Slow Economic Recovery Stalls Infrastructure ProjectsBy Emilio Aristegui | Wed, 09/01/2021 - 21:19
Mexico’s infrastructure investments dropped despite the plans made at the beginning of the year because funds destined for infrastructure projects have shrank as the country’s government reorganizes its finances.
On Jan. 25, 2021, Mexico’s Treasury (SHCP) published a press release indicating some infrastructure plans for the year, which included “68 projects in communications and transportation, energy, water and environment sectors, distributed throughout the country, mainly in the central and northern regions, representing an investment of 2.3 percent of GDP (MX$525.97 billion or US$26.3 billion) and expected to generate between 370,000-400,000 direct and indirect jobs, which will bring social benefits and well-being for Mexicans.” However, these plans have been heavily altered as Mexico hired a new Head of SCHP as it continues to fight with the economic crisis.
Christopher Cernichiaro, Coordinator of the Local Public Finance at the Economic and Budget Investigation Center (CIEP), said that “this investment has been reduced from previous six-year terms, since to face the economic and budgetary crises it is administratively easier to cancel investment projects than to reallocate and redesign public spending.” This has put this year’s infrastructure projects on pause, as the government continues to focus on other areas.
Public sector investment on infrastructure had been similar throughout the years. Between 2016 and 2018, infrastructure projects represented 2.6 percent of the GDP. In 2019, the share decreased to 2.3 percent but then increased to 2.8 percent in 2020. However, the spending went down again to 2.3 percent in 2021 as the country focuses on its economic recovery.
The Head of SCHP, Rogelio Ramírez de la O, announced a new infrastructure package for the public and private sectors will be presented in a press conference. However, Alfonso Ramírez Cuellar, Deputy Leader of Grupo de Trabajo para la Transición Hacendaria, stated that, “We need adjustments, it is urgent to meet the needs of education, health, protection of small and medium enterprises, water and sanitation, national care system, we need space from the public sector to allocate MX$700 billion (US$35 billion) in investment, equivalent to 3 points of the GDP.” The lack of investment for infrastructure has affected public projects but there are still plans to revitalize the industry when the economy is more stable.