News Article

Private Investment to Bridge Mexico’s Infrastructure Gap

By Miriam Bello | Wed, 11/13/2019 - 13:03

Mexico needs to incorporate a long-term view when drawing up plans for the infrastructure necessary to push its economy forward and to attract the private investment that could help see projects to fruition, panelists at the Mexico Infrastructure & Sustainability Summit 2019 told the audience at the Hotel Marquis in Mexico City on Wednesday. “The risk should be spread across different parties, and not be a burden for just the government,” said Gerónimo Gutiérrez, Managing Partner at BEEL Infrastructure.

The panel, titled Private Investment to Bridge Mexico’s Infrastructure Gap and moderated by Othon Pérez Martínez, Business Development Director of FOA Consulting, looked at the actions needed from all sides to attract private money and build solid projects. “What is key is to have a mechanism to draw up these plans, with the goal being a long-term commitment to the growth of this country,” said Estéban Lecumberri, Director of Infrastructure at KPMG in Mexico. Jack Levy, Founder and Chairman of Grupo VEQ, added that it takes more than one party to ensure successful projects. “Teamwork and defining a common goal as a community is the key to creating good infrastructure projects, which will automatically attract private investment,” he said.

All participants agreed that a long-term vision was needed to attract greater investment in Mexico, where government administrations are limited to six-year terms. The current landscape causes uncertainty, which leads investors to hold back their capital, in turn leading to project delays and ultimately, higher costs. “Trust and certainly would help the country move and progress. Investors see that the ground is not very stable,” said Levy. Added Esteban: “Corruption and insecurity are as damaging as uncertainty.”

Gutierrez highlighted the elements that could promote private investment. “First, is certainty as we’ve already said. Second, investors need to know what percentage of participation the government is willing to give them. The third factor is to have effective mechanisms for bureaucratic processes, and lastly, clear legal frameworks and litigation processes, mostly for concessions.”

Another factor that plays into the landscape is the public and its perception of infrastructure projects, the government and the role of private businesses. “The public needs to have a clear understanding of what infrastructure in needed, so they can vote according to their interests,” said Lecumberri. He added that education was needed to ensure people were making informed opinions. “Our work as companies needs to be to communicate our projects, from how we choose them as an investor to how we develop them. That way, community can have informed opinions and an understanding of the project.”

Levy added that “presidents and governors should not focus so much on public opinion, because (projects) will generate debt, but that does not mean that it is a bad thing, because the effect will be to address and prevent a future problem.”

The panelist agreed that more financing options were needed to attract more private investment, along with incentives. The government’s austerity measures are also an impediment to strengthening the country infrastructure backbone. “Institutional strength worries me,” said FOA Consulting’s Pérez. “With austerity, we have been facing loss of capacity and talent. We might have the project but no people to work on them and develop them.” 

Miriam Bello Miriam Bello Journalist and Industry Analyst