---

|UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
|-----------------------------------------------------------------------
|                                                                       

|ANNUAL
REPORT PURSUANT TO SECTION 13 
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 13, 2003
Commission file number: 1-14814 | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------- | 

---

Fomento Económico Mexicano, S.A. de C.V.(Exact Name of Registrant as Specified in Its Charter)

---

|Mexican Economic Development, Inc.(Translation of Registrants Name into English) | United Mexican States(Jurisdiction of Incorporation or Organization)
|--------------------------------------------------------------------------------- | --------------------------------------------------------------------

---

General Anaya No. 601 Pte. 
  Colonia Bella Vista
  Monterrey, NL 64410 Mexico (Adress of Principal Executive Offices)


---

Securities registered or to be registered pursuant to Section 12(b) of the Act:

|Title of Each Class                                                                                                                                                   | Name of Each Exchange on Which Registered
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------
|American Depositary Shares, each representing ten BD Units, each consisting of one Series B Share, two Series D-B Shares and two Series D-L Shares,
without par value | New York Stock Exchange                  

**Securities registered or to be registered pursuant to Section 12(g) of the Act:** **None****Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:** **None****The number of outstanding shares of each of the issuers classes of capital or common stock as of December 31, 2003 was:**

|639,892,590 ........ | BD Units, each consisting of one Series B Share, two Series D-B Shares and two Series D-L Shares, without par
value. The BD Units represent a total of 639,892,590 Series B Shares, 1,279,785,180 Series D-B Shares and 1,279,785,180 Series D-L Shares.
|-------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|419,569,500 ........ | B Units, each consisting of five Series B Shares without par value. The B Units represent a total of 2,097,847,500 Series
B Shares.                                                                                                                     

Indicate by check mark whether the registrant:
 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
 of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
 file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes         
         No


**Indicate by check mark which financial
statement item the registrant has elected to follow:**

Item 17  
         Item 18


---



TABLE OF CONTENTS

|INTRODUCTION |                                                           
|------------ | ----------------------------------------------------------
|             | References                                                
|             | Accounting Principles                                     
|             | Currency Translations and Estimates                       
|             | Forward-Looking Information                               
|             | Presentation of Panamco                                   
|             | Available Information                                     
|ITEM 1.      | NOT APPLICABLE                                            
|ITEM 2.      | NOT APPLICABLE                                            
|ITEM 3.      | KEY INFORMATION                                           
|             | Selected Financial Data                                   
|             | Dividends                                                 
|             | Exchange Rate Information-Mexican Peso                    
|             | Risk Factors                                              
|ITEM 4.      | INFORMATION ON THE COMPANY                                
|             | Overview                                                  
|             | Corporate Background                                      
|             | Ownership Structure                                       
|             | Significant Subsidiaries                                  
|             | Business Strategy                                         
|             | Coca-Cola FEMSA                                           
|             | FEMSA Cerveza                                             
|             | FEMSA Comercio                                            
|             | FEMSA Empaques                                            
|             | Other                                                     
|             | Description of Property, Plant and Equipment              
|             | Capital Expenditures and Divestitures                     
|             | Regulatory Matters                                        
|ITEM 5.      | OPERATING AND FINANCIAL REVIEW AND PROSPECTS              
|             | Operating Leverage                                        
|             | New Accounting Pronouncements                             
|             | Operating Results                                         
|             | Results of Operations                                     
|             | Liquidity and Capital Resources                           
|             | Plan for the Disposal of Certain Fixed Assets             
|             | U.S. GAAP Reconciliation                                  
|ITEM 6.      | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                
|             | Directors                                                 
|             | Statutory Examiner                                        
|             | Senior Management                                         
|             | Executive Officers                                        
|             | Compensation of Directors and Senior Management           
|             | Stock Incentive Plan                                      
|             | Share Ownership                                           
|             | Board Practices                                           
|             | Employees                                                 
|             | Insurance Policies                                        
|ITEM 7.      | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS         
|             | Major Shareholders                                        
|             | Related Party Transactions                                
|ITEM 8.      | FINANCIAL INFORMATION                                     
|             | Consolidated Financial Statements                         
|             | Dividend Policy                                           
|             | Legal Proceedings                                         
|ITEM 9.      | THE OFFER AND LISTING                                     
|             | Description of Securities                                 
|             | Trading Markets                                           
|             | Trading on the Mexican Stock Exchange                     
|             | Price History                                             
|ITEM 10.     | ADDITIONAL INFORMATION                                    
|             | Bylaws                                                    
|             | Organization and Register                                 
|             | Voting Rights and Certain Minority Rights                 
|             | Shareholder Meetings                                      
|             | Dividend Rights                                           
|             | Change in Capital and Withdrawal Rights                   
|             | Preemptive Rights                                         
|             | Limitations on Share Ownership                            
|             | Other Provisions                                          
|             | Taxation                                                  
|             | Material Contracts                                        
|ITEM 11.     | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|             | Interest Rate Risk                                        
|             | Foreign Currency Exchange Rate Risk                       
|             | Equity Risk                                               
|             | Commodity Price Risk                                      
|ITEMS 12-14. | NOT APPLICABLE                                            
|ITEM 15.     | CONTROLS AND PROCEDURES                                   
|ITEM 16A.    | AUDIT COMMITTEE FINANCIAL EXPERT                          
|ITEM 16B.    | CODE OF ETHICS                                            
|ITEM 16C.    | PRINCIPAL ACCOUNTANT FEES AND SERVICES                    
|ITEM 16D.    | NOT APPLICABLE                                            
|ITEM 16E.    | NOT APPLICABLE                                            
|ITEM 17.     | NOT APPLICABLE                                            
|ITEM 18.     | FINANCIAL STATEMENTS                                      
|ITEM 19.     | EXHIBITS                                                  



Table of Contents

INTRODUCTION

Table of Contents

References

The terms FEMSA, our
company, we, us and our, are used in this annual report to refer to Fomento Económico
Mexicano, S.A. de C.V. and, except where the context otherwise requires, its subsidiaries
on a consolidated basis.

References to U.S.
dollars, US$, Dollars or $ are to the lawful currency of the United States.
 References to Mexican pesos, Pesos or Ps.  are to the lawful currency of the
United Mexican States or Mexico.

Table of Contents

Accounting Principles

We publish our
financial statements in Mexican pesos and prepare our financial statements in accordance
with Generally Accepted Accounting Principles in Mexico, which we refer to as Mexican
GAAP.  Mexican GAAP differs in certain significant respects from Generally Accepted
Accounting Principles in the United States, which we refer to as U.S. GAAP.  Notes 25 and
26 to our consolidated financial statements provide a description of the principal
differences between Mexican GAAP and U.S. GAAP as they relate to our company and a
reconciliation to U.S. GAAP of majority net income and majority stockholders equity.

Table of Contents

Currency
Translations and Estimates

This annual report
contains translations of certain Mexican peso amounts into U.S. dollars at specified
rates solely for the convenience of the reader.  These translations should not be
construed as representations that the Mexican peso amounts actually represent the U.S.
dollar amounts or could be converted into U.S. dollars at the rate indicated.  Unless
otherwise indicated, these U.S. dollar amounts have been translated from Mexican pesos at
an exchange rate of Ps. 11.235 to US$1.00, the exchange rate quoted by dealers to FEMSA
for the settlement of obligations in foreign currencies on December 31, 2003.  On
December 31, 2003 and on March 15, 2004, the noon buying rates for Mexican pesos as
published by the Federal Reserve Bank of New York were Ps. 11.242 to US$1.00 and Ps. 10.975
to US$1.00, respectively.  See Item 3.  Key InformationExchange Rate InformationMexican
Pesos for information regarding exchange rates since 1999.

To the extent
estimates are contained in this annual report, we believe that such estimates, which are
based on internal data, are reliable.  Amounts in this annual report are rounded, and the
totals may therefore not precisely equal the sum of the numbers presented.

Per capita growth
rates and population data have been computed based upon statistics prepared by the
Instituto Nacional de Estadística, Geografía e Informáticaof Mexico (the National
Institute of Statistics, Geography and Information, which we refer to as the Mexican
Institute of Statistics), the Federal Reserve Bank of New York, Banco de México(the Bank
of Mexico) and upon our estimates.

Table of Contents

Forward-Looking
Information

This annual report
contains words, such as believe, expect and anticipate and similar expressions that
identify forward-looking statements.  Use of such words reflects our views about future
events and financial performance.  Actual results could differ materially from those
projected in such forward-looking statements as a result of various factors that may be
beyond our control, including but not limited to effects on our company from changes in
our relationship with or among our affiliated companies, movements in the prices of raw
materials, competition, significant developments in Mexico or international economic or
political situations or changes in our regulatory environment.  Accordingly, we caution
readers not to place undue reliance on these forward-looking statements.  In any event,
these statements speak only as of their respective dates, and we undertake no obligation
to update or revise any of them, whether as a result of new information, future events or
otherwise.

Table of Contents

Presentation of
Panamco

Our subsidiary,
Coca-Cola FEMSA, S.A. de C.V., which we refer to as Coca-Cola FEMSA, acquired Corporación
Interamericana de Bebidas, S.A. de C.V., formerly known as Panamerican Beverages, Inc.
and which we refer to as Panamco, on May 6, 2003.  Under Mexican GAAP, Panamco is
included in our consolidated financial statements since May 2003 but is not included for
periods prior to this date.  As a result, our consolidated financial statements for the
year ended and as of December 31, 2003 are not comparable to prior periods.  The
acquisition of Panamco only impacted the comparability of our consolidated information
and of the Coca-Cola FEMSA segment.  The comparability of our remaining segments was not
affected by the acquisition.

Table of Contents

Available Information

The materials referred
to in this annual report, the annual report itself and its exhibits, may be inspected and
copied at the SECs public reference room in Washington, D.C.  Please call the SEC at
1-(800)-SEC-0330 for further information on the public reference room.  In addition, we
began making filings with the SECs EDGAR system in 2002.  Any filings made
electronically will be available to the public over the internet at the SECs web site at
www.sec.gov.  Additional information regarding Coca-Cola FEMSA can be found in its annual
report on Form 20-F filed with the SEC on April 5, 2004.  Coca-Cola FEMSAs annual report
does not constitute part of this annual report and is not incorporated by reference.



Table of Contents

ITEM 1.  NOT
APPLICABLE

Table of Contents

ITEM 2.  NOT
APPLICABLE

Table of Contents

ITEM 3.  KEY
INFORMATION

Table of Contents

Selected Financial
Data

This annual report
includes, under Item 18, our audited consolidated balance sheets as of December 31, 2003
and 2002 and the related consolidated income statements, changes in stockholders equity
and changes in financial position for the years ended December 31, 2003, 2002 and 2001.
 Our consolidated financial statements are prepared in accordance with Mexican GAAP which
differs in certain significant respects from U.S. GAAP.  Notes 25 and 26 to our
consolidated financial statements provide a description of the principal differences
between Mexican GAAP and U.S. GAAP as they relate to FEMSA, together with a
reconciliation to U.S. GAAP of net majority income, majority shareholders equity and
certain other selected financial data.  The effects of inflation accounting under Mexican
GAAP have not been reversed in the reconciliation to U.S. GAAP.  See Note 25 to our
consolidated financial statements.

On May 6, 2003, our
subsidiary Coca-Cola FEMSA acquired Panamco.  Under Mexican GAAP, Panamco is included in
our consolidated financial statements since May 2003 but is not included for periods
prior to this date.  As a result, our consolidated financial statements for the year
ended and as of December 31, 2003 are not comparable to prior periods.

The following table
presents selected financial information about us.  This information should be read
together with, and is qualified in its entirety by, our consolidated financial statements
and the notes to those statements.  The selected financial information is presented on a
consolidated basis and is not necessarily indicative of our financial position or results
of operations at or for any future date or period.

|                                                         | Selected Consolidated Financial Information
Year Ended December 31,                                                                                                                      
|-------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                         |                                                                                                                                                                                          
|                                                         | 2003(1)                                                                                                                                                                                  
|                                                         |                                                                                                                                                                                          
|                                                         | (in millions of U.S. dollars and Mexican pesos, except for per share data, the
                                       weighted average number of shares outstanding and operating margin)
|Income Statement Data:                                  
|Mexican GAAP:                                           
|Total revenues                                           | $6,755                                                                                                                                                                                   
|Income from operations(2)                                | 1,078                                                                                                                                                                                    
|Taxes(3)                                                 | 300                                                                                                                                                                                      
|Change in accounting principle                           |                                                                                                                                                                                         
|Net income                                               | 415                                                                                                                                                                                      
|Net majority income                                      | 275                                                                                                                                                                                      
|Net minority income                                      | 140                                                                                                                                                                                      
|Net majority income per share(4)                        
|Series B Shares                                          | 0.046                                                                                                                                                                                    
|Series D Shares                                          | 0.058                                                                                                                                                                                    
|Weighted average number of shares outstanding (millions)
|Series B Shares                                          | 2,737.7                                                                                                                                                                                  
|Series D Shares                                          | 2,559.6                                                                                                                                                                                  
|                                                        
|U.S. GAAP:                                              
|Total revenues                                           | $6,755                                                                                                                                                                                   
|Income from operations(2)                                | 1,039                                                                                                                                                                                    
|Change in accounting principle                           |                                                                                                                                                                                         
|Net minority income                                      | 143                                                                                                                                                                                      
|Net income                                               | 291                                                                                                                                                                                      
|Net income per share(4)                                 
|Series B Shares                                          | 0.049                                                                                                                                                                                    
|Series D Shares                                          | 0.061                                                                                                                                                                                    
|                                                        
|Balance Sheet Data:                                     
|Mexican GAAP:                                           
|Total assets                                             | $9,287                                                                                                                                                                                   
|Current liabilities                                      | 1,488                                                                                                                                                                                    
|Long-term debt(5)                                        | 2,968                                                                                                                                                                                    
|Other long-term liabilities                              | 728                                                                                                                                                                                      
|Capital Stock                                            | 378                                                                                                                                                                                      
|Total shareholders equity                               | 4,103                                                                                                                                                                                    
|Majority interest                                        | 2,528                                                                                                                                                                                    
|Minority interest                                        | 1,575                                                                                                                                                                                    
|                                                        
|U.S. GAAP:                                              
|Total assets                                             | $10,636                                                                                                                                                                                  
|Current liabilities                                      | 1,711                                                                                                                                                                                    
|Long-term debt(5)                                        | 3,130                                                                                                                                                                                    
|Other long-term liabilities                              | 515                                                                                                                                                                                      
|Capital Stock                                            | 378                                                                                                                                                                                      
|Shareholders equity                                     | 3,748                                                                                                                                                                                    
|Minority interest                                        | 1,532                                                                                                                                                                                    
|                                                        
|Other information:                                      
|Mexican GAAP:                                           
|Depreciation(6)                                          | $278                                                                                                                                                                                     
|Capital expenditures(7)                                  | 604                                                                                                                                                                                      
|Operating margin(8)                                      | 16.0%                                                                                                                                                                                    
|                                                        
|U.S. GAAP:                                              
|Depreciation(6)                                          | $285                                                                                                                                                                                     
|Operating margin(8)                                      | 15.4%                                                                                                                                                                                    
|                                                        

|__________________
|------------------
|(1)               
|(2)               
|(3)               
|(4)               

|                                                       | Series B Shares | Series D Shares
|------------------------------------------------------ | --------------- | ---------------
|                                                       |                
|                                                       | Number ofShares | WeightedAverage
|                                                       |                 |                
|At December 31, 1999                                   | 2,746,546,090   | 2,746,546,050  
|Allocation of earnings                                 |                 | 45.85%         
|Repurchase of our shares in 2000 from October 29, 2000
|to December 29, 2000                                   | 6,750,000       | 736,246        
|At December 31, 2000                                   | 2,739,796,090   | 2,745,809,844  
|Allocation of earnings                                 |                 | 45.85%         
|Repurchase of our shares in 2001 from                 
|January 4, 2001 to January 16, 2001                    | 2,056,000       | 2,004,647      
|At December 31, 2001                                   | 2,737,740,090   | 2,737,791,443  
|Allocation of earnings                                 |                 | 46.11%         
|At December 31, 2002 and 2003                          | 2,737,740,090   | 2,737,740,090  
|Allocation of earnings                                 |                 | 46.11%         

|(5) | Includes long-term bank loans minus the current portion of long-term debt.          
|--- | ------------------------------------------------------------------------------------
|(6) | Includes bottle breakage.                                                           
|(7) | Includes investments in property, plant and equipment and deferred charges.         
|(8) | Operating margin is calculated by dividing income from operations by total revenues.

Table of Contents

Dividends



Subject to
extraordinary economic events and to the factors described below that affect our
financial situation and liquidity, which may affect whether or not dividends are declared
and the amount of such dividends, we intend to pay aggregate dividends of approximately
15% to 30% of net income.  We do not expect to be subject to any contractual restrictions
on our ability to pay dividends, although our subsidiaries may be subject to such
restrictions.  Because we are a holding company with no significant operations of our
own, we will have distributable profits and cash to pay dividends only to the extent that
we receive dividends from our subsidiaries.  Accordingly, there can be no assurance that
we will pay dividends or as to the amount of any dividends.

Subject to certain
exceptions contained in the Deposit Agreement dated February 11, 2004, among FEMSA, The
Bank of New York as depositary and all holders and beneficial owners from time to time of
American Depositary Shares or ADSs evidenced by American Depositary Receipts issued under
the Deposit Agreement, any dividends distributed to U.S. holders of our ADSs will be paid
to the ADS depositary in Mexican pesos and will be converted by the ADS depositary into
U.S. dollars.  As a result, exchange rate fluctuations may affect the U.S. dollar amount
actually received by holders of our ADSs.  Although the Mexican government does not
currently restrict the ability of Mexican and foreign persons or entities to convert
Mexican pesos to U.S. dollars or other currencies or to transfer other currencies out of
Mexico, we cannot give any assurance that the Mexican government will not institute a
restrictive exchange control policy in the future.  Any restrictive exchange control
policy could affect the ADS depositarys ability to convert dividends received in Mexican
pesos into U.S. dollars for purposes of making a distribution to holders of the ADSs.

The table below sets
forth for each year the nominal amount of dividends per share that we declared in Mexican
pesos and the U.S. dollar equivalent amounts that were actually paid on each of the
respective payment dates for the period 2000 to 2004:

|                   | Dividends by FEMSA2000 to 2004                        
|------------------ | -------------------------------------------------------
|                   |                                                        
|Date Dividend Paid | Fiscal Year with Respect to which Dividend was Declared
|                   |                                                        
|July 31, 2000      | 1999                                                   
|May 21, 2001       | 2000                                                   
|May 31, 2002       | 2001                                                   
|May 30, 2003       | 2002                                                   
|March 11, 2004(3)  | 2003(4)                                                

|__________________
|------------------
|(1)               

| | Date Dividend Paid | Outstanding Shares |              
| | ------------------ | ------------------ | -------------
| |                    |                    |              
| |                    | Series B           | Series D     
| | July 31, 2000      | 2,746,546,090      | 2,594,794,360
| | May 21, 2001       | 2,737,740,090      | 2,559,570,360
| | May 31, 2002       | 2,737,740,090      | 2,559,570,360
| | May 30, 2003       | 2,737,740,090      | 2,559,570,360
| | March 11, 2004(3)  | 2,737,740,090      | 2,559,570,360
| |                    |                    |              

|__________________
|------------------
|(2)               
|(3)               
|(4)               

Table of Contents

Exchange Rate
Information-Mexican Peso



After a volatile 1997
and 1998, the Mexican peso remained relatively stable through 1999, 2000 and most of
2001.  Towards the end of 2001 and the beginning of 2002, the Mexican peso appreciated
considerably against the U.S. dollar and even more so against other currencies.  The
value of the Mexican peso peaked in March 2002 at Ps. 9.00 per U.S. dollar.  From the
second quarter of 2002 through the end of 2003, the peso depreciated reaching an exchange
rate of Ps. 11.24 per U.S. dollar in December of 2003.  The peso has appreciated slightly
in 2004 to date. There can be no assurance that the Mexican government and the Bank of
Mexico will maintain their current policies with regard to the Mexican peso or that the
Mexican peso will not further depreciate significantly.

The noon buying rate
per U.S. dollar on March 15, 2004 was Ps. 10.975.  The following table sets forth, for
the periods indicated, the high, low, average and period-end noon buying rates of the
Federal Reserve Bank of New York, expressed in Mexican pesos per U.S. dollar.  We
calculated the average rate by using the average of the exchange rates on the last day of
each month during the period.  The rates have not been restated in constant currency
units.  All amounts are stated in Mexican pesos.

|                    | Exchange Rate
|------------------- | -------------
|                    | High         
|                    |              
|1999                | 10.60        
|2000                | 10.09        
|2001                | 9.97         
|2002                | 10.43        
|2003                | 11.41        
|                   
|                   
|                    | High         
|2003:               |              
|September           | 11.04        
|October             | 11.32        
|November            | 11.40        
|December            | 11.41        
|                   
|2004:              
|January             | 11.10        
|February            | 11.25        
|March 1 to March 15 | 11.05        



Table of Contents

Risk Factors

Risks Related to
Our Company

Coca-Cola FEMSA

Coca-Cola FEMSAs
business depends on its relationship with The Coca-Cola Company.

Approximately 93.2% of
Coca-Cola FEMSAs sales volumes in 2003 were derived from sales of Coca-Colatrademark
beverages. Coca-Cola FEMSA produces, markets and distributes Coca-Colatrademark
beverages through standard bottler agreements that cover all of Coca-Cola FEMSAs present
territories. Through its rights under the bottler agreements and as a large shareholder,
The Coca-Cola Company has the ability to exercise substantial influence over the conduct
of Coca-Cola FEMSAs business. See Item 10. Additional InformationMaterial ContractsCoca-Cola
FEMSABottler Agreements.

Under Coca-Cola FEMSAs
bottler agreements, The Coca-Cola Company may unilaterally set the price for its
concentrate. Furthermore, in conjunction with The Coca-Cola Company, Coca-Cola FEMSA
prepares a three-year general business plan that is submitted to Coca-Cola FEMSAs board
of directors for approval. The Coca-Cola Company may require that Coca-Cola FEMSA
demonstrates its financial ability to meet Coca-Cola FEMSAs plans and may terminate
Coca-Cola FEMSAs rights to produce, market and distribute soft drinks in territories
with respect to which such approval is withheld. The Coca-Cola Company also makes
significant contributions to Coca-Cola FEMSAs marketing budget although they are not
required to contribute a particular amount. In addition, Coca-Cola FEMSA is prohibited
from bottling any soft drink product or distributing other beverages without The
Coca-Cola Companys authority or consent. The Coca-Cola Company has the exclusive right
to import and export Coca-Colatrademark beverages to and from Coca-Cola FEMSAs
territories. Coca-Cola FEMSA may not transfer control of the bottler rights of any of
its territories without the consent of The Coca-Cola Company.

Coca-Cola FEMSA
depends on The Coca-Cola Company to renew its bottler agreements. Coca-Cola FEMSAs
bottler agreements for Mexico expire in 2005 and 2013, renewable in each case for
ten-year terms. Its bottler agreements for Colombia, Brazil and Argentina expire in
2004, renewable in each case for five-year terms (except for Argentina, which is
renewable for ten-year terms). Coca-Cola FEMSAs remaining territories are governed by
bottler agreements that expire after 2005 that have similar renewal periods. There can
be no assurances that The Coca-Cola Company will decide to renew any of these agreements.
In addition, these agreements generally may be terminated in the event that Coca-Cola
FEMSA fails to comply with their terms. Non-renewal or termination would prevent
Coca-Cola FEMSA from selling Coca-Colatrademark beverages in the affected territory and
would have an adverse effect on Coca-Cola FEMSAs business, financial condition,
prospects, and results of operations.

The Coca-Cola Company
indirectly owns 39.6% of Coca-Cola FEMSAs outstanding capital stock, representing 46.4%
of the voting rights in Coca-Cola FEMSA.  The Coca-Cola Company is entitled to appoint
four of Coca-Cola FEMSAs 18 directors and certain of Coca-Cola FEMSAs executive
officers and, except under limited circumstances, has the power to veto significant
decisions of Coca-Cola FEMSAs board of directors.  Thus, the Coca-Cola Company has the
power to affect the outcome of all actions requiring approval by Coca-Cola FEMSAs board
of directors and, except in certain limited situations, has the power to affect the
outcome of all actions requiring approval of Coca-Cola FEMSAs shareholders.  See Item
10. Additional InformationMaterial ContractsCoca-Cola FEMSAShareholders Agreement.  The
interests of the Coca-Cola Company may be different from the interests of Coca-Cola FEMSAs
remaining shareholders, and they may cause Coca-Cola FEMSA to take actions that are not
in the interest of Coca-Cola FEMSAs remaining shareholders.

Coca-Cola FEMSA has
significant transactions with affiliates, particularly The Coca-Cola Company, that create
potential conflicts of interest.

Coca-Cola FEMSA
engages in transactions with subsidiaries of The Coca-Cola Company.  Coca-Cola FEMSA has
entered into cooperative marketing arrangements with The Coca-Cola Company.  Coca-Cola
FEMSA is a party to a number of bottler agreements with The Coca Cola Company and has
also entered into a credit agreement with The Coca-Cola Company pursuant to which
Coca-Cola FEMSA may borrow up to US$250 million for working capital and other general
corporate purposes.  See Item 7.  Major Shareholders and Related Party TransactionsRelated
Party Transactions and Item 10.  Additional InformationMaterial ContractsCoca-Cola
FEMSABottler Agreements.  Transactions with affiliates may create the potential for
conflicts of interest, which could result in terms less favorable to Coca-Cola FEMSA than
could be obtained from an unaffiliated third party.

Coca-Cola FEMSA has
recently increased its leverage as a result of the Panamco acquisition.

In connection with the
acquisition of Panamco, Coca-Cola FEMSA incurred approximately Ps. 26,352 million of debt
(including existing debt of Panamco).  Coca-Cola FEMSAs total indebtedness as of December 31,
2003 was Ps. 29,004 million.  Its debt level is now significantly higher than it has been
historically.  The increase in debt may reduce the amount of cash otherwise available to
Coca-Cola FEMSA to invest in its business or meet its obligations and may prevent it in
the future from pursuing acquisitions and other opportunities that may present themselves
to Coca-Cola FEMSA or from obtaining additional financing or completing refinancings on
terms favorable to Coca-Cola FEMSA.

Coca-Cola FEMSA may
not achieve expected operating efficiencies in the newly acquired territories.

Through the
acquisition of Panamco, Coca-Cola FEMSA acquired new territories in Mexico as well as in
the following countries in which it has not historically conducted operations:
 Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Venezuela and Brazil. Since the
acquisition, Coca-Cola FEMSA has undertaken a plan in the newly acquired territories to
integrate Coca-Cola FEMSAs operations, to improve the utilization of assets across
Coca-Cola FEMSAs territories and to implement the commercial strategies that Coca-Cola
FEMSA has historically applied in its territories in Mexico and Argentina.  Conditions in
these new territories are different from the conditions under which Coca-Cola FEMSA has
historically operated with less favorable consumption patterns than those experienced in
Mexico and different and more challenging political and economic climates.  In addition,
distribution and marketing practices in Coca-Cola FEMSAs new territories differ from
Coca-Cola FEMSAs historical practices.  Several of these territories have a lower level
of pre-sale as a percentage of total distribution than Coca-Cola FEMSA is accustomed to
having, and the product and presentation mix varies from territory to territory with
customer preferences.  There can be no assurance that Coca-Cola FEMSAs initiatives will
reduce operating costs or maintain or improve sales in the near term or at all, which may
adversely affect Coca-Cola FEMSAs sales growth and operating margins.

Competition could
affect Coca-Cola FEMSAs business.

The beverage industry
throughout Latin America is highly competitive.  Coca-Cola FEMSA faces competition from
other bottlers of soft drinks such as PepsiCo, Inc., which we refer to as PepsiCo, and
from producers of low cost beverages or B brands. Coca-Cola FEMSA also competes against
beverages other than soft drinks such as water, fruit juice and sport drinks.  Although
competitive conditions are different in each of Coca-Cola FEMSAs territories, Coca-Cola
FEMSA competes principally in terms of price, packaging, consumer sale promotions,
customer service and non-price retail incentives.  There can be no assurances that
Coca-Cola FEMSA will be able to avoid lower pricing as a result of competitive pressure.
 Lower pricing, changes made in response to competition and changes in consumer
preferences may have an adverse effect on Coca-Cola FEMSAs results of operations.

Coca-Cola FEMSAs
principal competitor in Mexico is The Pepsi Bottling Group, which we refer to as PBG.
PBG is the largest Pepsi bottler worldwide and competes with Coca-Colatrademark
beverages. Coca-Cola FEMSA has also experienced stronger competition in Mexico from
lower priced soft drinks in multi-serving presentations. In Argentina and Brazil,
Coca-Cola FEMSA competes against Companhia de Bebidas das Americas, commonly referred to
as AmBev, the largest brewer in Latin America, which sells Pepsi products, in addition to
a portfolio that includes local brands with flavors such as guaraná and proprietary
beers. In each of Coca-Cola FEMSAs territories it competes against bottlers of Pepsi
with various other bottlers and distributors of national and regional soft drinks as well
as complementary beverages such as water, juice and sports drinks. In certain
territories, Coca-Cola FEMSA also competes against soft drink flavors that have a strong
local presence, such as La Colombianain Colombia.

A water shortage or
a failure to maintain existing concessions could affect Coca-Cola FEMSAs business.

Water is an essential
component of soft drinks.  Coca-Cola FEMSA obtains water from various sources in its
territories, including springs, wells, rivers and municipal water companies.  In Mexico,
Coca-Cola FEMSA purchases water from municipal water companies and pumps water from its
own wells pursuant to concessions granted by the Mexican government.  Coca-Cola FEMSA
obtains the vast majority of the water used in its soft drink production in Mexico
pursuant to these concessions, which the Mexican government granted based on studies of
the existing and projected groundwater supply.  Coca-Cola FEMSAs existing water
concessions in Mexico may be terminated by governmental authorities under certain
circumstances and their renewal depends on receiving necessary authorizations from
municipal water authorities.  See Item 4.  Information on the CompanyRegulatory MattersWater
Supply Law.  In Coca-Cola FEMSAs other territories, its existing water supply may not
be sufficient to meet its future production needs and the available water supply may be
adversely affected by shortage or changes in governmental regulations.

Coca-Cola FEMSA cannot
assure that water will be available in sufficient quantities to meet its future
production needs, or that its concessions and permits will not be terminated or prove
sufficient to meet its water supply needs.

Increases in the
prices of raw materials may increase Coca-Cola FEMSAs cost of sales and may affect its
results of          operations.

Coca-Cola FEMSAs most
significant raw materials are concentrate, which it acquires from companies designated by
The Coca-Cola Company, sweeteners and packaging materials.  Prices for concentrate are
determined by The Coca-Cola Company pursuant to its bottler agreements as a percentage of
the weighted average retail price, net of applicable taxes.  The prices for remaining raw
materials are driven by market prices and local availability as well as the imposition of
import duties and import restrictions and fluctuations in exchange rates.  Coca-Cola
FEMSA is also required to use only suppliers approved by The Coca-Cola Company, which may
limit the number of suppliers available to Coca-Cola FEMSA.  Coca-Cola FEMSAs sales
prices are denominated in the local currency in which it operates, while the prices of
certain materials used in the bottling of its products, mainly aluminum cans and plastic
bottles, are paid in or determined with reference to the U.S. dollar and therefore may
increase if the U.S. dollar appreciates against the currency of any country in which it
operates, particularly against the Mexican peso.  See Item 4.  Information on the CompanyCoca-Cola
FEMSARaw Materials.

After concentrate,
packaging, and sweeteners constitute the largest portion of Coca-Cola FEMSAs raw
material costs.  Sugar prices in all of the countries in which Coca-Cola FEMSA operates
other than Brazil, are subject to local regulations and other barriers to market entry
that cause Coca-Cola FEMSA to pay in excess of international market prices for sugar.  In
Mexico, sugar prices increased approximately 8% in 2003, and Coca-Cola FEMSAs ability to
substitute other sweeteners has been limited by the imposition of a 20% excise tax on
carbonated soft drinks produced with non-sugar sweeteners.  In Venezuela, there was a
shortage of sugar during the second half of 2003 due to the inability of the main sugar
importers to access foreign currencies as a result of the exchange controls implemented
at the beginning of 2003.

Coca-Cola FEMSA cannot
assure that its raw material prices will not increase in the future.  Increases in the
prices of raw materials will increase Coca-Cola FEMSAs cost of sales and adversely
affect its results of operations.

Taxes on soft
drinks could affect Coca-Cola FEMSAs business.

Coca-Cola FEMSAs
products are subject to excise and value-added taxes in many of the countries in which it
operates. The imposition of new taxes or increases in taxes on Coca-Cola FEMSAs products
may have a material adverse effect on its business, prospects, financial conditions and
results of operations.  Mexico recently implemented a 20% excise tax on carbonated soft
drinks produced with non-sugar sweeteners.  Certain countries in Central America,
Argentina and Brazil have also imposed taxes on Coca-Cola FEMSAs products.  See Item 4.
 Information on the CompanyCoca-Cola FEMSATaxation of Soft Drinks.  Coca-Cola FEMSA
can give no assurance that any governmental authority in any country where it operates
will not impose or increase any such taxes in the future.

Regulatory
developments may have an affect on Coca-Cola FEMSAs business.

Coca-Cola FEMSA is
subject to regulation in each of the territories in which it operates.  The principal
areas in which Coca-Cola FEMSA is subject to regulation are environment, labor, taxes and
antitrust.  The adoption of new laws or regulations in the countries in which Coca-Cola
FEMSA operates may increase its operating costs or impose restrictions on its operations.
 In particular, environmental standards became more stringent recently in several of the
countries in which Coca-Cola FEMSA operates, and Coca-Cola FEMSA is in the process of
complying with these new standards.

Voluntary price
restraints or statutory price controls have been imposed historically in several of the
countries in which Coca-Cola FEMSA operates.  The imposition of these restrictions may
have an adverse effect on its results of operations and financial position.  Although
Mexican bottlers have been free to set prices for carbonated soft drinks without
governmental intervention since January 1996, such prices were once subject to statutory
price controls and, later, to voluntary price restraints, which effectively limited
Coca-Cola FEMSAs ability to increase prices in the Mexican market without governmental
consent.  See Item 4. Information on the CompanyRegulatory MattersPrice Controls on
Soft Drinks.  Coca-Cola FEMSA can give no assurance that governmental authorities in any
country where Coca-Cola FEMSA operates will not impose voluntary price restraints or
statutory price controls.

FEMSA Cerveza

Unfavorable
economic conditions in Mexico and the United States may affect FEMSA Cervezas business.

Demand for the
products of FEMSA Cerveza, S.A. de C.V., which we refer to as FEMSA Cerveza, our
70%-owned subsidiary engaged in the production, distribution and marketing of beer, may
be affected by economic conditions in Mexico and the United States.  In particular,
demand in our northern stronghold regions in Mexico, where there are a large number of
border towns, may be more affected by the performance of the United States economy.  In
addition, our exports to the United States may be affected by reduced demand from the
United States or from a reduction in prices by our competitors.  Any depreciation of the
Mexican peso may negatively affect our results of operations because a significant
portion of our costs and expenses are denominated in or determined by reference to the
U.S. dollar.

Uncertainty in
commodity prices of raw materials used in beer production may result in increased costs.

FEMSA Cerveza
purchases a number of commodities for the production of its products (principally barley,
malt and hops) from Mexican producers and in the international market.  The prices of
such commodities can fluctuate and are determined by global supply and demand and other
factors, including changes in exchange rates, over which FEMSA Cerveza has no control.
 There can be no assurance that FEMSA Cerveza will be able to recover increases in the
cost of raw materials.  See Item 4.  Information on the CompanyFEMSA CervezaRaw
Materials.  An increase in raw materials costs would adversely affect our results of
operations.

Labatt, through a
joint venture with FEMSA Cerveza, has significant rights that may allow Labatt to
influence the conduct of          FEMSA Cervezas business.

On December 1, 1994,
FEMSA Cerveza and Labatt Brewing Company Limited, which we refer to as Labatt, entered
into a joint venture pursuant to which Labatt currently holds 30% of the capital stock of
FEMSA Cerveza.  Both parties agreed to combine their United States beer businesses
through their joint ownership of Labatt USA LLC and Latrobe Brewing Company LLC, which we
collectively refer to as Labatt USA.  FEMSA Cervezas relationship with Labatt gives
Labatt significant rights, which may allow Labatt to influence the conduct of FEMSA
Cervezas business.  Under the bylaws of FEMSA Cerveza, Labatt may appoint four directors
to FEMSA Cervezas 15 member board of directors.  As long as Labatt or its controlled
affiliates or permitted transferees hold certain shares of FEMSA Cerveza representing at
least 20% of the outstanding capital stock, Labatt has the right to approve the
appointment of the senior operating vice presidents of FEMSA Cerveza and veto certain
decisions of the board of directors.

In addition,
affiliates of Labatt own 70% of Labatt USA, and Labatt USA is the exclusive importer of
FEMSA Cervezas brands into the United States.  As such, FEMSA Cervezas exports to the
United States may depend on Labatt.  See Item 10.  Additional InformationMaterial
ContractsFEMSA Cerveza.

On April 29, 2002,
Wisdom Import Sales Co., which we refer to as Wisdom, a subsidiary of FEMSA Cerveza in
the United States, filed a lawsuit against certain affiliates of Labatt to enjoin the
integration of the beer brands of Becks North America, which we refer to as Becks, into
the beer distribution portfolio of Labatt USA, and on May 23, 2002 a preliminary
injunction was issued by a New York district court preventing the integration of Becks
into the Labatt USA portfolio.  This ruling was upheld on appeal and on October 10, 2003,
the district court entered a final judgment on consent, providing that the affiliates of
Labatt are permanently prohibited from integrating the Becks brands into the portfolio
of Labatt USA without the required approval of Wisdom or the Wisdom directors on the
board of the limited liability company that governs Labatt USA.

On March 3, 2004,
Interbrew and the Brazilian brewer AmBev announced a transaction that would affect the
ownership of the majority interest in the limited liability company that owns Labatt USA.
 Wisdom has commenced litigation in the United States District Court for the Southern
District of New York alleging, among other things, that the transaction involves a
transfer of membership or other ownership interests in the limited liability company that
owns Labatt USA, and that such a transfer cannot occur without the approval of Wisdom or
at least one of the Wisdom-appointed directors on the board of the limited liability
company.  See Item 8.  Financial InformationLegal ProceedingsFEMSA Cerveza.  An
ongoing dispute between FEMSA Cerveza and Labatt may have an adverse effect on our
existing joint venture and our exports in the United States.

FEMSA Cervezas
sales in the Mexican market depend on its ability to compete with Grupo Modelo.

FEMSA Cerveza faces
competition in the Mexican beer market from Grupo Modelo, S.A. de C.V., which we refer to
as Grupo Modelo.  FEMSA Cervezas ability to compete successfully in the Mexican beer
market will have a significant impact on its Mexican sales.  See Item 4.  Information on
the CompanyFEMSA CervezaThe Mexican Beer Market.

Competition from
imports in the Mexican beer market is increasing.

Imports do not
currently constitute a significant portion of the Mexican beer market.  Under the North
American Free Trade Agreement or NAFTA, the tariffs applicable to imported beers from the
United States and Canada were eliminated in January 2001. During 2003 imports grew 10.6%
versus 2002 and represented 1.8% of the Mexican beer market.  FEMSA Cerveza believes that
imports will continue to represent a small percentage of the Mexican beer market.
 Increased import competition, however, could lead to greater competition in general, and
there can be no assurance that such a trend would not affect FEMSA Cerveza.  See Item 4.
 Information on the CompanyFEMSA CervezaThe Mexican Beer Market.

Regulatory
developments in Mexico could affect FEMSA Cervezas business.

FEMSA Cervezas
business is subject to a variety of different Mexican government regulations, both
federal and local, and may be affected by changes in law, regulation or regulatory
policy.  Actions of Mexican federal and local authorities, in particular changes in
governmental policy with respect to excise and value-added tax laws, cold beer regulation
or the beer industry practice of tied-customer arrangements, which are agreements with
retailers to sell and promote its products, may have a material adverse impact on FEMSA
Cervezas business, financial conditions and results of operations.

Federal regulation of
beer consumption in Mexico is primarily effected through a 25% excise tax and a 15%
value-added tax. We do not anticipate an increase in these taxes, but federal regulation
relating to excise taxes may change in the future, resulting in an increase or decrease
in the tax.  Local regulations are primarily effected through the issuance of licenses,
which authorize retailers to sell alcoholic beverages.  Other regulations affecting beer
consumption in Mexico vary according to local jurisdictions and include limitations on
the hours during which restaurants, bars and other retail outlets are allowed to sell
beer.  See Item 4. Information on the CompanyFEMSA CervezaThe Mexican Beer Market.

A water supply
shortage could affect FEMSA Cervezas business.

FEMSA Cerveza
purchases water from government entities and obtains pump water from its own wells
pursuant to concessions granted by the Mexican government.

FEMSA Cerveza believes
that its water concessions will satisfy its current and future water requirements.  There
can be no assurance, however, that isolated periods of adverse weather will not affect
FEMSA Cervezas supply of water to meet its future production needs in any given period,
or that its concessions will not be terminated or will not be renewed by the Mexican
government or prove insufficient to meet its water demand.

FEMSA Comercio

Competition from
other retailers in Mexico could affect our companys business.

The Mexican retail
sector is highly competitive.  FEMSA participates in the retail sector primarily through
FEMSA Comercio, S.A. de C.V., which we refer to as FEMSA Comercio.  FEMSA Comercios Oxxo
convenience stores face competition on a regional basis from 7-Eleven, Super Extra, AM/PM
and Circle K stores.  In particular, the Super Extra chain is owned and managed by Grupo
Modelo, our main competitor in the Mexican beer market, and in 2003 the Super Extra chain
launched an aggressive expansion in the number of their stores.  Oxxo convenience stores
also face competition from numerous small chains of retailers in some regions across
Mexico. There can be no assurance that FEMSA Comercio will not be affected by an increase
in competition.

Oxxo convenience
stores are sensitive to economic conditions in Mexico.

Due to the nature of
the convenience store market, convenience stores often sell certain products at a
premium.  The convenience store market is thus highly sensitive to economic conditions as
an economic slowdown is often accompanied by a decline in consumer purchasing power,
which in turn results in a decline in the overall consumption of our main product
categories.  During periods of economic slowdown, Oxxo stores may experience a decline in
traffic per store and purchases per customer, and this may result in a decline in
operating revenue.

FEMSA Empaques

FEMSA Empaques beverage
can operation is sensitive to economic conditions and competition from alternative
beverage          presentations.

The aluminum can
operations of Fábricas Monterrey, S.A. de C.V., which we refer to as Famosa, a subsidiary
of FEMSA Empaques, S.A. de C.V., which we refer to as FEMSA Empaques, are sensitive to
economic conditions because beverage can presentations are more expensive to the consumer
than alternative presentations.  FEMSA Empaques beverage can business exclusively serves
the beverage industry and therefore is vulnerable to shifts in demand for beverage
products.  Furthermore, beverage can presentations also compete with alternative beverage
presentations such as glass and polyethylene terephtalate or PET presentations.  Demand
for canned beverages has decreased in recent years due to a shift toward PET
presentations in the soft drink industry.  See Item 4. Information on the CompanyFEMSA
EmpaquesPrincipal ProductsBeverage Cans.  A decrease in demand may adversely affect
FEMSA Empaques results of operations.

The Mexican
beverage can industry may have excess capacity, which may result in decreases in prices.

Certain significant
competitors in the beverage can industry operate at average levels of capacity
utilization below 60%. We cannot guarantee that some of these businesses will not
practice aggressive pricing strategies in order to increase their sales volume.  See Item
4.  Information on the CompanyFEMSA EmpaquesPrincipal ProductsBeverage Cans.

FEMSA Empaques sales
of glass bottles may be affected by competition and from alternative beverage
presentations.

FEMSA Empaques principal
domestic competitor in the sale of glass bottles is Vitro, S.A. de C.V., which we refer
to as Vitro.  There can be no assurance that FEMSA Empaques will not be affected by price
competition from Vitro or other producers of glass bottles or alternative containers.
 See Item 4.  Information on the CompanyFEMSA EmpaquesPrincipal ProductsGlass Bottles.

Moreover, like the
beverage can business, FEMSA Empaques glass bottle business exclusively serves the
beverage industry and, thus, is vulnerable to shifts in preferences for those products
and presentations.  Demand for glass bottle presentations has declined in recent years
due to a shift towards non-returnable PET presentations for soft drinks.  See Item 4.
 Information on the CompanyFEMSA EmpaquesPrincipal ProductsGlass Bottles.  There can
be no assurance that there will not be a further shift in demand towards such alternative
presentations, which would have an effect on our glass bottle operations.

FEMSA Empaques operating
expenses are affected by changes in commodity prices and exchange rate fluctuations.

A significant portion
of FEMSA Empaques raw materials consist of commodities, the prices of which are subject
to volatility in accordance with international market conditions.  In addition, FEMSA
Empaques operating expenses are denominated in Mexican pesos while its revenues are
linked to the U.S. dollar.  As a result, the operating margins of FEMSA Empaques may be
adversely affected as a result of increases in commodity prices or an appreciation in the
Mexican peso against the U.S. dollar.

Risks Related to
Our Principal Shareholders and Capital Structure

A majority of our
voting shares are held by a voting trust, which effectively controls the management of
our company, and          whose interests may differ from those of other shareholders.

A voting trust,
comprised mainly of five families, owns 36.01% of our capital stock and 69.67% of our
capital stock with full voting rights, consisting of the Series B Shares.  Consequently,
the voting trust has the power to elect a majority of the members of our board of
directors and to play a significant or controlling role in the outcome of substantially
all matters to be decided by our shareholders.  The interests of the voting trust may
differ from those of our other shareholders.  See Item 7.  Major Shareholders and
Related Party Transactions and Item 10.  Additional InformationBylawsVoting Rights
and Certain Minority Rights.

Holders of Series
D-B and D-L Shares have limited voting rights.

Holders of Series D-B
and D-L Shares have limited voting rights and are only entitled to vote on specific
matters, such as changes in our corporate form, a dissolution or liquidation and the
cancellation of the registration of the Series D-B and D-L Shares.  See Item 7.  Major
Shareholders and Related Party TransactionsMajor Shareholders and Item 10.  Additional
InformationBylawsVoting Rights and Certain Minority Rights.

Holders of ADSs may
not be able to vote at our shareholder meetings.

Our shares are traded
on the New York Stock Exchange in the form of ADSs under the trading symbol FMX.  There
can be no assurance that holders of our shares through ADSs will receive notice of
shareholders meetings from our ADS depositary in sufficient time to enable such holders
to return voting instructions to the ADS depositary in a timely manner.  In the event
that instructions are not received with respect to any shares underlying ADSs, the ADS
depositary will, subject to certain limitations, grant a proxy to a person designated by
us.  In the event that this proxy is not granted, the ADS depositary will vote these
shares in the same manner as the majority of the shares of each class for which voting
instructions are received.

Holders of ADSs may
not be able to participate in any future preemptive rights offering and as a result may
be subject to          dilution of their equity interests.

Under applicable
Mexican law, if we issue new shares for cash as a part of a capital increase, we must
generally grant our shareholders the right to purchase a sufficient number of shares to
maintain their existing ownership percentage.  Rights to purchase shares in these
circumstances are known as preemptive rights.  We may not be legally permitted to allow
holders of our shares in the form of ADSs in the United States to exercise any preemptive
rights in any future capital increases unless (i) we file a registration statement with
the SEC with respect to that future issuance of shares or (ii) the offering qualifies for
an exemption from the registration requirements of the U.S. Securities Act of 1933.  At
the time of any future capital increase, we will evaluate the costs and potential
liabilities associated with filing a registration statement with the SEC, as well as the
benefits of preemptive rights to holders of our shares in the form of ADSs in the United
States and any other factors that we consider important in determining whether to file a
registration statement.

There can be no
assurance that we will file a registration statement with the SEC to allow holders of our
shares in the form of ADSs in the United States to participate in a preemptive rights
offering.  In addition, under current Mexican law, the sale by the ADS Depositary of
preemptive rights and the distribution of the proceeds from such sales to the holders of
our shares through ADSs is not possible.  As a result, the equity interest of holders of
our shares through ADSs would be diluted proportionately.  See Item 10.  Additional
InformationPreemptive Rights.

Risks Related to
Mexico and the Other Countries in Which We Operate

Adverse economic
conditions in Mexico may affect our financial condition and results of operations.

We are a Mexican
corporation, and our Mexican operations are our single most important geographic
division.  In the past, Mexico has experienced both prolonged periods of weak economic
conditions and dramatic deteriorations in economic conditions that have had a negative
impact on our company.  There can be no assurances that such conditions will not return
or that such conditions will not have a material adverse effect on our financial
condition and results of operations.

Our business may be
significantly affected by the general condition of the Mexican economy, the rate of
inflation, interest rates and exchange rates.  Decreases in the growth rate of the
Mexican economy, periods of negative growth and increases in inflation or interest rates
may result in lower demand for our products, lower real pricing or a shift to lower
margin products.  Because a large percentage of our costs are fixed costs, we may not be
able to reduce costs and expenses, and our profit margins may suffer as a result.  In
addition, an increase in interest rates in Mexico would increase the cost to us of
variable rate, Mexican peso-denominated funding and have an adverse effect on our
financial condition and results of operations.

Depreciation of the
Mexican peso relative to the U.S. dollar could affect our financial condition and results
of operations.

A depreciation of the
Mexican peso relative to the U.S. dollar would increase the cost to us of a portion of
the raw materials, the price of which is tied to the U.S. dollar, and debt obligations
denominated in U.S. dollars, and thereby may have a negative effect on our net results.
 A severe devaluation or depreciation of the Mexican peso may also result in disruption
of the international foreign exchange markets and may limit our ability to transfer or to
convert Mexican pesos into U.S. dollars and other currencies for the purpose of making
timely payments of interest and principal on our indebtedness.  While the Mexican
government does not currently restrict, and for many years has not restricted, the right
or ability of Mexican or foreign persons or entities to convert Mexican pesos into U.S.
dollars or to transfer other currencies out of Mexico, the Mexican government could
institute restrictive exchange rate policies in the future.  To the extent that there are
currency fluctuations, they are likely to have an effect on our financial condition,
results of operations and cash flows in future periods.

Political events in
Mexico could affect our operations.

Mexican political
events may also significantly affect our operations. In the Mexican national elections
held on July 2, 2000, Vicente Fox of the National Action Party (Partido Acción Nacional)
or PAN won the presidency. Although his victory ended more than 70 years of presidential
rule by the Institutional Revolutionary Party (Partido Revolucionario Institucional) or
PRI, neither the PRI nor the PAN succeeded in securing a majority in the Mexican
congress. In elections in 2003, the PAN lost additional seats in the Mexican congress
and state governorships. The resulting legislative gridlock has impeded the progress of
reforms in Mexico, which may adversely affect economic conditions in Mexico or our
results of operations. During 2004, there will be elections for governors in 10 out of
32 states and for local congresses in 14 states.

Developments in
other Latin American countries in which we operate may affect our business.

In addition to Mexico,
our subsidiary Coca-Cola FEMSA conducts operations in Guatemala, Nicaragua, Costa Rica,
Panama, Colombia, Venezuela, Brazil and Argentina.   These countries expose us to
different or greater country risk than Mexico.  For many of these countries, operating
results in recent years have been adversely affected by deteriorating macroeconomic and
political conditions.  In Argentina and Venezuela, significant economic and political
instability, including a contracting economy, a drastic currency devaluation, high
unemployment, the introduction of exchange controls and social unrest have resulted in
higher production costs and declining net sales for Coca-Cola FEMSA.  In Colombia,
Coca-Cola FEMSA has experienced problems with production and distribution as a result of
political instability.

Coca-Cola FEMSAs
future results may be significantly affected by the general economic and financial
conditions in the countries where it operates, by the devaluation of the local currency,
inflation and high interest rates, or by political developments or changes in law.
 Devaluation of the local currency against the U.S. dollar may increase the operating
costs in that country, and a depreciation against the Mexican peso may negatively affect
the results of that country as reported in our Mexican GAAP financial statements.  In
addition, some of these countries may impose exchange controls that could impact
Coca-Cola FEMSAs ability to purchase raw materials in foreign currencies and the ability
of the subsidiaries in these countries to remit dividends abroad or make payments other
than in local currencies, as is currently the case in Venezuela under regulations imposed
in January 2003.  As a result of these potential risks, Coca-Cola FEMSA may experience
lower demand, lower real pricing, or increases in costs, which may negatively impact its
results of operations.



Table of Contents

ITEM 4.
 INFORMATION ON THE COMPANY

Table of Contents

Overview

We are a Mexican
company headquartered in Monterrey, Mexico. Our legal name is Fomento Económico
Mexicano, S.A. de C.V., and in commercial contexts we frequently refer to ourselves as
FEMSA. Our principal executive offices are located at General Anaya No. 601 Pte.,
Colonia Bella Vista, Monterrey, Nuevo León 64410, Mexico. Our telephone number at this
location is (52-81) 8328-6000. Our website is www.femsa.com. We are organized as a
sociedad anónima de capital variableunder the laws of Mexico. Our company was
incorporated on May 30, 1936 and has a duration of 99 years.

We conduct our
operations through the following principal holding companies, each of which we refer to
as a subholding company:

- Coca-Cola
FEMSA, which engages in the production, distribution and marketing of soft drinks;
- FEMSA
Cerveza, which engages in the production, distribution and marketing of beer;
- FEMSA
Comercio, which operates convenience stores; and
- FEMSA
Empaques, which engages in the production and distribution of beverage-related packaging
materials.

Table of Contents

Corporate
Background

FEMSA traces its
origins to the establishment of Mexicos first brewery, Cervecería Cuauhtémoc, S.A. de
C.V., which we refer to as Cuauhtémoc, which was founded in 1890 by four Monterrey
businessmen:  Francisco G. Sada, José A. Muguerza, Isaac Garza and José M. Schneider.
 The company is controlled by descendants of certain of the founders of Cuauhtémoc.

In 1891, the first
year of production, Cuauhtémoc produced 2,000 hectoliters of beer.  Cuauhtémoc continued
to expand through additions to existing plant capacity and through acquisitions of other
Mexican breweries, and has continued to increase its production capacity, reaching
approximately 32.5 million hectoliters in 2003.

The strategic
integration of the company dates back to 1936 when Famosa was established to supply crown
caps to the brewery.  The packaging operations were expanded in 1957 when we began to
produce labels and flexible packaging for the companys beer operations.  During this
period, these operations were part of what was known as the Monterrey Group, which also
included interests in banking, steel and other packaging operations.

In 1974, the Monterrey
Group was split between two branches of the descendants of the founding families of Cuauhtémoc.
 The steel and other packaging operations formed the basis for the creation of Corporación
Siderúrgica, S.A. (later Grupo Industrial Alfa, S.A. de C.V.), controlled by the Garza
Sada family, and the beverage and banking operations were consolidated under the FEMSA
corporate umbrella, controlled by the Garza Lagüera family.  FEMSAs shares were first
listed on the Mexican Stock Exchange on September 19, 1978.  Between 1977 and 1981, FEMSA
diversified its operations through acquisitions in the soft drink and mineral water
industries, the establishment of the first convenience stores under the trade name Oxxo
and investments in the hotel, construction, auto parts, food and fishing industries,
which were subsequently divested.

In August 1982, the
Mexican government suspended payment on its international debt obligations and
nationalized the Mexican banking system.  In 1985, certain controlling shareholders of
FEMSA acquired a controlling interest in Cervecería Moctezuma, S.A., which was then Mexicos
third-largest brewery and which we refer to as Moctezuma, and related companies in the
packaging industry. FEMSA subsequently undertook an extensive corporate and financial
restructuring that was completed in December 1988.

Pursuant to the 1988
restructuring, these different assets were combined under a single corporate, which
became Grupo Industrial Emprex, S.A. de C.V., which we refer to as Emprex.  The debt
restructuring included a capital increase, capitalization of debt and a divestiture of
interests in non-core businesses.  As a result of these transactions, FEMSAs interest in
Emprex was diluted to 60%, only to increase subsequently to approximately 68% as a result
of the exercise of certain option rights by FEMSA.

In August 1991, FEMSA
repurchased approximately 30% of its shares from a dissident minority shareholder.  In
October 1991, certain majority shareholders of FEMSA acquired a controlling interest in
Bancomer, S.A., which we refer to as Bancomer.  The investment in Bancomer was undertaken
as part of the Mexican governments reprivatization of the banking system, which had been
nationalized in 1982.  The Bancomer acquisition was financed in part by a subscription by
Emprexs shareholders, including FEMSA, of shares in Grupo Financiero Bancomer, S.A. de
C.V. (currently Grupo Financiero BBVA Bancomer, S.A. de C.V.), which we refer to as BBVA
Bancomer, the Mexican financial services holding company that was formed to hold a
controlling interest in Bancomer.  In February 1992, FEMSA offered Emprexs shareholders
the opportunity to exchange the BBVA Bancomer shares to which they were entitled for
Emprex shares owned by FEMSA.  As a result, FEMSAs interest in Emprex declined to
approximately 62%.   In connection with these transactions, an 11% interest in Emprex was
issued to a European portfolio investor.  This reduced FEMSAs interest in Emprex to
approximately 51%.  In August 1996, the shares of BBVA Bancomer that were received by
FEMSA in the exchange with Emprexs shareholders were distributed as a dividend to FEMSAs
shareholders.

Upon the completion of
these transactions, Emprex began a series of strategic transactions to strengthen the
competitive positions of its operating subsidiaries.  These transactions included the
sale of a 30% strategic interest in Coca-Cola FEMSA to a wholly-owned subsidiary of The
Coca-Cola Company and a subsequent public offering of Coca-Cola FEMSA shares, both of
which occurred in 1993, and the sale of a 22% strategic interest in FEMSA Cerveza to
Labatt in 1994.  Labatt subsequently increased its interest in FEMSA Cerveza to 30%.

In 1998, we completed
a reorganization that:

- simplified
our capital structure by converting our outstanding capital stock at the time of the
reorganization into BD Units      and B Units, and
- united the
shareholders of FEMSA and the former shareholders of Emprex at the same corporate level
through an exchange offer      that was consummated on May 11, 1998.

As part of the
reorganization, FEMSA listed ADSs on the New York Stock Exchange representing BD Units,
and listed the BD Units and the B Units on the Mexican Stock Exchange.  Prior to the
completion of the exchange offer, FEMSA owned 51.04% of the shares of Emprex.  Upon the
completion of the exchange offer, FEMSA owned 98.70% of the outstanding shares of Emprex,
which amount increased to 99.99% through a tender offer by FEMSA for the remaining Emprex
shares.

In July 2002, as a
result of the split-up or escisiónof Emprex, Compañía Internacional de Bebidas, S.A. de
C.V., which we refer to as CIBSA, was created as a new company to hold our interest in
Coca-Cola FEMSA.

In May 2003, our
subsidiary Coca-Cola FEMSA expanded its operations throughout Latin America by acquiring
100% of Panamco, then the largest soft drink bottler in Latin America in terms of sales
volume in 2002. Through its acquisition of Panamco, Coca-Cola FEMSA began producing and
distributing Coca-Colatrademark beverages in additional territories in Mexico, Central
America, Colombia, Venezuela and Brazil, along with bottled water, beer and other
beverages in some of these territories. The total cost of the acquisition was Ps. 29,518
million and was financed with new debt, an equity contribution by FEMSA, an exchange of
The Coca-Cola Companys equity interests in Panamco and available cash. Shareholders of
Panamco, other than The Coca-Cola Company and its subsidiaries, received cash in exchange
for their shares. The Coca-Cola Company and its subsidiaries received Series D Shares in
exchange for their equity interest in Panamco of approximately 25%. After the Panamco
acquisition, FEMSA indirectly owns 45.7% of the capital stock of Coca-Cola FEMSA (53.6%
of its capital stock with full voting rights) and The Coca-Cola Company indirectly owns
39.6% of the capital stock of Coca-Cola FEMSA (46.4% of its capital stock with full
voting rights). The remaining 14.7% of its capital stock trades on the Mexican Stock
Exchange and on the New York Stock Exchange in the form of ADSs under the trading symbol
KOF.

Table of Contents

Ownership Structure

We conduct our
business through our subholding companies as shown in the following diagram and table:

Subholding
Companies--Ownership StructureAs of March 15, 2004

(1)   Percentage of
capital stock, equal to 53.6% of capital stock with full voting rights.

Subholding CompaniesOverview

|          | Coca-Cola     | FEMSA   | FEMSA    | FEMSA    
|--------- | ------------- | ------- | -------- | ---------
|          | FEMSA         | Cerveza | Comercio | Empaques 
|          |               |         |          |          
|         
|Industry  | Soft.Drinks   | Beer    | Retail   | Packaging
|         
|Strategic | The Coca-Cola
|Partner   | Company       | Labatt  | None     | None     

Operations by SegmentOverview
Year Ended December 31, 2003(1)

|                         | Coca-Cola | FEMSA   | FEMSA    | FEMSA   
|------------------------ | --------- | ------- | -------- | --------
|                         | FEMSA     | Cerveza | Comercio | Empaques
|                         |          
|                         | Pesos     | %       | Pesos    | %       
|Total Revenues           | 35,729    | 47.08   | 21,924   | 28.89   
|Income from Operations.. | 6,710     | 55.39   | 3,586    | 29.60   
|Total Assets             | 61,420    | 58.87   | 28,936   | 27.73   
|Employees                | 56,841    | 65.99   | 16,461   | 19.11   

|__________________
|------------------
|(1)               

Total Revenues
Summary by Segment(1)

|                            | Year Ended December 31,
|--------------------------- | -----------------------
|                            |                        
|                            | 2003                   
|                            |                        
|Coca-Cola FEMSA             | 35,729                 
|FEMSA Cerveza               | 21,924                 
|FEMSA Comercio              | 16,601                 
|FEMSA Empaques              | 7,352                  
|Other                       | 3,843                  
|                            |                        
|Consolidated Total Revenues | 75,891                 
|                            |                        

|__________________
|------------------
|(1)               

Total Revenues
Summary by Geographic Location (1)

|                            | Year Ended December 31,
|--------------------------- | -----------------------
|                            |                        
|                            | 2003                   
|                            |                        
|Mexico                      | 64,185                 
|Argentina                   | 2,077                  
|Brazil                      | 2,797                  
|Venezuela                   | 2,544                  
|Colombia                    | 2,319                  
|Central America             | 2,187                  
|                            |                        
|Consolidated Total Revenues | 75,891                 
|                            |                        

|__________________
|------------------
|(1)               



Table of Contents

Significant Subsidiaries

The following table
sets forth our significant subsidiaries as of the date of this annual report:

|Name of Company                                               | Jurisdiction ofEstablishment | PercentageOwned
|------------------------------------------------------------- | ---------------------------- | ---------------
|CIBSA                                                         | Mexico                       | 100.0          
|                                                             
|Coca-Cola FEMSA                                               | Mexico                       | 45.7(1)        
|Corporación Interamericana de Bebidas, S.A. de C.V. (Panamco) | Mexico                       | 45.7           
|Propimex, S.A. de C.V                                         | Mexico                       | 45.7           
|Panamco Bajío, S.A. de C.V                                    | Mexico                       | 42.7           
|Panamco México, S.A. de C.V                                   | Mexico                       | 44.8           
|Inmuebles del Golfo, S.A. de C.V                              | Mexico                       | 45.7           
|                                                             
|Emprex                                                        | Mexico                       | 100.0          
|                                                             
|FEMSA Cerveza                                                 | Mexico                       | 70.0           
|Cervecería Cuauhtémoc Moctezuma, S.A. de C.V                  | Mexico                       | 70.0           
|Cervezas Cuauhtémoc Moctezuma, S.A. de C.V                    | Mexico                       | 70.0           
|                                                             
|FEMSA Comercio                                                | Mexico                       | 100.0          
|Cadena Comercial Oxxo, S.A. de C.V                            | Mexico                       | 100.0          
|Oxxo Express, S.A. de C.V                                     | Mexico                       | 100.0          
|                                                             
|FEMSA Empaques                                                | Mexico                       | 100.0          
|Fábricas Monterrey, S.A. de C.V                               | Mexico                       | 100.0          
|Sílices de Veracruz, S.A. de C.V                              | Mexico                       | 100.0          
|Vendo de México, S.A. de C.V                                  | Mexico                       | 100.0          

|______________________
|----------------------
|(1)                   

Table of Contents

Business Strategy

We are a beverage
company. Our soft drink operation, Coca-Cola FEMSA, is currently the second largest
bottler of Coca-Colaproducts in the world, measured in terms of sales volumes in 2003,
and our brewing operation, FEMSA Cerveza, is both a significant competitor in the Mexican
beer market as well as a major exporter in key international markets including the United
States. Coca-Cola FEMSA and FEMSA Cerveza are our core businesses, which together define
our identity and are the main avenues of our future growth.

As a beverage company,
we understand the importance of connecting with our end consumers by interpreting their
needs, and ultimately delivering the right products to them for the right occasions.  We
strive to achieve this by developing superior brand equity, expanding our already
significant distribution capabilities and improving the efficiency of our operations.  We
continue to improve our information gathering and processing systems in order to better
know and understand what our consumers want and need, and we are improving our production
and distribution by more efficiently leveraging our asset base.

Our ultimate
objectives are achieving sustainable revenue growth, improving profitability and
increasing the return on invested capital in each of our operations.  We believe that by
achieving these goals we will create sustainable value for our shareholders.

Our beverage
businesses are supported by Oxxo, the largest convenience store chain in Mexico measured
in terms of number of stores, which are managed by FEMSA Comercio, and by FEMSA Empaques,
our glass bottle and aluminum can operation.  These two businesses provide us with
strategic competitive advantages and are also complemented by additional support
businesses that manufacture crown caps and closures, commercial refrigerators, labels and
flexible packaging and chemical products.

We believe that the
competencies that our businesses have developed can be replicated in other geographic
regions.  This underlying principle guided our consolidation efforts, which culminated in
Coca-Cola FEMSAs acquisition of Panamco on May 6, 2003. The continental platform that
this new combination produces -encompassing a significant territorial expanse in Mexico
and Central America, plus most of the large urban centers in South America-we believe may
provide us with opportunities to create value through both an improved ability to execute
and the use of superior marketing tools.

During 2003, Coca-Cola
FEMSA engaged in the integration of the Panamco territories while adjusting its
strategies to a more competitive landscape, particularly in Mexico.  In addition, FEMSA
Cerveza continued to be immersed in a transformation process that has developed key
competencies aimed at strengthening its consumer-focused orientation, namely excellence
in execution, brand building capabilities, efficient asset utilization and the
development of a powerful information system infrastructure.  FEMSA Comercio further
accelerated the expansion of the Oxxo convenience store chain by opening 582 net new
stores.

Table of Contents

Coca-Cola FEMSA

Overview and Background

Coca-Cola FEMSA is the
largest Coca-Colabottler in Latin America, with its territories representing
approximately 40% of Coca-Colasales volumes in Latin America, and the second largest
bottler of Coca-Colatrademark beverages in the world, calculated in each case by sales
volumes in unit cases sold in its territories in 2003. Coca-Cola FEMSA operates in the
following territories:

- Mexico - a substantial portion of central Mexico (including Mexico City) and southeast Mexico (including the Gulf region).
- Central America - Guatemala City and surrounding areas, Nicaragua (nationwide), Costa Rica (nationwide) and Panama
     (nationwide).
- Colombia - most of the country.
- Venezuela - nationwide.
- Brazil - the area of greater São Paulo, Campinas, Santos, the state of Mato Grosso do Sul and part of the state of Goiás.
- Argentina -federal capital of Buenos Aires and surrounding areas.

The following is an
overview of Coca-Cola FEMSAs operations by territory in 2003:

Operations by Territory-Overview
Year Ended December 31, 2003(1)(2)

|                       | Mexico   | Central America | Colombia | Venezuela | Brazil  | Argentina
|---------------------- | -------- | --------------- | -------- | --------- | ------- | ---------
|                       |         
|                       | Pesos    | %               | Pesos    | %         | Pesos   | %        
|Total Revenues         | 23,935.2 | 66.7%           | 2,186.5  | 6.1%      | 2,319.1 | 6.5%     
|Income from Operations | 5,633.6  | 84.0%           | 218.4    | 3.2%      | 261.1   | 3.9%     

|______________________
|----------------------
|(1)                   
|(2)                   

In 1979, a subsidiary
of ours acquired certain soft drink bottler subsidiaries that are now a part of Coca-Cola
FEMSA.  At that time, the acquired subsidiaries had 13 Mexican distribution centers
operating 701 distribution routes, and the production capacity of the acquired
subsidiaries was 83 million physical cases.  In 1991, we transferred our ownership in the
subsidiaries to FEMSA Refrescos, S.A. de C.V., the corporate predecessor of Coca-Cola
FEMSA.

Consistent with
Coca-Cola FEMSAs goals of maximizing long-term profitability and growth and enhancing
its competitive position, in June 1993, a subsidiary of The Coca-Cola Company subscribed
for 30% of Coca-Cola FEMSAs capital stock in the form of Series D Shares for US$195
million.  In September 1993, FEMSA sold Series L Shares that represented 19% of Coca-Cola
FEMSAs capital stock to the public, and Coca-Cola FEMSA listed these shares on the
Mexican Stock Exchange and in the form of ADSs on the New York Stock Exchange.  After
giving effect to these transactions, we retained a 51% indirect interest in Coca-Cola
FEMSA.

In a series of
transactions between 1994 and 1997, Coca-Cola FEMSA acquired the territory for the
federal capital of Buenos Aires by purchasing 100% of Coca-Cola FEMSA de Buenos Aires,
S.A. de C.V. from a subsidiary of The Coca-Cola Company.  Coca-Cola FEMSA expanded its
Argentine operations in February 1996 by acquiring the former San Isidro Refrescos, S.A.
territories, which we refer to as SIRSA, including certain properties of Refrescos del
Norte, S.A.  Through these transactions, Coca-Cola FEMSA expanded its Argentine
operations to include the contiguous San Isidro and Pilar areas.

Coca-Cola FEMSA
expanded its Mexican operations in November 1997 by acquiring 100% of Embotelladora de
Soconusco, S.A. de C.V., a bottler in the Tapachula area of the state of Chiapas in
southern Mexico.  With this acquisition, Coca-Cola FEMSA services the entire state of
Chiapas.

In May 2003, Coca-Cola
FEMSA expanded its operations throughout Latin America by acquiring 100% of Panamco, then
the largest soft drink bottler in Latin America in terms of sales volumes in 2002.
Through Coca-Cola FEMSAs acquisition of Panamco, Coca-Cola FEMSA began producing and
distributing Coca-Colatrademark beverages in additional territories in the central and
the gulf regions of Mexico, and in Central America (Guatemala, Nicaragua, Costa Rica and
Panama), Colombia, Venezuela and Brazil, along with bottled water, beer and other
beverages in some of these territories. The total cost of the transaction was
approximately Ps. 29,518 million, excluding transaction expenses, and Coca-Cola FEMSA
financed the acquisition as follows: Ps. 17,267 million of new debt (including
approximately Ps. 5,245 million used to refinance existing Panamco indebtedness); a Ps. 2,779
million capital investment from FEMSA; the issuance of Coca-Cola FEMSAs Series D Shares
to subsidiaries of The Coca-Cola Company in exchange for a capital contribution of Ps. 7,041
million in the form of equity interests in Panamco; Ps. 2,820 million in cash; and Ps. 9,085
million of assumed net debt.

