The Mexican opportunity

Mayer Brown delves into Mexico's recent infrastructure announcement.

Mexican President Enrique Peña Nieto announced on July 15, 2013, that Mexico will invest $315 billion during the period 2013-2018 to upgrade Mexico’s infrastructure by modernising roads and highways, building rail lines, building and expanding the country’s seaports and airports, providing universal access to telecommunications and boosting the energy sector. 

The plan is expected to include close to 500 projects across the country. President Peña Nieto stated, however, that the flow of investments, and possible further spending increases, will depend on the approval of fiscal reform that his administration will propose to Mexico’s Congress in September.

The $315 billion plan is part of an effort to improve Mexico’s competitiveness and productivity. Mexico’s stated long-term goal is to be ranked in the top 20 percent of the World Economic Forum’s Infrastructure Competitiveness Index by 2030 (Mexico currently ranks 68th out of 144 countries surveyed). It represents a significantly larger investment than the six-year plans submitted by previous presidential administrations. 

By comparison, Mexico’s last six-year plan involved about $200 billion in infrastructure spending. Annual investment through the current plan is expected to equal approximately 5 percent of Mexico’s gross domestic product.

While the administration has yet to provide specific details about the general infrastructure plan, the Transport and Communications Infrastructure Investment Programme 2013-2018, which is part of the infrastructure plan, includes the following five action items designed to modernise roads, railroads, ports, airports and telecommunications:

Telecommunications: The aim is to achieve universal access by expanding network coverage, fostering competition and ensuring that the recent constitutional reform of the telecommunications industry is implemented in a timely, effective manner.

Road and Highway Infrastructure: The goal is to have a safe, complete and integrated road system in good condition that can serve as the backbone of the Mexican economy, linking the country’s various regions and bringing remote communities closer together.

Railroads: The aim is to restore passenger rail transport and encourage greater use of freight trains. The plan aims to reduce travel costs and times through the construction of bypasses and urban infrastructure, which will help improve the speed of transportation by rail.

Ports: The goal is to have four world-class ports and increase the capacity of the port system as a whole to support the country’s various economic sectors, as well as to encourage the growth of a merchant fleet.

Airports: The goal is to achieve better service, lower costs and higher frequency in air transportation, relieve the congestion of Mexico City International Airport and promote regional interconnections.

The government also has yet to announce the details of the infrastructure plan particularly as it relates to energy. Mexico’s energy infrastructure is in need of significant investment, and its refining industry and pipeline network are particularly in need of upgrade and expansion. Despite being one of the largest producers of crude oil in the world, Mexico is a net importer of refined petroleum products.