Recommended Market Practices concerning Mexico USD Discount and Par Bonds and their related Value Recovery Rights

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1 E M T A m e r g i n g a r k e t s r a d e r s s s o c i a t i o n 63 Wall Street, 20 th floor New York, NY Fax 91. January 18, 2001; effective February 1, 2001 Recommended Market Practices concerning Mexico USD Discount and Par Bonds and their related Value Recovery Rights Background Since 1992, EMTA has recognized as Market Practice that, unless otherwise specified, Mexico Discount and Par Bonds should be traded together with all their related Rights. Because the Series A Rights became detachable and were assigned their own separate ISIN No. as of July 1, 1992, market participants trading such Par or Discount Bonds in accordance with Market Practice were generally required to deliver two separate settlement instructions to Euroclear/Clearstream. In many cases, the separate instructions for the Rights were either not given or unmatched, resulting in many failed transfers of the Rights. To help remedy this, Par Bond Units were created in 1997 (one for Series A Par Bonds and one for Series B Par Bonds) that combined USD Par Bonds and all related Rights under a separate, single ISIN No. for each Series of Par Bond. Creation of Discount Bond Units was considered at that time but not pursued. Subsequently, Series B Rights (on July 1, 1999) and Series C Rights (on July 1, 2000) became detachable from Discount and Par Bonds, but were not assigned separate ISIN No s. For further background regarding the Rights, please refer to EMTA s revised Primer on Mexican Value Recovery Rights (11/15/00), which is available in the New Developments section of EMTA s website ( New Market Practices EMTA is now recommending the following new Market Practices, effective for all trades of Mexico USD Discount Bonds and USD Par Bonds and/or related Series A Rights entered into on and after February 1, 2001, for settlement on and after February 6, 2001: USD Discount and Par Bonds 1. Unless otherwise specified contemporaneously with the oral trade, Mexico USD Discount Bonds (Series A, B, C and D) and USD Par Bonds (Series A and B) should

2 trade without their related Series A Rights. Accordingly, a trade of such Discount Bonds and Par Bonds shall be deemed to exclude the related Series A Rights (but will, until further notice as referred to below, include all related Series B-Q Rights), and shall be settled as follows: Bond Series (USD) Discount Series A Discount Series B Discount Series C Discount Series D Par Series A Par Series B ISIN No. XS XS XS XS XS XS Series A Rights may be traded alone, and the confirmation of any such trade * should refer to ISIN No. XS and reflect a transfer in the minimum amount of $250,000 (and integral multiples of $1,000). 3. Series B-Q Rights. In the interest of avoiding confusion, Series B-Q Rights will not generally be separately tradable until they are assigned their own separate ISIN No. (expected, subject to market conditions, to occur not later than approximately three months before their respective initial scheduled payment dates, beginning (for Series B Rights) in 2003). The clearing systems have confirmed that trade settlement of Mexico USD Bonds will include the Series B and C Rights despite the fact that separate ISIN No s have been assigned to the Series B and C Rights related to certain non-usd-denominated Mexico Bonds (see footnote on next page). 4. USD Par Bond Units. While existing USD Par Bond Units (Series A and Series B), which include Series A Rights, may still be traded, it is expected that many of them will be unwound. For the sake of convenience, their ISIN No s are as follows: Parties may wish to confirm such Series A Rights trades by using the type of confirmation customarily used for bond trades. Please be aware that a Series A Rights trade should be settled using the following formula: the screen price should be divided by 100 (consistent with customary bond practices) and the resulting amount should be multiplied by the notional amount of the trade. In addition, certain certificates should be completed in connection with any transfers of Rights (see Paragraph No. 6 below and Annex A). Parties wishing to unwind their Par Bond Units may do so at any time by instruction into their clearing systems, which will shortly provide their accountholders with information on the appropriate procedures to be used to effect such unwinds. 2

