Connecting Mexico's Infrastructure Industry to the Global MarketWed, 11/01/2017 - 12:12
As the public sector continues to struggle with a shrinking federal budget, the infrastructure industry in Mexico must continue to attract FDI to ensure that development does not come to a standstill, says Ricardo Díaz de León, Infrastructure, Mining, Logistics and Tourism Coordinator of ProMéxico. There must be a unified effort from both the public and private sectors to ensure that Mexico’s infrastructure opportunities remain relevant enough to draw capital from the international market.
According to the Center of Economic Studies in the Construction Sector (CEESCO), FDI attracted by Mexico’s construction sector dropped 53.8 percent in 2016 to US$1.1 billion in comparison to 2015’s US$2.3 million. “Attracting new foreign private investors is one of the biggest challenges the industry faces,” says Díaz de León. “Foreign companies often battle with structures in Mexico that highly favor companies already operating here.” Companies venturing into Mexico must also face international players that already have a strong presence in the country, particularly those from Spain. To improve the competitivity of the market and lower entry barriers, ProMéxico strives to help international companies identify areas of opportunity within Mexico’s industries. “We organize international missions to bring information about the industry closer to strategic players,” says Díaz de León. “This is important because sometimes opportunities to participate and invest in the country reach investors too late.”
As part of it mission, ProMéxico either promotes an entity or a series of projects to regions that can complement the project’s objective, typically in collaboration with embassies and their commercial offices. “ProMéxico is currently organizing a mission in Asia to promote the Lazaro Cardenas port that recently opened its Tec II automated terminal,” he says. “Strengthening ties with Asia has the dual advantage of diversifying Mexico’s commercial portfolio and ensuring a strong flow of goods to the port as Lazaro Cardenas is one of the most important doors from Asia into Mexico.” Another notable collaboration was with GACM, which requested support from ProMéxico to promote NAICM terminal tender on an international scale and attract more bidders. ProMéxico has a particular focus on promoting PPP projects because the model encompasses a wide spectrum of sectors within the industry, from airports to hospitals. “The model invites international companies to share their best practices within iconic projects,” explains Díaz de León. “But the model should be re-evaluated considering that over 90 percent of infrastructure projects in Mexico experience cost overruns and delays.”
Nonetheless, he emphasizes that it is not just the public sector that bears the responsibility of making sure projects are completed on time. “Companies can contribute by choosing to participate only in projects to which they can offer added value,” he says. The scheme also needs to allow the private sector to be more involved in the design and planning phases to mitigate technical issues. This was a lesson the government learned from the Mexico-Toluca Interurban Train project. With the proper risk assessment and private-sector contributions, the rights of way problems faced by the project could have been avoided, therefore preventing the delays and construction issues it has faced. “Developing passenger trains in Mexico is difficult as the region is used to freight trains while Europe and the US have more experience managing a system that includes both passenger and freight trains,” says Diaz de León. Nevertheless, ProMéxico believes that the development of these projects can greatly benefit the country. “The government must always be certain that the services they are offering to the public have economic advantages, even if the service is highly subsidized,” he says. “This train will facilitate mobility between the State of Mexico and Mexico City and can result in economic prosperity and a better quality of life.”
Overall, Diaz de León believes that the infrastructure industry would greatly benefit from more organization and communication between governmental authorities and the private sector. ProMéxico does its part by promoting the country internationally. “We strive to prove that Mexico is not a mere export destination and that local companies have talent to offer the global market,” he says.