After the Panamco
acquisition, we indirectly own 45.7% of Coca-Cola FEMSAs capital stock, representing
53.6% of Coca-Cola FEMSAs capital stock with full voting rights, and The Coca-Cola
Company indirectly owns 39.6% of Coca-Cola FEMSAs capital stock, representing 46.4% of
Coca-Cola FEMSAs capital stock with full voting rights.  The remaining 14.7% of
Coca-Cola FEMSAs capital stock trades on the Mexican Stock Exchange and in the form of
ADSs on the New York Stock Exchange.

Business Strategy

Coca-Cola FEMSA is the
largest bottler of Coca-Colatrademark beverages in Latin America in terms of sales
volumes in 2003, with operations in Mexico, Guatemala, Nicaragua, Costa Rica, Panama,
Colombia, Venezuela, Brazil and Argentina. While Coca-Cola FEMSAs corporate
headquarters are in Mexico City, it has established divisional headquarters in the
following three regions:

- Mexico with divisional headquarters in Mexico City;
- Latin Centro (covering territories in Guatemala, Nicaragua, Costa Rica, Panama, Colombia and Venezuela) with divisional
     headquarters in San José, Costa Rica; and
- Mercosur (covering territories in Brazil and Argentina) with divisional headquarters in São Paulo, Brazil.

Coca-Cola FEMSA seeks
to provide its shareholders with an attractive return on their investment by increasing
its profitability.  The key factors in achieving profitability are increasing its
revenues by implementing well planned product, package and pricing strategies through
channel distribution and by implementing best practices in order to improve operational
efficiencies throughout Coca-Cola FEMSA.  To achieve these goals Coca-Cola FEMSA
continues its efforts in:

- working with The Coca-Cola Company to continue exploring new lines of beverages that extend existing brands and allow
     Coca-Cola FEMSA to participate in new beverage segments;
- implementing packaging strategies designed to increase consumer demand for Coca-Cola FEMSAs products and to build a strong
     returnable base in Coca-Cola FEMSAs new territories;
- replicating Coca-Cola FEMSAs successful best practices throughout the whole value chain within the newly acquired
     territories;
- rationalizing and adapting Coca-Cola FEMSAs organizational and asset structure in order to be in a better position to
     respond to a changing competitive environment;
- strengthening Coca-Cola FEMSAs selling capabilities in order to get closer to its clients, helping them satisfy the
     beverage needs of consumers;
- integrating Coca-Cola FEMSAs operations through advanced information technology systems;
- evaluating Coca-Cola FEMSAs bottled water strategy, in conjunction with The Coca-Cola Company, to maximize profitability
     across its market territories; and
- committing to building a best-in-class collaborative team, from top to bottom.

Coca-Cola FEMSA seeks
to increase per capita consumption of soft drinks in the territories in which it
operates.  To that end, its marketing teams continuously develop sales strategies
tailored to the different characteristics of its various territories and channels.
 Coca-Cola FEMSA continues to develop its product portfolio to better meet market demand
and maintain overall profitability.  To stimulate and respond to consumer demand,
Coca-Cola FEMSA continues to introduce new products and new presentations.  See -Product
and Packaging Mix.  Coca-Cola FEMSA also seeks to increase placement of refrigeration
equipment, including promotional displays, through the strategic placement of such
equipment in retail outlets in order to showcase and promote Coca-Cola FEMSAs products.
 In addition, because Coca-Cola FEMSA views its relationship with The Coca-Cola Company
as integral to its business strategy, Coca-Cola FEMSA uses market information systems and
strategies developed with The Coca-Cola Company to improve its coordination with the
worldwide marketing efforts of The Coca-Cola Company.  See -Marketing-Channel Marketing.

Coca-Cola FEMSA seeks
to rationalize its distribution capacity to improve the efficiency of its operations.  In
2003, as part of the integration process from the acquisition of Panamco, Coca-Cola FEMSA
closed several under-utilized manufacturing centers and shifted distribution activities
to other existing facilities.  In each of Coca-Cola FEMSAs facilities, it seeks to
increase productivity through infrastructure and process reengineering for improved asset
utilization.  Coca-Cola FEMSAs capital expenditure program includes investments in
production and distribution facilities, bottles, cases, coolers and information systems.
 Coca-Cola FEMSA believes that this program will allow it to maintain its capacity and
flexibility to innovate and to respond to consumer demand for non-alcoholic beverages.

Coca-Cola FEMSA
continues with the integration process in its new Mexican territories, realizing
synergies in back-office operations, manufacturing and procurement and has implemented
closure and integration of facilities and headcount reductions. Coca-Cola FEMSA closed
Panamcos Miami and Mexico City offices, consolidating its headquarter operations into
its original office in Mexico City. In its new territories it has replicated some of its
traditional management practices and systems and has introduced several packing
presentations across its new territories, strengthening Coca-Colabrands and offering new
options to consumers. Coca-Cola FEMSA has implemented new pricing architecture
strategies, differentiating returnable presentations from non-returnables in order to
achieve an adequate combination of price and convenience.

Finally, Coca-Cola
FEMSA focuses on management quality as a key element of its growth strategies and remains
committed to fostering the development of quality management at all levels.  Both FEMSA
and The Coca-Cola Company provide Coca-Cola FEMSA with managerial experience.  To build
upon these skills, Coca-Cola FEMSA also offers management training programs designed to
enhance executives abilities, and cross-fertilization programs, whereby a growing team
of multinational executives exchange experiences, know how and talent among its new and
existing territories.

Coca-Cola FEMSA Markets

The following map
shows the locations of Coca-Cola FEMSAs territories, giving in each case the population
to which Coca-Cola FEMSA offers products, the number of retailers of its carbonated soft
drinks and the per capita consumption of Coca-Cola FEMSAs soft drink products:



Per capita consumption
data for a territory is determined by dividing sales volumes within the territory (in
bottles, jugs, cans, powders and fountain containers) by the estimated population within
such territory, and is expressed on the basis of the number of eight-ounce servings of
Coca-Cola FEMSAs consumed annually per capita.  In evaluating the development of local
volume sales in its territories, Coca-Cola FEMSA and The Coca-Cola Company measure, among
other factors, the per capita consumption of their carbonated beverages.

Coca-Cola FEMSA Products

Coca-Cola FEMSA
produces, markets and distributes the following Coca-Colatrademark beverages,
proprietary brands and brands licensed from third parties, as of March 15, 2004:

|Colas:                | Mexico | CentralAmerica | Colombia | Venezuela | Brazil | Argentina
|--------------------- | ------ | -------------- | -------- | --------- | ------ | ---------
|Coca-Cola             | a      | a              | a        | a         | a      | a        
|                     
|Coca-Cola light       | a      | a              | a        | a         | a      | a        
|                     
|Coca-Cola light lemon |        |                |          |           | a      |          
|                     
|Coca-Cola vanilla     | a      |                | a        | a         |        |          
|                     

|***Flavored Soft Drinks:***  | **Mexico** | **Central America** | **Colombia** | **Venezuela** | **Brazil** | **Argentina**
|---------------------------- | ---------- | ------------------- | ------------ | ------------- | ---------- | -------------
|*Beat*                       | a          |                     |              |               |            |              
|                            
|*Canada Dry ginger ale*      |            | a                   |              |               |            |              
|                            
|*Chinotto*                   |            |                     |              | a             |            |              
|                            
|*Chinotto light*             |            |                     |              | a             |            |              
|                            
|*Crush*                      |            |                     |              |               |            | a            
|                            
|*Delaware Punch*             | a          |                     |              |               |            |              
|                            
|*Fanta*                      | a          | a                   | a            |               | a          | a            
|                            
|*Fanta light*                |            |                     |              |               | a          | a            
|                            
|*Fanta multi-flavors*        | a          | a                   |              |               | a          |              
|                            
|*Fresca*                     | a          | a                   |              |               |            |              
|                            
|*Fresca pink grapefruit*     | a          |                     |              |               |            |              
|                            
|*Frescolita*                 |            |                     |              | a             |            |              
|                            
|*Grapette*                   |            |                     |              | a             |            |              
|                            
|*Hit*                        |            |                     |              | a             |            |              
|                            
|*Kist (1)*                   |            | a                   |              |               |            |              
|                            
|*Kola Román (2)*             |            |                     | a            |               |            |              
|                            
|*Kuat*                       |            |                     |              |               | a          |              
|                            
|*Kuat laranja*               |            |                     |              |               | a          |              
|                            
|*Kuat light*                 |            |                     |              |               | a          |              
|                            
|*Lift*                       | a          | a                   | a            |               |            |              
|                            
|*Lift green apple*           | a          | a                   |              |               |            |              
|                            
|*Mundet multi-flavors (3)*   | a          |                     |              |               |            |              
|                            
|*Premio (1)*                 |            |                     | a            |               |            |              
|                            
|*Prisco (3)*                 | a          |                     |              |               |            |              
|                            
|*Quatro*                     | a          |                     | a            | a             |            | a            
|                            
|*Schweppes*                  |            |                     |              |               | a          | a            
|                            
|*Senzao*                     | a          |                     |              |               |            |              
|                            
|*Sidral Mundet (3)*          | a          |                     |              |               |            |              
|                            
|*Sidral Mundet light (3)*    | a          |                     |              |               |            |              
|                            
|*Simba*                      |            |                     |              |               | a          |              
|                            
|*Sintonia*                   |            |                     |              |               | a          |              
|                            
|*Sprite*                     | a          | a                   | a            |               | a          | a            
|                            
|*Sprite light / Sprite Cero* | a          |                     |              |               | a          | a            
|                            
|*Taí*                        |            |                     |              |               | a          | a            
|                            

|***Water:***        | **Mexico** | **Central America** | **Colombia** | **Venezuela** | **Brazil** | **Argentina**
|------------------- | ---------- | ------------------- | ------------ | ------------- | ---------- | -------------
|*Alpina (1)*        |            | a                   |              |               |            |              
|                   
|*Ciel*              | a          |                     |              |               |            |              
|                   
|*Ciel Mineralizada* | a          |                     |              |               |            |              
|                   
|*Club K (1)*        |            |                     | a            |               |            |              
|                   
|*Crystal (1)*       |            |                     |              |               | a          |              
|                   
|*Dasani*            |            | a                   |              |               |            |              
|                   
|*Kin*               |            |                     |              |               |            | a            
|                   
|*Manantial (1)*     |            |                     | a            |               |            |              
|                   
|*Nevada*            |            |                     |              | a             |            |              
|                   
|*Pure Mountain (1)* |            | a                   |              |               |            |              
|                   
|*Santa Clara (1)*   |            |                     | a            |               |            |              
|                   
|*Shangri-la (1)*    |            | a                   |              |               |            |              
|                   
|*Soda Clausen (1)*  |            |                     | a            |               |            |              
|                   
|*Soda Kin*          |            |                     |              |               |            | a            
|                   

|***Other Categories:****(4)* | **Mexico** | **Central America** | **Colombia** | **Venezuela** | **Brazil** | **Argentina**
|---------------------------- | ---------- | ------------------- | ------------ | ------------- | ---------- | -------------
|*Black Fire*                 |            |                     |              |               |            | a            
|                            
|*Burn*                       |            |                     |              |               | a          |              
|                            
|*Flash Power*                |            |                     |              |               | a          |              
|                            
|*Fruitopia*                  |            | a                   |              |               |            |              
|                            
|*Hi-C*                       |            | a                   |              |               |            | a            
|                            
|*Juizz (1)*                  |            | a                   |              |               |            |              
|                            
|*Kapo*                       |            | a                   |              |               |            |              
|                            
|*Keloco (1)*                 | a          |                     |              |               |            |              
|                            
|*Kin light*                  | a          |                     |              |               |            |              
|                            
|*Malta Regional (2)*         |            |                     |              | a             |            |              
|                            
|*Mickey Aventuras*           | a          |                     |              |               |            |              
|                            
|*Nativa*                     |            |                     |              |               |            | a            
|                            
|*Nestea (2)*                 | a          | a                   |              | a             | a          |              
|                            
|*Polar*                      |            | a                   |              |               |            |              
|                            
|*Powerade*                   | a          | a                   | a            | a             |            |              
|                            
|*Schweppes*                  |            | a                   |              | a             |            |              
|                            
|*Shangri-la (1)*             |            | a                   |              |               |            |              
|                            
|*Sunfil*                     |            | a                   |              | a             |            |              
|                            
|*Super 12 (1)*               |            | a                   |              |               |            |              
|                            
|*Super Malta (2)*            |            | a                   |              |               |            |              
|                            

|__________________
|------------------
|(1)               
|(2)               
|(3)               
|(4)               

**Sales Overview**

Coca-Cola FEMSA measures sales volume in terms of unit cases. Unit case refers to 192 ounces of
finished beverage product (24 eight-ounce servings) and, when applied to fountain syrup, powders and concentrate, refers to the volume of fountain syrup, powders and concentrate that is required to produce 192 ounces of
finished beverage product. The following table illustrates Coca-Cola FEMSA's historical sales volumes for each of its territories. The sales volumes include the newly acquired Panamco territories only from May 2003.

|                | **Sales Volume 
  Year Ended December 31,**
|--------------- | -------------------------------------------
|                | **2003**                                   
|                | **(millions of unit cases)**               
|                |                                            
|Mexico          | 850.1                                      
|Central America | 72.9                                       
|Colombia        | 114.1                                      
|Venezuela       | 110.1                                      
|Brazil          | 176.6                                      
|Argentina       | 126.6                                      
|Combined Volume | 1,450.5                                    

**Product and Packaging Mix**

Coca-Cola FEMSA's single most important brand is *Coca-Cola*, which accounted for 60.2%
of its total consolidated sales volume in 2003. *Fanta, Sprite, Lift* and *Fresca*, Coca-Cola FEMSA's next largest brands in consecutive order, accounted for 5.1%, 3.1%, 2.4% and 2.1%, respectively, of
sales volumes in 2003. Coca-Cola FEMSA produces, markets and distributes *Coca-Cola* trademark beverages in each of its territories in containers authorized by The Coca-Cola Company, which consist of a variety
of returnable and non-returnable presentations in the form of glass bottles, cans and plastic bottles made of PET. Presentation sizes for *Coca-Cola* trademark beverages range from a 6.5-ounce personal size to a
20-liter multi-serving size. Coca-Cola FEMSA considers multi-serving size presentations as equal to or larger than 1.0 liter. In general, personal



sizes have a higher price per unit case as compared to multi-serving sizes. Coca-Cola FEMSA offers both returnable and non-returnable presentations, which allows it to offer different combinations of convenience and
price to implement revenue management strategies and to target specific distribution channels and population segments in its territories. In addition, Coca-Cola FEMSA sells some *Coca-Cola* trademark beverage
syrups in containers designed for soda fountain use, which we refer to as fountain. Coca-Cola FEMSA also sells bottled water products in jug presentations, which is a presentation larger than 17 liters, that have a much
lower price per unit than its other beverage products.

In addition to *Coca-Cola* trademark beverages, Coca-Cola FEMSA produces, markets and
distributes certain other proprietary brands and beverages licensed from third parties other than The Coca-Cola Company in a variety of presentations.

The characteristics of Coca-Cola FEMSA's territories are very diverse. Central Mexico is densely
populated and has a large number of competing soft drink brands and higher per capita income as compared to the rest of Coca-Cola FEMSA's territories. Brazil and Argentina are densely populated but have lower per capita
consumption of soft drink products as compared to Mexico. Portions of Central America and Colombia are large and mountainous areas with lower population density, lower per capita income and lower per capita consumption
of soft drink products. In Venezuela, per capita income and consumption have been affected due to the economic and political unrest in recent years. In recent years, per capita income has been negatively affected by
macroeconomic conditions in most of the countries where Coca-Cola FEMSA operates.

The following discussion analyzes Coca-Cola FEMSA's product and packaging mix by territory. The
volume data presented is for the years 2002 and 2003 and includes the newly acquired territories for all of 2002 and the first four months of 2003 prior to the acquisition of Panamco. As discussed above, Coca-Cola FEMSA
did not acquire these territories until May 6, 2003. Nonetheless, Coca-Cola FEMSA believes that presenting the prior periods in this section provides a more complete illustration of the characteristics of its
territories than would be possible based solely on information from the last eight months of 2003. It has not included information for periods prior to 2002. It has presented above under Sales Overview its
actual sales volumes by territory for the three years ended December 31, 2001, 2002 and 2003, which include the newly acquired territories solely
for eight months of 2003.

***Mexico.***Coca-Cola FEMSA's product portfolio consists of *Coca-Cola* trademark beverages, and since 2001 has included third party *Mundet*trademark beverages. In 2003, it expanded its core brand portfolio line launching the flavored soft drinks *Fanta multi-flavors,
Fresca pink grapefruit* and *Lift green apple*. It also introduced *Coca-Cola vanilla* in its Mexican territories, strengthening the cola category. Soft drink per capita consumption in Mexico during
2003 was 483 eight-ounce servings.

The following table highlights historical sales volume and mix in Mexico for Coca-Cola FEMSA's
products:

|                                     | **Year Ended December 31,** 
|------------------------------------ | ----------------------------
|                                     | **2003**                    
|**Product Sales Volumes**            | **(millions of unit cases)**
|*Coca-Cola* Trademark Beverages      | 985.4                       
|Other Beverages                      | 16.2                        
|Total                                | 1,001.6                     
|% Growth                             | 2.2%                        
|**Unit Case Volume Mix by Category** | **(in percentages)**        
|Colas                                | 59.8%                       
|Flavored Soft Drinks                 | 18.7                        
|Total Carbonated Soft Drinks         | 78.5                        
|Water (1)                            | 20.9                        
|Other Categories                     | 0.6                         
|Total                                | 100.0%                      
|**Product Mix by Presentation**      | **(in percentages)**        
|Returnable                           | 27.9%                       
|Non-returnable                       | 54.9                        
|Fountain                             | 1.3                         
|Jug                                  | 15.9                        
|Total                                | 100.0%                      

|__________________
|------------------
|(1)               

Coca-Cola FEMSA's most popular soft drink presentations are the 2.5-liter and 2.0-liter
returnable plastic bottles, the 0.6-liter non-returnable plastic contour bottle, and the 2.5-liter and the 2.0-liter non-returnable plastic bottle, which combined accounted for more than 60% of its total soft drink
sales volume in 2003 in Mexico. Since 1995, Coca-Cola FEMSA has introduced a number of new presentations in Mexico. These include 2.5-liter and 2.0-liter returnable plastic bottles, 1.0-liter non-returnable plastic
bottles, eight-ounce non-returnable glass bottles, 0.25-liter non-returnable plastic bottles and 0.6-liter plastic contour bottles to replace the 0.5-liter non-returnable glass and plastic presentations. In 2003,
Coca-Cola FEMSA launched new 2.5-liter returnable and non-returnable presentations.

Multi-serving presentations are an important component of Coca-Cola FEMSA's product mix. In 2003,
multi-serving presentations represented 67% of its total soft drink sales volumes in Mexico, as compared to 64% in 2002. Coca-Cola FEMSA expects that demand for multi-serving presentations will continue increasing.
Coca-Cola FEMSA believes that the popularity of multi-serving presentations is primarily attributable to the lower price per ounce of product in larger presentations.

In the past, the packaging trend in the soft drink industry in Mexico had moved toward
non-returnable presentations. However, due to the entrance of low price brands in multi-serving size presentations, Coca-Cola FEMSA has refocused its packaging mix strategy to reinforce its sales of multi-serving size
returnable packages, and as a result non-returnable presentations remained almost flat in 2003 as compared to 2002. Returnable plastic and glass presentations offer consumers a more affordable, although less convenient,
product, and Coca-Cola FEMSA believes returnable packages present an opportunity for Coca-Cola FEMSA to attract new customers and maintain customer loyalty, because they make *Coca-Cola* trademark beverages more
attractive to price-sensitive consumers. The price of a 2.5-liter returnable package is approximately 30% less than the same size non-returnable package. Th












ese returnable products are mainly sold to small store retailers, representing the largest distribution channel in the Mexican market, that benefit from returnable bottles' lower price per ounce of product, allowing
them to compete with larger supermarkets. Coca-Cola FEMSA believes that its continued commitment to returnable bottle availability will allow it to compete with low-price entrants to the Mexican soft drink market.

Total sales volumes reached 1,001.6 million unit cases in 2003, increasing 2.2% compared to 2002,
including a 2.9% carbonated soft drink volume growth during the same period. The volume growth was mainly driven by (i) the solid performance of Coca-Cola FEMSA's new flavored brands including *Fanta
multi-flavors, Fresca pink grapefruit*and *Lift green apple*, accounting for approximately 70% of the incremental volumes during the year, (ii) the incremental sales volumes reached by *Ciel*
still water in a 5.0-liter presentation, and (iii) volume growth from *Coca-*Cola brand beverages. This volume growth was partially offset by a decline in jug water volume, mainly in the 19.0-liter water
jug presentation, the result of new revenue management initiatives intended to improve the profitability of Coca-Cola FEMSA's bottled water business in its



new territories, and to a lesser extent to the increased size of multi-serving presentations.

In 2003, product and packaging innovation helped Coca-Cola FEMSA weather a relatively weak
economic environment and increased competition from low price soft drink brands in multi-serving size presentations, which have increased their presence and product alternatives in certain areas of Coca-Cola FEMSA's
Mexican territories. With the introduction of its new multi-serving size 2.5-liter returnable and non-returnable presentations, for the *Coca-Cola* brand and selected flavors, Coca-Cola FEMSA reduced the price
gap per ounce versus low price brands during 2003, enhancing the value proposition for its customers.

***Central America.***Coca-Cola FEMSA's product sales in Central America
consist predominantly of *Coca-Cola* trademark beverages. During 2003 it launched the *Dasani* water brand in one of its Central American territories. Soft drink per capita consumption in Central America
during 2003 was 131 eight-ounce servings.

The following table highlights historical sales volume mix and total sales volumes in Central
America :

|                                     | **Year Ended December 31,** 
|------------------------------------ | ----------------------------
|                                     | **2003**                    
|**Product Sales Volumes**            | **(millions of unit cases)**
|*Coca-Cola* Trademark Beverages      | 99.6                        
|Other Beverages                      | 7.7                         
|Total                                | 107.3                       
|% Growth                             | 7.2%                        
|**Unit Case Volume Mix by Category** | **(in percentages)**        
|Colas                                | 69.4%                       
|Flavored Soft Drinks                 | 24.7                        
|Total Carbonated Soft Drinks         | 94.1                        
|Water                                | 4.2                         
|Other Categories                     | 1.7                         
|Total                                | 100.0%                      
|**Product Mix by Presentation**      | **(in percentages)**        
|Returnable                           | 51.8%                       
|Non-returnable                       | 42.9                        
|Fountain                             | 5.3                         
|Jug                                  | -                           
|Total                                | 100.0%                      

In Central America, Coca-Cola FEMSA sells the majority of its sales volume through small
retailers. In 2003, multi-serving presentations represented 47.5% of its total soft drink sales volumes in Central America. It also launched a 2.0-liter returnable presentation in Central America for *Coca-Cola*
brand and selected flavor brands in 2003 to take advantage of the trend to larger presentations.

Total sales volumes reached 107.3 million unit cases in 2003, increasing 7.2% compared to 2002,
including 8.1% growth in carbonated soft drink sales volumes during the same period. The sales volume growth was mainly driven by (i) the solid performance of the cola category, increasing almost 7% during the
year, and representing 66% of the incremental volumes, especially in Coca-Cola FEMSA's territories in Guatemala and Nicaragua, and (ii) the incremental sales volume reached by the carbonated soft drink flavor
segment, which represented the majority of the balance.

***Colombia.***Coca-Cola FEMSA's product portfolio in Colombia consists of
*Coca-Cola* trademark beverages, certain products sold under proprietary trademarks, as well as sales of the *Kola Román*brand, which it licenses from a third party. Soft drink per capita
consumption in Colombia during 2003 was 80 eight-ounce servings.

The following table highlights historical sales volume mix and total sales volumes in Colombia :

|                                     | **Year Ended December 31,** 
|------------------------------------ | ----------------------------
|                                     | **2003**                    
|**Product Sales Volumes**            | **(millions of unit cases)**
|*Coca-Cola* Trademark Beverages      | 133.5                       
|Other Beverages                      | 38.3                        
|Total                                | 171.8                       
|% Growth                             | (7.1)%                      
|**Unit Case Volume Mix by Category** | **(in percentages)**        
|Colas                                | 62.4%                       
|Flavored Soft Drinks                 | 22.3                        
|Total Carbonated Soft Drinks         | 84.7                        
|Water (1)                            | 15.1                        
|Other Categories                     | 0.2                         
|Total                                | 100.0%                      
|**Product Mix by Presentation**      | **(in percentages)**        
|Returnable                           | 53.4%                       
|Non-returnable                       | 36.8                        
|Fountain                             | 3.0                         
|Jug                                  | 6.8                         
|Total                                | 100.0%                      

|__________________
|------------------
|(1)               

The Colombian market is characterized by lower per capita consumption and relatively lower levels
of multi-serving presentations. In 2003, multi-serving presentations represented 45.7% of Coca-Cola FEMSA's total soft drink sales volumes in Colombia. Coca-Cola FEMSA is continuing to evaluate the
right product, package and pricing architecture for its portfolio of brands in Colombia.

Total sales volumes amounted to 171.8 million unit cases in 2003, decreasing 7.1% compared to
2002, including a 4.4% carbonated soft drink volume decline during the same period. The volume decline was mainly driven by a reduction in the production of water sold in less profitable packages, which accounted
for almost 50% of the volume decline during the year. Carbonated soft drinks accounted for the balance.

***Venezuela.***Coca-Cola FEMSA's product portfolio in Venezuela consists
predominantly of *Coca-Cola*trademark beverages. Soft drink per capita consumption in Venezuela during 2003 was 123 eight-ounce servings.

The following table highlights historical sales volume mix and total sales volumes in Venezuela :

|                                     | **Year Ended December 31,** 
|------------------------------------ | ----------------------------
|                                     | **2003**                    
|**Product Sales Volumes**            | **(millions of unit cases)**
|*Coca-Cola*Trademark Beverages       | 148.6                       
|Other Beverages                      | 3.0                         
|Total                                | 151.6                       
|% Growth                             | (6.9)%                      
|**Unit Case Volume Mix by Category** | **(in percentages)**        
|Colas                                | 57.0%                       
|Flavored Soft Drinks                 | 29.2                        
|Total Carbonated Soft Drinks         | 86.2                        
|Water (1)                            | 8.2                         
|Other Categories                     | 5.6                         
|Total                                | 100.0%                      
|**Product Mix by Presentation**      | **(in percentages)**        
|Returnable                           | 36.4%                       
|Non-returnable                       | 57.6                        
|Fountain                             | 2.7                         
|Jug                                  | 3.3                         
|Total                                | 100.0%                      

|__________________
|------------------
|(1)               

During January of 2003, political unrest in Venezuela due to a national strike made it
practically impossible for Panamco to run its Venezuelan operation on a regular basis. Supply shortages during the first quarter and a severe economic recession significantly affected volume performance during 2003.
Coca-Cola FEMSA re-introduced the one-liter returnable glass presentation for the *Coca-Cola*brand in 2003, which it believes had a positive impact on sales volumes in 2003.

Total sales volumes decreased in 2003 to 151.6 million unit cases, including a decrease of 2.3%
in carbonated soft drink volumes. Carbonated soft drink flavors accounted for almost 60% of the sales volume decline during the year, and still bottled water accounted for the majority of the balance, driven by a change
of consumption habits of the population toward tap water due to the country's economic recession.

***Brazil.***Coca-Cola FEMSA's product portfolio in Brazil consists mainly
of *Coca-Cola*trademark beverages. Pursuant to an agreement with Cervejarias Kaiser, Coca-Cola FEMSA distributes the *Kaiser*brands of beer, which represented 18.2% of its sales volumes in Brazil in
2003. During 2003, it expanded its product lines, introducing *Coca-Cola light lemon, Kuat laranja*and *Sintonia*. Soft drink per capita consumption in Brazil during 2003 was 189 eight-ounce servings.

The following table highlights historical sales volume mix and total
sales volumes in Brazil:

|                                     | **Year Ended December 31,** 
|------------------------------------ | ----------------------------
|                                     | **2003**                    
|**Product Sales Volumes**            | **(millions of unit cases)**
|*Coca-Cola*Trademark Beverages       | 206.1                       
|Other Beverages                      | 59.0                        
|Total                                | 265.1                       
|% Growth                             | (17.8)%                     
|**Unit Case Volume Mix by Category** | **(in percentages)**        
|Colas                                | 53.4%                       
|Flavored Soft Drinks                 | 23.7                        
|Total Carbonated Soft Drinks         | 77.1                        
|Water                                | 4.1                         
|Other Categories (1)                 | 18.8                        
|Total                                | 100.0%                      
|**Product Mix by Presentation**      | **(in percentages)**        
|Returnable                           | 11.1%                       
|Non-returnable                       | 85.1                        
|Fountain                             | 3.8                         
|Jug                                  | -                           
|Total                                | 100.0%                      

|__________________
|------------------
|(1)               

During 2003, Coca-Cola FEMSA initiated a packaging differentiation strategy intended to diversify
its operation from 2.0-liter PET non-returnable packages and cans, which together accounted for almost 80% of sales volumes in 2002 and the beginning of 2003. Coca-Cola FEMSA launched more than six different packaging
presentations during 2003, including a new 12-ounce non-returnable glass bottle and a new 200-milliliter returnable glass bottle in order to offer convenience and affordability for the on-premise segment. By selling
more profitable stock keeping units or SKUs, Coca-Cola FEMSA intends to strengthen its packaging and brand portfolio, and enhance its pricing architecture in order to increase the profitability of the segment.

Total sales volumes amounted to 265.1 million unit cases in 2003, decreasing 17.8% compared to
2002 volumes, including a 14.7% decline in non-profitable carbonated beverage sales volumes during the same period. The majority of the volume decline during 2003 came from 2.0-liter non-returnable presentations,
especially for low margin products like *Simba*and *Taí*, as Coca-Cola FEMSA tried to reach a better price value combination by shifting to more profitable presentations. Carbonated soft drinks
accounted for 60% of the volume decline during 2003, beer represented 30% and bottled water represented the balance.

***Argentina.***Coca-Cola FEMSA's product portfolio in Argentina consists
exclusively of *Coca-Cola*trademark beverages. Soft drink per capita consumption in Argentina during 2003 was 276 eight-ounce servings.

The following table highlights historical sales volume mix and total sales volumes in Argentina :

|                                     | **Year Ended December 31,** 
|------------------------------------ | ----------------------------
|                                     | **2003**                    
|**Product Sales Volumes**            | **(millions of unit cases)**
|*Coca-Cola*Trademark Beverages       | 126.6                       
|Other Beverages                      | -                           
|Total                                | 126.6                       
|% Growth                             | 9.5%                        
|**Unit Case Volume Mix by Category** | **(in percentages)**        
|Colas                                | 71.4%                       
|Flavored Soft Drinks                 | 27.4                        
|Total Carbonated Soft Drinks         | 98.8                        
|Water                                | 0.9                         
|Other Categories                     | 0.3                         
|Total                                | 100.0%                      
|**Product Mix by Presentation**      | **(in percentages)**        
|Returnable                           | 24.5%                       
|Non-returnable                       | 71.8                        
|Fountain                             | 3.7                         
|Jug                                  | -                           
|Total                                | 100.0%                      

In 2002, in order to minimize the impact of the deteriorated economic situation in Argentina, as
well as increase the affordability of its products, Coca-Cola FEMSA launched new returnable presentations such as a 1.25-liter returnable glass presentation and a 2.0-liter returnable PET presentation, which combined
with existing presentations accounted for 25% of its sales volumes in 2003. During 2003, Coca-Cola FEMSA also experienced an increase in its premium brands fostered by the launch of *Fanta light*and the slow
recovery of the Argentine economy.

Total sales volumes amounted to 126.6 million unit cases in 2003, increasing 9.5% compared to
2002. The sales volume increase was mainly driven by Coca-Cola FEMSA's returnable packaging strategy and the economic recovery from the devaluation of the Argentine peso in 2002. Coca-Cola FEMSA also experienced a
product shift from its less profitable value protection brands, *Taí*and *Crush*, toward its core and premium brands, the *Coca-Cola*brand and *Fanta,*which increased 15.1% and
40.6%, respectively. For the first time, in 2003 Coca-Cola FEMSA sold more sales volumes from premium brands than from value protection brands, fostered by a 10.9% volume increase of the *Coca-Cola light*brand
and the successful introduction of *Fanta light*during the year. Premium brands represented 12.2% of total sales volumes during 2003.

**Marketing**

Coca-Cola FEMSA, in conjunction with The Coca-Cola Company, has developed a sophisticated
marketing strategy to promote the sale and consumption of Coca-Cola FEMSA's products. It relies extensively on advertising, sales promotions and non-price related retailer incentive programs designed by local affiliates
of The Coca-Cola Company to target the particular preferences of Coca-Cola FEMSA's soft drink consumers. Through the use of advanced information technology, Coca-Cola FEMSA has collected customer and consumer
information that allow it to tailor marketing strategies to the types of customers located in each of its territories and to meet the specific needs of the various market segments it serves. Coca-Cola FEMSA is in the
process of rolling out its information technology system in its new territories in order to standardize the systems in these territories with its original territories.

***Retailer Incentive Programs.***Incentive programs include providing
retailers with commercial refrigerators for the display and cooling of soft drink products and for point-of-sale display materials. Coca-Cola FEMSA seeks, in particular, to increase distribution coolers among retailers
to increase the visibility and consumption of Coca-Cola FEMSA's products and to ensure that they are sold at the proper temperature. Sales promotions include sponsorship of community activities, sporting, cultural and
social events and consumer sales promotions such as contests, sweepstakes and product giveaways.

***Advertising.***Coca-Cola FEMSA advertises in all major communications
media. It focuses its advertising efforts on increasing brand recognition by consumers and improving customer relations. National advertising campaigns are designed and proposed by The Coca-Cola Company's local
affiliates, with Coca-Cola FEMSA's input at the local or regional level.

***Channel Marketing.***In order to provide more dynamic and specialized
marketing of its products, Coca-Cola FEMSA's strategy is to segment its market and develop targeted efforts for each segment or distribution channel. Coca-Cola FEMSA's principal channels are small retailers,
on-premise consumption such as restaurants and bars, supermarkets and third party distributors. Presence in these channels entails a comprehensive and detailed analysis of the purchasing patterns and
preferences of various groups of soft drink consumers in each of the various types of locations or distribution channels. In response to this analysis, Coca-Cola FEMSA tailors its product, price, packaging and
distribution strategies to meet the particular needs of and exploit the potential of each channel.

Coca-Cola FEMSA believes that the implementation of its channel marketing strategy also enables
it to respond to competitive initiatives with channel-specific responses as opposed to market-wide responses. This focused response capability isolates the effects of competitive pressure in a specific channel, thereby
avoiding costlier market-wide responses. Coca-Cola FEMSA's channel marketing activities are facilitated by its management information systems. It has invested significantly in creating such systems, including in
hand-held computers to support the gathering of product, consumer and delivery information required to implement its channel marketing strategies effectively, for most of its sales routes in Mexico and Argentina, and
will continue investing to increase pre-sale coverage in certain of its new territories.

***Cooperative Marketing Budget.***Coca-Cola FEMSA 's consolidated total
marketing expenditure made in 2003 was Ps. 1,498.4 million. In 2002 and 2003, The Coca-Cola Company contributed
48% and 41%, respectively, of Coca-Cola FEMSA's marketing expenditures budget. See Item 10.
Additional Information  Material Contracts  Coca-Cola FEMSA  Bottler Agreements.

**Product Distribution**

The following table provides an overview of Coca-Cola FEMSA's product distribution centers and the retailers to
which it sells its products:

**Product Distribution Summary 
As of December 31, 2003**

|                        | **Mexico** | **Central America** | **Colombia** | **Venezuela** | **Brazil** | **Argentina**
|----------------------- | ---------- | ------------------- | ------------ | ------------- | ---------- | -------------
|Distribution Centers    | 113        | 43                  | 42           | 38            | 10         | 4            
|Number of Retailers (1) | 547,185    | 139,289             | 442,210      | 234,740       | 120,008    | 75,735       

|__________________
|------------------
|(1)               

Coca-Cola FEMSA uses two main sales methods depending on market and geographic conditions: the
traditional or conventional truck route system, in which the person in charge of the delivery makes immediate sales from inventory available on the truck, and the pre-sale system. The pre-sale program separates the
sales and delivery functions, allowing sales personnel to sell products prior to delivery and enabling trucks to be loaded with the mix of products that retailers have previously ordered, thereby increasing distribution
efficiency. Under the pre-sale program, sales personnel also provide merchandising services during retailer visits, which Coca-Cola FEMSA believes enhances the presentation of its products at the point of sale. In
certain areas Coca-Cola FEMSA also makes sales through third party wholesalers of Coca-Cola
FEMSA's products. The vast majority of its sales are on a cash basis.

Coca-Cola FEMSA believes that service visits to retailers and frequency of deliveries are
essential elements in an effective distribution system for soft drink products. Accordingly, it has continued to expand its pre-sale system throughout its operations, except in areas where it believes consumption
patterns do not warrant pre-sale. Coca-Cola FEMSA is in the process of replicating this business model in its new territories.

Coca-Cola FEMSA's distribution centers range from large warehousing facilities and re-loading
centers to small deposit centers. In addition to its fleet of trucks, Coca-Cola FEMSA distributes its products in certain locations through a fleet of electric carts and hand-trucks in order to comply with local
environmental and traffic regulations. Coca-Cola FEMSA generally retains third parties to transport its finished products from the bottler plants to the distribution centers.

***Mexico.***Coca-Cola FEMSA contracts with a subsidiary of ours for the
transportation of finished products to distribution centers from its Mexican production facilities. From the distribution centers, Coca-Cola FEMSA then distributes its finished products to retailers through its own
fleet of trucks. In 2003, Coca-Cola FEMSA implemented these practices in the newly acquired Mexican territories.

In Mexico, Coca-Cola FEMSA sells a majority of its beverages at small retail stores to customers
who take the beverages home or elsewhere for consumption. It also sells products through the on-premise segment, supermarkets and others. On premise consists of (i) sales through sidewalk
stands, restaurants, bars and various types of dispensing machines and (ii) sales through point of sale programs in concert halls, auditoriums and theaters by means of a series of arrangements with Mexican
promoters.

***Central America.***In Central America, Coca-Cola FEMSA distributes its
finished products to retailers through a combination of its own fleet of trucks and third party distributors. In Central America, excluding Guatemala, Coca-Cola FEMSA sells more than 50% of its sales volumes through the
pre-sale system in 2003. In Guatemala, Coca-Cola FEMSA sold only around 10% of its sales volumes through pre-sale in 2003, but currently plans to increase pre-sale coverage in the future. In its Central American
operations, just as in most of Coca-Cola FEMSA's territories, an important part of its sales volumes is through small retailers, and it has low supermarket penetration in this region, representing less than 8% of its
sales volumes in 2003.

***Colombia.***Approximately half of Coca-Cola FEMSA's sales volumes in
Colombia are sold through pre-sale and half through the traditional system in 2003. Coca-Cola FEMSA distributes its finished products to retailers through a combination of its own fleet of trucks and third party
distributors. Since May 2003, it consolidated five distribution centers out of 47 in its Colombian operations, with the objective of increasing productivity levels and asset utilization.

***Venezuela.***In Venezuela close to 70% of Coca-Cola FEMSA's sales volumes
in 2003 were through the pre-sale system. Coca-Cola FEMSA distributes its finished products to retailers through a combination of its own fleet of trucks and third party distributors. During 2003 it consolidated the
operations of two of the 40 distribution facilities. Its Venezuelan operations distribute a significant part of sales volumes through small retailers and supermarkets, which represent approximately 13% of its sales
volumes in 2003.

***Brazil.***In Brazil, almost 100% of Coca-Cola FEMSA's sales are through
the pre-sale system, although the delivery of finished products to customers is by a third party. At the end of 2003, it operated ten distribution facilities in its Brazilian territories. In contrast with the rest of
Coca-Cola FEMSA's territories, which have low supermarket penetration, in Brazil it sold more than 25% of its sales volume through supermarkets in 2003. In addition, in designated zones independent wholesalers purchase
Coca-Cola FEMSA's products at a discount from the wholesale price and resell the products to retailers. Independent wholesalers distributed approximately 16% of its products in 2003.

***Argentina**.*At December 31, 2003, Coca-Cola FEMSA operated four
distribution centers in Argentina. Coca-Cola FEMSA distributes its finished products to retailers through a combination of its own fleet of trucks and third party distributors. Independent wholesalers distributed
approximately 5.7 % of its products in 2003.

In Argentina, in 2003 Coca-Cola FEMSA sold the majority of its products in the take-home segment,
which consists of sales to consumers who take the beverages home or elsewhere for consumption. In 2003, the percentage of sales volumes through supermarkets decreased to 17.9% from 23.4% in 2002.

**Competition**

Although Coca-Cola FEMSA believes that its products enjoy wider recognition and greater consumer
loyalty than those of its principal competitors, the soft drink segments in the territories in which Coca-Cola FEMSA operates are highly competitive. Its principal competitors are local bottlers of Pepsi and other
bottlers and distributors of national and regional soft drink brands. Coca-Cola FEMSA faces increased competition in many of its territories from producers of low price beverages, commonly referred to as B
brands. A number of its competitors in Central America and Brazil also offer both soft drinks and beer, which may enable them to achieve distribution efficiencies.

During 2003, Coca-Cola FEMSA faced new competitive pressures that are different than those it has
historically faced as it began operations in Central America, Colombia, Venezuela and Brazil. In addition, distribution and marketing practices in some of these territories differ from Coca-Cola FEMSA's historical
practices.

Recently, price discounting and packaging have joined consumer sales promotions, customer service
and non-price retailer incentives as the primary means of competition among soft drink bottlers. Coca-Cola FEMSA competes by seeking to offer an attractive price / value proposition to the different segments in its
markets and by building on its brand equity. Coca-Cola FEMSA believes that the introduction of new products and new presentations has been a significant competitive technique that allows it to increase demand for
Coca-Cola FEMSA's products, provide different options to consumers and increase new consumption opportunities. See Sales Overview.

***Mexico*****.**Coca-Cola FEMSA's principal competitors in
Mexico are bottlers of Pepsi products, whose territories overlap but are not co-extensive with those of Coca-Cola FEMSA. These competitors include Pepsi Gemex in central Mexico, a subsidiary of PBG, the largest bottler
of Pepsi globally, and several other Pepsi bottlers in central and southeast Mexico. In addition, Coca-Cola FEMSA competes with Cadbury Schweppes and with other national and regional brands in its Mexican territory.
Coca-Cola FEMSA also faces an increase in competition from low price producers offering multi-serving size presentations in the soft drink industry.

***Central America.***In the countries that comprise its Central America
territory, Coca-Cola FEMSA's main competitors are Pepsi bottlers. In Guatemala and Nicaragua it competes against The Central American Bottler Corporation, in Costa Rica its principal competitor is Embotelladora
Centroamericana, S.A. and in Panama its main competitor is Refrescos Nacionales, S.A.

***Colombia.***Coca-Cola FEMSA's principal competitor is Postobón
S.A., which we refer to as Postobón, a well-established local bottler that sells flavored soft drinks, some of which have a wide consumption preference, such as cream soda, the second most popular category in the
Colombian soft drink industry in terms of sales volumes, and Pepsi products. Postobón is a vertically integrated producer, the owners of which hold other significant commercial interests in Colombia.

***Venezuela***. In Venezuela, Coca-Cola FEMSA's main competitor is
Pepsi-Cola Venezuela, C.A., a joint venture formed between PepsiCo and Empresas Polar, S.A., the leading beer distributor in the country. It also competes with the producers of *Kola Real*in part of the country.

***Brazil.***In Brazil, Coca-Cola FEMSA competes against AmBev, a Brazilian
company with a portfolio of brands that includes Pepsi, local brands with flavors such as guaraná and proprietary beers. It also competes against B brands or Tubainas, which are small,
local producers of low cost flavored soft drinks in multi-serving presentations that represent an important portion of the soft drink market.

***Argentina.***In Argentina, Coca-Cola FEMSA's main competitor is BAESA, a
Pepsi bottler, which is owned by Argentina 's principal brewery, Quilmes Industrial S.A., and indirectly controlled by AmBev. In addition to BAESA, competition has intensified over the last several years with the
entrance of a number of competitors offering generic, low priced soft drinks as well as many other generic products and private label proprietary supermarket brands.

**Production and Distribution Facilities**

Over the past several years, Coca-Cola FEMSA has made significant capital improvements to
modernize its facilities and improve operating efficiency and productivity, including:

- increasing the annual capacity of its bottler plants;
- installing clarification facilities to process different types of sweeteners;
- installing plastic bottle-blowing equipment and can presentation capacity;
- modifying equipment to increase flexibility to produce different presentations, including
swing lines that can bottle both non-returnable and returnable presentations; and
- closing obsolete production facilities.

As of December 31, 2003, Coca-Cola FEMSA owned 32 bottler plants. By country, Coca-Cola FEMSA has
twelve bottler facilities in Mexico, four in Central America, six in Colombia, six in Venezuela, three in Brazil and one in Argentina.

Since the Panamco acquisition during 2003, Coca-Cola FEMSA consolidated 20 of its plants into
existing facilities, including four plants in Mexico, one in Central America, eleven in Colombia, three in Venezuela and one in Brazil. At the same time, Coca-Cola FEMSA increased its productivity measured in unit cases
sold by its remaining plants by more than 50% company wide.

As of December 31, 2003, Coca-Cola FEMSA operated 250 distribution centers, more than 40% of
which were in its Mexican territories. Coca-Cola FEMSA owns approximately 80% of these
distribution centers and leases the remainder. See  Product Distribution. During 2003, as part of its consolidation
process, Coca-Cola FEMSA closed 37 distribution centers across its territories.

The table below sets forth the location, principal use, installed capacity and percentage
utilization of Coca-Cola FEMSA's production facilities by country:

**Production Facility Summary 
As of December 31, 2003**

|**Country** | **Principal Use** | **Installed Capacity (thousands of unit cases)** | **% Utilization (1)**
|----------- | ----------------- | ------------------------------------------------ | ---------------------
|Mexico      | Bottler Facility  | 1,417,345                                        | 59.5%                
|Guatemala   | Bottler Facility  | 30,303                                           | 54.6%                
|Nicaragua   | Bottler Facility  | 26,807                                           | 70.8%                
|Costa Rica  | Bottler Facility  | 37,992                                           | 56.3%                
|Panama      | Bottler Facility  | 28,830                                           | 36.1%                
|Colombia    | Bottler Facility  | 264,036                                          | 37.5%                
|Venezuela   | Bottler Facility  | 268,763                                          | 42.1%                
|Brazil      | Bottler Facility  | 378,969                                          | 56.3%                
|Argentina   | Bottler Facility  | 206,736                                          | 60.3%                

|__________________
|------------------
|(1)               

**Taxation of Soft Drinks**

All the countries in which Coca-Cola FEMSA operates, except for Panama, impose a value-added tax on the sale of
soft drinks, with a rate of 15% in Mexico, 12% in Guatemala, 15% in Nicaragua, 13% in Costa Rica, 5% in Panama, 16% in Colombia, 16% in Venezuela, 18% in Brazil (only in the territories where Coca-Cola FEMSA operates)
and 21% in Argentina. In addition, several of the countries in which Coca-Cola FEMSA operates impose the following excise or other taxes:

- Mexico imposes a 20% excise tax on soft drinks produced with high fructose corn syrup or HFCS in January 2002 that was suspended in
September 2002. In January 2003, the Mexican government implemented a 20% excise tax on carbonated soft drinks produced with non-sugar sweeteners.
- Guatemala imposes an excise tax of 0.18 cents in local currency (Ps. 0.25 as of December 31, 2003) per liter of soft drink.
- Nicaragua imposes a 9% consumption tax.
- Costa Rica imposes a specific tax on non-alcoholic bottled beverages based on the
combination of packaging and flavor, a 5% tax on local brands, a 10% tax on foreign brands and a 14% tax on mixers.
- Panama imposes a 5% tax based on the cost of goods produced.
- Brazil imposes an excise tax of 9% and a consumption tax of 6.9% in the terriritories
where Coca-Cola FEMSA operates.
- Argentina imposes an excise tax on colas and on flavored soft drinks containing less
than 5% lemon juice or less than 10% fruit juice of 8.7%, and an excise tax on flavored soft drinks with 10% or more fruit juice, and on mineral water of 4.2%.

**Price Controls on Soft Drinks**

At present, there are no price controls on
soft drinks in any of our territories. In Mexico, prior to 1992, prices of carbonated soft drinks were regulated by the Mexican government. From 1992 to 1995, the industry was subject to voluntary price restraints.
In response to the devaluation of the Mexican peso relative to the U.S. dollar in 1994 and 1995, however, the Mexican government adopted an economic recovery plan to control inflationary pressures in 1995. As part of
this plan, the Mexican government encouraged the
Asociación Nacional de Productores de Refrescos
y Aguas Carbonatadas, A.C.(the National Association of Bottlers) to engage in voluntary consultations with the Mexican government with respect to price increases for returnable presentations. These voluntary
consultations were terminated in 1996. In the last ten years, the governments in Colombia, Brazil and Venezuela
have also imposed formal price controls on soft drinks. The imposition of price controls in the future may limit Coca-Cola FEMSAs ability to set prices and adversely affect its results of operations.

**Seasonality**

Sales of Coca-Cola FEMSA's products are seasonal, as its sales levels generally increase during
the summer months of each country and during the Christmas holiday season. In Mexico, Central America, Colombia and Venezuela, Coca-Cola FEMSA typically achieves its highest sales during the summer months of
April through September as well as during the Christmas holidays in December. In Argentina and Brazil, its highest sales levels occur during the summer months of October through March and the Christmas
holidays in December.

**Raw Materials**

Pursuant to the bottler agreements with The Coca-Cola Company, Coca-Cola FEMSA is required to
purchase concentrate, including aspartame, an artificial sweetener used in diet sodas, for all *Coca-Cola*trademark beverages from companies designated by The Coca-Cola Company. The price of concentrate for all
*Coca-Cola*trademark beverages is a percentage of the average price Coca-Cola FEMSA charges to its retailers net of applicable taxes. Although The Coca-Cola Company has the right to unilaterally set the price of
concentrates, in practice this percentage is set pursuant to periodic negotiations with The
Coca-Cola Company. In connection with the Panamco acquisition, The Coca-Cola Company agreed that concentrate prices would not be raised through May 2004. See Item 10. Additional InformationMaterial
ContractsCoca-Cola FEMSAThe Coca-Cola Memorandum. In most cases, concentrate is purchased in the local currency of the territory.

In addition to concentrates, Coca-Cola FEMSA purchases sweeteners, carbon dioxide, glass and
plastic bottles, cans, closures and fountain containers, as well as other packaging materials. Its bottler agreements provide that, with respect to *Coca-Cola*trademark beverages, all containers, closures,
cases, cartons and other packages and labels may be purchased only from suppliers approved by The Coca-Cola Company, which includes manufacturing subsidiaries of FEMSA Empaques. Prices for packaging materials
historically are determined with reference to the U.S. dollar, although the local currency equivalent in a particular
country is subject to price volatility in accordance with changes in exchange rates. Under the agreements with The Coca-Cola Company, Coca-Cola FEMSA may also use raw or refined sugar or HFCS as sweeteners in its
products, although it currently use sugar in all of its operations except for Argentina. Sugar prices in all of the countries in which Coca-Cola FEMSA operates, other than Brazil, are subject to local regulations and
other barriers to market entry that cause it to pay in excess of international market prices for sugar. Coca-Cola FEMSA has experienced sugar price volatility in these territories as a result of changes in local
conditions and regulations.

None of the materials or supplies that Coca-Cola FEMSA uses are presently in short supply,
although the supply of specific materials could be adversely affected by strikes, weather conditions, governmental controls or national emergency situations.

***Mexico.***Coca-Cola FEMSA purchases some glass bottles, closures, plastic
cases, commercial refrigerators, cans and certain lubricants and detergents for bottling lines from subsidiaries of FEMSA Empaques. It purchases returnable its plastic bottles from Continental PET Technologies de
México, S.A. de C.V, a subsidiary of Continental Can, Inc., which has been the exclusive supplier of returnable plastic bottles to The Coca-Cola Company and its bottlers in Mexico. Coca-Cola FEMSA purchases some
of its non-returnable plastic bottles, as well as pre-formed plastic ingots for the production of non-returnable plastic bottles, from ALPLA Fábrica de Plásticos, S.A. de C.V., which we refer to as ALPLA,
an authorized provider of PET for The Coca-Cola Company.

Coca-Cola FEMSA purchases some can presentations from Industria Envasadora de Querétaro,
S.A. de C.V., known as IEQSA, a bottler cooperative in which it holds 33.68% interest. Both Coca-Cola FEMSA and IEQSA purchase a portion of empty can supply requirements from Famosa. Coca-Cola FEMSA's supply agreements
provide for market based pricing.

Sweeteners are combined with water to produce basic syrup, which is added to the concentrate as
the sweetener for the soft drink. Coca-Cola FEMSA regularly purchases sugar from Promotora Mexicana de Embotelladoras, S.A. de C.V., known as PROMESA, a cooperative of *Coca-Cola*bottlers. These purchases are
regularly made under one-year agreements between PROMESA and each bottler subsidiary for the sale of sugar at a price that is determined monthly based on the cost of sugar to PROMESA. Coca-Cola FEMSA also purchases
sugar from Beta San Miguel, another sugar-cane producer in which it holds a 2.54% equity interest.

In December 2001, the Mexican government expropriated the sugar industry in Mexico. To administer
this industry, the Mexican government entered into a trust agreement with Nacional Financiera, S.N.C., which we refer to as Nafin, a Mexican government-owned development bank, pursuant to which Nafin acts as trustee. In
addition, the Mexican government imposed a 20% excise tax, effective January 1, 2002, on carbonated soft drinks sweetened with HFCS. As a result Coca-Cola FEMSA converted its Mexican bottler facilities to
sugar-cane-based production in early 2002. On January 1, 2003, the Mexican government broadened the reach of this tax by imposing a 20% excise tax on carbonated soft drinks produced with non-sugar sweetener, including
HFCS. The effect of these excise taxes is to limit Coca-Cola FEMSA's ability to substitute other sweeteners for sugar.

Imported sugar is also presently subject to import duties, the amount of which is set by the
Mexican government. As a result, sugar prices in Mexico are in excess of international market prices for sugar and increased by approximately 8% in 2003.

***Central America.***The majority of Coca-Cola FEMSA's raw materials such
as glass and plastic bottles and cans are purchased from several local suppliers. Sugar is available from one supplier in each country. Local sugar prices are significantly higher than international market prices, and
Coca-Cola FEMSA's ability to import sugar or HFCS is limited.

***Colombia.***Coca-Cola FEMSA uses sugar as a sweetener in its products,
which it buys from several domestic sources. It purchases pre-formed ingots from a local supplier and Tapón Corona, in which it has a 40% equity interest. Coca-Cola FEMSA purchases all its glass bottles and cans
from suppliers, in which its competitor Postobón owns a 40% equity interest. Other suppliers exist for glass bottles, however, cans are available only from this one source.

***Venezuela.***Coca-Cola FEMSA uses sugar as a sweetener in its products,
of which it purchases the majority from the local market and the rest it imports mainly from Colombia. In the second half of 2003, there was a shortage of sugar due to the inability of the main sugar importers to access
foreign currencies as a result of the exchange controls implemented at the beginning of 2003. Coca-Cola FEMSA only buys glass bottles from one supplier, Productos de Vidrio, S.A., a local supplier, but there are other
alternative suppliers authorized by The Coca-Cola Company. Coca-Cola FEMSA has several supplier options for plastic non-returnable bottles but it acquires most of its requirements from ALPLA de Venezuela, S.A. One
exclusive supplier handles all of its can requirements.

***Brazil.***Sugar is widely available in Brazil at internal market prices
which are generally lower than international prices. Coca-Cola FEMSA purchases glass bottles, PET bottles and cans from several domestic and international suppliers.

***Argentina.***In Argentina, Coca-Cola FEMSA uses HFCS from several
different local suppliers as sweetener in its products instead of sugar. It purchases glass bottles, plastic trays and other raw materials from several domestic sources. Coca-Cola FEMSA purchases pre-formed plastic
ingots, as well as returnable plastic bottles, at competitive prices from Complejo Industrial PET, S.A., which we refer to as CIPET, a local subsidiary of Embotelladera Andina S.A., a Coca Cola bottler with operations
in Argentina, Chile and Brazil, and other international suppliers. Coca-Cola FEMSA purchases crown caps from local and international suppliers. It purchases its can presentations for distribution to customers in Buenos
Aires from Complejo Industrial CAN S.A., which we refer to as CICAN, in which Coca-Cola FEMSA de Buenos Aires has a 48.1% equity interest.

**Purchases from FEMSA Affiliates**

Coca-Cola FEMSA regularly engages in transactions with FEMSA and its subsidiaries. In 2003,
Coca-Cola FEMSA purchased crown caps, plastic bottle caps, cans, commercial refrigerators, lubricants, detergents, plastic cases and substantially all of its returnable glass bottle requirements for its Mexican
operations from FEMSA Empaques under several supply agreements. A subsidiary of FEMSA Empaques also sells refrigerators to Coca-Cola FEMSA's non-Mexican operations. The aggregate amount of these purchases was
approximately Ps. 1.513 billion in 2003. Coca-Cola FEMSA believes that its purchasing practices with FEMSA Empaques result in prices comparable to those that would be obtained in arm's length negotiations with
unaffiliated parties. Coca-Cola FEMSA also sells its products to FEMSA Commercio's chain of convenience stores. These transactions are also conducted on an arm's length basis










..



Table of Contents

FEMSA Cerveza

Overview and
Background

FEMSA Cerveza is one
of our core subholding companies and one of the two leading beer producers in Mexico
measured in terms of sales volume.  In 2003, FEMSA Cerveza sold 24.564 million
hectoliters of beer.  In 2003, FEMSA Cerveza was ranked the fourteenth-largest brewer in
the world in terms of sales volume based on third party estimates.  FEMSA Cerveza exports
its products to more than 70 countries worldwide, with North America being its most
important export market, followed by certain markets in Asia, Europe and Latin America.
 FEMSA Cervezas principal operating subsidiaries are Cervecería Cuauhtémoc Moctezuma,
S.A. de C.V., which we refer to as CCM, and which operates six breweries, and Cervezas
Cuauhtémoc Moctezuma, S.A. de C.V. which operates our company-owned distribution centers.

In September 1994,
Labatt acquired 22% of FEMSA Cerveza for US$510 million and was granted an option to
acquire an additional 8%.  On December 1, 1994, FEMSA Cerveza and Labatt entered into a
joint venture agreement whereby both parties agreed to combine their United States beer
businesses through their joint ownership of Labatt USA.  FEMSA Cerveza owns 30% of Labatt
USA.  In July 1995, Interbrew N.V./S.A., which we refer to as Interbrew, a Belgian
holding company with extensive brewing interests worldwide, acquired Labatt.  On May 15,
1998, Labatt, through its subsidiary, Stellamerica Holdings Limited, which we refer to as
Stellamerica, exercised the option to acquire an additional 8% interest in FEMSA Cerveza
for a total amount of US$221.6 million. Currently, Stellamerica holds 18.42% of FEMSA
Cerveza, and Labatt holds 11.58%, therefore Interbrew indirectly owns 30% of FEMSA
Cerveza.

On March 3, 2004,
Interbrew and AmBev announced a transaction that would affect the ownership of the
majority interest in the limited liability company that owns Labatt USA.  Wisdom has
commenced litigation in the United States District Court for the Southern District of New
York alleging, among other things, that the transaction involves a transfer of membership
or other ownership interests in the limited liability company that owns Labatt USA, and
that such a transfer cannot occur without the approval of Wisdom or at least one of the
Wisdom-appointed directors on the board of the limited liability company.  See Item 8.
 Financial InformationLegal ProceedingsFEMSA Cerveza.  In the event the transaction
announced by Interbrew and AmBev were to be consummated, we believe the transaction would
also involve a change of control, as that term is defined in certain agreements governing
our relationship with Labatt.  See "Item 10. Additional InformationMaterial ContractsFEMSA
Cerveza."  We are currently in conversations with these parties to determine the future
of our relationship with Labatt.

Business Strategy

FEMSA Cervezas
objectives are to produce, market, distribute and sell quality beer products, expanding
penetration in its core Mexican markets as well as in key export markets, particularly
the southwestern or sun belt states of the United States.  FEMSA Cerveza seeks to achieve
profitable volume growth to ultimately generate economic value for its shareholders.  In
order to achieve these objectives in its core Mexican markets, FEMSA Cerveza is following
a comprehensive strategy which seeks to:

|1. | differentiate brand portfolios through market segmentation and brand positioning.  After thorough
              analysis, portfolios have been tailored for each different market, leveraging the distinct
              attributes of FEMSA Cervezas various brands.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | develop advanced capabilities to gather information at the point of sale, ensuring that appropriate
              products are being sold at the right price points, and allowing FEMSA Cerveza to fine-tune its
              portfolio offerings according to the markets characteristics, which we refer to as revenue
              management competencies.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | establish profitable, long-term relationships with retailers, by helping them to sell more product to
              the end consumer.  FEMSA Cerveza implements customized client differentiation strategies that
              involve different commercial terms, promotional strategies, levels of refrigeration equipment and
              point of sale marketing materials to suit the individual retailer.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | achieve balanced and profitable market coverage, by selecting the appropriate mix of on- and off-premise
              accounts, and a balance of image (such as an upscale restaurant) versus volume coverage accounts
              (such as beer depots).  FEMSA Cerveza is committed to optimizing retail coverage and engaging
              solely in selective expansion with a priority on growing volumes profitably.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | pursue continuously the maximization of efficiencies and cost reductions along the entire value chain,
              from production to final distribution, by using information technology and adapting processes
              accordingly.  The implementation of FEMSA Cervezas comprehensive Enterprise Resource Planning
              solution is well advanced and it is allowing us to coordinate and optimize most of our processes,
              enabling the different components of our strategy to come together, with a goal of generating
              improved results.  See Enterprise Resource Planning.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Product Overview

FEMSA Cerveza
currently operates six breweries, all of which are located in Mexico, with an aggregate
annual installed capacity of approximately 32.496 million hectoliters. In 2003, FEMSA
Cerveza sold an aggregate volume of 24.564 million hectoliters, of which 22.582 million
hectoliters were sold in the Mexican market and 1.982 million hectoliters were sold
abroad. FEMSA Cerveza produces and distributes 15 brands of beer in up to ten different
presentations, resulting in a portfolio of 61 different product offerings. The most
important brands in FEMSA Cervezas portfolio include: Tecate, Carta Blanca, Soland
Superior. These four brands, all of which are distributed throughout Mexico, accounted
for approximately 88% of FEMSA Cervezas domestic sales volume in 2003.

Per capita
information, product segments, relative prices and packaging information with respect to
FEMSA Cerveza have been computed and are based upon our statistics and assumptions.

The Mexican Beer
Market

The Mexican beer
market is the eighth largest beer market in the world in terms of industry sales volume
in 2003 and is characterized by (i) a concentrated domestic beer production, (ii)
regional market share differences, (iii) the prevalence of government licensing
regulations, (iv) favorable demographics in the beer drinking population and (v) macroeconomic
factors affecting the level of beer consumption.

|Concentrated domestic beer production | Since 1985, Mexico has effectively had only two independent domestic beer
                                         producers, FEMSA Cerveza and Grupo Modelo.  Grupo Modelo, a publicly traded
                                         company based in Mexico City, is the holding company of 76.8% of Diblo,
                                         S.A. de C.V., which operates the brewing and packaging subsidiaries of
                                         Grupo Modelo.  Grupo Modelos principal beer brands are Corona, Modelo,
                                         Victoria and Pacífico.  Grupo Modelos Corona brand is distributed
                                         nationally, while Victoria is distributed primarily in Mexico City and the
                                         surrounding areas and Pacífico is sold principally along the pacific
                                         coastal regions.  Modelo Especial, Modelo Light and Pacífico are Grupo
                                         Modelos domestic can presentations.  In addition, Grupo Modelo produces
                                         Corona in a can presentation for sale in export markets.
                                         Historically, beer imports have not been a significant factor in the
                                         Mexican beer market, because they were subject to tariffs of up to 20%.
                                         Under NAFTA, the tariff on imported beer from the United States and Canada
                                         was gradually reduced and eventually eliminated in January 2001.
                                         Notwithstanding the reduction in tariff levels, imported beers accounted
                                         for approximately 1.8% of the total Mexican beer market in terms of sales
                                         volume during 2003.  FEMSA Cerveza believes that tariff elimination has had
                                         a limited effect on the Mexican beer market because imported beers are
                                         largely premium and super-premium products sold in aluminum cans, which are
                                         a more expensive means of packaging in Mexico than beer sold in returnable
                                         bottles.  However, periods of strength of the Mexican peso with respect to
                                         the U.S. dollar may lower the price of imported beer to the consumer and
                                         may result in increased demand for imported beer in the Mexican market.
|------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Regional market share differences | FEMSA Cerveza and Grupo Modelo each dominate the Mexican beer market in
separate regions of the country. FEMSA Cerveza has a dominant sales
position in the northern and southern areas of Mexico while Grupo Modelo
has a dominant sales position in central Mexico. We believe that this
regional domination can be traced in part to consumer loyalty to the brand
of beer that has historically been associated with a particular region.
For example, FEMSA Cervezas Carta Blancabrand was first produced in
Monterrey, Nuevo León in 1891. The strong regional identity in Monterrey
and surrounding northeastern areas is reflected in the regions preference
for Carta Blancaand other FEMSA Cerveza brands.

We also believe that regional market strength is a function of the
proximity of the breweries to the markets they serve. Transportation costs
restrict the most efficient distribution of beer to a geographic area of
approximately 300 to 500 kilometers surrounding a brewery. Generally,
FEMSA Cerveza commands a majority of the beer sales in regions that are
nearest to its largest breweries. FEMSA Cervezas largest breweries are in
Orizaba, Veracruz and in Monterrey, Nuevo León. Grupo Modelos largest
breweries are located in Mexico City, Oaxaca and Zacatecas.
The northern region of Mexico has traditionally enjoyed a higher per capita
income level, attributable in part to its rapid industrialization within
the last 50 years and to its commercial proximity to the United States. In
addition, FEMSA Cerveza estimates that per capita beer consumption is also
greater in this region due to its warmer climate and a more ingrained beer
culture.
|--------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Mexican Regional
Demographic Statistics

|              | Percent of
2003
Total
Population(1) | Percent of Total
2003 GDP(1) | Per Capita GDP 2003 (Thousands
of Pesos)
|------------- | ----------------------------------- | ---------------------------- | ----------------------------------------
|              |                                     |                              |                                         
|Region       
|Northern      | 26.3%                               | 31.0%                        | Ps. 68.0                                
|Southern      | 22.6                                | 15.6                         | 39.9                                    
|Central       | 51.1                                | 53.4                         | 60.5                                    
|Country Total | 100.0%                              | 100.0%                       | Ps. 57.8                                
|              |                                     |                              |                                         

__________________


|Sources:  Mexican Institute of Statistics and FEMSA Cervezas estimates.
|------------------------------------------------------------------------
|(1)                                                                     

|Government regulation | The Mexican federal government regulates beer consumption in Mexico
primarily through taxation while local governments in Mexico regulate
primarily through the issuance of licenses that authorize retailers to
sell alcoholic beverages.
Federal taxes on beer currently represent 43.75% of the total retail
price of beer to the consumer and include a 25% excise tax and a 15%
value-added tax. The beer excise tax has remained constant at 25% since
January 1998. The tax component of retail beer prices is significantly
higher in Mexico than in the United States, where taxes on average
represent approximately 19.2% of the retail price to the consumer.
The number of retail outlets authorized to sell beer is controlled by
local jurisdictions, which issue licenses authorizing the sale of
alcoholic beverages. Other regulations regarding beer consumption in
Mexico vary according to local jurisdiction and include limitations on
the hours during which restaurants, bars and other retail outlets are
allowed to sell beer and other alcoholic beverages. FEMSA Cerveza has
developed efforts that address these limitations at various levels,
promoting better education of responsible consumption of beer with
government and civil authorities. For instance, as part of its ongoing
community activities, FEMSA Cerveza has been a very active sponsor of a
nationwide designated driver program.
 Since July 1984, Mexican federal regulation has required that all forms of
beer packaging carry a warning advising that excessive consumption of beer
is hazardous to ones health. In addition, the Ley General de Salud(the
Mexican General Health Law), requires that all beers sold in Mexico
maintain a sanitation registration with the Secretaría de Salud(the
Ministry of Health).
|--------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Demographics of beer drinking population | We estimate that annual per capita beer consumption for the total Mexican
                               population increased to approximately 52 liters in 2003.  The legal
                                         drinking age in Mexico is 18.  At least 38% of the Mexican population is
                                         under the age of 18 and, therefore, is not considered to be part of the
                                         beer drinking population.  We consider the population segment of men
                                         between the ages of 18 and 45 to be FEMSA Cervezas primary market.
                                         Based on historical trends and what management perceives as the continued
                                         social acceptance of beer consumption, FEMSA Cerveza believes that general
                                         population growth will result in an increase in the number of beer
                                         consumers in Mexico.  Based on historical trends as measured by the Mexican
                                         Institute of Statistics, we expect the Mexican population to grow at an
                                         average annual rate of approximately 1.2% per year over the period 2004 to
                                         2009.  We estimate that over the next ten years approximately one million
                                         additional people per year will become potential beer consumers due to the
                                         natural aging of the Mexican population.
                                         In 2003, Mexicos annual per capita beer consumption was approximately 52
                                         liters compared to approximately 80 liters in the United States.  Generally
                                         speaking, countries with higher per capita beer consumption have relatively
                                         higher per capita income.  Per capita income in Mexico in 2003 was
                                         equivalent to approximately US$6,172 compared to a per capita income of
                                         approximately US$37,770 in the United States.  FEMSA Cerveza identifies
                                         approximately 61% of its consumers as blue collar, 28% as white collar and
                                         the remaining 11% as students, unemployed, retirees or other.
|---------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Macroeconomic influences affecting beer consumption | We believe that consumption activity in the Mexican beer market is heavily
                         influenced by the general level of economic activity in Mexico, the
                                         countrys gross wage base, changes in real disposable income and employment
                                         levels.  As a result, the beer industry reacts sharply to economic change.
                                         The industry generally experiences high volume growth in periods of
                                         economic strength and slower volume growth or volume contraction in periods
                                         of economic weakness.  Domestic beer sales declined in 1982, 1983 and
                                         1995.  These sales decreases correspond to periods in which the Mexican
                                         economy experienced severe disruptions.  Similarly, the economic weakness
                                         observed in 2001 and 2002 corresponds to a reduction in domestic beer sales
                                         in 2002.  In 2003, given the effect of a continued economic slowdown on
                                         consumers, FEMSA Cerveza decided not to increase prices.  This reduction in
                                         prices in real terms (after giving effect to inflation) was the main driver
                                         for increasing sales volumes during 2003.
|--------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Annual Price
Increases

FEMSA Cerveza did not
implement a general price increase during 2003, reflecting the difficult economic
environment.  For the Mexican beer industry as a whole, the real average retail price of
beer decreased 3.8 percentage points as shown below:

Mexican Beer
Industry
Cumulative Real Retail Beer Price Index: 1999-2003
                       (1999 = 100%)

|Year Ended December 31,
|-----------------------
|                       
|2003                   
|                       
|101.5                  

|__________________     
|-----------------------
|Source: Banco de México

In February 2004,
FEMSA Cerveza started a price increase representing an average 5% nominal price increase
as compared to December 2003.

