Volume 6, Number 21, Page 1
Mexico’s Position with Respect to the Y2K Bug
By George R. Gonzalez, Esq. and Lic. Maria Elia Gastelum
The Y2K bug in Mexico is having the same effect as in the rest of the world. The public and private sectors in Mexico presently utilize “some five million computers, and millions of items of equipment with embedded computer technology, which operate in strategic sectors.” 1
According to the Y2K Country Readiness Survey published by the International Y2K Cooperation Center (IY2KCC) on Mexico, Mexico’s customs, energy/power, finance, telecommunications and air transportation sectors are highly dependent on computers or digital control systems. The report was prepared on the basis of information provided by Carlos M. Jarque, National Coordinator of the National Commission for Year 2000 Informatics Conversion (CNY2K). Government services (which include social and emergency services), health and maritime transportation are moderately dependent. Railroad transportation is only slightly dependent on computers. Thirty percent of the private sector, excluding the finance sector, is comprised of 30 percent large companies and 70 percent medium and small companies. Out of the 70 percent, it is estimated that only 50 percent of those companies have completed some action to convert their information systems.2
It is interesting to analyze what Mexico’s position is with respect to the Y2K Bug without delving much into the details of the Y2K problem and its effects, since we all know that it effects any computer system.
Many consider Mexico one of the countries of the world that has conscientiously prepared to confront the arrival of Y2K.3 Accordingly, the purpose of this article is to outline the measures Mexico is taking for the conversion of its computerized systems in the public and the private sectors. It is also important to consider the measures the federal government has taken to protect public interest, as well as public and private bodies dedicated to providing information for conversion and those in charge of ensuring that the conversion is successfully carried out.
Preventative Measures Implemented by the Mexican Government
At the beginning of 1997, the Mexican government began preparations to confront the Y2K problem in various sectors of the government and in the finance sector.4 In mid 1998, concrete steps were taken with the creation of the CNY2K. Mexico and Chile are considered the Latin American countries to have provided citizens and other interested parties with essential information regarding Y2K via the Internet.5
The presidential decree creating CNY2K charges it with the following functions:
I. Perform a diagnostic analysis on the present condition of the informatics infrastructure of the country, with respect to its capacity to recognize years in computer database date fields;
II. Identify strategies, policies and criterion so that informatics systems, equipment and components operating in the country can correctly recognize the year in the date field starting from year 2000;
III. Promote the coordination of actions with different sectors in the country to implement technical changes necessary to carry out the conversion of their informatics systems, equipment and components;
IV. Assist in the implementation of measures that are established for the federal public administration for these purposes, and the public services supervised by it;
V. Follow up measures adopted at the national and international level as a solution for this problem;
VI. Organize forums for the analysis of this topic, and;
VII. Establish mechanisms for dissemination of information designed to keep the public informed about Government programs and other initiatives to resolve the Y2K problem.
According to this decree, the heads of the Secretaries of Government; Foreign Relations; National Defense; Maritime; Treasury and Public Credit; Energy; Commerce and Industrial Development; Communications and Transportation; Comptroller and Administrative Development; Public Education; Health; along with the National Institute of Statistics, Geography and Informatics (INEGI) comprise the CNY2K.
The CNY2K is organized in three working groups: 1) the Finance Sector Working Group, coordinated by the Bank of Mexico; 2) the Public Sector Working Group, coordinated by the Secretary of the Comptroller and Administrative Development (SECODAM); and 3) the Private Non-Finance Working Group, coordinated by the Secretary of Commerce and Industrial Development (SECOFI) and the Consejo Coordinador Empresiarial. In addition, sub-groups have been formed for areas that have a significant economic impact, such as energy, communication, transportation, health, food and education. Also, sub-groups have been formed for the coordination of efforts with the states and municipal governments for dissemination of information, international relations and technical and methodological aspects.
On its web page, CNY2K offers general information on the informatics problem, solutions and tools, tasks and conversion process monitoring, an extensive glossary of terms related to the informatics problem, a list of service providers, a guide for the preparation of contingency plans and formats for inventories, examples of letters to clients and suppliers6, and a self evaluation guide. A Spanish translation of the “Implications On Management And On Auditors Of The Year 2000 Problem” standard issued by the International Auditing Practices Committee (IAPC) of the International Federation of Accountants (IFAC) is included.
The CNY2K has advised that systems and equipment be tested using the following dates listed in the order of importance, which they believe will to present possible problems in the operation of equipment:
- December 31, 1999 to January 1, 2000.
- December 31, 2000 to February 1, 2000.
- February 28, 2000 to February 29, 2000.
- December 31, 2000 to January 1, 2001.
- February 28, 2004 to February 29, 2004.
- August 20, 1999 to August 21, 1999.
- August 21, 1999 to August 22, 1999.
Carlos Jarque has stated that “a developing country like Mexico has an advantage when facing the millennium bug because 40 percent of the country’s 5 million computers are no more than two years old, and therefore easy to convert. The main disadvantage that developing countries face are a heavy dependence on imported equipment and difficulty in obtaining suitable replacement software, particularly in the small and medium size firms, in which most Mexicans work.”7
Public Sector—Government and the Rendering of Basic Public Services
Informatics conversion in the public sector began in 1997, becoming more systematic with the creation of CNY2K. In general terms, conversion in the public sector has been carried out in six stages: creation of a state of awareness, diagnostic, correction, internal and external tests, audits, and backup or contingency plans. The deadline for completion of these activities through the fifth stage was June 1999, leaving preparation of contingency plans for the second half of the year.
