Public Investment in Infrastructure to Stagnate in 2024

The López Obrador administration is expected to finish its first term with a stagnation in the GDP’s percentage destined for public infrastructure investment reveals data from the Ministry of Finance (SHCP).

SHCP foresees that public investment in infrastructure will account for 3.6 percent of the GDP for 2023, which will result in an average of 2.94 percent for the period between 2019 and 2023. In contrast, during the first five years of Enrique Peña Nieto’s presidential term, public infrastructure investment averaged 3.9 percent, over 1 percentage point more than the López Obrador government. 

According to the analysis center México Evalua, the federal government will invest over 44 percent of the budget in fuels and energy, 3 percent in health, 2 percent in education and 1 percent in environmental protection.

The investment was also impacted by the economic downturn in 2019 and the COVID-19 pandemic, which resulted in a contraction of the Mexican economy of 8.2 percent in 2020. 

Currently, most of the public infrastructure expenditure is focused on the federal government's megaprojects like the Mayan Train, the Interoceanic Corridor and the Dos Bocas Refinery, however, Deloitte has argued it would be better to have a portfolio of more and smaller-scale projects while the main projects mature to avoid concentrating the benefits in just a few regions.

One of the sectors most affected by the lack of investment is the construction of highways. According to the International Transport Forum (ITF), Mexico is the OECD member that invests the least in this area with only 0.2 percent of its GDP. Regarding railroad infrastructure investment, Mexico ranked 32nd among 36 countries since it invested less than 0.1 percent of its GDP in this sector in 2020. 

Industry insiders have also criticized Mexico's insufficient investment. Fernando Solares, President, CMIC, urged the federal government to allocate more resources to the construction sector since it invests only 2 percent of the GDP here, while the minimum required to recover from the pandemic was 5 percent. Solares added that the government’s resource management only benefits major developers and not the whole industry, as reported by MBN. 

According to the Economic and Budgetary Research Center (CIEP), public investment in infrastructure is essential for economic growth and social development. CIEP identified two kinds of public investment in infrastructure: firstly, economy-related projects like electricity grids, highways and bridges, and secondly social infrastructure such as housing, the construction of hospitals, schools and recreational centers.