Abel López
Urban Transport Specialist
World Bank Group
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Insight

Altering the Transport Landscape

Fri, 09/01/2017 - 10:41

The World Bank is doing something few entities could: changing the landscape of public transportation systems in Mexico. This has been the main purpose of the US$350 million credit line the bank extended to the Mexican government. “The role we play is conveying good practices throughout the country,” says Abel López, Urban Transport Specialist at World Bank Group. “We participated in the design of the Federal Program for Urban Mass Transportation (PROTRAM) and through the National Infrastructure Bank (Banobras) we finance projects that contribute to PROTRAM’s objectives.”

While it is true that money does not solve every problem, the bank’s financing has contributed to the expansion of the (BRT) system throughout the country. “Eight years after PROTRAM started, we have financed projects, through Banobras in Monterrey and Tijuana. We are also in the process of financing systems in Mexico City, Cuernavaca, Acapulco, Campeche, San Luis Potosi and Aguascalientes,” says López. The country’s changing landscape from rural to urban conditions makes the implementation of BRT systems an attractive option. According to López, Mexico has more than 93 urban zones with over 100,000 inhabitants. “When PROTRAM began, we thought Mexico could house approximately 15 projects,” says López. “Today, PROTRAM has at least 40 projects in different planning stages of obtaining or using federal grants for BRT or city-wide transport systems.”

PROTRAM is not short of possible projects but most take half a decade to complete. “There are several potential complications such as finding a government that wants to carry out the entire project, obtaining the necessary funding to complement PROTRAM’s support, negotiating with current service providers and preparing bidding documents for civil works or for a public-private partnership arrangement,” López says. There are political and financial factors that have a direct impact on a project’s completion. “Most politicians like to be seen inaugurating public projects. If a project takes five or six years to be completed, the time that most politicians are in office are not enough to finish it.” He argues that planning should always be prioritized over cutting ribbons. “We believe that those who plan and lay the first stone are those who are remembered in the long run.”

Finances also play an important role. “Governments are accustomed to assigning concessions and letting private individuals handle transportation services,” says López. This practice results in dependence on the private sector and has led most local congresses to deprive cities of budget that would have been allocated to public transportation.

Although the bank’s credit line allows Banobras to fund up to 67 percent of the total debt of a project, a problem often encountered is the private-sector financing. Big commercial banks are also hesitant to provide financing to projects like Metrobús, as it is considered too small to merit their involvement in the other 33 percent. “Local banks have found a niche market that has been neglected by financial institutions,” says López. “Nevertheless, banks have yet to develop financial instruments to meet the sector’s needs.” López believes the country still has a long way to go, signaling the need for an institutional, legal and financial overhaul.

For the World Bank specialist, the present administration’s goal of adding 100km more of 10 Metrobús lines by 2018 seems out of reach. But a respectable total of 80km of additional Metrobús lines would be perfectly attainable in Mexico City, according to López. Currently, the World Bank has agreed to finance the Extension of Line 5, which will contribute 20km of the government’s 100km goal. The challenge ahead is convincing entrepreneurs and governments from other entities of following the capital’s example. “The most important factors relate to concessions because they balance the challenges of the business’ operation.” According to the World Bank’s specialist, the government needs to provide current microbus operators legal certainty regarding possible investments in BRT or citywide systems.

“The government needs to assure the private sector that there will be transparency and fair competition,” says López. In this context, the World Bank’s work becomes more relevant. “We work to convey good practices on a wide array of subjects that go beyond transportation such as road safety and the prevention of gender-based violence in public transportation,” says López, proving that the bank’s participation impacts much more than just public transportation.