help  improve FIDEIN's appraisal capability. Subsequently, subproject approval accelerated, reflecting FIDEIN's improved appraisal capability. 5.8 Technical Assistance. Under SHI I and II, the Technical Secretary of PAI administered an industrial extension service and other TA programs that helped clients of FOGAIN, F0MIN and FIDEIN. During project implementation, the Bank suggested that an assessment be made of the effectivenoss of the TA received through the extension services, partly in preparation for the follow-up loan (2858-ME). However, no assessment was made and the SMI IV appraisal mission had to do part of the work itself. Under the project, PAI carried out seminars on a wide variety of subjects all over the country, but these seminars were unfocussed and did not have a clear objective. In 1987, when the PAI was abolished, its TA program was integrated within the Industrial Promotional Directorate of NAFIN, which transferred suitable staff from its headquarters to the regional offices to manage it. By the end of 1988, there were more than 150 agents operating in more than 50 NAYIN regional offices. VI. Proiect Results 6.1 When assessing the project from a resource transfer point of view, there is little doubt the loan did achieve its objective of providing financial support to SMIs. Despite adverse macro-economic conditions, all the funds were disbursed to the targeted group (SMIs), albeit with some delays, especially during the later years. Term financing to SMIs for investment and permanent working capital was made available, providing resources at a time of great liquidity scarcity. Efforts were made to strengthen the institutions in charge of assisting SMIs and some progress was achieved in terms of improvements in project appraisal and supervision. The project, by providing funds during a period of adverse economic conditions to generally viable enterprises, helped preserve jobs and alleviate the deterioration of the SMI sector. 6.2 The employment creation expected from the project was estimated at 10,000 jobs. In addition, an estimated 20,000 to 30,000 jobs were preserved through helping firms with adequate working capital. Although no exhaustive assessment of the project results was made, preliminary analysis of the four project components showed that targets were generally met; some were even exceeded. A sample survey of 49 subprojects indicated that 4,300 new jobs were generated at an average cost of US$9,000 in 1982 constant prices. Another sample of 10 industrial subprojects with Mexican public utilities as the main market completed in December 1989 showed: (i) employment generation effects almost equal to estimated individual subproject goals; (ii) product sales increases of 42.51 on average; and (iii) production increases that reached an average of 64% of estimated levels. The latter sample is particularly interesting as suppliers to public entities were more adversely affected by public sector budget reductions than SMIs in general. 6.3 FOGAIN (Oritinal allocation: $150.0 million: Utilization: $144.4 million). The FOGAIN credit component developed as expected. FOGAIN's loan discount operation provided financial support at a critical time whan many firms were facing financing problems and enabled the SMI sector to continue receiving  - 10 - long-term credits, not available elsewhere. During project implementation, FOGAIN activated a guarantee program with its own resources solely for use by micro-enterprises. The program helped encourage participating FIs to lend to micro-enterprises. 6.4 A total of 7,235 subloans were made to 6,041 industrial enterprises for a total of US$144.4 million. As expected, 58% of the subloans were for permanent working capital and the remaining for fixed assets financing, excluding building constructions (Annex IX). In dollar terms, however, working capital financing was below appraisal expectations, with only $63.1 million disbursed as compared to an estimate of $75 million (Annex V). NAFIN was the main participating financial institution with 1,203 subprojects, or 19S of total approvals under the loan. A total of 4,934 micro and small enterprises received subloans, which represented over 80% of the total enterprises. While financing was provided to the entire industrial sector, the bulk of subloans were channeled to traditional SMI industries: food processing, textiles and apparel, leather products, rubber and plastics, and metal products industries. The largest number of enterprises financed were in Mexico City, Monterrey and Guadalajara. In spite of the disruptions and adverse economic conditions during project implementation, FOGAIN, which had losses in 1981 and 1983, rebounded strongly, posting profits for each year from 1984 through 1987. As of September 1987, FOGAIN had accumulated reserves amounting to US$130.9 million, including funds received from Government. 6.5 FOMIN (Oritinal allocation: S18.0 million: Utilization: S12.6 million). During the early years of project implementation, few FOMIN financed industrial firms made profits. In 1984 and 1985, FOMIN sold off for Mex$660 million its share holdings in 17 companies for which it had originally paid Mex$300 million, making a more than 100Z nominal profit and about breaking even in real terms. FOMIN showed operating profits of between US$1.3 million and US$3.3 million in 1984-86. The value of its portfolio at the end of 1986 was US$12.7 million with participation in 110 firms. Only 14 of the 110 companies reported profits; nine were in bankruptcy proceedings (though these represented only 1.1% of FOMIN's portfolio), and the remaining firms reported losses during 1986 as result of the difficult financial conditions of the country. By November 1987, FOMIN had fully committed its reallocated amount of US$12.6 million, of which US$7.9 million was channeled to 44 subprojects for fixed assets investments and US$4.7 million to 34 subprojects for permanent working capital purposes. About 70% of the subprojects were equity participation and the remainder 30% convertible loans. Before liquidation in December 1989, FOMIN had outstanding investments in 102 enterprises. Of these, 44 were classified as in "normal condition", 23 were to be sold at a loss, 5 required an audit, and 30 were in companies undergoing judicial proceedings. These overall results reflect the great difficulty of equity investments and venture capital in SMIs and are not very different from the experience of other countries. However, FOMIN did not have any cash flow or profitability problems as it reimbursed PAI only what it recovered in subordinated credit and sale of shares, but kept 20% of interest collected and 50% of profits accrued through share sales. To provide an incentive for active investment promotion, FOMIN did not pay PAI for the funds invested in equity nor for the interests generated by the installment sales.  - 11 - 6.6 FOMIN investments covered a wide range of industrial subsectors from food processing, basic metals, pulp and paper, wood products, to chemical industries. The geographical distribution of FOHIN's portfolio showed that many of its investments were made in support of the Government's policy of promoting investments outside the high concentration zones. 6.7 Two secondary objectives in the FOMIN component were not achieved. These were: (i) the emergence of new minority investors; and (ii) the establishment of a secondary market for the share equity portfolio. As agreed under the project, FOMIN would liquidate its investment by selling back to the original enterprises within 3 or 4 years. This buy back period was, however, probably too short for this kind of investment. In any case, FOMIN-financed companies interviewed by the PCR mission declined to buy back the shares, invoking financial difficulties and inflated share values as calculated by NAFIN. 6.8 FIDEIN (Oriainal allocation: S4.6 million: Utilization: S14.6 million). The loan helped FIDEIN finance 43 infrastructure subprojects for a total of US$14.6 million, of which 76% were privately-owned estates and 24% publicly-owned estates. From 1983 through 1988, FIDEIN sponsored activities in 113 industrial parks that included: (i) feasibility, pre-investment and engineering studies; (ii) technical assistance; (iii) financing of infrastructure projects; and (iv) development of an information bank on industrial location. FIDEIN's program gave priority to industrial centers that met decentralization criteria, promote export industries and were located in border towns. By the end of 1985, FIDEIN had comitted the entire original US$4.6 million assigned to this component, and was allocated another US$10 million to enable it to meet the strong demand for industrial buildings. 