EXECUTIVE SUMMARY ? Background and Outlook. Mexico has been resilient to global uncertainty, in large part due to confidence in the strong policy framework and sound policy management, which are underpinned by a broad consensus about macroeconomic stability and by the signaling and insurance benefits of the FCL arrangement. Significant progress has been made in advancing far-reaching structural reforms, signaling Mexico’s commitment to address deep-rooted impediments to growth. The economy slowed down in early 2013, but is expected to recover starting in the second half of the year. Mexico’s financial markets have functioned reasonably well through the recent global volatility, although with some currency depreciation and a rise in long-term government bond yields. Given Mexico’s open capital account and large balance sheet exposures to portfolio investment, risks are associated with unsettled external conditions, especially the risk of a possible disorderly exit from Unconventional Monetary Policy (UMP) in the U.S. ? FCL. The fourth arrangement with Mexico under the FCL for 1,304 percent of quota (in an amount equivalent to SDR 47.292 billion) was approved on November 30, 2012. The authorities intend to continue treating the arrangement as precautionary. ? Qualifications. The staff assess that Mexico continues to meet the qualification criteria for access to FCL resources specified under the Executive Board decision on FCL arrangements (Decision No. 14283-(09/29), adopted on March 24, 2009, as amended) and therefore recommend that the Board completes the review under the FCL arrangement which would allow Mexico to make purchases before the expiration of the arrangement on November 29, 2014.