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IRWA’s Annual Conference and the Banana Republics

By Pablo Gutiérrez de la Peza -

Managing Partner

STORY INLINE POST

Last June, I was invited to speak at the International Right of Way Association (IRWA) annual conference held in Cleveland, Ohio, with my colleague Juan Pedro Fernández Cueto. IRWA is a professional member organization of around 7,000 global infrastructure real estate practitioners, most located in the US, focused on elevating ethics, learning and standards of excellence among those dedicated to acquiring, managing and transferring land rights for infrastructure development.

We spoke about the right of way liberation process in Mexico and the special opportunities and challenges it presents in our country from a legal, social and communications perspective. We discussed how Mexico has increasingly become a key player in today’s global economy: it is the No. 1 beer exporter and silver producer in the world, a prime tourist destination that received over 31 million visitors last year, and a top trading partner with the US, with a total trade volume —exports and imports — of $661 billion in 2021, practically the same as Canada and China. And how despite that privileged position, our infrastructure has not followed suit.

Such a mismatch, we said, can be at least partially explained by the lack of rights of way and land, which have become one of the main bottlenecks for much needed infrastructure, from trains and highways, mining and industrial concerns, to pipelines and transmission lines, across all sectors. And how there is no easy way to handle an inherently complex and high-stakes process, which presents nonlinear risks and is highly prone to black swans (although Nassim Taleb would say most are not really such, as they could have been predicted).

We discussed how governments and private corporations struggle to do it, more so to do it right. In Mexico, at least for the last two decades, the government has been unable or unwilling to exercise its legal right to expropriate lands. Our president, Andrés Manuel López Obrador, even made it one of his election promises and has struggled with rights of way even for his landmark projects, the Mayan Train, a US$15 billion-plus project to build a 1,500km passenger and freight railway that will connect five southern states, and the Interoceanic Corridor, which is developing infrastructure over a 280 km stretch of land in the states of Oaxaca and Veracruz to connect the Pacific with the Atlantic Ocean in an attempt to compete with the Panama Canal. Many large-scale projects have been canceled for lack of land rights and social license.

With so much at stake and as the IRWA is a not-for-profit professional association founded in 1934 and highly respected as the pre-eminent source of right of way educational and professional services worldwide, it really surprised me that Juan Pedro and myself were the only Mexicans attending. After three days of seminars and conferences, here are some things we learned:

Mexico is some 20 years behind the US and Europe regarding information access:

In the US and Europe, information regarding title and land ownership is of public record, has been mostly digitized and accessible to anyone through easily accessible GIS (geographic information systems). That’s not the case in Mexico. Here, information is scattered, scarcely digitized, hard to find — sometimes, even hidden — and needs to be analyzed and sorted through to have a true understanding of the real estate’s legal standing.

Technology is only starting and will very likely disrupt the industry:

Not long ago, drones, sensors, satellite information and software were too expensive, not available or too complex to become widespread and deployed in most projects. Their use was limited to certain moments in time and for specific purposes. Especially with survey-related issues, appraisals and environmental studies, technology will drive costs down in a secular and exponential trend, allowing for the development of many new applications that could disrupt many facets of our industry. It will make many processes much more efficient and information more readily available to manage lands and infrastructure for those able to navigate it.

Structural differences:

While the US and most countries can rely on eminent domain, in Mexico that is not the case. The government has been unable or unwilling to exercise its legal right to expropriate lands. Following his election promise, our president has been reluctant to expropriate land, except for his landmark project, the Mayan Train. Therefore, consent must be obtained directly from the owners, which changes the risk dynamic and requires agents with a different profile.

Different processes, very similar challenges:

The right of way acquisition process is different in every location, depending on the applicable rules and laws, which in some cases can be cumbersome to understand and untangle. Nonetheless, the industry faces very similar challenges worldwide. In the end, it’s all about people, the right incentives and good timing.

It’s a tough industry to be in internationally:

It is a very tough industry to be in internationally. Professionals from many countries commented that for quite some time, fees have stagnated and similar challenges make it hard to thrive. Most are hired by procurement departments that do not understand the specialization required for our industry and are forced to compete on price with companies without the experience, know-how and resources required to achieve what they promise.

Some cross-border learning is warranted:

In our times, the US should learn from Mexico that consent and social license are crucial. Not all problems can be solved by throwing money at them. For any company thinking about coming to Mexico, it could help to read Rich Cohen’s thrilling biography of Samuel Zemurray’s life (The Fish That Ate the Whale: The Life and Times of America's Banana King), because even though almost a century has passed and many things have changed, we are still haunted by many of the traits that for decades have stigmatized our country as a Banana Republic.

Learning from history should serve as a reminder that no amount of money and power can help a project that does not make it a priority to avoid corruption, creating shared value for all its stakeholders and not only building wealth but being an agent to reduce inequality through grassroots efforts.