3 Bond Series Par Bond Series A Unit (including Series A-Q Rights) Par Bond Series B Unit (including Series A-Q Rights) ISIN No. XS XS Option, Forward and Repo Trades. It is expected that market practices for option, forward and repo trades of Mexico USD Discount and Par Bonds entered into on and after February 1, 2001 will be recommended shortly and will be consistent with those described in Paragraph No s 1-4 above; it being understood that any option, forward or repo trade of Mexico USD Discount and Par Bonds entered into before February 1, 2001 with a term that ends on or after that date is subject to the pre-existing Market Practice that such Bonds shall be transferred with all their related Rights. 6. Transferor and Transferee Certificates. Please note that the Fiscal Agency Agreement for the Mexico Bonds requires that certain schedules (Schedules F and G) be completed by transferors and transferees of Rights (see Annex A) in connection with transfers of any Rights separate from the related Bond. As of the date of this memorandum, however, EMTA has not received definitive advice from issuer s counsel regarding the completion of these schedules (including whether or not such schedules are, in fact, required to be completed and to which address at the Fiscal Agent such schedules must be submitted). Market Practices for Non-USD Currencies Although, the foregoing Market Practices are generally intended to apply only to Mexico USD Discount and Par Bonds and their related Rights, parties may wish to adopt analogous practices for trades of Mexico Discount and Par Bonds denominated in non-usd currencies to the extent practicable. * * * * * * * * * * * * * * * * * * If you have any comments regarding these new Market Practices, please contact either Aviva Werner (awerner@emta.org) or me (mchamb@emta.org). Please note that, as of December 2000, separate ISIN No s have been assigned for the Series B and C Rights relating to the FRF Discount Bonds, DEM Discount Bonds and JPY Par Bonds that were subject to the recent redemptions by the issuer. Accordingly, trades in these Bonds are presumed to exclude the related Series A, B and C Rights. In addition, EMTA has been advised that, with respect to the DEM Discount and Par Bonds, the Series B and C Rights were never distributed on their respective Separation Dates of July 1, 1999 and July 1, Accordingly, trades of DEM Par Bonds entered into on and after February 1, 2001 should probably be presumed to exclude the Series A, B and C Rights, unless the parties specifically agree otherwise. 3

4 ANNEX A Schedule F Form of Transferor Certificate for Value Recovery Rights CERTIFICATE The United Mexican States Value Recovery Rights (the "Rights") This is to certify with respect to [insert Notional Amount] of the Rights (Series [1]) being transferred on the date hereof by the undersigned (the "Transferor") to [insert name of transferee] that. * * [Insert, either: "such transfer is a private transaction not involving any general solicitation or advertising" [OR] "such transfer is being made as a result of an offer and sale made outside the United States and not to a U.S. Person. For purposes of this certificate, "U.S. Person" means a national or resident of the United States (including the estate of any such person) or a corporation or other entity organized under the laws of the United States or any political subdivision thereof; provided, however, that the term "U.S. Person" shall not include a branch or agency of a United States bank or insurance company that is operating outside the United States for valid business reasons as a locally regulated branch or agency engaged in the banking or insurance business and not solely for the purpose of investing in instruments, such as the Rights, or in securities not registered under the Securities Act of 1933 of the United States, as amended. For purposes of this certificate, "United States" means the United States of America, its territories and possessions and areas subject to its jurisdiction."] [Insert name of Transferor] Dated:, By: Title: 1. Insert for the Series of Rights to be transferred the Series designation "[A], [B], [C], [D], [E], [F], [G], [H], [I], [J], [K], [L], [M], [N], [O], [P] or [Q]".