6.9 A total of 94 prefeasibility studies were performed by FIDEIN during the 1983-88 period in 26 different states. In many cases FIDEIN carried out prefeasibility studies free of charge as a promotional activity to generate industrial parks development interest. Another 35 feasibility studies were conducted in 17 states. The agency also carried out 49 engineering studies in industrial parks, many leading to financing, and performed special studies on a state-wide basis to define criteria necessary for state government participation. FIDEIN provided TA for the administration and supervision of industrial towns constructed by state governments, and for the supervision of 126 different construction works in 19 States. Based on data from its subproject supervision files, FIDEIN estimates that its industrial parks promotion and development program, under this five year period, helped generate approximately 65,000 jobs. 6.10 In 1986, FIDEIN developed an Operating Manual for industrial parks, which became a key publication for industrial parks management in Mexico. By the end of that year, there were 93 industrial parks in operation, some of which supported by the project, which demonstrated that the decentralization objectives of this program had been met. FIDEIN lending program was not as successful. When FIDEIN was merged with NAFIN in November 1988, the quality of its portfolio was relatively poor: two companies totalling 8% of the portfolio were in arrears and eight enterprises totalling 23% of the portfolio were awaiting judicial proceedings.  - 12 - 6. 11 Technical Assistance (Ortainal allocation: S2.0 million: Utilixation: S2.7 million). This component financed 115 separate TA subprojects through various entities, which benefitted hundreds of SIs. Thirty-seven subprojects went to INFOTEC (Inatituto de Informacion Tecnologica - Institute for Technological Information) for US$0.9 million, vhich played a key role throughout the entire project implementation period by providing consulting services for industry, technical information, financial, production, and technology assistance to SMIs through its various programs. SKI Training and industrial extension activities (20 subprojects), along with training of the three trust funds' staff (26 subprojects), and miscellaneous PAI program activities (25 subprojects) accounted for most of the other technical assistance services. This component also provided financing for computer equipment, software and training for the PAI program, along with consultant services. In addition, it financed a national survey of SMIs (US$0.6 million), conducted by Instituto Nacional de Geografia * Inform6tica (INEGI). The results were used in the preparation the Loan 2858-ME. 6.12 The benefits derived from the technical assistance program are very difficult to evaluate, since no monitoring mechanisms were developed to follow and evaluate the program, and the Bank during supervision missions did neither make a preliminary assessment of the program, nor insist on any corrective measures. The TA provided under the project was unfocused, lacked a clear objective and a long-term strategy. Many enterprises benefitted from direct assistance given by extension agents in the field and technology services provided by INFOTEC without a comprehensive assessment of their needs or attempts to recover costs. A technical assistance program of the type carried out by PAI has had little success in other countries (Ecuador and Colombia) and was very costly. 6.13 Proiect Coordination Overall coordination of the project was to be carried out by PAI. However, institutional rivalries, constant changes in staff and, more importantly, the lack of coordinator's authority made this task impossible to achieve. In April 1989, the Mexican Government decided to merge all the trust funds assisting the industrial sector into NAFIN and to convert the latter into a second-tier financial institution. The merger is too recent to assess whether the new set up responds better and more efficiently to the needs of SMIs. This assessment will be made in the PCR for SMI IV scheduled for FY94. VII. Proiect Sustainabilitv 7.1 As mentioned above, no comprehensive ex-post evaluation of enterprises financed under the project was made, therefore, their sustainability would have to be assessed differently. Field interviews conducted by the PCR mission with beneficiaries under each of the three components and with participating FIs provided overall positive feedback on subproject sustainability as discussed in para. 6.2 above. The project is also sustainable in the sense that SMI financing is now an integral part of many participating FIs's activities. FIs also reported a very low level of defaults, which never exceeded 3Z of their SMI portfolio.  - 13 - 7.2 NAFIN benefitted from the project institutional development program, as well as FOGAIN, FOMIN, and FIDEIN and, although these three executing agencies have been merged into NAFIN, many of their staff (particularly those of FOGAIN) have continued to work on SMI development. The project appraisal and supervision experience acquired under this loan is invaluable for the implementation of NAFIN's SMI modernization and development program for 1991-94. 7.3 With regard to the Bank, the project was justified by the need to assist SMIs during the severe economic recession of the early 1980. and the gross distortions in Mexico's financial sector at that time, which effectively blocked the access of credit to small enterprises. The situation has drastically changed. Mexico has implemented far-reaching reforms to liberalize the economy and the financial sector, and growth has resumed. NAFIN has also embarked on a multi-billion dollar program of technical and financial assistance to SMIs. Thus, any potential role of the Bank in the sector would now be to deemphasize provision of directed finance and concentrate on helping Mexico identify and address regulatory, institutional and other non-financial constraints to SMI development. VIII. Bank Performance 8.1 The Bank's performance has been satisfactory overall. There is evidence throughout the implementation of the loan that the Bank kept a constant and careful monitoring of the project financial aspects, acting promptly at early problem signs emanating from the executing agencies. Generally, the Bank provided sound advice and took adequate actions to smooth implementation problems. A particular case in point wva the Bank's recommendation to FIDEIN to introduce a competitive bidding proces for contractors for its industrial estate subprojects, rather than have the subborrowers choose any firm without clear criteria. This was successful and became a standardized procedure throughout the country. Also, in mid-1985, the Bank helped NAFIN and PAI-FOGAIN establish a computer program with software and analytical system compatible with those of the Bank to facilitate loan disbursement monitoring. This proved very useful during project implementation. 8.2 In general, the Borrower agreed with Bank suggestions. However, there were several instances where Bank advice was not followed. Thus, under the TA component, the Bank suggested that TA activities be provided to clients on a collective rather than on an individual basis, and that the TA programs be consolidated from PAI's central office rather than directly from the regions. The Bank also recommended that an extension agent impact evaluation be carried out in conformance with Section 3.11 of the Loan Agreement. Both recommendations were not acted upon, but the Bank did not follow up on its advice nor take remedial measures. NAFIN continued to expand its regional TA office and extension agents kept on providing assistance on an individual basis, as NAFIN believed that effective extension work must be tailored to the individual entrepreneur's problems. The Bank also did not insist on the carrying out of a number of agreed actions and studies, such as the TA program evaluations and the assessment of FOGAIN borrowers. Annex VI provides a list of covenants not complied with. The appraisal mission of SKI IV, however, did carry out an  - 14 - assessment of a sample of 32 FOGAIN subjects, as well as 17 others provided by PAI and follow up on some of the other shortcomings observed above. According to that sample, FOGAIN has been financing economically and financially sound investments. 8.3 The amount of supervision was adequate. Supervision efforts were sustained through an average of two missions per year (full or partial) during the first years of project implementation, decreasing to about one mission per year in the project's last two years. The major supervision weakness was an excessive emphasis on loan disbursement, subproject visits, and financial aspects of the project at the expense of issues such as the overall content, goals and objectives of the training program, or coordination and conflict between the executing agencies. The Bank may also have been rather lenient in accepting inadequate/incomplete subproject reports and other less than satisfactory information submitted by the executing agencies. 