PPPs Carrying Weight of Infrastructure DevelopmentThu, 01/11/2018 - 10:44
In an industry as broad and far-reaching as infrastructure, neither the public nor the private sector can go it alone. Although the public sector should oversee projects and shoulder risk, the money needs to come from private companies, says Ricardo Díaz de León, Infrastructure, Mining, Logistics and Tourism Coordinator at ProMéxico. “For ProMéxico, it is crucial to attract companies and to have them invest,” he says. “The private sector should carry the financial weight of infrastructure project development and integration, and PPPs enables them to do so.”
The Telecommunications Reform gave way to the first telecom PPP in México, a project worth US$7 billion. The Shared Network is an initiative to eliminate Mexico’s telecoms monopoly and generate competition in the country, allowing more companies to enter and services to improve. Altan Redes was awarded the 20-year concession to build and operate the 700MHz band, while both Telefonica and AT&T secured control of the 2.5GHz band. “The Shared Network is not a finite project. It is the base to develop and integrate other services into society,” Díaz de León says.
Prior to 2012, the industry had no legal framework for PPPs and before 2017 there was no way of knowing about PPPs prior to their publishing. But in 2017, Bancomext launched the Mexican Projects Platform to catalog the projects to be developed under a PPP scheme. “This platform is a key tool for ProMéxico to better promote investment in public infrastructure abroad,” explains Díaz de León.
Despite the improvement that PPPs and new financial vehicles have seen in increasing private investment and participation in infrastructure projects, he believes there is still a great deal of opportunity. “Unsolicited proposals are an example of a mechanism contemplated in the law that has not yet not being fully capitalized on,” he says. “This is a key area of opportunity as companies are better positioned to detect needs and document them, saving the government the time and costs of the initial phase of mapping infrastructure demand.”
As Mexico’s project financing portfolio adapts more sophisticated mechanisms, some of the most attractive have debuted on the BMV. Financing instruments such as Fibras, CKDs and CERPIs have taken off, especially for real estate projects. “New financial schemes allow the pursuit of new infrastructure projects. Previously, funding was limited to development banking,” Díaz de León says.
The benefits of greater financial options are reaped not only at an industry level but nationally, according to Díaz de León. “I think these vehicles give way to the development of projects that were hindered before due to a lack of expertise or resources. This not only impacts the infrastructure sector but also benefits the entire economy.”
ProMéxico plays a key role in the country’s economic development, with a mandate to spread information about the country’s investment opportunities abroad. “We are prioritizing the regions that have shown more appetite for construction and infrastructure development in our country,” Díaz de León says. China and other Asian countries constitute a key region for ProMéxico’s outreach efforts. “The Asian market is playing a preponderant role as these countries are looking at the opportunities that Mexico has to offer.”
Díaz de León adds that one problem is that foreign investors often do not know where to start looking. To address this issue, ProMéxico has promotional agreements with other public and private entities such as FONATUR to seek investors for the tourism sector. The tourism promotion fund developed a specialized platform to showcase the land available. “We often have foreign executives who want to venture into the Mexican hospitality sector. Given the growth of the tourism sector, their investment allows the development of niche infrastructure, for example in medical tourism,” he says.
As for the impact the new administration will have on the infrastructure promotion equation, Díaz de León says the country must wait to see how events unfold. “The newly-elected president has spoken about infrastructure projects, which is a good because it means that infrastructure is a priority,” he says.