FEMSA Cervezas
Beer Sales Volume

FEMSA Cerveza volume
figures contained in this annual report refer to invoiced sales volume.  Invoiced sales
volume represents the quantity of hectoliters of beer sold by FEMSA Cervezas breweries
to unaffiliated distributors and by affiliated distributors to retailers.  The term
hectoliter means 100 liters or approximately 26.4 U.S. gallons.

FEMSA Cervezas
aggregate beer sales volume totaled 24.564 million hectoliters in 2003, an increase of
3.2% from total sales volume of 23.811 million hectoliters in 2002.  In 2003, FEMSA
Cervezas domestic sales volume increased by 3.3% to 22.582 million hectoliters and
export sales volume increased by 1.4% to 1.982 million hectoliters.

FEMSA Cerveza Beer
Sales Volumes                                                  (Thousands of Hectoliters)

|                      |       
|--------------------- | ------
|                      | 2003  
|                      |       
|Domestic Sales Volume | 22,582
|Export Sales Volume   | 1,982 
|                      |       
|Total Sales Volume    | 24,564
|                      |       

FEMSA Cervezas
domestic sales volume recorded a five-year compounded average growth rate of 0.4% for the
period 1999-2003.  This compares with the 2.1% five-year compounded average growth rate
of the Mexican GDP. Domestic net sales for the same period recorded a 2.1% compounded
average growth rate.  Currently, FEMSA Cervezas strategy continues to focus on
increasing consumption of its products while improving the real price of beer through
revenue management strategies.

FEMSA Cervezas
Beer Presentations

FEMSA Cerveza produces
beer in returnable glass bottles and kegs and in non-returnable metal cans and glass
bottles.  The following table shows the percent of total sales volume by presentation for
the year ended December 31, 2003:

FEMSA Cervezas
Total Beer Volume by Presentation
 As of
December 31, 2003

|Presentation                            |       
|--------------------------------------- | ------
|Returnable Bottle325 ml                | 23.4% 
|Returnable Bottle1 liter               | 38.4  
|Returnable Bottle190 ml                | 5.2   
|                                        |       
|Subtotal Returnable Bottles             | 67.0  
|                                        |       
|Non-returnable Bottle325 ml and 190 ml | 8.1   
|Cans                                    | 23.1  
|Kegs                                    | 1.8   
|                                        |       
|Total                                   | 100.0%
|                                        |       

|Returnable presentations | The most popular form of packaging in the Mexican beer market is the
                                         returnable bottle.  FEMSA Cerveza believes that the popularity of the
                                         returnable bottle is attributable to its lower price to the consumer.
                                         While returnable bottles generally cost approximately twice as much to
                                         produce as non-returnable bottles, returnable bottles may be reused as many
                                         as 30 times before being recycled.  As a result, beer producers are able to
                                         charge lower prices for beer in returnable bottles.  Because non-returnable
                                         presentations are the most expensive, we believe that demand for these
                                         presentations is highly sensitive to economic factors.  During periods when
                                         the Mexican economy is weak, returnable volumes generally increase at the
                                         expense of non-returnable volumes.
|------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Non-returnable presentations | FEMSA Cervezas domestic presentation mix has been growing in
                                         non-returnable presentations in the last few years, as we tailor our
                                         offering to consumer preferences and provide different convenient
                                         alternatives.
|---------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Relative Pricing in
the Mexican Market

Returnable bottles and
kegs are the least expensive beer presentation on a per-milliliter basis.  Cans have
historically been priced approximately 40% higher than returnable bottles, and
non-returnable bottles are generally priced approximately 30% higher than returnable
bottles.  The consumer preference for presentations in cans has varied considerably over
the past 20 years, rising in periods of economic prosperity and declining in periods of
economic austerity, reflecting the price differential between these forms of packaging.

In 2003, FEMSA Cerveza
increased slightly the relative price of its non-returnable presentations as compared to
the 325 milliliters returnable glass presentation.  The relative price of the can
presentation and the non-returnable glass presentation as compared to the 325 milliliters
returnable glass presentation was 1.38 and 1.28, respectively, as of December 31, 2003.
 In February 2004 FEMSA Cerveza started a price increase differentiated by region, brand
and presentation that was fully implemented by the first week of March.  This represents
an average 5% nominal price increase as compared to December 2003.

Domestic Beer
Relative Pricing by Presentation                                               As of
December 31, 2003

|Presentation                            | Relative Prices (1)
|--------------------------------------- | -------------------
|Returnable Bottle325 ml                | 1.00               
|Returnable Bottle1 liter               | 0.90               
|Returnable Bottle190 ml                | 1.14               
|Non-Returnable Bottle325 ml and 190 ml | 1.28               
|Cans                                    | 1.38               
|Kegs                                    | 0.99               

|__________________
|------------------
|(1)               

Exports

FEMSA Cervezas export
strategy focuses on the United States market, concentrating efforts on the markets in the
sun belt states bordering Mexico.  We believe that the sun belt states are FEMSA Cervezas
greatest potential market outside of Mexico.

Total export sales
volume of 1.982 million hectoliters represented 8.1% of FEMSA Cervezas total beer sales
volume in 2003 and accounted for 6.7% of FEMSA Cervezas total revenues.  The following
table highlights FEMSA Cervezas export volumes and total revenues:

FEMSA Cerveza Export
Summary

|                              | Year Ended December 31,
|----------------------------- | -----------------------
|                              |                        
|                              | 2003                   
|                              |                        
|Export Sales Volume(1)        | 1,982                  
|Volume Growth                 | 1.4%                   
|Percent of Total Sales Volume | 8.1%                   
|                             
|Export Revenues              
|Millions of Pesos(2)          | 1,467                  
|Millions of U.S. dollars(3)   | 133                    
|Revenue Growth (US$)          | 4.6%                   
|Percent of Total Sales        | 6.7%                   

|__________________ Source:  FEMSA Cerveza.
|------------------------------------------
|(1)                                       
|(2)                                       
|(3)                                       

FEMSA Cerveza
currently exports its products to more than 70 countries.  The principal export markets
for FEMSA Cerveza are North America, Europe, Asia and Latin America.  In 2003, export
sales volume to these areas accounted for 91.9%, 2.9%, 2.3% and 2.9%, respectively, of
FEMSA Cervezas total export sales volume.

FEMSA Cervezas
affiliate, Labatt USA, is the importer of FEMSA Cervezas brands in the United States.
 Labatt USA manufactures and distributes Rolling Rock and is also the U.S. importer of
Labatts Canadian brands and of European brands such as Lowenbrau, Stella Artois,
Boddingtons, Leffe and Carlsberg.  Sales of FEMSA Cervezas brands contributed 35% of
Labatt USAs volume in 2003, representing 1% volume growth from 2002 levels.

On April 9, 2003,
FEMSA and Interbrew jointly announced that Labatt USA would introduce Bass Ale into its
portfolio of brands for a twelve to eighteen month trial period beginning July 1, 2003.
 On December 19, 2003 the trial period was extended for an additional 6-month period.
 This temporary arrangement gives Labatt USA distribution and marketing responsibility
for Bass Ale in the United States, and also gives Labatt USA an eighteen to twenty-four
month period to establish the best development plan for the brand in the United States.
 During the period of the agreement, Labatt USA and its shareholders, Interbrew and FEMSA
Cerveza, will continue to assess the desirability of a longer-term arrangement for Labatt
USA to serve as the United States distributor of Bass Ale.  This agreement also allows
the existing core brands of the Labatt USA portfolio to benefit from incremental
marketing support and sales resources.

In August 2002, FEMSA
Cerveza began licensing the production and distribution of its Solbrand to
Holsten-Brauerei AG, which we refer to as Holsten, a Hamburg-based brewer. This venture
enables FEMSA Cerveza to leverage Holstens extensive knowledge of the German beer market
and offer a fresher product to a wider audience, while still complying with the exact
quality specifications of the Mexican brew. In 2002, Holsten distributed the existing
inventory of Solin Germany and began brewing and distributing the brand in 2003.

FEMSA Cervezas
principal export brands are Tecate, XX Lager, Dos Equis (Amber)and Sol. These brands
collectively accounted for 94% of FEMSA Cervezas export sales volume for the year ended
December 31, 2003.

FEMSA Cervezas
Principal Export Brands                                         Year Ended December 31,
2003

|Brand                          | Percent of 
     Total Export
      Volume
|------------------------------ | ------------------------------------------
|                               |                                           
|Tecate                         | 58.4%                                     
|XX Lager and Dos Equis (Amber) | 23.7                                      
|Sol                            | 11.6                                      
|Bohemia                        | 2.2                                       
|Carta Blanca                   | 4.1                                       
|                               |                                           
|Total                          | 100.0%                                    
|                               |                                           

Primary Distribution

FEMSA Cervezas
primary distribution is from its production facilities to its distribution centers warehouses.
 FEMSA Cerveza delivers to a combination of company-owned and third-party distributors.
 In 2003, approximately 75% of FEMSA Cervezas domestic sales passed through 273
company-owned distribution centers.  The remaining 25% was sold through 90 independent
distributors operating under agreements with FEMSA Cerveza.  In an effort to improve the
efficiency and alignment of the distribution network, FEMSA Cerveza is adjusting its
relationship with independent distributors by implementing franchise agreements and as a
result, achieving economies of scale through alignment with FEMSA Cervezas operating
systems.  FEMSA Cerveza has also increased the number of company-owned distributors by
acquiring third party distributors in recent years.  A franchise agreement is offered
only to those distributors that meet certain standards of operating capabilities,
performance and alignment. FEMSA Cerveza has already and will eventually acquire those
distributors that do not meet these requirements.  Through this initiative FEMSA Cerveza
will continue to seek to increase its volume through company-owned distribution centers.

Retail Distribution

The main sales outlets
for beer in Mexico are small, independently-owned mom and pop grocery stores, dedicated
beer stores or depósitos, liquor stores and bars. Supermarkets account for only a
small percentage of beer sales in Mexico. In addition, FEMSA Comercio operates a chain
of more than 2,798 convenience stores under the trade name Oxxo that exclusively sell
FEMSA Cervezas brands.

Distribution of
FEMSA Cerveza Domestic Sales Volume By Outlet
                                        Year Ended December 31, 2003

|Points of Sale                      |       
|----------------------------------- | ------
|Small Grocery Stores                | 21.3  
|Beer and Liquor Stores              | 31.9  
|Mini-markets and Convenience Stores | 16.0  
|Other Points of Sale                | 9.8   
|                                    |       
|Subtotal                            | 79.0  
|                                    |       
|                                   
|Consumption Centers                
|Bars                                | 9.7   
|Restaurants                         | 4.9   
|Nightclubs                          | 2.1   
|Other Consumption Centers           | 4.3   
|                                    |       
|Subtotal                            | 21.0  
|                                    |       
|Total                               | 100.0%
|                                    |       

In 2001, FEMSA Cerveza
began implementing pre-sale processes.  For 2003, approximately 80% of our sales volume
was sold through pre-sale, which consists of systematic on-site visits to collect advance
orders.  One of the primary objectives of pre-sale is to separate sales from distribution
to ensure more reliable market access and to enhance efficiency by reducing the number of
secondary distribution routes in otherwise highly fragmented markets.  Overall, in
markets where pre-sale has been implemented, we have experienced a significant reduction
in unsold product and a net reduction in distribution personnel. Furthermore, pre-sale
has enabled FEMSA Cerveza to collect customer and consumer information directly from the
marketplace, which then becomes valuable in defining brand portfolios by channel.  See Marketing
Strategy.

The Mexican retail
market is fragmented and characterized by a preponderance of small outlets that are
unable and unwilling to maintain meaningful inventory levels.  Consequently, FEMSA
Cerveza must make frequent product deliveries to its retailers.  The existence of
pre-sale systems facilitates systematic product delivery and helps discipline product
inventory at the point of sale.  As of December 31, 2003, FEMSA Cerveza serves more than
265,000 retailers and its distribution network operates approximately 1,926 retail
distribution routes.  This is slightly lower than the number of routes in operation in
2002 (without considering 176 routes acquired from third parties distributors during
2003), and reflects the reconfiguration in distribution logistics as a result of the
implementation of pre-sale in many of our key markets.

Enterprise Resource
Planning

Since 2001, FEMSA
Cerveza has embarked on the implementation of an Enterprise Resource Planning or ERP
system at various levels of the organization, with the ultimate objective of possessing
an information and control platform that supports all commercial activities nationwide
and correlates them with the administrative and business development decision-making
process occurring in our central office.  The ERP system has gone through a development
phase in which the design, organization and configuration of various components of the
system have been evaluated.  In this phase, special care has been given to defining
functions and procedures, which in some cases have spanned departmental divisions, in
order to produce a cohesive set of operating processes.  Some basic modules have been
implemented successfully and according to schedule both at our central office and
throughout the company.  These modules assist finance, shared services, maintenance and
equipment functions, among others.  These ERP modules operate under the SAP®software
platform.

In 2003, we started
the rollout of the ERP commercial module in our company-owned distribution centers.  By
the end of 2003, approximately 36% of the company-owned distribution centers volume were
operating through ERP.  As we advance in the implementation process, we are also working
in increasing our personnel capabilities in order to take advantage of the new tools and
improve our decision-making processes.  FEMSA Cerveza expects that this percentage will
continue to increase and that implementation will be completed during 2005.

Marketing Strategy

The principal
marketing objectives of FEMSA Cerveza are:

- ensuring
coherence between point of sale marketing and sales activities by linking the promotional
     programs of each brand with their respective communication and advertising campaigns;

- exploiting
channel marketing and market research functions;

- defining
and implementing differentiated strategies to promote the image of each brand; and

- capturing
new sales or consumption opportunities through innovative solutions in product and
     package offering, refrigeration, visibility and sponsorships.

Focus on Consumer:
Brand Positioning and Market Segmentation

FEMSA Cervezas
marketing strategy relies on a diverse brand and presentation portfolio to effectively
serve all consumer and geographic segments of the Mexican beer market. FEMSA Cervezas
product portfolio consists of brands at different stages of market development. The
strategy for each brand is dictated by its potential to either capture additional
consumers or increase frequency of consumption in each market. The objective of FEMSA
Cervezas marketing is to position each of its four major brands as the principal brand
in the respective region of relative strength. Our leading brands in their targeted
domestic markets are Tecatein the northwest, Carta Blancain the northeast, Solin the
central region and Superior in the south. FEMSA Cerveza believes that this strategy
allows it to leverage the brand equity and market position of its products in their
respective territories. In addition, FEMSA Cerveza plans to use other brands in its
portfolio to complement, and thereby strengthen, its regional offering and to assist in
creating a richer pricing scheme.

By defining brand
positioning and the relevant promotional strategies to be executed by the sales team,
FEMSA Cervezas marketing efforts seek to establish connections between the consumer and
FEMSA Cervezas brands.  The brand architecture and concept derived from brand
positioning are founded on rigorous market research that evaluates, among other things,
the brands attributes from the consumers perspective.  Furthermore, periodic market
research is conducted in several markets to monitor brand health attributessuch as brand
awareness, recent trial, purchase intent and first favoriteto help FEMSA Cerveza keep
accurate track of the status of the image of each brand.  The branding specialists also
rely on this market-obtained data to better target products and promotions.

Focus on Retailer:
Channel Marketing

FEMSA Cerveza believes
that defining channel strategies is just as important as defining brand positioning.
 Therefore, FEMSA Cerveza has established a channel marketing function within the
marketing division with the objective of understanding the strategic relevance of the
different channels across markets in order to define brand portfolios per channel.  A
channel refers to a category or sub-category of point of sale, such as supermarkets, beer
depots, restaurants, etc.  Channel marketing is responsible for:

- establishing
the optimal promotional programs for each channel;

- identifying
the most effective combination and position for merchandising material; and

- providing
refrigeration equipment at the point of sale.

Channel marketing is
also responsible for new channel development that could foster additional consumption
opportunities for FEMSA Cervezas brands.

Channel marketing and
coverage will be strengthened considerably with the use of electronic maps of certain
cities.  These maps superimpose crucial informationsocioeconomic strata, micro market
share, outlet location and channel characteristicsallowing sales managers and marketing
strategists to implement differentiated tactics such as revenue management and portfolio
segmentation.  FEMSA Cerveza is in the initial development stages of this sales tool.

Integrated Marketing

With the objective of
further aligning the brand and channel strategies with the sales teams, FEMSA Cerveza
began implementing integrated marketing programs that combine the functions of the sales
and marketing divisions.  An integrated marketing program promotes a brand through
simultaneous deployment of media communications, intense marketing efforts and
sponsorship of events, increasing the effectiveness of the sales force by bridging the
gap between the brand and the channel.

Jointly, our brand and
channel experts define an integrated brand strategy, which will be implemented in each
type of market and in each designated channel by a specialized team responsible for
designing the communication and marketing materials, including promotional programs that
reflect the brands strategy.  FEMSA Cerveza utilizes the following forms of sales
promotion:  television, radio, billboards and point of sale material, as well as channel
specific promotions, promotional material, refrigeration equipment and branded
merchandise such as plastic furniture and neon signs to dress the point of sale.  The
implementation team is responsible for the delivery of the specific brand programs to the
sales force, which is ultimately responsible for their market execution.

Product and Package
Innovation

FEMSA Cerveza has
established a working system that identifies, develops and ultimately launches
product/package innovation alternatives to create incremental volume and value for its
business.  This system has a structured set of components functions and criteria to
help innovative ideas materialize into feasible rollouts in an optimal way.  Currently,
the product development initiatives at FEMSA Cerveza do not contemplate the introduction
of new brands or the retirement of existing ones.

Plants and
Facilities

FEMSA Cerveza
currently operates six breweries with an aggregate monthly production capacity of 2,708
thousand hectoliters, equivalent to approximately 32.5 million hectoliters of annual
capacity. Each of FEMSA Cervezas breweries has received ISO 9002 certification and a
Clean Industry Certification (Industria Limpia) given by Mexican environmental
authorities. A key consideration in the selection of a site for a brewery is its
proximity to potential markets, as the cost of transportation is a critical component of
the overall cost of beer to the consumer. FEMSA Cervezas breweries are strategically
located across the country to better serve FEMSA Cervezas distribution system.

FEMSA Cerveza
Facility Capacity Summary                                          (Thousands of
Hectoliters)                                         Year Ended December 31, 2003

|                             | AverageAnnualized
|---------------------------- | -----------------
|                             |                  
|Brewery                     
|Orizaba                      | 7,200            
|Monterrey                    | 7,800            
|Toluca                       | 5,400            
|Navojoa                      | 4,200            
|Tecate                       | 4,680            
|Guadalajara                  | 3,216            
|                             |                  
|Total                        | 32,496           
|                             |                  
|Average capacity utilization | 73.8%            

Between 1999 and 2003,
FEMSA Cerveza increased its average monthly production capacity by approximately 210,000
hectoliters through additional investments in existing facilities.  During 2003, FEMSA
Cerveza expanded average monthly capacity in the Monterrey brewery to achieve a
production of 650,000 hectoliters.  FEMSA Cervezas management believes that it will be
able to continue to adequately expand its production capacity by investing in existing
facilities.

FEMSA Cerveza operates
seven effluent water treatment systems to treat the water used by the breweries, all of
which are wholly owned by FEMSA Cerveza except for the effluent treatment system at the
Orizaba brewery, which is a joint venture among FEMSA Cerveza, several other local
companies and the government of the state of Veracruz.

Seasonality

Demand for FEMSA
Cervezas beer is highest in the Mexican summer season, and consequently, brewery
utilization rates are at their highest during this period.  Demand for FEMSA Cervezas
products decreases during the months of November, January and February primarily as a
result of colder weather in the northern regions of Mexico.  Demand for FEMSA Cervezas
products tends to increase in the month of December reflecting consumption during the
holiday season.

Raw Materials

Malted barley, hops,
certain grains, yeast and water represent the principal ingredients used in manufacturing
FEMSA Cervezas beer products.  These inputs are generally available in the open market.
FEMSA Cerveza satisfies its commodity requirements through purchases from various
sources, including purchases pursuant to contractual arrangements and purchases in the
open market.  The prices and supply sources of raw materials are determined by, among
other factors, the level of crop production, weather conditions, export demand and
government regulations and legislation affecting agriculture.  Hops is the only
ingredient that is not available domestically.  FEMSA Cerveza imports hops primarily from
the United States and Europe.

The principal source
of barley for the Mexican beer industry is the domestic harvest.  If domestic production
is insufficient to meet the industrys requirements, barley (or its equivalent in malt),
can be sourced from the international markets.  Before 2003, pursuant to NAFTA, an annual
duty-free import quota for barley (or its equivalent in malt) was set.  Beginning in
2003, under NAFTA, barley imports from the U.S. and Canada are tax free and there are no
import quota restrictions.  Domestic barley production increased significantly in 2003,
and as a consequence we believe that imports have experienced an important reduction.
 Prior to NAFTA, domestic barley prices were significantly higher than international
barley prices.  Since the implementation of NAFTA, domestic barley prices have declined,
and local producers now generally price their crop so that, after accounting for
transportation and other import-related expenses, imported barley and barley purchased
from the domestic market result in the same cost to the domestic purchaser.

Purchases from
FEMSA Empaques

FEMSA Cerveza obtains
its packaging materials primarily from its affiliate, FEMSA Empaques.  In 1994, FEMSA
Cervezas principal operating subsidiaries entered into a packaging supply agreement with
FEMSA Empaques.  See FEMSA Empaques and Item 10.  Additional InformationMaterial
ContractsFEMSA CervezaPackaging Supply Agreement.  As of December 31, 2003, FEMSA
Empaques supplied 100% of FEMSA Cervezas bottle, aluminum can, bottle cap and label
requirements.

Table of Contents

FEMSA Comercio

Overview and
Background

FEMSA Comercio
operates the largest chain of convenience stores in Mexico, measured in terms of number
of stores, under the trade name Oxxo.  As of December 31, 2003, FEMSA Comercio operated
2,798 Oxxo stores located in 25 states of the country, with a particularly strong
presence in the northern part of Mexico.

FEMSA Comercio, the
largest single customer of FEMSA Cerveza and of the Coca-Cola system in Mexico, was
established by FEMSA in 1978 when two Oxxo stores were opened in Monterrey, one store in
Mexico City and another in Guadalajara.  The motivating factor behind FEMSAs entrance
into the retail industry was to enhance beer sales through company-owned retail outlets
as well as to gather information on customer preferences.  In 2003, sales of beer through
Oxxo represented 5.4% of FEMSA Cervezas domestic sales volume as well as approximately
12.8% of FEMSA Comercios revenues.  A typical Oxxo store carries 2,723 different SKUs in
37 main product categories, representing a significant increase in the product offering
historically distributed in Oxxo stores.

In recent years, FEMSA
Comercio has gained importance as an effective distribution channel for our beverage
products, as well as a rapidly growing point of contact with our end consumers.  Based on
our belief that location plays a major role in the long-term success of a retail
operation such as a convenience store, as well as a role in our continually improving
ability to accelerate and streamline the new-store development process, we have focused
on a strategy of rapid, profitable growth.  We continue to add selling space across the
northern border of Mexico, even as macroeconomic variables have weakened in some parts of
the country, particularly along the Mexican northern border with the United States, in
furtherance of our long-term view of our businesses.  FEMSA Comercio opened 297, 437 and
582 net new Oxxo stores in 2001, 2002 and 2003, respectively.  The accelerated expansion
yielded total revenue growth of 25.3% to reach Ps. 16.601 billion in 2003, while same
store sales increased 8.2%, which was considerably above the retail industry average.
 FEMSA Comercio served approximately 628 million customers in 2003 compared to 505
million in 2002.

Business Strategy

A fundamental element
of FEMSA Comercios business strategy is to utilize its position in the convenience store
market to grow in a cost-effective and profitable manner.  As a market leader in
convenience store retailing, based on internal company surveys, management believes that
FEMSA Comercio has an in-depth understanding of its markets and significant expertise in
operating a national store chain.  FEMSA Comercio intends to continue increasing its
store base while capitalizing on the market knowledge gained at existing stores.

FEMSA Comercio has
developed proprietary models to assist in identifying appropriate store locations, store
formats and product categories.  Its model utilizes location-specific demographic data
and FEMSA Comercios experience in similar locations to fine tune the store format and
product offerings to the target market.  Market segmentation is becoming an important
strategic tool, and it should increasingly allow FEMSA Comercio to improve the operating
efficiency of each location and the overall profitability of the chain.

FEMSA Comercio has
made and will continue to make significant investments in ERP technology to improve its
ability to capture customer information from its existing stores and to improve its
overall operating performance.  Approximately 97% of the products carried through Oxxo
stores are bar-coded, and 100% of the Oxxo stores are equipped with point of sale systems
that are integrated into a company-wide computer network.

FEMSA Comercio has
adopted innovative promotional strategies in order to increase store traffic and sales.
 In particular, FEMSA Comercio prices high-frequency items such as beverages, snacks and
cigarettes at competitive prices.  FEMSA Comercios ability to implement this strategy
profitably is partly attributable to the size of the Oxxo chain, as FEMSA Comercio is
able to work together with its suppliers to implement their revenue-management strategies
through differentiated promotions.  Oxxos national and local marketing and promotional
strategies are an effective revenue driver and a means of reaching new segments of the
population while strengthening the Oxxo brand.  For example, the organization refined its
expertise in executing cross promotions (discounts on multi-packs or sales of
complementary products at a special price) and targeted promotions to attract new
customer segments, such as housewives, by expanding the offerings in the grocery product
category in certain stores.

To implement revenue
management strategies, FEMSA Comercio created a division in charge of product category
management, such as beverages, fast food and perishables, to enhance and better utilize
its consumer information base and market intelligence capabilities.  FEMSA Comercio is
implementing an ERP system, which will allow FEMSA Comercio to redesign its key operating
processes and enhance the usefulness of its market information going forward.

Store Locations

With 2,798 Oxxo stores
in Mexico as of December 31, 2003, FEMSA Comercio operates the largest convenience store
chain in Latin America measured by number of stores.  Oxxo stores are concentrated in the
northern part of Mexico, but also have a growing presence in central Mexico and the Gulf
coast.

FEMSA Comercio has
aggressively expanded its number of stores over the past several years.  The average
investment required to open a new store varies, depending on location and format and
whether the store is opened in an existing retail location or requires construction of a
new store.  FEMSA Comercio is generally able to use supplier credit to fund the initial
inventory of new stores.

Growth in Oxxo Stores

|                  | Year Ended December 31,
|----------------- | -----------------------
|                  |                        
|                  | 2003                   
|                  |                        
|Total Oxxo Stores | 2,798                  
|Store Growth (%)  | 26.3%                  

FEMSA Comercio expects
to continue the growth trend established over the past several years by emphasizing
growth in areas of high economic potential in existing markets and by expanding in
underserved and unexploited markets.  Management believes that the southeast part of
Mexico is particularly underserved by the convenience store industry.

The identification of
locations and pre-opening planning in order to optimize the results of new stores are
important elements in FEMSA Comercios growth plan.  FEMSA Comercio continuously reviews
store performance against certain operating and financial benchmarks to optimize the
overall performance of the chain.  Stores unable to maintain benchmark standards are
generally closed.  Between December 1999 and December 31, 2003, a period during which the
total number of stores increased by 1,573, 1,647 new stores were opened and 74 stores
were closed.

Competition

Oxxo competes in the
convenience store segment of the retail market with 7-Eleven, Super Extra and Circle-K,
AM/PM, as well as other local brands of convenience stores. The format of these stores is
similar to the format of the Oxxo stores.  Based on an internal market survey conducted
by FEMSA Comercio, management believes that, as of December 31, 2003, there were
approximately 4,610 stores in Mexico that could be considered part of a convenience store
segment of the retail market or network.  Oxxo is the largest chain in Mexico, operating
more than half of these stores.  Furthermore, FEMSA Comercio operates in 25 states and
has much broader geographical coverage than any of its competitors.

Market and Store
Characteristics

Market
Characteristics

FEMSA Comercio is
placing increased emphasis on market segmentation and differentiation of store formats to
more appropriately serve the needs of customers on a location-by-location basis.  The
principal segments include residential neighborhoods, commercial and office locations,
stores near schools and universities, along with other types of specialized locations.

Approximately 71% of
Oxxos clientele is between the ages of 15 and 35.  FEMSA Comercio also segments the
market according to demographic criteria, including income level.

Store
Characteristics

The average size of an
Oxxo store is approximately 114 square meters of selling space, excluding space dedicated
to refrigeration, storage or parking.  The average constructed area of a store is
approximately 183 square meters and, when parking areas are included, the average store
size increases to approximately 415 square meters.

FEMSA ComercioOperating
Indicators

|                                     | Year Ended December 31,
                                                               (percentage change against previous year)
|------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------
|                                     |                                                                                                                                 
|                                     | 2003                                                                                                                            
|                                     |                                                                                                                                 
|Total Store Sales                    | 25.3%                                                                                                                           
|                                    
|Same-Store Sales(1)                  | 8.2%                                                                                                                            
|                                    
|Beer-related data:                   | (percentage of total)                                                                                                           
|                                    
|Beer sales as % of total store sales | 12.8%                                                                                                                           
|                                    
|Oxxo store sales as a % of          
|FEMSA Cervezas volume               | 5.4%                                                                                                                            
|                                    

|(1) | Same-store sales growth is calculated by comparing the sales of stores for each year that have been in operation
    for at least thirteen months  with the sales of those same stores during the previous year.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Beer, telephone cards,
soft drinks and cigarettes represent the main product categories for Oxxo stores.  FEMSA
Comercio has a distribution agreement with FEMSA Cerveza.  As a result of this agreement,
Oxxo stores only carry beer brands produced by FEMSA Cerveza.  See Item 10.  Additional
InformationMaterial ContractsFEMSA Cerveza.  Prior to 2001, Oxxo stores had informal
agreements with Coca-Cola bottlers, including Coca-Cola FEMSAs territories in central
Mexico, to sell only their products.  In 2001, a limited number of Oxxo stores commenced
the sale of Pepsi products in certain cities in northern Mexico, as part of a defensive
competitive strategy.

Approximately 90% of
the Oxxo stores are operated by independent managers responsible for all aspects of store
operations.  The managers are commission agents and are not employees of FEMSA Comercio.
Each store manager is the legal employer of the stores staff, which typically numbers
six people.  FEMSA Comercio continually invests in on-site operating personnel, with the
objective of promoting loyalty, customer-service and low personnel turnover in the stores.

Advertising and
Promotion

FEMSA Comercios
marketing efforts include both specific product promotions and image advertising
campaigns.  These strategies seek to increase store traffic and sales, and to reinforce
the Oxxo name and market position.

FEMSA Comercio manages
its advertising on three levels depending on the nature and scope of the specific
campaign:  local or store-specific, regional and national.  Store-specific and regional
campaigns are closely monitored to ensure consistency with the overall corporate image of
Oxxo stores and to avoid conflicts with national campaigns.  FEMSA Comercio primarily
uses point of purchase materials, flyers, handbills and print and radio media for
promotional campaigns, although television is used occasionally for the introduction of
new products and services.  The Oxxo chains image and brand name are presented
consistently across all stores, irrespective of location.

Inventory and
Purchasing

FEMSA Comercio has
placed considerable emphasis on improving operating performance.  As part of these
efforts, FEMSA Comercio continues to invest in extensive information management systems
to improve inventory management.  Electronic data collection has enabled FEMSA Comercio
to reduce average inventory levels.  Inventory replenishment decisions are carried out on
a store-by-store basis.

Management believes
that the Oxxo chains scale of operations provides FEMSA Comercio with a competitive
advantage in its ability to realize strategic alliances with suppliers.  General category
offerings are determined on a national level, although purchasing decisions are
implemented on a local, regional or national level, depending on the nature of the
product category.  Given the fragmented nature of the retail industry in Mexico in
general, Mexican producers of beer, soft drinks, bread, dairy products, snacks,
cigarettes and other high-frequency products have established proprietary distribution
systems with extensive direct distribution routes.  As a result, almost 78.7% of the
products carried by the Oxxo chain are delivered directly to the stores by suppliers.
 Other products with longer shelf lives are distributed to stores by FEMSA Comercios
distribution system, which includes six regional warehouses located in Monterrey, Mexico
City, Guadalajara, Mexicali, Mérida and León.  The distribution centers operate a fleet
of 120 trucks that make deliveries to each store approximately every week.

Seasonality

Oxxo stores experience
periods of high demand in December, as a result of the holidays, and in July and August
as a result of increased consumption of beer and soft drinks during the hot summer
months.  The months of November and February are generally the weakest sales months for
Oxxo stores.  In general, colder weather during these months reduces store traffic and
consumption of cold beverages.

Other Stores

FEMSA Comercio also
operates a small number of stores under the names Bara, Six and Matador.



Table of Contents

FEMSA Empaques

Business Overview

Our packaging
operations are handled through, FEMSA Empaques, the operating subsidiaries of which
manufacture and distribute a wide variety of packaging solutions to the beverage industry
primarily in Mexico.  FEMSA Empaques has 12 production facilities and 29 service centers
throughout Mexico and conducts operations primarily through two main subsidiaries:
 Famosa, which manufactures aluminum beverage cans and ends, and crown caps and closures;
and Silices de Veracruz, S.A., which we refer to as Sivesa, which manufactures glass
beverage bottles.  We also manufacture commercial refrigeration equipment through Vendo
de Mexico, S.A. de C.V., which we refer to as Vendo, flexible packaging materials through
Grafo Regia S.A. de C.V., which we refer to as Grafo Regia, and other items such as
plastics and chemical products.  We announced on October 23, 2003 that FEMSA Empaques
would become part of FEMSA Strategic Procurement, which we refer to as Strategic
Procurement and which will coordinate procurement efforts across FEMSA.

Business Strategy

Within the FEMSA
business portfolio, FEMSA Empaques performs a relevant role as it supplies essential
packaging materials, particularly for our beverage operations.  We have determined that
certain operations within FEMSA Empaques, namely glass, cans, crown caps and closures and
commercial refrigerators, are essential for our core beverage operations.  Furthermore,
the structure of the industry for some of these products warrants our ownership of these
businesses to balance pricing and supply conditions in order to adequately support our
beverage operations.  For example, our main competitor in the Mexican beer market is also
one of the largest packaging producers in Mexico.  Therefore, we are committed to keeping
those operations as part of our business going forward.

Certain other
operations, such as labels and flexible packaging, plastics and chemical products, face
more competitive conditions in their respective industries and are relatively less
relevant to our core operations, and therefore, we have indicated our intention to divest
those operations as opportunities present themselves.  The price, terms and timing of
these divestitures have not been established.

The primary objective
of FEMSA Empaques is to provide our beer and soft drink subsidiaries with high-quality
packaging materials at competitive prices.  To maximize our operations, FEMSA Empaques
also provides packaging materials to unaffiliated third parties.  FEMSA Empaques places
particular emphasis on reducing costs through productivity gains and resource
conservation initiatives, providing customers with technical service as a means of
ensuring production quality and competitive differentiation and investing in human and
capital resources to facilitate cost reduction and competitiveness.

Customers

In 2003, sales to
affiliates represented 57.5% of FEMSA Empaques total revenues of Ps. 7.352 billion.
 While sales to affiliates are still the most significant portion of FEMSA Empaques business,
it has increased its penetration with unaffiliated third parties in recent years to
improve capacity utilization and to continue to reduce the cost of packaging products for
its beverage affiliates.

Currently, FEMSA
Empaques main third-party customers include unaffiliated Coca-Cola bottlers, Casa Pedro
Domecq, S.A. de C.V., Compañía Nestlé, S.A. de C.V., Labatt, Miller Brewing Co. and Coors
Brewing Company.  In 2003, more than 70.8% of FEMSA Empaques sales of crown caps were
sold to unaffiliated third parties.  In addition, FEMSA Empaques believes that it has
developed a significant presence in the export market.  In 2003, approximately 12.0% of
FEMSA Empaques total revenues were generated through export sales.

The following table
sets forth an allocation of FEMSA Empaques revenues by product and client category:

FEMSA EmpaquesRevenue
Allocation by Product and Client

|                              | Year Ended December 31,
|----------------------------- | -----------------------
|                              |                        
|                              | 2003                   
|                              |                        
|Product Categories:           |                        
|Beverage Cans                 | 33.4%                  
|Crown Caps                    | 10.0                   
|Glass Bottles                 | 20.2                   
|Commercial Refrigerators      | 11.1                   
|Labels and Flexible Packaging | 8.0                    
|Other(1)                      | 17.3                   
|                              |                        
|Total Revenues                | 100.0%                 
|                              |                        
|                             
|Client Categories:           
|Coca-Cola FEMSA               | 17.8%                  
|FEMSA Cerveza                 | 39.7                   
|Third Parties                 | 42.5                   
|Domestic                      | 30.4                   
|Export                        | 12.0                   
|                              |                        
|Total Revenues                | 100.0%                 
|                              |                        

|__________________
|------------------
|(1)               
|(2)               

Capital Investments

Over the past five
years, we have invested approximately Ps. 1.2 billion in capital improvements and
expansion projects at FEMSA Empaques.  These projects have included the expansion of can
and can-lid capacity, and most recently, a major refurbishment of a furnace to produce
glass bottles.  We believe that these investments, coupled with ongoing efforts to reduce
costs and streamline operating processes, have resulted in significant productivity gains
by FEMSA Empaques.  However, we maintain that current and future capital investments in
FEMSA Empaques will be primarily determined by the packaging requirements of our beverage
subsidiaries.

Principal Products

Beverage Cans

FEMSA Empaques activities
in the beverage can segment are oriented towards the beer, soft drink and juice
industries.  FEMSA Empaques oldest operating subsidiary, Famosa, was established in 1936
to supply crown caps to the Cuauhtémoc brewery.  Famosa operates six production lines,
four that produce aluminum beverage can bodies at our production facilities in Ensenada
and Toluca, and two that produce can ends at our production facility in Monterrey.
 Aggregate annual production capacity for beverage cans at our production facilities in
Ensenada and Toluca is approximately 3.2 billion cans and capacity utilization was
approximately 97.4% in 2003.  Aggregate annual production capacity for can ends at our
production facility in Monterrey was approximately 4.2 billion can ends, and average
capacity utilization was 82.1% in 2003.

We believe that Famosas
production facilities utilize state of the art technology.  Famosa has a technology
exchange agreement with Ball Corporation, which we refer to as Ball, for the licensing
and cross-licensing of beer and soft drink can technology.  Ball has recognized FEMSA
Empaques Monterrey and Ensenada can production facilities as the benchmark for Balls
licensees worldwide.  See Item 10. Additional InformationMaterial ContractsFEMSA
EmpaquesBall Licensing Agreement.

FEMSA Empaques is the
largest Mexican beverage can manufacturer based on sales volume in 2003. The following
table sets forth an allocation of FEMSA Empaques sales volume by client category:

FEMSA EmpaquesBeverage
Can Volume

|                                                 | Year Ended December 31,
|------------------------------------------------ | -----------------------
|                                                 |                        
|                                                 | 2003                   
|                                                 |                        
|Beverage can sales volume (in Millions of units) | 3,231                  
|Client Categories:                              
|FEMSA Cerveza                                    | 46.3%                  
|Coca-Cola FEMSA                                  | 12.0                   
|Third parties                                    | 41.7                   
|Domestic                                         | 23.7                   
|Export                                           | 18.0                   
|                                                 |                        
|Total Sales Volume                               | 100.0%                 
|                                                 |                        

Crown Caps and
Closures

In addition to can
ends, in 2003 Famosa operates 10 crown cap production lines in Monterrey with an annual
production capacity of approximately 16.4 billion crown caps.  In 2003, capacity
utilization was approximately 87.3%.

The  principal
 clients for crown caps and closures are the  domestic  and  international  beverage
industries.  Demand  for crown  caps in Mexico  has  decreased  due to shifts in
 packaging  options in both the beer and soft drink  industries.  In response to this
trend,  in 1998 FEMSA Empaques added a plastic cap production  unit to its  existing
 facilities.  The current  installed  capacity of this unit is 1.1 billion caps per year.
 FEMSA  Empaques  has been able to  minimize  the  impact of reduced  demand by its
 beverage affiliates  through sales to an increasing  number of domestic third party
clients and through  exports.  In 2003, export demand accounted for 58.5% of FEMSA
Empaques crown cap production.

The  following  table
sets forth an allocation  of FEMSA  Empaques  sales volume of crown caps and closures by
client category:

FEMSA EmpaquesCrown
Caps and Closures

|                                         | Year Ended December 31,
|---------------------------------------- | -----------------------
|                                         |                        
|                                         | 2003                   
|                                         |                        
|Crown caps and closures sales volume (in |                        
|Millions of units)                       | 14,347                 
|Client Categories:                      
|FEMSA Cerveza                            | 27.2%                  
|Coca-Cola FEMSA                          | 4.3                    
|Third parties                            | 68.5                   
|Domestic                                 | 10.0                   
|Export                                   | 58.5                   
|                                         |                        
|Total Sales Volume                       | 100.0%                 
|                                         |                        

Glass Bottles

FEMSA Empaques
manufactures glass bottles through Sivesa, which was founded in 1948.  Sivesa conducts
operations through its glass production facility in Orizaba, Veracruz and its bottle
decorating plant in Nogales, Veracruz.  In 1979, the bottling department acquired press
blow technology through Hermann Heye, Kommanditgesellschaft, which we refer to as Heye
Glass of Germany, to produce narrow-neck beer bottles.  The glass production facility in
Orizaba includes three glass furnaces with an aggregate glass production capacity of
260,000 tons per year (the equivalent of approximately 1,300 million bottles).  As of
December 31, 2003, Sivesas capacity utilization was approximately 80.4%.

In the past, all of
Sivesas output was sold to FEMSA Cerveza and Coca-Cola FEMSA.  However, in the late
1990s Sivesa began selling bottles to domestic third party clients because of a reduction
in the purchase of glass bottles by Coca-Cola FEMSA resulting from rapid changes in the
presentation mix to non-returnable PET presentations in the Mexican market.  The
reduction in glass bottle sales volume during 1999 and 2000 reflects this change in
presentation mix.  In 2001 and 2002, this trend reverted as Coca-Cola FEMSA increased its
demand for glass bottles with the introduction of a new eight-ounce Coca-Cola
non-returnable presentation.  In 2003, the sales volume to FEMSA Cerveza increased, but
was not enough to compensate for the decrease in sales volume to domestic third parties
and Coca-Cola FEMSA. During 2003, Sivesa sold 74.5% of its output to FEMSA Cerveza and
19.5% to Coca-Cola FEMSA.  This represented 100% of FEMSA Cervezas bottle requirements
and approximately 95% of Coca-Cola FEMSAs bottle requirements.  The following table sets
forth an allocation of FEMSA Empaques sales volume of glass bottles by client category:

FEMSA EmpaquesGlass
Bottles

|                                                    | Year Ended December 31,
|--------------------------------------------------- | -----------------------
|                                                    |                        
|                                                    | 2003                   
|                                                    |                        
|Glass bottles sales volume (in Millions of Bottles) | 1,034                  
|Client Categories:                                 
|FEMSA Cerveza                                       | 74.5%                  
|Coca-Cola FEMSA                                     | 19.5                   
|Third parties                                       | 6.0                    
|Domestic                                            | 3.9                    
|Export                                              | 2.1                    
|                                                    |                        
|Total Sales Volume                                  | 100.0%                 
|                                                    |                        

Other

FEMSA Empaques
manufactures commercial refrigerators through Vendo and labels and flexible packaging
through Grafo Regia.  Vendo, which began operations in Mexico City in 1941, produces
vertical and horizontal commercial refrigerators for the soft drink, beer and food
industries.  In 2003, Vendo sold approximately 101,415 refrigeration units, 74.9% of
which were sold to affiliates.  In 2003, Grafo Regia, which began operations in 1954, has
its facilities in Monterrey with an annual production capacity of 13,500 tons of flexible
packaging.  In 2003, Grafo Regia operated at approximately 88.5% of capacity. During
2003, Grafo Regia sold 60.0% of its label production to FEMSA Cerveza and 25.8% to
Coca-Cola FEMSA.  Third-party customers accounted for the remaining 14.2% of production
in 2003.

Management believes
that growth at Vendo and Grafo Regia will continue to reflect the marketing strategies of
Coca-Cola FEMSA and FEMSA Cerveza.

Plant Locations

The following map
shows the locations of FEMSA Empaques principal production facilities:

Raw Materials

The principal raw
materials used by FEMSA Empaques include aluminum, steel, paper, aluminum foil, silica
sand, soda ash and polyethylene.  FEMSA Empaques is vertically integrated in silica sand
mining, and FEMSA Empaques silica sand mine has been able to satisfy all of FEMSA
Empaques silica sand requirements.  With the exception of aluminum, all of these
products are available from a variety of domestic and international sources.  FEMSA
Empaques purchases aluminum and steel directly from qualified suppliers on a contractual
basis.  These contracts generally have terms of six months or one year and specify prices
free-on-board at FEMSA Empaques plants.  Companies such as Alcoa, Nittetsu-Shoji, Alcan,
CSN and Rasselstein have been selected as qualified suppliers.  FEMSA Empaques purchases
polyethylene from Petróleos Mexicanos, which we refer to as PEMEX, and several other
suppliers.

Seasonality

Demand for FEMSA
Empaques products is closely correlated to demand in the beverage industry. However, as
a supplier to the beverage industry, FEMSA Empaques peak demand periods generally
precede the peak beverage seasons.

Table of Contents

Other Business
Segment

FEMSA Logística, S.A.
de C.V., which we refer to as Logistica, provides logistics services to Coca-Cola FEMSA,
FEMSA Empaques and third-party clients that either supply or participate directly in the
Mexican beverage industry or in other industries.  Logistica provides integrated
logistics support for its clients supply chain, including the management of carriers and
other supply chain services.  Prior to January 1, 2003, we reported Logistica as part of
a separate business segment that included Logistica CCM, S.A. de C.V., which we referred
to as Logistica CCM and which provided logistics services to FEMSA Cerveza.  As of
January 1, 2003, Logistica CCM was merged into FEMSA Cerveza, and we began reporting
Logistica as part of our other business segment.

Perfil Corporativo,
S.A. de C.V., which we refer to as Perfil Corporativo, is the owner of the Mundet brands
of soft drinks and certain concentrate production equipment.

FEMSA Servicios
employs all of our corporate staff, including the personnel managing the areas of
finance, corporate accounting, taxation, legal, planning, human resources and internal
audit.  FEMSA Servicios directs, controls, supervises and reviews the operations of our
subholding companies.  FEMSA Cerveza, FEMSA Empaques and FEMSA Comercio pay Emprex
management fees for the services provided to them by FEMSA Servicios.  In addition, FEMSA
Cerveza and Coca-Cola FEMSA have each entered into a services agreement with FEMSA
Servicios pursuant to which they pay for specific services.

Table of Contents

Description of
Property, Plant and Equipment

As of December 31,
2003, we owned all of our manufacturing facilities and substantially all of our
warehouses and distribution centers.  Our properties primarily consisted of production
and distribution facilities for our beer, soft drink and packaging operations and office
space.  In addition, FEMSA Comercio owns approximately 10% of the Oxxo store locations,
while the other stores are located in properties that are rented under long-term lease
arrangements with third parties.

The table below sets
forth the location, principal use and production area of our production facilities, and
the subholding company that owns such facilities:

Production
Facilities of FEMSA                                             On December 31, 2003

|Subholding Company | Location                            | Principal Use             | Production Area
(thousand sq. meters)
|------------------ | ----------------------------------- | ------------------------- | -------------------------------------
|                  
|FEMSA Cerveza     
|                   | Tecate, Baja California Norte       | Brewery                   | 90                                   
|                   | Toluca, Estado de Mexico            | Brewery                   | 374                                  
|                   | Guadalajara, Jalisco                | Brewery                   | 97                                   
|                   | Monterrey, Nuevo León               | Brewery                   | 209                                  
|                   | Navojoa, Sonora                     | Brewery                   | 463                                  
|                   | Orizaba, Veracruz                   | Brewery                   | 246                                  
|Coca-Cola FEMSA   
|México             | San Cristobal de las Casas, Chiapas | Soft Drink Bottling Plant | 24                                   
|                   | Cedro, Distrito Federal             | Soft Drink Bottling Plant | 18                                   
|                   | Cuautitlán, Estado de Mexico        | Soft Drink Bottling Plant | 35                                   
|                   | Los Reyes la Paz, Estado de Mexico  | Soft Drink Bottling Plant | 28                                   
|                   | Toluca, Estado de Mexico            | Soft Drink Bottling Plant | 280                                  
|                   | Celaya, Guanajuato                  | Soft Drink Bottling Plant | 87                                   
|                   | León, Guanajuato                    | Soft Drink Bottling Plant | 38                                   
|                   | Morelia, Michoacan                  | Soft Drink Bottling Plant | 50                                   
|                   | Juchitán, Oaxaca                    | Soft Drink Bottling Plant | 27                                   
|                   | Ixtacomitán, Tabasco                | Soft Drink Bottling Plant | 90                                   
|                   | Apizaco, Tlaxcala                   | Soft Drink Bottling Plant | 80                                   
|                   | Coatepec, Veracruz                  | Soft Drink Bottling Plant | 96                                   
|                  
|Guatemala          | Guatemala City                      | Soft Drink Bottling Plant | 46                                   
|                  
|Nicaragua          | Managua                             | Soft Drink Bottling Plant | 59                                   
|                  
|Costa Rica         | San José                            | Soft Drink Bottling Plant | 52                                   
|                  
|Panama             | Panama City                         | Soft Drink Bottling Plant | 29                                   
|                  
|Colombia           | Barranquilla                        | Soft Drink Bottling Plant | 27                                   
|                   | Bogotá Norte                        | Soft Drink Bottling Plant | 89                                   
|                   | Bucaramanga                         | Soft Drink Bottling Plant | 27                                   
|                   | Cali                                | Soft Drink Bottling Plant | 88                                   
|                   | Manantial                           | Soft Drink Bottling Plant | 33                                   
|                   | Medellín                            | Soft Drink Bottling Plant | 44                                   
|                  
|Venezuela          | Antimano                            | Soft Drink Bottling Plant | 14                                   
|                   | Barcelona                           | Soft Drink Bottling Plant | 141                                  
|                   | Calabozo                            | Soft Drink Bottling Plant | 70                                   
|                   | Maracaibo                           | Soft Drink Bottling Plant | 34                                   
|                   | Maracay                             | Soft Drink Bottling Plant | 31                                   
|                   | Valencia                            | Soft Drink Bottling Plant | 91                                   
|                  
|Brazil             | Campo Grande                        | Soft Drink Bottling Plant | 36                                   
|                   | Jundiaí                             | Soft Drink Bottling Plant | 191                                  
|                   | Mogi das Cruzes                     | Soft Drink Bottling Plant | 95                                   
|                  
|Argentina          | Alcorta                             | Soft Drink Bottling Plant | 73                                   
|                  
|FEMSA Empaques    
|                   | Ensenada, Baja California Norte     | Beverage Cans             | 33                                   
|                   | Toluca, Estado de Mexico            | Beverage Cans             | 22                                   
|                   | Monterrey, Nuevo León               | Crown Caps and Can Lids   | 51                                   
|                   | San Juan del Río, Querétaro         | Refrigeration Equipment   | 25                                   
|                   | Acayucan, Veracruz                  | Silica Sand Mine          | 7                                    
|                   | Nogales, Veracruz                   | Bottle Decoration         | 26                                   
|                   | Orizaba, Veracruz                   | Glass Bottles             | 23                                   

Insurance

We maintain an all
risk insurance policy covering our properties (owned and leased), machinery and
equipment and inventories as well as losses due to business interruptions.  The policy
covers damages caused by natural disaster, including hurricane, hail, earthquake and
damages caused by human acts, including, explosion, fire, vandalism, riot and losses
incurred in connection with goods in transit.  In addition, we maintain an all risk liability
insurance policy that covers product liability.  We purchase our insurance coverage
through an insurance broker.  The policies are issued by Allianz, and the coverage is
partially reinsured in the international reinsurance market.

Table of Contents

Capital Expenditures
and Divestitures

Our consolidated
capital expenditures for the years ended December 31, 2003, 2002 and 2001 were Ps. 6.789
billion, Ps. 5.780 billion and Ps. 5.531 billion, respectively, and were for the most
part financed from cash from operations generated by our subsidiaries.  These amounts
were invested in the following manner:

Capital Expenditures

|                             | Year Ended December 31,
|---------------------------- | -----------------------
|                             |                        
|                             | 2003                   
|                             |                        
|In Millions of Mexican pesos
|Coca-Cola FEMSA              | Ps.  1,910             
|FEMSA Cerveza                | 3,246                  
|FEMSA Comercio               | 1,210                  
|FEMSA Empaques               | 376                    
|Others                       | 47                     
|                             |                        
|Total                        | Ps.  6,789             
|                             |                        

Coca-Cola FEMSA

During 2003, Coca-Cola
FEMSA's capital expenditures focused on integration of its new territories, placing
refrigeration equipment with retailers and investments in returnable bottles and cases,
increasing plant operating efficiencies, improving the efficiency of its distribution
infrastructure and advancing information technology.  Capital expenditures in Mexico were
approximately Ps. 1,431 million and accounted for most of its capital expenditures.

FEMSA Cerveza

Production

During 2003, FEMSA
Cerveza invested approximately Ps. 783 million in its production facilities, of which Ps.
627 million was spent on equipment substitution and upgrades and approximately Ps. 145
million on expansion projects in existing production facilities.  The capacity expansion
projects occurred mainly in the Navojoa brewery.  FEMSA Cervezas monthly installed
capacity as of December 31, 2003 was 2.7 million hectoliters, equivalent to an annualized
installed capacity of 32.5 million hectoliters.

Distribution

In 2003, FEMSA Cerveza
invested Ps. 258 million in its distribution network.  Approximately Ps. 163  million of
this amount was invested in the replacement of the distribution fleet, Ps. 20 million in
land and buildings and improvements to leased properties dedicated to various
distribution functions, Ps. 32 million in office equipment for the distribution units and
the remaining Ps. 43 million in other distribution-related investments.

Market-related
Investments

During 2003, FEMSA
Cerveza invested approximately Ps. 2.2 billion in market-related activities and brand
support in the domestic market.  A significant amount of these investments were directed
to tied-account agreements with retailers and commercial support to owned and third-party
distributors. Investments in retail agreements with tied customers that exceed a one-year
term are capitalized and amortized over the life of the agreement.  In general, FEMSA
Cervezas retail agreements are for a period of three to four years.  Other
market-related investments include the purchase of refrigeration equipment, coolers,
plastic furniture and other promotional items.  These items are placed with retailers as
a means of facilitating the retailers ability to service consumers and to promote the
image and profile of FEMSA Cervezas brands.

FEMSA Comercio

FEMSA Comercios
principal investment activity is the construction and opening of new stores. During 2003,
FEMSA Comercio opened 582 net new Oxxo stores.  The amount invested in 2003 dedicated to
the opening of new stores and improvements to leased properties was Ps. 1.1 billion.  In
addition, FEMSA Comercio invested Ps. 76 million in ERP system software.

FEMSA Empaques

In 2003, FEMSA
Empaques invested a total of Ps. 376 million, of which Ps. 225 million was for the
refurbishment of a glass bottle furnace.  In addition, investments in the metal products
production facilities, which include aluminum cans and crown caps, amounted to Ps. 76
million, primarily for plant improvement and equipment substitution.

Table of Contents

Regulatory Matters

Competition
Legislation

The Ley Federal de
Competencia Económica(the Federal Economic Competition Law or the Mexican Competition
Law) became effective on June 22, 1993. The Mexican Competition Law and the Reglamento
de la Ley Federal de Competencia Económica(the regulations under the Mexican Competition
Law), effective as of March 9, 1998, regulate monopolies and monopolistic practices and
require Mexican government approval of certain mergers and acquisitions. The Mexican
Competition Law subjects the activities of certain Mexican companies, including us, to
regulatory scrutiny. In addition, the regulations of Mexican Competition Law prohibit
members of any trade association from reaching any agreement relating to the price of
their products. Management believes that we are currently in compliance in all material
respects with Mexican competition legislation.

In Mexico and in some
of the other countries in which we operate, we are involved in ongoing competition
related procedures.  We believe that the outcome of these procedures will not have a
material adverse effect on our financial condition.  See Item 8.  Financial InformationLegal
ProceedingsFEMSA CervezaAntitrust Matters and  Item 8. Financial InformationLegal
ProceedingsCoca-Cola FEMSAAntitrust Matters.

Environmental
Matters

In all of the
countries where we operate, our businesses are subject to federal and state laws and
regulations relating to the protection of the environment.  We have expended, and may be
required to expend in the future, funds for compliance with and remediation under local
environmental laws and regulations.  Currently, we do not believe that such costs will
have a material adverse effect on our results of operations or financial condition.
 However, since environmental laws and regulations and their enforcement are becoming
increasingly more stringent in our territories, and there is increased awareness of local
authorities for higher environmental standards in the countries where we operate, changes
in current regulations may result in an increase in costs, which may have an adverse
effect on our future results of operations or financial condition.  Management is not
aware of any pending regulatory changes that would require additional remedial capital
expenditures in a significant amount.

Mexico.Our Mexican
operations are subject to Mexican federal and state laws and regulations relating to the
protection of the environment. The principal legislation is the Ley General de
Equilibrio Ecológico y la Protección al Ambiente(the Federal General Law of Ecological
Equilibrium and Environmental Protection) or the Mexican Environmental Law, the Ley
General para la Prevención y Gestión Integral de los Residuos(the General Law for the
Prevention and Integral Management of Waste), which are enforced by the Secretaría de
Medio Ambiente, Recursos Naturales y Pesca(the Ministry of the Environment, Natural
Resources and Fisheries) or SEMARNAP. SEMARNAP can bring administrative and criminal
proceedings against companies that violate environmental laws, and it also has the power
to close non-complying facilities. Under the Mexican Environmental Law, rules have been
promulgated concerning water, air and noise pollution and hazardous substances. In
particular, Mexican environmental laws and regulations require that Mexican companies
file periodic reports with respect to air and water emissions and hazardous wastes and
set forth standards for waste water discharge that apply to their operations. We are
also subject to certain minimal restrictions on the operation of delivery trucks in
Mexico City. We have implemented several programs designed to facilitate compliance with
air, waste, noise and energy standards established by current Mexican federal and state
environmental laws, including a program to install catalytic converters and liquid
petroleum gas in delivery trucks for our operations in Mexico City.

In addition, we are
subject to the Ley Federal de Derechos(the Federal Law of Governmental Fees), also
enforced by SEMARNAP. Adopted in January 1993, the law provides that plants located in
Mexico City that use deep water wells to supply their water requirements must pay a fee
to the city for the discharge of residual waste water to drainage. In 1995, municipal
authorities began to test the quality of the waste water discharge and charge plants an
additional fee for measurements that exceed certain standards published by SEMARNAP.

Central America.Coca-Cola FEMSAs Central American operations are subject to several federal and state
laws and regulations relating to the protection of the environment, which have been
enacted in the last ten years, as awareness has increased in this region about the
protection of the environment and the disposal of dangerous and toxic materials. In some
countries in Central America, Coca-Cola FEMSA is in the process of bringing its
operations into compliance with new environmental laws. For example, in Nicaragua
Coca-Cola FEMSA is in the final phase of the construction of a water treatment plant
located at its bottler plant in Managua. Also, Coca-Cola FEMSAs Costa Rica operations
have participated in a joint effort along with the local division of The Coca-Cola
Company called Proyecto Planeta(Project Planet) for the collection and recycling of
non-returnable plastic bottles.

Colombia.Coca-Cola
FEMSAs Colombian operations are subject to several Colombian federal, state and
municipal laws and regulations related to the protection of the environment and the
disposal of toxic and dangerous materials. These laws include the control of atmospheric
emissions and strict limitations on the use of chlorofluorocarbons. Coca-Cola FEMSA is
also engaged in nationwide campaigns for the collection and recycling of glass and
plastic bottles.

Venezuela.Coca-Cola
FEMSAs Venezuelan operations are subject to several Venezuelan federal, state, and
municipal laws and regulations related to the protection of the environment. The most
relevant of these laws are the Ley Orgánica del Ambiente(the Organic Environmental Law),
the Ley Sobre Sustancias, Materiales y Desechos Peligrosos (the Substance, Material and
Dangerous Waste Law) and the Ley Penal del Ambiente(the Criminal Environment Law).
Since the enactment of the Organic Environmental Law in 1995, Coca-Cola FEMSAs
Venezuelan subsidiary has presented to the proper authorities plans to bring certain of
its production facilities and distribution centers into compliance with the law. While
the laws provide certain grace periods for compliance with the new environmental
standards, Coca-Cola FEMSA has had to adjust some of the originally proposed timelines
presented to the authorities, because of delays in the completion of some of these
projects.

Brazil. Coca-Cola
FEMSAs Brazilian operations are subject to several federal, state and municipal laws and
regulations related to the protection of the environment. Among the most relevant laws
and regulations are those dealing with the emission of toxic and dangerous gases, which
impose penalties, such as fines, facility closures or criminal charges depending upon the
level of non-compliance. Coca-Cola FEMSAs production plant located in Jundiaí has been
recognized by from the Brazilian authorities for its compliance with environmental
regulations and for having standards well above those imposed by the law. The plant has
been certified for the ISO 9000 since March 1995 and for the ISO 14001 since March 1997.

Argentina. Coca-Cola
FEMSAs Argentine operations are subject to federal and provincial laws and regulations
relating to the protection of the environment. The most significant of these are
regulations concerning waste water discharge, which are enforced by the Secretaría de
Recursos Naturales y Ambiente Humano (the Ministry of Natural Resources and Human
Environment) and the Secretaría de Política Ambiental(the Ministry of Environmental
Policy) for the province of Buenos Aires. Coca-Cola FEMSAs Alcorta plant meets and is
in compliance with waste water discharge standards.

Water Supply Law

FEMSA Cerveza and
Coca-Cola FEMSA purchase water directly from municipal water companies and pump water
from wells pursuant to concessions obtained from the Mexican government through the
National Water Commission on a plant-by-plant basis. Water use in Mexico is regulated
primarily by the Ley de Aguas Nacionales de 1992(including regulations issued
thereunder, the Mexican 1992 Water Law), which created the National Water Commission,
charged with overseeing the national system of water use. Under the Water Law of 1992,
concessions for the use of a specific volume of ground or surface water generally run for
five, ten or fifteen year terms depending on the supply of groundwater in each region as
projected by the National Water Commision. Concessionaires may request concession terms
to be extended upon termination. The Mexican government is authorized to reduce the
volume of ground or surface water granted for use by a concession by whatever volume of
water that is not used by the concessionaire for three consecutive years. Our management
believes that we are in general compliance with the terms of our existing concessions and
that such concessions satisfy our current water requirements in Mexico. We cannot assure
you, however, that groundwater will be available in sufficient quantities to meet future
production needs.

We do not currently
require a permit to obtain water in our other territories.  In Nicaragua, Costa Rica and
some plants in Colombia, we own private water wells.  In Argentina, we obtain water from
Aguas Argentinas, a privately-owned concessionaire of the Argentine government.  In the
remainder of our territories, we obtain water from governmental agencies or
municipalities.  In the past five years we have not had a water shortage in any of our
territories, although we can give no assurances that water will be available in
sufficient quantities to meet our future production needs or that additional regulations
relating to water use will not be adopted in the future.

Table of Contents

**ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS**

**General**

The following discussion should be read in conjunction with, and is entirely qualified by reference to, our consolidated financial
statements and the notes to those statements. Our consolidated financial statements were prepared in accordance with Mexican GAAP,
which differs in certain significant respects from U.S. GAAP. Notes 25 and 26 to our consolidated financial statements provide
a description of the principal differences between Mexican GAAP and U.S. GAAP as they relate to us, and a reconciliation to U.S. GAAP
of net majority income, majority shareholders' equity and certain other selected financial data.

Our consolidated financial statements include the financial statements of FEMSA and those of all companies in which we own
directly or indirectly a majority of the outstanding voting capital stock and/or exercise control.

**Acquisition of Panamco**

On May 6, 2003, our subsidiary, Coca-Cola FEMSA, completed the acquisition of Panamco. The acquisition of Panamco resulted in a
substantial increase in the size and geographic scope of our subsidiary's operations. The purchase price for 100% of the capital
stock of Panamco was Ps. 29,518 million, excluding transaction expenses. Coca-Cola FEMSA also assumed Ps. 9,085 million
of net debt. The acquisition was financed with an equity contribution from us of Ps. 2,779 million, an exchange of The Coca-Cola
Company's equity interests in Panamco valued at Ps. 7,041 million for new shares of Coca-Cola FEMSA, cash on hand of Ps. 2,820 million and new indebtedness of Coca-Cola FEMSA in Mexican pesos and U.S. dollars
in the amount of Ps. 17,267 million. As a result of the Panamco acquisition, in accordance with Mexican GAAP, Coca-Cola FEMSA recognized as intangible assets with indefinite lives, the rights to produce and
distribute trademark brands of The Coca-Cola Company. These identified intangibles, calculated as the difference between the price paid and the fair value of the net assets acquired, were valued at Ps. 33,420
million, including financial and advisory fees, costs associated with closing certain acquired facilities, rationalizing and consolidating operations, relocating the corporate and other offices and the integration of
the operations.

**Comparability of Information Presented**

Under Mexican GAAP, Panamco is included in our consolidated financial statements since May 2003 and is not reflected for periods
prior to this date. As a result, our consolidated financial statements as of and for the year ended December 31, 2003 are not
comparable to prior periods. Financial information provided by us with respect to the newly acquired territories is also not comparable
to Panamco's consolidated financials statements for prior periods as they were prepared using different policies and in accordance
with U.S. GAAP and in U.S. dollars, while we present our financial statements in Mexican GAAP and Mexican pesos as part of our
consolidation. The acquisition of Panamco only impacted the comparability of our consolidated information and of the Coca-Cola FEMSA
segment. The comparability of our remaining segments was not affected by the acquisition.

**Effects of Changes in Economic Conditions**

Our results of operations are affected by changes in economic conditions in Mexico and in the other countries in which we operate.
For the years ended December 31, 2003, 2002 and 2001, 84.6 %, 96.7% and 96.2%, respectively, of our total sales were attributable to Mexico . As a result, after the acquisition of Panamco, we have greater exposure to
countries in which we have not historically conducted operations, particularly countries in Central America and Colombia , Venezuela and Brazil , although we continue to generate a substantial portion of our sales from
Mexico .

Our future results may be significantly affected by the general economic and financial conditions in the countries where we operate,
including by levels of economic growth, by the devaluation of the local currency, by inflation and high interest rates or by political developments, and may result in lower demand for our products, lower real pricing or
a shift to lower margin products. Because a large percentage of our costs are fixed costs, we may not be able to reduce costs and expenses, and our profit margins may suffer as a result of downturns in the economy of
each country. In addition, an increase in interest rates in Mexico would increase our cost of peso- denominated variable interest rate, funding and would have an adverse effect on our financial position and results of
operations. A depreciation of the Mexican peso relative to the U.S. dollar would increase our cost of those raw materials, the price of which is paid in or determined with reference to the U.S. dollar and debt
obligations denominated in U.S. dollars, and thereby may negatively impact our financial condition and results of operations.

Table of Contents

**Operating Leverage**

Companies with structural characteristics that result in margin expansion in excess of sales growth are referred to as having high operating
leverage.

The operating subsidiaries of Coca-Cola FEMSA, FEMSA Cerveza and FEMSA Empaques are engaged, to varying degrees, in capital-intensive activities.
The high utilization of the installed capacity of the production facilities results in better fixed cost absorption, as increased output results in higher revenues without additional fixed costs. Absent significant
increases in variable costs, gross profit margins will expand when production facilities are operated at higher utilization rates. Alternatively, higher fixed costs will result in lower gross profit margins in periods
of lower output.

In addition, the commercial operations of Coca-Cola FEMSA and FEMSA Cerveza are carried out through extensive distribution networks, the principal
fixed assets of which are warehouses and trucks. The distribution systems of both Coca-Cola FEMSA and FEMSA Cerveza are designed to handle large volumes of beverages. Fixed costs represent an important proportion of the
total distribution expense of both Coca-Cola FEMSA and FEMSA Cerveza. Generally, the higher the volume that passes through the distribution system, the lower the fixed distribution cost as a percentage of the
corresponding revenues. As a result, operating margins improve when the distribution capacity is operated at higher utilization rates. Nonetheless, periods of decreased utilization because of lower volumes will
negatively impact our operating margins.

**Critical Accounting Estimates**

The preparation of our consolidated financial statements requires that we make estimates and assumptions that affect (i) the reported amounts
of our assets and liabilities, (ii) the disclosure of our contingent assets and liabilities at the date of the financial statements and (iii) the reported amounts of revenues and expenses during the reporting
period. We base our estimates and judgments on our historical experience and on various other reasonable factors that together form the basis for making judgments about the carrying values of our assets and liabilities.
Our actual results may differ from these estimates under different assumptions or conditions. We evaluate our estimates and judgments on an on-going basis. Our significant accounting policies are described in notes 4
and 5 to our consolidated financial
statements. We believe our most critical accounting policies that imply the application of estimates and/or judgments are:

Allowance for doubtful accounts

We determine our allowance for doubtful accounts based on an evaluation of the aging of our receivable portfolio. The amount of the allowance
contemplates our historical loss rate on receivables and the economic environment in which we operate. Our beer operations represent the most important part of the consolidated allowance for doubtful accounts as a
result of the credit that FEMSA Cerveza extends to retailers, on terms and conditions in accordance with industry practices. Soft drink and retail sales are generally realized in cash.

Bottles and cases; allowance for bottle breakage

We classify bottles and cases in accordance with industry practices. Consequently, for FEMSA Cerveza, bottles and cases are classified as
inventories, and for Coca-Cola FEMSA, they are classified as fixed assets. For both of these subsidiaries, breakage is expensed as incurred, and returnable bottles and cases are not depreciated. Coca-Cola FEMSA
determines depreciation of bottles and cases only for tax purposes.

We periodically compare the book breakage expense with calculated depreciation expense, estimating a useful life of four years for returnable glass
bottles, one year for returnable plastic bottles and four years for returnable cases. These useful lives are determined in accordance with our business experience. The annual calculated depreciation expense has been
similar to the annual book breakage expense. Whenever we decide to discontinue a particular returnable presentation and retire it from the market, we write-off the discontinued presentation through an increase in the
breakage expense.