8.4 Besides these weaknesses, Bank supervision missions have been an important factor in the implementation of the project. The staff of the former executing agencies generally expressed appreciation for the flexibility and for the technical advice provided by the Bank staff, especially on issues such as improvement of subproject evaluation criteria and increases in the free limit of subproject approvals. IX. Borrower Performance 9.1 Considering the adverse economic situation experienced by Mexico during project implementation, including a serious economic contraction, monetary and credit restrictions, high inflation, reorganization and frequent changes of staff in all the executing agencies, the Borrower performed as well as could have been expected under the circumstances. The three credit/equity investment components of the project were all implemented in accordance with agreed upon terms, and loan categories were reallocated as conditions warranted. A criticism of NAFIN would be its non-performing of several studies, evaluation, appraisals and impact analyses agreed upon at negotiations and included in the Loan Agreement and in the PED, not to mention the ex-post evaluation of a sample of a dozen subprojects requested by the PCR mission to estimate the impact of the project on SMIs. Obviously, the Borrower gave greater attention and provided more management resources to credit and TA delivery and performance by the executing agencies than to the assessments needed to measure impact and quality of the assistance provided, a typical weakness of development banking institutions. 9.2 The three trust funds developed institutionally and established improved project appraisal and supervision procedures as the loan progressed. FOGAIN passed through a trial and error phase with the use of outside consultants to help carry out loan supervision and follow-up activities on its subborrowers. After less than a year of implementation, however, it appeared that these supervision evaluations, paid for by FOGAIN on a piece-meal basis, lacked uniformity and objectivity and they proved unsuccessful, generating complaints from both, the subborrowers and the FIs, that the evaluations had become  - 15 - self-serving to the consultants. An agreement was reached whereby the FIs themselves would perform the supervision tasks, with FOGAIN (as a second-tier institution) carrying out an ex-post analysis on a sample basis, which included sanctions against the FIs for non-compliance. This change helped establish professional supervisory departments in the participating FIs and the system still exists today. This was a fundamental innovation that introduced standardized supervisory practices into the Mexican banking system, which previously had promotional rather than supervisory departments. Compliance supervisory criteria are now codified in operating rules and regulations that are updated periodically, the latest in 1989. In 1986, the information and computer system were improved with the purchase of adequate computer hardware and software, and linkage between the central and regional offices. The expanded computer network fell short of providing FOGAIN with information on portfolio default rates, which remained with the FIs. 9.3 Following Bank recommendation, FOMIN adequately revised and expanded the data submitted to the Bank for subprojects above the US$600,000 free limit, and this accelerated Bank reviews and approvals. FOMIN also took adequate measures to mitigate the impact of its tight personal budget on project implementation as a result of limited program promotion and subproject identification. These measures were: (i) use of INFOTEC resources for subproject appraisal, with costs assumed by the beneficiaries; (ii) use of outside consultants for supervision and control tasks in subprojects above Mex$150.0 million, paid for by the recipients; and (iii) use of State Fund risk capital programs by FOMIN, thus expanding program promotion. 9.4 Of the three executing agencies, FIDEIN absorbed the largest reallocation of the loan proceeds and demonstrated growth as a specialized financing agency. It went through a transformation both in its role and objectives, and emerged in the process with a more professional and technical staff than it had at appraisal. FIDEIN designed operational criteria for financing industrial parks infrastructure credits, which were approved for national applicability in November 1987 by the Mexican Treasury. On the negative side, FIDEIN did neither transfer its credit control operation to FOGAIN for its management, nor transfer its loan portfolio to an intermediary bank trust fund for collection and administration, as agreed upon during negotiations. X. Prolect Relationships 10.1 By and large, relationships between the Bank and the Borrower were close, candid and, both were generally in agreement concerning identification of an issue or problem and the mechanism to be used for solution or improvement. Similarly there was a good cooperation between Bank staff and the three executing agencies. An example of good relationship was the timely request by the Borrower and the quick response by the Bank for a US$1 million reallocation from the FOGAIN component to the TA component to reestablish computer installations destroyed in the 1985 earthquake. Both the Bank and the Borrower tended to have similar views regarding the project, emphasizing fluid and timely loan commitment and disbursement on the part of the three executing agencies, with less concern given by each to: (i) the TA needed by the subborrowers, especially in the  - 16 - technically more difficult and specialized FO7IN and FIDEIN programs; and (ii) the specific requiromnto of the O1IN risk capital program at a time of high inflation. These two areas should have attracted more of both the Bank's and the Borrower's attentioni,-long vith greater efforts to establish the institutional framework for a venture capital market. As mentioned earlier, both the Bank and the Borrower tondod not to follow up vigorously on the respective studies and avaluations which vere not completed. 10.2 The SKI III project represented a comprehensive program for the development of Mexico's SKI sector at a time when Government policy tended to favor large- scale industry. It was only in April 1985 that an official Government SMI policy was made explicit vith the Integral Development Program for SMIs (PIPMI) whose objectives dovetailed with this project. Yet, there were no known linkages established between the project and PIPHI either by the Bank or the Borrower. XI, Consultina Services 11.1 Performance of the consultants and the results obtained under the project were mixed. The consultants used by FIDEIN to help design a Project Plan Analysis perform d vwll and gave good recommendations t a time that FIDEIN was altering its role. They vwre highly qualified industrial estate experts who focused their time on transferring their specific expertise onto FIDEIN staff. On the other hand, the consultants hired by FOGAIN for subprojects supervision and follow-up monitoring activities had problems with both the subborrowers and the Fla and were eventually removed from the project. A team of consultants was also recruited to deviset (i) a guarantee mechanism for risk capital investment; and (ii) a long-tern echanim for financing industrial'plant construction in industrial estates. The results were not conclusive and were not used. XII. Progect Documentation and Data 12.1 Project documentation and data includes the legal documents, the staff appraisal report (SAR), missions back-to-office reports and supervision reports, and progress reports provided by the Borrower. 