Why Mexico's private sector is bullish on infra sector opportunities

The prospects for major participation next year by Mexico's private sector in government infrastructure projects appear favorable as meetings continue to take place between President Andrés Manuel López Obrador (AMLO) and top private sector representatives.

The meetings, of which the latest reportedly took place on October 7, are linked to government’s decision in August to allow private sector participation in the drafting of the national infrastructure program (PNI) for 2019-2024. 

That decision was unveiled by AMLO on the day of the announcement of the successful renegotiation of contracts with companies in charge of building controversial natural gas pipelines.

Flanked by business mogul and billionaire Carlos Slim, AMLO then said that those involved in drafting the plan included the respective heads of the Mexican business council (CMN) and the country's confederation of business associations (CCE), Antonio del Valle and Carlos Salazar, and that the new collaboration had been proposed by the private sector representatives.

Around 1,600 projects could be incorporated into the plan, including pipelines and energy projects, roads, waterworks, ports, airports, and health and education infrastructure, Slim said at the conference.

Some of the projects on the list are proposals that already have an advanced degree of maturity, for which basic engineering designs have been completed and where construction is ready to begin.

According to Slim, financing for the projects could be provided by local investors, investment fund managers, as well as the banking sector. Salazar told reporters a few days later that both banks and international entities have expressed interest in investing in PNI.

At the end of September, AMLO met with a group of business people - including Slim, del Valle and Salazar - to discuss some of the financing sources available for the projects. According to local paper La Jornada, which had access to a document that the private sector representatives presented to AMLO, the proposals are strongly focused on gas and power projects in the country’s southeast, particularly the states of Chiapas and Oaxaca.

The projects would be developed over the next five years to improve social and economic development in a region with some of the country's highest poverty levels.

AMLO confirmed earlier this month that the planned cooperation with the private sector was still ongoing, but refused to provide details as per the request of the private sector leaders. 

What AMLO did reveal was that the public-private sector team that has been formed is focused on selecting the most relevant projects and deciding how these will be financed. He also said that the preliminary project studies have been financed by the private sector.

According to press reports, the first 100 projects drafted by the public-private sector group will be carried out in 2020. Some of the participants in the drafting of the plan reportedly also include cement companies Cemex, Fortaleza, Holcim, Cruz Azul, and Moctezuma.

The new PNI will be officially presented in November.

More public-private sector proposals 

A group of business people from Sonora state met last week with AMLO in Mexico City to present a proposal comprised of 25 projects, some of which include the infrastructure sector. The parties did not end up signing any agreements at that meeting, according to press reports.

Slim has also submitted water infrastructure works proposals to Mexico City mayor Claudia Sheinbaum which are focused on the capital's historic center and that could be developed through private sector financing.

The proposals look to reduce over-exploitation of the aquifer that currently supplies the capital, Sheinbaum told reporters. Although the works could be financed with private sector funds, they would not imply water privatization - something that is now allowed by the local constitution, she added.

Last year, Slim donated 20mn pesos (US$1mn) to pay for studies that could help develop water projects in Mexico City. The donation was made to the engineering school of the public UNAM university.