Nearshoring Brings Opportunities CloserThu, 10/15/2020 - 15:40
Q: What is Cal y Mayor’s greatest contribution to the Mexican infrastructure sector?
A: Some of our greatest contributions are in highways and railroads. The company has participated in the construction of one-third of all Mexican highways and contributed to the entire value chain of highway construction, from project selection and development of traffic and revenue studies to the engineering for the construction.
Railroad development has also been one of Cal y Mayor’s strengths. Throughout our history, we have collaborated on some of Mexico’s most important railroad developments up to and including this administration’s largest transportation project: the Mayan Train. We have also worked on the development of urban railroad transportation, such as the expansion of Mexico City’s subway line 12, the recently inaugurated line 3 of Guadalajara’s subway and the Monterrey subway. Other projects have involved the expansion of two private cargo rails, for Kansas City Southern and Ferromex.
Q: In which areas of the transport infrastructure sector do you see more opportunities?
A We are now seeing significant opportunities in the development of transport infrastructure for manufacturing regions. Over the past few years, US companies have been moving supply chains from China to countries like Mexico. Nearshoring involves less risk in transportation, supply and even during emergencies like the COVID-19 pandemic. This practice is becoming increasingly popular among US companies and represents significant opportunities for the Mexican market. In 2019, Mexico passed China in exports to the US, becoming the latter’s main commercial partner. This trend will only continue. However, bringing more production to Mexico will challenge its customs, warehouses, roads, ports, airports and other infrastructure. We are now working to improve the mobility infrastructure of impacted cities to support their growing value chains. We see significant opportunities in railroads and highways, which have been historically the main transportation method for manufacturing companies between the US and Mexico since the start of NAFTA. Now, USMCA and the trade war between the US and China will only strengthen this effect.
Q: What role will public-private partnerships (PPP) have on the future of Mexico’s infrastructure?
A: PPPs will have an increasingly larger role in the development of Mexico’s infrastructure, as public resources will not be sufficient to finance all of Mexico’s infrastructure needs. We have seen increasing participation of private entities in the development of public infrastructure over the past 20 years. The future of Mexican infrastructure is in these types of partnerships.
Q: The group was responsible for the development of Mexicable, a unique mobility platform in Mexico City. In what other ways is the group innovating in mobility solutions?
A: Cal y Mayor is developing new solutions for electric and autonomous vehicles, which are increasingly penetrating the Mexican market. We are closely following the outcome of local regulatory processes that are limiting further penetration of this technology in the country. The use of electric vehicles, in combination with the digitalization of road information, will lead mobility trends for the coming decade. Electric vehicles have their own challenges. For example, although the network of charging stations continues to expand, charging an electric vehicle still takes about four hours. As a result, it is still not possible to see a charging station as a fuel station where one can charge a vehicle in minutes. At this point, electric vehicles are perceived mainly as an urban solution but some of them have a 300km range and in the next five years this will double.
Q: IT has grown significantly since the start of the COVID-19 outbreak. How is the group capitalizing on the opportunities that this booming sector represents?
A: Internally, we saw an opportunity to increase our productivity through the use of technological tools that allowed our employees to work remotely. This has proven highly beneficial and we expect to continue operating this way, even after the outbreak is contained. We also identified a large market opportunity as COVID-19 led to a boom in IoT and cloud services, which were already growing at a double-digit rate before the pandemic. Cloud services require the development of large data processing centers. We identified a large opportunity in building the infrastructure for these centers. We are seeing large investments in this infrastructure in the US and the EU but cloud services are used across the world. Mexico has greatly increased its use of cloud services but most data centers are located in the US and they need to be closer to the places where they are being used, so there is a growing interest in building these centers in Mexico. Larger companies are implementing smaller data center at their offices but this is highly inefficient and riskier than using a dedicated data center as the latter has to guarantee availability 24/7 with over a 99.9 percent confidence rate. Recently, a local data center failed suddenly and left thousands of Mexican without the ability to use their credit and debit cards for several hours.
Q: How does the group capitalize on its experience in foreign markets for the development of projects in Mexico?
A: We have been working in foreign markets for the past 26 years, having developed a systematic approach toward internationalization. We export engineering infrastructure to all of South America. Our first project outside of Mexico was the construction of the electric train in Lima, Peru. We continue to work with the Peruvian government and helped to introduce new infrastructure business models to the country, including long-term services for highways in which developers are paid not for their initial work but for the services they offer over a long period, such as 10 years. In Peru, we also introduced the first exclusive lanes for buses. In Colombia, we worked on the installation of the Transmilenio train and later took some of that experience to Mexico and Peru. Beyond developing projects, we cross-market new technology and methodologies to the countries we work in.
We have also been working in the US for the past 15 years and bringing technology and projects experience from there to Mexico. We are working to introduce intelligent transportation systems (ITS) to Mexican and Latin American highways. These have numerous applications, such as payment through electronic toll collection. At this point, we are seeing significant opportunities in the US because its infrastructure sector is much more resilient than that in Latin American countries. We have been systematically exporting engineering to the US for 15 years and we will continue to focus on this area.