During the conversion process in the public sector, 12,282 information systems were counted. Nine hundred twenty-eight were considered to be employed in critical uses. Of these 928, 496 were found unprepared for Y2K. As of July 1999, 433 had been corrected. The remaining 63 were expected to be corrected in the second half of the year. The public sector also had 318,000 personal computers, of which 92,220 were not prepared for Y2K. As of July 1999, 83,500 had been corrected.
Energy
The energy area is one of the most advanced in informatics conversion. This area is comprised of Petroleos Mexicanos (PEMEX), the Comisión Federal de Electricidad (CFE), and Luz y Fuerza del Centro (LFC), all government owned entities. Of these three entities, CFE alone has invested more than $160 million in the conversion of its informatics systems.8 In a meeting that was held in July of 1999, Luis Tellez, Secretary of Energy, informed President Ernesto Zedillo, that “the North American Electrical Reliability Council, a body comprised of the principal producers in the United States, Canada and Mexico, has acknowledged that CFE and LFC have advanced as much or more than companies that are most advance in the United States, in those matters.”
Luis Tellez also anticipates that by the end of September 1999 it is hoped that PEMEX will be 96 percent complete in its conversion.
Communications
Another area of vital importance, the majority of whose systems are computerized, is communications. The principal companies in this area are Teléfonos de México (TELMEX), Satélites Mexicanos (SATMEX) and TELECOM.
According to a report of the Undersecretary of Transportation of the Secretary of Communications and Transportation, Dr. Aaron Dychter Poltolarek, given to President Zedillo in July of 1999, TELMEX completed 100 percent of its conversion in the month of June, and in July it was performing verification tests. SATMEX, was scheduled to complete its conversion in July. The Undersecretary also said that LORAL, SATMEX’s partner in the United States, has joined SATMEX in verification of the Year 2000 Project with good results, and further said that Hughes Space and Communications confirmed that the satellites in orbit will not be effected in the Year 2000.
TELECOM was in the testing stage in the month of June.
Air Transportation
Efforts made in this area have been concentrated on maintaining operational safety levels.
In the area of navigation, the Navigation Service In Mexican Airspace (SENEAM), has invested around $15 million and has finished updating its systems, including radar, network of satellite stations, time synchronization; and radar processing systems and flight plans.
On July 31 an integral final test simulating real time transition to the Year 2000 was performed with participation of certified pilots from commercial airlines carrying no passengers and this test was considered to be completely successful.9
Also September 20, 1999, the Secretary of Communications and Transportation published a new standard in the Diario Oficial de la Federación “that establishes measures and activities that concession holders and permit holders for air transportation services and airline operators must adopt to ensure that the informatics systems they use in their aircraft, and that are involved in operations, maintenance, communication and navigation aboard the same, are not affected by the change to Year 2000 and allow continuity in the rendering of services, with a high level of safety and quality.”
Private Sector—Finance and Non-Finance
For purposes of informatics conversion, the CNY2K has divided the private sector into two subsectors: 1) the private finance sector; and 2) the private non-finance sector or business sector.
Private Finance Sector
The finance sector is one of the first sectors in Mexico to take steps to prepare itself for Y2K. Mexico is considered one of the best prepared countries in the finance sector.10
It is believed that of 41 banks, Banamex has invested $33 million, Bancomer $45 million and Banorte $17 million for informatics conversion. The total that is has been invested by the finance sector is around estimated at around $600 million .11
The Bank of Mexico may place an additional $100 billion pesos in circulation, almost double the present monetary base, for purposes of preparing to have more currency circulating and alleviate the possible effect of the hoarding of cash.12
Informatics conversion of the finance sector has essentially been performed in three stages: 1) review, correction and testing of computer equipment and applications; 2) verification of the correct interaction of computer equipment and systems and of the principal financial processes; and 3) drafting and implementation of contingency plans. At the end of July, it was reported that 95 percent of the financial institutions had concluded the first stage and 50 percent had concluded the third stage. The deadline to complete the third stage was the month of August. On July 26, 1999, during the message of the Governor of the Bank of Mexico, Dr. Guillermo Ortiz Marti, assurances were given that the finance sector shall be completely prepared far in advance of the arrival of the Year 2000.
Non-Finance Private Sector—Business Sector
As explained above, it is estimated that the business sector in Mexico is made up of 30 percent large companies and 70 percent medium and small companies. Of the latter 70 percent, only half have successfully complete their informatics conversion.13 Some believe that the majority of large companies14 have completed informatics changes necessary to confront the change of millenium. This is probably due to the fact that many industries, including telecommunications, airlines, finance, building materials, construction, and retail chains are dominated by a small number of firms.15
The reason small and medium companies are not a 100 percent prepared for Y2K is not a lack of information about the problem, but rather a lack of resources. Informatics conversion is not inexpensive. Presently, consulting firms in Mexico are focusing on the creation of contingency plans, since it is too late to start any conversion program now.16
The government, through the CNY2K, has emphasized the risks that companies at all levels run if they don’t perform informatics conversion in an appropriate manner. Specifically, CNY2K identifies to the following risks:
Operative. Systems or some processing equipment and machinery with internal processors could produce erroneous results or quit operating altogether, which would impede the company’s ability to service its costumers.
Financial. Caused by reduction in its operations and consequently in its revenues, as well as the cost of correcting the error.
Credibility and Image. Loss of credibility and image, especially with customers of the company that receive erroneous information.
According to CNY2K criterion, all of these problems in the business sector can be reduced to one concept: “Competitiveness.” Those companies that are informatically prepared to confront Year 2000 should have a higher level of competitiveness than those companies that are not prepared. Although may become a problem for companies who are unprepared, it also represents an opportunity to move ahead of other businesses at the same level, but who fail to take necessary precautions.17
George R. Gonzalez, Esq. and Lic. Maria Elia Gastelum are attorneys with Haight, Brown and Bonesteel, LLP in San Diego, California.
