Biden aiming to replace China in financing of Mexico megaprojects, says think tank

The Biden administration sees the megaprojects of Mexico's President Andrés Manuel López Obrador as an opportunity to strengthen US supply chains and aims to compete with China in the financing of these projects, José Ignacio Martínez, head of Mexican think tank Lacen, told BNamericas.

Lacen is focused on economic, business and trade issues.

In the southeast of Mexico, Chinese state-owned companies have gotten a head start by securing major contracts and helping finance projects such as the 161bn-peso (US$8bn) Maya train and the Dos Bocas refinery.

The most important Mexican project on the US government’s radar is the 20bn-peso Tehuantepec isthmus rail corridor, which will connect the Atlantic and Pacific oceans through a 300km freight rail line and compete with the Panama Canal, Lacen said in a recent report. 

“With the investment of companies from the US, the Isthmus of Tehuantepec is immersed in the commercial security of Biden’s supply chains. To do so, the US government has to displace Chinese investment in the south of Mexico,” the think tank wrote. 

According to Martínez, there are plans to connect Mexico’s growing railway network with the interoceanic corridor’s Medias Aguas station in Veracruz state, which, at the same time, will become the link to the Maya train rail line that will unite five southern states in the southeast.

“That station will enable a connection between the interoceanic train, the Maya train and the railway line that will extend to North America,” he said, adding that this project has seen Biden order that US investment be allocated to the region in order to prevent the logistics hub from being dominated by China. 

According to Martínez, US companies have so far not taken López Obrador’s megaprojects in the south seriously, which is evidenced by the lack of participation of firms from the US. 

Last year, US asset manager BlackRock made an offer to build the fifth stretch of the Maya train but it was rejected over high costs. 

“This is the logistics hub project that Mexican and American businessmen did not take into consideration and that US Vice President Kamala Harris put on the table on Monday,” said Martínez, adding that Mexico stands to benefit from an investment race between China and the US.

New US investments

Following Harris’ visit to Mexico, the White House announced that it would “aim to create US$250mn in new investment and sales in southern Mexico.” The funds will mainly go to the agriculture and eco-tourism sectors, but also infrastructure initiatives. 

“The US Trade and Development Agency (USTDA) and the Department of Commerce will organize trade and business development missions that will support infrastructure development in southern Mexico,” the White House said in a fact sheet on Monday. 

The commitment includes several projects to boost social development, which are part of the US-Mexico plan to fight economic inequality and address the problem of mass migration from Central America. 

According to Martínez, the “development missions” to support infrastructure development in Mexico’s southern region should be seen as a signal for a new wave of investments coming to the region, with Lacen estimating around US$2.5bn in US investment during the next five years in railways, ports and airports. 

“What we will see soon is the participation of private capital, but already mounted on the infrastructure that the Mexican government put in place,” said Martínez.

The White House also said it plans to help Mexico recover its Category 1 aviation safety rating, which the US Federal Aviation Agency downgraded last month.