Mexico's current-account deficit was close to 2.9% of GDP.

The Price and Quotations Index of the Mexican Stock Exchange ended the year 20.7% lower.

Inflation was considerably lower than the government's target.

A heavy inflow of capital kept the peso stable against the dollar.

The 28-day Cetes rate started out the year at an annual yield of 16.41%.

During the first few months of the year, the world economy grew at a satisfactory pace. Oil demand rose considerably in response to a pickup in activity among industrialized nations, driving the price of West Texas Intermediate to a record US$37.44 per barrel in September.

To contend with the risk of inflation stemming from the vigor of the U.S. economy, the Federal Reserve sharply reined in monetary policy, raising interest rates by a total of 100 basis points in the year. Finally, in the last quarter, high interest rates began to bring about signs of a slowdown in industrialized countries. Demand for crude oil declined, and prices dropped sharply in late November.

During the expansive phase, however, the vigor of the world's largest economies and high oil prices gave a significant boost to Mexican economic activity. As we said earlier, both economic growth and inflation were better than expected. The Mexican economy grew by 6.9% in 2000, its highest rate since 1981, and for the second year in a row, inflation was considerably lower than the government's target, at 8.96%. In addition, there was no six-year financial crisis marking the changeover in presidential administration, a painful tradition for Mexico in the past, and one which many analysts thought would be repeated in 2000.

Moody's decision to grant investment grade rating to Mexico in March, problem-free federal elections and strong prospects for the local economy helped lower the perceived Mexico risk, the primary effect of which was a heavy inflow of capital, which kept the peso stable against the dollar. With Mexico risk lower than in 1999 and a drop in anticipated inflation, interest rates were also considerably lower for most of 2000.

With the favorable external climate and the solid domestic economy, Mexico's current-account deficit was close to 2.9% of GDP. Additionally, international reserves were high, which together with some advance payments on government debt showed a strength that considerably reduced the risks for our economy.

However, the overvaluation of technology stocks and changing expectations for economic growth in 2001 sparked a downturn in international equity markets. The NASDAQ fell 39.29%, followed by the Dow, which lost 6.18% in the year. Wide swings in the international markets and unusual post-election uncertainty in the United States caused a steep slide in Mexican stock prices: the Price and Quotations Index of the Mexican Stock Exchange ended the year 20.7% lower.

In 2000, Interacciones Casa de Bolsa built on its use of new information technologies as the ideal medium for financial transactions, offering clients swift and easy access to analysis by our equity research department. This past year 100% of the most representative products and services of the brokerage firm could be traded through the group's web site, which brought substantial savings on operating costs. To contend with the new challenges facing financial institutions, Interacciones Casa de Bolsa entered into a joint venture with the Internet portal Todito.com. The partnership was a major marketing advance for Interacciones, because it means new distribution channels and more customers. New technologies promise dramatically increased prospects for long-term growth in areas like promotion and the attraction of resources.

In September, Interacciones Casa de Bolsa served as Global Coordinator of a successful simultaneous national and international offering of the stock package of Grupo Aeroportuario del Sureste (ASUR), the largest of the year.

Banco Interacciones continued to manage its fixed-income funds with considerable success, offering the highest yields in the market.  ILAPLAZ, IEMPRE3 and INFOBRI ranked first in the market in their category, contributing greatly to the solidity of our High Financial Yield Centers. The bank also focused on bolstering its sales force, and on increasing and segmenting its client base.

One reason for the solidity shown by Banco Interacciones last year was that the loans it placed provided a reliable source of payment, having been placed among construction, public works, and retail companies, as well as in the public sector (government agencies are a major source of business for this institution). The bank also began a program to finance rural farmers by offering advances on their PROCAMPO government subsidies. The bank also continued using document discounts to serve triple-A and capital-intensive companies in covering their liquidity and financing needs.

As for Aseguradora Interacciones, the year 2000 saw a considerable rise in premiums written, both to small- and medium-sized companies and to individuals. Operations in northern Mexico were intensified, the first step in which was to restructure the Monterrey office in order to make it the regional headquarters. With careful underwriting of businesses and an appropriate handling of claims, the insurance company brought in satisfactory earnings, both technical and net.

Stockholders' equity for Grupo Financiero Interacciones totaled 976 million pesos at the end of the year; consolidated assets were 7.05 billion pesos. The amount of client resources in custody totaled 21.37 billion pesos.

Expectations of sustained economic growth and a more equitable distribution of income in Mexico in coming years are highly encouraging for the financial industry. Institutions like ours will find it necessary to restructure themselves in order to stay on top of market needs in an increasingly globalized environment, but the "New Economy" will offer excellent development opportunities for Grupo Financiero Interacciones in a number of market niches.

We at Grupo Financiero Interacciones are committed to staying ahead of investors' needs, in order to offer them the best possible service. In this effort, we have the support of an excellent staff of professionals and new information technologies, which will help us to become one of the best financial groups in Mexico.

Carlos Hank Rhon
Chairman of the Board