BACKGROUND
The Government of Mexico recognizes the critical importance of forests as a natural asset for domestic socio-economic development as well as for the environmental services they provide. The Government’s commitment to this agenda is evidenced by its participation in relevant international fora, such as President Calderon’s statements on REDD+ at COP 16 in Cancun, Mexico’s leading role in the Forest Carbon Partnership Facility, and a new partnership with Costa Rica and Ecuador to learn lessons about how Payment for Environmental Services programs in those countries can create conditions for future REDD+ implementation.

CONAFOR (Comisión Nacional Forestal) was created as a decentralized agency by decree in 2001 with the objective of developing, supporting, and encouraging productive activities related to conservation and forest restoration, and of applying the policy of sustainable forest development. To that end, CONAFOR’s main financial instrument is the Forest Fund which:

• facilitates access to financial services
• promotes projects to integrate and increase the competitiveness of production chains
• develops mechanisms for payment of environmental services
• promotes bonds associated with the conservation of forest resources
• and also channels direct subsidy payments to communities to support activities such as reforestation, soil conservation, community forest management, and payments for environmental services.

CHALLENGE
The size of the Forest Fund and the scale of its operations have grown tremendously since its inception in 2001. The number of transactions has increased from about 200 per year to about 12,000 and the size of the fund has grown from about 20 to 600 million dollars. Also, some additional financial mechanisms have been created linked to the Forest Fund, such as a guarantee fund for forest plantations. In addition, it is expected that the Forest Fund will play an enabling role as part of the financial architecture that will be used to manage new financing associated with REDD+.

APPROACH
In light of Mexico’s changing circumstances and needs, CONAFOR and the World Bank proposed in 2011 to collaborate to redesign the Forest Fund so that it becomes a state-of-the art, best-practice financial mechanism, by:

• identifying key desirable features in the Forest Fund emerging from the current climate discussions and current and future needs,
• identifying international good practices relevant to Mexico’s needs (this desk review would build on previous work supported by the UNFF and its Ad-Hoc Expert Group on Forest Finance, and work on national forest financing strategies supported by Tropenbos, the NFP Facility, as well as others)
• providing summary recommendations and options for the redesign of the Fund that are feasible in the Mexican legal context.

RESULTS
This activity was closed in April 2012 because of lack of progress with the proposed analytical and policy support.  However the redesign of the Mexican Forest Fund is underway.