A country’s prosperity is intricately linked to the quality of its infrastructure. Concrete and steel are the building blocks of a nation’s economy, boosting the competitiveness of its industries. For Mexico to join the world’s leading economies, it must invest more time and money in constructing and maintaining its infrastructure. 2018 will mark the end of Enrique Peña Nieto’s presidential term, opening the way for a new candidate to take on the challenge of bridging the country’s hefty US$544 billion infrastructure gap.
The ballot on July 1 will display the names of Ricardo Anaya (PAN-PRD-MC), José Antonio Meade (PRI-PVEM-PANAL), Andrés Manuel López Obrador (MORENA-PES-PT), also known as AMLO, and Margarita Zavala (independent). Through their campaigns, most candidates have expressed their thoughts on how they will boost the competitiveness of the country’s infrastructure if they are elected president.
Here is a breakdown of how Mexico’s 2018 presidential candidates are planning to boost the country’s infrastructure industry:
If not the most controversial topic, NAIM is definitely one of the most important debate points in this election. For the most part, candidates support the construction and completion of NAIM in the Lake of Texcoco, except for AMLO. Anaya believes NAIM will be the boost the country needs, but insists that contracts and projects must be revised, questioning transparency. Meade agrees to the revision of the contracts to ensure transparency but trusts that the project was developed by national and international airports and will be of the best quality. Zavala also supports the revision of contracts and the completion of the project but has voiced her opinion on the viability of AMLO’s proposals. AMLO, the only candidate against the construction of NAIM, says it is extremely expensive and that he has a better plan to increase the country’s connectivity. This includes modernizing and rehabilitating the Santa Lucia Military Airport and the Benito Juarez International Airport to meet the needs of the market. His proposal would shift bonds and investments in NAIM to thesetwo projects, reducing costs from the MX$290 billion for NAIM to MX$40 billion and that it would take only three years to complete.
INVESTMENT IN INFRASTRUCTURE
Mexico’s infrastructure gap is related to the lack of public resources to fund the much-needed projects. Anaya’s plan is to restructure public spending and for the construction sector to represent at least 5 percent of the country’s GDP by 2021. “Between public and private investment, my commitment is that by 2021, we can reach 25 percent of GDP. That implies reducing private current spending, increase investment in infrastructure and that naturally will stimulate private investment and it allows us to reach 25 percent of public and private investment by 2021,” he told the CMIC Annual Conference in Jalisco. Zavala believes the construction sector is also a driver for economic growth. Her plan is to increase Mexico’s GDP by 5 percent through an increase in public spending on infrastructure, complemented by the private sector, of course. AMLO’s goal is to double investment in public works with construction as the main driver of the country’s economic growth. Nevertheless, his plans as to how he will double the investment are not yet defined. And last but not least, Mead. He believes the country’s infrastructure gap is due to a lack of planning and not so much a lack of investment. “Today we have financial mechanisms so that any reasonable project can be financed,” said Meade during the CMIC Annual Conference. “This does not mean that any project that is profitable can be financed. Those that cannot, can be financed through PPPs or budget resources.” Experts in the industry, however, agree that PPPs are not the answer to financing the country’s infrastructure gap. Says Alejandro Ruiz, Head of Construction at KPMG Mexico: “Apart from reinforcing PPPs and making them more attractive, transparent and ensuring financial security, a fiscal reform is necessary to acquire the funds to bridge the country’s infrastructure gap.”
If money is not the issue, then it must be the planning and Meade has made his plan to ensure projects are top-of-the-line. He wants to create a National Infrastructure Planning System that will have a joint agenda with SHCP and Banobras, while also incorporating ideas from the private and education sectors. “Mexico’s great infrastructure projects cannot be defined by ignorance and prejudice. Certainty, stability and respect of the acquired commitments are fundamental to attract investment, employment and wellbeing,” said Mead, according to MVS. Anaya’s approach is to also develop the National Infrastructure Program alongside all sectors to ensure it is the best solution for the country in its implementation and inclusive policies. AMLO has his sights set on making only a few good projects that are within the country’s possibilities while Zavala has not commented on how she wants to take on planning.
CORRUPTION IN CONSTRUCTION
The country’s elephant in the room is also at the top of the candidates’ lists and the infrastructure sector is particularly vulnerable. At the 2018 CMIC Annual Congress in Jalisco, Anaya, Meade and AMLO expressed their desire to increase transparency and combat corruption in public procurement to strengthen the construction sector, according to Expansion. Anaya made clear that whether it is for the public infrastructure sector or real-estate development, transparency and eradication of bribes is crucial. A strategy he believes will help achieve this is replacing the General Attorney of the Republic with an Independent Attorney General. Meade and AMLO also want to eliminate bribes and would push for transparent processes. According to Jacobo García, Senior Specialist on Integrity and Procurement Policies at the OECD, “There needs to be more incentives to be more transparent and ethical. Companies that follow these actions should be awarded more points. We must work on enforcement and create a culture of integrity throughout the industry.”
So what comes next? Millions of pesos have been invested in not only NAIM, but also the Mexico-Toluca Interurban Train, various highways, hospitals, dams and other public infrastructure projects that the country drastically needs. The industry wants certainty that projects will enjoy continuity and that investors’ money will be safe. “At the end of 2017, we expected the construction industry to remain steady, neither decrease nor increase. Nevertheless, there was a 1.1 decrease in comparison to 2016. If the projects that are scheduled for this year are completed as planned, such as the Mexico-Toluca Interurban Train or NAIM, and housing subsidies continue, the sector could grow 1-3 percent in 2018. If this does not happen, we could see negative numbers once again,” says KPMG’s Ruiz.