Revitalizing infrastructure plan could rescue Calderon's reputation

Mexico appears on the verge of jump-starting its lagging multi-billion-dollar infrastructure program, created to boost the country’s economic performance and global competitiveness and pull it out of the recession.

If the projects, including the massive Baja California port-rail project at Punta Colonet, are realized, the effort might rescue the reputation of President Felipe Calderon whose reform agenda has faltered.

Calderon in July 2007 launched the National Infrastructure Program, which identified more than 300 infrastructure projects to be financed through public-private partnerships, with significant Mexican public sector investment.

The program was to have been a step toward boosting Mexico’s gross domestic product from 3 to 8 percent by the year 2012. It presented opportunities for investment of more than $141 billion for domestic and foreign films, with projects ranging in size from $45 million to $5 to $8 billion for the Colonet port-rail project.

Calderon’s commitment to the program continued as the economic crisis deepened because it was seen as an employment generator to help workers who were being shed from their jobs.

But companies that were suffering their own setbacks were unwilling to commit to the projects, and financing from lending institutions almost completely evaporated.

More than two years into the five-year National Infrastructure Program, less than a third of the projects have gotten underway despite the efforts of the Calderon administration.

A recent study presented at the International Congress at the Enterprise College at Huixquilucan said half the projects should have been completed by now.

As Mexico emerges from the recession, however, there have been signs of renewed efforts to get the infrastructure projects underway. Measures include reworking the projects to tapping new sources of public and private financing.

The Colonet port, for instance, is being drastically downsized to receive 1 million TEUs annually rather than the 6 to 8 million TEUs originally projects. Cost of the project is expected to shrink from $5 to $8 billion to $1 billion.

Calderon meanwhile has sent a package of initiatives to Congress seeking to tap into the country’s 17 retirement accounts, or Afores, valued at more than $80 billion. If approved, government spending on infrastructure is expected to multiply three or more times with the participation of private capital.

At the same time, private companies are showing renewed interest.

Mexican construction company Empresas ICA and Goldman Sachs Infrastructure Partners set the ball rolling on infrastructure trusts, selling a $477.3 million state in a toll road concession.

The Australian investment bank Macquarie Group is joining with the Mexican government to create a $1 billion fund to invest in the country’s infrastructure. And Singapore wealth fund Temasek was being paid a visit by Calderon during his attendance at the APEC summit to gain its interest in such projects.

It still is too early to tell if these efforts will revive the ambitious infrastructure vision of President Calderon. But completion of even a portion of the projects will boost Mexico’s economic development.

Diane Lindquist is publisher of mexbiznews.com.