AFOREs Interested in Infrastructure Finance Instruments: Banorte

The Mexican Pension Fund Administrators (AFORE) are more likely to invest in infrastructure-related financial instruments, said Grupo Financiero Banorte during a forum held by the Mexican Institute of Finance executives (IMEF). According to the bank, AFOREs are beginning to take more risks and venturing into the infrastructure and energy sectors.

According to Raúl Carreto, Deputy Director General for Infrastructure, Structured Finance and Syndication, Grupo Financiero Banorte, Development Capital Certificates (CKD) are of great interest for AFOREs since they are a great refinancing option that also allows credit to flow. 

Carreto said that CKDs enable a revolving scheme where AFOREs refinance infrastructure projects that are already in an advanced stage. This mitigates construction risks and allows financial assets to gain a stabilized cash flow. “These are usually big projects that are in the interest of major banks, but it is always a healthy practice to allow revolving credit or refinancing,” Carreto added.

Carreto added that the offer of capital is another benefit of investing in CKDs since AFOREs are taking more risks in infrastructure and energy projects. He added that it is positive to have more players in these sectors because 20 years ago there were only developers and contractors. Nonetheless, he pointed out that AFOREs are not as interested in taking risks in the construction of projects at their earlier stage.

According to the National Commission for the Pension System (CONSAR), which regulates AFOREs, the latter have invested over US$23 billion in Mexican infrastructure projects. In an interview with BNAmericas, Iván Pliego, President, CONSAR concurred that these infrastructure projects are of great interest to AFOREs. Nonetheless, one of the major challenges for CONSAR is to make smaller-scale infrastructure projects attractive. “There are projects of medium- and small-sized companies that could be useful to trigger development and create jobs, but they are not attractive for AFOREs because they need financing for up to US$10 million,” said Pliego. 

Pliego added that follow-up investments in small-scale projects are tedious since they require almost the same effort as larger projects. He suggested that to make such projects more attractive, they could be grouped. “Investing less than US$25 million is costly for an AFORE regarding investment management. For this reason, we need to make them more attractive, by making them larger, by grouping small projects together as local investment projects for those with limited resources,” Piego added.