Property, plant and equipment

Property, plant and equipment are depreciated over their useful lives. The estimated useful lives represent the period we expect the assets to
remain in service and to generate revenues. We base our estimates on independent appraisals and the experience of our technical personnel.

We describe the methodology used to restate imported equipment in note 5(g) to our consolidated financial statements, which includes applying the
exchange and inflation rates of the country of origin utilized as permitted by Mexican GAAP. We believe this method more accurately presents the fair value of the assets than restated cost determined by applying
inflation factors.

Coca-Cola FEMSA valued at fair value all fixed assets acquired in the Panamco transaction, considering their operating conditions and the future
cash flows they will generate in accordance with their estimated future use by Coca-Cola FEMSA management.

In 2003, we decided to expand from three to five years the useful life for the refrigerators of the Mexican operations of Coca-Cola FEMSA, based on
technical studies, strong control over the refrigerators placed in point of sales and the replacement investment refrigerator program for the following years. As a result, depreciation expense recorded in 2003 decreased
approximately Ps. 92 millions. The useful life of refrigerators for the new territories acquired from Panamco is in accordance with the new accounting estimate of five years.

Valuation of intangible assets and goodwill

As we discuss in note 5(i) to the consolidated financial statements, beginning in 2003 FEMSA applies Bulletin C-8  *Activos Intangibles* (Intangible Assets) (Bulletin C-8), which establishes that project development costs should be capitalized if they fulfill the criteria established for recognition as assets. Additionally, Bulletin C-8
requires identifying all intangible assets to reduce as much as possible the goodwill associated with business combinations. Prior to 2003, the excess of the purchase price over the fair value of the net assets acquired
in a business combination was considered to be goodwill. With the adoption of Bulletin C-8, Coca-Cola FEMSA considers such excess to relate to the rights to produce and distribute trademark *Coca-Cola* products.
We separate intangible assets between those with a finite useful life and those with an indefinite useful life, in accordance with the period over which




















to receive the benefits.

As required in Bulletin C-8, we determined the fair value of all Panamco's assets and liabilities as of the date of acquisition, and we assigned the
excess purchase price over the fair value of the net assets. This resulted in the recognition of an intangible asset with indefinite life denominated Rights to Produce and Distribute Coca-Cola Trademark Products of
Ps.  33,420 million , which will be subject to annual impairment tests, for U.S. GAAP and Mexican GAAP. The fair value of the assets and liabilities was determined considering the following:

- The fair value of the assets acquired: the value of fixed assets, glass returnable bottles and refrigerators were adjusted considering their
remaining useful lives, general operational conditions of the assets at the acquisition date, certain operational and strategic decisions that Coca-Cola FEMSA implemented as it assumed control of the operations as well
as the standardization with Coca-Cola FEMSA's accounting policies and estimates.
- Labor and other liabilities: severance of personnel and other obligations generated by Panamco's operations before Coca-Cola FEMSA assumed
control of the operations.
- Cancellation of goodwill: the goodwill previously recorded by Panamco was cancelled.

For Mexican GAAP purposes, goodwill is the difference between the price paid and the fair value of the shares and/or net assets acquired that was
not assigned directly to an intangible asset. Goodwill is recorded in the functional currency of the subsidiary in which the investment was made and is restated by applying the inflation rate of the country of origin
and the year-end exchange rate. Goodwill is amortized over a period of not more than 20 years.

Under U.S. GAAP, SFAS No. 142 Goodwill and Other Intangible Assets went into effect in 2002. Under this standard, goodwill is no longer
subject to amortization, but instead is subject to an initial impairment review in 2002 and subsequent impairment test to be performed annually by us, unless an event occurs or circumstances change by which it becomes
more likely than not that a reporting unit reduces its fair value below its carrying amount, in which case an interim impairment test must be performed. Our impairment review indicates that no impairment charge is
required as of the beginning of 2004.

Impairment of intangible assets, goodwill and long-lived assets

We continually review the carrying value of our intangible assets, goodwill and long-lived assets for accuracy. We review for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable based on our projections of anticipated future cash flows. While we believe that our estimates of future cash flows
are reasonable, different assumptions regarding such cash flows could materially affect our evaluations.

In December 2001, the Argentine government adopted a series of economic measures, the most important of which consisted of restrictions on cash
withdrawals and foreign exchange transactions. Due to the continuing difficult economic situation in Argentina , the uncertainty with respect to the period of recovery and the instability of the exchange rate, on July
1, 2002, we performed a valuation of our investment in Coca-Cola FEMSA Buenos Aires, based on market price value multiples of comparable businesses. The valuation resulted in the recognition of an impairment of
Ps. 457 million, which was recorded in our results of 2002. Given the present economic situation in Argentina , we believe that the current net asset value of our foreign subsidiary is fairly valued, and although
we can give no assurances, we do not expect to recognize additional impairments in the future in Argentina .

During 2003, FEMSA Cerveza recognized an impairment of certain fixed assets that will be replaced in the near future in accordance with its
investment master plan. The replacement cost of the new machinery and equipment as well as the new location compared to carrying value of these assets result in a loss, which was recorded in other expenses in the 2003
income statement of Ps. 680 million.

Our evaluations throughout the year and up to the date of this filing did not lead to any other significant impairment of goodwill or long-lived
assets. We can give no assurance that our expectations will not change as a result of new information or developments. Changes in economic or political conditions in all the countries in which we operate or in the
industries in which we participate, however, may cause us to change our current assessment.

Executory contracts

As part of the normal course of business, we frequently invest in the development of our beer distribution channels through a variety of commercial
agreements with different retailers in order to generate sales volume. These agreements are considered to be executory contracts and accordingly the costs incurred under these contracts are recognized as performance
under the contracts is received.

These agreements require cash disbursements to be made in advance to certain retailers in order to fund activities intended to generate volume.
These advance cash disbursements are then compensated for as sales are invoiced. These disbursements are considered to be market-related investments, which are capitalized as other assets. The amortization of amounts
capitalized is presented as a reduction of net sales in relation to the volume sold to each retailer. The period of amortization is between three and four years, which is the normal term of the commercial agreements.

We periodically evaluate the carrying value of executory contracts. If the carrying value is considered to be impaired, these assets are written
down as appropriate. The accuracy of the carrying value is based on our ability to predict certain key variables such as sales volume, prices and other industry and economic factors. Predicting these key variables
involves assumptions based on future events. These assumptions are consistent with our internal projections.

Labor liabilities

Our labor liabilities are comprised of pension plan, seniority premium and post-retirement medical services. The determination of our obligations
and expenses for pension and other post-retirement benefits is dependent on our selection of certain assumptions used by actuaries in calculating such amounts. We evaluate our assumptions at least annually. Those
assumptions are described in note 15 to our consolidated financial statements and include the discount rate, expected long-term rate of return on plan assets, rates of increase in compensation costs and certain
employee-related factors, such as turnover, retirement age and mortality. All of our assumptions depend on the economic circumstances of each country in which we operate.

In accordance with Mexican GAAP, actual results that differ from our assumptions are accumulated and amortized over future periods and, therefore,
generally affect our recognized expenses and recorded obligations in these future periods. While we believe that our assumptions are appropriate, significant differences in our actual experience or significant changes
in our assumptions may materially affect our pension and other post-retirement obligations and our future expense. The following table is a summary of the three key assumptions to be used in determining 2004 annual
pension expense for Mexico , along with the impact on pension expense of a 1% change in each assumed rate.

|**Assumption**          | **2004 Rate**(in real terms) | **Impact of Change in Millions of Ps.**(1)****
|----------------------- | ---------------------------- | ----------------------------------------------
|****                    | ****                         | **+1%**                                       
|                       
|*Mexican Subsidiaries:* |                              |                                               
|Discount rate           | 6.0%                         | Ps. (184)                                     
|Salary growth rate      | 2.0%                         | 186                                           
|Long-term asset return  | 6.0%                         | (184)                                         
|*Foreign Subsidiaries:* |                              |                                               
|Discount rate           | 4.5%                         | (31)                                          
|Salary growth rate      | 1.5%                         | 36                                            
|Long-term asset return  | 4.5%                         | (31)                                          

|   
|---
|(1)

Table of Contents

**New Accounting Pronouncements**

**In Mexican GAAP**

*Bulletin C-15, Deterioro en el Valor de los Activos de Larga Duración y su Disposición (Impairment of the Value of
Long-Lived Assets and Their Disposal)* (Bulletin C-15): In March 2003, the Instituto Mexicano de Contadores Públicos or IMCP issued Bulletin C-15, the application of which is mandatory for financial
statements for periods beginning on or after January 1, 2004, although early application is encouraged. Bulletin C-15 establishes, among others, new principles for the calculation and recognition of impairment losses
for long-lived assets and their reversal. The calculation of such loss requires the determination of the recoverable value, which is now defined as the greater of the net selling price of a cash-generating unit and its
value in use, which is the present value of discounted future net cash flows. The accounting principles issued prior to this new bulletin used future net cash f



















out requiring the discounting of such cash flows. We do not anticipate that this new standard will have a significant impact on our financial position or results of operations.

*Bulletin C-12, Instrumentos Financieros con Características de Pasivo, de Capital o de Ambos (Financial Instruments with
Characteristics of Debt, Equity or Both)* (Bulletin C-12): In April 2003, the IMCP issued Bulletin C-12, the application of which is mandatory for financial statements for periods beginning on or after January 1,
2004, although early application is encouraged. Bulletin C-12 establishes the more significant differences between debt and equity, as the basis for the development of the criteria necessary to appropriately identify,
classify and record, upon initial recognition, the debt and equity components of compound financial instruments. This new pronouncement is similar to SFAS No. 150 Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity of U.S. GAAP. We do not anticipate that this new standard will have a significant impact on our fina





























sults of operations.

**In U.S. GAAP**

*SFAS No. 149, Amendments of Statement 133 on Derivative Instruments and Hedging Activities*(SFAS No. 149): In April 2003, the
FASB issued SFAS No. 149, which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under
SFAS No. 133. The changes in this statement improve financial reporting by requiring that contracts with comparable characteristics be accounted for similarly. The new standard will be effective for contracts entered
into or modified after June 30, 2003, except as stated below and for hedging relationships designated after June 30, 2003. In addition, except as stated below, all provisions of this statement should be applied
prospectively.

The provisions of this statement that relate to SFAS No. 133 implementation issues that have been effective for fiscal quarters that began prior to
June 15, 2003, should continue to be applied in accordance with their respective effective dates. We do not anticipate that this new standard will have a significant impact on our financial position or results of
operations.

*FASB Interpretation No. 46, Consolidation of Variable Interest Entities*(FIN 46): In January 2003, the FASB issued FIN 46. FIN
46 clarified the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 was effective immediately for all
variable interests held in a variable interest entity created after January 31, 2003. For a variable interest held by us in a variable interest entity created before February 1, 2003, we would be required to apply the
provisions of FIN 46 as of December 31, 2004. We do not currently have any variable interests in a variable interest entity.

Table of Contents

**Operating Results**

The following table sets forth our consolidated income statement for the years ended December 31, 2003, 2002 and 2001:

|**                                                                                   | **Year Ended December 31,**                                  
|------------------------------------------------------------------------------------ | -------------------------------------------------------------
|**                                                                                   | **2003**                                                     
|                                                                                     | (millions of constant Mexican pesos as of 
December 31, 2003)
|Net sales                                                                            | Ps.  75,597                                                  
|Other operating revenues                                                             | 294                                                          
|Total revenues                                                                       | 75,891                                                       
|Cost of sales                                                                        | 39,371                                                       
|Gross profit                                                                         | 36,520                                                       
|Operating expenses:                                                                  |                                                              
|Administrative                                                                       | 5,740                                                        
|Sales                                                                                | 18,696                                                       
|Total operating expenses                                                             | 24,436                                                       
|Income from operations                                                               | 12,084                                                       
|Participation in affiliated companies                                                | 30                                                           
|                                                                                     | 12,114                                                       
|Interest expense                                                                     | (2,540)                                                      
|Interest income                                                                      | 695                                                          
|                                                                                     | (1,845)                                                      
|Foreign exchange gain (loss)                                                         | (2,532)                                                      
|Gain (loss) on monetary position                                                     | 954                                                          
|                                                                                     | (3,423)                                                      
|Other expenses, net                                                                  | (656)                                                        
|Income for the year before income tax, tax on
    assets and employee profit sharing | 8,035                                                        
|Income tax, tax on assets and employee profit
    sharing                            | 3,378                                                        
|Net income before change in accounting principle                                     | 4,657                                                        
|Change in accounting principle                                                       | -                                                            
|Consolidated net income for the year                                                 | Ps.  4,657                                                   
|Net majority income                                                                  | 3,093                                                        
|Net minority income                                                                  | 1,564                                                        
|                                                                                     | Ps.  4,657                                                   





**Operating Results by Segment**

The following table sets forth certain operating results by segment financial information for each of our segments for the years ended December 31,
2003, 2002 and 2001. See note 24(a) to our consolidated financial statements for additional information by segment.

|****                          | **Year Ended December 31,**   
|----------------------------- | ------------------------------
|**                            | **2003**                      
|****                          | *in millions of Mexican pesos*
|**Net Sales**                 | ****                          
|Coca-Cola FEMSA               | 35,487                        
|FEMSA Cerveza                 | 21,763                        
|FEMSA Comercio                | 16,601                        
|FEMSA Empaques                | 7,328                         
|**Total Revenues**            |                               
|Coca-Cola FEMSA               | 35,729                        
|FEMSA Cerveza                 | 21,924                        
|FEMSA Comercio                | 16,601                        
|FEMSA Empaques                | 7,352                         
|**Cost of Sales**             |                               
|Coca-Cola FEMSA               | 17,980                        
|FEMSA Cerveza                 | 9,425                         
|FEMSA Comercio                | 12,199                        
|FEMSA Empaques                | 5,639                         
|**Gross Profit**              |                               
|Coca-Cola FEMSA               | 17,749                        
|FEMSA Cerveza                 | 12,499                        
|FEMSA Comercio                | 4,402                         
|FEMSA Empaques                | 1,713                         
|**Income from Operations**(1) |                               
|Coca-Cola FEMSA               | 6,710                         
|FEMSA Cerveza (2)             | 3,586                         
|FEMSA Comercio                | 694                           
|FEMSA Empaques                | 988                           
|**Depreciation**              |                               
|Coca-Cola FEMSA (3)           | 1,480                         
|FEMSA Cerveza                 | 1,175                         
|FEMSA Comercio                | 131                           
|FEMSA Empaques                | 301                           
|                              |                               
|*Percentages*                 |                               
|**Gross Margin**(4)           |                               
|Coca-Cola FEMSA               | 50.0%                         
|FEMSA Cerveza                 | 57.4%                         
|FEMSA Comercio                | 26.5%                         
|FEMSA Empaques                | 23.4%                         
|                              |                               
|**Operating Margin**(5)       |                               
|Coca-Cola FEMSA               | 18.8%                         
|FEMSA Cerveza                 | 16.4%                         
|FEMSA Comercio                | 4.2%                          
|FEMSA Empaques                | 13.4%                         

|__________________
|------------------
|(1)               
|(2)               
|(3)               
|(4)               
|(5)               

**Results of Operations for the Year Ended December 31, 2003 
Compared to the Year Ended December 31, 2002**

**FEMSA Consolidated**

Total Revenues

FEMSA's consolidated total revenues increased by 37.0% to Ps. 75.891 billion for the year ended December 31, 2003 from Ps. 55.395
billion for the year ended December 31, 2002. Consolidated net sales increased by 37.0% to Ps. 75.597 billion in 2003 from Ps. 55.176 billion in 2002 and represented 99.6% of total revenues in 2003 and in
2002.

The acquisition of Panamco and the inclusion by Coca-Cola FEMSA of the newly acquired territories for eight months of 2003 was the driving force
behind our revenue increases. We also experienced revenue growth in each one of our other main subholding companies. FEMSA Cerveza increased its total sales volume by 3.2%, reaching 24.564 million hectoliters, resulting
in an increase in FEMSA Cerveza's total revenues by 1.3% to Ps. 21.924 billion despite the adverse impact of a weak pricing environment. FEMSA Comercio had total revenue growth of 25.3% due to an increase of 582
net new Oxxo stores opening in 2003. FEMSA Empaques increased total revenues by 7.1% mostly as a direct result of an increase in demand for beverage cans as well as for refrigerators for the newly acquired Panamco
territories.

Gross Profit

Consolidated gross profit increased by 31.6% to Ps. 36.520 billion in 2003 from Ps. 27.755 billion in 2002, primarily as a result of the
inclusion by Coca-Cola FEMSA of the newly acquired territories for eight months of 2003. Gross margin decreased by 2.0% basis points to 48.3% for 2003 compared to 50.3% for 2002. The downward pressure on margins was
primarily due to h igher raw material prices and the integration of the new Coca-Cola FEMSA operations. In addition, our dollar-linked variable cost of sales became more expensive on a real basis because of the
depreciation of the Mexican peso in 2003.

Income from Operations

Our consolidated operating expenses (including management fees paid to Labatt) increased by 36.0% in 2003 to Ps. 24.436 billion from
Ps. 17.964 billion in 2002. As a percentage of total revenues, consolidated operating expenses remained stable at 32.2% in 2003 versus 32.4% in 2002.

Consolidated administrative expenses increased by 17.9% to Ps. 5.740 billion in 2003 from Ps. 4.870 billion in 2002, primarily reflecting
an increase of Ps. 818 million in the administrative expenses of Coca-Cola FEMSA as a consequence of the Panamco acquisition.

Consolidated sales expenses increased by 42.8% to Ps. 18.696 billion in 2003 from Ps. 13.094 billion in 2002, mainly reflecting the
combination of a 54% increase of sales expenses of Coca-Cola FEMSA due to the Panamco acquisition, which explains most of the increase, and to a much lesser extent an increase of 26% in the sales expenses of FEMSA
Comercio due to the aggressive expansion in the number of stores implemented during the year.

We incur various expenses related to the distribution of our products. We include these types of costs in the sales expenses line of our income
statement. During 2003 and 2002, our distribution costs amounted to Ps. 4.848 billion and Ps. 4.092 billion, respectively, mainly due to the incorporation of Panamco. The exclusion of these charges from our
cost of sales line may result in the amounts reported as gross profit not being comparable to other companies that may include all expenses related to their distribution network in cost of sales when computing gross
profit (or an equivalent measure).

Consolidated income from operations (including results of affiliated companies) increased by 22.6% reaching Ps. 12.114 billion for the full
year 2003 from Ps. 9.878 billion in 2002. The consolidated operating margin decreased 1.8% to 16.0% of total revenues in 2003 as compared to 2002. This margin contraction was primarily due to the integration of the
newly acquired Panamco territories which have a lower level of profitability than Coca-Cola FEMSA's original territories, and the increased contribution of the Oxxo retail chain in our consolidated financial results
which has lower gross profit margin. In addition to this, both FEMSA Cerveza and FEMSA Empaques recorded operating margin contractions reflecting a lower gross profit margin at both subsidiaries caused by lack of
pricing increases and the impact of a weaker Mexican peso on the cost of U.S. dollar-denominated raw materials.

Some of our subsidiaries pay management fees to FEMSA in consideration for corporate services provided to such subsidiaries. Our subsidiaries'
payments of management fees are eliminated in consolidation and, thus, have no effect on our consolidated operating expense, with the exception of the management fee paid by FEMSA Cerveza to Labatt, which amounted to
Ps. 126 million in 2003 compared to Ps. 122 million in 2002. Prior to 2003, the excess of the purchase price over the fair value of the net assets acquired in a business combination was considered goodwill.
With the adoption of Bulletin C-8, Coca-Cola FEMSA considers this excess to relate to the rights to produce and distribute *Coca-Cola* trademark products, which are recorded as intangible assets with indefinite
lives that are not amortized, but are periodically subject to an impairment test. Therefore, we no longer amortize goodwill. (See note 5(i) to our consolida









ted financial statements.)

**Coca-Cola FEMSA**

Total Revenues

Coca-Cola FEMSA's total revenues increased by 91.4% to Ps. 35.729 billion from Ps. 18.668 billion in 2002. Net sales increased by 91.6% to Ps.
35.487 billion in 2003, from Ps. 18.519 billion in 2002, as a result of the inclusion of sales from the newly acquired territories for eight months of 2003 as well as increases in sales in its previously existing
territories in Mexico and Argentina.

Sales volumes increased to 1.4501 billion unit cases for 2003. Most of Coca-Cola FEMSA's sales volume, approximately 56.8%, was attributable to the Mexican
operations, which grew sales volume to 850.1 million unit cases during 2003 from 504.7 million unit cases in 2002. The sales growth in Mexico was primarily attributable to the inclusion of the newly acquired
territories. In addition to this the following factors also attributed to our sales growth in Mexico (i) solid performance from new flavored brands including *Fresca pink grapefruit* and *Lift green apple*, (ii) incremental sales volume in *Ciel* still water in a 5.0-liter presentation, particularly in central Mexico and (iii) volume growth from the *Coca-Cola*brand .

Average unit price per case decreased by 18.1% to Ps. 24.46 in 2003 from Ps. 29.86 in 2002 due to the inclusion of the newly acquired territories,
which had a higher sales volume of lower priced products relative to the original Coca-Cola FEMSA territories.

Other operating revenues increased by 62.9% to Ps. 242.6 million in 2003, from Ps. 148.9 million in 2002. Other operating revenues mainly consist of
sales to other bottlers pursuant to tolling arrangements in Argentina , revenues from sales of recyclable scrap to bottle suppliers and sales of point of sales materials for the fountain business.

Gross Profit

Coca-Cola FEMSA's cost of sales increased to Ps. 17.980 billion in 2003, from Ps. 8.681 billion in 2002, as a result of the inclusion of the newly
acquired territories for eight months of 2003. As a percentage of total sales, cost of sales increased 3.8%, reflecting the higher costs of sales in the newly acquired territories mainly due to the different product mix
and higher manufacturing costs. Coca-Cola FEMSA was also affected by the impact of the devaluation of the U.S. dollar against the Mexican peso as applied to raw materials with prices that are paid in or determined with
reference to the U.S. dollar.

During 2003, Coca-Cola FEMSA's gross profit totaled Ps. 17.749 billion resulting in a gross margin of 49.68%. Mexico accounted for approximately
72.4% of Coca-Cola FEMSA's gross profit, totaling Ps. 12.845 billion in 2003. In Mexico, higher raw material prices, the effect of the devaluation of the Mexican peso versus the U.S. dollar on raw materials with prices
payable in or determined with reference to the U.S. dollar, a softer economy and a lower disposable income amplified by a migration to multi-serving presentations from individual size presentations resulted in declining
margins in 2003. Coca-Cola FEMSA's territories outside of Mexico have lower gross margins primarily due to the devaluation of the U.S. dollar versus their local currencies applied to their U.S. dollar-denominated
expenses, in addition to higher manufacturing costs and different product mixes. In Central America , gross profit totaled Ps. 1.088 billion, approximately









 6.1% of Coca-Cola FEMSA's gross profit, reaching a gross margin of


49.8% in 2003. In Argentina , Coca-Cola FEMSA was able to achieve a gross margin improvement of 2.6% as compared to 2002, resulting in a gross margin of 37.0% during 2003. This improvement was mainly driven by higher
sales volume in more profitable products and an appreciation of the Argentine peso versus the U.S. dollar applied to its U.S. dollar-denominated raw materials and expenses.

Income from Operations

Coca-Cola FEMSA's operating expense was Ps. 11.039 billion in 2003, as a result of the inclusion of the newly acquired territories for eight months
of 2003. As a percentage of total sales, operating expenses increased 2.4%, due to the standardization of marketing practices in the newly acquired territories and the fact that distribution costs in Coca-Cola FEMSA's
new territories are higher than in its original territories. During 2003, in Mexico , Coca-Cola FEMSA eliminated Panamco's former headquarters in Mexico City and Miami , closed four plants out of 16, consolidated 29
distribution centers out of 142, introduced more than 73,000 new coolers into the market, and reconfigured pre-sale and distribution networks by reducing third party selling and distribution. Coca-Cola FEMSA implemented
similar initiatives in its other territories as well. For example, it (i) closed 3 of 9 plants in Venezuela , (ii) closed 1 of 2 plants in Panama , (i









ii) reduced its manufacturing plants from 17 to 11 in Colombia , and


 (iv) consolidated 1 of 4 plants in Brazil . The implementation of best practices and strong asset allocation efforts throughout its territories is an ongoing effort. However, during 2003, the potential cost savings
from these efforts were more than offset by the incremental costs of the integration process.

Coca-Cola FEMSA incurs various expenses related to the distribution of its products. It includes these types of costs in the selling expenses line
of its income statement. During 2003 and 2002, its distribution costs amounted to Ps. 2.804 billion and Ps. 2.099 billion, respectively. The exclusion of these charges from its cost of sales line may result in the
amounts reported as gross profit not being comparable to other companies, which may include all expenses related to their distribution network in cost of sales when computing gross profit (or an equivalent measure) .

In Mexico , income from operations totaled Ps. 5.634 billion in 2003, and represented approximately 84.0% of that income from operations. Its other
territories, accounting for 16.0% of that income from operations, had much lower operating margins. In these territories, Coca-Cola FEMSA sees opportunities to develop a more effective returnable packaging base, new
product alternatives, and to improve execution practices. Total income from operations after amortization of goodwill grew to Ps. 6.710 billion in 2003, from Ps. 4.627 billion in 2002. Income from operations as a
percentage of total revenues decreased 6.0% in 2003, from 24.8% to 18.8%, mainly as a result of the inclusion of its new territories, which have lower operating margins.

**FEMSA Cerveza**

Total Revenues

FEMSA Cerveza's net sales increased by 1.4% to Ps. 21.763 billion in 2003 from Ps. 21.453 billion in 2002. Other operating revenues, which
consist mainly of sales of manufacturing by-products and sundries in retail locations owned by FEMSA Cerveza, totaled Ps. 161 million in 2003, 15.5% lower than in 2002. Total revenues for FEMSA Cerveza increased by
1.3% to Ps. 21.924 billion in 2003 from Ps. 21.642 billion in 2002. The increase in revenues in 2003 was primarily attributable to the net effect of the following: (i) a 3.3% and 1.4% increase in domestic and
export volumes, respectively, and (ii) a reduction of 2.4% in domestic revenue per hectoliter and a 9% increase in export revenue per hectoliter. Domestic revenues represented 93% of the total, while the remaining 7%
came from exports, which is for the most part in line with the previous year.

Domestic sales volume increased in 2003 by 3.3% reaching 22.582 million hectoliters compared to 21.856 million hectoliters in 2002. This increase
was due to (i) the absence of a price increase since early 2002, (ii) a modest recovery in the Mexican economy, which experienced an estimated increase of 1.3% in Gross Domestic Product during the year and (iii)
successful promotions, particularly with the *Sol* and *Indio* brands. Our domestic revenue per hectoliter increased 2.4% in nominal terms due to a successful shift in our sales mix from returnable
presentations towards more premium, higher profit margin presentations such as non-returnable bottles and cans.

Export sales volume increased by 1.4% in 2003 reaching 1.982 million hectoliters compared to 1.955 million hectoliters in 2002. This was primarily
due to a 1.2% increase in sales volume to the United States , the destination for most of our exports, in particular, our *Tecate* and *Dos Equis* brands. The export revenue per hectoliter increased 9.0%
in peso terms, mainly as a result of a depreciation in real terms of the peso versus the U.S. dollar in 2003 and a price increase in U.S. dollar terms effective at the end of 2002.

Gross Profit

FEMSA Cerveza's increase in cost of sales remained in line with revenue growth. Cost of sales increased to Ps. 9.425 billion for 2003 from
Ps. 9.281 billion during 2002. FEMSA Cerveza's gross profit totaled Ps. 12.499 billion resulting in a gross margin of 57.4%, a slight decrease of 20 basis points compared with the 2002 level of 57.6%. The
margin was impacted by the currency effect due to an increase in U.S. dollar denominated costs, which represented approximately one-fourth of cost of sales, that was offset by: (i) better purchasing terms for raw
materials, (ii) headcount adjustments and (iii) lower transportation costs from our breweries to the warehouses.

Income from Operations

FEMSA Cerveza's operating expenses increased by 2.0% to Ps. 8.522 billion in 2003, from Ps. 8.354 billion in 2002 and represented 38.9% of
total revenues in 2003, compared to 38.6% of total revenues in 2002.

Administrative expenses increased by 3.1% to Ps. 2.333 billion in 2003, from Ps. 2.262 billion in 2002, reflecting mainly the start of the
amortization of the ERP commercial module and its initial rollout.

Sales expenses increased by 1.6% to Ps. 6.189 billion in 2003, from Ps. 6.093 billion in 2002, primarily reflecting an increase in
variable expenses that grew in line with our sales. At 28.2% of total revenues, sales expenses remained constant with the 2002 level of 28.2%.

Our participation in affiliated companies dropped by 65.9% relative to the previous year, primarily reflecting a reduction in the profitability of
Labatt USA due to increased marketing spending for our brands *Tecate* and *Dos Equis*.

FEMSA Cerveza's income from operations, before deduction of management fees paid to us and to Labatt, decreased by 2.1% to Ps. 4.007 billion in
2003 from Ps. 4.094 billion in 2002. This is due to (i) lower gross profit margin, (ii) new amortizations of ERP related expenses and (iii) lower profitability at Labatt USA . In 2003, FEMSA Cerveza's operating
margin before deduction of management fees decreased by 60 basis points to 18.3% of total revenues. Management fees amounted to Ps. 420 million and represented 1.9% of total revenues in 2003, compared to
Ps. 407 million recorded in 2002, which represented 1.9% of total revenues in 2002. FEMSA Cerveza's income from operations after deduction of management fees amounted to Ps. 3.587 billion, 2.7% less than in
2002.

**FEMSA Comercio**

Total Revenues

Total revenues increased by 25.3% to Ps. 16.601 billion in 2003, from Ps. 13.247 billion during 2002. The increase of total revenues of
FEMSA Comercio was mainly a result of the aggressive expansion of the Oxxo convenience store chain, which added 582 net new Oxxo stores during the year. The Oxxo chain brought the total number of stores nationwide up to
2,798, an increase of 26.3% from 2002. This increase is an average of a 30% increase in the number of stores in the central and southern regions of the country and a 24% increase in the north of Mexico .

Same-store sales of Oxxo increased 8.2% in 2003 reflecting an increase in the average consumer purchase of 1.7% and an increase in store traffic of
6.5%. This increase reflects the rapid expansion as well as stronger category management practices, such as tailoring the product offering at the store depending on its geographical location. This same-store sales
calculation is different than what we have historically presented as Sales of Comparative Mature Stores, which reflected the variation in average sales of Oxxo stores that were then currently in operation
for 18 consecutive months. Under our new methodology, we now calculate same-store sales by comparing the sales of stores for each year that have been in operation for at least thirteen months with the sales of those
same stores during the previous year. This change in our methodology falls in line with industry standards of how same-store sales are calculated, is reflect



















 annual report and will be our practice going forward.

Gross Profit

Cost of sales remained in line with revenue growth at Ps. 12.199 billion in 2003, from Ps. 9.739 billion in 2002, an increase of 25.3%. As
a result, our gross margin was also stable relative to our growth in total sales at Ps. 4.402 billion in 2003, compared to Ps. 3.508 billion in 2002.

Income from Operations

Operating expenses increased by 24.8% to Ps. 3.621 billion in 2003, from Ps. 2.902 billion in 2002. These expenses remained practically
flat as a percentage of total revenues at 21.8% in 2003 and 21.9% in 2002. Administrative expenses increased 12.1% to Ps. 285 million during 2003, from Ps. 254 million in 2002, as we adjusted our management
structure to support our expanded operations. In particular, we opened two new regional administrative offices and now have 37 offices nationwide. Sales expenses increased 26.0% to Ps. 3.336 billion, compared to
Ps. 2.647 billion in 2002. At 20.1% of our total revenues, this figure remained in line with 2002. This increase was due to the amortization of investments in technology and systems, as well as investments in
distribution and workforce as we plan to strengthen the expansion of Oxxo's business model.

FEMSA Comercio's income from operations, before deduction of management fees, increased by 28.9% to Ps. 781 million in 2003, from Ps. 606
million in 2002. This increase was in line with sales growth and contributed to a stable operating margin of 4.7% for 2003, slightly above the 4.6% operating margin achieved in 2002. In 2003, management fees amounted to
Ps. 87 million or 0.5% of total revenues compared to Ps. 99 million or 0.7% of total revenues in 2002. FEMSA Comercio's operating margin after deduction of management fees increased 0.4% to 4.2% of total
revenues in 2003.

**FEMSA Empaques**

Total Revenues

FEMSA Empaques' total revenues increased by 7.1% to Ps. 7.352 billion in 2003, from Ps. 6.862 billion in 2002. This increase is primarily
due to (i) a 7.7% increase in the sales volume of beverage cans, mainly to Coca-Cola FEMSA and FEMSA Cerveza, (ii) the currency effect of the depreciation of the Mexican peso, which offset a small decrease in the
average price of these products in U.S. dollars, (iii) a surge in the sales volume of refrigerators shipped to the former Panamco territories and (iv) the production of plastic cases for a new 2.5 liter bottle for
Coca-Cola FEMSA.

Gross Profit

FEMSA Empaques' cost of sales reached Ps. 5.639 billion during 2003 compared to Ps. 5.193 billion in 2002, resulting in a gross margin of
23.4% in 2003 compared to 24.4% in 2002. This decrease in gross margin is primarily due to (i) an increase in the cost of U.S. dollar-denominated raw materials, (ii) an increase in depreciation expenses related to the
molds used to produce the cases for 2.5 liter plastic bottles and the replacement of one of the glass furnaces replaced early 2003 and (iii) higher energy costs.

Income from Operations

Operating expenses decreased by 1.6% to Ps. 614 million in 2003 from Ps. 624 million in 2002 and decreased only 70 basis points as a
percentage of total revenues to 8.4% in 2003. Administrative expenses decreased by 8.2% to Ps. 177 million in 2003 compared to Ps. 193 million in 2002, due to a decrease in the personnel level, along with the
optimization of certain administrative processes. Sales expenses increased 1.4% to Ps. 437 million in 2003 compared to Ps. 431 million in 2002, mainly as a result of higher freight costs due to the increased
sales volume of refrigerators and plastic cases.

Income from operations, before deduction of management fees, increased by 5.1% to Ps. 1.098 billion in 2003 compared to Ps. 1.045 billion
in 2002. This resulted in an operating margin, before reduction of management fees, of 14.9% of total revenues, 0.3% less than in 2002. In 2003, management fees amounted to Ps. 111 million, or 1.5% of total
revenues, compared to Ps. 103 million recorded in 2002, 1.5% of total revenues. FEMSA Empaques' operating margin, after deduction of management fees, was 13.4% in 2003, compared to 13.7% in 2002.

**FEMSA ConsolidatedNet Income**

**Integral Cost of Financing**

Net interest expense during 2003 amounted to Ps. 1.845 billion compared to Ps. 478 million in 2002, resulting primarily from the interest
expense related to new debt issued by Coca-Cola FEMSA in order to finance the acquisition of Panamco.

Foreign exchange gain (loss) during 2003 amounted to a loss of Ps. 2.532 billion compared to a loss of Ps. 293 million in 2002. This
amount primarily reflects our higher U.S. dollar-denominated liabilities resulting from the new debt incurred for our recent acquisition of Panamco and a 3.3% depreciation in real terms of the Mexican peso versus the
U.S. dollar during the year.

Monetary position gain (loss) during 2003 amounted to a gain of Ps. 954 million, compared to a gain of Ps. 398 million during 2002. Most
of the additional gain is attributable to the inflation rate over the liabilities attained from the various territories in our recent acquisition. To determine changes in monetary position, we reflect adjustments for
inflation over the year such that monetary assets and liabilities obtained or disposed of during the year are not eroded.

Tax recognized during 2003 amounted to Ps. 3.378 billion, which includes income tax, tax on assets, and employee profit sharing compared to
Ps. 3.764 billion in 2002. The effective tax rate for the year was 42.0% and compares favorably with the 44.0% effective tax rate of 2002.

**Net Income**

Our consolidated net income decreased 2.8% to Ps. 4.657 billion from Ps. 4.791 billion for 2002, mainly attributable to a foreign exchange
loss. Consolidated net majority income amounted to Ps. 3.093 billion for the year 2003, which is 5% higher than 2002. Net majority income per FEMSA Unit was Ps. 2.919 for 2003. Net majority income per FEMSA
ADS, considering an exchange rate of Ps. 11.235 per dollar, was 2.598 U.S. dollars for 2003.

Table of Contents

**Results of Operations for the Year Ended December 31, 2002 
  Compared to the Year Ended December 31, 2001**

**FEMSA Consolidated**

Total Revenues

FEMSA's consolidated total revenues increased by 5.6% to Ps. 55.395 billion for the year ended December 31, 2002, from Ps. 52.465
billion for the year ended December 31, 2001. Consolidated net sales increased by 5.5% to Ps. 55.176 billion in 2002, from Ps. 52.301 billion in 2001 and represented 99.6% of total revenues in 2002, compared
to 99.7% in 2001. FEMSA Comercio, whose total revenue increased 18.7%, contributed significantly to the growth in consolidated revenue with the opening of 437 net new Oxxo stores, and Coca-Cola FEMSA, whose total
revenues grew 5.0%, was also a significant contributing factor. FEMSA Cerveza faced weak demand in the northern markets throughout the year, but posted revenue growth of 0.5% aided by steady demand and successful
performance in the central and southern markets. FEMSA Empaques capitalized on strong demand for its main product lines in the second half of the year and closed t









he year with 0.3% growth in revenue.

Gross Profit

Our consolidated gross profit increased by 5.2% to Ps. 27.755 billion in 2002 from Ps. 26.395 billion in 2001. As gross profit increased
at a slightly lower rate than net sales, our consolidated gross profit margin was 50.3%, a decrease of 0.2% over 2001. In addition, our U.S. dollar-linked variable cost of sales became more expensive on a real basis
because of the depreciation of the Mexican peso in the second half of 2002. The decrease in gross profit margin was only partially offset by operational efficiencies achieved in our manufacturing facilities, such as
increased productivity and strategic procurement.

Income from Operations

Our consolidated operating expenses (including goodwill amortization and management fees paid to Labatt) increased by 2.5% in 2002 to
Ps. 17.964 billion, from Ps. 17.527 billion in 2001. As a percentage of total revenues, consolidated operating expenses decreased by 100 basis points to 32.4% in 2002.

Consolidated administrative expenses increased by 1.2% to Ps. 4.870 billion in 2002 from Ps. 4.814 billion, primarily reflecting the net
effect of the following:

- increases in administrative expenses at Coca-Cola FEMSA, mainly reflecting investments in preparation for a large acquisition, such as administrative consultants
and expanding managerial staff, plus certain system upgrades in Mexico ;
- slight increases in administrative expenses at FEMSA Comercio, related to its expansion, and at FEMSA Empaques, reflecting investments in ERP systems; and
- slight decrease in FEMSA Cerveza's administrative expenses as a result of efforts to contain expenses.

Some of our subsidiaries pay management fees to FEMSA in consideration for corporate services provided to such subsidiaries. Our subsidiaries'
payments of management fees are eliminated in consolidation and thus have no effect on our consolidated operating expense, with the exception of the management fee paid by FEMSA Cerveza to Labatt, which amounted to
Ps. 122 million in 2002 compared to Ps. 129 million in 2001. Goodwill amortization corresponding to Coca-Cola FEMSA amounted to Ps. 40 million in 2002 compared to Ps. 106 million in 2001, reflecting
the goodwill impairment related to Coca-Cola FEMSA Buenos Aires.

Consolidated sales expenses increased by 3.0% to Ps. 13.094 billion in 2002 from Ps. 12.713 billion in 2001, mainly reflecting the
combination of:

- growth in FEMSA Comercio's sales expenses as the chain expands at a rapid pace, requiring a proportional operating expense infrastructure and a larger
infrastructure required to manage the expansion of the chain; and
- reduction in Coca-Cola FEMSA's sales expenses reflecting expense containment measures in Mexico and lower marketing expenses and payroll optimization in
Argentina .

We incur various expenses related to the distribution of our products. We include these types of costs in the sales expenses line of our income
statement. During 2002 and 2001, our distribution costs amounted to Ps. 4.092 billion and Ps. 4.013 billion, respectively. The exclusion of these charges from our cost of sales line may result in the amounts
reported as gross profit not being comparable to other companies, which may include all expenses related to their distribution network in cost of sales when computing gross profit (or an equivalent measure).

All of our principal businesses reported increases in their respective income from operations, which produced growth in consolidated income from
operations (after participation in the results of affiliated companies) for the full year 2002 of 11.0% to Ps. 9.878 billion from Ps. 8.902 billion in 2001. Our consolidated operating margin increased 0.8% to
17.8% of consolidated total revenues. Coca-Cola FEMSA was our primary driver of profitability growth, posting a 14.0% increase in its income from operations. FEMSA Cerveza and FEMSA Comercio each generated similar
amounts of incremental operating profit in 2002, contributing to the consolidated result with growth rates of 5.3% and 44.3%, respectively, in their operating income (before management fees).

**Coca-Cola FEMSA**

Total Revenues

Coca-Cola FEMSA recorded net sales of Ps. 18.519 billion in 2002, a 5.0% increase over net sales of Ps. 17.637 billion in 2001. Revenue
growth was primarily attributable to strong volume growth and a steady improvement in the average price per unit case in Mexico , which more than offset the volume contraction observed in Argentina . Other revenues,
which consist mainly of income from toll production agreements with a neighboring Coca-Cola Bottler in Argentina , whereby Coca-Cola FEMSA has been producing *Coca-Cola* brand beverages for sale in its
territories, amounted to Ps. 149 million in 2002, 10.1% higher than in 2001. Total revenues for Coca-Cola FEMSA increased by 5.0% to Ps. 18.668 billion in 2002 from Ps. 17.773 billion in 2001.

Coca-Cola FEMSA recorded volume growth of 5.6% to 505 million unit cases in Mexico and an improvement in the real revenue per unit case of 1.1%
during 2002. These improvements resulted in revenue growth of 6.7% to Ps. 16.843 billion in Mexico for 2002. We believe that the principal volume drivers in Mexico in 2002 were:

- strong performance of Mundet beverages and still water, particularly the new 5-liter jug of Ciel;
- continued expansion in the flavor and new categories segments with the introduction of new and exciting products, such as *Beat*, *Mundet*, *Mickey Adventuras*, *Kin Light* and *Nestea*; and
- modest volume growth in the core cola portfolio.

In Argentina , Coca-Cola FEMSA operated in a very depressed economic environment in 2002. Volume decreased by 11.0% to 116 million unit cases in a
year that started off with a severe economic crisis that hampered demand for our products. Coca-Cola FEMSA responded to this challenging market with the objectives of defending the brand equity of its brands, regaining
market share from B Brands, extracting positive cash flow and performing overall damage containment. As the year progressed, the commercial strategies implemented by Coca-Cola FEMSA yielded a more favorable
outcome, closing the year with volume growth in the fourth quarter of 2002. The principal strategies implemented were:

- shifting the mix back to returnable packages, which jumped from 5.8% of the mix in 2001 to 12.4% in 2002, led by the 1.25-liter glass returnable presentation of
*Coca-Cola*, *Fanta* and *Sprite*; and
- continuing to promote the core *Coca-Cola*brand while further developing the value protection brands ( *Taí*and *Crush*).

Together these strategies allowed Coca-Cola FEMSA to defend its pricing structure and produced an increase in average revenue per unit case of 2.1%
in 2002 compared to 2001. The reduction in total revenue was limited to 8.2%.

Gross Profit

Coca-Cola FEMSA's cost of sales increased by 5.1% to Ps. 8.681 billion in 2002, from Ps. 8.256 billion in 2001, and its gross profit
increased by 4.9% to Ps. 9.987 billion, from Ps. 9.517 billion in 2001. Gross margin expanded by 0.1% to 53.9% in 2002. Coca-Cola FEMSA's Mexican operations experienced a gross margin expansion of 0.9% for the
full year 2002, resulting mainly from solid revenue growth characterized by greater fixed cost absorption as a result of growth in volumes. The Argentine operation's gross margin dropped 9.8% to 36.0% of net sales for
the full year 2002, due to lower absorption of fixed costs as a result of lower volumes, higher prices of raw materials and a larger depreciation charge in Argentina in connection with the reevaluation of fixed assets
of foreign origin as a consequence of the devaluation of the Argentine peso.

Income from Operations

Operating expenses for 2002 decreased by 0.6% to Ps. 5.320 billion. As a percentage of total revenues, operating expenses decreased 1.6% to
28.5% in 2002. Administrative expenses in Mexico remained flat as a proportion of total revenues when compared to 2001; in absolute terms, these expenses increased 7.9% mainly reflecting investments in preparation for a
large acquisition, such as systems upgrades, administrative consultants and reinforcing managerial staff. Administrative expenses for Argentina grew 17.2% relative to 2001, due mainly to higher depreciation in local
currency in connection with a reevaluation of our foreign currency-denominated assets. Selling expenses for Coca-Cola FEMSA in Mexico increased by 0.2% in 2002, which represents a reduction of 1.3% relative to total
revenues, reflecting improvements in operations in Mexico . Selling expenses also decreased in Argentina in 2002, as a result of lower marketing expenses a









nd headcount reduction combined with adjusted salar

ies.

Goodwill amortization for 2002 was Ps. 40.4 million compared to Ps. 106.2 million for 2001, reflecting impairment in the goodwill as a
result of the difficult economic situation in Argentina . In July 2002, Coca-Cola FEMSA recorded an impairment of Ps. 457 million. Until 2002, under Mexican GAAP, goodwill is amortized gradually in the income
statement through a straight-line method for a 20-year period. Coca-Cola FEMSA's income from operations after amortization of goodwill increased by 14.0% to Ps. 4.627 billion in 2002, from Ps. 4.057 billion in
2001, reflecting the net effect of the following:

- an increase of 15.5% in income from operations of Coca-Cola FEMSA's Mexican operations; and
- a decline of 66.6% in income from operations of Coca-Cola FEMSA's Argentine operations.

Coca-Cola FEMSA's operating margin increased by 2.0% to 24.8% of total revenues in 2002 from 22.8% of total revenues in 2001.

**FEMSA Cerveza**

Total Revenues

FEMSA Cerveza's net sales increased by 0.4% to Ps. 21.453 billion in 2002 from Ps. 21.367 billion in 2001. Other revenues, which consist
mainly of income from the sale of manufacturing byproducts and sundries in retail locations owned by FEMSA Cerveza, totaled Ps. 189 million in 2002, 20.2% higher than in 2001. Total revenues for FEMSA Cerveza
increased by 0.5% to Ps. 21.642 billion in 2002, from Ps. 21.529 billion in 2001. The increase in revenues in 2002 was primarily attributable to the net effect of the following:

- 0.2% decrease in total sales volume; and
- 0.6% improvement in real total revenue per hectoliter sold for the full year 2002, derived primarily from a 7.0% nominal increase in the domestic price of beer
(on a weighted average basis) implemented during the first quarter of 2002. FEMSA Cerveza's average revenue per hectoliter in 2002 was Ps. 901.0, including domestic and export sales.

Domestic volume declined by 0.7% to 21.856 million hectoliters, as FEMSA Cerveza continued to experience the adverse effects of the deterioration in
disposable income in the northern region of Mexico. FEMSA Cerveza has greater exposure to the markets in the northern regions, where it sells approximately 56% of its domestic volume. Over the past two years we have
observed a progressive deterioration in the economy that has disproportionately affected the northwest region, as its higher concentration of border towns makes it more susceptible to the U.S. economy. The central and
southern regions have been more protected from this economic slowdown. For example, we estimate that employment in the manufacturing and retail industries in the north declined approximately 4.6% in 2002, compared to an
estimated decline of 0.3% and 0.4% in the central and southern regions, respectively. At the same time, our sales volumes in the north declined 2.9%,









 while those in the rest of the country grew by approximately 1.9%.


Another factor that materially affected our ability to sell more of our beer products in the north was a higher presence of beer imports, particularly during the period of Mexican peso appreciation against the U.S.
dollar in the first half of 2002. On a quarterly basis, domestic volume trends were as follows: a 2.2% volume decline in the first quarter, marginal growths of 0.1% and 0.3% in the second and third quarters,
respectively, and a decline of 1.3% in the fourth quarter of 2002, all relative to the comparable quarters of 2001. Pricing in the domestic market increased by 0.9% in real terms, averaging Ps. 921 per hectoliter
in 2002.

Export volume grew by 6.1% to 1.955 million hectoliters in 2002 and represented 8.2% of the total volume sold by FEMSA Cerveza. Volume sold to North
America , FEMSA Cerveza's main export market, increased by 8.2% and accounted for 92.2% of FEMSA Cerveza's export volume. Export volume to Europe and Asia declined 17.6% and 25.7%, respectively, compared to 2001 and
accounted for 2.9% and 2.8% of total export sales. Average pricing in the export market decreased by 2.2% in real terms, averaging Ps. 679 per hectoliter in 2002. Export revenues increased by 3.7% to Ps. 1.327
billion in 2002 and in U.S. dollar terms, export revenues increased by 3.7% to US$127 million.

In 2002, we adopted EITF Consensus No. 01-9, Accounting for Consideration Given By a Vendor to a Customer or Reseller of the Vendor's
Products, issued by the FASB. This consensus requires certain sales expenses incurred by FEMSA Cerveza previously classified as operating expenses to be reclassified as deductions from revenue. Amortizations that
were previously classified as sales expenses in the amount of Ps. 885 million for 2001 were reclassified as a reduction in net sales in accordance with this EITF consensus. Correspondingly, during 2002 we
classified Ps. 990 million as a reduction in net sales.

Gross Profit

FEMSA Cerveza's cost of sales for 2002 remained flat at Ps. 9.281 billion compared to 2001. FEMSA Cerveza's gross profit increased by 1.0% to
Ps. 12.361 billion in 2002, from Ps. 12.244 billion in 2001. As a percentage of net sales, gross margin increased by 30 basis points to 57.6% in 2002, reflecting enhancements in manufacturing productivity and
savings in the plant-to-warehouse logistics. Cost trends for FEMSA Cerveza's principal raw materials (malting barley, hops, aluminum cans and glass bottles) remained relatively stable throughout 2002. The favorable
effect of the appreciation of the Mexican peso against the U.S. dollar on U.S. dollar-denominated costs during the first half of the year was more than offset by a depreciation of the Mexican peso against the U.S.
dollar during the latter half of 2002.

Income from Operations

FEMSA Cerveza's operating expenses decreased by 0.4% to Ps. 8.354 billion in 2002 from Ps. 8.390 billion in 2001 and represented 38.6% of
total revenues in 2002, compared to 39.0% of total revenues in 2001. Administrative expenses decreased by 0.7% to Ps. 2.262 billion in 2002 from Ps. 2.277 billion in 2001, reflecting continued expense
containment practices across the organization and an average headcount reduction. Selling expenses decreased by 0.3% to Ps. 6.093 billion in 2002 and represented 28.2% of total revenues. Our success in containing
sales expenses and generating operational savings resulted from the following:

- warehouse rationalization across all markets;
- presale logistics, which by separating the sales and delivery functions have reduced significantly unsold load in delivery trucks; and
- improved resource utilization, which resulted in a net reduction of sales routes.

FEMSA Cerveza has continued to invest in the development of its new competitive business model, which has entailed budgeted expenditures in
information technology platforms (including the ERP system), acquisition of third party distributorships, high-impact marketing campaigns and deployment of commercial equipment (such as refrigerators and point-of-sale
displays). See Item 4. Information on the Company-FEMSA Cerveza-Business Strategy.

FEMSA Cerveza recorded Ps. 87 million in 2002 for participation in the results of affiliated companies (including Labatt USA ) compared to
Ps. 34 million in 2001. FEMSA Cerveza's income from operations, before deduction of management fees paid to us and to Labatt, increased by 5.3% to Ps. 4.094 billion in 2002 over Ps. 3.888 billion recorded
in 2001. In 2002, FEMSA Cerveza's operating margin before deduction of management fees increased 0.8% to 18.9% of total revenues. Management fees amounted to Ps. 407 million and represented 1.9% of total revenues
in 2002 compared to Ps. 430 million recorded in 2001, which represented 2.0% of total revenues in 2001. FEMSA Cerveza's income from operations after deduction of management fees amounted to Ps. 3.687 billion,
6.6% more than in 2001.

**FEMSA Comercio**

Total Revenues

FEMSA Comercio's total revenues increased by 18.7% in 2002 to Ps. 13.247 billion, from Ps. 11.160 billion in 2001. The increase of total
revenues of FEMSA Comercio was mainly a result of the aggressive expansion of the Oxxo convenience store chain, which added 437 net new stores during the year. We believe that the strong revenue growth rate of the Oxxo
chain is primarily attributable to:

- site scouting capabilities;
- nationwide presence;
- efficient store setup model; and
- aggressive expansion and saturation business plan.

The Oxxo chain brought the total number of stores up to 2,216 by year-end 2002. As the chain grows, we have discovered new market opportunities in
urban centers with high pedestrian traffic, such as hospitals and convention centers, and are increasingly exploiting the convenience store/gasoline station format. Same-store sales increased by 6.0% with respect to
2001. Same-store sales in our northwestern markets-which have the highest border town concentration-performed weakly in 2002. In contrast, the central and southern regions of the country have experienced significant
same-stores sales growth during 2002. Growth in the northwest was affected by:

- economic sluggishness characterized by high rates of unemployment;
- the strength of the peso during the first semester of 2002 which induced consumers to purchase sundries across the border in U.S. territory; and
- high differentials in the price of gasoline between Mexico and the U.S. that caused Mexicans to buy gasoline and therefore convenience store products in the U.S.
( Mexico being materially more expensive until corrective measures were taken in major border towns in December 2002).

Average monthly traffic per store (within the same-store sample) increased by 4.7% and the average sale per customer decreased by 1.3% during the
full year 2002. We believe that these increases are mainly attributable to:

- FEMSA Comercio's strategy of competitively pricing traffic-generating products;
- improvement in the value proposition to Oxxo's customers, including cross promotions, product introductions, and store enhancements; and
- Oxxo becoming a reliable payment center where our customers can pay most home utilities in one stop.

Gross Profit

FEMSA Comercio recorded gross profit of Ps. 3.508 billion for the full year 2002, a 22.4% gain over the Ps. 2.867 billion recorded in
2001. Gross margin improved 0.8% to 26.5% of net sales, as compared to 25.7% for 2001, as the additional scale has also allowed us to establish strategic alliances with some of our suppliers and thereby reduce costs. In
addition, our successful category management execution and our growing ability to work jointly with our supplier partners to design differentiated assortment, pricing and promotions have contributed to gross margin
expansion.

Income from Operations

Operating expenses increased by 18.7% to Ps. 2.902 billion in 2002, from Ps. 2.445 billion in 2001 and remained flat as a percentage of
total revenues at 21.9% in both 2002 and 2001. Administrative expenses increased by only 5.4% to Ps. 254 million, as the increased costs associated with expansion were mitigated by higher absorption of fixed
administrative costs as more stores were opened in cities where there is already an Oxxo administrative infrastructure. Selling expenses increased 20.1% to Ps. 2.647 billion, slightly above total revenue growth,
reflecting higher expenditures associated with the infrastructure required to manage the expansion of the chain. FEMSA Comercio recorded income from operations, before deduction of management fees, of Ps. 606
million in 2002, an increase of 44.3% from the Ps. 420 million recorded in 2001. FEMSA Comercio's operating margin before management fees grew 0.8% to 4.6% o









f total revenues in 2002 from 3.8% in 2001. In 2002, management fees


 amounted to Ps. 99 million or 0.7% of total revenues compared to Ps. 111 million or 1.0% of total revenues in 2001. FEMSA Comercio's operating margin after deduction of management fees increased by 1.0% to
3.8% of total revenues in 2002.

**FEMSA Empaques**

Total Revenues

FEMSA Empaques' total revenues increased 0.3% to Ps. 6.862 billion in 2002 from Ps. 6.840 billion in 2001, which was mainly attributable
to a surge in demand in beverage cans and glass bottles coupled with the favorable effect of the weaker Mexican peso on our U.S. dollar revenues in the second half of the year. These increases offset slower demand for
our packaging products in the first six months of 2002. For the full year, average capacity utilization was close to full in all of our main product lines.

Beverage can volumes reversed the weakness observed during 2001 by posting a growth of 6.8% in sales volume to 3.000 billion can units in 2002. In
the second half of the year, the beverage can unit experienced increased demand from its main commercial partners domestically and abroad: FEMSA Cerveza, Coca-Cola FEMSA and Ball. We met this demand by reducing our
sales to smaller domestic third party clients. Average real prices for beverage cans, which are quoted in U.S. dollars, decreased by approximately 0.6%, following a multi-year trend of convergence with international
prices for these products.

Glass bottle volumes grew a solid 8.4% to 1.053 billion bottle units in 2002, while Mexican peso-denominated prices decreased 1.4%. FEMSA Empaques
has encountered very high demand for its glass products domestically, since there is currently almost no excess capacity in the industry. Coca-Cola FEMSA purchased a larger number of 8 oz non-returnable glass
*Coca-Cola* contour bottles. Supply of internal clients rose from 68.4% in 2001 to 89.2% in 2002. FEMSA Empaques commenced an inventory buildup during the fourth quarter of 2002 in preparation for the scheduled
replacement of one of its glass furnaces in the first quarter of 2003, which involved approximately 85 days of inactivity.

Sales volumes for crown caps increased 1.8% in 2002 despite the decline in demand for crown caps in the domestic market, reflecting FEMSA Empaques'
success in the export markets, particularly in the North American market, where FEMSA Empaques is a major crown cap supplier for Labatt, Miller Brewing Company and Coors Brewing Company. FEMSA Empaques increased its
crown cap export ratio from 51% in 2001 to a record 55% in 2002.

Export revenues increased by 12.2% to Ps. 749 million and represented 10.9% of net sales in 2002. In U.S. dollar terms, export revenues
increased by 12.4% to US$71.7 million.

Gross Profit

FEMSA Empaques' cost of sales decreased by 1.3% to Ps. 5.193 billion in 2002 from Ps. 5.259 billion in 2001, mainly due to the following
factors:

- efficiencies achieved in the manufacturing lines that resulted in less spoilage and lower headcount;
- consistency in the average contracted price of steel sheets; and
- slight declines in the average price for bulk aluminum and ancillary raw materials.

Gross profit increased by 5.6% to Ps. 1.669 billion in 2002 from Ps. 1.581 billion in 2001, resulting in a gross margin
expansion of 1.3% to 24.4% of net sales in 2002, as compared to 23.1% in 2001. Improvement in gross profit is closely related to exchange rate fluctuations: as the Mexican peso depreciated against the U.S. dollar
towards the end of the year, U.S. dollar-denominated income for metallic products increased at a faster rate than costs, which have significant Mexican peso-denominated components. FEMSA Empaques is gradually recovering
its long-term gross margin level, which has reached as high as 25.4% in the last five years, by means of implementing high productivity measures in the manufacturing plants such as the elimination of line personnel and
middle management and application of ERP systems.

Income from Operations

Operating expenses increased by 6.5% to Ps. 624 million in 2002 from Ps. 586 million in 2001 and increased only 0.5% as a percentage of total
revenues to 9.1% in 2002. For the full year 2002, FEMSA Empaques recorded parallel increases in sales expenses and administrative expenses of 7.0% and 5.5%, respectively. The increase in sales expenses is mainly
attributable to higher shipment costs. The increase in administrative expenses is mainly attributable to the one-time implementation costs of ERP modules in Famosa.

Income from operations before deduction of management fees increased by 5.0% to Ps. 1.045 billion in 2002, from Ps. 995 million for 2001,
primarily reflecting the growth in gross profit. FEMSA Empaques recorded an operating margin before deduction of management fees of 15.2% in 2002, compared to a 14.5% margin recorded in 2001. In 2002, management fees
amounted to Ps. 103 million, or 1.5% of total revenues, compared to Ps. 105 million recorded in 2001, also 1.5% of total revenues. FEMSA Empaques' operating margin after deduction of management fees was 13.7%
in 2002 compared to 13.0% in 2001. Operating margin was significantly affected in the first quarter of 2002, under a considerably strong Mexican peso scenario, but rebounded to record levels in the second and third
quarters, as the Mexican peso depreciated.

**FEMSA Consolidated-Net Income**

Our consolidated net income decreased by 8.1% to Ps. 4.791 billion in 2002, from Ps. 5.215 billion recorded in 2001. The decrease in net
income recorded for the full year 2002 resulted from the net effect of:

- an 11.0% increase in consolidated income from operations;
- the write-off of a portion of our goodwill related to the acquisition of Coca-Cola FEMSA Buenos Aires;
- a significant increase in the consolidated integral result of financing loss, primarily in connection with the devaluation of the Mexican peso against the U.S.
dollar in the second half of the year; and
- a larger tax provision.

Goodwill

In view of the continued deterioration and uncertainty in Argentine economic conditions, we decided to take a more conservative approach in the
valuation of the goodwill related to our investments in that country. Therefore, in the third quarter we wrote down Ps. 457 million related to the acquisition of the territories of Coca-Cola FEMSA Buenos Aires. In
view of the prevailing volatility of the Argentine currency, we also decided to take a conservative approach and stop considering our investment in Coca-Cola FEMSA Buenos Aires as a hedge for the U.S. dollar-denominated
liabilities incurred in connection to this acquisition, thereby affecting the integral cost of financing for 2002 in the foreign exchange and monetary position calculations. These adjustments were non-cash.

Integral Cost of Financing

In the twelve months ended December 31, 2002, we recorded a consolidated integral cost of financing of Ps. 373 million, compared to a
consolidated integral cost of financing of Ps. 274 million for the comparable period in 2001. In 2002, consolidated net financial expense decreased by 2.0% to Ps. 478 million as compared to Ps. 488
million in 2001. Consolidated interest expense decreased by 4.3% to Ps. 943 million compared to 2001, mainly attributable to lower average real rates for our liabilities, although our average gross liabilities
increased by 3.4% in 2002 and the U.S. dollar portion was subsequently affected by the devaluation of the peso against the dollar that occurred in the second half of the year. This was partially compensated by the
reduction in consolidated interest income, which decreased by 6.4% to Ps. 465 million reflecting the net effect of lower interest rates earned on our investments rela









tive to the year 2001 and a larger average cash position in Mexican


pesos. As of December 31, 2002, our weighted average cost of debt was 6.9%, approximately 0.9% lower than the weighted average cost of debt as of December 31, 2001.

For the year 2002, we recorded a consolidated foreign exchange loss of Ps. 293 million compared to a foreign exchange gain of Ps. 256 million for the year
2001, primarily reflecting:

- the effect of the depreciation of the Mexican peso against the U.S. dollar, which totaled Ps. 1.28 per U.S. dollar in the year, on our net dollar
liabilities in Mexico, compared to an appreciation of Ps. 43 cents on higher net U.S. dollar liabilities observed in 2001; and
- the depreciation of the Argentine peso against the U.S. dollar on our net U.S. dollar assets in Argentina, which had a positive effect on the foreign exchange
variation during 2002.

The gain on monetary position for the year 2002 amounted to Ps. 398 million, compared to a loss of Ps. 42 million in 2001. This gain was
mainly generated as a result of the inflation rate for the twelve months in Argentina over the debt incurred in connection with the acquisition of Coca-Cola FEMSA Buenos Aires. The Argentine inflation rate for 2002 was
41.2%. It should be noted that the Argentine goodwill impairment, as explained above, had an impact on the foreign exchange variation and monetary position lines.

Other Expenses

Our consolidated other expenses for the year 2002 amounted to Ps. 950 million, consisting mainly of the aforementioned impairment of a portion
of the goodwill on our investments in Argentina charged in the third quarter, plus severance payments and asset write-offs.

Income Tax, Tax on Assets, and Employee Profit Sharing

Our consolidated income before income tax, tax on assets and employee profit sharing increased by 2.9% to Ps. 8.555 billion in 2002 from
Ps. 8.314 billion in 2001, primarily reflecting a larger consolidated integral result of financing loss. We recognized consolidated income tax, tax on assets and employee profit sharing of Ps. 3.764 billion in
2002, an increase of 22.6% over the Ps. 3.069 billion in 2001. This increase was primarily a consequence of an increase of 24.8% in our income tax, largely resulting from a deferred tax benefit realized in 2001 as
a result of a reduction in the Mexican statutory income tax rate, the increase in non-deductible expenses generated in the course of business and the impairment to the goodwill generated by the acquisition of Coca-Cola
FEMSA Buenos Aires. The combined effective tax rate for 2002 was 44.0%.

Net Income

Our consolidated net income decreased by 8.1% amounting to Ps. 4.791 billion for 2002 compared with Ps. 5.215 billion recorded in 2001,
combining the improvement in consolidated income from operations, the goodwill write-off, an increase in the consolidated integral result of financing loss, and a larger tax provision. Consolidated net majority income
amounted to Ps. 2.947 billion for 2002, a reduction of 16.9% as compared with Ps. 3.547 billion recorded in 2001. Net majority income per FEMSA Unit amounted to Ps. 2.781 in 2002, compared with
Ps. 3.348 for 2001.

Table of Contents

**Liquidity and Capital Resources**

**Liquidity**

Each of our subholding companies finances its operational and capital requirements. As of December 31, 2003, 100% of our outstanding consolidated
indebtedness was at the level of our subholding companies. This structure is attributable, in part, to the inclusion of third parties in the capital structure of both FEMSA Cerveza and Coca-Cola FEMSA. Currently, we
expect to continue to finance our operations and capital requirements primarily at the level of our subholding companies. Nonetheless, we may decide to incur indebtedness at our holding company in the future to finance
the operations and capital requirements of our subsidiaries or significant acquisitions, investments or capital expenditures. As a holding company, we would depend on dividends and other distributions from our
subsidiaries to service any such indebtedness.

The principal source of liquidity of each subholding company has generally been cash generated from operations. We have traditionally been able to
rely on cash generated from operations because a significant majority of the sales of FEMSA Cerveza, Coca-Cola FEMSA and FEMSA Comercio are on a cash or short-term credit basis, and FEMSA Comercio's Oxxo stores are able
to finance a significant proportion of their initial and ongoing inventories with supplier credit. Our principal use of cash has generally been for capital expenditure programs, debt repayments and dividend payments.
The following is a summary of the principal uses of cash for the three years ended December 31, 2003:

**Principal Uses of Cash**

|****                                   | **For the Year Ended December 31, 
(Millions of Constant Pesos)**
|-------------------------------------- | -----------------------------------------------------------------
|****                                   | **2003**                                                         
|                                       |                                                                  
|Net resources generated by operations  | Ps. 8,858                                                        
|Capital expenditures (1)               | (6,789)                                                          
|Bank loans, notes and interest payable | 15,659                                                           
|Dividends declared and paid            | (1,070)                                                          

|   
|---
|(1)

Our subholding companies generally incur short-term indebtedness in the event that they are temporarily unable to finance operations or meet any
capital requirements with cash from operations. A significant decline in the business of any of our subholding companies may affect the subholding company's ability to fund its capital requirements. A significant and
prolonged deterioration in the economies in which we operate or in our businesses may affect our ability to obtain short-term and long-term credit or to refinance existing indebtedness on terms satisfactory to us.

We have traditionally financed significant acquisitions, principally Coca-Cola FEMSA's acquisition of Coca-Cola Buenos Aires in 1994 and more
recently its acquisition of Panamco in May 2003, capital expenditures and other capital requirements that could not be financed with cash from operations by incurring long-term indebtedness.

Our total consolidated indebtedness was Ps. 38,361 million as of December 31, 2003, as compared to Ps. 14,354 million as of December 31,
2002. Cash and cash equivalents were Ps. 7,733 million as of December 31, 2003, as compared to Ps. 15,148 as of December 31, 2002. The significant increase in total indebtedness was primarily at Coca-Cola
FEMSA and was attributable to the acquisition of Panamco in May 2003.

We believe that our sources of liquidity as of December 31, 2003 were adequate for the conduct of our subholding companies' businesses and that we
will have sufficient funds available to meet our expenditure demands and financing needs in 2004.

**Off-balance Sheet Arrangements**

We do not have any off-balance sheet arrangements.

**Contractual Obligations**

The table below sets forth our significant long-term contractual obligations as of December 31, 2003:

|****                                                                       | **Contractual Obligations 
      As of December 31, 2003 
      In Millions of Mexican pesos**
|-------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------
|****                                                                       | **Maturity**                                                                                  
|****                                                                       | **Less than 1 year**                                                                          
|                                                                           |                                                                                               
|Long-Term Debt                                                             |                                                                                               
|Mexican pesos                                                              | 225                                                                                           
|U.S. dollars                                                               | 2,362                                                                                         
|Colombian pesos                                                            | -                                                                                             
|Interest Payments (1)                                                      |                                                                                               
|Mexican pesos                                                              | 1,418                                                                                         
|U.S. dollars                                                               | 936                                                                                           
|Colombian pesos                                                            | 61                                                                                            
|Operating Leasing Commitments                                              |                                                                                               
|Mexican pesos                                                              | 437                                                                                           
|U.S. dollars                                                               | 418                                                                                           
|Price Commodity Contracts                                                  | 580                                                                                           
|Contributions to the Pension Plan and post-retirement medical services (2) | 90                                                                                            

|   
|---
|(1)
|(2)

As of December 31, 2003, Ps. 2,428 million of our total consolidated indebtedness was due within one year and Ps. 35,933 million was
long-term debt. As of December 31, 2003, our consolidated average cost of borrowing was approximately 6.5% compared to an average cost of borrowing of 6.9% in 2002. The decrease in our average cost of borrowing mainly
reflects a decrease in the London interbank offered rate, or LIBOR, a benchmark rate used for Eurodollar loans. As of December 31, 2003, 47.8% of our consolidated indebtedness was denominated and payable in U.S.
dollars, 50.6% was in Mexican pesos and the remainder 1.6% was in Colombian pesos. We did not have any Purchase Obligations nor Capital (Finance) Lease Obligations as of December 31, 2003.

**Overview of Debt Instruments**

The following table shows the allocations of debt of our company:

|                           | **Debt Profile of the Company 
    As of December 31, 2003**
|-------------------------- | ------------------------------------------------------------
|**                         | **FEMSA and Others**                                        
|**Short-term Debt**        |                                                             
|*U.S. dollars:*            |                                                             
|Bank loans                 | Ps.  -                                                      
|Unsecured loan             | -                                                           
|                           |                                                             
|*Mexican pesos:*           |                                                             
|Unsecured loan             | -                                                           
|                           |                                                             
|**Long-term Debt**(1)      |                                                             
|*U.S. dollars:*            |                                                             
|Bank loans                 | 24                                                          
|Yankee bond                | -                                                           
|Private placement          | -                                                           
|Leasing                    | -                                                           
|Syndicated loan            | -                                                           
|Mortgage loan              | 67                                                          
|                           |                                                             
|*Mexican pesos:*           |                                                             
|Bank loans                 | -                                                           
|Notes                      | -                                                           
|Units of investment (UDIS) | -                                                           
|                           |                                                             
|*Colombian pesos:*         |                                                             
|Notes                      | -                                                           
|                           |                                                             
|Total                      | Ps. 91                                                      
|**Average Cost**           |                                                             
|U.S. dollars               | 3.6%                                                        
|Mexican pesos              | -                                                           
|Colombian pesos            | -                                                           
|Total                      | 3.6%                                                        

|__________________
|------------------
|(1)               
|(2)               

Generally, the covenants contained in the credit facilities and other instruments governing our indebtedness entered into by our subholding
companies include limitations on the incurrence of any additional debt based on debt service coverage ratios or leverage tests. The credit agreements entered into by our subholding companies or their subsidiaries also
generally include restrictive covenants applicable to our subholding companies and their subsidiaries. There are no cross-guarantees between subholding companies, and we have not provided guarantees with respect to any
of the debt obligations of our subholding companies.