12.2 The legal agrements and the SAR were adequately prepared and satisfactorily guided project start-up and implementation. Supervision reports gave a good idea of the project evolution, and the issues addressed during implementation. However, ome of the reports--and other relevant project documents available at the Bank- were not sufficiently detailed and did not provide all the quantitative data needed for the preparation of the PCR. 12.3 NAFIN *etended ample assltance to the PCR mission in facilitating meetings with staff from the three former executing agencies, who provided available institutional Information. Unfortunately, the PCR mission was conducted more than a year after loan closing and two years after NAFIN's reorganization which made access to remaining Institutional memory more difficult. As indicated  - 17 - earlier, no comprehensive ex-pout documentation on the financed subprojects was provided. In addition, NAPIN had little data on the present status of the subloan/investment portfolios of the participating financial intermediaries. XIII. Lessons Learned 13.1 Proiect Desian. The institutional framework for SHI. was complex in Mexico at the time of the project, with many institutions involved in the provision of technical assistance and credit to the sector. In retrospect, the question may be asked whether the Bank should not have tried to simplify and rationalize the framework, instead of involving so many institutions in the project, thus, complicating its implementation. At least, more attention should have been paid to the coordination issues, which proved to have hampered project implementation. Under the SMI IV follow up operation, some remedial measures were taken. To simplify implementation and facilitate coordination among various executing agencies, the Bank and th Mexican Government agreed on the establishment of a small, but high level, Project Coordinating ComiIttee chaired by one of the Vice Ministers of Finance and with the following members: NAFIN's Director General and two other NAFIN's Deputy Director Generals, and the Director General of the Credit and Development Banks in the Finance Ministry. FOGAIN, FOMIN, and FIDEIN also participated in the Committee, but as non-voting members. The coordination issue was resolved in April 1989 (before effectiveness of SMI IV) when the Mexican Government decided to merge all the trust funds assisting the industrial sector into NAFIN and to convert the latter into a second-tier institution. The merger is still too recent to allow a meaningful assessment of the new set-up in terms of its efficiency to meet SMIs's needs. This assessment will be done in the PCR for the SMI IV.loan tentatively scheduled for FY94. 13.2 Sector Work. The technical assistance component was put into place without a good understanding of the institutional, regulatory and policy constraints hampering SKI growth. Good sector would have helped better design this component. At least, the Bank should have insisted that the studies on the PAI's technical assistance and extension programs be carried out and the results implemented. The SMI IV follow-up operation addressed the issue by providing financing for a series of studies aimed at broadening the understanding of the potential and constraints to SHI development to be carried out by SECOFI. 13.3 SuDervision. More attention--and staff resources--should have been devoted to the supervision of the TA component, which although small is very complex and labor intensive. Supervision of the credit components was adequate. However, in retrospect, it appears that Bank supervision was too narrowly focused on the implementation of the loan and did not follow developments in the sector. Supervision missions must have devoted some time to assess the non-financial constraints hampering the development of SMIs with a view to helping address them through the project technical assistanc- resources. Also, the Government's PIPMI program should have been carefully analyzed and its links to the project made explicit. 13.4 PCR Preparation. Availability of quantitative data is often a problem for the preparation of PCR., particularly those on loans through financial  - 18 - intermediaries. In any future similar projects, it is recommended that (i) the second-tier institutions conduct a close monitoring of the participating institutions' portfolios that would permit an assessment of the project impact; and (ii) provision be made to have the Borrower make the necessary efforts to compile the required data that will permit a meaningful project evaluation.  - 19 - PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE I. Background 1.1 In 1978 the Federal Government, acting through Nacional Financiera, S.A. (NAFIN), established the Programs de Apoyo Integral a In Industria Mediana y PequefiAs (PAI), which was intended to strengthen and promote actions to bring about modernization and growth in the industrial sector through improved use of its human, financial and technological resources. 1.2 As one step in this direction, PAI sought to minimize the dispersal of programs and support efforts for SMIs by instituting a number of technical assistance programs and giving full support to the development funds set up by the Federal Government to assist small and medium-scale industries -- for instance, Fondo Hacional de Estudios y Proyectos (FONEP), Fondo Nacional de Fomento Industrial (FOMIN), Fondo de Garantis y Fomento a In Industria Medians y Pequefia (FOGAIN), Fidelcomiso pars el EstudIo y Fomento de Conjuntos, Parques, Cludades Industriales y Centros Comerciales (FIDEIN), and Fondo de Informaci6n y Documentscifn pars In Industris (INFOTEC). 1.3 In addition, PAI became the central point for processing the external resources obtained through loans signed with the World Bank to finance SMIs. Such operations included two earlier Bank loans for a total of US$147 million (Loan 1552-ME for US$47 million, and 1881-ME for US$100 million), which were satisfactorily concluded -- as confirmed in the respective PCRs -- despite very serious macroeconomic problems that were already beginning to emerge and which became fully apparent by the early 1980s. 1.4 Throughout the period 1982-88, in fact, Mexico was confronted with a serious economic crisis, provoked mainly by such factors as: the Federal Government's huge domestic and external debt burden; the steep plunge, in 1982, in world prices for petroleum, the country's principal export; and the resultant high rates of inflation, which caused domestic markets to collapse and reduced growth in the national productive sector. 1.5 In view of the change of Federal Government in 1982, at the time this new loan was being appraised, the World Bank suggested a number of measures it believed would minimize the impact of the transition on execution of this project: PROPOSAL COMMENTS 1. Creation of an SMI Support Unit NAFIN had its Direcci6n Adjunta de to coordinate activities geared Promoci6n, Filiales y Fideicomisos to satisfactory execution of (Subdirectorate of Promotion, this project. Subsidiaries and Trusts), responsible for regulating and supervising the operations of Government trust funds as far as implementation of its own policies was concerned.  - 20 - 2 Devise a portfolio oversight FOGAIN developed a computer program system for FOGAIN. to identify subprojects possibly eligible for IBRD financing; however, the records vere not kept in a separate file. 3. Conclude negotiations started During the six year period 1982-88, with INFOTEC to support SMI INFOTEC supported SMIs with needs in terms of information information and technical assistance, and technical assistance, under arrangements entered into by it with the World Bank, Mexico's own technology information agencies, and the Asian Organization for Technological Productivity. 4. Establishment of a training Although such a program never program for FOMIN staff. materialized, FOMIN's results in 1983 were satisfactory in real terms, and in 1984 it sought to guarantee its temporary participation, in order to recover its resources. In addition, the Bank obtained a commitment from PAI to carry out various studies: - evaluation of the major PAI programs implemented; - cost-benefit analysis of PAI programs implemented; - ex-post analysis of the impact of the loan, based on a representative sample of subprojects supported by FOGAIN; - analysis of a number of enterprises supported by FOGAIN, to determine the impact of the economic crisis on small and medium- scale industries. These studies were not carried out, for the following reasons: In 1985, the Federal Government took a number of steps to rationalize the system supporting the industrial sector; one of them was to merge the development funds with RAFIN. The first institution to become part of NAFIN was PAI, in 1987, when the loan had just been reactivated following the delays mentioned above. In addition, while the merger of the development funds with RAEIN was being planned and put into effect, an assessment was made of the advisability of continuing with the programs they had launched. Based on RABIN's analysis, it was determined that implementation of the technical assistance programs had not been as successful as initially expected, since they were not meeting major SMI needs.  - 21 - Given the resulting lack of continuity in PAI programs, it became impossible to carry out the studies requested. - With respect to evaluation of the impact of the loan on small and medium-scale industries, it should be recalled that in 1989, the year of loan completion, FOGAIN was in the process of being merged with NAFIN, which delayed the studies requested. However, the possibility is currently being reviewed of conducting them at the same time as evaluation of the results of loan 2858-HE (PAI IV), since this would allow comparative analyses of results obtained in economic contexts as different as those experienced by Mexico over the period 1980-92. 