Santiago Principles Self-Assessment®
BISF 2025
Pillar 1: Legal
Principle 1
1. The legal framework for the SWF should be sound and support its effective operation and the achievement of its stated objective(s).
1.1. The legal framework for the SWF should ensure legal soundness of the SWF and its transactions.
1.2. The key features of the SWF’s legal basis and structure, as well as the legal relationship between the SWF and other state bodies, should be publicly disclosed.
The legal framework and main objectives for Mexico’s SWF are clearly defined in i) the Budget and Fiscal Responsibility Law (hereinafter BFRL), and ii) the Agreement that establishes the Rules of Operation for the Budgetary Income Stabilization Fund (FEIP). The framework is designed specifically to establish a sound and effective operation for the FEIP, ensuring the achievement of its objectives.
The BFRL defines obligations and procedures to ensure fiscal sustainability and to promote the implementation of countercyclical policies. In line with this, the BFRL
establishes the creation of a SWF (the FEIP) with a clear mandate aligned with its goals.
Mexico’s SWF is constituted by assets managed in a Public Trust with direct legal relationship with the Federal Government.
The Ministry of Finance serves as the Settlor of the Trust, and one of the Federal Development banks, “Nacional Financiera” (hereinafter NAFIN), serves as the Trustee.
The legal framework and supporting documentation delineating Mexico’s SWF, as well as its rules of operation, and key features are publicly disclosed and can be found on the official websites of the Congress and the Official Gazette of the Federation.
- Rules of the Budget and Fiscal Responsibility Law.
- Agreement that establishes the Rules of Operation for the Budgetary Income Stabilization Fund.
Principle 2
2. The policy purpose of the SWF should be clearly defined and publicly disclosed.
The FEIP´s main objective is to reduce the effects on public spending of a decrease in the Federal Government’s revenues with respect to those authorized by the Congress in the annual Revenue Act. The purpose is clearly defined and decreed in article 21 Bis fraction II of the Budget and Fiscal Responsibility Law.
Principle 3
3. Where the SWF’s activities have significant direct domestic macroeconomic implications, those activities should be closely coordinated with the domestic fiscal and monetary authorities, so as to ensure consistency with the overall macroeconomic policies.
The FEIP is one of the tools that is used by the Federal Government to fulfil the goals stated in the BFRL (see GAPP 2), particularly in the implementation of countercyclical policies:
- FEIP accumulates more resources when economic conditions improve. The resources allocated to the FEIP are calculated as a fixed percentage of the estimated government oil revenues and the revenue surpluses. As such, these resources increase
whenever the government oil revenues increase.
FEIP’s assets are used to protect public finances, especially when economic conditions are worsening. FEIP assets are intended to help reduce the effect of economic contractions on fiscal revenues as a consequence of downturns in the GDP, a decline in oil revenues and oil production, among others. According to the latter, the purpose of the fund is aligned with fiscal policy, acting as a countercyclical measure to preserve
macroeconomic stability.
Principle 4
4. There should be clear and publicly disclosed policies, rules, procedures, or arrangements in relation to the SWF’s general approach to funding, withdrawal, and spending operations.
4.1. The source of SWF funding should be publicly disclosed.
4.2. The general approach to withdrawals from the SWF and spending on behalf of the government should be publicly disclosed.
The BFRL and the Rules of Operation of the Budgetary Income Stabilization Fund explicitly define the sources and uses of the SWF assets, and this information is publicly available.
• The sources of the FEIP’s assets are defined in articles 19, 19 Bis and 87 of the BFRL.
According to these articles, accumulates resources through i) a fixed percentage of the oil revenues approved by the Congress and of the Federal Government surpluses ii) up to 30% of the Central Bank’s operational profit (by law, central bank’s operational profits have to be given to the Federal Government).
• The uses of the FEIP’s assets are defined in articles 21, 21 Bis of the BFRL and in the Rules of Operation of BISF. According to these articles, assets are to be used only to:
i) compensate decreases in government revenues under the amount approved by congress, and
ii) cover the cost of hedging instruments acquired by the government to contribute to stabilizing the Federal Government’s revenues.
Principle 5
5. The relevant statistical data pertaining to the SWF should be reported on a timely basis to the owner, or as otherwise required, for inclusion where appropriate in macroeconomic data sets.
NAFIN reports relevant SWF’s financial information to the Ministry of Finance on a monthly basis. Additionally, the BFRL and the Rules of Operation of the FEIP require the Ministry of Finance to report quarterly to the Congress about his revenues, expenditures, reserves and other relevant financial information.