The following is a summary of our indebtedness by subholding company:

- *Coca-Cola FEMSA.*As a result of the Panamco acquisition, Coca-Cola FEMSA's total indebtedness was Ps. 28,915 million, excluding Ps. 89 million of short
and long term notes payable, as of December 31, 2003, as compared to Ps.3,306 million as of December 31, 2002. Cash and cash equivalents were Ps.2,783 million as of December 31, 2003, as compared to Ps.6,429 million as
of December 31, 2002. Approximately US$43 million of cash is subject to restrictions as a result of certain collateral arrangements Coca-Cola FEMSA entered into on behalf of its subsidiaries with respect to existing
indebtedness. 
    As part of Coca-Cola FEMSA's financing policy, it expects to continue to finance its liquidity needs from cash from operations, although in the future it may be required to finance its working capital and capital
expenditure needs with short-term debt or other borrowings. As a result of regulations in certain countries in which it operates, it may not be beneficial or, as in the case of exchange controls in Venezuela ,
practicable for Coca-Cola FEMSA to remit cash generated in local operations to fund cash requirements in other countries. In the event that cash from operations in these countries is not sufficient to fund future
working capital requirements and capital expenditures, Coca-Cola FEMSA or its subsidiaries may decide, or be required, to fund cash requirements in these countries through local borrowings rather than remitting funds
from another country. 
    As of December 31, 2003, Coca-Cola FEMSA had U.S. dollar-denominated, uncommitted approved lines of credit totaling approximately Ps.2,944 million, of which Ps.2,039 million was available as of such date. In
December 2003, Coca-Cola FEMSA finalized a loan agreement with The Coca-Cola Company that permits it to borrow, upon the satisfaction of certain conditions, up to US$250 million prior to December 20, 2006 for funding
working capital needs and for other general corporate purposes at any time when such funding is not otherwise available under existing lines of credit.

Coca-Cola FEMSA's average cost of debt was 5.9% in U.S. dollars, 7.4% in Mexican pesos and 10.3% in Colombian pesos as of December 31, 2003 compared to 9.1% in U.S. dollars as of December 31, 2002
- *FEMSA Cerveza.*As of December 31, 2003, FEMSA Cerveza's total outstanding debt was Ps. 5,662 million, which included Ps. 31 million of
outstanding short-term trade and working capital loans. As of December 31, 2003, FEMSA Cerveza had approximately Ps. 5,631 million of long-term debt outstanding that included a Ps. 285 million medium-term
revolving loan and Ps. 5,346 million consisting of bilateral loans and equipment financing loans. As of December 31, 2003, FEMSA Cerveza had U.S. dollar-denominated approved, uncommitted lines of credit totaling
approximately Ps. 2,030 million, of which Ps. 1,999 million was available as of such date. FEMSA Cerveza's average cost of debt as of December 31, 2003 was 9.0% in Mexican pesos and 3.8% in U.S. dollars.
- *FEMSA Comercio.*As of December 31, 2003, FEMSA Comercio's total outstanding debt was Ps. 1,534 million, which consisted of a Ps. 1,477
long-term syndicated loan denominated in U.S. dollars that matures in August 2006, and Ps. 57 million of U.S. dollar-denominated short-term debt that matures in June 2004. As of December 31, 2003, FEMSA Comercio had
U.S. dollar-denominated approved, uncommitted lines of credit totaling Ps. 1,036 million, all of which was available as of such date. FEMSA Comercio's average cost of debt was 3.0% in U.S. dollars as of December 31,
2003 compared to 2.7% as of December 31, 2002.
- *FEMSA Empaques.*As of December 31, 2003, FEMSA Empaques' total outstanding debt was Ps. 2,159 million, Ps. 682 million of which consisted
of short-term trade and the remaining Ps. 1,477 million which consisted of long-term indebtedness. As of December 31, 2003, FEMSA Empaques' long-term debt obligations amounted to Ps. 567 million under
long-term credit agreements incurred in connection with equipment financing transactions and/or government sponsored export-financing programs of the countries of origin of such equipment and Ps. 910 million of a long
term syndicated loan maturing in December 2005. As of December 31, 2003, FEMSA Empaques had U.S. dollar-denominated approved, uncommitted lines of credit totaling Ps. 1,235 million, of which Ps. 554 million was
available as of such date. FEMSA Empaques' average cost of debt was 3.7% as of December 31, 2003 compared to 2.9% as of December 31, 2002.

**Contingencies**

We have various loss contingencies, for which reserves have been recorded in those cases where we believe the results of an unfavorable resolution
is probable. Most of these loss contingencies have been recorded as reserves against intangibles. Any amounts required to be paid in connection with these loss contingencies would be required to be paid from available
cash.

**Capital Expenditures**

For the past four years, we have had significant capital expenditure programs, which for the most part were financed with cash from operations.
Principal components of our capital expenditures have been for equipment, market-related investments and production capacity and distribution network expansion at Coca-Cola FEMSA and at FEMSA Cerveza; the construction
of new Oxxo stores at FEMSA Comercio; and plant improvements at FEMSA Empaques.

*Expected Capital Expenditures for 2004*

Our capital expenditure budget for 2004 is expected to be approximately Ps. 9.7 billion. The following discussion is based on each of our
subholding companies' internal 2004 budgets. The capital expenditure plan for 2004 is subject to change based on market and other conditions and the subsidiaries' results of operations and financial resources.

In connection with the continued integration of Coca-Cola FEMSA's new territories, it estimated that its capital expenditures in 2004 would be
approximately of Ps. 3.3 billion. Coca-Cola FEMSA's capital expenditures in 2004 are primarily intended for:

- investments in returnable bottles and cases;
- market investments (primarily for the placement of refrigeration equipment); and
- integration of operations within our new territories, such as expenditures required to standardize our information systems, replace older distribution vehicles
and overhaul plant facilities and distribution centers; and improve our manufacturing facilities.

FEMSA Cerveza's capital expenditure budget for 2004 is expected to be approximately Ps. 4.7 billion. FEMSA Cerveza expects to allocate part of
this budget for investments in its manufacturing facilities, predominantly related to marginal capacity expansions of its breweries and equipment modernization. FEMSA Cerveza also expects to apply a portion of this
budget towards the improvement of its distribution assets, including new and replacement vehicles, towards the maintenance of a secondary distribution fleet and towards its ERP and information technology systems. In
addition, FEMSA Cerveza plans to invest in commercial and market-related activities such as the enhancement of its retail coverage, to acquire third-party distributors, to develop long-term sponsorships and to place
refrigeration equipment nationwide.

FEMSA Comercio's capital expenditure budget in 2004 is expected to total approximately Ps. 1.4 billion. The year 2004's budget will be
allocated to the addition of new Oxxo stores and to a lesser extent to the refurbishing of the existing Oxxo stores. In addition, investments are planned in FEMSA Comercio's information technology and ERP software
systems.

FEMSA Empaques' capital expenditure budget for 2004 is expected to be approximately Ps. 329 million to be allocated among its various product
lines and facilities.

**Hedging Activities**

Our business activities require the holding or issuing of derivative instruments to hedge our exposure to market risks related to changes in
interest rates, foreign currency exchange rates, equity risk and commodity price risk. See Item 11. Quantitative and Qualitative Disclosures about Market Risk.

The following table provides a summary of the fair value of derivative instruments as of December 31, 2003. The fair market value is obtained mainly
from external sources, which are our counterparties to the contracts.

|****                              | **Fair Value 
      At December 31, 2003 
      (Millions of Constant Mexican pesos)**
|--------------------------------- | --------------------------------------------------------------------------------------
|****                              | **Maturity less than 1 year**                                                         
|Prices quoted by external sources | (63)                                                                                  

Table of Contents

**Plan for the Disposal of Certain Fixed Assets**

We have identified certain fixed assets consisting of land, buildings and equipment for disposal, and we have an approved program for disposal of
these fixed assets. These assets are not in use and have been valued at their estimated realizable value, according to independent appraisals. These assets are allocated as follows:

|**             | **December 31, 
    (Millions of Mexican pesos)**
|-------------- | -------------------------------------------------
|**             | **2003**                                         
|FEMSA Cerveza  | Ps. 299                                          
|FEMSA Empaques | 41                                               
|FEMSA          | 327                                              
|Total          | Ps. 667                                          

Fixed assets recorded at their estimated realizable value are considered monetary assets on which a loss on monetary position is computed and
recorded in the results of operation.

Table of Contents

**U.S. GAAP Reconciliation**

The principal differences between Mexican GAAP and U.S. GAAP that affect our net majority income and majority shareholders' equity relate to the
accounting treatment of the following items:

- deferred income taxes and deferred employee profit sharing;
- deferred promotional expenses;
- restatement of imported machinery and equipment;
- goodwill amortization;
- financial instruments; and
- capitalization of interest expense.

For a more detailed description of the differences between Mexican GAAP and U.S. GAAP as they relate to us and a reconciliation of net majority
income and majority shareholders' equity under Mexican GAAP to net income and shareholders' equity under U.S. GAAP, see notes 25 and 26 to our consolidated financial statements.

Pursuant to Mexican GAAP, our consolidated financial statements recognize certain effects of inflation in accordance with Bulletin B-10 and
B-12. These effects were not reversed in the reconciliation to U.S. GAAP.

Under U.S. GAAP, we had net income of Ps. 3.271 billion and Ps. 3.206 billion in 2003 and 2002, respectively. Under Mexican GAAP, we had
net majority income of Ps. 3.093 billion and Ps. 2.947 billion in 2003 and 2002, respectively. In 2003, net income under U.S. GAAP was higher than net majority income under Mexican GAAP, mainly as a result of
the effect of deferred income taxes, deferred employee profit sharing and financial instruments.

Shareholders' equity under
U.S. GAAP as of December 31, 2003 and 2002 was Ps. 42.112 billion and Ps. 38.233 billion, respectively.
 Under Mexican GAAP, majority shareholders' equity as of December 31, 2003 and 2002 was Ps. 28.400 billion and
Ps. 24.024 billion, respectively. The principal reasons for the difference between majority shareholders' equity under
U.S. GAAP and Mexican GAAP were the effect of the goodwill generated by the minority interest acquisition and the restatement
of imported machinery and equipment, partially offset by the effects of deferred income taxes and deferred employee profit sharing.



Table of Contents

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Table of Contents

**Directors**

Management of our business is vested in the board of directors. Our bylaws provide that the board of directors will consist of at least sixteen
directors and designated alternate directors elected by our shareholders at the annual ordinary general shareholders meeting. Directors are elected for a term of one year, although they remain in office until successors
are appointed and replace them. Alternate directors are authorized to serve on the board of directors in place of directors who are unable to attend meetings and may participate in the activities of the board of
directors. Nineteen members form our board of directors. Our bylaws provide that the holders of the Series B Shares elect at least eleven directors and that the holders of the Series D Shares elect five directors. The
shareholders may designate alternate directors to cover the absences of a specific director. Upon the issuance of Series L Shares or upon the conversion of th








e Series D-L Shares, the holders of the Series L Shares will be entitled to elect two directors. See Item 10. Additional Information **-**Bylaws.

The names and positions of the current members of the board of directors, their dates of birth and information on their principal business
activities outside our company are outlined in the following table. In each case, the date presented as First elected corresponds to the earliest appointment to the board of directors of either FEMSA, Emprex
or FEMSA's predecessor Valores Industriales, S.A. See Item 4. Information on the Company--Corporate Background.

**BOARD OF DIRECTORS OF FEMSA**

|Eugenio Garza Lagüera                | Born:                     | December 1923                                                                                                                                                                                                                                                                                                                                                                                                   
|------------------------------------ | ------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*Director and Honorary*              | First elected:            | 1960                                                                                                                                                                                                                                                                                                                                                                                                            
|*Life Chairman*                      | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Other directorships:      | Honorary Life Chairman of Coca-Cola FEMSA, Instituto Tecnológico de Estudios Superiores de Monterrey (ITESM) and BBVA
Bancomer                                                                                                                                                                                                                                                                                  
|                                     | Business experience:      | Joined FEMSA in 1946 in the research department of Cuauhtémoc                                                                                                                                                                                                                                                                                                                                                   
|                                     | Education:                | Holds degrees in chemical engineering from the University of Texas and in business administration from ITESM                                                                                                                                                                                                                                                                                                    
|                                     | Alternate director:       | Mariana
Garza de Treviño (1)(2)                                                                                                                                                                                                                                                                                                                                                                                 
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|José Antonio Fernández (3)           | Born:                     | February 1954                                                                                                                                                                                                                                                                                                                                                                                                   
|*Director and Chairman of the Board* | First elected (Chairman): | 2001                                                                                                                                                                                                                                                                                                                                                                                                            
|**                                   | First elected (Director): | 1984                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Principal occupation:     | Chief Executive Officer of FEMSA                                                                                                                                                                                                                                                                                                                                                                                
|                                     | Other directorships:      | Chairman of the Board of Coca-Cola FEMSA, Vice-Chairman of the Board of ITESM and Member of the Boards of BBVA Bancomer, Grupo
Industrial Saltillo, S.A. de C.V., Industrias Peñoles, S.A. de C.V. and Grupo Industrial Bimbo, S.A. de C.V. (Grupo Bimbo)                                                                                                                                                       
|                                     | Business experience:      | Joined FEMSA's strategic planning department in 1987. Held managerial positions at FEMSA Cerveza's Commercial Division and
Oxxo. Appointed our Chief Executive Officer in 1995                                                                                                                                                                                                                                  
|                                     | Education:                | Holds a degree in industrial engineering and an MBA from ITESM                                                                                                                                                                                                                                                                                                                                                  
|                                     | Alternate director:       | Federico Reyes                                                                                                                                                                                                                                                                                                                                                                                                  
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Paulina Garza de Marroquín (1)(2)    | Born:                     | March 1972                                                                                                                                                                                                                                                                                                                                                                                                      
|*Director*                           | First elected:            | 2004                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Principal occupation:     | Private Investor                                                                                                                                                                                                                                                                                                                                                                                                
|                                     | Other directorships:      | Member of the Board of Trustees of Pronatura del Noreste, A.C. and Patronato de Chipinque, A.C.                                                                                                                                                                                                                                                                                                                 
|                                     | Business experience:      | Held a position in FEMSA Cerveza's marketing department in 1996                                                                                                                                                                                                                                                                                                                                                 
|                                     | Education:                | Holds a business administration degree from ITESM                                                                                                                                                                                                                                                                                                                                                               
|                                     | Alternate director:       | Javier Fernández Carbajal (4)                                                                                                                                                                                                                                                                                                                                                                                   
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|José Calderón                        | Born:                     | September 1931                                                                                                                                                                                                                                                                                                                                                                                                  
|*Director*                           | First elected:            | 1955                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Principal occupation:     | Chairman of Franca Servicios, S.A. de C.V.                                                                                                                                                                                                                                                                                                                                                                      
|                                     | Other directorships:      | Member of the Boards of BBVA Bancomer and Grupo Industrial Alfa, S.A. de C.V., (Grupo Alfa)                                                                                                                                                                                                                                                                                                                     
|                                     | Education:                | Holds a degree in business administration from ITESM                                                                                                                                                                                                                                                                                                                                                            
|                                     | Alternate director:       | José Calderón Rojas (5)                                                                                                                                                                                                                                                                                                                                                                                         
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Consuelo Garza de Garza (6)          | Born:                     | October 1930                                                                                                                                                                                                                                                                                                                                                                                                    
|*Director*                           | First elected:            | 1995                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Business experience:      | Founder and Former President of Asociación Nacional Pro-Superación Personal (a non-profit organization)                                                                                                                                                                                                                                                                                                         
|                                     | Alternate director:       | Alfonso Garza Garza (7)                                                                                                                                                                                                                                                                                                                                                                                         
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Max Michel Suberville                | Born:                     | July 1932                                                                                                                                                                                                                                                                                                                                                                                                       
|*Director*                           | First elected:            | 1985                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Principal occupation:     | Honorary Chairman of the Board of El Puerto de Liverpool, S.A. de C.V.                                                                                                                                                                                                                                                                                                                                          
|                                     | Other directorships:      | Member of the Boards of Grupo Lamosa, S.A. de C.V., Industrias Peñoles, S.A. de C.V., BBVA Bancomer and Grupo Nacional
Provincial, S.A.                                                                                                                                                                                                                                                                         
|                                     | Education:                | Holds a graduate degree from The Massachusetts Institute of Technology and completed post-graduate studies at Harvard
University                                                                                                                                                                                                                                                                                
|                                     | Alternate director:       | Max Michel González (8)                                                                                                                                                                                                                                                                                                                                                                                         
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Alberto Bailleres                    | Born:                     | August 1931                                                                                                                                                                                                                                                                                                                                                                                                     
|*Director*                           | First elected:            | 1995                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Principal occupation:     | Executive President of Industrias Peñoles, S.A. de C.V., Grupo Nacional Provincial, S.A., and Grupo BAL, S.A. de C.V.                                                                                                                                                                                                                                                                                           
|                                     | Other directorships:      | Chairman of the Board of Industrias Peñoles, S.A. de C.V., Grupo Nacional Provincial, S.A. and Grupo Palacio de Hierro,
S.A. de C.V. Member of the Boards of BBVA Bancomer and Valores Mexicanos Casa de Bolsa, S.A. de C.V.                                                                                                                                                                                    
|                                     | Education:                | Holds an economics degree from Instituto Tecnológio Autónomo de México                                                                                                                                                                                                                                                                                                                                          
|                                     | Alternate director:       | Arturo Fernández                                                                                                                                                                                                                                                                                                                                                                                                
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Eduardo A. Elizondo                  | Born:                     | December 1922                                                                                                                                                                                                                                                                                                                                                                                                   
|*Director*                           | First elected:            | 1995                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Principal occupation:     | Attorney at law                                                                                                                                                                                                                                                                                                                                                                                                 
|                                     | Other directorships:      | Member of the Board of BBVA Bancomer, Chairman of the Regional Board of Advisors of Bancomer, S.A., and Grupo Industrial
Ramirez, S.A.                                                                                                                                                                                                                                                                          
|                                     | Business experience:      | Served as Treasurer General from 1961 to 1967 and Constitutional Governor from 1967 to 1971 for the State of Nuevo León.
Acted as Chairman of the Board of Valores of Monterrey, S.A. de C.V.                                                                                                                                                                                                                   
|                                     | Education:                | Holds a law degree from the Universidad Autónoma de Nuevo León (UANL)                                                                                                                                                                                                                                                                                                                                           
|                                     | Alternate director:       | Juan Guichard Michel (9)                                                                                                                                                                                                                                                                                                                                                                                        
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Ricardo Guajardo Touché              | Born:                     | May 1948                                                                                                                                                                                                                                                                                                                                                                                                        
|*Director*                           | First elected:            | 1988                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Principal occupation:     | Chairman of the Board of BBVA Bancomer                                                                                                                                                                                                                                                                                                                                                                          
|                                     | Other directorships:      | Member of the Board of El Puerto de Liverpool, S.A. de C.V., Grupo Alfa, BBVA Bancomer, Grupo Aeroportuario del Sureste, S.A.
de C.V. and ITESM                                                                                                                                                                                                                                                                 
|                                     | Business experience:      | Has held senior executive positions in our company, Grupo AXA, S.A. de C.V. and Valores de Monterrey, S.A. de C.V.                                                                                                                                                                                                                                                                                              
|                                     | Education:                | Holds degrees in electrical engineering from ITESM and the University of Wisconsin and a masters degree from the University of
California at Berkeley                                                                                                                                                                                                                                                           
|                                     | Alternate director:       | Eva Garza de Fernández (1)(10)                                                                                                                                                                                                                                                                                                                                                                                  
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Alfredo Livas                        | Born:                     | July 1951                                                                                                                                                                                                                                                                                                                                                                                                       
|*Director and Secretary*             | First elected:            | 1995                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Principal occupation:     | President of Praxis Financiera, S.C.                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Other directorships:      | Member of the Boards of Grupo Jomar, S.A. de C.V. and British American Tobacco (Mexican board)                                                                                                                                                                                                                                                                                                                  
|                                     | Business experience:      | Joined FEMSA in 1978 and held several positions in the areas of financial planning and treasury and served as Chief Financial
Officer from 1989 to 1999                                                                                                                                                                                                                                                         
|                                     | Education:                | Holds an economics degree from the UANL and an MBA and masters degree in economics from the University of Texas                                                                                                                                                                                                                                                                                                 
|                                     | Alternate Director **:**  | José González Ornelas                                                                                                                                                                                                                                                                                                                                                                                           
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Roberto Servitje                     | Born:                     | January 1928                                                                                                                                                                                                                                                                                                                                                                                                    
|*Director*                           | First elected:            | 1995                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Principal occupation:     | Chairman of the Board of Grupo Bimbo                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Other directorships:      | Member of the Board of DaimlerChrysler de México, S.A.                                                                                                                                                                                                                                                                                                                                                          
|                                     | Business experience:      | Founding Member and active Chairman of Grupo Bimbo                                                                                                                                                                                                                                                                                                                                                              
|                                     | Education:                | Holds a PMD degree from Harvard University                                                                                                                                                                                                                                                                                                                                                                      
|                                     | Alternate director        | Alfredo Martínez Urdal                                                                                                                                                                                                                                                                                                                                                                                          
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Carlos Salguero                      | Born:                     | October 1929                                                                                                                                                                                                                                                                                                                                                                                                    
|*Director*                           | First elected:            | 1995                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Business experience:      | Former Executive Vice President of Phillip Morris International                                                                                                                                                                                                                                                                                                                                                 
|                                     | Other directorships:      | Former Member of the Boards of Tabacalera Mexicana, S.A. de C.V., Tabacalera Costarricense, S.A., Tabacalera Centroamericana,
S.A. and other Latin American companies                                                                                                                                                                                                                                           
|                                     | Education:                | Holds a business degree from the Columbian Faculty of Economic Sciences, postgraduate studies in economics and management from
Albany Business College and University College (Syracuse). Received an Honor for Civil Merit by H.M. the King of Spain in 1995                                                                                                                                                   
|                                     | Alternate director:       | Eduardo Padilla Silva                                                                                                                                                                                                                                                                                                                                                                                           
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|José Manuel Canal Hernando           | Born:                     | February 1940                                                                                                                                                                                                                                                                                                                                                                                                   
|*Director*                           | First elected:            | 2003                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Principal occupation:     | Private consultant                                                                                                                                                                                                                                                                                                                                                                                              
|                                     | Other directorships:      | Member of the Board of Coca-Cola FEMSA                                                                                                                                                                                                                                                                                                                                                                          
|                                     | Business experience:      | Former managing partner at Ruiz, Urquiza y Cía, S.C., from 1981 to 1999. Acted as our statutory examiner from 1984 to
2002. Presided in the Committee of Surveillance of the Mexican Institute of Finance Executives and has participated in several commissions at the Mexican Association of Public Accountants. Extensive experience in
financial auditing for holding companies, banks and financial brokers
|                                     | Education:                | Holds a CPA degree from the Universidad Nacional Autónoma de México                                                                                                                                                                                                                                                                                                                                             
|                                     | Alternate director:       | Othón Páez Garza (11)                                                                                                                                                                                                                                                                                                                                                                                           
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Bárbara Garza Gonda (1)(2)           | Born:                     | December 1959                                                                                                                                                                                                                                                                                                                                                                                                   
|*Director*                           | First elected:            | 2002                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Principal occupation:     | Vice President of Fundación Cultural Bancomer                                                                                                                                                                                                                                                                                                                                                                   
|                                     | Other directorships:      | Alternate Director of Coca-Cola FEMSA.                                                                                                                                                                                                                                                                                                                                                                          
|                                     | Business experience:      | Has worked in BBVA Bancomer, Citibank and Banca Serfin                                                                                                                                                                                                                                                                                                                                                          
|                                     | Education:                | Holds a degree in business administration and an MBA from ITESM                                                                                                                                                                                                                                                                                                                                                 
|                                     | Alternate director:       | Carlos Salazar Lomelín                                                                                                                                                                                                                                                                                                                                                                                          
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|**Series D Directors**             | ****                      | ****                                                                                                                                                                                                                                                                                                                                                                                                            
|Alexis E. Rovzar                     | Born:                     | July 1951                                                                                                                                                                                                                                                                                                                                                                                                       
|*Director*                           | First elected:            | 1989                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Principal occupation:     | Executive Partner at White & Case, S.C. law firm                                                                                                                                                                                                                                                                                                                                                                
|                                     | Other directorships:      | Member of the Boards of Coca-Cola FEMSA, Grupo Bimbo, Deutsche Bank (Mexico), Grupo ACIR, S.A. de C.V. and COMEX, S.A. de C.V.                                                                                                                                                                                                                                                                                  
|                                     | Business experience:      | Expert in private and public mergers and acquisitions as well as other aspects of financial law and has been advisor to many
companies on international business and joint venture transactions                                                                                                                                                                                                                 
|                                     | Education:                | Holds a law degree from the Universidad Nacional Autónoma de México                                                                                                                                                                                                                                                                                                                                             
|                                     | Alternate director:       | Lorenzo Garza Hinojosa                                                                                                                                                                                                                                                                                                                                                                                          
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Luis Téllez                          | Born:                     | October 1958                                                                                                                                                                                                                                                                                                                                                                                                    
|*Director*                           | First elected:            | 2001                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Principal Occupation:     | Managing Director of The Carlyle Group, S. de R.L. de C.V., a finance consulting firm                                                                                                                                                                                                                                                                                                                           
|                                     | Other directorships:      | Member of the Boards of Grupo Desc, S.A. de C.V., Grupo México, S.A. de C.V. and Casa de Cambio Monex, S.A. de C.V.,
Cablevisión, S.A. de C.V. and Daimler Chrysler de México, S.A. de C.V.                                                                                                                                                                                                                     
|                                     | Business experience:      | Former Executive Vice-President of Grupo Desc, S.A. de C.V. Served as Secretary of Energy of Mexico from 1997 to 2000 and Chief
of Staff of the President of Mexico from 1996 to 1997                                                                                                                                                                                                                           
|                                     | Education:                | Holds an economics degree from Instituto Tecnológico Autónomo de México and a Ph.D. in Economics from The
Massachusetts Institute of Technology                                                                                                                                                                                                                                                                 
|                                     | Alternate director:       | Armando Garza Sada                                                                                                                                                                                                                                                                                                                                                                                              
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Helmut Paul                          | Born:                     | March 1940                                                                                                                                                                                                                                                                                                                                                                                                      
|*Director*                           | First elected:            | 1988                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Principal occupation:     | Owner of H. Paul & Company LLC, a corporate finance advisory firm and Senior Consultant of International Finance
Corporation                                                                                                                                                                                                                                                                                    
|                                     | Other directorships:      | Member of the Boards of Scudder Fund for Independent Power Generation (management committee), HSBC Private Equity Fund
(Argentina/Brazil) and Zurich Emerging Markets Solutions                                                                                                                                                                                                                                 
|                                     | Business experience:      | Has held several managing positions in the International Finance Corporation, mainly responsible for Latin American and
Caribbean investments                                                                                                                                                                                                                                                                   
|                                     | Education:                | Holds an MBA from the University of Hamburg                                                                                                                                                                                                                                                                                                                                                                     
|                                     | Alternate director:       | Antonio Elosua Muguerza                                                                                                                                                                                                                                                                                                                                                                                         
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Lorenzo H. Zambrano                  | Born:                     | March 1944                                                                                                                                                                                                                                                                                                                                                                                                      
|*Director*                           | First elected:            | 1995                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Principal occupation:     | Chairman and Chief Executive Officer of Cemex, S.A. de C.V.                                                                                                                                                                                                                                                                                                                                                     
|                                     | Other directorships:      | Member of the Boards of Alfa, S.A. de C.V. (Human Resources Committee), Vitro, S.A. de C.V. (Chairman of the Compensations
Committee), Televisa, S.A. de C.V., and Grupo Financiero Banamex, S.A. de C.V. Member of Citigroup's International Advisory Board and Member of the Advisory Committee of Capital International, Inc.                                                                                
|                                     | Education:                | Holds a degree in mechanical engineering and administration from ITESM and an MBA from Stanford University                                                                                                                                                                                                                                                                                                      
|                                     | Alternate director:       | Francisco Garza Zambrano                                                                                                                                                                                                                                                                                                                                                                                        
|                                     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                 
|Robert E. Denham                     | Born:                     | August 1945                                                                                                                                                                                                                                                                                                                                                                                                     
|*Director*                           | First elected:            | 2001                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Term expires:             | 2005                                                                                                                                                                                                                                                                                                                                                                                                            
|                                     | Principal occupation:     | Partner of Munger, Tolles & Olson LLP law firm                                                                                                                                                                                                                                                                                                                                                                  
|                                     | Other directorships:      | Member of the Boards of Wesco Financial Corporation, US Trust Company, and Lucent Technologies, Inc.                                                                                                                                                                                                                                                                                                            
|                                     | Business experience:      | Former Chief Executive Officer of Salomon Inc., Representative to the APEC Business Advisory Council, Member of the OECD
Business Sector Advisory Group on Corporate Governance                                                                                                                                                                                                                                 
|                                     | Education:                | *Magna cum laude* graduate from the University of Texas, holds a JD from Harvard Law School and a masters degree in
Government from Harvard University                                                                                                                                                                                                                                                          
|                                     | Alternate director:       | Sergio Deschamps Ebergenyi                                                                                                                                                                                                                                                                                                                                                                                      

__________________  (1) Daughter of Eugenio Garza Lagüera.(2) Sister-in-law of José Antonio Fernández. (3) Son-in-law of Eugenio Garza Lagüera. (4) Brother of José Antonio Fernández Carbajal. (5) Son of José Calderón Senior. (6) Sister of Eugenio Garza Lagüera. (7) Son of Consuelo Garza de Garza. (8) Son of Max Michel Suberville. (9) Nephew of Max Michel Suberville. (10) Wife of José Antonio Fernández. (11) Cousin of Eugenio Garza Lagüera.


Table of Contents

**Statutory Examiner**

Under Mexican law, a statutory examiner must be elected by the shareholders at the annual ordinary general shareholders' meeting for a term of one
year. At our subsequent annual ordinary general shareholders' meeting, the statutory examiner is required to review the affairs of the company and report as to the accuracy of the financial information presented to
shareholders by the board of directors. The statutory examiner is also authorized:

to call ordinary
or extraordinary general shareholders' meetings;to place items on the agenda for general shareholders' meetings and
 meetings of the board of directors; andto attend general shareholders' meetings and meetings
of the board of directors (without the right to vote).


The statutory examiner also receives periodic reports from the board of directors regarding material aspects of our affairs and financial condition.
Our current statutory examiner is Ernesto González Dávila and the current alternate statutory examiner is Ernesto Cruz Velázquez de León.

Table of Contents

**Senior Management**

The names and positions of our current senior management and that of our principal subholding companies, their dates of birth and information on
their principal business activities outside of FEMSA are as follows:

Table of Contents

**Executive Officers**

|**FEMSA**                                                                                                             | ****                                                                              | ****                                                                                                                                                                                                                                                                                                                                                                                                     
|--------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|José Antonio Fernández 
                  *Chief Executive Officer*                                                   | See -Board of Directors of FEMSA.                                               |                                                                                                                                                                                                                                                                                                                                                                                                          
|**                                                                                                                    | Joined FEMSA: 
    Appointed to current position:                                 | 1987 
    1994                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                      |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|Alfredo Martínez Urdal 
                  *Deputy Chief Executive Officer*
    **                                     | Born:Joined FEMSA:Appointed to current position:Directorships:                    | September 193119932003Member of the board of Coca-Cola FEMSA                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                      | Business experience within FEMSA:                                                 | Former Chief Executive Officer of FEMSA Cerveza and Coca-Cola FEMSA                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                      | Other business experience:                                                        | Holds an economics degree from the Western Reserve University, a law degree from the Universidad Nacional Autónoma de
México and a post-graduate degree from Harvard Business School. Has served as Chief Executive Officer of many prominent Mexican companies and banks, including Ponderosa Industrial Accel, Grupo Chihuahua,
Multibanco Comermex, Celulosa de Chihuahua and Banco Comercial Mexicano
|                                                                                                                      |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|Federico Reyes 
                *Executive Vice-President
      of Finance and Corporate 
      Development*          | Born:Joined FEMSA:Appointed to current position:Directorships:                    | September 194519992000Vice Chairman of the Board of Seguros Monterrey New York Life, S.A., and Chairman of the Board of Review of Fianzas Monterrey, S.A.                                                                                                                                                                                                                                                
|                                                                                                                      | Business experience within FEMSA:                                                 | Director of Corporate Development, 1992                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                      | Other business experience:                                                        | Holds a degree in business and finance from ITESM. Has worked as Director of Corporate Staff at Grupo AXA and has extensive
experience in the insurance sector, working eight years in Valores de Monterrey, S.A. de C.V., six of them as Chief Executive Officer                                                                                                                                        
|                                                                                                                      |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|José González Ornelas 
                *Executive Vice President
      of Administration and
      Operative Control* | Born:Joined FEMSA:Appointed to current position:Directorships:                    | April 195119732001Member of the board of directors of FEMSA Cerveza                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                      | Business experience within FEMSA:                                                 | Has held several managerial positions in FEMSA including Chief Financial Officer of FEMSA Cerveza, Director of Planning and
Corporate Development of FEMSA and Chief Executive Officer of FEMSA Logística                                                                                                                                                                                                
|                                                                                                                      | Other business experience:                                                        | Holds a CPA degree from the UANL and has post-graduate studies in business administration from the Instituto Panamericano de
Alta Dirección de Empresa (IPADE)                                                                                                                                                                                                                                           
|                                                                                                                      |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|Ricardo González Sada 
                *Executive Vice President
       of Human Resources*                           | Born:Joined FEMSA:Appointed to current position:                                  | August 195520002000                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                      | Business experience within FEMSA:                                                 | Vice President of Strategic Planning. Held managerial positions in the human resources department of FEMSA from 1977 to 1978                                                                                                                                                                                                                                                                             
|                                                                                                                      | Other business experience:                                                        | Holds a degree in industrial and systems engineering from ITESM and an MBA from IESE, Barcelona. Had a 20-year career in
Grupo Vitro, three of them as Chairman and Chief Executive Officer of Vidrio Plano, S.A. de C.V.                                                                                                                                                                                
|                                                                                                                      |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|Carlos Aldrete 
                *General Counsel*                                                                     | Born:Joined FEMSA:Appointed to current position:Directorships:                    | August 195619791996Alternate Secretary of the board of directors of FEMSA and Secretary of the board of directors of all of the subholding companies                                                                                                                                                                                                                                                     
|                                                                                                                      | Business experience within FEMSA:                                                 | Extensive experience in international business and financial transactions, debt issuances and corporate restructurings.
Expertise in securities and private mergers and acquisitions law                                                                                                                                                                                                                 
|                                                                                                                      | Other business experience:                                                        | Holds a law degree from the UANL and a masters degree in Comparative Law from the College of Law of the University of
Illinois                                                                                                                                                                                                                                                                           
|                                                                                                                      |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|Rosa María Hinojosa Martínez 
                *Chief Accounting Officer*                                              | Born:Joined FEMSA:Appointed to current position:Business experience within FEMSA: | February 196219831996Has held several positions in FEMSA in financial information and administrative areas and has participated in several financial transactions, debt issuances
and corporate restructuring                                                                                                                                                                                            
|                                                                                                                      | Other business experience:                                                        | Holds a CPA degree from ITESM, completed post-graduate studies at IPADE and has participated in several post-graduate
programs in business administration                                                                                                                                                                                                                                                
|                                                                                                                      |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|**FEMSA Cerveza**                                                                                                     |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|Javier Astaburuaga Sanjines 
                *Co-Chief Executive
      Officer- Operations*                           | Born:Joined FEMSA:Appointed to current position:                                  | July 195919822003                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                      | Business experience within FEMSA:                                                 | Joined FEMSA as a financial information analyst and later acquired experience in corporate development, administrative and
finance. Between 1993 and 2001, held various senior positions at FEMSA Cerveza, including Chief Financial Officer. For two years prior to his current position, was FEMSA Cerveza's Director of Sales for the north region
of Mexico.                                         
|                                                                                                                      |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|Jorge Luis Ramos 
                *Co-Chief Executive
      Officer- Sales*                                           | Born:Joined FEMSA:Appointed to current position:                                  | December 195219962003                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                      | Business experience within FEMSA:                                                 | Director of Human Resources of FEMSA Cerveza from 1996 until 2000; Director of Sales, South Market from 2000 until his
appointment to his current position                                                                                                                                                                                                                                               
|                                                                                                                      |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|Gerardo Estrada Attolini 
                *Chief Financial Officer*                                                   | Born:Joined FEMSA:Appointed to current position:                                  | May 195720002003                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                      | Business experience within FEMSA:                                                 | Chief Financial Officer of FEMSA from 2000 until 2002; Administrative Director of FEMSA Cerveza from 2002 until his
appointment to his current position                                                                                                                                                                                                                                                  
|                                                                                                                      | Other business experience:                                                        | Holds CPA and MBA degrees from ITESM                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                      |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|***Coca-Cola FEMSA***                                                                                                 |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|Carlos Salazar 
                *Chief Executive Officer*                                                             | Born:Joined FEMSA:Appointed to current position:                                  | April 195119732000                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                      | Business experience within FEMSA:                                                 | Has held managerial positions in several subsidiaries of FEMSA, including Grafo Regia and PTM. Served as Chief Executive
Officer of FEMSA Cerveza where he also held various management positions in the Commercial Planning and Export divisions                                                                                                                                                        
|                                                                                                                      | Other business experience:                                                        | Bachelor's degree in economics from ITESM, postgraduate studies in business administration and in economic development in
Italy                                                                                                                                                                                                                                                                          
|                                                                                                                      |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|Héctor Treviño Gutiérrez 
                *Chief Financial Officer*                                                   | Born:Joined FEMSA:Appointed to current position:                                  | August 195619811993                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                      | Business experience within FEMSA:                                                 | Has held managerial positions in the international financing, financial planning, strategic planning and corporate
development areas of FEMSA                                                                                                                                                                                                                                                            
|                                                                                                                      | Other business experience:                                                        | Holds a degree in chemical engineering from ITESM and an MBA from the Wharton Business School                                                                                                                                                                                                                                                                                                            
|                                                                                                                      |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|**FEMSA Comercio**                                                                                                    |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|Eduardo Padilla Silva 
                *Chief Executive Officer*                                                      | Born:Joined FEMSA:Appointed to current position:                                  | January 195519972003                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                      | Business experience within FEMSA:                                                 | Director of Planning and Control of FEMSA from 1997 to 2000; Chief Executive Officer Strategic Business Division from 2000
until his current position                                                                                                                                                                                                                                                    
|                                                                                                                      | Other business experience:                                                        | Had a 20-year career in Grupo Alfa, culminating with a ten-year tenure as Chief Executive Officer of Terza, S.A. de C.V. His
major areas of expertise are operational control, strategic planning and financial restructuring                                                                                                                                                                            
|                                                                                                                      | Education:                                                                        | Holds a degree in mechanical engineering from ITESM and an MBA from Cornell University                                                                                                                                                                                                                                                                                                                   
|                                                                                                                      |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|**Strategic Procurement (FEMSA Empaques)**                                                                            |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|Sergio Sáenz*Executive Vice-President*                                                                                | Born:Joined FEMSA:Appointed to current position:                                  | September 195019992003                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                      | Directorships:                                                                    | Chairman of the Board of FEMSA Cerveza                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                      | Business experience within FEMSA:                                                 | Chief Financial Officer of FEMSA Cerveza                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                      | Other business experience:                                                        | Had a 13-year career in Cuprum, S.A. de C.V., culminating as Chief Executive Officer. Holds a chemical engineering degree
from the UANL and an MBA from the University of Texas at Austin                                                                                                                                                                                                                
|                                                                                                                      |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                          
|Alfonso Garza Garza 
                *Chief Executive Officer FEMSA 
          Empaques*                              | Born:Joined FEMSAAppointed to current:position:                                   | July 196219852003                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                      | Other directorships:                                                              | Member of the board Coca-Cola FEMSA, and Hospital San José Tec de Monterrey                                                                                                                                                                                                                                                                                                                              
|                                                                                                                      | Business experience within FEMSA:                                                 | Has experience in several FEMSA business units and departments, including Domestic Sales, International Sales, Procurement
and Marketing, mainly in CCM and FEMSA Empaques                                                                                                                                                                                                                               
|                                                                                                                      | Other business experience:                                                        | Holds a degree in Industrial Engineering from the ITESM and an MBA from IPADE                                                                                                                                                                                                                                                                                                                            

Table of Contents

**Compensation of Directors and Senior Management**

For the year ended December 31, 2003, the aggregate compensation paid to our directors was approximately Ps. 4.2 million.

For the year ended December 31, 2003, the aggregate compensation paid to executive officers and senior management of FEMSA and its subsidiaries was
approximately Ps. 806 million. Aggregate compensation includes bonuses we paid to certain members of senior management and payments in connection with the Stock Incentive Plan described below. Our senior management
and executive officers participate in our benefit plan and post-retirement medical services plan on the same basis as our other employees. Members of our board of directors do not participate in our benefit plan and
post-retirement medical services plan, unless they are retired employees of our company. As of December 31, 2003, amounts set aside or accrued for all employees under these retirement plans were Ps. 3,512 million,
of which Ps. 1,697 million is already funded.

Table of Contents

**Stock Incentive Plan**

From 1998 until 2003, we, along with our subsidiaries, had a five-year stock incentive plan for the benefit of our executive officers, which we
refer to as the Stock Incentive Plan. Under the terms of the Stock Incentive Plan, during the years 1999 through 2003, our executive officers may have been selected to receive a special cash bonus, which will be used to
obtain a stock grant. Each year, our Chief Executive Officer, together with the chief executive officers of the subholding companies, selected the executive officers who may have participated in the Stock Incentive Plan
and determined the amount of the special bonus, based on each executive officer's level of responsibility and corporate achievements during the prior year.

The stock grants were administrated by certain trusts for the benefit of the selected executive officers. Every year a new administrative trust was
formed to manage the stock grants acquired in that particular year. Under the terms of the Stock Incentive Plan, each time a special bonus was assigned to an executive officer, the executive officer contributed the
special bonus received to the administrative trust in exchange for a stock grant, as determined annually by us. Each administrative trust is managed by a technical committee formed by executives of our company and is
governed by Mexican law.

A stock grant entitles an executive officer to receive BD Units or, in the case of officers of Coca-Cola FEMSA, a specified proportion of BD Units
and Series L Shares of Coca-Cola FEMSA, which will be acquired by the respective administrative trust in the open market, using the special bonus contributed by each executive officer. Under the terms of the Stock
Incentive Plan, the ownership of the BD Units and, in its case, the Series L Shares of Coca-Cola FEMSA, will vest upon the executive officer holding a stock grant each 28 th of February over the next five years
following the date of receipt of the stock grant, at a rate per year equivalent to the number of BD Units and, as applicable, Coca-Cola FEMSA Series L Shares, which can be acquired with 20% of such stock grant.

As of the date of this annual report, five administrative trusts, which administer the Stock Incentive Plan, hold a total of 4,131,501 BD Units and
1,133,926 Series L Shares of Coca-Cola FEMSA, each representing 0.389% and 0.061% of the total number of shares outstanding of FEMSA and of Coca-Cola FEMSA, respectively.

**EVA-Based Stock Incentive Plan**

Beginning in 2004, we, along with our subsidiaries, plan to commence a new three-year stock incentive plan for the benefit of our executive
officers, which we refer to as the EVA Stock Incentive Plan. This new plan replaces the Stock Incentive Plan described above and is being developed using as the main metric for evaluation the Economic Value Added or EVA
framework developed by Stern Stewart & Co., a compensation consulting firm. Under the proposed terms of the EVA Stock Incentive Plan, eligible executive officers will be entitled to receive a special cash bonus,
which will be used to purchase a stock grant in the Mexican stock exchange.

Based on the current proposed structure for the plan, each year, our Chief Executive Officer in conjunction with our Evaluation and Compensation
Committee together with the chief executive officer of the respective subholding company, will determine the amount of the special cash bonus used to purchase the stock grant. This amount will be determined based on
each executive officer's level of responsibility and based on the EVA generated by us.

We intend for the stock grants to be administrated by certain trusts for the benefit of the selected executive officers in the same manner as in the
previous Stock Incentive Plan. Under the proposed terms of the EVA Stock Incentive Plan, each time a special bonus is assigned to an executive officer, the executive officer will contribute the special bonus received to
the administrative trust in exchange for a stock grant. Pursuant to the proposed plan, the administrative trust will acquire BD Units of FEMSA or, in the case of officers of Coca-Cola FEMSA, a specified proportion of BD
Units of FEMSA and Series L Shares of Coca-Cola FEMSA in the open market using the special bonus contributed by each executive officer. The ownership of the BD Units of FEMSA and, in the case of Coca-Cola FEMSA
executives, the Series L Shares of Coca-Cola FEMSA will vest upon the executive officer holding a stock grant each year over the next five years followi








ng the date of receipt of the stock grant, at a rate per year equivalent to 20% of the number of BD Units of FEMSA and Series L Shares of Coca-Cola FEMSA, as applicable.

Table of Contents

**Share Ownership**

Several of our directors are participants to a voting trust. Each of the trust participants of the voting trust is deemed to have beneficial
ownership with shared voting power over the shares deposited in the voting trust, which consist of 1,907,373,675 Series B Shares representing 69.67% of the Series B Shares outstanding as of March 15, 2004. See
Item 7. Major Shareholders and Related Party Transactions.

The following table shows the Series B Shares, Series D-B Shares and Series D-L Shares as of March 15, 2004 beneficially owned by our directors who
are trust participants of the voting trust, other than the shares deposited in the Voting Trust:

|****                    | **Series B** | **Series D-B**       | **Series D-L**
|----------------------- | ------------ | -------------------- | --------------
|**Beneficial Owner**    | **Shares**   | **Percent of Class** | **Shares**    
|                        |              |                      |               
|Eugenio Garza Lagüera   | 4,440,868    | 0.16%                | 8,881,736     
|José Calderón Ayala     | 2,276,517    | 0.08                 | 4,553,034     
|Consuelo Garza de Garza | 20,821,980   | 0.40                 | 4,031,160     
|Max Michel Suberville   | 55,270,870   | 2.02                 | 0             
|Alberto Bailleres       | 333,890      | 0.01                 | 667,780       
|Bárbara Garza Gonda     | 0            | 0.00                 | 0             
|Paulina Garza Gonda     | 0            | 0.00                 | 0             
|                       

To our knowledge, no other director or officer is the beneficial owner of more than 1% of any class of our capital stock.

Table of Contents

Board Practices

Our bylaws state that the board of directors will meet at least once every three months following the end of each quarter to discuss our operating
results and the advancement in the achievement of strategic objectives. Our board of directors can also hold extraordinary meetings. See Item 10. Additional Information **-**Bylaws.

Under our bylaws, directors serve one-year terms although they continue in office if and until successors are appointed. None of our directors or
senior managers of our subsidiaries has service contracts providing for benefits upon termination of employment.

Our board of directors is supported by committees, which are working groups that analyze issues and provide recommendations to the board of
directors regarding their respective areas of focus. The executive officers interact periodically with the committees to address management issues. The following are the three committees of the board of directors:
******

- *The Evaluation and Compensation
(Human Resources) Committee*. Responsibilities include (i) recommending procedures for the election of
the Chief Executive Officer and other senior executives; (ii) proposing to the board of directors the criteria for the evaluation of the
Chief Executive Officer and other senior executives; and (iii) analyzing and presenting to the board of directors the proposal prepared by
 the Chief Executive Officer regarding the structure and amount of compensation for FEMSA's key executives. The current Evaluation and
Compensation Committee members are: Lorenzo H. Zambrano (chairman), Roberto Servitje , Max Michel Suberville , Arturo Fernández
 Pérez and Carlos Salguero . Ricardo González Sada is the appointed secretary of this committee.
- *The Audit Committee*. Responsibilities
include (i) recommending to the board of directors the candidates for external auditors of FEMSA; (ii) ensuring the independence
and objectivity of the latter; and (iii) recommending to the board of directors procedures for the preparation of financial information.
The current Audit Committee members are: Alexis Rovzar (chairman), José Manuel Canal Hernando, Eduardo A. Elizondo and Helmut Paul.
 José González Ornelas is the appointed secretary of the Audit Committee.
- *The Finance and Planning Committee*.
Responsibilities include (i) evaluating the investment and financing policies proposed by the Chief Executive Officer; (ii)
furnishing an opinion on the soundness of the annual budget and ensuring the implementation of the budget and any proposed strategic
plan; and (iii) identifying risk factors to which the corporation is exposed, as well as evaluating its management policies. The current ,
Finance and Planning Committee members are: Ricardo Guajardo Touché (chairman), Alfredo Livas, Luis Téllez, Robert Denham
and Javier Fernández Carbajal. Federico Reyes is the appointed secretary of this committee.

Table of Contents

**Employees**

The table below sets forth the number of our employees for the years ended December
31, 2003, 2002 and 2001:

|**                   | **Employees of FEMSA for the Years Ended December 31,**
|-------------------- | -------------------------------------------------------
|                     |                                                        
|**                   | **2003**                                               
|                     |                                                        
|**                   | **Non-Union 
    Employees**                           
|                     |                                                        
|*Subholding Company* |                                                        
|Coca-ColaFEMSA (1)   | 32,499                                                 
|FEMSA Cerveza        | 10,111                                                 
|FEMSA Comercio (2)   | 2,555                                                  
|FEMSA Empaques       | 1,129                                                  
|Other                | 899                                                    
|                     |                                                        
|Total                | 47,193                                                 
|                     |                                                        

|__________________
|------------------
|(1)               
|(2)               
|(3)               

As of December 31, 2003, our subsidiaries had entered into 357 collective bargaining or similar agreements with personnel employed at our
operations. In general, we have a good relationship with the labor unions throughout our operations, except for in Colombia and Venezuela, which are the subject of signinficant labor-related litigation. See Item
8. Financial Information-Legal Proceedings. The agreements applicable to our Mexican operations generally have an indefinite term and provide for an annual salary review and for review of other terms and
conditions, such as fringe benefits, every two years.

The table below sets forth the number of collective bargaining agreements and unions for FEMSA's employees:

**Collective Bargaining Labor Agreements Between 
Subholding Companies and Unions 
As of December 31, 2003**

|*Subholding Company* | **Collective 
        Bargaining 
        Agreements** | **Labor Unions**
|-------------------- | ------------------------------------------------------ | ----------------
|                     |                                                        |                 
|Coca-Cola FEMSA      | 89                                                     | 28              
|FEMSA Cerveza        | 148                                                    | 7               
|FEMSA Comercio (1)   | 68                                                     | 14              
|FEMSA Empaques       | 27                                                     | 4               
|Others               | 25                                                     | 2               
|                     |                                                        |                 
|Total                | 357                                                    | 55              
|                     |                                                        |                 

|__________________
|------------------
|(1)               

Each of the labor unions in Mexico is associated with one of 10 different national Mexican labor organizations. Our management believes that we have
good relations with our employees and the various labor unions.

Table of Contents

**Insurance Policies**

We maintain
life insurance policies for all of our employees. These policies mitigate the risk of having
to pay death benefits in the event of an industrial accident. We maintain a directors and officers' insurance
 policy covering all directors and certain key executive officers for liabilities incurred in their capacities as
directors and officers.



Table of Contents

ITEM 7.  MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Table of Contents

Major Shareholders

The following table
identifies each owner of more than 5% of any class of our shares known to the company as
of March 15, 2004.  Except as described below, we are not aware of any holder of more
than 5% of any class of our shares.  Only the Series B Shares have full voting rights
under our bylaws.

Ownership of Capital
Stock                                                                      as of March
15, 2004

|                                       | Series B Shares(1) | Series D-B Shares(2) | Series D-L Shares(3) |                 
|-------------------------------------- | ------------------ | -------------------- | -------------------- | ----------------
|                                       |                    |                      |                      |                 
|                                       | Shares Owned       | Percent of Class     | Shares Owned         | Percent of Class
|                                       |                    |                      |                      |                 
|Shareholder                           
|Technical Committee and Trust         
|Participants under the Voting Trust(4) | 1,907,373,675      | 69.7%                | 0                    | 0.0%            
|Capital International Inc.(5)          | 65,282,220         | 2.4%                 | 30,564,440           | 10.2%           

|__________________
|------------------
|(1)               
|(2)               
|(3)               
|(4)               
|(5)               

Because of their
ownership of a majority of the Series B Shares, the Technical Committee and Trust
Participants may be deemed to control our company.

To the best of our
knowledge, on March 25, 2004, 66.5% of BD units were held as ADSs through the ADS
Depositary.  According to the estimates provided by U.S. brokers to the ADS Depositary,
on March 25, 2004 we had 3,121 stockholders registered as ADS holders.

Table of Contents

Related-Party
Transactions

Voting Trust

The Trust
Participants, who are our principal shareholders, agreed in April 1998 to deposit a
majority of their shares, which we refer to as the Trust Assets, of FEMSA into the Voting
Trust.  The primary purpose of the Voting Trust is to permit the Trust Assets to be voted
as a block, in accordance with the instructions of the Technical Committee.  The
Technical Committee is comprised of all of the Trust Participants.  The number of B Units
deposited by each Trust Participant (the proportional share of the Trust Assets of such
participant) determines the number of votes that such Trust Participant has on the
Technical Committee.  Most matters are decided by a simple majority of the Trust Assets.

The Trust Participants
agreed to certain transfer restrictions with respect to the Trust Assets.  During the
ten-year term of the Voting Trust, Trust Assets may be transferred by Trust Participants
to spouses and immediate family members and, subject to certain conditions, to companies
that are 100% owned by Trust Participants, which we refer to as the Permitted
Transferees, provided in all cases that the transferee agrees to be bound by the terms of
the Voting Trust.  In the event that a Trust Participant wishes to sell part of its Trust
Assets to someone other than a Permitted Transferee, the other Trust Participants have
the right of first refusal to purchase the Trust Assets that the Trust Participant wishes
to sell.  If none of the Trust Participants elects to acquire the Trust Assets from the
selling Trust Participant, the Technical Committee will have the right to nominate
(subject to the approval of Technical Committee members representing 75% of the Trust
Assets, excluding Trust Assets that are the subject of the sale) a purchaser for such
Trust Assets.  In the event that none of the Trust Participants or a nominated purchaser
elects to acquire Trust Assets, the selling Trust Participant will have the right to sell
the Trust Assets to a third party on the same terms and conditions that were offered to
the Trust Participants.  Acquirors of Trust Assets will only be permitted to become
parties to the Voting Trust upon the affirmative vote of Technical Committee members.  In
the event that a Trust Participant holding a majority of the Trust Assets elects to sell
its Trust Assets, the other Trust Participants have tag along rights that will enable
them to sell their Trust Assets to the acquiror of the selling Trust Participants Trust
Assets.

Interest of
Management in Certain Transactions

We, along with certain
of our subsidiaries, engage in financial and insurance coverage transactions, including
the receipt of loans and credit line facilities, with subsidiaries of BBVA Bancomer, a
financial services holding company of which Ricardo Guajardo Touché, who is also a
director of FEMSA, is the chairman of the board of directors. These transactions include
the following: (i) BBVA Bancomer is the administrative agent and is one of the lenders in
a Ps. 1,478 million credit agreement entered into by FEMSA Comercio, and (ii) BBVA
Bancomer and its affiliates are also a lender under a term loan facility and a purchaser
of Mexican Certificados Bursátilesincurred by Coca-Cola FEMSA in connection with the
acquisition of Panamco. These loans were made in the ordinary course of business and on
the same terms as those prevailing at the time for comparable transactions with other
parties and did not involve more than the normal risk of collectibility or present other
unfavorable features.

We maintain an
insurance policy covering auto insurance and medical expenses for executives issued by
Grupo Nacional Provincial, S.A., an insurance company of which the chairman of the board
and chief executive officer is Alberto Bailleres, one of our directors.  The aggregate
amount of premiums paid under these policies in nominal Mexican pesos was approximately
Ps. 54.5 million in 2003.

We maintained
insurance covering life and medical expenses for executives issued by Seguros Monterrey
New York Life, S.A., an insurance company of which the vice-chairman of the board is
Federico Reyes, our Executive Vice President of Finance and Corporate Development.  The
aggregate amount of premiums paid under these policies was approximately Ps. 62.8
million.  In addition, we paid during 2003 premiums of approximately Ps. 29.6 million for
fidelity bonds issued by Fianzas Monterrey New York Life, S.A., a company for which
Federico Reyes is the chairman of its review board.

In 2003, FEMSA
Comercio in its ordinary course of business, purchased Ps. 584 million in products for
their stores from subsidiaries of Grupo Bimbo, of which the chief executive officer is
Roberto Servitje, a director of FEMSA.

José Antonio Fernández,
Eva Garza de Fernández, Ricardo Guajardo Touché and Lorenzo H. Zambrano, who are
directors of FEMSA, are also members of the board of directors of ITESM, which is a
prestigious university that routinely receives donations from FEMSA and its subsidiaries.

Beer Sales to
Labatt USA

FEMSA Cervezas
affiliate, Labatt USA, is the importer of FEMSA Cervezas brands in the United States.
 In 2003, exports through Labatt USA to the United States were approximately US $93
million.  See Item 4. Information on the CompanyFEMSA CervezaFEMSA Cerveza Export
Summary.

Business
Transactions between Coca-Cola FEMSA and The Coca-Cola Company

Coca-Cola FEMSA
regularly engages in transactions with The Coca-Cola Company and their affiliates.
Coca-Cola FEMSA and The Coca-Cola Company pay and reimburse each other for marketing
expenditures under a cooperative marketing arrangement. In each of 2003 and 2002, The
Coca-Cola Company contributed approximately 48% and 41%, respectively of Coca-Cola FEMSAs
marketing budget, which totaled approximately Mexican pesos 1,372 million and Mexican
pesos 522 million, respectively. In addition, The Coca-Cola Company has made payments to
Coca-Cola FEMSA in connection with cold-drink equipment investment and other volume
driving investment programs. In each of 2002 and 2001, The Coca-Cola Company also
contributed to Coca-Cola FEMSAs refrigerator equipment investment program. Coca-Cola
FEMSA purchases all of its concentrate requirements for Coca-Colatrademark beverages
from The Coca-Cola Company. Total payments by Coca-Cola FEMSA to The Coca-Cola Company
for concentrates were approximately Ps. 5,614 million and Ps. 2,725 million in 2003 and
2002, respectively.

Coca-Cola FEMSA de
Buenos Aires also purchased a portion of its plastic ingot requirements for producing
plastic bottles and all of our returnable bottle requirements from CIPET. CIPET is a
local subsidiary of Embotelladora Andina, a Coca-Colabottler with operations in
Argentina, Chile and Brazil in which The Coca-Cola Company has a substantial interest.

In connection with the
acquisition of Panamco, subsidiaries of The Coca-Cola Company made specified undertakings
to support and facilitate the Panamco acquisition for the benefit of Coca-Cola FEMSA.  In
consideration for these undertakings, Coca-Cola FEMSA made certain undertakings for the
benefit of The Coca-Cola Company and its subsidiaries, including indemnity obligations
with respect to specified matters relating to the accuracy of disclosure and the
compliance with applicable law by Coca-Cola FEMSAs board of directors and Panamcos
board of directors and undertakings to take specified actions and refrain from specified
others to facilitate the ability of The Coca-Cola Company to receive favorable tax
treatment in connection with its participation in the acquisition.  In connection with
the execution of the acquisition agreement for Panamco, The Coca-Cola Company and FEMSA
memorialized their understandings relating to specified operational and business issues
that may affect Coca-Cola FEMSA following completion of the acquisition. A summary of
these understandings is set forth under Item 10.  Additional InformationMaterial
ContractsThe Coca-Cola Memorandum.

ITEM 8.  FINANCIAL
INFORMATION

Table of Contents

Consolidated
Financial Statements

See pages F-1 through
F-53, incorporated herein by reference.

Table of Contents

Dividend Policy

For a discussion of
our dividend policy, see Item 3.  Key Information ̄Dividends and Item 10.  Additional
Information.

Table of Contents

Legal Proceedings

We are party to
various legal proceedings in the ordinary course of business.  Other than as disclosed in
this annual report, we are not currently involved in any litigation or arbitration
proceeding, including any proceeding that is pending or threatened of which we are aware,
which we believe will have, or has had, a material adverse effect on our company. Other
legal proceedings that are pending against or involve us and our subsidiaries are
incidental to the conduct of our and their business. We believe that the ultimate
disposition of such other proceedings individually or on an aggregate basis will not have
a material adverse effect on our consolidated financial condition or results of
operations.

FEMSA

Tax Matters.Due to
adjustments to consolidated asset taxes derived from increased shareholdings in
subsidiaries during 1998 and 1999, we calculated the asset tax receivable and filed for a
refund. The tax authorities rejected the refund request. The company obtained a
favorable decision during the amparoproceedings, the tax authorities have appealed the
decision, and the procedure is still ongoing. As of December 31, 2003, the receivable
amount was approximately Mexican pesos 218 million.

Coca-Cola FEMSA

Mexico

Tax Matters.During
2002, Coca-Cola FEMSA initiated an appeal related to the Impuesto Especial Sobre
Productos y Servicios(Special Tax on Products and Services) or IEPS applicable to
inventories produced with HFCS. Additionally, during 2003, Coca-Cola FEMSA included in
its appeal the IEPS applicable to carbonated soft drinks produced with non-sugar
sweetners. On November 21, 2003, Coca-Cola FEMSA obtained a favorable resolution for its
2002 claim and during 2004 expect to receive from the authorities the IEPS paid during
2002, including accrued interest. An appeal related to the IEPS paid in 2003 has also
been initiated, and Coca-Cola FEMSAs management and legal counsel believe that it is
highly probable that it will obtain another favorable resolution.

Antitrust Matters.During May 2000, the Comisión Federal de Competenciain Mexico (the Mexican Antitrust
Commission), pursuant to a complaint filed by PepsiCo and certain of its bottlers in
Mexico, initiated an investigation of the sales practices of The Coca-Cola Company and
its bottlers. In November 2000, in a preliminary decision and in February 2002, through
a final resolution, the Mexican Antitrust Commission determined that The Coca-Cola
Company and its bottlers engaged in monopolistic practices with respect to exclusivity
arrangements with certain retailers. The Mexican Antitrust Commission did not impose any
fines, but ordered The Coca-Cola Company and its bottlers, including certain Mexican
subsidiaries of the company, to abstain from entering into any exclusivity arrangement
with retailers. Coca-Cola FEMSA, along with other Coca-Colabottlers, appealed the
resolution rendered in February 2002 by a Recurso de Revisión(Review Recourse), which
was presented before the Mexican Antitrust Commission. The Mexican Antitrust Commission
confirmed its original resolution and issued a confirmatory resolution in July 2002.
Coca-Cola FEMSA and its Mexican operating subsidiaries appealed this resolution before
the competent courts by initiating several juicios de amparo, appeals based on the
violation of constitutional rights, and obtained favorable decisions. Under these
decisions, the resolution was declared null and void and the Mexican Antitrust Commission
was ordered to issue a new resolution amending its determination that The Coca-Cola
Company and its bottlers had engaged in monopolistic transactions.

In a different
proceeding, in 2003, Coca-Cola FEMSA, The Coca-Cola Company and certain other Coca-Colabottlers were requested by the Mexican Antitrust Commission to deliver certain
proprietary information pursuant to a new investigation initiated by the Mexican
Antitrust Commission. Coca-Cola FEMSA obtained injunctions against the orders from the
Mexican Antitrust Commission to deliver the requested information.

Central America

Antitrust Matters in
Costa Rica and Panama.During August 2001, the Comisión para Promover la Competenciain
Costa Rica (Costa Rican Antitrust Commission) pursuant to a complaint filed by PepsiCo
and its bottler in Costa Rica initiated an investigation of the sales practices of The
Coca-Cola Company and Coca-Cola FEMSAs Costa Rica subsidiary for alleged monopolistic
practices in the retail distribution channel, including sales gained through exclusivity
arrangements. Although no assurances can be given, we do not believe that the outcome of
this matter, even if determined against Coca-Cola FEMSA, will have a material adverse
effect on its financial condition or results of operations. Coca-Cola FEMSAs Costa Rica
subsidiary has vigorously defended itself throughout the process and is anticipating a
decision from the Costa Rican Antitrust Commission at any time.

During 2002, Refrescos
Nacionales, S.A., the Pepsi bottler in Panama, initiated a lawsuit against Coca-Cola FEMSAs
Panamanian operating subsidiary, based on alleged monopolistic practices in the retail
distribution channel through the implementation of exclusivity agreements, which
allegedly have caused significant financial and sales losses to the plaintiff.  Coca-Cola
FEMSA believes this lawsuit is without merit and intends to vigorously defend itself in
this matter.

Colombia

Labor Matters.During
July 2001, a labor union and several individuals from the Republic of Colombia filed a
lawsuit in the U.S. District Court for the Southern District of Florida against certain
subsidiaries of Coca-Cola FEMSA. In the complaint, the plaintiffs alleged that the
subsidiaries of Coca-Cola FEMSA acquired in the Panamco acquisition engaged in wrongful
acts against the labor union and its members in Colombia, including kidnapping, torture,
death threats and intimidation. The complaint alleges claims under the U.S. Alien Tort
Claims Act, Torture Victim Protection Act, Racketeer Influenced and Corrupt Organizations
Act and state tort law and seeks injunctive and declaratory relief and damages of more
than US$500 million, including treble and punitive damages and the cost of the suit,
including attorney fees. Coca-Cola FEMSA filed a motion to dismiss the complaint for
lack of subject matter and personal jurisdiction. Coca-Cola FEMSA expects a ruling on
the motion to dismiss at any time. Coca-Cola FEMSA believes this lawsuit is without
merit and intends to vigorously defend itself in this matter.

Venezuela

Tax Matters.In 1999,
Coca-Cola FEMSAs Venezuelan subsidiary received notice of certain tax claims asserted by
the Venezuelan taxing authorities. This subsidiary has taken the appropriate recourses
against these claims at the administrative level as well as at the court level. These
claims currently total approximately US$23 million. Coca-Cola FEMSA has certain rights
to indemnification from Venbottling Holding, Inc., a former shareholder of Panamco, and
The Coca-Cola Company for a substantial portion of such claims. Based on the analysis
that Coca-Cola FEMSA has completed in relation to these claims, as well as the defense
strategy that it has developed, Coca-Cola FEMSA does not believe that the ultimate
disposition of these cases will have a material adverse effect on its financial condition
or results of operations.

Labor and
distribution.Since 1999, a group of independent distributors of Coca-Cola FEMSAs
Venezuelan subsidiary commenced a proceeding to incorporate a union of distributors. As
a result, these distributors may, among other things, individually demand certain labor
and severance rights against this subsidiary. Since the incorporation process began,
Coca-Cola FEMSA has vigorously opposed its formation through all available legal
channels. In February 2000, Coca-Cola FEMSAs Venezuelan subsidiary presented a nullity
recourse against the union incorporation solicitation, as well as an injunction request
before the Venezuelan Supreme Court. On September 20, 2001, the Venezuelan Supreme Court
rendered its opinion confirming the incorporation of the union, but withheld granting any
specific labor rights to the members of the union other than the right to be unionized.
In order to obtain specific labor rights, the union, or its members, will have to
request and obtain from a court of law a determination that the members of such union are
considered workers pursuant to Venezuelan labor laws, and thereafter claim against
Coca-Cola FEMSAs Venezuelan subsidiary the payment of such benefits and rights including
retroactive payments. To Coca-Cola FEMSAs knowledge, neither the union nor any of its
individual members have initiated any process with the objective of obtaining such a
court decision, although certain members of the union have threatened such action.

Since 2001 (after two
decisions rendered during 2000 and 2001 by the Venezuelan Supreme Court against
affiliates of Empresas Polar, S.A., whereby the Supreme Court found in those individual
cases that the relationship between the affiliates of Empresas Polar, S.A. and those
specific distributors constituted a  labor  relationship rather than a commercial relationship)
Coca-Cola FEMSAs Venezuelan subsidiary has been the subject of numerous claims by former
distributors (including former members of the distributors union) claiming alleged labor
and severance rights owed to them at the time of the termination of their relationship
with us.  As of December 31, 2003, Coca-Cola FEMSAs Venezuelan subsidiary was the
subject of several lawsuits filed by former distributors for a total amount of
approximately US$31 million.  Notwithstanding the number of claims and the amounts
involved, most of these claims have been filed by former distributors that either have
entered into release agreements with Coca-Cola FEMSAs Venezuelan subsidiary at the time
of their termination, and therefore Coca-Cola FEMSA believes have no rights for
additional claims, or are claims that have been filed after the expiration of the statute
of limitations.  There are also lawsuits presented by people that have never had a
distributor or employee relationship with Coca-Cola FEMSA, which Coca-Cola FEMSA believes
have no merit.  Since the decisions rendered by the Supreme Court during 2000 and 2001
against the affiliates of Empresas Polar, S.A., the Supreme Court has, during 2002 and
2003, revised its criteria for determining a labor relationship vis-à-vis a commercial
relationship.  Coca-Cola FEMSA believes based on the new decisions rendered by the
Supreme Court, as well as based on the individual analysis of each individual claim, that
these claims are without merit and intends to vigorously defend themselves against them.

FEMSA Cerveza

Tax Matters.Tax
proceedings are pending in the Mexican tax courts related to exports to countries
considered to be tax havens under Mexican law in the amount of Ps. 67.6 million. FEMSA
Cerveza believes that the resolution of these claims will not have a material adverse
effect on its business.

Antitrust Matters.On
January 24, 2000, the Mexican Antitrust Commission notified FEMSA Cerveza that it was
reviewing the pricing practices of the Mexican beer industry and requested information as
a part of that review. On April 11, 2002, the Mexican Antitrust Commission issued a
final decision recognizing that FEMSA Cerveza had not engaged in any illegal behavior.
FEMSA Cerveza has agreed to inform the Mexican Antitrust Commission regarding its
pricing practices for the next three years. FEMSA Cerveza has delivered the relevant
information to the Mexican Antitrust Commission in accordance to this agreement.

On June 18, 2003, the
Mexican Antitrust Commission announced that it was launching a separate investigation
into the beer industry practice of tied-customer arrangements. FEMSA Cerveza received a
request for information from the Mexican Antitrust Commission. FEMSA Cerveza initiated
amparoproceedings challenging the legality of the Commissions actions. As of the date
of this annual report, the Mexican Antitrust Commission has not formally charged FEMSA
Cerveza of any illegal behavior and continues its investigation. FEMSA Cerveza cannot
give any assurances that any action taken as a result of this investigation will not
negatively affect them in the future.

