Felipe Duarte
Deputy Director General of Infrastructure and Energy at Grupo Financiero Banorte
View from the Top

A Rich Future Ahead for Infrastructure Investors

Thu, 11/01/2018 - 11:35

Q: How has the infrastructure industry evolved in the last years and how has the financial market evolved with it?
A: I do not see a financial gap within the Mexican infrastructure industry. I do see a vibrant market in which the selection and professionalization of projects has improved drastically in the last years. I also see a financial market that has evolved in the last 10 years, both in equity and debt. The creation of new equity funds and financial instruments such as CKDs has become important tools to finance the country’s infrastructure development. Several commercial banks have also began participating more in the industry. Banorte has specialized in both infrastructure and energy sectors and we have seen that the market is becoming stronger. We see that the infrastructure financing market is becoming more intricate as years go by and this is good news for the project, for the banks and for the people.
Q: How has Banorte participated in the financing of infrastructure projects in the last few years?
A: Banorte provides a complete array of financial products to clients and one of our strengths is that we know the market and we are local players, which is something international companies always look for when investing in Mexico. We are actively providing financial products and services to various participants in the construction of NAIM and airports are a large area of interest for us. In the last 18 months, PPPs have been more active in the country’s road sector when it comes to conservation and maintenance contracts. We believe that the port sector will also continue to grow in the next five to 10 years, mainly to Lazaro Cardenas and Veracruz. We are currently not participating in passenger rail projects but we are open to new opportunities that may arise. PPPs are a relevant tool for governments to build and maintain infrastructure. Although it is a relatively new law, it has great potential in the next few years. It is a very good tool for the market, but it closes the gap for some uncertainties or circumstances that the government sometimes encounters.
Q: How will Banorte’s purchase of Interacciones impact its role infrastructure industry and what are what types of projects does it want to invest in?
A: Banorte’s purchase of Interacciones will have a positive impact on the company’s portfolio and results. It will help us understand the infrastructure needs of local governments and together we can best meet Mexico’s infrastructure and energy needs. Interacciones is an important player within the country’s infrastructure market and has been a flagship of the banking industry in the last 10-12 years. It is very good in understanding the infrastructure needs of local governments. Project selection is important when providing financial services to local governments and municipalities. For a project to be sustainable it must generate productivity gains. Otherwise the project may be compromised in the long term. Sustainability refers to social, financial and environmental sustainability. This makes the selection of a project much easier.
NAIM is one of the best examples of a bankable project. There are various commercial and development banks, as well as financial instruments being used, apart from the fact that it is also an environmentally sustainable project. For investors to feel confident investing in an infrastructure project in Mexico, the project must prove that it is sustainable, that it fulfills a need and that it is also a good anchor for investment in impoverished areas.
Q: How has the participation of pension funds and Afores impacted the country’s financial sector when it comes to infrastructure?
A: Almost all major funds are now operating in the Mexican market. This is a good thing because that means that there are more professional investors in the market that bring with them set of skills that complement the existing players. There is this need to develop managers that can deliver on the investments, including the operation and maintenance of those facilities. Having stronger partnerships in the market allows us to provide financial structuring that is more efficient to specific assets or projects.