5 Schedule G Form of Transferee Certificate for Value Recovery Rights CERTIFICATE The United Mexican States Value Recovery Rights (the "Rights") This is to certify with respect to [insert Notional Amount] of the Rights (Series [1]) being transferred on the date hereof by [insert name of transferor] to the undersigned [the "Transferee"] that: * [Insert, if the transfer referred to above is a private transaction not involving any general solicitation or advertising, the following: (1) the Transferee is an Eligible Institutional Investor; For purposes of this certificate, "Eligible Institutional Investor" means: (a) any bank as defined in Section 3(a) (2) of the Securities Act of 1933 of the United States, as amended (the "1933 Act") whether acting in its individual or fiduciary capacity; or (b) any insurance company as defined in Section 2 (13) of the 1933 Act; or (c) any investment company registered under the Investment Company Act of 1940 of the United States, as amended; or (d) any corporation with assets of not less than U.S. $100,000,000; (2) the Transferee is purchasing the Rights for its own account and not with a view to any distribution thereof within the meaning of the 1933 Act (or, if a bank, it is purchasing in an individual or fiduciary capacity); and (3) the Transferee will not sell or transfer such Rights except either: (a) (b) in a private transaction to an Eligible Institutional Investor or outside the United States to a person that (i) represents that it is not a U.S. Person and is not purchasing such Rights (or any portion thereof) on behalf of a U.S. Person; 1. Insert for the Series of Rights to be transferred the Series designation "[A], [B], [C], [D], [E], [F], [G], [H], [I], [J], [K], [L], [M], [N], [O], [P] or [Q]".

6 (ii) represents that it is purchasing such Rights for its own account and not with a view to the resale thereof in the United States or to any U.S. Person; and (iii) agrees that it will not resell any of such Rights within the United States or to any U.S. Person, except to a transferee that, in connection with such transaction, shall provide to the Registrar of such Rights a certificate in the form of Schedule G to the Fiscal Agency Agreement. For purposes of this certificate, "U.S. Person" means a national or resident of the United States (including the estate of any such person) or a corporation or other entity organized under the laws of the United States or any political subdivision thereof; provided, however, that the term "U.S. Person" shall not include a branch or agency of a United States bank or insurance company that is operating outside the United States for valid business reasons as a locally regulated branch or agency engaged in the banking or insurance business and not solely for the purpose of investing in instruments, such as the Rights, or in securities not registered under the 1933 Act. For purposes of this certificate, "United States" means the United States of America, its territories and possessions and areas subject to its jurisdiction.] * [Insert, if the transfer referred to above is being made as a result of an offer and sale outside the United States and the Transferee is not a U.S. Person (as defined below) and is not purchasing such Rights on behalf of any U.S. Person, the following: (1) the Transferee is not a U.S. Person and is not purchasing such Rights (or any portion thereof) on behalf of any U.S. Person; For purposes of this certificate, "U.S. Person" means a national or resident of the United States (including the estate of any such person) or a corporation or other entity organized under the laws of the United States or any political subdivision thereof; provided, however, that the term "U.S. Person" shall not include a branch or agency of a United States bank or insurance company that is operating outside the United States for valid business reasons as a locally regulated branch or agency engaged in the banking or insurance business and not solely for the purpose of investing in instruments, such as the Rights, or in securities not registered under the Securities Act of 1933 of the United States, as amended (the "1933 Act"). For purposes of this certificate, "United States" means the United States of America, its territories and possessions and areas subject to its jurisdiction; (2) the Transferee is purchasing such Rights for its own account and not with a view to the resale thereof in the United States or to any U.S. Person; and Sch. G, p. 2

7 (3) the Transferee will not sell or transfer such Rights except either Sch. G, p. 3 (a) (b) in a private transaction to an Eligible Institutional Investor or outside the United States to a person that Dated:, (i) represents that it is not a U.S. Person and is not purchasing such Rights (or any portion thereof) on behalf of a U.S. Person; (ii) represents that it is purchasing such Rights for its own account and not with a view to the resale thereof in the United States or to any U.S. Person; and (iii) agrees that it will not resell such Rights within the United States or to any U.S. Person, except to a transferee that, in connection with such transaction, shall provide to the Registrar of such Rights a certificate in the form of Schedule G to the Fiscal Agency Agreement.] [Insert name of Transferee] By: Title: