these factors reduces the efficiency of the creditor rights framework and the predictability and amount of recovering debt – especially when one compares Mexico to peers (see Table 1) – which adversely impacts the willingness of banks to expand lending.

**Table 1: Selected Cross-Country Doing Business Comparisons (2005)**

||**Mexico**|**Chile**|**Brazil**|**Region**|**OECD**|
|---|---|---|---|---|---|
|**_Registering Property_**||||||
|Procedures (number)|5|6|15|6.7|4.7|
|Time (days)|74|31|47|76.5|32.2|
|Cost (% of property value)|5.3|1.3|4.0|4.8|4.8|
|**_Getting Credit_**||||||
|Legal Rights Index|2|4|2|3.8|6.3|
|Credit Information Index|6|6|5|4.5|5.0|
|Public registry coverage (% adults)|0|45.7|9.6|11.5|7.5|
|Private bureau coverage (% adults)|49.4|22.1|53.6|31.2|59.0|
|**_Protecting Investors_**||||||
|Disclosure Index|6|8|5|4.1|6.1|
|Director Liability Index|0|4|7|3.8|5.1|
|Shareholder Suits Index|5|5|4|5.7|6.6|
|Investor Protection Index|3.7|5.7|5.3|4.5|5.9|
|**_Enforcing Contracts_**||||||
|Procedures (number)|36|28|24|35.4|19.5|
|Time (days)|421|305|546|461.3|225.7|
|Cost (% of debt)|20.0|10.4|15.5|23.3|10.6|

# Source: World Bank.

Note: The Legal Rights Index ranges from 0-10, with higher scores indicating that those laws are better designed to expand access to credit. The Credit Information Index ranges from 0-6, with higher values indicating that more credit information is available from a public registry or private bureau. The Investor Protection Index is an average of three dimensions: transparency of transactions (Extent of Disclosure Index), liability for self-dealing (Extent of Director Liability Index) and shareholders’ ability to sue officers and directors for misconduct (Ease of Shareholder Suits Index); each of these indices varies between 0-10, with higher scores indicating better investor protection.

The growth in domestic debt issuance by private sector firms has been facilitated by a supporting macroeconomic environment and significant financial system reforms. The aforementioned improvements in economic fundamentals (see previous section) have allowed a substantial shift from external to domestic public (sovereign, parastatal and municipal) and private sector bond issuance at progressively longer maturities and fixed rates in the last few years (see figure 21)<sup>25</sup> ; anecdotal evidence also suggests the replacement of some bank business loans with corporate debt issuance. The process has been supported by important reforms that have contributed to the growth of domestic institutional investors (e.g. mutual funds and Afores) and a more robust, efficient and transparent capital markets framework and infrastructure (see Box 1 in previous section)<sup>26</sup> . With respect to the latter, the introduction in 2001 of the _certificado bursátil_ , a versatile bond contract, has been particularly beneficial since it combined flexible

> 25 This does not necessarily mean that financing has shifted from foreign currency to MXP; in fact, anecdotal evidence suggests that large multinational Mexican firms swap their domestic bond proceeds into US dollars in order to take advantage of pricing differences between the domestic and foreign debt markets. 26 See, for example, Ilyina A. (2005) and Soueid M. (December 2005).

22