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News Article

Infrastructure Spending to Benefit Mexico's Southern States

By Emilio Aristegui | Fri, 10/15/2021 - 12:48

Government spending regarding social infrastructure is set to increase in 2022 following a consistent growth since 2016. States like Chiapas, Veracruz, Guerrero and Oaxaca are set to receive the most funds as the government seeks to aid help these communities through social infrastructure works in drinking water, sewers, drainage, electrification, education, health, housing and urbanization.

Christopher Cernichiaro Reyna from the Center for Economic and Budgetary Research A.C. (CIEP) published a report indicating that an increase in social infrastructure is set to grow in 2022, “The actual federalized spending projected for 2022 would be 4.7 percent higher than the one assigned in 2021.” The Participate Federal Revenue (RFP) is the federal organization in charge of allocating the funds that the Federation transfers to municipalities from the participate federal collection. Cernichiaro said that other sectors of the economy will benefit as well due  to this important increase in tax collection. “In part, due to the 7.3 percent increase in the Participate Federal Revenue (RFP) during said period. Thus, participations would increase 6.7 percent, contributions 2.7 percent and resources for agreements, subsidies and health 9.4 percent.”

Cernichiaro highlights that while all components of federalized spending will grow in 2021-2022, the increase in resources for social infrastructure in the Contribution Fund for Social Infrastructure will receive special attention in order to promote the economic growth. Mexico is seeking to recover from the economic crisis and the country’s strategy is directing towards social infrastructure spending, an investment that the government believes will help by creating a necessary economic reactivation for the country.  

The Contribution Fund for Social Infrastructure (FAIS), which is the branch of government in charge of organizing and allocating funds for infrastructure projects that will benefit municipalities and cities, is currently focusing on helping populations or regions that suffer from extreme poverty in the country. Currently, Oaxaca, Veracruz, Chiapas and Guerrero suffer from some of the highest poverty rates in Mexico, and as stated by the SHCP the objective of these institutions in 2022 is to help these states as much as possible with different projects. The main goal is to help through social infrastructure works in drinking water, sewers, drainage, electrification, education, health, housing and urbanization.

As reported by Cernichiaro on the CIEP report, “The FAIS would contain MX$94.321 billion (US$4.53 billion) in 2022, a figure 7.3 percent higher than that assigned in 2021.” The monetary increase in this budget can be interpreted as a recovery for the Mexican economy from the effects of the pandemic. This news highlights  that Mexico is progressing as the country seeks an economic recovery as stated by the CIEP report, “The resources of the FAIS in 2022 would be similar to the levels prior to the pandemic. Resources from the Contribution Fund for Social Infrastructure also increased in a sustained manner from 2016 to 2020, showing an average annual growth rate of 3.9 percent. The only decrease was from 2020 to 2021 by 6.9 percent, as the country was severely impacted by the COVID-19 pandemic.

Resources will be allocated differently in 2022 as the CIEP report shows, Chiapas will receive 17 times more resources from FAIS next year than Mexico City . The Contribution Fund for Social Infrastructure financed housing, roads, clean water, electrification, health works among others from 2018 to 2019. Home improvement has been the major goal of FAIS, representing 26 percent of the entire budget for 2019-2020, followed by urbanization works, such as roads, sidewalks and public lighting with 18 percent and clean water projects with 15 percent.

The data used in this article was sourced from:  
CIEP, FAIS, SHCP
Emilio Aristegui Emilio Aristegui Junior Journalist and Industry Analyst