Labatt USA Litigation.On March 3, 2004, Interbrew and AmBev announced a transaction that would affect the
ownership of the majority interest in the limited liabity company that owns Labatt USA.
Wisdom has commenced litigation in the United States District Court for the Southern
District of New York alleging, among other things, that the transaction involves a
transfer of membership or other ownership interests in the limited liability company that
owns Labatt USA, and that such a transfer cannot occur without the approval of Wisdom or
at least one of the Wisdom-appointed directors on the board of the limited liability
company. See Item 8. Financial InformationLegal ProceedingsFEMSA Cerveza. FEMSA
Cerveza found it necessary to take this legal action in order to preserve Wisdoms rights
as the holder of the minority interest in Labatt USA. In connection with the litigation,
Interbrew has agreed not to close prior to May 17, 2004 (i) any transfer to AmBev, or to
the company referred to as Mergeco in AmBevs Schedule 13D/A filed with the SEC on
March 8, 2004, of shares in Labatt or assets or businesses of Labatt, or (ii) the entry
by Labatt USA into a management agreement with Interbrew or any of its affiliates. In
the event the transaction announced by Interbrew and AmBev were to be consummated, we
believe the transaction would also involve a change of control, as that term is defined
in certain agreements governing our relationship with Labatt. See "Item 10. Additional
InformationMaterial ContractsFEMSA Cerveza."



Table of Contents

ITEM 9.  THE OFFER
AND LISTING

Table of Contents

Description of
Securities

Our capital stock
consists of Series B Shares with full voting rights and of Series D-B and D-L Shares with
limited voting rights.  Prior to May 11, 2008, the shares of our company are not
separable and may be transferred only in the following forms:

- B Units,
consisting of five Series B Shares; and

- BD Units,
consisting of one Series B Share, two Series D-B Shares and two Series D-L Shares.

On May 11, 2008, each
Series D-B Share will automatically convert into one Series B Share with full voting
rights, and each Series D-L Share will automatically convert into one Series L Share with
limited voting rights.  At that time, the BD Units and the B Units will cease to exist
and the underlying Series B Shares and Series L Shares will be separated.

The following table
sets forth information regarding our capital stock as of March 15, 2004:

|Class                            | Number        | Percentage of Capital | Percentage ofVoting(1)
|-------------------------------- | ------------- | --------------------- | ----------------------
|                                 |               |                       |                       
|Series B Shares (no par value)   | 2,737,740,090 | 51.68%                | 100.0%                
|Series D-B Shares (no par value) | 1,279,785,180 | 24.16                 | 0.0                   
|Series D-L Shares (no par value) | 1,279,785,180 | 24.16                 | 0.0                   
|                                 |               |                       |                       
|Total Shares                     | 5,297,310,450 | 100.0%                | 100.0%                
|                                 |               |                       |                       
|Units                           
|BD Units                         | 639,892,590   | 60.40%                | 23.37%                
|B Units                          | 419,569,500   | 39.60                 | 76.63                 
|                                 |               |                       |                       
|Total Units                      | 1,059,462,090 | 100.0%                | 100.0%                
|                                 |               |                       |                       

|__________________
|------------------
|(1)               

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Trading Markets

Prior to May 11, 1998,
there was no market for the BD Units, the B Units or any of our shares.  Since May 11,
1998, ADSs representing BD Units have been listed on the New York Stock Exchange, and the
BD Units and the B Units have been listed on the Mexican Stock Exchange.  Each ADS
represents ten BD Units deposited under the ADS Deposit Agreement with the ADS Depositary.

The New York Stock
Exchange trading symbol for the ADSs is FMX and the Mexican Stock Exchange trading
symbols are FEMSA UBD for the BD Units and FEMSA UB for the B Units.

Fluctuations in the
exchange rate between the Mexican peso and the U.S. dollar have affected the U.S. dollar
equivalent of the Mexican peso price of our shares on the Mexican Stock Exchange and,
consequently, have also affected the market price of our ADSs.  See Item 3. Key
InformationExchange Rate InformationMexican Peso.

Table of Contents

Trading on the
Mexican Stock Exchange

The Mexican Stock
Exchange, located in Mexico City, is the only stock exchange in Mexico.  Founded in 1907,
it is organized as a corporation, the shares of which are held by 30 brokerage firms,
that are exclusively authorized to trade on the exchange.  Trading on the Mexican Stock
Exchange takes place principally through automated systems and is open between the hours
of 8:30 a.m. and 3:00 p.m. Mexico City time, each business day.  Trades in securities
listed on the Mexican Stock Exchange can also be effected off the exchange.  The Mexican
Stock Exchange operates a system of automatic suspension of trading in shares of a
particular issuer as a means of controlling excessive price volatility, but under current
regulations this system does not apply to securities such as the BD Units that are
directly or indirectly (for example, through ADSs) quoted on a stock exchange (including
for these purposes the New York Stock Exchange) outside Mexico.

Settlement is effected
two business days after a share transaction on the Mexican Stock Exchange. Deferred
settlement, even by mutual agreement, is not permitted without the approval of the Comisión
Nacional Bancaria y de Valores(the Mexican National Banking and Securities Commission).
Most securities traded on the Mexican Stock Exchange, including ours, are on deposit
with S.D. Indeval, S.A. de C.V., Instituto para el Depósito de Valores, a privately owned
securities depositary that acts as a clearinghouse for Mexican Stock Exchange
transactions.

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Price History

The table below sets
forth, for the periods indicated, the reported high and low sale prices for the BD Units
and B Units on the Mexican Stock Exchange and the reported high and low sale prices for
the ADSs on the New York Stock Exchange.  Prices for the BD Units are presented from 1999
to March 23, 2004 based on data provided by the Mexican Stock Exchange.  Prices for the B
Units and the ADSs from 1999 to March 23, 2004 have been presented based on information
from the Mexican Stock Exchange and the New York Stock Exchange.

|               | BD Units(1)  
|-------------- | -------------
|               |              
|               | Nominal Pesos
|               |              
|               | High         
|               |              
|1999           | 42.60        
|2000           | 50.50        
|2001           | 41.60        
|2002          
|First Quarter  | 42.50        
|Second Quarter | 46.50        
|Third Quarter  | 41.34        
|Fourth Quarter | 39.50        
|2003          
|First Quarter  | 38.45        
|Second Quarter | 45.10        
|Third Quarter  | 43.60        
|Fourth Quarter | 43.00        
|September      | 42.00        
|October        | 43.00        
|November       | 41.49        
|December       | 41.48        
|2004          
|January        | 47.00        
|February       | 50.71        
|March(3)       | 55.50        

|__________________
|------------------
|(1)               
|(2)               
|(3)               

|               | B Units(1)   
|-------------- | -------------
|               |              
|               | Nominal Pesos
|               |              
|               | High         
|               |              
|1999           | 37.00        
|2000           | 45.00        
|2001           | 45.00        
|2002          
|First Quarter  | 39.00        
|Second Quarter | 40.00        
|Third Quarter  | 39.44        
|Fourth Quarter | 37.50        
|2003          
|First Quarter  | 36.90        
|Second Quarter | 40.90        
|Third Quarter  | 40.90        
|Fourth Quarter | 40.00        
|September      | 40.56        
|October        | 40.00        
|November       | 38.50        
|December       | 39.50        
|2004          
|January        | 42.00        
|February       | 45.00        
|March(3)       | 49.00        

|__________________
|------------------
|(1)               
|(2)               
|(3)               

|               | ADSs(1)     
|-------------- | ------------
|               |             
|               | U.S. dollars
|               |             
|               | High        
|               |             
|1999           | 44.87       
|2000           | 54.62       
|2001           | 45.49       
|2002          
|First Quarter  | 47.30       
|Second Quarter | 49.79       
|Third Quarter  | 42.23       
|Fourth Quarter | 39.69       
|2003          
|First Quarter  | 36.93       
|Second Quarter | 42.69       
|Third Quarter  | 41.40       
|Fourth Quarter | 38.74       
|September      | 38.76       
|October        | 38.74       
|November       | 37.24       
|December       | 36.92       
|2004          
|January        | 43.23       
|February       | 45.57       
|March(2)       | 50.76       

|__________________
|------------------
|(1)               
|(2)               

Table of Contents

ITEM 10. ADDITIONAL
INFORMATION

Table of Contents

Bylaws

Below is a brief
summary of certain significant provisions of our bylaws and applicable Mexican law.  This
description does not purport to be complete and is qualified in its entirety by reference
to our bylaws and the provisions of applicable Mexican law.  For a description of the
provisions of our bylaws relating to the board of directors, executive committee and
statutory examiners, See Item 6.  Directors, Senior Management and Employees.

Table of Contents

Organization and
Register

We are a sociedad anónima
de capital variableorganized in Mexico under the Ley General de Sociedades Mercantiles(the Mexican General Corporations Law). We were incorporated in 1936 under the name
Valores Industriales, S.A., as a sociedad anónimaand are currently named Fomento Económico
Mexicano, S.A. de C.V. We were registered in the Public Registry of Commerce of
Monterrey, Nuevo León on May 30, 1936 under the mercantile number 16, page 168, volume
79, third book, second auxiliary of the Registry.

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Voting Rights and
Certain Minority Rights

Each Series B Share
entitles its holder to one vote at any of our ordinary or extraordinary general
shareholders meetings.  The bylaws state that the board of directors must comprise at
least sixteen members.  Holders of Series B Shares are entitled to elect at least eleven
members of our board of directors, which shall constitute the majority (51%) of the board
at all times.  Holders of Series D-B and D-L Shares are entitled to elect five members of
our board of directors and, upon conversion of the Series D-L Shares to Series L Shares
or upon issuance of Series L Shares, the holders of Series L Shares will be entitled to
elect two members of the board of directors.  Under Mexican law, a minority shareholder
or group of shareholders voting in concert has the right to elect one director and, if
generally elected, one alternate director for each 10% of the capital stock of the
company owned by such minority holder or group.  None of our shares have cumulative
voting rights.

Under our bylaws, the
holders of Series D and L Shares are entitled to vote at extraordinary shareholders meetings
only on the following limited matters:  (i) transformation of the company, but not
transformation from a company with variable capital stock to a company without variable
capital stock or vice versa, (ii) any merger in which we are not the surviving entity, or
mergers with other entities whose principal corporate purposes are different from those
of our company or our subsidiaries, (iii) change of nationality, (iv) dissolution and
liquidation and (v) the cancellation of the registration of the Series L Shares or Series
D Shares in the Mexican Stock Exchange or in any other foreign stock markets where
listed, except in the case of conversion of these shares as provided for in the bylaws.

Under Mexican law,
holders of shares of any series are entitled to vote as a class in a special meeting
governed by the same rules that apply to extraordinary meetings on any action that would
impair the rights of holders of shares of such series, and a holder of shares of such
series would be entitled to judicial relief against any action taken without such a vote.
 In certain cases, the board of directors, the statutory examiner or a Mexican court
could call a special meeting.  A negative determination would be subject to judicial
challenge by an affected shareholder, and the necessity of a class vote would ultimately
be determined by a court.  There are no procedures for determining whether a particular
proposed shareholder action requires a class vote, and Mexican law does not provide
extensive guidance on the criteria to be applied in making such a determination.

Subject to the terms
of the ADS Deposit Agreement, holders of ADSs may instruct the ADS Depositary with
respect to voting the FEMSA shares comprising the BD Units underlying their ADSs.

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Shareholder Meetings

General shareholders
meetings may be ordinary meetings or extraordinary meetings.  Extraordinary meetings are
those called to consider certain matters specified in Article 182 of the Mexican
Corporations Law and our bylaws.  Such matters include:  amendments to the bylaws,
liquidation, dissolution, merger and transformation from one form of company to another,
issuance of preferred stock debentures and increases and reductions of the fixed portion
of the capital.  General meetings called to consider all other matters are ordinary
meetings.  An ordinary meeting must be held at least once each year within the first four
months following the end of the preceding fiscal year to (i) consider the approval of the
financial statements of FEMSA and certain of our subsidiaries for the preceding fiscal
year, (ii) to appoint, remove, ratify or elect directors and statutory examiners and
(iii) to determine their compensation and to determine the allocation of profits and
losses of the preceding year.  Generally, as a matter of Mexican law, holders of
securities of limited voting rights are not entitled to attend shareholders meetings at
which they are not entitled to vote.  Holders of BD Units or B Units are entitled to
attend all shareholders meetings (by virtue of the Series B Shares and Series D Shares
included in the BD Units or B Units) and vote on matters that are subject to the vote of
holders of the underlying shares.

The quorum for an
ordinary shareholders meeting of the Series B Shares on first call is more than 50% of
the Series B Shares, and action may be taken by a majority of the Series B Shares
represented at the meeting.  If a quorum is not available, a second or subsequent meeting
may be called and held by whatever number of Series B Shares are present, at which
meeting action may be taken by a majority of the Series B Shares present.

The quorum for an
extraordinary shareholders meeting is at least 75% of the Series B Shares entitled to
vote at the meeting, and action may be taken by a vote of the majority of the outstanding
shares that are entitled to vote.  If a quorum is not available, a second meeting may be
called, at which the quorum will be the majority of the outstanding capital stock
entitled to vote, and actions will be taken by holders of the majority of the outstanding
capital stock entitled to vote.

Under Mexican law,
holders of 20% of our outstanding shares entitled to vote on a particular item may
judicially oppose resolutions adopted at a shareholders meeting if the following
conditions are met:  (i) such holders file a complaint with a Mexican court within 15
days after the adjournment of the meeting at which such action was taken, (ii) such
holders complaint details the provisions of the Mexican law or the bylaws that are
violated, and the reason for their claim and (iii) such holders were not represented at
the meeting when the action was taken or, if represented, voted against such action.

Shareholders meetings
may be called by the board of directors, the statutory examiner and, under certain
circumstances, a Mexican court. In addition, an ordinary meeting may be called by any
holder of Series B Shares if an ordinary shareholders meeting has not been held within
the preceding two fiscal years or if any action required under Mexican law to be taken at
any ordinary shareholders meeting is not taken. The board of directors or the statutory
examiner may be required to call a shareholders meeting at the written request of the
holders of 10% of the outstanding shares. In the event this meeting is not called within
15 days following the date of the request, a Mexican court may require a meeting to be
called. A notice of meeting and an agenda must be published in the Periódico Oficial del
Estado de Nuevo León(the Official State Gazette) or a newspaper of general circulation
in Monterrey, N.L., Mexico at least 15 days prior to the date set for the meeting. To
attend a meeting, shareholders must deposit their shares with the company or with an
institution for the deposit of securities prior to the meeting as indicated in the
notice. If entitled to attend a meeting, a shareholder may be represented by an
attorney-in-fact.

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Dividend Rights

At the annual ordinary
general shareholders meeting, the board of directors submits the financial statements of
the company for the previous fiscal year, together with a report thereon by the board of
directors and the report of the statutory examiner.  Once the holders of Series B Shares
have approved the financial statements, they determine the allocation of our net profits
for the preceding year.  Mexican law requires the allocation of at least 5% of net
profits to a legal reserve, which is not subsequently available for distribution, until
the amount of the legal reserve equals 20% of our capital stock. Thereafter, the holders
of Series B Shares may determine and allocate a certain percentage of net profits to any
general or special reserve, including a reserve for open-market purchases of our shares.
 The remainder of net profits is available for distribution in the form of dividends to
the shareholders.

Amounts allocated as
dividends will be paid to the holders of capital stock of FEMSA in the following manner.
 Our bylaws provide that, before May 11, 2008, dividends will be allocated among the
shares outstanding and fully paid at the time a dividend is declared in such manner that
each Series D-B Share and Series D-L Share receives 125% of the dividend distributed in
respect of each Series B Share.  Holders of Series D-B Shares and Series D-L Shares are
entitled to this dividend premium in connection with all dividends paid by us other than
payments in connection with the liquidation of our company.  On May 11, 2008, the Series D-B
Shares will automatically convert into Series B Shares and the Series D-L Shares will
automatically convert into Series L Shares, which will not be entitled to a dividend
premium.  From and after May 11, 2008, the Series L Shares and Series B Shares that are
outstanding and fully paid at the time a dividend is declared will be entitled to share
equally in the dividend.

Table of Contents

Change in Capital
and Withdrawal Rights

Our outstanding
capital stock consists of both a fixed and a variable portion.  The fixed portion of our
capital stock may be increased or decreased only by an amendment of the bylaws adopted by
a resolution of the holders of the Series B Shares at an extraordinary shareholders
meeting or, in the case of a reduction of capital represented by the Series D-B, Series
D-L or Series L Shares, a resolution of the holders of Series D-B, Series D-L or Series L
Shares, as the case may be, at a special meeting of the holders of Series D-B, Series D-L
or Series L Shares, as the case may be.  The variable portion of our capital stock may be
increased or decreased by resolution of an ordinary shareholders meeting.  Capital
increases and decreases must be recorded in our stock registry book and book of capital
variations, if applicable.

A capital stock
increase may be effected through the issuance of new shares for payment in cash or in
kind, or by capitalization of indebtedness or of certain items of shareholders equity.

Under our bylaws and
the Mexican National Banking and Securities Commission regulations, variable capital may
not be greater than ten times the minimum fixed portion of the capital stock specified in
our bylaws.  The fixed portion of our capital stock cannot be withdrawn.

The outstanding
variable portion of our capital stock may be fully or partially withdrawn by the
shareholders.  Shareholders wishing to effect a total or partial withdrawal of the
variable portion of their shares must notify us through an authenticated written notice
to that effect.  If the notice of withdrawal is received prior to the last quarter of the
fiscal year, the withdrawal becomes effective at the end of the fiscal year in which the
notice is given.  Otherwise, the withdrawal becomes effective at the end of the following
fiscal year.  Upon an election by shareholders to withdraw their variable capital as
described above, our share capital will be reduced.

Reimbursement of
withdrawn shares is made at the lower of:  (i) 95% of the average price per share quoted
on the Mexican Stock Exchange during the 30 business days prior to the date on which the
withdrawal becomes effective, and (ii) the book value per share as calculated from the
companys financial statements (as approved at the annual ordinary general shareholders
meeting) for the fiscal year at the end of which the withdrawal becomes effective.
Shareholders exercising their withdrawal rights can request reimbursement by us on the
day following the ordinary shareholders meeting at which the financial statements
referred to above are approved.

Because the fixed
capital cannot be withdrawn, requests for withdrawals are satisfied only to the extent of
the available variable capital and in the order in which they are received; requests that
are received simultaneously are fulfilled pro rata to the extent of the available
variable capital.

Any increase or
decrease in our capital stock or any redemption or repurchase will be subject to the
following limitations:  (i) the Series B Shares will always represent at least 51% of the
outstanding shares of capital stock and the Series D-L Shares and Series L Shares will
never represent more than 25% of the outstanding shares of capital stock, (ii) before May
11, 2008, the Series D-B, Series D-L and Series L Shares will not exceed in the aggregate
49% of our capital stock and (iii) from and after May 11, 2008, no Series D Shares will
be outstanding, the Series L Shares will represent up to 25% of the capital stock and the
Series B Shares will represent at least 75% of the capital stock.

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Preemptive Rights

Except in limited
circumstances under Mexican law, in the event of a capital increase, a holder of existing
shares of a given series generally has a preferential right to subscribe to shares of the
same series sufficient to maintain the holders existing proportionate holding of shares
of that series. Preemptive rights must be exercised during a term fixed by the
shareholders at the meeting declaring the capital increase, which term must last at least
15 days following the publication of notice of the capital increase in the Official State
Gazette.  As a result of applicable United States securities laws, holders of ADSs may be
restricted in their ability to participate in the exercise of preemptive rights under the
terms of the ADS Deposit Agreement.  Shares designated for issuance pursuant to a
preemptive rights offering, with respect to which preemptive rights have not been
exercised, may be sold by us to third parties on the same terms and conditions previously
approved by the shareholders or the board of directors.

Article 81 of the Ley
de Mercado de Valores(the Mexican Securities Market Law) permits the issuance and sale
of shares through a public offering without granting shareholders preemptive rights, if
permitted by the bylaws and upon, among other things, express authorization of the
Mexican National Banking and Securities Commission and the approval of the extraordinary
shareholders meeting called for such purpose. Our bylaws permit the issuance and sale of
shares in a public offering in accordance with Article 81 of the Mexican Securities
Market Law. Such offer may not take place if shareholders representing 25% or more of
the Series B Shares vote against such issuance. Any shareholder that votes against such
issuance has the right to demand that we sell such shareholders shares to the public at
the same price at which the newly issued shares are to be sold.

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Limitations on Share
Ownership

Ownership by
non-Mexican nationals of shares of Mexican enterprises is regulated by the 1993 Ley de
Inversión Extranjera(the Foreign Investment Law) and its regulations. The Comisión
Nacional de Inversión Extranjera(the National Commission on Foreign Investment or the
Foreign Investment Commission) is responsible for the administration of the Foreign
Investment Law and its regulations.

As a general rule, the
Foreign Investment Law allows foreign holdings of up to 100% of the capital stock of
Mexican companies except for those engaged in certain specified restricted industries.
 The Foreign Investment Law and its regulations require that Mexican shareholders retain
the power to determine the administrative control and the management of corporations in
industries in which special restrictions on foreign holdings are applicable. Foreign
investment in our shares is not limited under either the Foreign Investment Law or its
Regulations.

Table of Contents

Other Provisions

Redemption.We may
redeem part of our shares for cancellation with retained earnings pursuant to a decision
of an extraordinary shareholders meeting. Only shares subscribed and fully paid for may
be redeemed. Any shares intended to be redeemed shall be purchased on the Mexican Stock
Exchange in accordance with the Mexican Corporations Law and the Mexican Securities
Market Law. No shares will be redeemed, if as a consequence of such redemption, the
Series D-B, Series D-L and Series L Shares in the aggregate exceed the percentages
permitted by the bylaws or if any such redemption will reduce fixed capital below its
minimum.

Repurchase of shares.We may repurchase shares of our capital stock on the Mexican Stock Exchange at
prevailing market prices. Any such repurchase must be approved by the board of
directors. The repurchased shares must be paid for with the proceeds of a special
reserve account created for the repurchase of shares. Our capital stock would be reduced
automatically in an amount equal to the value of each repurchased share; in the event
that the purchase price of such shares exceeded the par value, the difference would be
paid for with amounts allocated from the special reserve mentioned above. An ordinary
shareholders meeting must approve the maximum amount of paid-in capital that may be
affected as a result of the repurchase. We will hold any repurchased shares as treasury
stock pending future sales thereof; any such sale could only be effected on the Mexican
Stock Exchange. Our capital stock will be automatically increased upon the resale of
such shares in an amount equal to their par value; any excess amounts will be allocated
to the special reserve referred to above. The economic and voting rights corresponding
to repurchased shares may not be exercised and such shares will not be deemed outstanding
for purposes of calculating any quorum or vote at any shareholders meeting while such
shares constitute treasury stock.

Pursuant to judicial
adjudication, we may acquire the shares of a shareholder in satisfaction of a debt owed
by such shareholder to us, and we must resell any shares so acquired within three months
or our capital stock will be reduced and those shares will be canceled.

Forfeiture of shares.As required by Mexican law, the bylaws provide that non-Mexican holders of FEMSA shares,
BD Units and B Units (i) are considered as Mexican with respect to such shares that they
acquire or hold and (ii) may not invoke the protection of their own governments in
respect of the investment represented by those shares. Failure to comply with the bylaws
may result in a penalty of forfeiture of a shareholders capital interests in favor of
the Mexican state. In the opinion of Lic. Carlos Aldrete, General Counsel of FEMSA,
under this provision, a non-Mexican shareholder (including a non-Mexican holder of ADSs)
is deemed to have agreed not to invoke the protection of its own government by asking
such government to interpose a diplomatic claim against the Mexican state with respect to
its rights as a shareholder, but is not deemed to have waived any other rights it may
have, including any rights under the United States securities laws, with respect to its
investment in our company. If a shareholder should invoke governmental protection in
violation of this agreement, its shares could be forfeited to the Mexican state.

Duration.The bylaws
provide that the duration of our company is 99 years, commencing on May 30, 1936.

Conflict of interest.Any shareholder or director that has a conflict of interest with respect to a
transaction of our company is required to abstain from voting with respect to such
transaction at the relevant shareholders meeting. A shareholder that votes on a business
transaction in which its interests conflict with those of our company may be liable for
damages, but only if the transaction would not have been approved without its vote.

Under Mexican law, any
director who has a conflict of interest with FEMSA in any transaction must disclose such
fact to the other directors and abstain from voting. Any director who violates such
provisions will be liable for damages. Additionally, our directors and statutory
examiners may not represent shareholders in the shareholder meetings.
Appraisal
rights.Whenever the shareholders approve a change of corporate purpose, change of
nationality or transformation from one corporate form to another of FEMSA, any
shareholder entitled to vote on such change that has voted against it, may withdraw from
FEMSA and redeem its shares receiving the amount calculated as specified under Mexican
law attributable to its shares, provided that it exercises its right within 15 days
following the adjournment of the meeting at which the change was approved. Under Mexican
law, the amount which a withdrawing shareholder is entitled to receive is equal to its
proportionate interest in our capital stock or reimbursement according to our most recent
balance sheet approved by an ordinary general shareholders meeting.

Obligation of Majority
Shareholders.In accordance with the Mexican Securities Market Law, persons deemed to
control us, including our principal shareholders, will be required to make a public offer
to repurchase any shares held by public minority shareholders in the event either we or
the Mexican National Banking and Securities Commission cancels the listing of such shares
with the Mexican Stock Exchange. Mexican law provides that any such repurchase will be
made at the higher of the (i) average market price during the preceding 30 days or (ii)
book value, as reflected in the last quarterly report filed with the Mexican National
Banking and Securities Commission.

Liquidation.Upon
dissolution of FEMSA, one or more liquidators must be appointed by an extraordinary
general meeting of the shareholders to wind up its affairs. All fully paid and
outstanding shares of capital stock will be entitled to participate equally in any
distribution upon liquidation.

Actions Against
Directors.Action for civil liabilities against directors may be initiated by resolution
of an ordinary shareholders meeting. In the event the ordinary shareholders meeting
decides to bring such action, the directors against whom such action is to be brought
will immediately cease to be directors. Additionally, shareholders representing not less
than 15% of the outstanding shares may directly exercise such action against the
directors, provided that (i) such shareholders shall not have voted against taking such
action at the relevant shareholders meeting, and (ii) the claim covers all the damages
alleged to have been caused to FEMSA and not only the portion corresponding to such
shareholders. Any recovery of damages with respect to such action will be for the
benefit of FEMSA.

Limited Liability.Shareholders liability for FEMSAs losses are limited to their shareholdings in our
company.

Table of Contents

Taxation

The following summary
contains a description of certain U.S. federal income and Mexican federal tax
consequences of the purchase, ownership and disposition of our ADSs by a holder that is a
citizen or resident of the United States, a U.S. domestic corporation or a person or
entity that otherwise will be subject to U.S. federal income tax on a net income basis in
respect of our ADSs, who we refer to as a U.S. holder, but it does not purport to be a
description of all of the possible tax considerations that may be relevant to a decision
to purchase ADSs.  In particular, this discussion does not address all Mexican or U.S.
federal income tax considerations that may be relevant to a particular investor, nor does
it address the special tax rules applicable to certain categories of investors, such as
banks, dealers, traders who elect to mark to market, tax-exempt entities, insurance
companies, investors who hold our ADSs as part of a hedge, straddle, conversion or
integrated transaction or investors who have a functional currency other than the U.S.
dollar.  This summary deals only with U.S. holders that will hold our ADSs as capital
assets, but does not address the tax treatment of a U.S. holder that owns or is treated
as owning 10% or more of the voting shares (including ADSs) of the company.

This summary is based
upon tax laws of the United States and Mexico as in effect on the date of this annual
report, including the provisions of the income tax treaty between the United States and
Mexico which we refer to as the Tax Treaty, which are subject to change.  The summary
does not address any tax consequences under the laws of any state or locality of Mexico
or the United States or the laws of any taxing jurisdiction other than the federal laws
of Mexico and the United States.  Holders of our ADSs should consult their tax advisors
as to the U.S., Mexican or other tax consequences of the purchase, ownership and
disposition of ADSs, including, in particular, the effect of any foreign, state or local
tax laws.

Mexican Taxation

For purposes of this
summary, the term non-resident holder means a holder that is not a resident of Mexico
and that does not hold our ADSs in connection with the conduct of a trade or business
through a permanent establishment or fixed base in Mexico. For purposes of Mexican
taxation, an individual is a resident of Mexico if he or she has established his or her
home in Mexico, or if he or she has another home outside Mexico, but his or her Centro de
Intereses Vitales(Center of Vital Interests) (as defined in the Mexican Tax Code) is
located in Mexico. A legal entity is a resident of Mexico either if it is organized
under the laws of Mexico or if it has its principal place of business or its place of
effective management in Mexico. A Mexican citizen is presumed to be a resident of Mexico
unless he or she can demonstrate that the contrary is true. If a legal entity or an
individual is deemed to have a permanent establishment in Mexico for tax purposes, all
income attributable to the permanent establishment will be subject to Mexican taxes, in
accordance with applicable tax laws.

Taxation of Dividends.Under Mexican income tax law, dividends, either in cash or in kind, paid with respect to
our shares represented by our ADSs are not subject to Mexican withholding tax.

Taxation of
Dispositions of ADSs.Gains from the sale or disposition of ADSs by non-resident holders
will not be subject to Mexican withholding tax, if the disposition is carried out through
an established stock exchange.

Gains on the sale or
other disposition of ADSs made in other circumstances generally would be subject to
Mexican tax, regardless of the nationality or residence of the transferor.  However,
under the Tax Treaty, a holder that is eligible to claim the benefits of the Tax Treaty
will be exempt from Mexican tax on gains realized on a sale or other disposition of our
ADSs in a transaction that is not carried out through the Mexican Stock Exchange or other
approved securities markets, so long as the holder did not own, directly or indirectly,
25% or more of our total capital stock (including shares represented by our ADSs) within
the 12-month period preceding such sale or other disposition.  Deposits of shares in
exchange for ADSs and withdrawals of shares in exchange for our ADSs will not give rise
to Mexican tax.

Other Mexican Taxes.There are no Mexican inheritance, gift, succession or value added taxes applicable to
the ownership, transfer, exchange or disposition of our ADSs. There are no Mexican
stamp, issue, registration or similar taxes or duties payable by holders of our ADSs.

United States
Taxation

Taxation of Dividends.The gross amount of any dividends paid with respect to our shares represented by our
ADSs generally will be included in the gross income of a U.S. holder as ordinary income
on the day on which the dividends are received by the ADS Depositary and will not be
eligible for the dividends received deduction allowed to corporations under the Internal
Revenue Code of 1986, as amended. Dividends, which will be paid in Mexican pesos, will
be includible in the income of a U.S. holder in a U.S. dollar amount calculated, in
general, by reference to the exchange rate in effect on the date that they are received
by the ADS Depositary (regardless of whether such Mexican pesos are in fact converted
into U.S. dollars on such date). If such dividends are converted into U.S. dollars on
the date of receipt, a U.S. holder generally should not be required to recognize foreign
currency gain or loss in respect of the dividends. U.S. holders should consult their tax
advisors regarding the treatment of the foreign currency gain or loss, if any, on any
Mexican pesos received that are converted into U.S. dollars on a date subsequent to the
date of receipt. Subject to certain exceptions for short-term and hedged positions, the
U.S. dollar amount of dividends received by an individual U.S. holder in respect of the
ADSs after December 31, 2002 and before January 1, 2009 is subject to taxation at a
maximum rate of 15%. U.S. holders should consult their own tax advisors regarding the
availability of the reduced dividends tax rate in light of their own particular
circumstances. Dividends generally will constitute foreign source passive income or,
in the case of certain U.S. holders, financial services income for U.S. foreign tax
credit purposes.

Distributions to
holders of additional shares with respect to our ADSs that are made as part of a pro rata
distribution to all of our shareholders generally will not be subject to U.S. federal
income tax.

A holder of ADSs that
is, with respect to the United States, a foreign corporation or non-U.S. holder generally
will not be subject to U.S. federal income or withholding tax on dividends received on
ADSs, unless such income is effectively connected with the conduct by the non-U.S. holder
of a trade or business in the United States.

Taxation of Capital
Gains.A gain or loss realized by a U.S. holder on the sale or other disposition of ADSs
will be subject to U.S. federal income taxation as a capital gain or loss in an amount
equal to the difference between the amount realized on the disposition and such U.S.
holders tax basis in the ADSs. Any such gain or loss will be a long-term capital gain
or loss if the ADSs were held for more than one year on the date of such sale. Any
long-term capital gain recognized by a U.S. holder that is an individual is subject to
lower rates of federal income taxation than ordinary income or short-term capital gains.
The deduction of capital losses is subject to limitations for U.S. federal income tax
purposes. Deposits and withdrawals of shares by U.S. holders in exchange for ADSs will
not result in the realization of gains or losses for U.S. federal income tax purposes.

Any gain realized by a
U.S. holder on the sale or other disposition of ADSs will be treated as U.S. source
income for U.S. foreign tax credit purposes.

A non-U.S. holder of
ADSs will not be subject to U.S. federal income or withholding tax on any gain realized
on the sale of ADSs, unless (i) such gain is effectively connected with the conduct by
the non-U.S. holder of a trade or business in the United States, or (ii) in the case of a
gain realized by an individual non-U.S. holder, the non-U.S. holder is present in the
United States for 183 days or more in the taxable year of the sale and certain other
conditions are met.

United States BackupWithholding and Information Reporting. A U.S. holder of ADSs may, under certain
circumstances, be subject to backup withholding with respect to certain payments to
such U.S. holder, such as dividends, interest or the proceeds of a sale or disposition of
ADSs, unless such holder (i) is a corporation or comes within certain exempt categories,
and demonstrates this fact when so required, or (ii) provides a correct taxpayer
identification number, certifies that it is not subject to backup withholding and
otherwise complies with applicable requirements of the backup withholding rules. Any
amount withheld under these rules does not constitute a separate tax and will be
creditable against the holders U.S. federal income tax liability. While non-U.S.
holders generally are exempt from backup withholding, a non-U.S. holder may, in certain
circumstances, be required to comply with certain information and identification
procedures in order to prove this exemption.

Table of Contents

Material Contracts

We and our
subsidiaries are parties to a variety of material agreements with third parties,
including shareholders agreements, supply agreements and purchase and service
agreements.  Set forth below are summaries of such agreements.  Because this is a
summary, readers should not rely on these summaries in lieu of reading the actual
agreements, which we have either filed or incorporated by reference in this annual
report.  See Item 19.  Exhibits.

Coca-Cola FEMSA

Shareholders
Agreement

In connection with the
initial subscription by a subsidiary of The Coca-Cola Company of Coca-Cola FEMSAs
capital stock, FEMSA and The Coca-Cola Company agreed that Coca-Cola FEMSA would be
managed as a joint venture.  Accordingly, in June of 1993, a subsidiary of ours and a
subsidiary of The Coca-Cola Company entered into a shareholders agreement, which,
together with Coca-Cola FEMSAs bylaws, set forth the basic rules under which Coca-Cola
FEMSA operates.  This agreement has been subsequently amended to reflect changes in the
subsidiaries through which FEMSA and The Coca-Cola Company hold their shares of Coca-Cola
FEMSA.

The shareholders
agreement contemplates that Coca-Cola FEMSA will be managed in accordance with one-year
and five-year business plans, although in practice, it is now managed according to a
three-year plan.

Under Coca-Cola FEMSAs
bylaws, its Series A Shares and Series D Shares are the only shares with full voting
rights and, therefore, control actions by its shareholders and board of directors.  The
holders of Series A Shares and Series D Shares have the power to determine the outcome of
all actions requiring approval by its board of directors and, except in certain limited
situations, all actions requiring approval of the shareholders.  For actions by its board
of directors, a supermajority including the directors appointed by the holders of Series
D Shares is required for all actions.  For shareholder actions, a majority of the shares
represented at the shareholder meeting must vote in favor, whereas to amend the voting or
quorum rights set out in Coca-Cola FEMSAs bylaws, a supermajority of at least 95% of
those voting and not abstaining, must vote in favor.

The shareholders
agreement sets forth the principal shareholders understanding as to the effect of
adverse actions of The Coca-Cola Company under the bottler agreements.  Coca-Cola FEMSAs
bylaws provide that a majority of the directors appointed by the holders of Series A
Shares, upon making a reasonable, good faith determination that any action of The
Coca-Cola Company under any bottler agreement between The Coca-Cola Company and Coca-Cola
FEMSA or any of its subsidiaries is materially adverse to Coca-Cola FEMSAs business
interests and that The Coca-Cola Company has failed to cure such action within 60 days of
notice, may declare a simple majority period at any time within 90 days after giving
notice.  During the simple majority period certain decisions, namely the approval of
material changes in Coca-Cola FEMSAs business plans, the introduction of a new, or
termination of an existing, line of business, and related party transactions outside the
ordinary course of business, which would ordinarily require the presence and approval of
at least two Series D directors, can be made by a simple majority vote of its entire
board of directors, without requiring the presence or approval of any Series D director.
 A majority of the Series A directors may terminate a simple majority period but, once
having done so, cannot declare another simple majority period for one year after the
termination.  If a simple majority period persists for one year or more, the provisions
of the shareholders agreement for resolution of irreconcilable differences may be
triggered, with the consequences outlined in the following paragraph.

In addition to the
rights of first refusal provided for in Coca-Cola FEMSAs bylaws regarding proposed
transfers of Series A Shares or Series D Shares, the shareholders agreement contemplates
three circumstances under which one principal shareholder may purchase the interest of
the other in Coca-Cola FEMSA:  (i) a change in control in a principal shareholder; (ii) the
existence of irreconcilable differences between the principal shareholders; or (iii) the
occurrence of certain specified defaults.

In the event that (i) one
of the principal shareholders buys the others interest in Coca-Cola FEMSA in any of the
circumstances described above or (ii) the ownership of Coca-Cola FEMSAs shares of
capital stock other than the Series L Shares of the subsidiaries of The Coca-Cola Company
or FEMSA is reduced below 20% and upon the request of the shareholder whose interest is
not so reduced, the shareholders agreement requires that our bylaws be amended to
eliminate all share transfer restrictions and all super-majority voting and quorum
requirements, after which the shareholders agreement would terminate.  In the event that
the ownership of Coca-Cola FEMSAs shares of capital stock other than the Series L Shares
of the subsidiaries of The Coca-Cola Company or FEMSA is reduced below 25% (but not below
20%) and upon the request of the shareholder whose interest is not so reduced, the
shareholders agreement requires that Coca-Cola FEMSAs bylaws be amended to eliminate all
super-majority voting and quorum requirements, other than those relating to the share
transfer restrictions.

The shareholders
agreement also contains provisions relating to the principal shareholders understanding
as to Coca-Cola FEMSAs growth.  It states that it is The Coca-Cola Companys intention
that Coca-Cola FEMSA will be viewed as one of a small number of its anchor bottlers in
Latin America.  In particular, the parties agree that it is desirable that Coca-Cola
FEMSA expands by acquiring additional bottler territories in Mexico and other Latin
American countries in the event any become available through horizontal growth.  In
addition, The Coca-Cola Company has agreed, subject to a number of conditions, that if it
obtains ownership of a bottler territory that fits with Coca-Cola FEMSAs operations, it
will give Coca-Cola FEMSA the option to acquire such territory.  The Coca-Cola Company
has also agreed to support prudent and sound modifications to Coca-Cola FEMSAs capital
structure to support horizontal growth.  The Coca-Cola Companys agreement as to
horizontal growth expires upon either the elimination of the super-majority voting
requirements described above or The Coca-Cola Companys election to terminate the
agreement as a result of a default.

The Coca-Cola
Memorandum

In connection with the
acquisition of Panamco, Coca-Cola FEMSA established certain understandings primarily
relating to operational and business issues with both The Coca-Cola Company and our
company that were memorialized in writing prior to completion of the acquisition.  The
terms are as follows:

- The current
stockholder arrangements between our company and The Coca-Cola Company will continue in
place.  See Shareholders Agreement.
- FEMSA will
continue to consolidate Coca-Cola FEMSAs financial results.
- The
Coca-Cola Company and our company will continue to discuss in good faith the possibility
of implementing changes to Coca-Cola FEMSAs capital      structure in the future.
- There will
be no changes in concentrate incidence pricing or marketing support by The Coca-Cola
Company up to May 2004.  After such time, The      Coca-Cola Company has complete
discretion to implement any changes with respect to these matters, but any decision in
this regard will be discussed with      Coca-Cola FEMSA and will take Coca-Cola FEMSAs
operating condition into consideration.
- The
Coca-Cola Company may require the establishment of a different long-term strategy for
Brazil.  If, after taking into account Coca-Cola FEMSAs      performance in Brazil, The
Coca-Cola Company does not consider Coca-Cola FEMSA to be part of this long-term
strategic solution for Brazil, then      Coca-Cola FEMSA will sell its Brazilian
franchise to The Coca-Cola Company or its designee at fair market value.  Fair market
value would be determined      by independent investment bankers retained by each party
at their own expense pursuant to specified procedures.
- FEMSA, The
Coca-Cola Company and Coca-Cola FEMSA will meet to discuss the optimal Latin American
territorial configuration for the Coca-Colabottler system. During this meeting,
Coca-Cola FEMSA will consider all possible combinations and any asset swap transactions
that may arise from these discussions. In addition, Coca-Cola FEMSA will entertain
any potential combination as long as it is strategically sound and done at fair market
value.
- Coca-Cola
FEMSA would like to keep open strategic alternatives that relate to the integration of
carbonated soft drinks and beer.  The Coca-Cola      Company, our company and Coca-Cola
FEMSA would explore these alternatives on a market-by-market basis at the appropriate
time.
- The
Coca-Cola Company will sell to a subsidiary of our company, sufficient shares to permit
FEMSA to beneficially own 51% of Coca-Cola FEMSAs      outstanding capital stock
(assuming that this subsidiary of FEMSA does not sell any shares and that there are no
issuances of Coca-Cola FEMSAs stock      other than as contemplated by the acquisition).
 This understanding will be in place until May 2006.  In this proposed sale, FEMSA would
pay the higher      of:
          -     The prevailing market price per share at the time
of the sale, and
          -     The sum of US$2.216 per share (US$22.16 per ADS) plus The
Coca-Cola Companys carrying costs.
- Coca-Cola
FEMSA may be entering some markets where significant infrastructure investment may be
required.  The Coca-Cola Company and FEMSA will      conduct a joint study that will
outline strategies for these markets, as well as the investment levels required to
execute these strategies.      Subsequently, it is intended that our company and The
Coca-Cola Company will reach agreement on the level of funding to be provided by each of
the      partners.  The parties intend that this allocation of funding responsibilities
would not be overly burdensome for either partner.
- Coca-Cola
FEMSA entered into a stand-by credit facility, on December 19, 2003, with The Coca-Cola
Export Corporation.  Under this facility,      Coca-Cola FEMSA may borrow, subject to
certain conditions, up to US$250 million for working capital and other general corporate
purposes at any time      when such funding is not otherwise available until December
2006.

Bottler Agreements

Bottler agreements are
the standard agreements that The Coca-Cola Company enters into with bottlers outside the
United States for the sale of concentrates for certain Coca-Cola trademark beverages.
 Coca-Cola FEMSA manufactures, packages, distributes and sells soft drink beverages and
bottled water under a separate bottler agreement for each of its territories.

These bottler
agreements provide that Coca-Cola FEMSA will purchase its entire requirement of
concentrates for Coca-Colatrademark beverages from The Coca-Cola Company and other
authorized suppliers at prices, terms of payment and on other terms and conditions of
supply as determined from time to time by The Coca-Cola Company at its sole discretion.
Concentrate prices are determined as a percentage of the weighted average wholesale
price, net of applicable taxes. Although the price multipliers used to calculate the
cost of concentrate and the currency of payment, among other terms, are set by The
Coca-Cola Company at its sole discretion, Coca-Cola FEMSA sets the price of products sold
to retailers at its discretion, subject to the applicability of price restraints.
Coca-Cola FEMSA has the exclusive right to distribute Coca-Colatrademark beverages for
sale in its territories in authorized containers of the nature prescribed by the bottler
agreements and currently used by Coca-Cola FEMSA. These containers include various
configurations of cans and returnable and non-returnable bottles made of glass and
plastic and fountain containers.

The bottler agreements
include an acknowledgment by Coca-Cola FEMSA that The Coca-Cola Company is the sole owner
of the trademarks that identify the Coca-Colatrademark beverages and of the secret
formulas with which The Coca-Cola Companys concentrates are made. Subject to Coca-Cola
FEMSAs exclusive right to distribute Coca-Colatrademark beverages in its territories,
The Coca-Cola Company reserves the right to import and export Coca-Colatrademark
beverages to and from each of its territories. Coca-Cola FEMSAs bottler agreements do
not contain restrictions on The Coca-Cola Companys ability to set the price of
concentrates charged to its subsidiaries and do not impose minimum marketing obligations
on The Coca-Cola Company. The prices at which Coca-Cola FEMSA purchases concentrates
under the bottler agreements may vary materially from the prices it has historically
paid. However, under Coca-Cola FEMSAs bylaws and the shareholders agreement with a
subsidiary of The Coca-Cola Company and a subsidiary of our company, an adverse action by
The Coca-Cola Company under any of the bottler agreements may result in a suspension of
certain veto rights of the directors, appointed by The Coca-Cola Company. This provides
us with limited protection against The Coca-Cola Companys ability to raise concentrate
prices to the extent that such increase is deemed detrimental to Coca-Cola FEMSA pursuant
to the shareholder agreement and the bylaws. See Shareholders Agreement.

The Coca-Cola Company
has the ability, at its sole discretion, to reformulate any of the Coca-Colatrademark
beverages and to discontinue any of the Coca-Colatrademark beverages, subject to certain
limitations, so long as all Coca-Cola trademark beverages are not discontinued. The
Coca-Cola Company may also introduce new beverages in Coca-Cola FEMSAs territories in
which case Coca-Cola FEMSA has a right of first refusal with respect to the
manufacturing, packaging, distribution and sale of such new beverages subject to the same
obligations as then exist with respect to the Coca-Colatrademark beverages under the
bottler agreements. The bottler agreements prohibit Coca-Cola FEMSA from producing or
handling cola products other than those of The Coca-Cola Company, or other products or
packages that would imitate, infringe upon, or cause confusion with the products, trade
dress, containers or trademarks of The Coca-Cola Company, or from acquiring or holding an
interest in a party that engages in such activities. The bottler agreements also
prohibit Coca-Cola FEMSA from bottling any soft drink product except under the authority
of, or with the consent of, The Coca-Cola Company. The bottler agreements impose
restrictions concerning the use of certain trademarks, authorized containers, packaging
and labeling of The Coca-Cola Company so as to conform to policies prescribed by The
Coca-Cola Company. In particular, Coca-Cola FEMSA is obligated to:

- maintain
plant and equipment, staff and distribution facilities capable of manufacturing,
packaging and distributing the Coca-Cola trademark      beverages in authorized
containers in accordance with Coca-Cola FEMSA bottler agreements and in sufficient
quantities to satisfy fully the demand in its      territories;
- undertake
adequate quality control measures prescribed by The Coca-Cola Company;
- develop,
stimulate and satisfy fully the demand for Coca-Cola trademark beverages using all
approved means, which includes the investment in      advertising and marketing plans;
- maintain a
sound financial capacity as may be reasonably necessary to assure performance by
Coca-Cola FEMSA and its affiliates of their obligations      to The Coca-Cola Company; and
- submit
annually to The Coca-Cola Company, Coca-Cola FEMSAs marketing, management, promotional,
and advertising plans for the ensuing year.

The Coca-Cola Company
contributed in 2003 approximately 48% of Coca-Cola FEMSAs advertising and marketing
budget in its territories.  Although Coca-Cola FEMSA believes that The Coca-Cola Company
intends to continue to provide funds for advertising and marketing, it is not obligated
to do so. Consequently, future levels of advertising and marketing support provided by
The Coca-Cola Company may vary materially from the levels historically provided.  See Shareholders
Agreement.

Coca-Cola FEMSA has
separate bottler agreements with the Coca-Cola Company for each of the territories in
which it operates.  Some of these bottler agreements renew automatically unless one of
the parties gives prior notice that it does not wish to renew the agreement, while others
require Coca-Cola FEMSA to give notice electing to renew the agreement.  The following
table summarizes by territory the expiration dates and renewal provisions of Coca-Cola
FEMSAs bottler agreements:

|Territory          | Expiration Date                     | Renewal Provision                               
|------------------ | ----------------------------------- | ------------------------------------------------
|                  
|Mexico             | For two territories  June 2013     | Ten years, renewable automatically.             
|                   | For two territories  May 2005      | Ten years, requires notice at least six but not 
|                   |                                     | more than twelve months before expiration date. 
|Central America(1) | Guatemala  March 2006              | Renewable as agreed between the parties.        
|                   | Nicaragua  May 2006                | Five years, requires notice at least six but not
|                   |                                     | more than twelve months before expiration date. 
|                   | Costa Rica  September 2007         | Five years, requires notice at least six but not
|                   |                                     | more than twelve months before expiration date. 
|Colombia           | June 2004(2)                        | Five years, requires notice at least six but not
|                   |                                     | more than twelve months before expiration date. 
|Venezuela          | For Coca-Cola trademark beverages  | Five years, requires notice at least six but not
|                   | August 2006                         | more than twelve months before expiration date. 
|                   | For other beverages  August 2006   | Renewable as agreed between the parties.        
|Brazil             | April 2004                          | Five years, requires notice at least six but not
|                   |                                     | more than twelve months before expiration date. 
|Argentina          | September 2004                      | Ten years, renewable automatically.             
|                  

|__________________
|------------------
|(1)               
|(2)               

The bottler agreements
are subject to termination by The Coca-Cola Company in the event of default by Coca-Cola
FEMSA. The event of default provisions include limitations on the change in ownership or
control of Coca-Cola FEMSA and the assignment or transfer of the bottler agreements and
are designed to preclude any person not acceptable to The Coca-Cola Company from
obtaining an assignment of a bottler agreement or from acquiring Coca-Cola FEMSA
independently of similar rights set forth in the shareholders agreement. These provisions
may prevent changes in Coca-Cola FEMSAs principal shareholders, including mergers or
acquisitions involving sales or dispositions of Coca-Cola FEMSAs capital stock, which
will involve an effective change of control without the consent of The Coca-Cola Company.
 See Shareholders Agreement.

Coca-Cola FEMSA has
also entered into tradename licensing agreements with The Coca-Cola Company pursuant to
which Coca-Cola FEMSA is authorized to use certain trademark names of The Coca-Cola
Company. These agreements have an indefinite term, but are terminated if Coca-Cola FEMSAs
ceases to manufacture, market, sell and distribute Coca-Colatrademark products pursuant
to the bottler agreements or if the shareholders agreement is terminated. The Coca-Cola
Company also has the right to terminate the license agreement if Coca-Cola FEMSA uses its
trademark names in a manner not authorized by the bottler agreements.

FEMSA Cerveza

Shareholders Agreement

In connection with the
subscription by Labatt of FEMSA Cervezas capital stock, Emprex and Labatt agreed that
FEMSA Cerveza would be managed as a joint venture.  Accordingly, on September 12, 1994,
Emprex, Labatt and FEMSA Cerveza entered into a shareholders agreement which, as
amended, we refer to as the FEMSA Cerveza Shareholders Agreement, that together with
FEMSA Cervezas bylaws, sets forth the basic governance structure under which FEMSA
Cerveza operates.

In the FEMSA Cerveza
Shareholders Agreement, Emprex and Labatt, which are each referred to in the agreement
as a Principal Cerveza Shareholder, confirm their agreement to the corporate governance
provisions set forth in FEMSA Cervezas bylaws relating to the composition of the board
of directors and the executive officers of FEMSA Cerveza as well as to the election of
the members of the board and officers.  In addition, the FEMSA Cerveza ShareholdersAgreement
provides for the establishment of a management committee to advise on strategic decisions
and policies and to review, approve and oversee important decisions of management, such
as the approval of senior operating vice presidents and the implementation of the annual
budget and the annual business plan.

The board of directors
of FEMSA Cerveza currently consists of fifteen directors and nine alternate directors who
were elected at the annual ordinary shareholders meeting for a renewable term of one
year.  Eleven directors and seven alternate directors were appointed by Emprex and four
directors and alternate directors were appointed by Labatt.

The management
committee currently consists of nine members, one of whom is the Chief Executive Officer
of FEMSA Cerveza (with one vote), four of whom were appointed by Emprex and four of whom
were appointed by Labatt.

The FEMSA Cerveza
Shareholders Agreement gives each of Labatt and Emprex significant influence in the
conduct of FEMSA Cervezas business.  In addition, Labatt has the power to veto certain
actions requiring approval by the board of directors of FEMSA Cerveza, including
amendments to the bylaws, reductions in capital stock, certain mergers or spin-offs,
initiation of bankruptcy or similar proceedings, delisting any shares from the Mexican
Stock Exchange and certain other matters, if any, are presented to a shareholders meeting.

In addition to the
rights of first refusal provided for in FEMSA Cervezas bylaws regarding proposed
transfers of shares, the FEMSA Cerveza Shareholders Agreement contemplates that a
Principal Cerveza Shareholder may purchase the interest in FEMSA Cerveza of the other in
the event of a change of control in a Principal Cerveza Shareholder.

In the event that (i)
one of the Principal Cerveza Shareholders buys the others interest in FEMSA Cerveza
because of a change in control in the other Principal Cerveza Shareholder; (ii) Labatts
ownership of FEMSA Cervezas shares of capital stock (other than certain limited voting
shares) is reduced below 20% of all such shares; or (iii) Emprex ceases to have managing
control of FEMSA Cerveza, and upon the request of the Principal Cerveza Shareholder whose
interest is not so affected, the FEMSA Cerveza Shareholders Agreement requires that
FEMSA Cervezas bylaws be amended to eliminate all share transfer restrictions and all
super-majority voting and quorum requirements, after which the FEMSA Cerveza Shareholders Agreement
will terminate.

The FEMSA Cerveza
Shareholders Agreement grants to the Principal Cerveza Shareholders registration and
tag-along rights with respect to their shareholdings in FEMSA Cerveza.  In addition, the
FEMSA Cerveza Shareholders Agreement provides for consultation between the Principal
Cerveza Shareholders regarding potential investment opportunities in Latin America.

As part of the FEMSA
Cerveza Shareholders Agreement, the Principal Cerveza Shareholders have agreed not to
compete with each other in Mexico or Canada and not to engage in the manufacturing, sale
or distribution of Mexican or Canadian beers other than their respective brands.  The
Principal Cerveza Shareholders have also agreed to share their know-how, expertise and
technology.

FEMSA
Cerveza-Labatt U.S. Joint Venture Agreement

On December 1, 1994,
FEMSA Cerveza, Labatt and certain of their respective affiliates entered into a Joint
Venture Agreement, which we refer to as the U.S. Joint Venture Agreement, wherein they
agreed to combine in Labatt USA, Labatts business related to the brewing, importation,
distribution and sale of beer and other malt beverages in the United States and FEMSA
Cervezas business related to the importation, distribution and sale of beer in the
United States.  Under the U.S. Joint Venture Agreement, Labatt and FEMSA Cerveza have 70%
and 30% membership interests, respectively, in Labatt USA.

U.S. Distributor
Agreement

In connection with the
U.S. Joint Venture Agreement, Labatt, FEMSA Cerveza and certain of their respective
affiliates (including Labatt USA) executed on December 1, 1994 an Exclusive Distributor
Agreement, which we refer to as the U.S. Distributor Agreement.  Under the U.S.
Distributor Agreement, Labatt USA was appointed as the sole and exclusive importer,
distributor, marketer and seller of CCMs brands in the United States.  The term of the
U.S. Distributor Agreement is 99 years, unless terminated earlier by FEMSA Cerveza
(subject to the terms of the Members Agreement, as described below) following a change of
control of Labatt, a Prolonged Poor Performance (as defined in the Members Agreement) or
a reduction of Labatts shareholding in FEMSA Cerveza to less than 20% (other than a
reduction resulting from certain permitted transfers).  The U.S. Distributor Agreement
requires that CCM and Labatt USA agree on a price for the purchase by Labatt USA of CCMs
brands, which provides Labatt USA with a reasonable profit and CCM with a recovery of its
costs and a reasonable contribution to overhead and profit.

Members Agreement

In connection with the
U.S. Joint Venture Agreement, Labatt and FEMSA Cerveza executed a Principal Owners and
Members Agreement, dated March 1, 1996, which we refer to as the Members Agreement, and
which, together with the limited liability agreements of Labatt USA, governs the
relationship of the parties with respect to Labatt USA.  The Members Agreement provides
primarily for the events of termination of the U.S. Distributor Agreement, restrictions
on transfers of membership interests, exit mechanisms (including certain puts and calls
in case of termination of the U.S. Distributor Agreement, a change of control or a
reduction of Labatts shareholding in FEMSA Cerveza to less than 20%), and agreements
with regard to certain matters related to the conduct of the business.  The Members
Agreement also requires a supermajority vote of six of the seven members of the board of
directors to approve certain matters, such as distribution of profits policy, debt to
capitalization ratio and annual marketing plans (including marketing expenses).  Two
members of the board of directors are appointed by FEMSA Cerveza and the other five
members are appointed by Labatt.  The Members Agreement also grants registration and
tag-along rights to Labatt and FEMSA Cerveza with respect to their shareholdings in
Labatt USA.

The executive
committee of Labatt USA consists of five members, one of whom is the Chief Executive
Officer of Labatt USA (with no vote), two of whom are appointed by FEMSA Cerveza and two
of whom are appointed by Labatt.  The executive committee has the authority to advise the
joint venture on strategic decisions, such as the approval of senior operating vice
presidents and to review, approve and oversee the annual business plan and budget.  FEMSA
Cerveza has the right to veto certain actions requiring the approval of the board of
directors of Labatt USA, including the introduction of new lines of business, the
acquisition or disposition of assets, the execution of material contracts with affiliates
and the marketing expenses for Labatts brands and CCMs brands.

Oxxo Distribution
Agreement

Pursuant to a
distribution agreement, which we refer to as the Oxxo Distribution Agreement, dated
September 12, 1994, FEMSA Cerveza (acting through certain of its operating subsidiaries)
has appointed FEMSA Comercio as a non-exclusive distributor of the beer products produced
and sold by CCM, and FEMSA Comercio has agreed to purchase all of its requirements for
beer products from FEMSA Cerveza.  The terms under which FEMSA Cervezas products are
sold to FEMSA Comercio, including pricing policy, are set forth in the Oxxo Distribution
Agreement, provided, however, that if FEMSA Cerveza shall grant to any third party more
favorable terms, such terms shall also be granted to FEMSA Comercio.  The initial term of
the Oxxo Distribution Agreement is ten years, and thereafter shall be automatically
renewed for periods of five years, unless there is a material change in market conditions
and either party gives notice of termination for that reason.  The Oxxo Distribution
Agreement may also be terminated in the event of a default or bankruptcy of either party.

Packaging Supply
Agreement

In connection with
Labatts investment in FEMSA Cerveza, on September 12, 1994, FEMSA Cervezas principal
operating subsidiaries entered into a packaging supply agreement with FEMSA Empaques,
which we refer to as the FEMSA Cerveza Supply Agreement.  Pursuant to the FEMSA Cerveza
Supply Agreement, FEMSA Cerveza has agreed to purchase all of its packaging and similar
product requirements from FEMSA Empaques.  The FEMSA Cerveza Supply Agreement provides
that the transactions pursuant to the agreement will be at competitive prices and that
FEMSA Empaques will supply FEMSA Cerveza in a continuous, adequate and reliable manner
and at reasonable standards of quality, innovation and levels of service.  If FEMSA
Empaques is unable to satisfy fully FEMSA Cervezas packaging requirements from FEMSA
Empaques own production, FEMSA Empaques is required to purchase the additional
requirements from third party producers and sell such products to FEMSA Cerveza at the
price paid by FEMSA Empaques plus the direct costs incurred by FEMSA Empaques in
connection with such purchases. Furthermore, FEMSA Cerveza has granted FEMSA Empaques a right
of first offer to supply FEMSA Cerveza with new packaging products as and when they are
developed by FEMSA Empaques.

Services Agreement

On September 12, 1994,
FEMSA Servicios and FEMSA Cerveza entered into a services agreement, which we refer to as
the FEMSA Cerveza Services Agreement, pursuant to which FEMSA Servicios provides certain
auditing and other management and professional services to FEMSA Cerveza and its
subsidiaries on terms competitive with those of third party providers.  The term of the
FEMSA Cerveza Services Agreement is indefinite so long as FEMSA Cerveza (i) continues to
be a majority-owned subsidiary of Emprex or (ii) the parties to the agreement agree to
terminate the agreement.

Labatt Services
Agreement

Labatt has agreed with
CCM as of December 31, 1999 to provide specialized services with respect to beer brewing,
including, without limitation, information systems, distribution, operations, brewing,
marketing and brand management.  The agreement provides for a yearly amount payable in
equal monthly installments.  The provisions are automatically renewable for a one year
term, subject to non-renewal by either party with notice to the other party.

FEMSA Empaques

Ball Licensing
Agreement

Famosa has entered
into a number of licensing agreements pursuant to which it has licensed technology
pertaining to the manufacture of can bodies and can ends.  Effective as of April 1, 2002,
Famosa entered into a new Proprietary Technology Licensing Agreement between Ball and
Famosa, which we refer to as the Ball Licensing Agreement.  The terms and conditions of
the new Ball Licensing Agreement are basically the same as those contained in the
licensing agreement dated as of January 1, 1997.  Famosa continues to have the exclusive
right to use, in Mexico, technology developed by Ball for the manufacture of drawn and
ironed aluminum and tin-plated steel cans and convenience end closures for such cans for
beer and soft drink products.  The Ball Licensing Agreement also provides Famosa with a
non-exclusive right to sell such cans and end closures manufactured pursuant to the Ball
Licensing Agreement throughout the world, other than in the United States and Canada.  In
addition, the Ball Licensing Agreement incorporates the terms of the Proprietary
Technology Cross Licensing Agreement executed with Ball on January 1, 1997, which we
refer to as the Cross Licensing Agreement pursuant to which Famosa obtained, for as long
as the Ball Licensing Agreement is exclusive, an exclusive right to use technology
developed by Balls other licensees with respect to the manufacture of cans and can ends.
 The Ball Licensing Agreement expires March 31, 2007.

Glass Technology
Agreement

Sivesa entered into an
Advanced Technology Agreement dated July 21, 1987, as amended on July 7, 1992, which we
refer to as the Advanced Technology Agreement or ATA, with Heye International Gmbh, a
German limited partnership based in Obernkirchen, Germany.  Under the ATA, Heye Glass
agreed to train the technical personnel of Sivesa in the operation and maintenance of
certain equipment provided by Heye International, and to supervise and assist during the
construction and commissioning of such equipment, as well as during the life of the ATA.
 The ATA was renewed before its expiration and is effective until July 20, 2009.



Table of Contents

ITEM 11.
         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our business
activities require the holding or issuing of financial instruments that expose us to
market risks related to changes in interest rates, foreign currency exchange rates,
equity risk and commodity price risk.

Table of Contents

Interest Rate Risk

Interest rate risk
exists principally with respect to our indebtedness that bears interest at floating
rates. At December 31, 2003, we had outstanding indebtedness of Ps. 35,933 million, of
which 34.4% bore interest at fixed interest rates and 65.6% bore interest at variable
interest rates. Swap contracts held by us effectively switch a portion of our
variable-rate indebtedness into fixed-rate indebtedness. After giving effect to these
contracts, as of December 31, 2003, 68.7% of our debt was of fixed-rate and 31.3% of our
debt was variable-rate. The interest rate on our variable rate debt is determined by
reference to LIBOR (the London Interbank Offer Rate, a benchmark rate used for Eurodollar
loans), CETEs (the Certificados de Tesorería del Gobierno Federalor the Federal
Government Treasury Certificates), U.S. treasury bonds and TIIE (the Tasa de Interés
Interbancaria de Equilibrioor Equilibrium Interbank Interest Rate). If these reference
rates increase, our interest payments would consequently increase.

The table below
provides information about our financial instruments that are sensitive to changes in
interest rates, including the effect of our interest rate swaps on our debt obligations.
 The table presents notional amounts and weighted average interest rates by expected
contractual maturity dates.  Notional amounts are used to calculate the contractual
payments to be exchanged under the contract.  Weighted average variable rates are based
on the reference rates on December 31, 2003, plus spreads, contracted by us.  The
instruments actual payments are denominated in U.S. dollars, Mexican pesos and Colombian
pesos.  All of the payments in the table are presented in Mexican pesos, our reporting
currency, utilizing the December 31, 2003 exchange rate of 11.235 Mexican pesos per U.S.
dollar.

The table below also
includes the fair value of long-term debt based on the discounted value of contractual
cash flows.  The discount rate is estimated using rates currently offered for debt with
similar terms and remaining maturities.  Furthermore, the fair value of long-term notes
payable is based on quoted market prices, and the fair value of the interest rate swaps
is estimated based on quoted market prices to terminate the contracts on December 31,
2003.  As of December 31, 2003, the fair value represents a loss of Ps. 876 million.



|Principal by Year of Maturity
At December 31, 2003
(millions of constant Mexican pesos)
|---------------------------------------------------------------------------------------
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Fixed Rate Debt                                                                        
|U.S. dollars                                                                           
|Interest rate(1)                                                                       
|Mexican pesos                                                                          
|Interest rate(1)                                                                       
|                                                                                       
|Variable Rate Debt                                                                     
|U.S. dollars                                                                           
|Interest rate(1)                                                                       
|Mexican pesos                                                                          
|Interest rate(1)                                                                       
|Colombian pesos                                                                        
|Interest rate(1)                                                                       
|                                                                                       

|__________________
|------------------
|(1)               

In the table above
we are including the effects of all of our interest swaps agreements, each of which is a
contract that swaps a variable interest rate for a fixed interest rate.  As of December
31, 2003, we have the following outstanding agreements:

|Interest Rate Swap Agreements At December 31, 2003
|--------------------------------------------------
|                                                  
|Maturity Date                                     
|                                                  
|2004                                              
|2006                                              
|2007                                              
|2008                                              
|                                                  

|__________________
|------------------
|(1)               

A hypothetical,
instantaneous and unfavorable change of 100 basis points in the average interest rate
applicable to floating-rate liabilities held at December 31, 2003 would increase our
interest expense by approximately Ps. 112 million, or 17.4% over a 12-month period of
2004, assuming no additional debt is incurred during such period, in each case after
giving effect to all of our interest swap agreements.

Table of Contents

Foreign Currency
Exchange Rate Risk

Our principal
exchange rate risk involves changes in the value of the local currencies, of each country
in which we operated, relative to the U.S. dollar.  In 2003, the percentage of our
consolidated total revenues was denominated as follows:

Total Revenues by
Currency

|At December 31, 2003
|--------------------
|                    
|Country             
|                    
|Mexico              
|Brazil              
|Venezuela           
|United States       
|Colombia            
|Argentina           
|Costa Rica          
|Guatemala           
|Nicaragua           
|Panama              
|                    

We estimate that a
majority of our consolidated costs and expenses are denominated in Mexican pesos for
Mexican subsidiaries and in the aforementioned currencies for the foreign subsidiaries,
which are part of Coca-Cola FEMSA.  Substantially all of our costs and expenses
denominated in a foreign currency, other than the functional currency of each country in
which we operate, are denominated in U.S. dollars.  As of December 31, 2003, 50.6% of our
indebtedness was denominated in Mexican pesos, 47.8% was denominated in U.S. dollars and
the remaining 1.6% in Colombian pesos.  Decreases in the value of the different
currencies relative to the U.S. dollar will increase the cost of our foreign currency
denominated operating costs and expenses, and the debt service obligations with respect
to our foreign currency denominated indebtedness.  A depreciation of the Mexican peso
relative to the US dollar will also result in foreign exchange losses as the Mexican peso
value of our foreign currency denominated indebtedness is increased.

Our exposure to
market risk associated with changes in foreign currency exchange rates relates primarily
to U.S. dollar-denominated debt obligations as shown in the interest risk table above.
 We occasionally utilize currency forward contracts to hedge our exposure to the U.S.
dollar relative to the Mexican peso and other currencies.

As of December 31,
2003 and 2002, we did not have any forward agreements to hedge our operations denominated
in U.S. dollars, and we did not have any call option agreements to buy U.S. dollars.  The
fair value of the foreign currency forward contracts is estimated based on quoted market
prices of each agreement at year end assuming the same maturity dates originally
contracted.   The fair value of the call option agreements  is estimated based on quoted
market prices of the cost of such agreements, considering the same amounts, exchange
rates and maturity dates originally contracted.

As of December 31,
2003, we had one forward agreement for the purchase of Euro in a notional amount of US$6
million, to hedge the exchange rate risk between the U.S. dollar and the Euro for the
purchase of equipment.  The fair value is estimated based on quoted market exchange rate
to terminate the contracts at the reporting date, which as of December 31, 2003
represented a gain of Ps. 17 million.

Euro-Forward
Agreements  Millions of U.S. dollars and
Millions of Constant Mexican pesos

|                                            | At December 31, 2003 | At December 31, 2002
|------------------------------------------- | -------------------- | --------------------
|                                            |                      |                     
|                                            | NotionalAmount       | Fair Value          
|                                           
|Euro-Forwards:                             
|To cover Mexican peso risk                  | US$ 6                | Ps. 17              
|Weighted average rate U.S. dollar per Euro:
|Contracted                                  | 0.9858               |                     
|                                           
|Quoted Market                               | 1.260                |                     
|                                           

A hypothetical,
instantaneous and unfavorable 10% devaluation in the value of the Mexican peso relative
to the U.S. dollar occurring on December 31, 2003, would have resulted in an increase in
our net consolidated integral result of financing expense of approximately Ps. 1,700
million over a 12-month period of 2004, reflecting higher interest expense and foreign
exchange gain generated by the cash balances held in U.S. dollars as of that date, net of
the loss based on our U.S. dollar-denominated indebtedness at December 31, 2003.
 However, this result does not take into account any gain on monetary position that would
be expected to result from an increase in the inflation rate generated by a devaluation
of the Mexican peso relative to the U.S. dollar, which gain on monetary position would
reduce the consolidated net integral cost of financing.

As of March 15,
2004, the exchange rates relative to the U.S. dollar of all the countries in which we
operate as well as their devaluation/revaluation effect compared to December 31, 2003,
are as follows:

|          
|----------
|Country   
|          
|Mexico    
|Brazil    
|Venezuela 
|Colombia  
|Argentina 
|Costa Rica
|Guatemala 
|Nicaragua 
|Panama    
|          

A hypothetical,
instantaneous and unfavorable 10% devaluation in the value of the currencies of all the
countries in which we operate, relative to the U.S. dollar occurring on December 31,
2003, would produce a reduction in stockholders equity as follows:

|          
|----------
|Country   
|Mexico    
|Brazil    
|Venezuela 
|Colombia  
|Argentina 
|Costa Rica
|Guatemala 
|Nicaragua 
|Panama    
|          

Table of Contents

Equity Risk

During 2002, a
subsidiary of Coca-Cola FEMSA entered into an equity forward agreement, expiring in March
2004.  As of  December 31, 2003 the notional amount was Ps. 203 million and its fair
value resulted in a loss of Ps. 74 million.