This information is publicly available in the Ministry of Finance institutional webpage in the Quarterly Reports Section, in the Public Finances Appendix. []
Pillar 2: Institutional
Principle 6
6. The governance framework for the SWF should be sound and establish a clear and effective division of roles and responsibilities in order to facilitate accountability and operational independence in the management of the SWF to pursue its objectives.
The FEIP is established as a Public Trust, and consequently, its governance framework is defined in the Trust Contract (“The Contract”).
https://www.sipot.hacienda.gob.mx/work/models/SIPOT/Articulos/Articulo_…
According to this:
• The Economic Planning Unit, which belongs to the Ministry of Finance, is responsible for overseeing that the Trust’s resources are applied for the stated purposes.
• A Technical Committee, integrated by the Undersecretary of Finance and Public Credit, the Undersecretary of Revenues and the Undersecretary of Expenditure, is responsible for i) authorizing the amount of resources to be used to fulfil the Fund’s objectives, ii)
approving monthly financial statements and iii) determining the portfolio’s currency composition, among others.
• NAFIN manages the Trust and, in order to distinguish the federal resources from operations related to the BISF, may create subaccounts.
• NAFIN must make use of the Mexican Federal Treasury (hereinafter “TESOFE”) to manage the Fund’s resources.
• For the implementation of hedging programs aimed to contribute with the stabilization of the Federal Government’s revenues, the Federal Government can request the Central Bank’s intermediation (as the Financial Agent of the Federal Government) to comply with such purpose.
Principle 7
7. The owner should set the objectives of the SWF, appoint the members of its governing body(ies) in accordance with clearly defined procedures, and exercise oversight over the SWF’s operations.
The Ministry of Finance and NAFIN clearly defined the FEIP’s objectives and governing body structure in the Trust Contract:
•The objectives are clearly established in article 21 Bis of the BFRL and the Rules of Operation.
• A Technical Committee is defined as the main governing body of the FEIP. The Committee members are the Undersecretary of Finance and Public Credit, the Undersecretary of Revenues and the Undersecretary of Expenditure.
• The Economic Planning Unit is responsible for overseeing that the Trust’s resources are applied for the stated purposes.
Principle 8
8. The governing body(ies) should act in the best interests of the SWF, and have a clear mandate and adequate authority and competency to carry out its functions.
The faculties of the Technical Committee are clearly enlisted in the Trust Contract and they are established specifically to reach SWF’s objectives:
• Authorize the amount of resources that must be used to fulfil the fund’s objectives.
• Brief the Federal Government of the resources that result from contributions to the FEIP.
• Approve the Trust’s financial statements.
• Determine the portfolio’s currency composition.
• Authorize the hiring of external auditors.
• Approve the fees for the legal guardians designated by the Trustee.
Principle 9
9. The operational management of the SWF should implement the SWF’s strategies in an independent manner and in accordance with clearly defined responsibilities.
NAFIN, as the SWF Trustee, is in charge of implementing the strategies defined by the Technical Committee, according to the set of faculties it has, in an independent manner in order to reach the BISF objectives. To comply with the SWF objectives, NAFIN’s investment strategy must ensure low- risk and high- liquidity investments.
The latter is in accordance to TESOFE’s investment policies (provided by the TESOFE Law). For the implementation of hedging programs aimed to contribute to the stabilization of the Federal Government’s revenues, the Federal Government can request the Central Bank’s intermediation (as the Financial Agent of the Federal Government) to comply with such purpose.
TESOFE Law []
Principle 10
10. The accountability framework for the SWF’s operations should be clearly defined in the relevant legislation, charter, other constitutive documents, or management agreement.
The accountability framework is defined in the public Trust Contract:
• NAFIN, as the SWF Trustee, is responsible for the FEIP assets’ protection and operation.
It has to be transparent and accountable for the management of the resources and obliged to deliver relevant information and documentation to the EPU.
• If NAFIN were to be found guilty or negligent in it acts and responsible for FEIP assets losses (according to Mexican Legislation), it would be responsible and obligated to respond according to Law.
• NAFIN has the faculty to request TESOFE the terms and conditions the deposits are subject to, as well as the delivery of financial statements.
• The EPU is responsible for overseeing that the Trust’s resources are applied for the stated purposes and is in charge of solving any FEIP administrative issues.
• The Technical Committee is responsible for determining the general activities of the Trustee as long as its instructions are within its faculties
Principle 11
11. An annual report and accompanying financial statements on the SWF’s operations and performance should be prepared in a timely fashion and in accordance with recognized international or national accounting standards in a consistent manner.
