Mexico Is OECD Country With Lowest Infrastructure ExpenditureBy Fernando Mares | Wed, 06/29/2022 - 17:33
OECD’s International Transport Forum (ITF) reported that Mexico is the OECD member country that spent the least on infrastructure relative to its GDP in 2020, a factor that could impact its privileged position in the restructuration of global supply chains.
According to 2020 data used for ITF’s report, Mexico spent 0.2 percent of its GDP on internal infrastructure. Therefore, Mexico ranks 36th, behind Ireland and Belgium. By contrast, China ranked first, with a domestic infrastructure expenditure of 5.8 percent of its GDP, followed by Georgia and Azerbaijan, with around 3 and 2 percent respectively.
Over the past 10 years, investment in countries like Serbia, China and Bulgaria increased at a compound annual growth rate of 10, 8.5 and 6.3 percent respectively. Mexico’s growth registered negative numbers, with an annual growth rate of -8.2 percent. Only Spain dropped more with 9.5 percent.
Regarding railroad infrastructure, Mexico ranked 32nd among 36 countries. The country invested less than 0.1 percent of its GDP in railroads, surpassing Greece and closely trailing the US. In this environment, the top countries are China with 0.7 percent, Switzerland with 0.6 percent and Austria with 0.5 percent.
ITF’s data is sourced from a survey sent to current member states. It covers total gross investment, defined as new construction, extension, reconstruction, updates and major repaira for roads, railroads and inland waterways, as well as ports and airports. It also covers maintenance expenditures financed by state governments. The data is not fully updated, so information about the newest infrastructure projects may not have been considered.
In 2022, investment in Mexican infrastructure has dropped drastically. According to the Ministry of Finance (SHCP) investment in Mexico dropped 13.8 percent over the past three years. For this reason, the private sector and the government have joined efforts to develop three infrastructure packages.
In March 2022, investment in the construction sector ticked up 2.8 percent, a significant increase compared to the numbers of February 2022, when the sector’s investment dropped 2.2 percent compared to the previous month. This increase was driven by a growing number of construction projects, especially key federal infrastructure projects. Although this growth was a positive indicator, experts argued that the market lacked the drivers to maintain it. According to the Mexican Chamber of the Construction Industry (CMIC), the sector could grow by 6 percent in 2022, which could increase the confidence of private investors. CMIC has also urged the government to invest more in the private construction sector, since it carries out 80 percent of the infrastructure work.