1.6 It should be noted here that the measures suggested by the World Bank were not implemented by lAPIN strictly as recommended. Nowever, NAFIN's performance throughout the execution of PAI III ensured that its component programs operated adequately, while project implementation in general was satisfactory in that quantitative and qualitative objectives were met. II. Proiect Obiectives and DescriDtion 2.1 From the time it was first identified, the projaet was designed as a set of support actions intended to expand the base of the SKI sector in the face of the serious economic crisis confronting the country. Loan proceeds were used predominantly to build up permanent working capital and finance purchases of machinery and equipment, in order to ward off further reductions in sector production and employment levels. 2.2 As with the two previous operations in this field, the proceeds of this third loan were deposited with PAI to be administered and channeled to the industrial sector through the development funds. On the basis of earlier experience, a disbursement schedule was drawn up for a period not to exceed four years (1983-87). 2.3 The loan was signed for US$175 million, of which US$150 million was earmarked to support credit operations, US$18 aillion for equity investments, US$5 million for industrial infrastructure, and US$2 million for technical assistance programs. 2.4 Of the amount allocated to the various loan categories, a total of US$174,979,354 was disbursed as follows: Category I: Credit US$ 144,792,000 Category II: Equity investments 12,887,354 Category III: Infrastructure 14,600,000 Category IV: Technical assistance 2,700,000 ________________________ TOTAL US$ 174,979,354 .. -.r_--rn---,  - 22 - III. Proiect Organization and Design 3.1 Loan 2325-ME (PAI III) was signed on August 15, 1983 but did not become effective until January 16, 1984. This was because NAFIN and PAI were unable to meet the agreed conditions of effectiveness, for the following two principal reasons: - failure by the World Bank to consider Mexico's serious economic and political problems, which meant that the proceeds of PAI III were applied very differently from those of PAI I and II; - the reorganization and restructuring that took place between 1983 and 1984, mainly affecting PAI and FOGAIN. 3.2 A few months after PAI started operations in 1978, its Technical Secretariat and the FOGAIN Directorate General came under the command of a single individual, so that both entities then had to coexist within a single administrative structure. Given the differences in the concepts underlying them, it became necessary to establish a dual structure reporting to the same director. 3.3 PAI, as an entity functioning within the FOGAIN organizational framework, had a staff of 300 and was set up as follows: - Secretaria T6cnica (Technical Secretariat) - Subdirecci6n General (General Subdirectorate) - Subdirecci6n de Operaci6n (Operations Subdirectorate) - Subdirecci6n de Asistencia T6cnica (Technical Assistance Subdirectorate) - Subdirecci6n de Promoci6n (Promotion Subdirectorate) - Subdirecciones Regionales (Regional Subdirectorates) (8). 3.4 However, the fact that these two entities functioned jointly prevented PAI from serving effectively as intersectoral coordinator. Consequently, in 1984 it reformulated its objectives and strategies and broke away permanently from the FOGAIN organizational structure, to become the executing agency for integrated technical assistance programs. 3.5 The new scheme of organization proposed provided for the elimination, creation and relocation of administrative units, with a view to maximizing PAI operational effectiveness while keeping its staff down to the authorized figure of 300. 3.6 In that same year (1984), the PAI Technical Committee was set up to approve and oversee implementation of PAI programs. Other units established that year were Organization and Methods, Internal Control, and Coordination of Regional Subdirectorates.  - 23 - IV. Proiect Implementation 4.1 It should be pointed out that in addition to the initial delay caused by the time lapse between loan signature and effectiveness, Mexico City was devastated by a severe earthquake in September 1985, which destroyed certain buildings, including the headquarters of NAPIN and the development funds. 4.2 Although alternative arrangements were made as quickly as possible, they involved housing staff in temporary offices, purchasing furniture, searching for new premises, and reinstalling the computing equipment that handled all of the operations of NAFIN and the funds. This naturally caused delays in getting credit and technical assistance programs into operation. 4.3 Following the PAI-FOGAIN split in 1984 and the earthquake in 1985, FOGAIN resumed its normal activities and, in 1986, reorganized itself, adding a Juridical Bureau and a Bureau of Loan Supervision, as a means of speeding up credit authorization and improving supervision, functions which had normally been handled previously by external consultants. 4.4 These changes, together with the introduction of automatic authorization, cut FOGAIN's average subproject approval time from 45-60 days (and occasionally longer) to 15 days. In any case, a maximum response time of 60 days was guaranteed, or authorization was to be automatic. 4.5 In addition, as NAFIN's internal operating reports indicate, FOMIN and FIDEIN operations expanded during the period 1983-86, despite the country's economic difficulties. However, the World Bank's reimbursement rate slowed because of the time needed to prepare the technical information it required for authorization of subprojects. 4.6 The technical assistance provided, for both individuals and groups, sought to induce businessmen to change their attitudes and embrace technological, technical, administrative and marketing innovations. As a result, collective purchasing centers were set up and credit unions established, among other achievements. V. Proiect Results 5.1 Implementation of this project was clearly not easy, and it was consequently not completed within the period anticipated at appraisal, which had serious repercussions where the disbursement schedule was concerned. Despite the slippage in compliance with the disbursement schedule, however, the loan was almost fully utilized within a period only 18 months longer than expected. All additional disbursement commitments made to the Bank during loan negotiations were also met. 5.2 In the case of FOGAIN, all targets and objectives set for this period were met, the only interruption in the rate of disbursement occurring in 1985 for the reasons already indicated. FOGAIN used the proceeds of the loan to assist a total of 6,041 enterprises. By 1987, it was unable to meet its targets for lack of funds, the amount allocated for this component having already been fully committed.  - 24 - 5.3 Where FIDEIN was concerned, the severe economic crisis faced by Mexico substantially reduced investment demand. however, the financing channeled through this fund helped to create 56,960 jobe during the period 1983-87. 5.4 FOMIN, for its part, assisted a total of 558 enterprises, providing them with risk capital and capital for minority equity investments, which helped to promote divestiture by FO1IN once the enterprises had reached full development and thus to assist efficient enterprises. 5.5 With respect to technical assistance and training activities, PAI assisted a total of 446,608 enterprises from 1984 to 1987, thereby directly contributing to the industrial modernization proce. 5.6 In addition, using World Bank funding, lAPIN comissioned the Instituto Naclonal de Geografla a Infor=Atlcs (INRGI) in 1987 to conduct a survey to determine the status of micro, mall and medium enterprises. Although the results of this study were not actually published until 1989, the information obtained was used during negotiations for Loan 2858-MH. 5.7 Finally, it should be explained that coordination of programs followed Federal Government policy guidelines for the period in question, and that in 1987 action was initiated to merge the various executing agencies with lAPIN, in order to meet the requirements set by the new period. VI. General Coments 6.1 Despite the series of problems that arose during the execution of Loan 2325-ME, its general objectives were nevertheless accomplished: the number of enterprises assisted, loans granted and technical assistance activities conducted, using the proceeds of the loan, met (or even exceeded, as in the case of technical assistance) the targets originally set. 6.2 Among the factors which adversely affected the project execution process, one in particular warrants mention, since it significantly delayed the rate of loan disbursement -- namely the type and quantity of information requested by IBRD for authorization of subprojects. 6.3 This problem could be alleviated in future operations if World Bank staff responsible for project design were to allow the executing agency greater participation at this early stage. Views could then be exchanged on the quantity and type of information that -- given operating constraints -- should reasonably be required for authorization of subprojects, while still allowing an adequate disbursement rate to be maintained during project implemntation.  