The Congress requires quarterly reports of the revenues, expenditures and reserves to the Ministry of Finance. This includes statistical information of the FEIP.
Reports to the Congress
Principle 12
12. The SWF’s operations and financial statements should be audited annually in accordance with recognized international or national auditing standards in a consistent manner.
The FEIP uses International Financial Reporting Standards (IFRS) to prepare its financial statements.
The Public Trust Contract establishes that the Trustee, in line with the Law of Acquisitions, Leases and Services of the Public Sector, is responsible for hiring an external auditor, with previous authorization from the Technical Committee and appointed by the Ministry of Public Services. According to the Guidelines for the Appointment and Control of External Auditors, issued by the Ministry of Public Services, it is the Auditor’s responsibility, among other obligations, to review the financial statements issued by the Trust.
The Firms interested in the practice of External Audits for public entities must be registered in the List of External Auditor Firms, for which they must certify that they meet the following criteria:
• Be established as a Firm that provides auditing services, in accordance with Law.
• Have partners with at least ten years of experience in financial-budgetary auditing or in the government sphere and with current records granted by the competent authority for the issuance of opinions and/or reports on the matters subject to such records.
• That the partners belong to a college or professional association recognized by the Ministry of Public Education.
• Have a staff corresponding to the audit area, identifying the staff structure that can be assigned for the practice of the External Audit(s) in which it could, if applicable, be designated.
• Have a diversified client portfolio in different areas, to whom it provides various services.
• That the partners in charge of issuing the corresponding opinions and/or reports, and the managers included in the structure, have a minimum of 20 points of continuous professional updating in government auditing or accounting granted by a college or professional association.
• Establish and apply continuous updating programs for the Firm's technical staff in matters of financial and budgetary auditing in the governmental sphere.
• Have criteria, policies and procedures in terms of hiring, work assignment, supervision, preparation and review of reports and assurance of service quality, as well as for the acceptance and continuity of its clients.
• Not be disqualified from doing business or subject to commercial bankruptcy or any other analogous figure.
• Be up to date in meeting your tax obligations.
• Others that the DGAE determines, in compliance with the applicable legal regulations.
Guidelines for the Appointment and Control of External Auditors []
Principle 13
13. Professional and ethical standards should be clearly defined and made known to the members of the SWF’s governing body(ies), management, and staff.
The government authorities and staff involved in the FEIP are public officers; thus, they are subject to the Federal Law of Liabilities of Public Officers (LLPO). In accordance with the fourth title of the LLPO, the Ministry of Finance and NAFIN define professional and ethical standards that are made known to its employees and are publicly disclosed on their websites.
Principle 14
14. Dealing with third parties for the purpose of the SWF’s operational management should be based on economic and financial grounds, and follow clear rules and procedures.
All transactions with third parties are based on economic and financial grounds. Banco de Mexico’s Fundamental Law establishes that Banco de Mexico (the Central Bank) will provide treasury services to the Federal Government and act as its financial agent in domestic and external credit operations. Therefore, the Federal Government requests the Central Bank to implement FEIP hedging operations.
Banco de Mexico’s Fundamental Law
Furthermore, if necessary, NAFIN has procedures that define the steps to be followed in acquiring services from third parties in accordance with the Credit Institutions Law (CIL) and the Trust Contract.
Credit Institutions Law []
Principle 15
15. SWF operations and activities in host countries should be conducted in compliance with all applicable regulatory and disclosure requirements of the countries in which they operate.
According to Mexican legislation, Credit Institutions’ international operations must comply with the host countries’ financial regulations. In addition, FEIP’s main operations with international counterparties, as the annual oil hedging strategy implemented by the Federal Government through its financial agent, Banco de Mexico, are subject to all regulatory requirements of the counterparties’ countries.
Principle 16
16. The governance framework and objectives, as well as the manner in which the SWF’s management is operationally independent from the owner, should be publicly disclosed.
The governance framework, objectives and operational management of the FEIP are defined in his rules of operation and the BFRL (publicly disclosed). These documents clearly establish that the operational management has to be carried out exclusively by NAFIN and the TESOFE in compliance with the Regulation of the Law of Treasury Service of the Federation (RLTSF), and according to the policies defined by the Technical Committee. Additionally, for the BISF hedging operations, the Federal Government can request the Central Bank’s intermediation (as the financial agent of the Government) to comply with such purpose.
