Impact bonds in Mexico: Opportunities and challenges

Students in the Mexican state of Chihuahua

The persistence and enormity of today’s economic and social development challenges require modern and innovative solutions that ensure better outcomes. Seven years ago, in an attempt to address these issues, the first impact bond was implemented in the United Kingdom with the goal of lowering recidivism rates. In the years since, governments around the world have focused on researching, studying, designing, and implementing impact bonds to improve social programs and address a variety of issues.

Mexico faces significant economic and social development challenges. In an increasingly complicated global environment, it is even more important to establish new and innovative partnerships to address these issues. Impact Bonds in Mexico: Opportunities and Challenges presents an overview of how the Mexican government can use this innovative tool to discover new ways to address the serious health, education, employment, and safety issues that the country faces. To address these challenges, a comprehensive and focused analysis is needed to support the creation of concrete, efficient, and effective public policies that involve diverse actors from the public and private sectors, as well as civil society.

An impact bond is an innovative and results-based tool that combines the experience and know-how of public, private, and civil society actors to create high-impact social, economic, and/or environmental programs and projects. This report presents an overview of international experience in the design, implementation, and evaluation of impact bonds; demystifies some of the most common questions about the structure; and clarifies the minimum criteria that must exist for them to be implemented. Additionally, the report provides an overview of the first impact bond in Mexico, as well as an analysis of the key factors that might impact the future successful implementation of impact bonds in the country, including the relevant legal, political, financial, and investment context.

Impact Bonds in Mexico

This report is a preliminary analysis of the potential of impact bonds in Mexico. It is not intended for use as a feasibility study for their direct implementation in any particular sector. We hope that Impact Bonds in Mexico: Opportunities and Challenges will help spark debate on both the national and local level among civil society, philanthropic, and public and private sector actors regarding the development of innovative, results-based, and data-driven public policy tools.

This report is divided into four sections:

The first section, titled Investing for the Future: What are Impact Bonds?, provides a history and overview of the structure of impact bonds, focusing on their implementation in different parts of the world. This section also includes a review of the published academic research analyzing the potential and limitations of impact bonds.

The second section, titled Key Challenges for the Development of Mexico, is focused on the underlying economic, social, and environmental challenges that might be addressed using an impact bond structure.

The third section, titled The Mexican Experience with Results-Based Financing, is focused on the use of impact bonds in Mexico, including an analysis of results-based financing projects in the states of Jalisco and Chiapas.

The fourth and final section, titled The Environment for Impact Bonds in Mexico, identifies and analyzes the current key legal, political, and financial considerations necessary to create a more conducive environment for impact bonds in Mexico.

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