Mexico with the revenues needed to dramatically reduce its stock of external debt and increase spending on education and poverty alleviation programs. Among those who accept that privatization is a positive force, there is a widespread belief that SOEs need extensive restructuring and nurturing before they are fit for sale. With this in mind, governments often spend vast sums of money and much valuable time implementing investment and efficiency plans that are not valued by bidders. For the case of Mexico, the presence of an efficiency restructuring program or an investment plan reduced the net privatization price received by the government by 56 and 95 percent, respectively. Furthermore, each additional month taken to complete the privatization decreased prices by 2.2 percent. This evidence clearly suggest that governments should think twice before engaging in these types of restructuring programs and that often the best solution is to simply concentrate on the sale of SOEs and leave the restructuring to the market. If politicians wish to help displaced workers, there is sure to be a more cost-effective way to do it than by trying to fix public firms before they are sold. An additional lesson that can be drawn from the Mexican experience is that simplicity and transparency are paramount to a successful program. Special requirements such as cash-only sales reduced net prices by 30 percent, while allowing foreigners to participate boosted prices by 32 percent and the presence of an additional bidder in the final round increased them by 17 percent. Finally, this paper attempts to make sense of cases of failed privatization by analyzing the importance of a set of complementary policies such as the design of the privatization contracts, deregulation and re-regulation of privatized firms and the corporate governance framework. We find that the main instances of botched privatization can be traced back to mistakes in one or more of these complementary policies. Although it is clear that more attention is needed in these areas, the good news is that the failures seen so far seem to have a readily available solution.
2. Mexican SOEs and Privatization To understand the opportunities presented by the Mexican privatization program it is helpful to first analyze the role of the government in the economy and the motives behind this role. The 1917 Constitution established the general jurisdictional framework under which the role of the State in the economy was defined. From this foundation, the Mexican government launched a gradual takeover of the economy and by 1982, the year in which banks were nationalized, the 7