Regulation of the Law of Treasury Service of the Federation
Principle 17
17. Relevant financial information regarding the SWF should be publicly disclosed to demonstrate its economic and financial orientation, so as to contribute to stability in international financial markets and enhance trust in recipient countries.
The EPU is authorized to request NAFIN relevant information regarding the Fund ́s activities and financial statements. The Ministry of Finance publicly discloses quarterly public finances reports through its website, which contains the most relevant financial information about the FEIP.
Pillar 3: Investment
Investment and Risk Management Framework.
Principle 18
18. The SWF’s investment policy should be clear and consistent with its defined objectives, risk tolerance, and investment strategy, as set by the owner or the governing body(ies), and be based on sound portfolio management principles.
18.1. The investment policy should guide the SWF’s financial risk exposures and the possible use of leverage.
18.2. The investment policy should address the extent to which internal and/or external investment managers are used, the range of their activities and authority, and the process by which they are selected and their performance monitored.
18.3. A description of the investment policy of the SWF should be publicly disclosed.
Principle 19
19. The SWF’s investment decisions should aim to maximize risk-adjusted financial returns in a manner consistent with its investment policy, and based on economic and financial grounds.
19.1. If investment decisions are subject to other than economic and financial considerations, these should be clearly set out in the investment policy and be publicly disclosed.
19.2. The management of an SWF’s assets should be consistent with what is generally accepted as sound asset management principles.
To construct a low-risk and high-liquidity portfolio, the TESOFE’s Technical Committee ensures that the investment strategy takes into account financial and economic circumstances, as well as the passive strategy. The guidelines establish the investment criteria and limits expressed in UDIS, an inflation-indexed unit of account. This allows the Fund to operate according to the economic and financial conditions. The Investment Guidelines outline the basic principles of a solid portfolio, as well as economic and financial grounds.
The framework for the FEIP’s investment policy clearly covers extensively, through its explicit legal structure – as well as its investment guidelines: the basic principles of a solid portfolio by minimizing risk and maximizing long-run stable growth. As part of the strategy to minimize risk, the use of financial derivatives is authorized for hedging purposes with the intermediation of Banco de Mexico, which serves as the financial agent of the Federal Government
Principle 20
20. The SWF should not seek or take advantage of privileged information or inappropriate influence by the broader government in competing with private entities.
Due to its constitution as a stabilization fund, it is against its purpose to seek advantages such as those arising from privileged access to market information that could cause negative effects on other agents or on financial markets. According to its legal framework, the FEIP’s operations are not subject to special financial or legal conditions, but they should comply with all financial regulation.
Principle 21
21. SWFs view shareholder ownership rights as a fundamental element of their equity investments’ value. If an SWF chooses to exercise its ownership rights, it should do so in a manner that is consistent with its investment policy and protects the financial value of its investments. The SWF should publicly disclose its general approach to voting securities of listed entities, including the key factors guiding its exercise of ownership rights.
Due to its constitution as a pool of assets with high liquidity, there are no shareholder ownerships others than the ones defined by the Trust Contract, where NAFIN is the Trustee and the Ministry of Finance serves as the settlor.
Principle 22
22. The SWF should have a framework that identifies, assesses, and manages the risks of its operations.
22.1. The risk management framework should include reliable information and timely reporting systems, which should enable the adequate monitoring and management of relevant risks within acceptable parameters and levels, control and incentive mechanisms, codes of conduct, business continuity planning, and an independent audit function.
22.2. The general approach to the SWF’s risk management framework should be publicly disclosed.
The identification, assessment and management of the FEIP’s risks are clearly defined in the TESOFE’s Law and the Investment Guidelines. In addition, establishing the use of systems and programs enables the adequate monitoring and management of relevant risks.
Information of relevant risks is reported in the Trust Control and Transparency System, in this system the financial statements and account statements are uploaded quarterly.
Principle 23
23. The assets and investment performance (absolute and relative to benchmarks, if any) of the SWF should be measured and reported to the owner according to clearly defined principles or standards.
The Contract states that the Ministry of Finance is authorized to request the FEIP’s financial statements, assets and investment performance on a monthly basis through the EPU, and the EPU is obligated to report this information to the Technical Committee for further observations and approval.
Principle 24
24. A process of regular review of the implementation of the GAPP should be engaged in by or on behalf of the SWF.
The Ministry of Finance shares the vision and objectives of the IFSWF and the Santiago Principles®. It has defined a strong legal, institutional and management framework that contributes to ensuring that the FEIP operations are aligned to the GAPP. This framework includes surveillance activities made by the Superior Audit Office of Mexico.