Defense Ministry Is Mexico’s Largest Developer: CMIC

The construction sector is severely affected by the government's preference for military engineers for the construction of key federal projects, a move that according to industry insiders, is not only affecting the sector but also Mexico’s economic recovery, said the Mexican Chamber of the Construction Industry (CMIC).

According to Francisco Solares, President, CMIC, the Ministry of Defense (SEDENA) has become the country’s largest infrastructure developer. The main problem he sees regarding military engineers working on such projects is not quality, since he considers them to be skilled and accomplished. Instead, the issue is that engineering and construction is simply not SEDENA’s duty. 

Solares considers SEDENA’s foray into developing infrastructure as unfair competition since the government has recently authorized SEDENA to purchase its supplies like cement and steel directly. The military is also allowed to hire professionals along the construction supply chain. “This, apart from being an unfair competition with private developers, is affecting the country’s economy, because the projects developed by the army are not taxed: they do not pay income tax (ISR) or value-added tax (IVA). Therefore, this is also an issue for the government's finances,” Solares said. 

Solares said that there is a growing concern in the industry because SEDENA’s projects lack transparency after the president declared them as a “national security” concern. He said that although the army is an honest institution, hence López Obrador’s faith in it, projects should nevertheless be transparent to know the actual cost of them, as well as how the resources were used. “With these characteristics, it is forbidden to give information regarding the project. For example the Felipe Angeles International Airport (AIFA). Even before it was labeled as a national security concern, it was a murky project… I believe the army’s word and I think it costs what they reported. Nonetheless, we do not have evidence, we cannot access the sources,” Solares added. 

The construction industry has shrunk over 36 percent during the past 13 years. Between 2018 and 2021, it shrank by 26 percent, which has caused CMIC to lose around 2,500 members. The perceived militarization of construction has become a thorn in the side of the private sector. CMIC has previously emphasized the need to audit major projects carried out by military engineers, arguing that private developers have the same capacity to carry out these works. The Mexican Union of Engineering Association (UMAI) has urged President López Obrador to include their members in key infrastructure projects, which could bring several benefits like cost savings and shorter execution times, owing to the union’s ample expertise regarding infrastructure issues.