Francisco Ibáñez
Capital Projects and Infrastructure Leader
PwC
/
Insight

Public-Private Participation to Bridge Infrastructure Gap

Wed, 11/01/2017 - 12:07

Stability and well-planned projects within Mexico’s infrastructure industry are factors that directly influence the country’s economic prospects. Considering geopolitical instability in the world, cooperation between the private and public sectors is now more essential than ever to ensure the continuation of the country’s key projects, such as the Mexico-Toluca Interurban Train and NAICM. According to Timetric, a leading global provider of market data and advisory services, Mexico’s infrastructure construction market is expected to reach a total value of MX$1.2 trillion if large-scale infrastructure projects continue as planned.

But, according to Francisco Ibáñez, Capital Projects and Infrastructure Leader at PwC Mexico, fragmented development of infrastructure projects in Mexico is an issue that jeopardizes the growth of the industry and the country. “Without clear multimodal planning, a government official could plan a highway near a port and not realize that the area actually requires a train,” he says. Government officials who plan the infrastructure in a way that solely focuses on their own projects without evaluating the true requirement of the area are allowing room for error.

Intermodal planning is one tool Mexican officials can use to implement successful projects and create an interconnected perception of infrastructure developments. “Intermodal planning can improve transportation logistics in the country and strengthen Mexico’s ability to compete in the global market,” says Ibáñez. “It creates unity, certainty and transparency across a wide range of projects such as ports, airports, highways and roads.”

To do this successfully, the private sector needs information and Ibáñez cites Bancomext’s recently created Mexico Projects Hub as a timely development that will promote investment in Mexico. “One company recruited PwC for the sole purpose of listing PPP projects in the transportation sector, a service that would not be needed if authorities made information more public,” he says. “Online platforms like Mexico Projects Hub can make information about the status of projects available to the general public because at the moment, this data is hard to find.”

Bancomext’s platform goes a long way to increasing transparency in infrastructure PPPs but one issue developers often face when working with the public sector is extremely tight timelines. “Sometimes public entities are only given a few months to submit proposals and this greatly inhibits competition and quality, which limits the amount of companies that can participate in the bidding process,” says Ibáñez. “Mexico can reassure investors and attract funds through the release of public tenders that allow developers enough time to create wellplanned proposals.”

To highlight these challenges and potential solutions, PwC recently developed a report that includes recommendations and best practices from seven countries to promote healthy infrastructure growth. The challenge is making sure that their suggestions and longterm vision are adopted by the public sector. This concern is compounded by the upcoming 2018 elections, since typically incoming administrations place little importance on continuity with the priorities of previous governments. Although the administration has an obligation to fulfil the promises it established at the beginning of the term, developers are rushing to complete projects in light of a possible change of priorities if a new political party takes the reins. “A new administration is a risk to developers because authorities with a different vision may prevent the continuation of important public projects,” says Ibáñez. “This creates a cycle of projects with a shortterm vision as it is difficult to ensure the long-term continuity among rotating administrations.” He suggests the creation of an independent body that can oversee planning and promote the continuation of projects beyond electoral periods.

It is important to have well-planned infrastructure to ensure Mexico’s capacity to thrive in the global market. Ibáñez stresses that the importance of a longterm infrastructure outlook cannot be underestimated. “Ultimately, long-term infrastructure projects are Mexico’s backbone and they enable the country to compete internationally,” he says.