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Mexico: Telecommunications Technical Assistance Project (Loan 3208-ME)

The Implementation Completion Report (ICR) on the Mexico Telecommunications Technical Assistance project (Loan 3208-ME, approved in FY90) prepared by the Latin America and the Caribbean Regional Office, including the Borrower's contribution, was reviewed by the Operations Evaluation Department (OED). The loan for an amount of US$22 million was approved in May 1990, and closed in June 1995, one year behind schedule. The loan was fully disbursed.

The project was processed and approved concomitantly with the US$380 million Road Transport and Telecommunications Sector Adjustment operation (Loan 3207-ME), which supported a major reform of the telecommunications sector (including, inter alia, the privatization of TELMEX, Mexico's telecommunications agency) and was successfully completed in 1991. The technical assistance project was to complement and follow-up the adjustment operation. Its objectives were to: (i) strengthen the Ministry of Communications and Transport's (SCT) ability to carry out its mandate to regulate the mostly privatized telecommunications services and networks (some of which retained monopolistic features); (ii) improve SCT's capabilities to plan, manage and monitor the use of the radio spectrum (a scarce public good); and (iii) assist TELECOMM-a new state-owned entity in charge, inter alia, of satellite operations-develop as a commercial enterprise. The project included studies, consultant services, training and equipment to support these three objectives. Loan funds assigned to the third objective (about US$0.5 million) were subsequently reallocated to studies for SCT, as TELECOMM decided to finance these activities from its own funds.

Most project components were completed, albeit about a year behind schedule due to procurement delays and substantial staff turnover in SCT. Their impact, however, was mixed. By late 1995, a new radio spectrum management system was in place and operating satisfactorily. But the strengthening of SCT's regulatory capabilities was only partially achieved, due to inadequate Government commitment to implement the necessary reorganization of, and to provide appropriate staffing for, SCT as recommended by the Bank-financed studies. As a result, SCT was still not well prepared, by the time the project was completed in 1995 (i.e. five years after the initiation of sector reform), to fulfill its regulatory role during the next phase of sector reform, which calls for further market liberalization by late 1996. A recent Bank-financed Infrastructure Privatization Technical Assistance project, approved in 1995, addresses these gaps in sector regulation.

On balance, the project's outcome is rated as marginally satisfactory (compared with satisfactory in the ICR) on account of the partial achievement of the project's primary objective, which was to strengthen SCT's regulatory capabilities. This rating contrasts with the highly successful rating of the parallel adjustment project completed in 1991, which reflected the depth and success of the initial phase of sector reform. As in the ICR, the project's institutional development impact is rated as moderate. Similarly, sustainability is rated as likely in light of the Government's continuing commitment to overall sector reform and its recent announcement that it will create an independent regulatory agency. Bank performance is assessed as satisfactory. Save for project outcome, these ratings are consistent with those in the ICR.

This project confirms that the constraints one usually finds in public administrations- including limited budgets, non-competitive salaries and burdens on procurement producersmake it difficult to improve the capabilities of a line ministry to the levels required of a regulatory agency in a technically advanced sector such as telecommunications.

The ICR is thorough and informative and is assessed as satisfactory. No audit is planned.

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