News Article

Challenges, Opportunities in the Transport Infrastructure

By Alejandro Ehrenberg | Wed, 11/13/2019 - 13:38

Transport infrastructure is key to Mexico’s development. On the one hand, investing in transport will kick-start the country’s productivity. Moreover, good transport can potentially alleviate regional inequality, which has grown in Mexico in the last decades, panelists said at the Mexico Infrastructure & Sustainability Summit on Wednesday at Mexico City’s Hotel Marquis. The conundrum is that the public sector lacks sufficient resources to undertake this investment on its own, especially “due to Mexico’s growth outlook, which is around 1.3 percent for 2020,” Roberto Ballinez, Senior Executive Director of Public Finance and Infrastructure at HR ratings de México, explained.

Led by moderator Luis Rubio, Executive Partner at Holland & Knight, the panel in which Ballinez took part along with other prominent industry leaders explored the challenges and opportunities this state of affairs presents.  

Ballinez is cautiously optimistic on López Obrador’s disposition for dealing with this conundrum. “Even when the government is taking too long to define the course it will take on transport infrastructure, it is good that the door for private investment remains open. Tendering processes on projects, especially in Mexico’s south, is crucial,” he said. Ballinez went on to explain that modernizing railroads is one area of opportunity, as 30 percent of merchandise is transported by train in the north of the country, but only 10 percent in the south.

With respect to the necessary cooperation between public and private players, Francisco Javier Castañeda, Country Manager of Grupo Calidra, remarked: “As public resources are insufficient, they must be used smartly, with the aim of detonating private investment. However, the government must provide a framework of legal certainty and rule of law for private players to invest. Mexico as a whole must assume this important challenge.” To Castañeda’s point, Roberto Martínez, Head of the OECD Mexico Center, added that certain international best practices can be implemented so as to provide certainty. “In Australia, for example, there is a system of independent planning councils, which work beyond political cycles, certifying the viability of projects and guaranteeing that they will be completed regardless of the party in power.” Martínez insisted on the concept of good governance in transport infrastructure projects. “Transparency, democratic decision-making, efficiency and inclusion are crucial, and all key players must be taken into account in order to achieve these ideals,” he added.

Manuel Juárez, Business Development Director of Sacyr Construcción Mexico, also underlined the importance of transport infrastructure for Mexico’s development. Even when he acknowledged that the country’s competitiveness is not terrible when compared to other Latin American countries, he insisted on the possibility to improve. To this end, Juárez said that it would be smart to invest in the maintenance and modernization of Mexico’s existing transport network. While undertaking new projects is certainly important—in his view, a train uniting Mexico City and Queretaro would be highly beneficial—he noted that the country’s roads and hubs are in need of service. “This updating should be done with a view to making infrastructure compatible with the new needs and technologies of today’s rapidly changing economy,” he said. Juárez coincided with the notion that the public sector has to detonate investments, leaving development to the expertise of properly-incentivized private players. He also remarked that private players, while ready to partner up with the public sector for the benefit of Mexico’s economy, are in a wait and see mode with respect to the decisions the government will take in order to boost investment in the country.

Alejandro Ehrenberg Alejandro Ehrenberg Journalist and Industry Analyst