Investigating the Pipeline

Edmundo J. Gamas, executive director, Mexican Institute of Infrastructure Development

IMEXDI, the Mexican Institute of Infrastructure Development, has analysed the Mexican federal government’s pipeline of P3 projects for 2017, which include water, highway maintenance, and hospital construction and general services operation.

The collapse in oil prices over the past two years has intensified the country’s interest in the PPP model for its infrastructure requirements.

In the water sector, Mexico’s National Water Commission (Conagua) will tender projects worth a total of US$285m. These include desalination plants in Guaymas and Los Cabos.

They encompass the modernization of the country’s National Meteorological Service, in which the Mexican federal government will purchase the P3 data. They also comprise regulation lagoons and water treatment plants for Mexico City’s new international airport.

Finally, Conagua’s P3 pipeline requires the rehabilitation of two aqueducts: one for Lazaro Cardenas, and another for a PEMEX industrial complex in La Cangrejera.

Meanwhile, the Secretariat of Communications and Transportation (SCT) will tender projects worth a total of $435m.

These include the maintenance of four highways: Matehuala-Saltillo; Piramides-Tulancingo-Pachuca; Saltillo-Monterrey-Nuevo Laredo; and Texcoco-Zacatepec.

Mexico’s Institute for Social Security and Services for State Workers (ISSSTE) will tender projects worth a total of $130m. These include hospital construction projects and general services operation schemes in Mexico City and Tepic.

In technology, the Red Compartida (Shared Network), a national wireless broadband network, is being procured as a P3 project.

Additionally, the Mexican federal government has recently tendered two P3 projects, resulting from unsolicited proposals, for a highway and a hospital, minus medical services. In both cases, the winner of the tender was the consortium that presented the unsolicited proposal.

State P3 projects are also gaining increasing importance. As examples, the State of Baja California has recently tendered two desalination plants, and the State of Mexico a highway maintenance contract.

Big potential

It is worthy of reflection that even if all the infrastructure P3 projects announced are launched, they represent a tiny proportion of the opportunities available in Mexico for the project financing and management structure.

The country still lacks appreciation for its potential, and the environment and tools for the planning and tendering of numerous, high quality projects, preferably within the scope of a coherent official pipeline.

During the first four years of President Enrique Peña Nieto’s term of office, the Minister of Finance was Luis Videgaray Caso, and the Deputy Minister of Finance was Fernando Aportela Rodríguez.

The fact that this team had launched several P3 projects in the State of Mexico, when the president was that state’s governor, created expectations that this structure would be a central plank for the new Mexican federal government when it came to power in 2012.

However, it has only launched a few P3 projects between late 2012 and late 2016.

The Mexican federal government’s thinking with respect to P3 projects during this first part of President Peña Nieto’s term of office, is important to note.

The government considered P3 projects to be expensive, compared to the cost of government-issued debt destined for public works. The fact that some projects went off course, due to poor planning, even as acknowledged by the government, did not help matters. Finally, the government recognizes that there are currently few P3 project planning and tendering skills among its officials.

Mexico has a new Minister of Finance heading the Secretariat of Finance and Public Credit (SHCP) as of September 7. He is José Antonio Meade Kuribreña, and he served as Minister of Energy under the PAN government of President Felipe Calderón Hinojosa. He has previously served the current President as Minister of Foreign Affairs and Minister of Social Development.

Kuribreña’s pragmatism and cosmopolitan outlook, coupled with the severe financial restrictions faced by the Mexican federal government, due to the collapse in world oil prices, and Mexico’s stated intention to stop public debt from increasing as a proportion of GDP, augur well for the future of P3 projects.

IMEXDI expects to be in the forefront, providing professional support through research, consulting, events and training.