Mexican military overreach: Is the army too involved in infrastructure?

Under the Andrés Manuel López Obrador administration, Mexico's defense ministry (Sedena) has been tasked with building infrastructure like rail stretches and airports, but industry players are becoming critical of the approach.

Business magnate Carlos Slim, whose Grupo Carso built stretch 2 of the Maya train, told reporters recently that the army was overused. 

López Obrador, who will leave office on October 1, claimed the army would build more efficiently than private players.

But the reality is different, while officials should also focus on public security and long-term planning, Francisco Solares, the outgoing president of construction industry chamber CMIC, which represents 9,000 companies, tells BNamericas in this interview.

Solares also talks about the challenges the next administration will face.

BNamericas: Carlos Slim has said that involving the military in infrastructure construction and in companies such as the one that operates the Maya Train and several airports is excessive. Do you agree with that opinion?

Solares: It's an excess of responsibilities and duties for the Mexican army, of which we Mexicans are always proud. However, I don't think that any army in the world is designed to build the country's infrastructure. None are designed to build civil works.

Slim also said that armies weren't designed to be businesspeople and commented that they would surely report losses. I agree with that.

BNamericas: What does it mean having the military taking responsibility for so many infrastructure works?

Solares: It has several implications from our point of view and we believe that the scheme should be reviewed. First of all, military engineers are wonderful engineers. However, the number of army personnel dedicated to construction isn't sufficient to meet all of these project responsibilities, so they hire civilian staff.

At AIFA, at one time, there were 25,000 civilians working 24 hours a day, seven days a week. This means that some construction companies, especially MSMEs, didn't have the opportunity to participate in the construction of these big projects.

Another implication is that there's no accountability, there's no transparency in the use of funds allocated to these very important projects.

We believe that we should have another option to be able to build them differently.

BNamericas: Leaders of NGOs have expressed doubts about whether the works being built by defense ministry Sedena are being done in line with international standards. Do you consider that to be the case?

Solares: I think that the construction carried out by the army meets all the specifications of the projects.

However, we believe that infrastructure planning can't be done in the short term. It has to be done in the medium and long term, 10, 15, 20 or 50 years. There are countries that have planned their infrastructure for 100 years.

This planning has to do with all the studies that need to be done before being able to start a project. You have to have a complete executive project, especially with projects as ambitious and as large as the Maya train, which also has to overcome a lot of technical challenges because it passes through cavern areas, and in some cases they're full of water, and that means that studies have to be carried out that take much longer than they're taking now, with deadlines that I think are political rather than technical. This could lead to increased costs due to unforeseen situations in the construction of the projects.

BNamericas: Competition think-tank IMCO, among others, say that although these works are a good idea in theory, perhaps studies weren't done to determine what was really required. Is there a risk that they’ve gone ahead without sufficient planning to define real demand?

Solares: I believe that the planning does exist. I don't know exactly what type of planning, but I'd like to think it exists.

I think that the interoceanic corridor is a very important project, but I believe that a sequence should be considered in the execution and development of the project in accordance with medium- and long-term planning. There has to be power availability, for example, and rights of way.

The workforce that would work in the 10 development hubs that were originally planned to be developed along with this big project must also be considered. Currently, if factories wanted to establish themselves there – taking advantage of the geopolitical situation that is facilitating nearshoring – there's not enough labor to satisfy that.

For us [the interoceanic corridor] is the most important project of this six-year period because it coincides with this need for relocation or appetite to relocate production plants to supply the United States, the biggest market in the world. We think it was necessary to do other types of works beforehand. 

Another example is the Felipe Ángeles airport, which was inaugurated almost two years ago, but access is still complicated and it doesn't allow it to have economically self-sufficient operations. This year it still won't be self-sufficient.

BNamericas: You mentioned nearshoring. Do you think Mexico should have implemented a prior strategy that included the construction of infrastructure? This is about encouraging investment in places like the southeast of the country, for example, where there are a lot of shortcomings in infrastructure.

Solares: I think that this issue that originates in the trade war between China and the United States couldn't have been foreseen in that way.

What is certain is that there's a delay in the construction of infrastructure. Not only are we not growing at the speed we should be growing in infrastructure, but in some states they don't even have enough money for road maintenance.

It's very important that we allocate greater resources, both public and private, to the construction and maintenance of projects. In the last three years, just 2.3% of GDP was allocated to infrastructure, including conservation and maintenance. For countries like ours, international organizations recommend the investment of at least 5% of GDP. It's not enough.

And it's also clear that no government has enough money to build all of its infrastructure or maintain it. So we believe that it would be good to review the financing policies, that is, with private investment and public investment, or just private investment.

BNamericas: Do you think that models such as public-private partnerships have been underutilized during this administration?

Solares: I wouldn't say underutilized, but I'm convinced that the most expensive infrastructure is what we don't have, and it's important to consider these schemes in public policies for the next government.

Whoever wins the presidency will have to review how we can build the infrastructure we need more quickly to try and take advantage of this appetite of factories to set up shop in our country. If they don't have the essential services they will surely have to go elsewhere.

BNamericas: So you say that would be faster with private sector participation?

Solares: It would be faster if we allocated more funds, either public or private, and did medium-term planning. There should be complete connectivity in the country in relation to ports, airports, railways, highways: multimodal connections throughout the country that would allow us to be more efficient and have greater competitiveness to attract foreign investment.

BNamericas: What do you think would be the greatest successes of this administration in terms of infrastructure and what do you think are areas of opportunities?

Solares: I believe that the successes are the big projects, but the areas of opportunity are related to planning, as I said.

BNamericas: Is organized crime still a concern for the construction sector?

Solares: It's a concern not just for the industry, but for all companies.

BNamericas: How does it affect the construction industry?

Solares: These people have a way of operating. They charge money for using a site, and there are thefts of equipment and problems with transportation in general. Our roads are suffering increasing cargo thefts. There are very low rates of prosecutions of those responsible for these crimes. 

BNamericas: What would the construction industry ask the next government to do?

Solares: We're inviting the presidential candidates to participate in a congress on March 14 in Mexico City, and every week we're meeting with all the regions of the country to compile a document on the updated situation of infrastructure by region and at national level. 

The proposal is that construction of infrastructure can be encouraged and that the next government must analyze and study the best way to build it as quickly, safely and economically as possible.