Mexico pensions, La Caisse in $1.2bn infrastructure tie-up

In a first-of-its-kind partnership, Mexican institutional investors are teaming up with a Canadian counterpart to make joint investments in Mexican infrastructure.

Canadian pension Caisse de dépôt et placement du Québec (CDPQ) and a consortium of Mexican institutional investors have announced joining together under the moniker of CKD Infraestructura Mexico (CKD IM) to make co-investments of up to MXN$35.1 billion (€1.9 billion; $2.1 billion) into Mexican infrastructure over the next five years.

The newly formed trust is comprised of CDPQ, Afore XXI Banorte, Afore Sura, Afore Banamex, Pensionissste and Fonadin. Banorte, Sura and Banamex are Mexico's three largest “afores,” or individual retirement accounts. Together they manage 62 percent of all Mexican pension fund assets. 

“CKD Infraestructura Mexico is the largest consortium of Mexican pension funds created to date. Together, these funds will invest in major projects that will provide tangible benefits for Mexicans, since it has been proven that infrastructure investments contribute to productivity and GDP growth,” said Eduardo Ramos, CKD IM general manager. 

“For us, it was a natural fit to partner with CDPQ, a global investor that shares our long-term vision and brings to the table its experience investing in infrastructure projects worldwide.”

According to a related release, the fund partners believe the Mexican economy is poised for significant growth in the years to come, with infrastructure opportunities showing particular promise in the wake of the country's four-year, MXN$7.7 trillion infrastructure plan.

During the five-year investment period, CDPQ, a Montreal-based pension that hopes to double its portfolio by 2018, has committed to deploying MXN$17.876 billion. CKD IM will commit the remaining MXN $17.215 BN. The Canadian company will hold a 51 percent interest in the vehicle, and CKD IM, which is listed on the Mexican stock exchange, will hold the remaining 49 percent.

The platform will focus on investing in transportation and power assets, among others. As an early show of force, CKD IM also jointly announced that it was in the process of acquiring 49 percent of CDPQ's equity investment into the ICA OVT platform that was originally made in June. ICA OVT aspires to continue growing its asset base, and currently holds four toll road concessions: the Mayab toll road, the Rio Verde – Ciudad Valles highway, La Piedad Bypass, and the Acapulco Tunnel.

“When we look around the world, especially in the infrastructure sector, Mexico stands out as an exceptional country to invest in. Given the scope of the opportunities in this sector, we are pleased to join forces with leading Mexican institutional investors,” said CDPQ president and CEO Michael Sabia. 

“By combining their in-depth knowledge of the market and local networks with our infrastructure expertise, we are creating an innovative investment platform that is ideally positioned to find and invest in the best Mexican infrastructure projects.”

Pensionissste CEO Jose Maria de la Torre said that he believes the platform will serve as a stepping stone for a number of related transactions that could catapult infrastructure investment in the country to a “new plateau”. 

Barclays Mexico acted as sole structuring agent and underwriter for the formation of the partnership.

According to the World Economic Forum, Mexico currently ranks 64 out of 148 countries in terms of its infrastructure. That has led the country's political leaders to institute a four-year, $600-billion National Infrastructure Program in 2014, to liberalise the Mexican energy market for the first time in 75 years, and to pour $5 billion to its port infrastructure, including planned development in Veracruz of four new terminals. 

And while there is reason for optimism, insiders fear Mexico may lack the institutional capacity to meet programme timelines, as noted by BMI's lead infrastructure analyst Michelle Karavias in a special report recently published in Infrastructure Investor.