THIRD SMALL AND MEDIUM-SCALE INDUSTRY DEVELOPMENT PROJECT (LOAN 2325-ME) PROJECT ACTIVITIES FINANCED BY THE DEVELOPMENT FUNDS AND THE PAI PROGRAM ACTIVITY NO. OF BENPICIARY KNTERPRISES 1983 1984 1985 1986 1987 1. Extension Services and Technical Assistance 14,549 9,119 5,203 8,084 9,653 2. Working capital financing 4,997 4,815 3,412 4,372 3. Fixed assets financing 3,927 3,327 2,059 2,220 4. Capital works financing 58 73 58 48 46 S. Zquity investment 109 121 115 112 111  THIRD SMALL AND MEDIUM-SCALE INDUSTRY DEVELOPMENT PROJECT (LOAN 2325-HE) FINANCIAL ASSISTANCE CHANNELED TO MICRO, SMALL AND MEDIUM-SCALE INDUSTRY (Max$ millions) FUND 1983 1984 1985 1986 1987 1. FOGAIN 2,678.6 6,074.1 18,675.1 14,260.0 8,865.9 2. FOHIN 442.6 1,962.3 666.6 2,672.8 12,143.1 3. FIDEIN 101.5 564.8 2,173.0 4,035.0 5,458.2 4. PAI 9.7 141.4 393.9 473.7 533.2 TOTAL 3.232.4 8,742.6 21,908.6 21.441.5 27,000.4  - 27 - PART III STATISTICAL IWJORHATIOI 1. RELATED BAD LOANS 1552-ME. Firat Small and To generate growth 1978 Closed Loan of US$47.0 Medium Scale Industry in and employment million was closed on Development Project (SMI and promote 11/31/1981. I) regional PCR No. 7552 issued development, on December 1988. 1881-ME. Second Small and Same aa above. 1980 Closed Loan of US$100.0 Medium Scale Industry million was closed on Development Project (SMI 6/30/1985. II) PCR No. 7552 issued on December 1988. 2858-ME. Fourth Small and Same as above. Also 1987 In Loan US$100.0 Medium Scale Industry include pilot progress million. Reduced from Development Project (SMI micro-industry, original amount of IV) US$185.0 million. Became effective 3/01/1991.  - 28 - 2. 1X5C TINTABL Identification 6110/1982 6/10/1982 Appraisal Migglons let Mission 9120/1982 9/20/1982 2nt Mission 1/10/1983 1/10/1983 Loan Nogotigtions 4/20/1983 4/20/1983 Board Approval 6/23/1983 6/23/1983 Loan Signature 8/25/1983 8/25/1983 Loan Zffectivenso 9/2711983 2/2711984 Loan Clog"ng 6/30/1987 6/30/1988 9/30/1989  : . :' ....... :' . ' :':' ' : ' ' j" '"~~~~~~~~~~~~~~....... tS4UO~~~~~~ 9 TOU*OI Tsn,4ov .... ~ ~~ ~ ~ ~ ~ ~~~ ~ j .. ... .... ........ .... :.ij ......-' :' "..:. -O : - O U 6.. ....j...6 ... . . ...... ~~~~~~~~~~~~~~~~~~~~~~~~~~.... .,,,..... ., .. , ... .....i ......... :: : : . :: i : :: i~~~~~~~~~~~~~~. . ....... - :6:8M: ~~~~~...... .i-v o:... (uo;tTuzF $sn) SJIUIZS1l1SIG 'ZDIO 0Wt UZYIIS Z&VL)D - 6Z -  - 30 - 4. PROJECT ESTIMATE FINANCING (US$ million equivalent) tComponents-; -R00 4 0Ba:nk GOW M0Total SMI/ftji Totol *Credit 150.0 56.0 206.0 95.4 301.4 *Risk Capital 18.0 6.7 24.7 11.6 36.3 *Industrial Parks 4.6 1.7 6.3 3.0 9.3 *Technical 2.0 0.2 2.2 - 2.2 Assistance TOTAL 174.6* 64.6 239.2 110.0 349.2 | Participation 50.0 18.5 68.5 31.5 100.0 * Front end fee of US$0.4 million is not included CONTENT OF FINANCING (US$million) component. Local Cost 7o:e1 gn- ixcnan ni of Credit 210.6 90.8 59.2 Risk Capital 25.3 11.0 7.0 Industrial Parks 6.5 2.8 1.8 Technical 0.8 1.4 0.6 Assistance TOTAL 243.2 106.0 68.6 Percentage 70Z 30Z 20Z  - 31 - 5. ALLOCATION OF LOAN PROCEEDS (US$ thousands) r - - :-- - .... . . . . . . .- Items A ri1d- FOGAIN * Fixed assets investments 75,000 81,400 81,323 * Permanent working capital 75,000 63,100 63,046 FOHIN * Fixed assets and increases 8,000 7,900 7,897 in working capital * Increase in permanent 10,000 4,700 4,695 working capital FIDEIN 4,600 14,600 14,596 Technical Assistance 1,964 2,700 2,703 Capitalized Front End Fee 436 436 436 TOTAL 17S000 175,000 174,698  - 32 - 6. STATUS 0F IZGAL COYKEATS Loan Agreement Section 3.11 *Cost-Benefit Analysis of lot complied Study was intially put on extension service hold for one year, then postponed to May 1989. Study not carried out. Section 5.01 *Consultation vith Bank In Regulations were revised in (b) before changes compliance 1986. Introduced in FOGAIN's operating regulations Project Executlon Document (PAD) PAI *Industrial Survey of In Survey initiated in 1984 enterprises compliance and completed in 1986. els-post evaluation of Not complied Evaluation not carried out. Subprojects under Ln.1552-M and Ln.1881-ME. FOGAIN *Plln of action established in Delay occurred because of to improvo compliance earthquake. Task completed portfolio control in 1986. elapllemntation of guarantee lot complied Implemented for micro- program industry only, but not with Bank funds. FIDEIN *leorganization of FIDEIN In Institutional set-up compliance remained unchanged but staff upgraded. elvaluation of its overall lot complied Study not performed. operation FOKIN *Two-phase study to determine Not Study not performed. problems its completed clients  - 33 - 7. UJS 0 SAK REsso3cEs (US$ million) | FOGAIN 144.4 82.0 Fixed assets 81.3 47.0 Permanent working capital 63.1 35.0 | FOMIN 15.6 8.0 Fixed assets and increases in 7.9 4.0 working capital Increase in permanent working 4.7 4.0 capital FIDEIN 14.6 8.0 Technical Assistance 2.7 2.0 Front end fee 0.4 - -i TOTAL 174.7 100.0 DISTRIBUTION 0F TOE TICUEICAL ASSISTANCE IUIES (US$ thousands) | INFOTEC 853.3 32.0 1 INEGI 625.4 23.0 |FPOMIN 68.5 3.0 | FOGAIN 102.1 4.0 Consultants 20.1 1.0 Computer Equipment 37.4 1.0 PAI courses and 786.6 28.0 seminars Industrial extension 205.3 8.0 training TOTAL 2,703.7 100.0  - 34 - 8. STAFF INPUTS BY STAGE OF PlOJECT CYCLE A. Staff Inputs Through Appraisal 82.6 Appraisal through Board 24.1 Approval Supervision 125.7 PCR 18.4 B. Missions AT T M .Ot i- . X4TYEA . -i. i.:S, . N R OF .: -S : . .: -iS- .. C,L,,-IZA . N.U-:B:-E. OP.-: STAFF. DA'MS - : :f.1 0 ,04 | . L iN i :.iE ,. iv, A, t i, ::! 40 ,0-, S: i ., .. , .: ... i E ... , ,, E .... . ,,.E ,E,: ',; ,'-'S -E''.L'. . . . . .... . . . . ... . . . . . . REPORT Apprisal 6/1982 4 FNA,LEG,POF,OTH 4 12 5/1983 Post-Appraisal 1/1983 3 FNA, LEG,POF 3 6 5/1983 Supervision* 8/1983 1 POP 2 2 11/1983 Supervision 11/1983 1 POP 1 1 12/1983 Supevision 1211983 1 POP 1 1 2/1984 Supervision 3/1984 1 POP 2 2 6/1984 Supmvision 4/1985 1 POF 2 2 7/1984 Supervision 611985 1 FNA 2 2 10/1985 Supervision 7/1985 2 PNA,POP 2 4 11/1985 Supervision 2/1986 1 POP 1 1 2/1986 Superviuion* 12/1986 1 PNA 2 2 1/1987 Supervision* 9/1987 2 PNA,POP 2 4 11/1987 Supervision* 10/1988 2 FNA,POP 1 2 11/1988 Supervision 2/1989 2 FNA,POP 1 2 2/1989 PCR 2/1991 1 OTH 2 2 4/1991 (draft) * combined with iupviaous of other projects Specialities: Project Officer-POP; Pinancial Analyst-PNA; Legal-LEG; Oter-OTH  - 35 - 9. FrAOECIRE-IFIS A) Direct Benefits [INDICATORS EPRIA STIMATE: A.. ....R.1SUM-~ Number of Enterprises Receiving Credits 2,650 6,162 *FOGAIN 2,500 6,041 *FOMIN 150 78 *FIDEIN 10- 12 43 Number of Jobs Generated 10,000 20,000 - 25,000 * Number of jobs Preserved 20,000 - 30,000 Over 100,000 *| Technical Assistance no estimate Over 500 firms Source: NAFIN B) Indirect Benefits !~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. . :: . :. : i~j.--.-. -.. .. . . . . .. FIDEIN Studies *Prefeasibility 94 in 26 States *Feasibility 35 in 17 States *Engineering 49 in industrial parks *Special Reports over 20 Other Benefits *Industrial decentralization *Follow-up subproject lending -Strengthened NAFIN financial intormediary *Institutionalized TA services within NAFIN -Expanded subproject local market export Source: NAFIN * NAFIN estimate ** FIDEIN alone estimated 65,000 from its financed projects.  - 36 - MACIONAL FINANCIERA, S.N.C. DOCUMENTO DE TERMINACION DE PROYECTO IEXICO T-CA 1SAPA DEL PitOYTO DE APOYO A LA PEQOURA Y.EDIANA INUSTRA (Pr&stano 2325-ME) Junio 1992 1 n&ceola wuM ase  - 37 - I K D I C U I. ANTECEDENTES II. ORGANIZACION Y DISEaO III. DESCRIPCION Y OBJETIVOS IV. EJECUCION DEL PROYECTO V. RESULTADOS VI. COMENTARIOS GENERALES VII. ANEXOS 2 nacional fnnca  - 38 - I. ANTECEDENTES En 1978, el Gobierno Federal, a traves de Nacional Financiera, S.A., cre6 el Programa de Apoyo Integral a la Industria Mediana y Pequenia (PAI) con el objeto de fortalecer y promover las acciones encaminadas a la modernizaci6n y crecimiento del sector industrial, a traves de un mejor aprovechamiento de los recursos humanos, financieros y tecnol6gicos de que dispone. En este sentido y como parte de las acciones implementadas para el logro de sus objetivos el PAI busc6 minimizar la dispersi6n de los programas y apoyos a la pequefia y mediana industria, por lo que desarroll6 diferentes programas de asistencia tecnica y promovi6 integralmente a los Fondos de Fomento constituidos por el Gobierno Federal para el apoyo de la pequena y mediana industria, tales como el Fondo Nacional de Estudios y Proyectos (FONEP), Fondo Nacional de Fomento Industrial (FOMIN), Fondo de Xarantfa y Fomento a la Industria Mediana y Pequefia (FOGAIN), Fideicomiso para el estudio y Fomento de Conjuntos, Parques, Ciudades Industriales y Centros Comerciales (FIDEIN) y el Fondo de Informaci6n y Documentaci6n para la Industria (INFOTEC). Asimismo, centraliz6 la operacion de los recursos externos captados de prestamos contratados con el Banco Mundial para financiar a estos estratos industriales entre los que figuran dos operaciones previas contratadas con este Organismo por 147.0 millones de d6lares (pr6stamos 1552-ME por 47.0 y 1881-ME por 100.0 millones de d6lares respectivamente), cuya administracifn fue satisfactoria, de conformidad con lo expresado en los documentos de terminaci6n de proyecto de ambas operaciones, a pesar de los graves problemas macroecon6micos que ya se gestaban y que detonaron a principios de la decada de los 80's. 3 nacional financiera  - 39 - Pr4staao 2325-XE Sobre este iltimo punto es conveniente sehalar que durante el periodo comprendido entre 1982-1988, el pals atravesd por una gran crisis econ6mica, provocada fundamentalmente por: el gran endeudamiento interno y externo del Gobierno Federal: la drastica caida durante 1982 de los precios internacionales del petr6leo, principal producto de exportacion en el PaIs; las altas tasas de inflaci6n obtenidas como resultado de este proceso que colapsaron los mercados domesticos y redujeron el crecimiento del sector productivo de nuestra economia. Ante el cambio de administracidn del Gobierno Federal en 1982, el Banco Mundial durante la evaluaci6n de este nuevo prestamo sugirio una serie de medidas, que a su punto de vista pudieran minimizar los efectos que este proceso ocasionard en la ejecucion del proyecto, tales cono: PROPUESTA OBSERVACIONES 1. Creaci6n de una Unidad de * Al interior de NAFIN se apoyo a la mediana y pe- contaba con la Direc- quefia industria cuyo ob- ci6n Adjunta de Promo- jetivo seria llevar a ca- ci6n, Filiales y Fidei- bo la coordinacion de las comisos, la cual era actividades concernientes encargada de normar y al buen desempeho en la supervisar la funcidn ejecuci6n del proyecto. de los diferentes fi- deicomisos del Gobier- no en cumplimiento a sus propias politicas. 4 nacional financiera  - 40 - III ETAPA DEL PROGRAMA DE APOYO A AL PEQUERA Y MEDIANA INDUSTRIA PROPUESTA OBSERVACIONES 2. Desarrollar un sistsua d * Dentro del sistema de control de cartera en cdmputo del FOGAIN, se FOGAIN. desarrollo un mddulo especifico para identi- ficar aquellos subpro- yectos que pudieran ser susceptibles de redes- cuento ante el BIRF, sin embargo, no se man- tenian en up archivo por separado. 3. Concluir las negociaciones * El INFOTEC durante el iniciadas con INFOTEC para sexenio comprendido en- apoyar los requerimientos tre 1982-1988 apoyb a de inforuacidn y asistencia estratos con servicios tecnoldgica de la pequefta y informaci6n y asistencia mediana industria. tecnol6gica que a su vez fueron obtenidos de los convenios suscritos en- tre INFOTEC y el Banco Mundial, los Servicios Nacionales de Informa- ci6n Tecnol6gica, la Organizacion Asiatica de Productividad Tec- nol6gica. 5 nactonad fmnanclor  - 41 - Pr6stauo 2325-RE PROPUESTA OBSERVACIONES 4. Establecimiento de un Pro- * A pesar de que dicho grama de capacitaci6n para Programa de capacitacion el personal del FOMIN. no fue implantado, los resultados del FOXIN en 1983, fueron satis- factorios en t6ruinos reales y para 1984 el Fondo busc6 garantizar Su participaci6n on forma temporal a fin de asegurar la recupera- cidn de sUs recursos. El Banco Mundial tambien estableci6 como un compromiso por parte del PAI, la realizacion de diferentes estudios, tal como: - Evaluaci6n de los principales programas implementados por el PAI. - Analisis del costo-beneficio de los programas implementadOs por el PAI. - Andlisis ex-post del impacto provocado por el prestamo utilizando para ello una muestra representativa de los suproyectos apoyados por el FOGAIN. - Andlisis de una serie de empresas apoyadas por el FOGAIN a fin de determinaar e1 impacto de la crisis econ6mica en las pequehas y modianas industrias. Dichos estudios no fueron realizados en virtud de las siguientes causas: - Durante 1985 el Gobierno Federal como part. de sus medidas de racionalizaci6n de los diversos instrumentos de apoyo al sector industrial, decidio fusionar las entidades de fomento a la estructura de NAFIN. 6 nacional financtera  - 42 - III ETAPA DEL PROGRAMA DE APOYO A LA PEQUERA Y MEDIANA INDUSTRIA En este sentido la prinera institucidn que pasa a formar parte de Nacional Financiera es el PAI, durante el ano de 1987, afio en que el prestamo apenas reactivaba su operatividad debido a los retrasos ya mencionados en puntos anteriores. Adicionalmente y durante el proceso de planeacion y formalizacion de la fusi6n de los Fondos de Fomento a la Instituci6n, se evalu6 la conveniencia de continuar con los programa desarrollados por esas instituciones y derivado del an&lisis efectuado por NAFIN, se comprob6 que la aplicaci6n de los Programas de Asistencia Tecnica no habia resultado tan exitosa como se esperaba, en virtud de que estos no alcanzaban a responder a las grandes necesidades de los estratos atendidos, ante lo cual se perdi6 la continuidad en los programas ejecutados por el PAI y por lo tanto se imposibilito la realizacion de los estudios solicitados. - Con relacion a los estudios solicitados para evaluar el impacto del prestamo en los estratos industriales mediano y pequefto, es conveniente sefialar que durante 1989, aho en que el pr6stamo concluyo, FOGAIN llevaba a cabo su proceso de incorporaci6n a NAFIN, lo cual retraso el cumplimiento de este compromiso, sin embargo, actualmente se ha contemplado la posibilidad de realizarlos conjuntamente con los resultados obtenidos del prestamo 2858-ME (PAI IV), a fin de poder establecer andlisis comparativos de los diferentes resultados obtenidos en contextos econfmicos tan diferentes como los experimentados par Mexico durante el peri6do 1980-1992. En este sentido es conveniente sefialar que las medidas sugeridas por el BIRF no fueron implementadas por NAFIN en el estricto sentido en que se recomendaron, sin embargo las acciones instrumentadas por esta Instituci6n a lo largo de la ejecuci6n del Programa permitieron la adecuada operaci6n de los programas y la implementacion del proyecto en general cumpli6 sus objetivos cuantitativos y cualitativos en un grado ampliamente satisfactorio. 7 nacional financiera  - 43 - Pr6stazo 2325-ME II. DESCRIPCION Y OBJETIVOS DEL PROYE El prdstamo desde su identificacion fue concebido como una serie de apoyos para ampliar la base del sector industrial mediano y pequefio ante la grave crisis economica del Pais. Durante la ejecuci6n del mismo, presento una tendencia hacia la canalizacion de recursos para capital de trabajo permanente y adquisici6n de maquinaria y equipo principalmente, con el objeto de evitar una mayor reduccion en los niveles de produccion y empleo logrados por este sector. Al igual que las dos operaciones anteriormente contratadas con el BIRF, los recursos de este prestamo fueron entregados al PAI para su administracion y canalizaci6n al sector industrial, a traves de los Fondos de Fomento y con base en las experiencias obtenidas, se fijo un calendario de disposiciones para un peri6do no mayor de cuatro ahos (1983-1987). El prestamo se suscribi6 por 175.0 millones de d6lares de los cuales 150.0 millones fueron etiquetados para apoyar operaciones de credito, 18.0 millones para aportacidn accionaria, 5.0 millones para infraestructura industrial y 2.0 millones para programas de asistencia tecnica. Del total asignado en cada una de las categorias del pr&stamo, se utilizaron 174'979,354.00 d6lares de acuerdo al siguiente desglose: Categoria I. Crddito 144'792,000.00 Categoria II. Capital accionario 12'887,354.00 Categoria III. Infraestructura 14'600,000.00 Categoria IV. Asistencia Tecnica 2'700,000.00 TOTAL 174'979,354.00 8 nacional financ,era  -44 - III ETAPA DEL PROGRAMA DE APOYO A LA PEQUERA Y KEDIANA INDUSTRIA III. ORGANIZACION Y DISErO DnEL PROYECTO El pr6stano 2325-HE (PAI III) fue firmado el 15 de agosto de 1983 y declarado en efectividad a partir del 16 de enero de 1984, dada la imposibilidad de Nacional Financiera y el PAI para dar cumplimiento a las condiciones de efectividad, lo cual fue provocado por dos razones principalnente: - la falta de consideracion por parte del BIRF de ls graves problemas economicos y politicos del Pals, los cuales marcaron una fuerte diferencia en la manera de aplicaci6n de los recursos con respecto a las dos primeras operaciones contratadas con el Banco Mundial, y la reestructuracion organizacional y estructural que durante 1983-1984 fue experimentada principalmente en las ostructuras del PAI y el FOGAIN A los pocas meses de gue el PAI iniciara operaciones en 1978, la Secretaria Tdcnica del PAI y la Direccidn General del FOGAIN recayeron bajo la responsabilidad de una sola persona, circunscribiendo a ambos dentro de una misma estructura administrativa, ante lo cual y dado la diferencia en su concepcidn, result6 necesario el establecimiento de