USAID/Mexico municipal development through infrastructure financing activity : a performance evaluation

The report examines EDII’s contributions in: i) increasing funding for public works projects at the subnational level using good financial practices with appropriate legal structures to facilitate access to private capital at market rates; and ii) testing the development of bond banks as a method to achieve these goals. The report chronicles the five phases of the activity, discusses conclusions about the creation of new laws to govern financing and bond banks to promote infrastructure and in the last three years, to facilitate clean energy and crime prevention projects, and provides recommendations for decision-makers replicating the activity. The data to answer eight evaluation questions came from activity documents and interviews with key stakeholders, including USAID and Evensen Dodge staff, Mexican government officials and activity beneficiaries. The evaluation found that the 16-year USAID-EDII activity contributed significantly to the creation of a national legal framework to create bond banks and financial vehicles to respond to the needs of local governments. This framework became self-sustaining and can be replicated in other countries. The original goal of creating an institution that would become a single national bond bank was set aside. Instead, the activity supported the creation of the legal framework for a mechanism—the bond bank/Special Purpose Vehicle (BB/SPV) tool—that can be used at a national, state, or municipal level. Two state bond banks were created, in Hidalgo and Quintana Roo. The capacity building goal was partially completed. High personnel turnover at the local government level, when national government administrations change, is a constraint for creating a sustained workforce of staff trained in the use of the tool. The work of the last years of the activity restructured the debt for the state of Veracruz and introduced a new special purpose financing vehicle, the Accredited Trust. The Accredited Trust functions like a bond bank. EDII missed the mark in achieving stated objectives in the final agreement of the GDA to generate projects focused on clean energy and crime prevention. The authors offer eight recommendations to USAID applicable to similar activities. Some support adjusting these activities to new global realities, others relate to macroeconomic conditions. One recommendation relates to management improvement opportunities.