Table of Contents

Commodity Price Risk

We entered into
various derivative contracts to hedge the cost of certain raw materials. The result of
our commodity price contracts was a loss of Ps. 19 million and Ps. 18 million as of
December 31, 2003 and 2002, respectively, which were recorded in the results of
operations of the year. The fair value is estimated based on the quoted market prices to
terminate the contracts at the reporting date. As of December 31, 2003, we had various
derivative instruments contracts with maturity dates in 2004 and 2005, notional amounts
of Ps. 703 million and the fair value of Ps. 53 million.



Table of Contents

ITEMS 12-14.
NOT APPLICABLE



Table of Contents

ITEM 15. CONTROLS
AND PROCEDURES

|(a) | As of December 31, 2003, we carried out an evaluation under the supervision and with the participation of our management, including our
                  Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and
                  procedures.  There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the
                  possibility of human error and the circumvention or overriding of the controls and procedures.  Accordingly, even effective disclosure
                  controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon and as of the date of our
                  evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to
                  provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Securities Exchange Act
                  of 1934, as amended, is recorded, processed, summarized and reported as and when required.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) | There has been no change in our internal control over financial reporting during 2003 that has materially affected, or is reasonably
likely
                  to materially affect, our internal control over financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



Table of Contents

ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT

At our annual
ordinary shareholders meeting in March 2004, our shareholders elected the following four
members of the Audit Committee:  Alexis Rovzar, José Manuel Canal Hernando, Eduardo A.
Elizondo and Helmut Paul and designated Mr. José Manuel Canal Hernando as an audit
committee financial expert within the meaning of this Item 16A.  Although under Mexican
law, the determination of the shareholders is binding on our company, our board of
directors will confirm this designation at its next board meeting.

Table of Contents

ITEM 16B.
CODE OF ETHICS

We have adopted a
code of ethics, as defined in Item 16B of this annual report on Form 20-F.  Our code of
ethics applies to our Chief Executive Officer, Chief Financial Officer, Chief Accounting
Officer, and persons performing similar functions as well as to our directors and other
officers and employees.  Our code of ethics is available on our web site at
www.femsa.com/ethics.asp.  If we amend the provisions of our code of ethics that apply to
our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, and
persons performing similar functions, or if we grant any waiver of such provisions to any
of these persons, we will disclose such amendment or waiver on our web site at the same
address.

Table of Contents

ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit and
Non-Audit Fees

The following
table summarizes the aggregate fees billed to us by Galaz, Yamazaki, Ruiz Urquiza, S.C.,
a member firm of Deloitte Touche Tohmatsu, and its affiliates as principal auditors
including Deloitte Consulting, which we collectively refer to as Deloitte & Touche,
during the fiscal years ended December 31, 2002 and 2003:

|                   | Year ended December 31,       
|------------------ | ------------------------------
|                   |                               
|                   | 2003                          
|                   |                               
|                   | (in millions of Mexican pesos)
|Audit fees         | Ps. 71                        
|Audit-related fees | 9                             
|Tax fees           | 4                             
|All Other fees     | 2                             
|                   |                               
|                   | Ps. 86                        

Audit Fees.Audit
fees in the above table are the aggregate fees billed by Deloitte & Touche in connection
with the audit of our annual financial statements, the review of our quarterly financial
statements and statutory and regulatory audits. In addition, in 2003, audit fees
included the opening balance sheet fees associated with the Panamco acquisition.

Audit-related
Fees.Audit-related fees in the above table for the year ended December 31, 2003 are the
aggregate fees billed by Deloitte & Touche for financial accounting and reporting
consultations.

Audit-related feesin the above table for the year ended December 31, 2002 are the aggregate fees billed by
Deloitte & Touche for due diligence associated with acquisitions (predominately the
Panamco acquisition), financial accounting and reporting consultations.

Tax Fees.Tax
fees in the above table are fees billed by Deloitte & Touche for services based upon
existing facts and prior transactions in order to document, compute, and obtain
government approval for amounts included in tax filings such as value-added tax return
assistance, transfer pricing documentation and requests for technical advice from taxing
authorities.

Other Fees. Other
fees in the above table are fees billed by Deloitte and Touche for non-audit services
rendered by Deloitte Consulting. As a percentage of total fees billed to FEMSA, other
fees represent 2.3% and 3.5% for 2003 and 2002, respectively.

Audit Committee
Pre-Approval Policies and Procedures

We have adopted
pre-approval policies and procedures under which all audit and non-audit services
provided by our external auditors must be pre-approved by the audit committee as set
forth in the audit committees charter.  Any service proposals submitted by external
auditors need to be discussed and approved by the audit committee during its meetings,
which take place at least four times a year.  Once the proposed service is approved, we
or our subsidiaries formalize the engagement of services.  The approval of any audit and
non-audit services to be provided by our external auditors is specified in the minutes of
our audit committee.  In addition, the members of our board of directors are briefed on
matters discussed by the different committees of our board.

Table of Contents

ITEM 16D.
NOT APPLICABLE

Table of Contents

ITEM 16E.
NOT APPLICABLE

Table of Contents

ITEM 17. NOT
APPLICABLE

ITEM 18. FINANCIAL
STATEMENTS

See pages F-1
through F-53, incorporated herein by reference.



Table of Contents

ITEM 19. EXHIBITS

|1.1  | Bylaws (estatutos sociales) of FEMSA (formerly known as Valores Industriales, S.A.), together with an
English translation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1  | Deposit Agreement, among FEMSA, The Bank of New York, and all owners and holders from time to time of
           any American Depositary Receipts, including the form of American Depositary Receipt (incorporated by
           reference to FEMSAs registration statement on Form F-6 filed on January 30, 2004 (File No.
           333-112342)).                                                                                                                                                                                                                                                                                                           
|2.2  | Specimen certificate representing a BD Unit, consisting of one Series B Share, two Series D-B Shares
           and two Series D-L Shares, together with an English translation (incorporated by reference to FEMSAs
           registration statement on Form F-4 filed on April 9, 1998 (File No. 333-8618)).                                                                                                                                                                                                                                                                                                                                                
|2.3  | US$80,000,000 Credit Agreement, dated August 8, 2001, among FEMSA Comercio, the financial institutions
           party thereto, BBVA Bancomer, S.A. and BBVA Securities, Inc. (incorporated by reference to FEMSAs Form
           20-F filed on June 20, 2001 (File No. 1-14814)).                                                                                                                                                                                                                                                                                                                                                                           
|2.4  | Indenture Agreement between Coca-Cola FEMSA and Citibank, N.A., as trustee, dated October 28, 1996
           (incorporated by reference to FEMSAs registration statement on Form F-4 filed on April 9, 1998 (File
           No. 333-8618)).                                                                                                                                                                                                                                                                                                                                                                                                                  
|2.5  | Note Purchase Agreement, dated August 26, 1994, among Coca-Cola FEMSA and the holders specified therein
           (incorporated by reference to FEMSAs registration statement on Form F-4 filed on April 9, 1998 (File
           No. 333-8618)).                                                                                                                                                                                                                                                                                                                                                                                                             
|2.6  | Term Loan Agreement, dated April 23, 2003, among Coca-Cola FEMSA, JPMorgan Chase Bank, Banco J.P.
           Morgan, S.A., Morgan Stanley Senior Funding, Inc., J.P. Morgan Securities Inc., Banco Nacional de
           México, S.A., BBVA Bancomer and ING Bank, N.V. (incorporated by reference to Coca-Cola FEMSAs annual
           report on Form 20-F filed on June 27, 2003 (File No. 1-2260)).                                                                                                                                                                                                                                                       
|2.7  | Indenture, dated July 11, 1997, by and between Panamco and The Chase Manhattan Bank, as Trustee
           (incorporated by reference to Exhibit 4.1 of Panamcos Registration Statement on Form F-4, (File No.
           333-7918)).                                                                                                                                                                                                                                                                                                                                                                                                                          
|2.8  | First Supplemental Indenture, dated October 15, 2003, between Corporación Interamericana de Bebidas,
           S.A. de C.V., as Issuer, Coca-Cola FEMSA, as Guarantor, and JPMorgan Chase Bank, as Trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|2.9  | Second Supplemental Indenture, dated November 19, 2003, between Corporación Interamericana de Bebidas,
           S.A. de C.V., as Issuer, Coca-Cola FEMSA, as Guarantor, and JPMorgan Chase Bank, as Trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|3.1  | Voting Trust Agreement among certain principal shareholders of FEMSA together with an English
           translation (incorporated by reference to FEMSAs Schedule 13D as amended filed on November 14, 2003
           (File No. 333-8618)).                                                                                                                                                                                                                                                                                                                                                                                                                  
|3.2  | Shareholders Agreement, dated September 12, 1994, as amended, among FEMSA, Labatt Brewing Company
           Limited and FEMSA Cerveza (incorporated by reference to FEMSAs registration statement on Form F-4
           filed on April 9, 1998 (file No. 333-8618)).                                                                                                                                                                                                                                                                                                                                                                                        
|4.1  | Joint Venture Agreement, dated December 1, 1994, among Labatt, Labatt Holdings, Inc. (Labatt Holdings),
           Labatt USA, Inc., Labatt Importers, Inc., Latrobe Brewing Company, Labatt Holdings II Inc. (Labatt
           Holdings II), FEMSA Cerveza, Multi-National Investment Corporation, Wisdom Import Sales Company, Inc.
           (Wisdom Import Sales Company), LF Holdings I. L.L.C. (LF Holdings I), LF Holdings II L.L.C. (LF
           Holdings II), Latrobe Brewing Company L.L.C. and Labatt USA L.L.C. (incorporated by reference to
           FEMSAs registration statement on Form F-4 filed on April 9, 1998 (File No. 333-8618)).
|4.2  | Distribution Agreement, dated December 1, 1994, among FEMSA Cerveza, Labatt, and certain affiliates
           (incorporated by reference to FEMSAs registration statement on Form F-4 filed on April 9, 1998 (File
           No. 333-8618)).                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.3  | Members Agreement, dated March 1, 1996, among FEMSA Cerveza and Labatt (incorporated by reference to
           FEMSAs registration statement on Form F-4 filed on April 9, 1998 (File No. 333-8618)).                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|4.4  | Distribution Agreement, dated September 12, 1994, between FEMSA Cerveza and FEMSA Comercio
           (incorporated by reference to FEMSAs registration statement on Form F-4 filed on April 9, 1998 (File
           No. 333-8618)).                                                                                                                                                                                                                                                                                                                                                                                                                          
|4.5  | Supply Agreement, dated September 12, 1994, between FEMSA Cerveza and FEMSA Empaques (incorporated by
           reference to FEMSAs registration statement on Form F-4 filed on April 9, 1998 (File No. 333-8618)).                                                                                                                                                                                                                                                                                                                                                                                                                                           
|4.6  | Services Agreement, dated September 12, 1994, between FEMSA Cerveza and FEMSA Servicios (incorporated
           by reference to FEMSAs registration statement on Form F-4 filed on April 9, 1998 (File No. 333-8618)).                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.7  | Services Agreement, dated December 31, 1999, between CCM and Labatt (incorporated by reference to
           FEMSAs Form 20-F filed on June 27, 2003 (File No. 1-14814)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.8  | Amended and Restated Shareholders Agreement, dated July 6, 2002, among CIBSA, Emprex, The Coca-Cola
           Company and Inmex (incorporated by reference to Coca-Cola FEMSAs annual report on Form 20-F filed on
           June 27, 2003 (File No. 1-12260)).                                                                                                                                                                                                                                                                                                                                                                                             
|4.9  | Amendment, dated May 6, 2003, to Shareholders Agreement as amended and restated on July 6, 2002, among
           CIBSA, Emprex, The Coca-Cola Company, Inmex, Atlantic Industries, Dulux CBAI 2003 B.V. and Dulux
           CBEXINMX 2003 B.V. (incorporated by reference to Coca-Cola FEMSAs annual report on Form 20-F filed on
           June 27, 2003 (File No. 1-12260)).                                                                                                                                                                                                                                                                             
|4.10 | Amended and Restated Bottler Agreement, dated June 21, 2003, between Coca-Cola FEMSA and The Coca-Cola
           Company with respect to operations in the valley of Mexico (incorporated by reference to Coca-Cola
           FEMSAs Annual Report on Form 20-F filed on April 5, 2004 (File No. 1-12260)).                                                                                                                                                                                                                                                                                                                                                  
|4.11 | Supplemental Agreement, dated June 21, 1993, between Coca-Cola FEMSA and The Coca-Cola Company with
           respect to operations in the valley of Mexico (with English translation) (incorporated by reference to
           Exhibit 10.3 to Coca-Cola FEMSAs Registration Statement on Form F-1 filed on August 13, 1993 (File No.
           333-67380)).                                                                                                                                                                                                                                                                                                
|4.12 | Amended and Restated Bottler Agreement, dated June 21, 2003, between Coca-Cola FEMSA and The Coca-Cola
           Company with respect to operations in the southeast of Mexico (incorporated by reference to Coca-Cola
           FEMSAs Annual Report on Form 20-F filed on April 5, 2004 (File No. 1-12260)).                                                                                                                                                                                                                                                                                                                                               
|4.13 | Bottler Agreement, dated August 22, 1994, between Coca-Cola FEMSA and The Coca-Cola Company with
           respect to operations in Argentina (with English translation) (incorporated by reference to Exhibit
           10.1 to Coca-Cola FEMSAs Annual Report on Form 20-F filed on June 30, 1995 (File No. 1-12260)).                                                                                                                                                                                                                                                                                                                                     
|4.14 | Supplemental Agreement, dated August 22, 1994, between Coca-Cola FEMSA and The Coca-Cola Company with
           respect to operations in Argentina (with English translation) (incorporated by reference to Exhibit
           10.2 to Coca-Cola FEMSAs Annual Report on Form 20-F filed on June 30, 1995 (File No. 1-12260)).                                                                                                                                                                                                                                                                                                                                
|4.15 | Amendments, dated May 17 and July 20, 1995, to Bottler Agreement and Letter of Agreement, dated August
           22, 1994, each with respect to operations in Argentina between Coca-Cola FEMSA and The Coca-Cola
           Company (with English translation) (incorporated by reference to Exhibit 10.3 to Coca-Cola FEMSAs
           Annual Report on Form 20-F filed on June 28, 1996 (File No. 1-12260)).                                                                                                                                                                                                                                              
|4.16 | Bottler Agreement, dated December 1, 1995, between Coca-Cola FEMSA and The Coca-Cola Company with
           respect to operations in SIRSA (with English translation) (incorporated by reference to Exhibit 10.4 to
           Coca-Cola FEMSAs Annual Report on Form 20-F filed on June 28, 1996 (File No. 1-12260)).                                                                                                                                                                                                                                                                                                                                        
|4.17 | Supplemental Agreement, dated December 1, 1995, between Coca-Cola FEMSA and The Coca-Cola Company with
           respect to operations in SIRSA (with English translation) (incorporated by reference to Exhibit 10.6 to
           Coca-Cola FEMSAs Annual Report on Form 20-F filed on June 28, 1996 (File No. 1-12260)).                                                                                                                                                                                                                                                                                                                                   
|4.18 | Amendment, dated February 1, 1996, to Bottler Agreement between Coca-Cola FEMSA and The Coca-Cola
           Company with respect to operations in SIRSA, dated December 1, 1995 (with English translation)
           (incorporated by reference to Exhibit 10.5 to Coca-Cola FEMSAs Annual Report on Form 20-F filed on
           June 28, 1996 (File No. 1-12260)).                                                                                                                                                                                                                                                                                        
|4.19 | Supplemental Agreement, dated June 21, 1993, between Coca-Cola FEMSA and The Coca-Cola Company with
           respect to operations in the southeast of Mexico (with English translation) (incorporated by reference
           to Exhibit 10.4 to Coca-Cola FEMSAs Registration Statement on Form F-1 filed on August 13, 1993 (File
           No. 333-67380)).                                                                                                                                                                                                                                                                                             
|4.20 | Amendment, dated May 22, 1998, to Bottler Agreement with respect to the former SIRSA territory, dated
           December 1, 1995, between Coca-Cola FEMSA and The Coca-Cola Company (with English translation)
           (incorporated by reference to Exhibit 4.12 to Coca-Cola FEMSAs Annual Report on Form 20-F filed on
           June 20, 2001 (File No. 1-12260)).                                                                                                                                                                                                                                                                                    
|4.21 | Bottler Agreement, dated July 1, 1999, between Panamco Golfo, S.A. de C.V. and The Coca-Cola Company
           with respect to operations in Golfo, Mexico (English translation) (incorporated by reference to Exhibit
           4.32 to Coca-Cola FEMSAs Annual Report on Form 20-F filed on June 27, 2003 (File No. 1-12260)).                                                                                                                                                                                                                                                                                                                             
|4.22 | Bottler Agreement, dated July 1, 1999, between Panamco Bajio, S.A. de C.V. and The Coca-Cola Company
           with respect to operations in Bajio, Mexico (English translation) (incorporated by reference to Exhibit
           4.33 to Coca-Cola FEMSAs Annual Report on Form 20-F filed on June 27, 2003 (File No. 1-12260)).                                                                                                                                                                                                                                                                                                                             
|4.23 | Bottler Agreement and Letter Agreement, both dated March 18, 2000, between The Coca-Cola Company and
           Embotelladora Central, S.A. with respect to operations in Guatemala (English translation) (incorporated
           by reference to Coca-Cola FEMSAs Annual Report on Form 20-F filed on April 5, 2004 (File No. 1-12260)).                                                                                                                                                                                                                                                                                                                     
|4.24 | Bottler Agreement and Letter Agreement, both dated May 13, 2001, between The Coca-Cola Company and
           Panamco de Nicaragua, S.A. with respect to operations in Nicaragua (English translation) (incorporated
           by reference to Coca-Cola FEMSAs Annual Report on Form 20-F filed on April 5, 2004 (File No. 1-12260)).                                                                                                                                                                                                                                                                                                                        
|4.25 | Bottler Agreement and Letter Agreement, both dated October 1, 2002, between The Coca-Cola Company and
           Embotelladora Panamco Tica, S.A. with respect to operations in Costa Rica (with English translation)
           (incorporated by reference to Coca-Cola FEMSAs Annual Report on Form 20-F filed on April 5, 2004
           (File No. 1-12260)).                                                                                                                                                                                                                                                                                              
|4.26 | Bottler Agreement, dated July 1, 1999, between The Coca-Cola Company and Panamco-Colombia, S.A., with
           respect to operations in Colombia (English translation) (incorporated by reference to Coca-Cola FEMSAs
           Annual Report on Form 20-F filed on April 5, 2004 (File No. 1-12260)).                                                                                                                                                                                                                                                                                                                                                      
|4.27 | Bottler Agreement, dated August 16, 1996, and Letter of Renewal, dated February 9, 2001, between The
           Coca-Cola Company and Embotelladora Coca-Cola y Hit de Venezuela, S.A. with respect to operations in
           Venezuela (with English translation) (incorporated by reference to Coca-Cola FEMSAs Annual Report on
           Form 20-F filed on April 5, 2004 (File No. 1-12260)).                                                                                                                                                                                                                                                          
|4.28 | Bottler Agreement, dated August 16, 1996, and Letter of Renewal, dated February 9, 2001, between
           Advantage Investments, Inc. and Embotelladora Coca-Cola y Hit de Venezuela, S.A. with respect to
           operations in Venezuela (English translation) (incorporated by reference to Coca-Cola FEMSAs Annual
           Report on Form 20-F filed on April 5, 2004 (File No. 1-12260)).                                                                                                                                                                                                                                                         
|4.29 | Supply Agreement, dated June 21, 1993, between Coca-Cola FEMSA and FEMSA Empaques (incorporated by
           reference to FEMSAs registration statement on Form F-4 filed on April 9, 1998 (File No. 333-8618)).                                                                                                                                                                                                                                                                                                                                                                                                                                              
|4.30 | Services Agreement, dated June 21, 1993, between Coca-Cola FEMSA and FEMSA Servicios (incorporated by
           reference to FEMSAs registration statement on Form F-4 filed on April 9, 1998 (File No. 333-8618)).                                                                                                                                                                                                                                                                                                                                                                                                                                           
|4.31 | Sugar Sale and Purchase Agreement, dated March 22, 2002, between Nacional Financiera, S.N.C. and
           Propimex, S.A. de C.V. (incorporated by reference to Coca-Cola FEMSAs Form 20-F filed on July 1, 2002
           (File No. 1-12260)).                                                                                                                                                                                                                                                                                                                                                                                                              
|4.32 | PET Purchase Agreement, dated April 1998, between Coca-Cola FEMSA and ALPLA Fábrica de Plásticos, S.A.
           de C.V. (incorporated by reference to Coca-Cola FEMSAs Form 20-F filed on July 1, 2002 (File No.
           1-12260)).                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.33 | Licensing Agreement, dated April 1, 2002, between Famosa and Ball Corporation (incorporated by
           reference to FEMSAs Form 20-F filed on June 27, 2003 (File No. 1-14814)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.34 | Advanced Technology Agreement, dated July 21, 1987, and amended July 7, 1992, among  Sivesa,
           Glastechnik Winckler & Co. GMBH, and Heye Glass (incorporated by reference to FEMSAs registration
           statement on Form F-4 filed on April 9, 1998 (File No. 333-8618)).                                                                                                                                                                                                                                                                                                                                                                        
|8.1  | Significant subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|12.1 | CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 7, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|12.2 | CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 7, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|13.1 | Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated April 7, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

Omitted from the
exhibits filed with this annual report are certain instruments and agreements with
respect to long-term debt of Coca-Cola FEMSA, none of which authorizes securities in a
total amount that exceeds 10% of the total assets of Coca-Cola FEMSA.  We hereby agree to
furnish to the SEC copies of any such omitted instruments or agreements as the Commission
requests.



Table of Contents

INDEPENDENT
AUDITORS' REPORT

To the Board of
Directors and Stockholders of  Fomento Económico Mexicano, S. A. de C. V.:

We have audited the
accompanying consolidated balance sheets of Fomento Económico Mexicano, S. A. de C. V. (a
Mexican corporation) and subsidiaries (the Company) as of December 31, 2003 and 2002,
and the related consolidated statements of income, changes in financial position and
changes in stockholdersequity for each of the three years in the period ended December
31, 2003, all expressed in millions of Mexican pesos of purchasing power as of December
31, 2003. These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based on our
audits. We did not audit the financial statement of certain consolidated subsidiaries,
which statements reflect total assets of approximately 14% and 12% of the consolidated
totals as of December 31, 2003 and 2002, respectively, and total revenues of 28, 26% and
22% of the consolidated totals for each of the three years in the period ended December
31, 2003, respectively. Those statements were audited by other auditors whose reports
have been furnished to us and our opinion, insofar as it relates to the amounts included
for those entities, is based solely on the reports of the other auditors.

We conducted our
audits in accordance with auditing standards generally accepted in Mexico and in the
United States of America. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe that our audits and
reports of the other auditors provide a reasonable basis for our opinion.

In our opinion, based
on our audits and the reports of the other auditors, such consolidated financial
statements present fairly, in all material respects, the financial position of Fomento
Económico Mexicano, S. A. de C. V. and subsidiaries as of December 31, 2003 and 2002, and
the results of their operations, changes in their stockholders equity and changes in
their financial position for each of the three years in the period ended December 31,
2003, in conformity with accounting principles generally accepted in Mexico.

As mentioned in Note
2, Coca-Cola FEMSA, S.A. de C.V. acquired Panamerican Beverages, Inc. on May 6, 2003,
incorporating its results of operations since the date of acquisition, as a result of
which the 2003 consolidated income statement and balance sheet are not comparable with
those of the prior year.

As mentioned in Note
5, effective January 1, 2003 the company adopted the Bulletins C-8, Intangible Assets,
and    C-9, Liabilities, Contingent Assets and Liabilities, and Commitments,
Additionally, effective January 1, 2001 the company adopted Bulletin C-2, Financial
Instruments.

Accounting principles
generally accepted in Mexico vary in certain significant respects from accounting
principles generally accepted in the United States of America.  The application of the
latter would have affected the determination of income for each of the three years in the
period ended December 31, 2003, and the determination of stockholders' equity at December
31, 2003 and 2002, to the extent summarized in Note 26.

Our audits also
comprehended the translation of the Mexican peso amounts into U.S. dollar amounts and, in
our opinion, such translation has been made in conformity with the basis stated in Note
3.  The translation of the financial statement amounts into U.S. dollars and the
translation of the financial statements into English have been made solely for the
convenience of readers in the United States of America.

Galaz, Yamazaki, Ruiz
Urquiza, S. C.

A member firm of
Deloitte Touche Tohmatsu

/s/ Ernesto Cruz Velázquez
de León

C. P. C. Ernesto Cruz
Velázquez de León

Monterrey, N.L., MexicoFebruary
9, 2004



FOMENTO ECONÓMICO
MEXICANO, S.A. DE C.V. Y SUBSIDIARIAS


Consolidated Balance
Sheets


At December 31, 2003
and 2002.


Amounts expressed in
millions of US dollars ($) and in millions of constant Mexican Pesos (Ps.) as of December
31, 2003.


|                                                         | 2003   | 2002       
|-------------------------------------------------------- | ------ | -----------
|                                                        
|ASSETS                                                  
|Current Assets:                                         
|Cash and cash equivalents                                | $688   | Ps. 7,733  
|Accounts receivable                                      | 381    | 4,285      
|Inventories                                              | 612    | 6,872      
|Recoverable taxes                                        | 57     | 641        
|Prepaid expenses                                         | 56     | 629        
|                                                        
|Total Current Assets                                     | 1,794  | 20,160     
|                                                        
|Investments in Shares                                    | 84     | 939        
|Properties, Plant and Equipment                          | 3,754  | 42,179     
|Other Assets                                             | 550    | 6,172      
|Intangible Assets and Goodwill                           | 3,105  | 34,884     
|                                                        
|TOTAL ASSETS                                             | $9,287 | Ps. 104,334
|                                                        
|LIABILITIES AND STOCKHOLDERS' EQUITY                    
|Current Liabilities:                                    
|Bank loans                                               | $216   | Ps. 2,428  
|Interest payable                                         | 36     | 404        
|Current maturities of long-term debt                     | 230    | 2,588      
|Suppliers                                                | 621    | 6,975      
|Taxes payable                                            | 126    | 1,416      
|Accounts payable, accrued expenses and other liabilities | 259    | 2,905      
|                                                        
|Total Current Liabilities                                | 1,488  | 16,716     
|                                                        
|Long-Term Liabilities:                                  
|Bank loans and notes payable                             | 2,968  | 33,345     
|Labor liabilities                                        | 162    | 1,815      
|Deferred income taxes                                    | 342    | 3,841      
|Other liabilities                                        | 224    | 2,519      
|                                                        
|Total Long-Term Liabilities                              | 3,696  | 41,520     
|                                                        
|Total Liabilities                                        | 5,184  | 58,236     
|                                                        
|                                                        
|Stockholders' Equity:                                   
|Minority interest in consolidated subsidiaries           | 1,575  | 17,698     
|                                                        
|Majority interest:                                      
|Capital stock                                            | 378    | 4,243      
|Additional paid-in capital                               | 1,073  | 12,060     
|Retained earnings from prior years                       | 1,375  | 15,450     
|Net income for the year                                  | 275    | 3,093      
|Cumulative translation adjustment                        | (54)   | (607)      
|Cumulative result of holding non-monetary assets         | (519)  | (5,839)    
|                                                        
|Total majority interest                                  | 2,528  | 28,400     
|                                                        
|Total Stockholders' Equity                               | 4,103  | 46,098     
|                                                        
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY               | $9,287 | Ps. 104,334
|                                                        

The accompanying notes
are an integral part of these consolidated balance sheets.Monterrey, N.L., México,
February 9, 2004.

|/s/ José Antonio Fernández Carbajal |  | /s/ Federico Reyes García
|----------------------------------- |  | -------------------------
|José Antonio Fernández Carbajal     |  | Federico Reyes García    
|Chief Executive Officer             |  | Chief Financial Officer  



FOMENTO ECONÓMICO
MEXICANO, S.A. DE C.V. Y SUBSIDIARIASConsolidated Income StatementsFor the years
ended December 31, 2003, 2002 and 2001.Amounts expressed in millions of US dollars
($) and in millions of constant Mexican Pesos (Ps.) as of December 31, 2003.

|                                                                                           | 2003   | 2002       | 2001      
|------------------------------------------------------------------------------------------ | ------ | ---------- | ----------
|                                                                                          
|Net sales                                                                                  | $6,729 | Ps. 75,597 | Ps. 55,176
|Other operating revenues                                                                   | 26     | 294        | 219       
|Total revenues                                                                             | 6,755  | 75,891     | 55,395    
|Cost of sales                                                                              | 3,504  | 39,371     | 27,640    
|                                                                                          
|Gross profit                                                                               | 3,251  | 36,520     | 27,755    
|                                                                                          
|Operating expenses:                                                                       
|Administrative                                                                             | 511    | 5,740      | 4,870     
|Sales                                                                                      | 1,664  | 18,696     | 13,094    
|                                                                                          
|                                                                                           | 2,175  | 24,436     | 17,964    
|                                                                                          
|Income from operations                                                                     | 1,076  | 12,084     | 9,791     
|Participation in affiliated companies                                                      | 2      | 30         | 87        
|                                                                                          
|                                                                                           | 1,078  | 12,114     | 9,878     
|Integral result of financing:                                                             
|Interest expense                                                                           | (226)  | (2,540)    | (943)     
|Interest income                                                                            | 62     | 695        | 465       
|Foreign exchange gain (loss)                                                               | (225)  | (2,532)    | (293)     
|Gain (loss) on monetary position                                                           | 84     | 954        | 398       
|                                                                                          
|                                                                                           | (305)  | (3,423)    | (373)     
|Other expenses, net                                                                        | (58)   | (656)      | (950)     
|                                                                                          
|Income for the year before income tax, tax on assets and
          employee profit sharing | 715    | 8,035      | 8,555     
|Income tax, tax on assets and employee profit sharing                                      | 300    | 3,378      | 3,764     
|                                                                                          
|Net income before effect of change in accounting principle                                 | 415    | 4,657      | 4,791     
|Effect of change in accounting principle                                                   | -      | -          | -         
|                                                                                          
|Consolidated net income for the year                                                       | $415   | Ps. 4,657  | Ps. 4,791 
|                                                                                          
|Net majority income                                                                        | 275    | 3,093      | 2,947     
|Net minority income                                                                        | 140    | 1,564      | 1,844     
|                                                                                          
|Consolidated net income for the year                                                       | $415   | Ps. 4,657  | Ps. 4,791 
|                                                                                          
|Net majority income per share                                                             
|(US dollars and constant Mexican pesos):                                                  
|Per Series "B" share                                                                      
|Before change in accounting principle                                                      | $0.046 | Ps. 0.521  | Ps. 0.496 
|After change in accounting principle                                                       | 0.046  | 0.521      | 0.496     
|                                                                                          
|Per Series "D" share                                                                      
|Before change in accounting principle                                                      | 0.058  | 0.651      | 0.620     
|After change in accounting principle                                                       | 0.058  | 0.651      | 0.620     
|                                                                                          

The accompanying notes
are an integral part of these consolidated income statements.



FOMENTO ECONÓMICO
MEXICANO, S.A. DE C.V. Y SUBSIDIARIASConsolidated Statements of Changes in Financial
PositionFor the years ended December 31, 2003, 2002 and 2001.Amounts expressed in
millions of US dollars ($) and in millions of constant Mexican Pesos (Ps.) as of December
31, 2003.

|                                                          | 2003    | 2002      | 2001      
|--------------------------------------------------------- | ------- | --------- | ----------
|                                                         
|Resources Generated by (Used in):                         |         |           |           
|Operations:                                              
|Consolidated net income                                   | $415    | Ps. 4,657 | Ps. 4,791 
|Depreciation                                              | 278     | 3,126     | 2,523     
|Impairment of long lived assets                           | 70      | 790       | 625       
|Deferred taxes                                            | 42      | 474       | 6         
|Amortization and other                                    | 177     | 1,982     | 1,933     
|                                                         
|                                                          | 982     | 11,029    | 9,878     
|                                                         
|Working capital:                                         
|Accounts receivable                                       | 32      | 361       | 444       
|Inventories                                               | (81)    | (911)     | (718)     
|Prepaid expenses                                          | 11      | 121       | (57)      
|Suppliers and other liabilities                           | (99)    | (1,108)   | 874       
|Recoverable taxes, net                                    | (57)    | (632)     | (648)     
|Interest payable                                          | 10      | 111       | -         
|Labor liabilities                                         | (10)    | (113)     | -         
|                                                         
|Net Resources Generated by Operating Activities           | 788     | 8,858     | 9,733     
|                                                         
|Investments:                                             
|Investments in shares                                     | -       | (4)       | (132)     
|Properties, plant and equipment                           | (358)   | (4,023)   | (3,229)   
|Intangible assets and other                               | (246)   | (2,766)   | (2,551)   
|Acquisition of Panamco                                    | (2,639) | (29,648)  | -         
|Other investments                                         | (5)     | (60)      | (345)     
|                                                         
|Net Resources Used in Investing Activities                | (3,248) | (36,501)  | (6,257)   
|                                                         
|Financing Activities:                                    
|Bank loans                                                | 1,394   | 15,659    | 5,700     
|Amortization in real terms of long-term liabilities       | (96)    | (1,064)   | (407)     
|Notes payable and others                                  | 4       | 45        | 82        
|Capital contribution by The Coca-Cola Company             | 627     | 7,041     | -         
|Dividends declared and paid                               | (95)    | (1,070)   | (1,185)   
|Repurchase of FEMSA shares                                | -       | -         | -         
|Decrease in the minority interest                         | -       | -         | -         
|Cumulative translation adjustment                         | (34)    | (383)     | (491)     
|                                                         
|Net Resources Generated by (Used in) Financing Activities | 1,800   | 20,228    | 3,699     
|                                                         
|Net Increase (Decrease) in Cash and Cash Equivalents      | (660)   | (7,415)   | 7,215     
|Cash and Cash Equivalents at Beginning of the Year        | 1,348   | 15,148    | 7,933     
|                                                         
|Cash and Cash Equivalents at the End of the Year          | $688    | Ps. 7,733 | Ps. 15,148
|                                                         

The accompanying notes
are an integral part of these consolidated statements of changes in financial position.



FOMENTO ECONÓMICO
MEXICANO, S.A. DE C.V. Y SUBSIDIARIASConsolidated Statements of Changes in
Stockholders EquityFor the years ended December 31, 2003, 2002 and 2001Amounts
expressed in millions of constant Mexican Pesos (Ps.) as of December 31, 2003.

|                                              | CapitalStock | AdditionalPaid-inCapital | RetainedEarningsfrom PriorYears | Net Incomefor theYear | CumulativeTranslationAdjustment | CumulativeResult ofHoldingNon-MonetaryAssets | TotalMajorityInterest | MinorityInterest inConsolidatedSubsidiaries | TotalStockholdersEquity
|--------------------------------------------- | ------------ | ------------------------ | ------------------------------- | --------------------- | ------------------------------- | -------------------------------------------- | --------------------- | ------------------------------------------- | ------------------------
|                                             
|Balances at December 31, 2000                 | Ps. 4,249    | Ps. 10,347               | Ps. 7,780                       | Ps. 2,865             | Ps. (538)                       | Ps. (5,010)                                  | Ps. 19,693            | Ps. 8,780                                   | Ps. 28,473              
|                                             
|Transfer of prior year income                 |              |                          | 2,865                           | (2,865)              
|Dividends declared and paid                   |              |                          | (494)                           |                       |                                 |                                              | (494)                 | (163)                                       | (657)                   
|Repurchase of FEMSA shares                    | (6)          |                          | (65)                            |                       |                                 |                                              | (71)                  |                                             | (71)                    
|Decrease in the minority interest             |              |                          |                                 |                       |                                 |                                              |                       | (511)                                       | (511)                   
|Comprehensive income                          |              |                          |                                 | 3,547                 | 356                             | (904)                                        | 2,999                 | 1,166                                       | 4,165                   
|                                             
|Balances at December 31, 2001                 | Ps. 4,243    | Ps. 10,347               | Ps. 10,086                      | Ps. 3,547             | Ps. (182)                       | Ps. (5,914)                                  | Ps. 22,127            | Ps. 9,272                                   | Ps. 31,399              
|                                             
|Transfer of prior year income                 |              |                          | 3,547                           | (3,547)              
|Dividends declared and paid                   |              |                          | (722)                           |                       |                                 |                                              | (722)                 | (463)                                       | (1,185)                 
|Comprehensive income                          |              |                          |                                 | 2,947                 | (250)                           | (78)                                         | 2,619                 | 1,465                                       | 4,084                   
|                                             
|Balances at December 31, 2002                 | Ps. 4,243    | Ps.10,347                | Ps. 12,911                      | Ps. 2,947             | Ps. (432)                       | Ps.(5,992)                                   | Ps. 24,024            | Ps. 10,274                                  | Ps. 34,298              
|                                             
|Transfer of prior year income                 |              |                          | 2,947                           | (2,947)              
|Dividends declared and paid                   |              |                          | (408)                           |                       |                                 |                                              | (408)                 | (662)                                       | (1,070)                 
|Capital contribution by The Coca-Cola Company |              | 1,713                    |                                 |                       |                                 |                                              | 1,713                 | 5,328                                       | 7,041                   
|Comprehensive income                          |              |                          |                                 | 3,093                 | (175)                           | 153                                          | 3,071                 | 2,758                                       | 5,829                   
|                                             
|Balances at December 31, 2003                 | Ps. 4,243    | Ps. 12,060               | Ps. 15,450                      | Ps. 3,093             | Ps. (607)                       | Ps. (5,839)                                  | Ps. 28,400            | Ps. 17,698                                  | Ps. 46,098              
|                                             

The accompanying notes
are an integral part of these consolidated statements of changes in stockholders' equity.



FOMENTO ECONÓMICO
MEXICANO, S.A. DE C.V. AND SUBSIDIARIES Notes to the Consolidated Financial Statements
At
December 31, 2003, 2002 and 2001.
Amounts expressed in millions of US dollars ($) and in
millions of constant Mexican Pesos (Ps.) as of December 31, 2003.


---

Note 1. Activities of
the Company.
Fomento Económico Mexicano, S.A. de C.V. (FEMSA) is a Mexican holding
company. The principal activities of FEMSA and its subsidiaries (the Company), as
an economic unit, are carried out by operating subsidiaries and grouped under direct
and indirect holding company subsidiaries (the Subholding Companies) of FEMSA.
The following is a description of such activities, together with ownership interest in
each Subholding Company:

|                                                                  
|------------------------------------------------------------------
|Subholding Company                                                
|                                                                  
|FEMSA Cerveza, S.A. de C.V.
and Subsidiaries
(FEMSA Cerveza)    
|                                                                  
|Coca-Cola FEMSA, S.A. de C.V. and Subsidiaries
(Coca-Cola FEMSA)
|                                                                  
|FEMSA Empaques, S.A. de
C.V. and Subsidiaries
(FEMSA Empaques)  
|                                                                  
|FEMSA Comercio, S.A. de C.V.
and Subsidiaries
(FEMSA Comercio)  
|                                                                  
|FEMSA Logística, S.A. de C.V.
and Subsidiaries
(FEMSA Logística)
|                                                                  

Note 2. Acquisition
of Panamerican Beverages, Inc.  On May 6, 2003,
Coca-Cola FEMSA acquired 100% of the outstanding stock of Panamerican  Beverages,  Inc. (Panamco)
for Ps. 29,518.  As part of the acquisition,  the Company assumed Ps. 9,085 of net debt
and incurred  transaction  costs of Ps. 388, which consist of financial, advisory and
legal fees, capitalized as adjustments to the purchase price.

After the  acquisition
 FEMSA owns 45.7% of the economic value of Coca-Cola  FEMSA and 53.6% of the voting
shares.  The Coca-Cola  Company owns 39.6% of the economic value and 46.4% of the voting
shares.  The remaining shares are listed in BMV and NYSE. Panamco produced and
distributed  Coca-Cola trademark beverages in Mexico,  Guatemala,  Nicaragua,  Costa
Rica,  Panama,  Venezuela,  Colombia  and  Brazil,  along  with  bottled  water  and
other  beverages  in some of these territories and beer in Brazil.

The results of Panamcos
 operations  have been included in the  consolidated  financial  statements  since the
date of acquisition,  as a result of which the 2003  consolidated  income  statement and
balance sheet are not comparable  with those of the prior year.  The 2003  statement of
changes in financial  position  has been  reclassified  to present the effects of the
acquisition and incorporation of Panamco as a single line item.

The  transaction  was
 financed  with an equity  contribution  from FEMSA of Ps.  2,779,  an exchange of The
 Coca-Cola Companys equity interests in Panamco valued at Ps. 7,041 for new shares of
Coca-Cola FEMSA,  cash on hand of Ps. 2,820 and additional indebtedness of Ps. 17,267.

The  exchange  of
 equity  interests  of The  Coca-Cola  Company  generated  additional  paid-in  capital
 in  majority stockholders  equity,  since the shares were  subscribed  at a value
 greater than the book value of the shares at the subscription date.

The  acquisition of
Panamcos  operations has great  strategic  importance  for FEMSA and Coca-Cola  FEMSA,
 because it positions  them as a strong  multinational  bottler,  assuring  their growth
in a  consolidating  environment,  and the largest  Coca-Cola  bottler in Mexico and
Latin America,  with great  potential for creating  business and  operational synergies.

The fair values of the
assets acquired and liabilities assumed are as follows:

|                                                             
|-------------------------------------------------------------
|Cash and cash equivalents                                    
|Other current assets                                         
|Properties, plant and equipment                              
|Other assets                                                 
|Rights to produce and distribute Coca-Cola trademark products
|                                                             
|Total assets acquired                                        
|Short-term debt                                              
|Other current liabilities                                    
|Long-term debt                                               
|Other long-term liabilities                                  
|                                                             
|Total liabilities assumed                                    
|                                                             
|Net assets acquired                                          
|                                                             

Note 3. Basis of
Presentation.
The consolidated financial statements of the Company are prepared in
accordance with accounting principles generally accepted in Mexico (Mexican GAAP),
which differ in certain significant respects from accounting principles generally
accepted in the United States of America (US GAAP), as further explained in Note
25. A reconciliation from Mexican GAAP to US GAAP is included in Note 26.

The  consolidated
 financial  statements are stated in millions of Mexican pesos (Ps.).  The
 translations of Mexican pesos into US dollars  ($) are included  solely for the
 convenience  of the reader,  using the  exchange  rate as of December 31, 2003 of 11.235
Mexican pesos per one US dollar.

The consolidated
 financial  statements include,  the financial statements of FEMSA and those of all
companies in which it owns  directly or  indirectly a majority of the  outstanding
 voting  capital stock and/or  exercises  control.  All intercompany account balances and
transactions have been eliminated in such consolidation.

Note 4. Foreign
Subsidiary Incorporation.The accounting records of the foreign subsidiaries are
maintained in the currency of the country where they are located, and in accordance
with the accounting principles generally accepted in each country. For incorporation
into the FEMSA consolidated financial statements, they are adjusted to Mexican GAAP
and restated to the purchasing power of the local currency at the end of the year by
applying the inflation factors of the country of origin and are subsequently
translated into Mexican pesos using the year-end exchange rate.

The variation in the
net  investment in foreign  subsidiaries  generated by exchange rate  fluctuations  is
included in the  cumulative   translation  adjustment  and  is  recorded  directly  in
 stockholders  equity,  as  part  of  other comprehensive income.

When the Company
designates  foreign  subsidiary net investment as an economic hedge of its own financing
 acquisition, the accounting treatment for the integral cost of financing is as follows:

- The foreign
 exchange  gain or loss is  recorded  as part of the  cumulative  translation
 adjustment,  to the      extent the net investment in the foreign  subsidiary  covers
the debt, net of taxes.  The foreign exchange gain or      loss associated with any
unhedged portion of such debt is recorded in the integral result of financing.
- The
monetary  position  result is computed  using the  inflation  factors of the country in
which the acquired      subsidiary is located to the extent the net  investment in the
foreign  subsidiary  covers the debt.  The unhedged      portion of such debt is
 calculated  using  inflation  factors of the country of the company  that  contracts
 the      financing. The total effect is recorded in the integral result of financing.

When the Company has
not designated an economic hedge,  the foreign  exchange gain or loss and gain or loss on
monetary position are recorded in the integral result of financing.

The monetary position
result and exchange gain or loss on intercompany  foreign currency  denominated balances
that are considered  to be of a  long-term-investment  nature  (that  is,  settlement  is
 not  planned  or  anticipated  in the foreseeable future), are reflected in cumulative
translation adjustment in stockholders equity.

In  December  2001,
 the  Argentine  government  adopted a series of economic  measures,  the most  important
 of which consisted of  restrictions on cash  withdrawals  and foreign  exchange
 transactions.  Due to the continuing  difficult economic  situation in Argentina,  the
uncertainty  with respect to the period of recovery,  and the instability of the exchange
 rate,  on July 1, 2002,  the Company  performed a valuation of its  investment  in
Coca-Cola  FEMSA de Buenos Aires,  S.A.  (Coca-Cola  FEMSA Buenos  Aires) based on
market price value  multiples of comparable  businesses.  The valuation  resulted in the
 recognition of an impairment of goodwill of Ps. 457, which was recorded in results of
2002. As a result,  the net  investment in Coca-Cola  FEMSA Buenos Aires is no longer
 considered to be an economic  hedge of the liabilities denominated in US dollars
incurred to acquire Coca-Cola FEMSA Buenos Aires.

In January  2003,  the
 Venezuelan  government  suspended  the exchange of bolivars for US dollars and in
February 2003 implemented an exchange  control  regime,  under which it created a foreign
 exchange  control agency that approves all foreign  currency  transactions  and
instructs  the Central Bank of Venezuela  (BCV) to release  foreign  currency to
approved  companies.  Under the exchange  control  regime,  approved US dollars are
released by the BCV at the official exchange  rate of 1,600  bolivars  per US dollar.
 For most of 2003  releases  had been  minimal in relation to amounts requested.  In view
of the  uncertainties  regarding the  availability  of US dollars at the official rate,
the Company has used the last available  market-closing rate of 1,853 bolivars per US
dollar to translate the financial  statements of its  Venezuela  subsidiary.  On
 February 6, 2004,  a 20%  devaluation  of the  Venezuelan  bolivar  was  officially
announced, with the new official exchange rate being set at 1,920 bolivars per US dollar.

The Company has not
designated any investment in foreign  subsidiary as an economic hedge of the  liabilities
 incurred to acquire Panamcos territories.

Note 5. Significant
Accounting Policies.
The Companys accounting policies are in accordance with Mexican
GAAP, which require that the Companys management make certain estimates and use
certain assumptions to determine the valuation of various items included in the
consolidated financial statements.
 The Companys management believes that the estimates
and assumptions used were appropriate as of the date of these consolidated financial
statements.

The significant
accounting policies are as follows:

Recognition of the
Effects of Inflation:
The recognition of the effects of inflation in the financial
information consists of:

- Restating
 non-monetary  assets such as  inventories  and fixed assets,  including  related costs
and expenses          when such assets are consumed or depreciated.
- Restating
 capital  stock,  additional  paid-in  capital  and  retained  earnings by the amount
 necessary  to          maintain  the  purchasing  power  equivalent  in Mexican  pesos
on the dates such capital was  contributed  or          income generated, through the use
of inflation factors.
- Including
in  stockholders  equity the cumulative  effect of holding  non-monetary  assets,  which
is the net          difference  between  changes  in the  replacement  cost of
 non-monetary  assets  and  adjustments  based upon          inflation factors.
- Including
in the cost of financing the purchasing power gain or loss from holding monetary items.

The Company  restates
its  consolidated  financial  statements in terms of the purchasing power of the Mexican
peso     as of the most recent balance sheet date by using  inflation  factors of the
country of origin and latest  year-end     exchange rate of the Mexican peso.
 Accordingly,  the amounts are comparable with each other and with the preceding
    years  since all are  expressed  in the  purchasing  power of the same  currency  as
of the end of the latest  year     presented.

Cash and Cash
Equivalents:

Cash consists of
 non-interest  bearing bank deposits.  Cash  equivalents  consist  principally of
short-term  bank     deposits and fixed-rate investments with brokerage houses valued at
the quoted market prices. (See note 17)

Inventories and
Cost of Sales:

The value of
inventories is adjusted to replacement  cost,  without  exceeding market value.  Advances
to suppliers     to purchase  raw  materials  and spare parts are  included in the
 inventory  account and are  restated by applying     inflation factors, considering
their average age.

Cost of sales is
 determined  based on  replacement  cost at the  time of  sale.  Cost of sales  includes
 expenses     related to raw materials used in production process,  labor (wages and
other benefits),  depreciation of production     facilities  and equipment  and other
costs  including  fuel,  electricity,  breakage of  returnable  bottles in the
    production process, equipment maintenance, inspection, and inter and intra-plant
transfer costs.

Prepaid Expenses:

These  represent
 payments  for  services  that will be  received  over the next 12 months.  Prepaid
 expenses  are     recorded at historical  cost and recognized in the income  statement
of the month in which the services or benefits     are received. Prepaid expenses are
principally represented by advertising, promotional and leasing expenses.

Advertising  costs
 consist of  television  and radio  advertising  airtime  paid in advance,  which are
 generally     amortized  over a 12-month  period  based on the  transmission  of the
 television  and radio  spots.  The  related     production costs are recognized in the
results of operations the first time the advertising takes place.

Promotional  costs are
expensed as incurred,  except for those  promotional  costs  related to the launching of
new     products or  presentations.  Those costs are recorded as prepaid  expenses and
 amortized  over the period,  during     which they are estimated to increase sales of
the related products or  presentations  to normal  operating  levels,     which is
generally one year.

Bottles and Cases:

Bottles and cases are
recorded at acquisition cost and restated to their replacement cost.

FEMSA  Cerveza
 includes  bottles and cases in  inventories.  Breakage is charged to expense as
 incurred.  For the     years  ended  December  31,  2003,  2002 and 2001,  breakage
 expense  amounted  to Ps.  174,  Ps. 153 and Ps. 176,     respectively.

Coca-Cola FEMSA
includes bottles and cases in properties,  plant and equipment.  For financial  reporting
purposes,     breakage is recorded as an expense as it is incurred.  Depreciation  is
computed  only for tax  purposes  using the     straight-line  method at a rate of 10%
per year.  The Company  estimates  that  breakage  expense is similar to the
    depreciation  calculated on an estimated useful life of approximately four years for
returnable glass bottles,  one     year for returnable  plastic  bottles and four years
for returnable  cases.  For the years ended December 31, 2003,     2002 and 2001,
 breakage  expense  amounted to Ps. 274, Ps. 201 and Ps. 208,  respectively.  Bottles and
cases that     have been placed in the hands of customers  and for which a deposit from
 customers has been received are presented     net of such deposits,  and the difference
 between the cost of these assets and the deposits  received is amortized     according
to their useful  lives.  The bottles and cases for which no deposit has been  received
are expensed  when     placed in the hands of customers.

Investments in
Shares:

Investments in shares
of associated  companies are initially  recorded at their  acquisition  cost and
subsequently     valued  using  the  equity  method.  Investments  in  affiliated
 companies  in  which  the  Company  does not have     significant  influence and which
does not have an observable  market value,  are recorded at  acquisition  cost and
    restated based upon inflation  factors of the country of origin.  Investments in
affiliated  companies in which the     Company does not have significant  influence and
which does have an observable  market value are adjusted to market     value, with such
adjustments reflected in earnings.

Properties, Plant
and Equipment:

These  assets are
 initially  recorded at their cost of  acquisition  and/or  construction.  Properties,
 plant and     equipment  of  domestic  origin,  except  bottles  and cases of  Coca-Cola
 FEMSA (see Note 5 e), are  restated  by     applying  inflation  factors.  Imported
 equipment  is restated by applying  the  inflation  rate of the country of     origin
and then translated at the year-end exchange rate.

Depreciation  is
computed  using the  straight-line  method,  based on the value of the restated  assets
reduced by     their  residual  values.  The  Company  together  with  independent
  appraisers  determines   depreciation  rates,     considering the estimated remaining
useful lives of the assets.

The estimated useful
lives of the main assets are as follows:

|                                
|--------------------------------
|                                
|                                
|Buildings and construction      
|Machinery and equipment         
|Distribution equipment          
|Information technology equipment
|                                

Other Assets:

These assets represent
payments whose benefits will be received in future years and consist of:

- Agreements
 with customers for the right to sell and promote the Companys  products  during certain
 periods of        time,  which are being  considered  as  monetary  assets  and
 amortized  in  accordance  with the terms of such        agreements,  based on the
volume sold by the customers.  The term of these  agreements is between three and four
       years.
 Prior to 2002,  the  amortization  was included in operating  expenses.  Beginning  in 2002,  as a  supplemental
       standard to Mexican GAAP, the Company  adopted the provisions of Emerging  Issues Task Force (EITF) No. 01-09,
       Accounting for Consideration  Given by a Vendor to a Customer  (Including a Reseller of the Vendors Products)
       of the Financial  Accounting  Standards  Board  (FASB),  which requires  presenting the  amortization of these
       capitalized  amounts as a reduction of net sales.  During the years ended  December 31, 2003,  2002 and 2001 the
       amortization  reducing  net sales  amounted to Ps.  1,055,  Ps. 990 and Ps. 885,  respectively.  The 2001 income
       statement has been reclassified to conform to this change in presentation.

- Leasehold
 improvements,   which  are  restated  by  applying  inflation  factors,  are  amortized
 using  the        straight-line method, in accordance with the terms of lease contracts.

Intangible Assets
and Goodwill:

These assets
 represent  payments  whose  benefits will be received in future years.  Beginning in
2003 the Company     applies  Bulletin  C-8  Activos  Intangibles   (Intangible
 Assets)  (C-8),   which  establishes  that  project     development  costs should be
 capitalized  if they  fulfill the criteria  established  for  recognition  as assets.
    Additionally,  C-8  requires  identifying  all  intangible  assets  to  reduce  as
much as  possible  the  goodwill     associated with business  combinations.  Prior to
2003, the excess of the purchase price over the fair value of the     net assets acquired
in a business  combination was considered to be goodwill.  With the adoption of C-8,
 Coca-Cola     FEMSA considers such excess to relate to the rights to produce and
distribute  Coca-Cola  trademark  products.  The     Company  separates  intangible
 assets between those with a finite useful life and those with an indefinite  useful
    life, in accordance with the period over which the Company expects to receive the
benefits.

Intangible assets with
definite lives are amortized during their useful life, and consist of:

- Start-up
 expenses  represent costs incurred prior to the opening of an Oxxo store,  including
 rent,  permits        and licenses.  Such amounts are restated based on inflation
 factors and are amortized on a straight-line  basis        in accordance with the terms
of the lease contract.

- Enterprise
 resource  planning (ERP) system  implementation  costs incurred during the  development
 stage are        capitalized in accordance  with Bulletin C-8 and are amortized using
the  straight-line  method over four years.        Expenses,  which do not fulfill the
requirements for  capitalization,  such as research expenses are expensed as
       incurred.

Intangible assets with
indefinite lives are not amortized,  but are periodically  subject to an impairment test
and     consist of:

- Coca-Cola
FEMSA rights to produce and distribute  Coca-Cola trademark  beverages in the territories
 acquired.        Those  agreements are the standard  contracts that The Coca-Cola
 Company enters into with bottlers  outside the        United  States of America for the
sale of  concentrates  for certain  Coca-Cola  trademark  beverages.  The most
       significant  bottler agreements have terms of 10 years. The bottler  agreements
are automatically  renewable for        10 year terms,  subject to non-renewal by either
party.  The agreements are recorded in the functional  currency        of the  subsidiary
 in which the  investment  was made and are  restated by applying the  inflation  rate of
the        country of origin and the year-end exchange rate.

- FEMSA
Cerveza  distribution  rights,  which represent the payments made to  concessionaries in
the acquisition        of the franchise previously granted, and are substantially equal
to the fair value.

Goodwill  is the
 difference  between  the price paid and the fair value of the shares  and/or net assets
 acquired     that was not assigned  directly to an  intangible  asset.  Goodwill is
recorded in the  functional  currency of the     subsidiary  in which the  investment
 was made and is  restated by applying  the  inflation  rate of the country of     origin
and the year-end exchange rate. Goodwill is amortized over a period of not more     than
20 years.

Impairment of
Goodwill and Long-Lived Assets:

The Company  reviews
the carrying  value of its  goodwill  and other  long-lived  assets for  impairment
 whenever      events or changes in  circumstances  indicate  that the  carrying  amount
of an asset may not be  recoverable.  In      order to determine whether  impairment
 exists,  management  compares estimated future discounted cash flows to be
     generated  by those  assets  with  their  carrying  value.  If such  assets are
 considered  to be  impaired,  the      impairment  charge to be recognized in net income
is measured by the amount by which the carrying  amount  exceeds      their fair value.

Payments from The
Coca-Cola Company:

The Coca-Cola  Company
 participates  in certain  advertising  and  promotional  programs of Coca-Cola  FEMSA.
 The     resources  received for  advertising and  promotional  incentives are included
as a reduction of selling  expenses.     The net expenses  incurred were Ps. 1,498,  Ps.
755 and Ps. 748 during the years ended December 31, 2003,  2002 and     2001,
respectively.

In addition,  The
Coca-Cola Company has made payments in connection with Coca-Cola FEMSAs refrigeration
 equipment     investment  program.  These resources are related to the increase in sales
volume of The Coca-Cola Company products     that result from such  expenditures  and
will be reimbursed if the established  conditions in the contracts are not     met. The
refrigeration equipment investments,  net of the participation,  are capitalized in
properties,  plant and     equipment.

Labor Liabilities:

Labor  liabilities
 include  obligations for pension and retirement  plan,  seniority  premiums and
 postretirement     medical  services,  based on actuarial  calculations  by  independent
 actuaries,  using the projected  unit credit     method.  These  liabilities are
considered to be non-monetary  and are restated using  long-term  assumptions.  The
    increase in labor liabilities of the year is charged to expense in the income
statement.

Unamortized  prior
service costs are recorded as expenses in the income  statement over the period during
which the     employees will receive the benefits of the plan,  which in the case of
pension and  retirement  plans and seniority     premiums is 14 years and for
postretirement medical services is 20 years, both since 1996.

Certain  subsidiaries
of the Company have established funds for the payment of pension benefits and
 postretirement     medical services through irrevocable trusts with the employees as
beneficiaries.

Severance  indemnities
 are  charged  to  expenses  on the date  that they are  incurred.  The  severance
 payments     resulting  from the Companys  reduction of  personnel,  as a result of the
 restructuring  of certain  areas,  are     included in other expenses,  net. During the
years ended December 31, 2003, 2002 and 2001, these payments  amounted     to Ps. 101,
Ps. 177 and Ps. 180, respectively.

Revenue Recognition:

Revenue is  recognized
 upon  shipment of goods to customers or upon  delivery to the customer and the customer
has     taken  ownership of the goods.  Net sales  reflect  units  delivered  at selling
 list prices  reduced by promotion     allowances and discounts.

Operating Expenses:

Administrative
 expenses  include labor costs (salaries and other benefits) for employees not directly
 involved in     the  sale  of  the  Companys  products,   professional  services  fees,
 depreciation  of  office  facilities  and     amortization of capitalized software costs.

Selling expenses
include:

|a) | Distribution:
 labor costs  (salaries  and other  benefits),  outbound  freight  costs,  warehousing
 costs of            finished  products,  breakage  for  returnable  bottles  in  the
 distribution  process,   depreciation  and            maintenance of trucks and other
distribution  facilities and equipment.  During the years ended December 31,
           2003, 2002 and 2001, these distribution costs amounted to Ps. 4,848, Ps. 4,092
and Ps. 4,013, respectively.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) | Sales:
labor costs (salaries and other benefits) and sales commission paid to sales personnel.
|-- | ----------------------------------------------------------------------------------------------

|c) | Marketing:
labor costs (salaries and other benefits), promotions and advertising costs.
|-- | ---------------------------------------------------------------------------------------

Income Tax, Tax on
Assets and Employee Profit Sharing:

Income taxes and
employee  profit sharing are charged to results of the year in which they are incurred,
 including     the deferred income tax that arises from the temporary  differences
 between the accounting and tax bases of assets     and  liabilities,  including  the tax
loss  carryforward  benefit.  Deferred  income tax assets are  reduced by any
    benefits  about  which  there is  uncertainty  as to their  realizability.  Deferred
 employee  profit  sharing  is     calculated  considering only those temporary
differences that arise from the reconciliation  between the accounting     income  for
the year and the basis  for  employee  profit  sharing  that are  expected  to  generate
 a benefit  or     liability within a defined period.

The tax on assets paid
that is expected to be recovered is recorded as a reduction of the deferred tax liability.

The balance of
deferred taxes is comprised of monetary and non-monetary  items, based on the temporary
 differences     from which it is derived.  Deferred taxes are classified as a long-term
asset or liability,  regardless of when the     temporary differences are expected to
reverse.

The deferred tax
 provision  for the year to be included in the results of  operations  is  determined by
comparing     the deferred tax balance at the end of the year to the balance at the
 beginning of the year,  excluding  from both     balances any temporary  differences
that are recorded directly in stockholders  equity. The deferred taxes related     to
such temporary differences are recorded in the same stockholders equity account.

FEMSA has received
 authorization  from the Secretaría de Hacienda y Crédito Público (SHCP) to prepare its
income     tax and tax on asset returns on a consolidated  basis,  which includes the
 proportional  taxable income or loss of     its Mexican  subsidiaries,  which is limited
to 60% of the stockholders  participation.  The provisions for income     taxes of the
foreign  countries have been determined on the basis of the taxable income of each
individual  company     and not on a consolidated basis.

Integral Result of
Financing:

The integral result of
financing includes:

Interest:
 Interest
income and expenses are recorded when earned or incurred, respectively.

Foreign Exchange Gains
and Losses:
 Transactions  in foreign  currency are recorded in local  currency  using
the exchange rate  applicable on the date     they occur.  Assets and  liabilities in
foreign  currencies are adjusted to the year-end  exchange rate,  recording     the
 resulting  foreign  exchange gain or loss directly in the income  statement,  except for
any foreign  exchange     gain or loss from  financing  obtained for the  acquisition  of
foreign  subsidiaries  that is  considered to be an     economic hedge (see Note 4).

Gain (Loss) on
Monetary Position:
 This is the result of the  effects of  inflation  on  monetary
 items.  The gain  (loss) on  monetary  position  is     computed by applying  inflation
 factors of the country of origin to the net monetary  position at the beginning of
    each month,  excluding the financing  contracted for the acquisition of any foreign
subsidiaries that is considered     to be an economic hedge (see Note 4). The gain (loss)
on monetary  position of foreign  subsidiaries  is translated     into Mexican pesos
using the year-end exchange rate.

Financial
Instruments:

The  Company
 frequently  contracts  financial  instruments  to manage  the  financial  risks
 associated  with its     operations.  If the  instrument  is used to manage the risk
related with the  Companys  operations,  the effect is     recorded in cost of sales and
in operating  expenses.  If the  instrument  is used to manage the risks related with
    the  financing  operations,  the effect is recorded in interest  expense or in the
foreign  exchange  loss  (gain),     depending on the related contract.

Bulletin C-2, Instrumentos
 Financieros (Financial  Instruments),  requires an enterprise to record all financial
    instruments  in the balance  sheet as assets or  liabilities.  The bulletin  requires
 that  financial  instruments     entered  into for hedging  purposes be valued  using
the same  valuation  criteria  applied to the hedged  asset or     liability.

Additionally,
 financial  instruments  entered into for purposes  other than hedging the  operations of
the Company     should be valued at fair market value.  The difference  between the
financial  instruments  initial value and fair     market value should be recorded in
the income  statement.  The initial  effect of this  bulletin is included in net
    income of 2001, net of taxes, as a change in accounting principle, which amount to
Ps. 30.

Cumulative Result
of Holding Non-monetary Assets:

This  represents the
sum of the difference  between book values and restatement  values,  as determined by
applying     inflation  factors to  non-monetary  assets such as  inventories  and fixed
assets,  and their effect on the income     statement when the assets are consumed or
depreciated.

Comprehensive
Income:

Comprehensive  income
is comprised of the net income for the year and other comprehensive  income items such as
the     translation  adjustment  and the  result of  holding  non-monetary  assets  and
is  presented  in the  consolidated     statement of changes in stockholders equity.

Provisions:

Beginning  January 1,
2003, the Company adopted the provisions of new Bulletin C-9, Pasivo,  Provisiones,
 Activos     y  Pasivos  Contingentes  y  Compromisos   (Liabilities,   Provisions,
  Contingent  Assets  and  Liabilities  and     Commitments),  which  establishes
 additional  guidelines  clarifying the accounting for  provisions,  accruals and
    contingent  liabilities,  and  establishes  new  standards  for the use of  present
 value  techniques  to  measure     liabilities and accounting for the early  settlement
or  substitution  of obligations.  The adoption of C-9 did not     have a material impact
on the Companys financial position and results of operations.

Note 6.    Accounts
Receivable.

|                               
|-------------------------------
|                               
|                               
|Trade                          
|Allowance for doubtful accounts
|Notes receivable               
|The Coca-Cola Company          
|Insurance claims               
|Loans to employees             
|Travel advances to employees   
|Rent of warehouses             
|Other                          
|                               
|                               
|                               

The changes in the
allowance for doubtful accounts are as follows:

|                                                       
|-------------------------------------------------------
|                                                       
|                                                       
|Balance at the beginning of the year                   
|Acquisition of Panamco                                 
|Provision for the year                                 
|Cancellation of reserve                                
|Restatement of the balance at the beginning of the year
|                                                       
|Balance at the end of the year                         
|                                                       

Note 7.
   Inventories.

|                                     
|-------------------------------------
|                                     
|                                     
|Raw materials                        
|Finished products                    
|Bottles and cases of FEMSA Cerveza   
|Spare parts                          
|Advances to suppliers                
|Work in process                      
|Advertising and promotional materials
|Allowance for obsolescence           
|                                     
|                                     
|                                     

Note 8.    Prepaid
Expenses.

|                                    
|------------------------------------
|                                    
|                                    
|Advertising and promotional expenses
|Agreements with customers           
|Leasing                             
|Other                               
|                                    
|                                    
|                                    

The advertising and
promotional  expenses  recorded in the income statement for the years ended December 31,
2003, 2002 and 2001 amounted Ps. 1,186, Ps. 935 and Ps. 949, respectively.

Note 9.
   Investments in Shares.

|                                                         
|---------------------------------------------------------
|Company                                                  
|                                                         
|FEMSA Cerveza:                                           
|Labatt-USA LLC (Labatt-USA)                            
|Associated companies of FEMSA Cerveza                    
|Río Blanco Trust (waste water treatment plant)           
|Other                                                    
|Coca-Cola FEMSA:                                         
|Molson, Inc. (Molson)                                  
|Industria Envasadora de Querétaro, S.A. de C.V. (IEQSA)
|Complejo Industrial Can, S.A. (CICAN)                  
|Beta San Miguel, S.A. de C.V. (Beta San Miguel)        
|Tapón Corona de Colombia, S.A. (Tapón Corona)          
|Other                                                    
|Other investments                                        
|                                                         
|                                                         
|                                                         

The  investment in
Molson  shares is recorded at its market value of Ps. 310 as of December 31, 2003,  and
is presented net of the fair value of the  related  equity  forward  contract  of Ps. 74.
The Molson  stock is subject to a two-year contractual restriction on sale that expires
on March 19, 2004.

Note 10.
  Properties, Plant and Equipment.

|                                    
|------------------------------------
|                                    
|                                    
|Land                                
|Buildings, machinery and equipment  
|Accumulated depreciation            
|Construction in progress            
|Bottles and cases of Coca-Cola FEMSA
|Assets stated at realizable value   
|                                    
|                                    
|                                    

The Company  has
 identified  fixed  assets  consisting  mainly of land,  buildings  and  equipment  for
 disposal,  in accordance with an approved program for the disposal of certain
 investments.  Such assets are not in use and have been valued at their estimated
realizable value, according to independent appraisals. Such assets are allocated as
follows:

|                
|----------------
|                
|                
|FEMSA and others
|FEMSA Cerveza   
|FEMSA Empaques  
|                
|                
|                

Those fixed assets
 recorded at their  estimated  realizable  value are considered  monetary  assets on
which a loss on monetary position is computed and recorded in the integral result of
financing.

Note 11.   Other
Assets.

|                                          
|------------------------------------------
|                                          
|                                          
|Agreements with customers                 
|Leasehold improvements                    
|Long-term accounts receivable             
|Additional labor liabilities (see Note 15)
|Long-term prepaid advertising             
|Recoverable taxes (see Note 23 b)         
|Financing issuance costs                  
|Other                                     
|                                          
|                                          
|                                          

Note 12.
  Intangible Assets and Goodwill.

|                                                              
|--------------------------------------------------------------
|                                                              
|                                                              
|Unamortized Intangible Assets:                                
|Coca-Cola FEMSA:                                              
|Rights to produce and distribute Coca-Cola trademark products:
|Territories of Panamco (see Note 2)                           
|Buenos Aires, Argentina                                       
|Tapachula, Chiapas                                            
|                                                              
|FEMSA Cerveza:                                                
|Distribution rights                                           
|                                                              
|FEMSA:                                                        
|Mundet trademark                                              
|                                                              
|Amortized Intangible Assets:                                  
|Goodwill:                                                     
|FEMSAs minority interest acquisition                         
|Other Intangible assets:                                      
|Cost of systems implementation (ERP)                          
|Start-up expenses                                             
|                                                              
|                                                              
|                                                              

The estimated
 goodwill  amortization  related to FEMSAs minority interest  acquisition is Ps. 14 per
year, and the changes in the carrying amount of goodwill are as follows:

|                                                     
|-----------------------------------------------------
|                                                     
|                                                     
|Original investment                                  
|Accumulated amortization at the beginning of the year
|Amortization for the year                            
|                                                     
|Accumulated amortization at the end of the year      
|                                                     
|Balance at the end of the year                       
|                                                     

Note 13.   Balances
and Transactions with Related Parties and Affiliated Companies.

The consolidated
 balance sheets and income statements  include the following balances and transactions
with related parties and affiliated companies:

|                                             
|---------------------------------------------
|Balances                                     
|Assets (accounts receivable)                 
|Liabilities (suppliers and other liabilities)
|Long-term debt with BBVA Bancomer, S.A. (1)  
|                                             

|                                                       
|-------------------------------------------------------
|Transactions                                           
|                                                       
|Income:                                                
|Sales to and other revenues from affiliated            
|Companies of FEMSA Cerveza                             
|Sales of cans to IEQSA                                 
|Interest income (1)                                    
|                                                       
|Expenses:                                              
|Purchase of concentrate from The Coca-Cola Company     
|Purchases from Grupo Industrial BIMBO, S.A. de C.V. (1)
|Purchase of canned products from IEQSA and CICAN       
|Purchase of sugar from Beta San Miguel                 
|Purchases of crown cap from Tapón Corona               
|Insurance premiums (1)                                 
|Services paid to Labatt                                
|Interest expense (1)                                   
|Other                                                  
|                                                       

|(1) | There are common members of the Board of Directors.
|--- | ---------------------------------------------------

Note 14.   Balances
and Transactions in Foreign Currency.