una *structura dual que reportara a la misma direccidn. La ostructura admisitrativa del PAI que funcionaba dentro del esquena organizacional do FOGAIN, estaba conformada por una plantilla de 300 plazas y estructurada de la siguiente manera: - Secretaria Tecnica - Subdirecci6n General - Subdireccidn de Operacidn - Subdirecci6n do Asistencia Tecnica - Subdireccidn de Promocidn - Subdirecciones Regionales (8) 9 n-cional ftnan6iera  - 45 - Prdstauo 2325-NE Sin embargo, la operacion conjunta de *stos organismos propicio que el PAI no atendiera con la oficiencia requerida mu funcion de congruencia intersectorial, por lo quo a partir do 1984, el PAI replanted sus objetivas y estrat6gias, separ6ndose definitivamente de la ostructura organizacional del FOGAIN para transfornarse en ojecutor do Programas de Asistoncia Tecnica Integrales. La propuesta de organizacidn contemplo la eliminacidn, creacidn y reubicacidn do unidades administrativas con e1 prop6sito de optimizar la operatividad del PAI, manejando i1nicamente las 300 plazas autorizadas por e1 PAZ. Durante este mismo afio (1984), so croa el Conit6 T4cnico del PAI encargado de sancionar y supervisar la impleuontacidn de los programas desarrollados por osa Institucidn, asi como las unidades de Organizacion y Ndtodo., la Contraloria Interna, la Coordinacion de Subdirocciones Regionales. IV. EJEPCUCIO DEL POUT Es conveniento sehalar quo adicionalmento al rotraso ya provocado por la distencia *ntr la f-echa do firma y la fecha do declaracidn de ofectividad del pr6stamo, on S-ptienbre do 1985 un fuerte torr-ooto azat6 a 1 Cd. do N6xico, dorruub6ndose entre otras cosas, .1 editfcioa n quo Nacional Financiera y loa Fondos de Pouento atendian sus operaciones. Esta situacidn adn y cuando fue solucionada lo ads rapidamente posible, implicd la adecuacidn del personal on oficinas provisionales, coupra de zobiliario busqueda do nuovas instalaciones y la roinstalaci6n del equipo do co6puto quo manejaba toda la operacion do ostas entidades, rotrasandose asi la operacion de los prograzas do cr6dito y asistencia t6cnica. 10 nacional financiera  - 46 - III ETAPA DEL PROGRAKA DE APOYO A 1A PEQUERA Y MEDIANA INDUSTRIA Posteriormente a la separaci6n del PAI-FOGAIN en 1984 y despues del sismo de 1985, FOGAIN continuo normalmente *us actividades e instruuent6 durante 1986 una reestructuracion en su organizaci6n, incorporando a su estructura las Dirocciones Juridica y de Sequiziento de Cr6dito con el objeto de agilizar su proceso de autorizacion de cr6dito y mejorar au funci6n de supervisidn, en virtud de que 6stas funciones se venian realizando normalmente a traves de la contrataci6n de consultores externos. Ante estas modificaciones y aunado al Programa de Autorizacion automitica instrunentado por .1 FOGAIN, es conveniente sefalar que el proceso de autorizacion de proyectos, que era en promedio entre 45 y 60 dias y on algunos casos mayor, fue reducido a un lapso de 15 dias promedio y se garantizo que la respuesta sobre el financiamiento no excediera en ningdn caso de los sesenta dias, pues. en caso contrario se procederia a la autorizacion automatica. Por otra parte y seg1n los reportes internos de operacion de NAPIN, la operaci6n del FONIN y do FIDEIN observ6 crecimiento durante el peri6do couprendido entre 1983 y 1986, a pesar de la dificil situacion econ6mica prevaleciente en el pals, sin embargo e1 ritmo de reembolso de recursos por parte del Banco Mundial disminuy6 en virtud del tiempo utilizado en la preparacion de la inforuaci6n tdcnica solicitada por el Banco Mundial para la autorizaci6n de subproyectos. La Asistencia Tdcnica en forma individual y colectiva se brindd buscando un caubio de actitud on ei empresario a fin de inducirlo a la innovaci6n tocnol6qica, t6cnica, administrativa y de couercializaci6n. Derivado de estas acciones se obtuvo la constitucidn de contros do coupras en comdn y uniones de cr&dito entre otros. 11 nac.anad financuer~a  - 47 - Pr6stano 2325-NE V. RESULTADOS DEL PROYECTO Como se puede observar, el proceso de ejecuci6n del proyecto no fue facil lo cual provoc6 que la ejecuci6n del proyecto no fuera concluido de acuerdo a lo previsto durante la evaluacidn del proyecto, repercutiendo drdsticamente en el peri6do de desembolso de recursos ante el Banco. Sin embargo y a pesar de los retrasos en el calendario de desembolsos, el pr6stamo se dispuso practicamente en su totalidad, en un periddo mayor al previsto en tan solo un aho y medio. Asi mismo, se di6 cumplimiento a todos los compromisos de desembolso adicionalmente contraidos con ese Organismo durante la contrataci6n del Prestamo. Con la relacidn a la operacidn del FOGAIN, este cumplio con las metas y objetivos planteados para este peri6do, interrumpiendo solamente el ritmo de desembolsos ante el Banco Mundial en 1985, por las causas que ya fueron descritas con anterioridad. El FOGAIN atendi6 un total de 6,041 empresas con recursos del pr6stamo. Para 1987, este fondo no pudo alcanzar las metas previstas en virtud de la falta de recursos pues para el prestamo 2325-ME ya se habia comprometido la totalidad del componente que se le asign6. Por parte del FIDEIN y ante la grave crisis econ6mica del pals, sus programas se redujeron sustancialmente por falta de demanda, sin embargo el financiamiento canalizado por esta instituci6n favorecio la creacion de 56,960 empleos durante el periddo 1983- 1987. Por parte del FOMIN, se atendi6 un total de 558 empresas con aportaci6n de capital de cardcter temporal y minoritario, lo cual ha favorecido para fomentar la desincorporacidn de las empresas una vez que 6stas han conseguido su madurez, fomentando asi el apoyo a empresas eficientes. Con relacidn a las actividades de Asistencia T6cnica y Capacitacion, el PAI apoyo entre 1984-1987 un total de 46,608 empresas contribuyendo directamente al proceso de modernizaci6n industrial. 12 nacional financiera  - 48 - III ETAPA DEL PROGRAMA DE APOYO A LA PEQUHIA Y NDIANA INDUSTRIA Asimisuo y d-rivado del financiaziento obtenido del Banco Mundial, durante 1987 NAPIN encomendo la realizacion de una *ncuesta para deteruinar la *ituaci6n do la micro, pequefia y mediana empresa al Instituto Nacional de GCograf la e Inform6tica (INEGI) cuyos resultados fueron publicados hasta 1989, sin embargo la informacifn obtenida fue utilizads durante la negociaci6n del prdstamo 2858-NE. Finalmente es conveniente aclarar que la coordinaci6n de los programsas fue realizada de conforuidad con los lineamientos de politica establecidos por el Gobierno Federal para ese peri6do y para 1987 so inicia la incorporaci6n de las diferentes entidades ejecutoras a NAFIN, con el objeto de responder a los requerizientos del nuevo periddo. 13 nacuonid hnancsers  - 49 - Prestamo 2325-NE 1. Es conveniente sehialar que no obstante la serie de problemas que se presentaron durante la ejecuci6n del prestamo 2325-ME, los objetivos generales del mismo fueron alcanzados; el ndmero de empresas apoyadas, crdditos concedidos y actividades de asistencia tecnica realizadas con los recursos del pr6stamo alcanzaron (y en el caso de asistencia tecnica superaron), las metas establecidas originalmente. 2. Adicionalmente a los factores negativos mencionados que afectaron la ejecuci6n del Programa, es conveniente mencionar como un factor fundamental que retrasd considerablemente el ritmo de desembolsos del pr6stamo, fue el tipo y cantidad de informacion solicitada por el BIRF para autorizar subproyectos. 3. Al respecto es conveniente sefialar que en futuras operaciones, este problema podria disminuirse si los tecnicos del Banco Mundial, encargados del disefho del Programa a ser apoyado, permitieran que existiera una mayor participaci6n del ejecutor en dicha etapa de preparacy6n del proyecto, con el objeto de intercambiar puntos de vista sobre la cantidad y el tipo de informacidn quo operativamente seria mds conveniente presentar para autorizaci6n de subproyectos, con el objeto de mantener un adecuado ritmo de desembolsos durante la ejecuci6n del mismo. 14 nacional financtera  - 50 - III ETAPA DEL PROGRAXA DE APOYO A LA PEQUERA Y KEDIANA INDUSTRIA x N E X O S  III ITAPA DEL PROGRAMA DE APOYO A LA PEQUERA Y MEDIANA INDUSTRIA BALACE D E3cucION MR1 PAT E O ONDOS DE FONENTO YELNATPl ACTIVIDAD NUMERO DE EMPREAS ATENHIDAS 1983 1984 1985 1986 1987 1. Orientaci6n y Asistencia T6cnica 14,549 9,119 5,203 8,084 9,653 2. Credito de Habilitaci6n o Avio 4,997 4,815 3,412 4,372 3. Cr6dito Refaccionario 3,927 3,327 2,059 2,220 4. Crddito Refaccionario para Insta- 58 73 58 48 46 laciones fisicas 5. Aportaci6n Accionaria 109 121 115 112 ill 15  Pr4staao 2325-M1 APOYOS FINANCIZERO CANALI ZADOS A LA MICRO, PEQUERA Y MEDIANA INDUSTRIA (Millones de Pesos) F O N p 0 18 94L2 2218 1. FOGAIN 2,678.6 6,074.1 18,675.1 14,260.0 8,865.9 2. FOMIN 442.6 1,962.3 666.6 2,672.8 12,143.1 3. FIDEIN 101.5 564.8 2,173.0 4,035.0 5,458.2 4. PAI 9.7 141.4 393.9 473.7 533.2 TOTAL 3,232.4 8,742.6 21,908.6 21,441.5 27,000.4 16