Assets,  liabilities
and transactions  denominated in a foreign currency, other than the functional currency
of the reporting unit, translated into US dollars are as follows:

|Balances           |             | ApplicableExchange Rate (1) | Short-Term | Long-Term | Total
|------------------ | ----------- | --------------------------- | ---------- | --------- | -----
|                  
|December 31, 2003: | Assets      | 11.235                      | $137       | $10       | $147 
|                   | Liabilities |                             | 535        | 1,394     | 1,929
|                  
|December 31, 2002: | Assets      | 10.459                      | $638       | $19       | $657 
|                   | Liabilities |                             | 389        | 652       | 1,041
|                  

|(1) | Mexican pesos per one US dollar.
|--- | --------------------------------

|                          
|--------------------------
|Transactions              
|                          
|Revenues                  
|Expenses:                 
|Purchases of raw materials
|Technical assistance fees 
|Interest and other        
|                          
|                          
|                          

As of February 9,
2004, the issue date of these  consolidated  financial  statements,  the exchange rate
was 11.120  Mexican  pesos per one US  dollar,  and the  foreign  currency  position  was
 similar to that as of December 31, 2003.

Note 15.   Labor
Liabilities.

The actuarial
 calculations for pension and retirement plans,  seniority premiums and postretirement
medical service liabilities and the cost for the year were determined using the following
long-term assumptions:

|                
|----------------
|                
|                
|Mexico          
|Guatemala       
|Nicaragua       
|Costa Rica      
|Colombia        
|Brazil          
|                
|Measurement date
|                

|(1) | No fund established for the payment of postretirement obligations.
|--- | ------------------------------------------------------------------

The bases for the
 determination  of the long-term  asset return rate is supported by a historical
 analysis of  average  returns  in real  terms of the last 30 years of the  Certificados
 de  Tesorería  del  Gobierno Federal (CETES) (Federal  Government  Treasury
 Certificates) and the expectations of long-term returns of the  actual  investments  of
the  Company.  Panama,  Venezuela  and  Argentina  operations  do not  have any
postretirement plans.

The balances of the
liabilities and the trust assets as well as the expenses for the year are as follows:

|                                                                          
|--------------------------------------------------------------------------
|                                                                          
|                                                                          
|Pension and retirement plans:                                             
|Vested benefit obligation                                                 
|Non-vested benefit obligation                                             
|                                                                          
|Accumulated benefit obligation                                            
|Excess of projected benefit obligation over accumulated benefit obligation
|                                                                          
|Projected benefit obligation                                              
|Pension plan funds at fair value                                          
|                                                                          
|Unfunded projected benefit obligation                                     
|Unrecognized net transition obligation services                           
|Unrecognized actuarial net gain                                           
|                                                                          
|                                                                          
|Additional labor liability                                                
|                                                                          
|Total                                                                     
|                                                                          
|                                                                          
|                                                                          
|Seniority premiums:                                                       
|                                                                          
|Vested benefit obligation                                                 
|Non-vested benefit obligation                                             
|                                                                          
|Accumulated benefit obligation                                            
|Excess of projected benefit obligation over accumulated benefit obligation
|                                                                          
|Unfunded projected benefit obligation                                     
|Unrecognized net transition obligation services                           
|                                                                          
|                                                                          
|Additional labor liability                                                
|                                                                          
|Total                                                                     
|                                                                          
|                                                                          
|                                                                          
|Postretirement medical services:                                          
|Vested benefit obligation                                                 
|Non-vested benefit obligation                                             
|                                                                          
|Accumulated benefit obligation                                            
|Medical services funds at fair value                                      
|                                                                          
|Unfunded accumulated benefit obligation                                   
|Unrecognized net transition obligation                                    
|Unrecognized actuarial net loss                                           
|                                                                          
|Total                                                                     
|                                                                          
|Total Labor Liabilities                                                   
|                                                                          

|                               
|-------------------------------
|Expense for the year           
|                               
|Pension plan                   
|Seniority premiums             
|Postretirement medical services
|                               
|                               
|                               

The accumulated
 actuarial  gains and losses were generated by the  differences in the assumptions  used
for the actuarial  calculations  at the beginning of the year versus the actual  behavior
of those  variables at the end of the year.

At December 31, 2003
and 2002,  the  projected  benefit  obligation in some  subsidiaries  was less than the
accumulated  benefit  obligation  reduced by the amount of the plan  assets at fair
value,  resulting  in an additional liability, which is recorded as an intangible asset
included in other assets (see Note 11).

The trust assets
consist of fixed income and variable funds,  valued at market.  As of December 31, 2003
and 2002, the pension plan assets are invested in the following financial instruments:

|                              
|------------------------------
|                              
|                              
|Fixed Rate:                   
|Traded securities             
|Bank instruments              
|Federal Government instruments
|                              
|Variable Rate:                
|Public traded shares in BMV   
|                              
|                              
|                              

The  Company  has a
 policy  of  maintaining  at  least  30% of  the  trust  assets  in  Federal  Government
instruments.  Objective  portfolio  guidelines  have been  established for the remaining
70%, and investment decisions  are being  made to comply  with  those  guidelines  to the
 extent  that  market  conditions  and available  funds allow.  The  composition of the
objective  portfolio is consistent with the Mexican company share  composition of the
portfolios of the five best-known  international  companies that manage  long-term funds.

The  contributions to
the pension plan and  postretirement  medical  services funds by certain  subsidiaries
amounted to Ps. 83 and Ps. 68 at December 31, 2003 and 2002,  respectively.  The Company
 estimates that the contributions to the pension plan and postretirement medical services
funds during 2004 will reach Ps. 90.

The integral  result
of  financing  includes the  interest  cost  related to labor  liabilities,  net of the
return on plan  assets.  This  amounted to Ps. 85, Ps. 63 and Ps. 50 for the years ended
 December 31, 2003, 2002 and 2001, respectively.

Note 16.   Bonus
Program.

The bonus program for
executive  officers is based upon the  accomplishment  of certain  goals,  established
annually by  management.  The bonuses are recorded in the results of operations in the
 respective  year and are paid in cash the following year, based on the accomplishment of
such goals.

In 1999  and the
 following  five  years,  the  Company  instituted  a  compensation  plan for  certain
 key executives,  which  consists of  granting  them an annual  bonus in FEMSA  stock or
 options,  based on each executives  responsibilities within the organization and the
executives  performance.  The executives will have access to the  assigned  stock or
options in 20%  increments  in each of the five years  following  the granting of the
bonus,  beginning  one year after they are granted.  The  five-year  program  ended in
2003, which was the last year shares were assigned.

Note 17.   Bank
Loans and Notes Payable.

Current  bank loans
and notes  payable  outstanding  at December 31, 2003 and 2002,  principally  consist of
revolving loans  denominated in Mexican pesos and US dollars.  The weighted  average
annual interest rate in 2003 for debt denominated in Mexican pesos and US dollars was
6.2% and 2.5%,  respectively,  and in 2002 the weighted average annual rate was 4.8% for
revolving loans denominated in US dollars.

Long-term bank loans
and notes payable of the Company are as follows:

|                                    
|------------------------------------
|                                    
|                                    
|Fixed interest rate                 
|US Dollars:                         
|Yankee bond                         
|Bank loans                          
|Private placement                   
|Leasing                             
|                                    
|Mexican Pesos:                      
|Notes                               
|Bank loans                          
|Units of Investment (UDIS)          
|                                    
|Variable interest rate              
|US Dollars:                         
|Bank loans                          
|Syndicated loan                     
|Mortgage loan                       
|Leasing                             
|Private placement                   
|                                    
|Mexican Pesos:                      
|Notes                               
|Bank loans                          
|                                    
|Colombian Pesos:                    
|Notes                               
|                                    
|Long-Term Debt                      
|Current maturities of long-term debt
|                                    
|                                    
|                                    

|(1) | Weighted average nominal rate.
|--- | ------------------------------

Maturities of
long-term debt as of December 31, 2003 are as follows:

|                   
|-------------------
|Current            
|2005               
|2006               
|2007               
|2008               
|2009 and thereafter
|                   
|                   
|                   

Each  Subholding
 Company has  financing  from  different  institutions,  with  different  restrictions
 and covenants,  which  mainly  consist of maximum  levels of leverage  and
 capitalization  as well as,  minimum consolidated net worth, and debt and interest
 coverage ratios.  As of December 31, 2003, the companies were in compliance with all
restrictions and covenants established in their financing agreements.

The Company has
restricted cash of  approximately  $43, which has been pledged as collateral for some of
its short-term bank loans.

Note 18.   Fair
Value of Financial Instruments.

a) Long-term
Debt:

The fair  value of
 long-term  bank  loans  and  syndicated  loans  is  based  on the  discounted  value of
     contractual  cash flows.  The discount  rate is  estimated  using rates  currently
 offered for debt of      similar amounts and maturities. The fair value of long-term
debt is based on quoted market prices.

|              
|--------------
|              
|              
|Carrying value
|Fair value    
|              

b)       Equity
Forward:

As mentioned in Note
9, during 2002 a subsidiary  of  Coca-Cola  FEMSA  entered into an equity  forward
     purchase  contract,  expiring in March 2004,  over the Molson shares with a notional
amount of Ps. 203.      As of December 31, 2003,  the  investment in Molson shares was
recorded at its fair value  resulting in      the recognition of a loss generated by the
forward of Ps. 74.

c)       Interest
Rate Swaps:

The Company uses
interest rate swaps to manage the interest rate risk  associated  with its borrowings,
     pursuant to which it pays amounts based on a fixed rate and receives  amounts based
on a floating rate.      Additionally,  the Company sold some put options as a complement
 to the swap  agreements,  for which a      premium was received.  The net effect of the
year is recorded in the financing expenses and amounted to      Ps. 116 and Ps. 38, in
2003 and 2002, respectively.

The fair value is
estimated  based on quoted  market prices to terminate the contracts at the reporting
     date.

At December 31, 2003,
the Company has the following outstanding agreements:

|        
|--------
|Maturity
|Date    
|        
|2004    
|2006    
|2007    
|2008    
|        

d)   Forward
Agreements to Purchase Foreign currency:

At December 31, 2003,
 the Company has one forward  agreement for the purchase of euros with a notional
     amount of 6 million  euros,  for the purpose of hedging the  exchange  risk  between
the dollar and the      euro for the purchase of equipment.  The fair value is estimated
 based on the quoted  market  exchange      rate to terminate  the  contracts at the
reporting  date,  which as of December 31, 2003,  represents a      gain of Ps. 17. The
net effect of the  contracts  terminated  during 2003 and 2002 was an exchange gain
     of Ps. 3 and Ps. 8,  respectively.  Additionally,  during  2003  various  contracts
 to  guarantee  the      purchase of US dollars in connection  with the acquisition of
Panamco were  terminated,  which resulted      in an exchange loss of Ps. 294.

e)       Commodity
Price Contracts:

The Company entered
into various derivative  contracts to hedge the cost of certain raw materials.  The
     result of the  commodity  price  contracts  was a loss of Ps. 19 and Ps. 18 as of
December 31, 2003 and      2002,  respectively,  which were recorded in the results of
 operations of the year.  The fair value is      estimated  based on quoted  market
 prices to terminate  the  contracts at the  reporting  date.  As of      December 31,
2003, the Company has various derivative  instrument contracts with maturity dates in
2004      and 2005, notional amounts      of Ps. 703 and a fair value of Ps. 53.

Note 19.   Minority
Interest in Consolidated Subsidiaries.

|               
|---------------
|               
|               
|FEMSA Cerveza  
|Coca-Cola FEMSA
|               
|               
|               

Note 20.
  Stockholders Equity.

As of December 31,
2003, the capital stock of FEMSA was comprised of  5,297,310,450  common shares,  without
par value and with no foreign ownership  restrictions.  Fixed capital amounts to Ps. 300
(nominal value) and the variable capital may not exceed 10 times the minimum fixed
capital stock.

The characteristics of
the common shares are as follows:

- Series B shares,
 with unlimited  voting  rights,  which at all times must represent a minimum of     51%
of total capital stock.
- Series L shares,
 with limited  voting  rights,  which may  represent up to 25% of total  capital
    stock.
- Series D shares,
 with  limited  voting  rights,  which  individually  or jointly with series L    shares
may represent up to 49% of total capital stock.

The Series D shares
are comprised as follows:

- Subseries D-L shares
may represent up to 25% of the series D shares.
- Subseries D-B shares
may comprise the remainder of outstanding series D shares.
- The
 non-cumulative  premium  dividend  to be paid to series D  stockholders  will be 125%
of any     dividend paid to series B stockholders.

The Series B and D shares
are linked together in related units as follows:

- B units each
of which represents five series B shares and which is traded on the BMV.
- BD units  each
of which  represents  one series B share,  two  subseries  D-B  shares and two
    subseries D-L shares, and which is traded both on the BMV and the NYSE.
- The related
 units will cease to be linked  together  on May 2008,  after a period of 10 years from
    the date of the first  issue.  Subseries  D-B  shares will be  converted  into
series B shares,  and     subseries D-L shares will be converted into series L shares.

As of December 31,
2003, FEMSAs capital stock is comprised as follows:

|               
|---------------
|               
|               
|Units          
|               
|Shares:        
|Series B     
|Series D     
|Subseries D-B
|Subseries D-L
|               
|Total Shares   
|               

The  restatement  of
 stockholders  equity for inflation is allocated to each of the various  stockholdersequity
accounts, as follows:

|                                  
|----------------------------------
|                                  
|                                  
|Capital stock                     
|Additional paid-in capital        
|Retained earnings from prior years
|Net income for the year           
|                                  

The net  income of the
 Company  is subject to the legal  requirement  that 5% thereof be  transferred  to a
legal  reserve  until such reserve  equals 20% of capital  stock at nominal  value.  This
reserve may not be distributed  to  stockholders  during the  existence of the
 subsidiary,  except as stock  dividends.  As of December 31, 2003, this reserve for
FEMSA amounted to Ps. 468 (nominal value).

Retained earnings and
other reserves  distributed as dividends,  as well as the effects derived from capital
reductions,  are  subject  to  income  tax at the  rate  in  effect,  except  for the
 restated  stockholder contributions  and  distributions  made from consolidated  taxable
income,  denominated  Cuenta de Utilidad Fiscal  Neta  Consolidada  (CUFIN).  From
1999 to 2001,  the  deferral of a portion (3% in 1999 and 5% in 2000 and 2001) of the
income tax was allowed,  until the  distribution  of such earnings as  dividends.  For
this purpose a Cuenta de Utilidad  Fiscal Neta  Consolidada  Reinvertida  (CUFINRE)
 was created,  which like CUFIN  represents  previously  taxed  earnings.  Beginning in
2002,  the right to defer payment of this income tax was eliminated.

Dividends  paid in
excess of CUFIN and CUFINRE will be subject to income  taxes at a  grossed-up  rate based
on the current  statutory rate.  Beginning in 2003,  this tax may be credited  against
the income tax of the year in which the  dividends  are paid and in the  following  two
years against the income tax and estimated tax  payments.  As of December 31, 2003,  the
balances of CUFIN and CUFINRE  amounted to Ps.  10,632 and Ps. 2,694, respectively, and
the deferred tax payments were Ps. 207.

At an ordinary
 stockholder meeting held on March 11, 2003, the stockholders  approved a dividend of
0.06700 pesos  (nominal  value) per series B share and 0.08375 pesos (nominal  value)
per series D share,  which was  paid  in May  2003.  Additionally,  the  stockholders
 approved  a  maximum  of Ps.  3,000  for a stock repurchase program.

At an ordinary
 stockholder  meeting of FEMSA Cerveza held on March 10, 2003,  the  stockholders
 approved a dividend of Ps.  2,206.  The  corresponding  payment to the  minority
 interest of Ps. 662 is presented as a reduction of minority interest in the statement of
changes in stockholders equity.

From October 2000 to
January 2001,  the Company  repurchased  shares.  The nominal value of the  repurchased
shares was recorded as a reduction of common stock,  and the  remainder was applied
 against the reserve for the  acquisition of Company stock within  retained  earnings.
 The shares  purchased  which were retired are presented as follows:

|                                       
|---------------------------------------
|                                       
|                                       
|As of December 31, 2000                
|From January 4 through January 16, 2001
|                                       
|Total                                  
|                                       

Note 21.   Net
Majority Income per Share.

This  represents  the
net  majority  income  corresponding  to each share of the  Companys  capital  stock,
computed on the basis of the weighted average number of shares  outstanding  during the
year.  Additionally, the net income distribution according to the dividend rights of each
share series is presented.

The following
 presents the computed  weighted  average number of shares and the  distribution of
income per share series:

|                             
|-----------------------------
|                             
|                             
|                             
|                             
|                             
|                             
|At December 31, 2001         
|At December 31, 2002 and 2003
|                             
|Dividend rights              
|Allocation of earnings:      
|2001, 2002 and 2003          
|                             

Note 22. Tax System.

a)       Income Tax:

Income tax is computed
on taxable income,  which differs from accounting  income  principally due to the
    treatment of the integral result of financing,  the cost of labor  liabilities,
 depreciation  and other     accounting  provisions.  In the case of  Mexico,  it also
 differs  because  of the  difference  between     purchase  and cost of  sales.  The tax
loss of any year can be  carried  forward  and  could be  applied     against taxable
income.

The income tax rates
 applicable  in 2003 in the countries  where the Company  operates and the years in
    which tax loss carryforwards may be applied are as follows:

|          
|----------
|          
|          
|Mexico    
|Guatemala 
|Nicaragua 
|Costa Rica
|Panama    
|Venezuela 
|Colombia  
|Brazil    
|Argentina 
|          

The Mexican  statutory
income tax rate from 2000 through 2002 was 35%.  Beginning 2003, the rate will be
    reduced one percentage  point per year through 2005, when the rate will be 32%.
 Therefore the statutory     tax rate for Mexico during 2003 is 34%.

In Guatemala tax loss
 carryforwards may only be applied by companies of recent creation (not applicable     to
the Company).  Colombian tax losses  generated  before December 31, 2002 may be carried
forward for a     period of five  years,  and tax losses  generated  after  January 1,
2003 may be carried  forward  for a     period of eight  years,  but  limited  to 25% of
the  taxable  income of each  year.  In Brazil tax loss     carryforwards  do not expire
and may be carried forward for an indefinitely  period.  The application of     tax
losses  carryforwards  in any year,  however,  is limited to 30% of the taxable income
 generated in     such year.

b)       Tax on
Assets:

Operations in Mexico,
Guatemala,  Nicaragua,  Venezuela,  Colombia and Argentina are subject to a tax on
    assets.

The Mexican  tax on
assets is computed at an annual rate of 1.8% based on the average of certain  assets
    at tax  restated  value less certain  liabilities.  The tax on assets is paid only to
the extent that it     exceeds the income tax of the year. If in any year a tax on assets
payment is required,  this amount can     be credited  against the excess of income
 taxes over the tax on assets in each of the  preceding  three     years.  Additionally,
 this payment may be restated and credited against the excess of income taxes over
    asset taxes for the following 10 years.

In Guatemala there is
an alternative  minimum tax (IEMA) equivalent to the lower of 2.25% of the prior
    years  revenues  or 3.5% of total  assets as of the  beginning  of the year,  which
is paid only to the     extent that it exceeds the income taxes of the year. If in any
year a payment of IEMA is required,  this     amount may be  credited  against  the
excess of income  taxes over the IEMA of the  following  year.  On     February 2, 2004,
 this tax was declared  unconstitutional  in  Guatemala.  At this time it is not known
    what favorable effect this could have on the IEMA payments made by the Company in
previous years.

In Nicaragua the tax
on assets  results from applying a 1% rate to total tax assets as of the end of the
    year,  and it is paid only to the extent that it exceeds the income taxes of the
year.  If in any year a     tax on assets  payment is required,  this tax is definitive
 and the amount may not be credited  against     the excess of income taxes in future
years.

In Venezuela the tax
on assets  results from applying a 1% rate to the net average amount of nonmonetary
    assets  adjusted for inflation and monetary  assets  devalued for  inflation.  The
tax on assets is paid     only to the extent  that it exceeds the income tax of the year.
 If in any year a tax on assets  payment     is  required,  this amount may be credited
 against the excess of income taxes over the tax on assets to     the following three
years.

In Colombia the tax on
assets  results from  applying a 6% rate to net tax assets as of the beginning of     the
year.  This tax is paid only to the extent that it exceeds the income taxes of the year.
If a tax on     assets  payment was  required in 2001 or 2002,  the amount may be
credited  against the excess of income     taxes over the tax on assets in the  following
 three  years.  If a tax on assets  payment  is  required     subsequent  to 2002,  the
 amount may be  credited  against  the excess of income  taxes over the tax on     assets
in the following five years.

The tax laws in
Argentina  established a Tax on Minimum  Presumptive Income (TMPI),  that results from
    applying 1% to certain  assets,  and is paid only to the extent that it exceeds the
income  taxes of the     year.  If in any year a payment is  required,  this amount may
be credited  against the excess of income     taxes over the TMPI in the following 10
years.

c)       Employee
Profit Sharing:

Employee profit
sharing is applicable to Mexico and Venezuela.  In Mexico the employee profit sharing is
    computed at the rate of 10% of the individual  taxable  income,  except that
 depreciation of historical     rather than restated values is used,  foreign exchange
gains and losses are not included until the asset     is disposed of or the  liability
 is due,  and the other  effects of  inflation  are also  excluded.  In     Venezuela
employee profit sharing is computed at a rate equivalent to 15% after tax earnings.

d)       Deferred
Income Taxes and Employee Profit Sharing:

The temporary
differences that generated deferred income tax liabilities (assets) are as follows:

---

|**Deferred Income Taxes**       | **2003** | **2002**   
|------------------------------- | -------- | -----------
|                               
|Allowance for doubtful accounts | **Ps.**  | **(149)**  
|Inventories                     | ****     | **1,843**  
|Prepaid expenses                | ****     | **127**    
|Properties, plant and equipment | ****     | **4,432**  
|Investments in shares           | ****     | **175**    
|Deferred charges                | ****     | **(188)**  
|Pension plan                    | ****     | **(261)**  
|Seniority premiums              | ****     | **(43)**   
|Medical services                | ****     | **(51)**   
|Recoverable tax on assets       | ****     | **(79)**   
|Tax loss carryforwards          | ****     | **(424)**  
|Other reserves                  | ****     | **(1,541)**
|                               
|                                | **Ps.**  | **3,841**  

---

The changes in the balance of the deferred income taxes for the year are as follows:

---

|                                        | **2003** | **2002** 
|--------------------------------------- | -------- | ---------
|                                       
|Balance at beginning of the year        | **Ps.**  | **4,175**
|Balance acquisition of Panamco          | ****     | **(934)**
|Gain on monetary position               | ****     | **27**   
|Provision for the year                  | ****     | **542**  
|Change in the statutory income tax rate | ****     | **(68)** 
|Result of holding non-monetary assets   | ****     | **99**   
|                                       
|Balance at end of the year              | **Ps.**  | **3,841**

---

At December 31, 2003, there are no significant non-recurring temporary differences between the accounting income for the year and the bases for Mexican employee profit sharing, therefore the Company did not record a provision for deferred employee profit sharing.

**e) Income Tax, Tax on Assets and Employee Profit Sharing Provisions:**

---

|                                        | **2003** | **2002**  | **2001**
|--------------------------------------- | -------- | --------- | --------
|                                       
|Current income taxes                    | **Ps.**  | **2,484** | Ps.     
|Tax on assets                           | ****     | **46**    |         
|Deferred income taxes                   | ****     | **542**   |         
|Change in the statutory income tax rate | ****     | **(68)**  |         
|                                       
|                                        | ****     | **3,004** |         
|Employee profit sharing                 | ****     | **374**   |         
|Deferred employee profit sharing        | ****     | **-**     |         
|                                       
|                                        | **Ps.**  | **3,378** | Ps.     

---

**f) Tax Loss Carryforwards and Recoverable Tax on Assets:**

As of December 31, 2003, Mexico, Venezuela and Brazil have tax loss carryforwards and/or recoverable tax on assets.

The expiration dates of such amounts are as follows:

|    
|----
|Year
|    
|2004
|2005
|2006
|2007
|2008
|2009
|2010
|2011
|2012
|2013
|    
|    

---

Due to the uncertainty of the realization of certain tax loss carryforwards, as of December 31, 2003 a valuation allowance has been provide for Ps. 1,275 of the carryforwards.

**g) Reconciliation of Mexican Statutory Income Tax Rate to Consolidated Effective Income Tax Rate:**

---

|                                                                               | **2003** | **2002** | **2001**
|------------------------------------------------------------------------------ | -------- | -------- | --------
|                                                                              
|Mexican statutory income tax rate                                              | **34%**  | **35%**  | **35%** 
|Difference between book and tax inflationary effects                           | **1**    | **-**    | -       
|Non-deductible expenses                                                        | **4**    | 3        | 2       
|Impairment of the goodwill generated by Coca-Cola
          FEMSA Buenos Aires | **-**    | 2        | -       
|Effect of change in tax rate                                                   | **(1)**  | (1)      | (3)     
|Other                                                                          | **(1)**  | 1        | (1)     
|                                                                              
|Consolidated effective income tax rate                                         | **37%**  | 40%      | 33%     

---

**Note 23. Contingencies and Commitments.**

**a) Settled Lawsuits:**

- During 2002 and 2003, Coca-Cola FEMSA initiated an appeal related to the Impuesto Especial sobre Producción
 y Servicios (IEPS) (Special Tax on Products and Services) applicable to inventories produced with high fructose content.
Additionally, during 2003, the Company included in its appeal the IEPS applicable to dietetic soft drink and mineral water.
On November, 2003, the Company obtained a favorable resolution for its 2002 claim. Based on the favorable resolution, the Company
has recorded a receivable for refundable taxes of Ps. 247, related to 2003 and 2002. Coca-Cola FEMSA has posted a bond for IEPS of
2003 in the amount of Ps. 85, for which management has a high expectation that payments will not have to be made.
- On April 29, 2002 a subsidiary of FEMSA Cerveza filed a lawsuit against certain affiliates of Labatt to enjoin
 the integration of the beer brands of Beck's North America in the beer distribution portfolio of Labatt-USA. The subsidiary of
 FEMSA Cerveza obtained a preliminary injunction from the lower court. Labatt's affiliates filed a notice of appeal from the preliminary
 injunction. In August 7, 2003, the second circuit upheld the decision of the district court. On October 10, 2003 the subsidiary of FEMSA
Cerveza and affiliates of Labatt entered into a final judgment on consent, providing that the affiliates of Labatt are permanently enjoined
 from integrating the Beck's brands into the portfolio of Labatt-USA
- In 1998, as a result of the restatement of
tax losses for inflation due to the increased shareholdings in subsidiaries, the Company determined an income tax receivable
of Ps. 161 and filed for refund, which was also rejected by the tax authorities. The Company appealed that decision and on July
14, 2003, obtained a favorable resolution.

**b) Unsettled Lawsuits:**

- In 1998 and 1999, due to adjustments to consolidated tax on assets derived from increased shareholdings in
subsidiaries, the Company determined a tax on assets receivable and filed for refund. The tax authorities rejected the
refund request, and the Company has appealed that decision. In the opinion of the Company's legal counsel, it is probable
 that the Company will obtain a favorable resolution and in 1999 the Company recorded a receivable for refundable taxes and a
 credit to the results of operations of that year. At December 31, 2003, the receivable amounted to Ps. 217, which is presented in
other assets.
- The SHCP determined taxes due by FEMSA Cerveza related to exports in 1998 and 1999 to countries considered to be tax havens. The Company has appealed these tax assessments and filed the corresponding documentation. To date this matter is unresolved; however, the Company's legal counsel believes that it is probable that the Company will obtain a favorable resolution.
- In 2000, the Comisión Federal de Competencia en Mexico (the Mexican Antitrust Commission) (the Commission), initiated an investigation of the sales practices of Coca-Cola bottlers. In 2002, through a final resolution, the Commission held that Coca-Cola bottlers engaged in monopolistic practices with respect to exclusivity arrangements with certain retailers, and ordered Coca-Cola bottlers, to abstain from entering into any exclusivity arrangements with retailers. The Company, along with other Coca-Cola bottlers, appealed the resolution. The Company and its legal counsel believe that it is probable that the Company will prevail and obtain a permanent injunction against the Commission.
- During 2001, the Comisión para Promover la Competencia en Costa Rica (the Costa Rican Antitrust Commission) initiated an investigation on the sales practices of Coca-Cola bottlers for alleged monopolistic practices in the retail distribution channels including the gain of share of sales through exclusivity arrangements. The Company does not believe that the resolution of this matter will have a material adverse effect on its consolidated financial statements.
- In 1999, the Company received notice of certain tax claims asserted by the Venezuelan taxing authorities. These claims currently total approximately $23. The Company has certain rights to indemnification from the original owner before Panamco and The Coca-Cola Company for a substantial portion of such claims. The Company does not believe that the ultimate disposition of these cases will have a material adverse effect on its consolidated financial statements.
- Since 2001, the Venezuelan subsidiary has been the subject of lawsuits filed by former distributors for a total amount of approximately $31. The Company believes, based on decisions rendered by Venezuela Supreme Court in similar cases, and an analysis of each case, that these claims are without merit.
- In 2001, a labor union and several inpiduals from the Republic of Colombia filed a lawsuit in the U.S. District Court for the Southern District of Florida against the Company and The Coca-Cola Company. In the complaint, the plaintiffs alleged that the Company engaged in wrongful acts against the labor union and its members in Colombia for the amount of $500. The Company has filed a motion to dismiss the complaint for lack of subject matter and personal jurisdiction and believes this lawsuit is without merit. The Company has received proposals to settle the claim, but no agreements have been reached.
- There are certain tax contingencies of the foreign subsidiaries that required asset guarantees while in litigation.
- The Company also has various other loss contingencies, for which reserves have been recorded in those cases where the Company believes the result of an unfavorable resolution is probable. The details regarding these contingencies has not been disclosed, since the Company believes that to do so would adversely impact its legal position.
- Other legal proceedings are pending against or involve the Company and its subsidiaries, which are incidental to the conduct of their businesses. The Company believes that the ultimate disposition of such other proceedings will not have a material adverse effect on its consolidated financial condition.

**c) Commitments:**

As of December 31, 2003, the Company has minimum operating lease commitments as follows:

- In dollars, for the leasing of production machinery and equipment, distribution equipment and computing equipment.
- In pesos, for the leasing of land for the operations of FEMSA Comercio.

Contract maturities are variable and expire as follows:

---

|2004         | **$** | **37** | **Ps.** | **437**  
|------------ | ----- | ------ | ------- | ---------
|2005         | ****  | **32** | ****    | **422**  
|2006         | ****  | **25** | ****    | **408**  
|2007         | ****  | **19** | ****    | **394**  
|2008         | ****  | **14** | ****    | **381**  
|2009         | ****  | **13** | ****    | **368**  
|20010        | ****  | **12** | ****    | **353**  
|2011 to 2020 | ****  | **12** | ****    | **2,227**

---

Rental expense for all operating leases charged against earnings amounted to approximately Ps. 681, Ps. 481 and Ps. 462 for the years ended December 31, 2003, 2002 and 2001, respectively.

**Note 24. Information by Segment.**

Relevant information concerning the major subsidiaries of FEMSA, which represent different segments, is as follows:

**a) By Business Unit**

---

|**Total Revenues**        | ****    | **2003**    | **** | **2002** | **** | **2001**
|------------------------- | ------- | ----------- | ---- | -------- | ---- | --------
|                         
|Coca-Cola FEMSA           | **Ps.** | **35,729**  | Ps.  | 18,668   | Ps.  | 17,773  
|FEMSA Cerveza             |         | **21,924**  |      | 21,642   |      | 21,529  
|FEMSA Empaques            | ****    | **7,352**   |      | 6,862    |      | 6,840   
|FEMSA Comercio            | ****    | **16,601**  |      | 13,247   |      | 11,160  
|Other                     | ****    | **3,843**   |      | 3,559    |      | 3,176   
|Consolidation adjustments | ****    | **(9,558)** |      | (8,583)  |      | (8,013) 
|                         
|                          | **Ps.** | **75,891**  | Ps.  | 55,395   | Ps.  | 52,465  

---

---

|**Income from Operations** | **2003** | **2002**    | **2001**
|-------------------------- | -------- | ----------- | --------
|                          
|Coca-Cola FEMSA            | **Ps.**  | **6,710**   | Ps.     
|FEMSA Cerveza (1)          | ****     | **3,586**   |         
|FEMSA Empaques             | ****     | **988**     |         
|FEMSA Comercio             | ****     | **694**     |         
|Others                     | ****     | **1,951**   |         
|Consolidation adjustments  | ****     | **(1,815)** |         
|                          
|                           | **Ps.**  | **12,114**  | Ps.     

---

---

|**Depreciation** | **2003** | **2002**  | **2001**
|---------------- | -------- | --------- | --------
|                
|Coca-Cola FEMSA  | **Ps.**  | **1,480** | Ps.     
|FEMSA Cerveza    |          | **1,175** |         
|FEMSA Empaques   | ****     | **301**   |         
|FEMSA Comercio   | ****     | **131**   |         
|Other            | ****     | **39**    |         
|                
|                 | **Ps.**  | **3,126** | Ps.     

---

---

|**Amortization and Other Non-Cash Charges (2)** | **2003** | **2002**  | **2001**
|----------------------------------------------- | -------- | --------- | --------
|                                               
|Coca-Cola FEMSA                                 | **Ps.**  | **531**   | Ps      
|FEMSA Cerveza                                   | ****     | **1,237** |         
|FEMSA Empaques                                  | ****     | **156**   |         
|FEMSA Comercio                                  | ****     | **312**   |         
|Other                                           | ****     | **220**   |         
|                                               
|                                                | **Ps.**  | **2,456** | Ps.     

---

|(1) | Includes equity method of affiliated companies of Ps. 30, Ps. 87 and Ps. 34, respectively.
|--- | ------------------------------------------------------------------------------------------
|(2) | Excludes the non-cash charges relative to current assets and liabilities.                 

---

|**Impairment of Long-Lived Assets** | **2003** | **2002** | **2001**
|----------------------------------- | -------- | -------- | --------
|                                   
|Coca-Cola FEMSA                     | **Ps.**  | **-**    | Ps.     
|FEMSA Cerveza                       |          | 790      |         
|                                   
|                                    | **Ps.**  | **790**  | Ps.     

---

---

|**Interest Expense**      | ****    | **2003**  | **** | **2002** | **** | **2001**
|------------------------- | ------- | --------- | ---- | -------- | ---- | --------
|                         
|Coca-Cola FEMSA           | **Ps.** | **1,551** | Ps.  | 348      | Ps.  | 343     
|FEMSA Cerveza             |         | 649       |      | 323      |      | 323     
|FEMSA Empaques            | ****    | **201**   |      | 261      |      | 454     
|FEMSA Comercio            | ****    | **150**   |      | 107      |      | 104     
|Other                     | ****    | **113**   |      | 94       |      | 95      
|Consolidation adjustments | ****    | **(124)** |      | (190)    |      | (334)   
|                         
|                          | **Ps.** | **2,540** | Ps.  | 943      | Ps.  | 985     

---

---

|**Interest Income**       | **2003** | ****      | **2002** | ****  | **2001**
|------------------------- | -------- | --------- | -------- | ----- | --------
|                         
|Coca-Cola FEMSA           | **Ps.**  | **227**   | Ps.      | 264   | Ps.     
|FEMSA Cerveza             |          | **210**   |          | 90    |         
|FEMSA Empaques            | ****     | **21**    |          | 27    |         
|FEMSA Comercio            | ****     | **57**    |          | 26    |         
|Other                     | ****     | **304**   |          | 248   |         
|Consolidation adjustments | ****     | **(124)** |          | (190) |         
|                         
|                          | **Ps.**  | **695**   | Ps.      | 465   | Ps.     

---

---

|**Income Tax and Tax on Assets** | **2003** | **2002**  | **2001**
|-------------------------------- | -------- | --------- | --------
|                                
|Coca-Cola FEMSA                  | **Ps.**  | **1,436** | Ps.     
|FEMSA Cerveza                    |          | 863       |         
|FEMSA Empaques                   | ****     | **240**   |         
|FEMSA Comercio                   | ****     | **268**   |         
|Other                            | ****     | **197**   |         
|                                
|                                 | **Ps.**  | **3,004** | Ps.     

---

---

|**Capital Expenditures** | **2003** | **2002**  | **2001**
|------------------------ | -------- | --------- | --------
|                        
|Coca-Cola FEMSA          | **Ps.**  | **1,910** | Ps.     
|FEMSA Cerveza            |          | **3,246** |         
|FEMSA Empaques           | ****     | **376**   |         
|FEMSA Comercio           | ****     | **1,210** |         
|Other                    | ****     | **47**    |         
|                        
|                         | **Ps.**  | **6,789** | Ps.     

---

---

|**Long-term Assets**      | ****    | **2003**    | **** | **2002**
|------------------------- | ------- | ----------- | ---- | --------
|                         
|Coca-Cola FEMSA           | **Ps.** | **53,346**  | Ps.  | 8,722   
|FEMSA Cerveza             |         | **20,910**  |      | 20,449  
|FEMSA Empaques            | ****    | **4,427**   |      | 4,178   
|FEMSA Comercio            | ****    | **3,870**   |      | 3,018   
|Other                     | ****    | **9,811**   |      | 7,861   
|Consolidation adjustments | ****    | **(8,190)** |      | (6,020) 
|                         
|                          | **Ps.** | **84,174**  | Ps.  | 38,208  

---

---

|**Total Assets**          | ****    | **2003**     | **2002**
|------------------------- | ------- | ------------ | --------
|                         
|Coca-Cola FEMSA           | **Ps.** | **61,420**   | Ps.     
|FEMSA Cerveza             |         | **28,936**   |         
|FEMSA Empaques            | ****    | **7,168**    |         
|FEMSA Comercio            | ****    | **6,137**    |         
|Other                     | ****    | **16,632**   |         
|Consolidation adjustments | ****    | **(15,959)** |         
|                         
|                          | **Ps.** | **104,334**  | Ps.     

---

**b) By Geographic Area**

---

|**Total Revenues**        | **2003** | **2002**   | **2001**
|------------------------- | -------- | ---------- | --------
|                         
|Mexico                    | **Ps.**  | **64,185** | Ps.     
|Argentina                 | ****     | **2,077**  |         
|Brazil                    | ****     | **2,797**  |         
|Venezuela                 | ****     | **2,544**  |         
|Colombia                  | ****     | **2,319**  |         
|Central America (1)       | ****     | **2,187**  |         
|Consolidation adjustments | ****     | **(218)**  |         
|                         
|                          | **Ps.**  | **75,891** | Ps.     

---

---

|**Capital Expenditures** | **2003** | **2002**  | **2001**
|------------------------ | -------- | --------- | --------
|                        
|Mexico                   | **Ps.**  | **6,309** | Ps.     
|Argentina                | ****     | **105**   |         
|Brazil                   | ****     | **166**   |         
|Venezuela                | ****     | **45**    |         
|Colombia                 | ****     | **1**     |         
|Central America (1)      | ****     | **163**   |         
|                        
|                         | **Ps.**  | **6,789** | Ps.     

---

---

|**Long-term Assets**      | ****    | **2003**     | **** | **2002**
|------------------------- | ------- | ------------ | ---- | --------
|                         
|Mexico                    | **Ps.** | **77,134**   | Ps.  | 37,749  
|Argentina                 | ****    | **1,226**    |      | 1,061   
|Brazil                    | ****    | **3,370**    |      | -       
|Venezuela                 | ****    | **2,886**    |      | -       
|Colombia                  | ****    | **4,866**    |      | -       
|Central America (1)       | ****    | **4,762**    |      | -       
|Consolidation adjustments | ****    | **(10,070)** |      | (602)   
|                         
|                          | **Ps.** | **84,174**   | Ps.  | 38,208  

---

---

|**Total Assets**          | **2003** | **2002**    
|------------------------- | -------- | ------------
|                         
|Mexico                    | **Ps.**  | **95,715**  
|Argentina                 | ****     | **1,631**   
|Brazil                    | ****     | **4,520**   
|Venezuela                 | ****     | **3,669**   
|Colombia                  | ****     | **6,688**   
|Central America (1)       | ****     | **5,656**   
|Consolidation adjustments | ****     | **(13,545)**
|                         
|                          | **Ps.**  | **104,334** 

---

|(1) | Includes Guatemala, Nicaragua Costa Rica and Panama.
|--- | ----------------------------------------------------

**Note 25. Differences Between Mexican GAAP and US GAAP.**

The consolidated financial statements of the Company are prepared in accordance with Mexican GAAP, which differs in certain significant respects from US GAAP. A reconciliation of the reported majority net income, majority stockholders' equity and majority comprehensive income to US GAAP is presented in Note 26. It should be noted that this reconciliation to US GAAP does not include the reversal of the restatement of the financial statements as required by Bulletin B-10, Reconocimiento de los Efectos de Inflación en la Información Financiera  (Recognition of the Effects of Inflation in the Financial Information), of Mexican GAAP.

The application of this bulletin represents a comprehensive measure of the effects of price-level changes in the Mexican economy and, as such, is considered a more meaningful presentation than historical cost-based financial reporting in Mexican pesos for both Mexican and US accounting purposes.

The principal differences between Mexican GAAP and US GAAP included in the reconciliation that affect the consolidated financial statements of the Company are described below.

**a) Restatement of Prior Year Financial Statements:**

As explained in Note 5 a ), in accordance with Mexican GAAP, the financial statements for Mexican subsidiaries for prior years was restated using inflation factors, and for foreign subsidiaries and affiliated companies for prior years was restated using the inflation rate of the country in which the foreign subsidiary or affiliated company is located, then translated to Mexican pesos at the year-end exchange rate.

Under US GAAP, the Company applies the regulations of the Securities and Exchange Commission of the United States of America (SEC), which require that prior year financial statements be restated in constant units of the reporting currency, in this case the Mexican peso, which requires the restatement of such prior year amounts using inflation factors. ,

Additionally, all other US GAAP adjustments for prior years have been restated based upon the SEC methodology.

**b) Classification Differences:**

Certain items require a different classification in the balance sheet or income statement under US GAAP. These include:

- As explained in Note 5 c), under Mexican GAAP advances to suppliers are recorded as inventories. Under US GAAP advances to suppliers are classified as prepaid expenses.
- The impairment of goodwill and other long-lived assets, the gain or loss on the disposition of fixed assets, all severance indemnities, and employee profit sharing must be included in operating expenses under US GAAP.

**c) Deferred Promotional Expenses:**

As explained in Note 5 d), for Mexican GAAP purposes, the promotional costs related to the launching of new products or presentations are recorded as prepaid expenses. For US GAAP purposes, such promotional costs are expensed as incurred.

**d) Start-up Expenses:**

As explained in Note 5 i), under Mexican GAAP, start-up expenses are capitalized and
are amortized at the start of operations using the straight-line method. Under US GAAP, these
expenses must be recorded in the income statement as incurred.

**e) Intangible Assets and Goodwill:**

As mentioned in Note 5 i), under Mexican GAAP, until January 1, 2002 all intangible assets were amortized over a period of no more than 20 years. Effective January 1, 2003 revised Bulletin C-8, Activos Intangibles (Intangible Assets) (C- 8 ), went into effect and recognizes that certain intangible assets have indefinite lives and should not be amortized. Under US GAAP, in accordance with Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002, goodwill and indefinite-lived intangible assets are also no longer subject to amortization, but rather are subject to periodic assessment for impairment. Accordingly, amortization of indefinite-lived intangible assets was discontinued in 2002 for US GAAP and in 2003 for Mexican GAAP.

A reconciliation of previously reported net income and income per share under US GAAP to the amounts adjusted to exclude intangible assets and goodwill is as follows:

---

|                                 | ****    | **Reported** | **** | **Amortization** | **** | **Adjusted**
|-------------------------------- | ------- | ------------ | ---- | ---------------- | ---- | ------------
|                                
|2003:                            |         |              |      |                  |      |             
|Net income for the year          | **Ps.** | **3,271**    | Ps.  | -                | Ps.  | 3,271       
|Net income per Series B shares |         | **0.551**    |      | -                |      | 0.551       
|Net income per Series D shares |         | **0.689**    |      | -                |      | 0.689       
|                                
|2002:                            | ****    | ****         |      |                  |      |             
|Net income for the year          | **Ps.** | **3,206**    | Ps.  | -                | Ps.  | 3,206       
|Net income per Series B shares | ****    | **0.540**    |      | -                |      | 0.540       
|Net income per Series D shares | ****    | **0.675**    |      | -                |      | 0.675       
|                                
|2001:                            | ****    | ****         |      |                  |      |             
|Net income for the year          | **Ps.** | **3,305**    | Ps.  | 466              | Ps.  | 3,771       
|Net income per Series B shares | ****    | **0.557**    |      | 0.078            |      | 0.635       
|Net income per Series D shares | ****    | **0.696**    |      | 0.099            |      | 0.795       

---

As a result of the adoption of this standard, the Company performed an impairment test as of January 1, 2002 and found no impairment. Subsequent impairment tests are performed annually by the Company, unless an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount, in which case an impairment test would be performed between annual tests. As mentioned in Note 4, due to significant adverse changes in the Argentine economy during 2002, on July 1, 2002 the Company recognized an impairment of the goodwill generated by the acquisition of Coca-Cola FEMSA Buenos Aires.

**f) Restatement of Imported Equipment:**

As explained in Note 5 g ), under Mexican GAAP, imported machinery and equipment have been restated by applying the inflation rate of the country of origin, then translated at the year-end exchange rate of the Mexican peso.

Under US GAAP, the Company applies the SEC regulations, which require that all machinery and equipment, both domestic and imported, be restated using inflation factors.

**g) Capitalization of the Integral Result of Financing:**

Under Mexican GAAP, the capitalization of the integral result of financing (interest, foreign exchange and monetary position) generated by loan agreements obtained to finance investment projects is optional, and the Company has elected not to capitalize the integral result of financing.

In accordance with US GAAP, if interest is incurred during the construction of qualifying assets, capitalization is required as part of the cost of such assets. Accordingly, a reconciling item for the capitalization of a portion of the integral result of financing is included in the US GAAP reconciliation of the majority net income and majority stockholders' equity. If the borrowings are denominated in US dollars, the weighted-average interest rate on all such outstanding debt is applied to the balance of construction-in-progress to determine the amount to be capitalized. If the borrowings are denominated in Mexican pesos, the amount of interest to be capitalized as noted above is reduced by the gain on monetary position associated with the debt.

**h) Financial Instruments**:

In accordance with Mexican GAAP, as mentioned in Note 5 q), beginning in January 2001 Bulletin C-2, Instrumentos Financieros (Financial Instruments), became effective.

Under US GAAP, SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, also became effective in 2001. SFAS No. 133, as amended, establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the fair value of the derivative instrument be recognized in the net income of the year or other comprehensive income, if the instruments represent cash flow hedges that qualify for hedge accounting.

For purposes of SFAS No. 133, the Company elected not to designate its financial instruments as hedges for the derivative instruments, and accordingly the entire effect of the valuation of those instruments contracted before December 31, 2000, was recognized in the income statement as a change in accounting principle under US GAAP at January 1, 2001.

Under
 Mexican GAAP, the commodity price contracts as well as the equity forward contracted
by the Company (see Note 18), have been designated as hedges and accordingly valued using
 the same valuation criteria applied to the underlying asset or liability, which are recognized in
the income statement when the consumption or payment takes place. However, under US GAAP, these agreements
 must be adjusted to their market value, recognizing the corresponding asset or liability. Except for
certain interest rate swaps, the hedging relationship required by US GAAP has not been adequately
documented; therefore, a reconciling item has been included in the US GAAP reconciliation to adjust
 earnings for this difference in valuation method.

Since the  Company
 has  properly  designated  the  interest  rate  swaps as  effective  cash flow  hedges,
 it     recognizes the change in the fair market value of those swaps through other
comprehensive income.

i)       Deferred
Income Taxes and Employee Profit Sharing:

The Company  follows
SFAS No. 109,  Accounting  for Income  Taxes, for US GAAP  purposes,  which differs
from     Mexican GAAP as follows:

- Under
Mexican GAAP,  deferred  taxes are  classified  as  non-current,  while under US GAAP are
based on the        classification of the related asset or liability.
- Under
Mexican  GAAP,  the effects of inflation on the deferred tax balance  generated by
monetary  items are        recognized in the result on monetary  position.  Under US
GAAP,  the deferred tax balance is classified as a        non-monetary item. As a result,
 the consolidated  income statement differs with respect to the presentation        of
the gain (loss) on monetary position and deferred income tax provision.
- Under
 Mexican  GAAP,  the change in  statutory  income tax rate (see Note 22 a) approved
 early in 2002 was        considered in the  calculation of deferred taxes at December
31, 2001.  Under US GAAP, a change in statutory        tax rate may not be considered
until the enactment date, which was January 1, 2002.
- Under
 Mexican  GAAP,  deferred  employee  profit  sharing is calculated  considering  only
those  temporary        differences  that arise  during the year and which are  expected
 to turn  around  within a defined  period,        while under US GAAP, the same
liability method as used for deferred income taxes is applied.
- The
differences in the restatements of prior year financial  statements,  start-up expenses,
 restatement of        imported  machinery and equipment,  the  capitalization  of
financing costs,  financial  instruments and the        pension plan mentioned in Note 25
a), d), f), g), h) and j) generate a difference  calculating  the deferred        income
tax under US GAAP compared to the one presented under Mexican GAAP (see Note 22 d).

|                                              
|----------------------------------------------
|Reconciliation of Deferred Income Taxes       
|                                              
|Deferred income taxes under Mexican GAAP      
|US GAAP adjustments:                          
|Restatement of imported equipment             
|Capitalization of integral result of financing
|Start-up expenses                             
|Pension plan                                  
|Financial instruments                         
|Restatement of prior year financial statements
|                                              
|Total adjustments                             
|                                              
|Deferred income taxes under US GAAP           
|                                              

The total  deferred
 income taxes under US GAAP include the  corresponding  current  portion as of December
31,     2003 and December 31, 2002 of Ps. 1,649 and Ps. 1,464, respectively.

The changes in the
balance of the deferred income taxes for the year under US GAAP are as follows:

|                                       
|---------------------------------------
|                                       
|                                       
|Balance at beginning of the year       
|Panamco acquisition effect             
|Financial instruments                  
|Provision for the year                 
|Change in the statutory income tax rate
|Cumulative translation adjustment      
|Inflation adjustment                   
|                                       
|Balance at end of the year             
|                                       

|                                                   
|---------------------------------------------------
|Reconciliation of Deferred Employee Profit Sharing 
|                                                   
|Deferred employee profit sharing under Mexican GAAP
|US GAAP adjustments:                               
|Allowance for doubtful accounts                    
|Inventories                                        
|Prepaid expenses                                   
|Properties, plant and equipment                    
|Capitalization of interest expense                 
|Deferred charges                                   
|Pension plan                                       
|Seniority premiums                                 
|Medical services                                   
|Other reserves                                     
|                                                   
|Total adjustments                                  
|                                                   
|Deferred employee profit sharing under US GAAP     
|                                                   

The changes in the
balance of the deferred employee profit sharing for the year under US GAAP are as follows:

|                                
|--------------------------------
|                                
|                                
|Balance at beginning of the year
|Panamco acquisition effect      
|Provision for the year          
|Inflation adjustment            
|                                
|Balance at end of the year      
|                                

j)       Pension
Plan:

Under Mexican GAAP,
the  liabilities  for employee  benefits are determined  using  actuarial  computations
 in     accordance with Bulletin D-3,  Obligaciones  Laborales (Labor  Obligations),
 which is substantially the same     as US GAAP SFAS No. 87,  Employers  Accounting for
 Pensions,  except for the initial year of application of     both bulletins,  which
generates a difference in the  unamortized  prior service costs and in the  amortization
    expense.

Under  Mexican  GAAP
 and US GAAP,  there is no  difference  in the  liabilities  for  seniority  premiums
 and     postretirement medical benefits.

The  Company has
 prepared a study of pension  costs under US GAAP based on  actuarial  calculations
 using the     same assumptions applied under Mexican GAAP (see Note 15).

The required
disclosures under SFAS No. 87 are as follows:

|                                                        
|--------------------------------------------------------
|Net Pension Cost                                        
|                                                        
|Service cost                                            
|Interest cost                                           
|Actual return on pension plan funds                     
|Net amortization and deferral                           
|                                                        
|Net pension cost under US GAAP                          
|Net pension cost recorded under Mexican GAAP            
|                                                        
|Additional expense that must be recognized under US GAAP
|                                                        

|                                                           
|-----------------------------------------------------------
|Pension Liability                                          
|                                                           
|Projected benefit obligation                               
|Pension plan funds at fair value                           
|                                                           
|Unfunded projected benefit obligation                      
|Unrecognized net transition obligation                     
|                                                           
|Total unfunded accrued pension liability under US GAAP     
|Total unfunded accrued pension liability under Mexican GAAP
|                                                           
|Liability that must be canceled under US GAAP              
|                                                           

|                                       
|---------------------------------------
|Change in Projected Benefit Obligation 
|                                       
|Obligation at the beginning of the year
|Panamco acquisition                    
|Service cost                           
|Interest cost                          
|Actuarial loss                         
|Benefits paid on pension plan funds    
|                                       
|Obligation at the end of the year      
|                                       

|                                          
|------------------------------------------
|Change in Pension Plan Funds              
|                                          
|Balance at the beginning of the year      
|Panamco acquisition                       
|Actual return on plan assets in real terms
|Actuarial loss                            
|Employee contribution                     
|Benefits paid on pension plan funds       
|                                          
|Balance at the end of the year            
|                                          

k)       Minority
Interest:

Under Mexican GAAP,
the minority  interest in consolidated  subsidiaries  is presented as a separate
 component     within stockholders equity in the consolidated balance sheet.

Under US GAAP, this
item must be excluded from consolidated  stockholders  equity in the consolidated
 balance     sheet.  Additionally,  the minority interest in the net earnings of
consolidated  subsidiaries is excluded from     consolidated net income.

The US GAAP
 adjustments  shown in Note 26 a) and b) are calculated on a  consolidated  basis.
 Therefore,  the     minority  interest  effect  is  presented  as a  separate  line
 item,  in  order  to  obtain  net  income  and     stockholders equity.

The minority interest
in US GAAP adjustments is as follows:

|                                                  
|--------------------------------------------------
|Income Statement                                  
|                                                  
|Restatement of imported machinery and equipment   
|Capitalization of the integral result of financing
|Financial instruments                             
|Deferred income taxes                             
|Deferred employee profit sharing                  
|Goodwill                                          
|Pension plan cost                                 
|Deferred promotional expense                      
|                                                  
|                                                  
|                                                  

|                                                  
|--------------------------------------------------
|Stockholders Equity                              
|                                                  
|Restatement of imported machinery and equipment   
|Capitalization of the integral result of financing
|Financial instruments                             
|Deferred income taxes                             
|Deferred employee profit sharing                  
|Goodwill                                          
|Accumulated pension plan liability                
|Deferred promotional expense                      
|                                                  
|                                                  
|                                                  

l)
      Acquisition of Minority Interest:

In accordance  with
Mexican GAAP,  the Company  applied the entity  theory to the  acquisition  of the
minority     interest by FEMSA in May 1998, through an exchange offer.  Accordingly,  no
goodwill was created as a result of     such  acquisition  and the  difference  between
 the book value of the shares  acquired  by FEMSA and the FEMSA     shares exchanged was
recorded as additional  paid-in capital.  The direct  out-of-pocket  costs identified
with     the purchase of minority interest are treated as an additional purchase cost and
included in other expenses.

In  accordance  with
US GAAP,  the  acquisition  of a minority  interest  must be accounted  under the
purchase     method,  using the market value of shares  received by FEMSA in the Exchange
Offer to determine the cost of the     acquisition of such minority  interest and the
related  goodwill.  Until December 2001,  goodwill was amortized     over a period of 40
years,  and beginning  2002, in accordance  with SFAS No. 142 (see Note 25 e),  goodwill
is     no longer amortizable.  Under US GAAP, the direct  out-of-pocket costs identified
with the purchase of minority     interest are treated as additional goodwill.

Additionally,  SFAS
No. 142  requires  the  allocation  of all  goodwill to the related  reporting  units.
 The     allocation  of the goodwill  generated  by the  previously  mentioned
 acquisition  of minority  interest is as     follows:

|               
|---------------
|FEMSA Cerveza  
|Coca-Cola FEMSA
|FEMSA Empaques 
|FEMSA Comercio 
|               
|               
|               

m)       Statement
of Cash Flows:

Under  Mexican  GAAP,
 the  Company  presents a  consolidated  statement  of changes in  financial  position in
    accordance  with  Bulletin  B-12,  Estado de  Cambios en la  Situación  Financiera  (Statement
 of Changes in     Financial  Position),  which identifies the generation and application
of resources by the differences  between     beginning and ending financial  statement
balances in constant Mexican pesos.  Bulletin B-12 also requires that     monetary  and
foreign  exchange  gains and losses be treated as cash items for the  determination  of
resources     generated by operations.

In  accordance  with
US GAAP,  the Company  follows SFAS No. 95,  Statement of Cash Flows, which is
presented     excluding the effects of inflation (see Note 25 n).

n)       Summarized
Financial Information under US GAAP:

|                                              
|----------------------------------------------
|Consolidated Balance Sheets                   
|                                              
|Current assets                                
|Properties, plant and equipment               
|Other assets                                  
|                                              
|Total assets                                  
|                                              
|Current liabilities                           
|Long-term liabilities                         
|Other liabilities                             
|                                              
|Total liabilities                             
|Minority interest in consolidated subsidiaries
|Stockholders equity                          
|                                              
|Total liabilities and stockholders equity    
|                                              

|                                                         
|---------------------------------------------------------
|Consolidated Income Statements                           
|                                                         
|Total revenues                                           
|Income from operations                                   
|Income before income tax and tax on assets               
|Income tax and tax on assets                             
|                                                         
|Income before change in accounting principle             
|Change in accounting principle                           
|                                                         
|Income before minority interest                          
|Minority interest in results of consolidated subsidiaries
|                                                         
|Net income                                               
|Cumulative translation adjustment                        
|Cumulative result of holding non-monetary assets         
|Financial instruments                                    
|                                                         
|Other comprehensive income                               
|                                                         
|Comprehensive income                                     
|                                                         
|Net income per Series B share (constant pesos):        
|Before change in accounting principle                    
|After change in accounting principle                     
|Net income per Series D share (constant pesos):        
|Before change in accounting principle                    
|After change in accounting principle                     
|                                                         

|                                                      
|------------------------------------------------------
|Consolidated Cash Flows (1)                           
|                                                      
|Consolidated net income                               
|Non-cash items                                        
|                                                      
|Gross operating cash flows                            
|                                                      
|Working capital investment                            
|Recoverable taxes, net                                
|Interest payable                                      
|Labor obligations                                     
|                                                      
|Net cash flows from operating activities              
|                                                      
|Investment in:                                        
|Shares                                                
|Properties, plant and equipment                       
|Panamco acquisition                                   
|Other assets                                          
|                                                      
|Net cash flows used in investing activities           
|                                                      
|Bank loans                                            
|Capital stock                                         
|Dividends declared and paid                           
|Other financial transactions                          
|                                                      
|Net cash flows used in financing activities           
|Effect of exchange rate changes on cash               
|                                                      
|Net increase in cash and cash equivalents             
|Cash received in acquisition of Panamco               
|Cash and cash equivalents at the beginning of the year
|                                                      
|Cash and cash equivalents at the end of the year      
|                                                      
|Supplemental cash flows information:                  
|Interest paid                                         
|Income tax and tax on assets paid                     
|                                                      

|(1) | Expressed in millions of historical Mexican pesos.
|--- | --------------------------------------------------

|                                                          
|----------------------------------------------------------
|Consolidated Statements of Changes in Stockholders Equity
|                                                          
|Stockholders equity at the beginning of the year         
|Dividends declared and paid                               
|Capital contribution by The Coca-Cola Company             
|Financial instruments                                     
|Cumulative translation adjustment                         
|Result of holding non-monetary assets                     
|Net income for the year                                   
|                                                          
|Stockholders equity at the end of the year               
|                                                          

Note 26.
  Reconciliation of Mexican GAAP to US GAAP.

a)
      Reconciliation of Net Income for the Year:

|                                                                  
|------------------------------------------------------------------
|                                                                  
|                                                                  
|Net majority income under Mexican GAAP                            
|US GAAP adjustments:                                              
|Restatement of prior year financial statements (see Note 25 a)    
|Deferred promotional expenses (see Note 25 c)                     
|Start-up expenses (see Note 25 d)                                 
|Intangible assets and goodwill (see Note 25 e)                    
|Restatement of imported machinery and equipment (see Note 25 f)   
|Capitalization of the integral result of financing (see Note 25 g)
|Financial instruments (see Note 25 h)                             
|Deferred income taxes (see Note 25 i)                             
|Deferred employee profit sharing (see Note 25 i)                  
|Pension plan (see Note 25 j)                                      
|Minority interest (see Note 25 k)                                 
|Acquisition of minority interest (see Note 25 l)                  
|                                                                  
|Total Adjustments                                                 
|                                                                  
|Net income under US GAAP                                          
|                                                                  

Under US GAAP, the
monetary  position effect of the income  statement  adjustments is included in each
 adjustment, except for the  capitalization  of the integral  result of  financing,
 intangible  assets and goodwill and pension plan liabilities, which are non-monetary.

b)
      Reconciliation of Stockholders Equity:

|                                                                  
|------------------------------------------------------------------
|                                                                  
|                                                                  
|Majority stockholders equity under Mexican GAAP                  
|US GAAP adjustments:                                              
|Restatement of prior year financial statements (see Note 25 a)    
|Deferred promotional expense (see Note 25 c)                      
|Start-up expenses (see Note 25 d)                                 
|Intangible assets and goodwill (see Note 25 e)                    
|Restatement of imported machinery and equipment (see Note 25 f)   
|Capitalization of the integral result of financing (see Note 25 g)
|Financial instruments (see Note 25 h)                             
|Deferred income taxes (see Note 25 i)                             
|Deferred employee profit sharing (see Note 25 i)                  
|Pension plan (see Note 25 j)                                      
|Minority interest (see Note 25 k)                                 
|Acquisition of minority interest (see Note 25 l)                  
|                                                                  
|Total Adjustments                                                 
|                                                                  
|Stockholders equity under US GAAP                                
|                                                                  

c)
      Reconciliation of Comprehensive Income:

|                                                
|------------------------------------------------
|                                                
|                                                
|Majority comprehensive income under Mexican GAAP
|US GAAP adjustments:                            
|Net income (see Note 26 a)                      
|Financial Instruments                           
|Translation adjustment                          
|Result of holding non-monetary assets           
|                                                
|Comprehensive income under US GAAP              
|                                                

Note 27.   Future
Impact of Recently Issued Accounting Standards Not Yet in Effect.

a)       In Mexican
GAAP:

- Bulletin C-15,
Deterioro en el Valor de los Activos de Larga Duración y su Disposición (Impairment
of the Value of Long-Lived Assets and Their Disposal) (C-15):In March
2003, the Instituto Mexicano de Contadores Públicos (IMCP) issued Bulletin
C-15, whose application is mandatory for financial statements of years
beginning on or after January 1, 2004, although early application is encouraged.
C-15 establishes, among others, new principles for the calculation and
recognition of impairment losses for long-lived assets and their reversal. The
calculation of such loss requires the determination of the recoverable value,
which is now defined as the greater of the net selling price of a cash-generating
unit and its value in use, which is the present value of discounted future net
cash flows. The accounting principles issued prior to this new bulletin used
future net cash flows, without requiring the discounting of such cash flows. The
Company does not anticipate that this new standard will have a significant impact
on its financial position or results of operations.

- Bulletin
C-12, Instrumentos Financieros con Características de Pasivo, de Capital o de
Ambos (Financial Instruments with Characteristics of Debt, Equity or Both)(C-12): In
April 2003, the IMCP issued Bulletin C-12, whose application is mandatory for
financial statements of periods beginning on or after January 1, 2004, although
early application is encouraged. C-12 establishes the more significant
differences between debt and equity, as the basis for the development of the criteria
necessary to appropriately identify, classify and record, upon initial
recognition, the debt and equity components of compound financial instruments.
This new pronouncement is similar to the SFAS No. 150, Accounting for Certain
Financial Instruments with characteristics of both Liabilities and Equity of US
GAAP. The Company does not anticipate that this new standard will have a
significant impact on its financial position or results of operations. This new
pronouncement is similar to the SFAS No. 150 Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity of US GAAP.

b)       In US GAAP:

- SFAS No 149, Amendments
of Statement 133 on Derivative Instruments and Hedging Activities (SFAS No. 149):In
April 2003 the FASB issued SFAS No. 149, which amends and clarifies financial
accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities
under SFAS No. 133. The changes in this Statement improve financial reporting
by requiring that contracts with comparable characteristics be accounted for
similarly. The new standard will be effective for contracts entered into or
modified after June 30, 2003, except as stated below and for hedging
relationships designated after June 30, 2003. In addition, except as stated below, all
provisions of this Statement should be applied prospectively. The provisions of this
Statement  that relate to SFAS No. 133  implementation  issues that have been effective
     for fiscal  quarters  that began prior to June 15,  2003,  should  continue to be
applied in  accordance  with      their  respective  effective  dates.  The  Company
 does not  anticipate  that this new  standard  will have a      significant impact on
its financial position or results of operations.

- FASB
Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46): In
January 2003, the FASB issued FIN 46. FIN 46 clarified the application of Accounting
Research Bulletin No. 51, Consolidated Financial Statements, to certain
entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the entity
to finance its activities without additional subordinated financial support from
other parties. FIN 46 was effective immediately for all variable interests held
by the Company in a variable interest entity created after January 31, 2003. For a
variable interest held by the Company in a variable interest entity created
before February 1, 2003, the Company will be required to apply the provisions of
FIN 46 as of December 31, 2004. The Company does not currently have any variable
interests in a variable interest entity.

Note 28. Unaudited
Supplemental Pro Forma Information.

The  unaudited  pro
forma  financial  information  presents  the results for the years ended  December 31,
2003 and 2002, as if the acquisition of Panamco had occurred at the beginning of the
respective  periods.  Such  information has been prepared for comparative purposes only.

These pro  forma
 results  have  been  prepared  on the  basis of  Mexican  GAAP,  and  accordingly,  they
 include restatement  for the effects of inflation as required by Mexican  GAAP.  These
pro forma  results  include  certain adjustments to conform  Panamcos  previous
 accounting  policies and estimates with those of the Company including such items as
depreciation rates,  accounting for bottles and cases, useful lives of refrigerators,  as
well as the increased  integral result of financing on acquisition  debt. The
 corresponding  income tax effects have also been considered.

The pro forma  amounts
do not reflect any  operating  efficiencies  and cost savings that the Company  believes
are achievable.

|                          
|--------------------------
|                          
|                          
|Net sales                 
|Total revenues            
|Net income                
|Majority net income       
|Minority net income       
|Earnings per share (pesos)
|                          

The pro forma results
are not necessarily  indicative  either of the results of operations that actually would
have resulted had the acquisition been in effect at the beginning of the respective
periods or of future results.





REPORT OF INDEPENDENT
AUDITORS

To the Stockholders of Femsa
Comercio, S.A. de C.V.

We have audited the
consolidated balance sheets of Femsa Comercio, S.A. de C.V. and Subsidiariesas of
December 31, 2003 and 2002, and the related consolidated statements of income, changes
in stockholders equity and changes in financial position for each of the three years
of the period ended December 31, 2003 (not presented separately herein). These
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on our
audits.

We conducted  our
audits in  accordance  with  auditing  standards  generally  accepted in Mexico and in
the United  States of America. Those standards  require that we plan and perform our
audit to obtain reasonable  assurance about whether the financial  statements are free of
material  misstatement.  An audit includes examining,  on a test basis,  evidence
supporting the amounts and disclosures in the financial  statements.  An audit also
includes assessing the accounting  principles used and significant  estimates made by
management, as well as evaluating the overall  financial  statement  presentation.  We
believe that our audits  provide a reasonable  basis for our opinion.

In our opinion, the
financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Femsa Comercio, S.A. de C.V. and Subsidiariesat December 31, 2003 and 2002, and the consolidated results of their operations,
the changes in their stockholders equity and the changes in their financial position
for each of the three years in the period ended December 31, 2003, in conformity with
accounting principles generally accepted in Mexico, which differ in certain
significant respects from accounting principles generally accepted in the United
States of America, as described in Note 20 to the consolidated financial statements.

| | Mancera, S. C. A Member Practice of
Ernst & Young Global./s/ Roberto Rodríguez CastañedaC.P.C. Roberto Rodríguez Castañeda
| | --------------------------------------------------------------------------------------------------------------------------

San Pedro Garza García, N.L. January
28, 2004





REPORT OF INDEPENDENT
AUDITORS

To the Stockholders of Femsa
Empaques, S.A. de C.V.

We have audited the
consolidated balance sheet of Femsa Empaques, S.A. de C.V. and Subsidiariesas of
December 31, 2003, and the related consolidated statements of income, changes in
stockholders equity and changes in financial position for the year then ended (not
presented separately herein). These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit
in accordance with auditing  standards  generally accepted in Mexico and in the United
States of America.  Those standards require that we plan and perform our audit to obtain
 reasonable  assurance about whether the financial  statements  are free of material
 misstatement.  An audit  includes  examining,  on a test  basis,  evidence supporting
the amounts and  disclosures in the financial  statements.  An audit also includes
 assessing the accounting principles used and significant  estimates made by management,
 as well as evaluating the overall  financial  statement presentation. We believe that
our audit provides a reasonable basis for our opinion.

In our opinion, the
financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Femsa Empaques, S.A. de C.V. and
Subsidiariesat December 31, 2003, and the consolidated results of their
operations, the changes in their stockholders equity and the changes in their
financial position for the year ended December 31, 2003, in conformity with accounting
principles generally accepted in Mexico, which differ in certain significant respects
from accounting principles generally accepted in the United States of America, as
described in Note 20 to the consolidated financial statements.

| | Mancera, S. C. A Member Practice of
Ernst & Young Global./s/ Victor Soulé GarcíaC.P.C. Victor Soulé García
| | ----------------------------------------------------------------------------------------------------------

San Pedro Garza García, N.L. January
28, 2004



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SIGNATURE

Pursuant to the
requirements of Section 12 of the Securities Exchange Act of 1934, the registrant
certifies that it meets all the requirements for filing on Form 20-F and has duly caused
this annual report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Dated:  April 7, 2004

| | FOMENTO ECONÓMICO MEXICANO, S.A. de C.V.
| | ----------------------------------------
|
| | By:                                     

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