For the remainder of the presidential term, SCT is expected to have a budget of MX$77.3 billion to complete its ambitious plan. With such a tight schedule and budget, the government will have to prioritize and accelerate the completion of the country’s most important projects

Source: Grupo Aeroportuario del Pacifico (GAP)

On the 2017 Global Competitiveness Index, Mexico’s infrastructure ranking has dropped from 57 to 62 in in comparison to 2016, with railroad, port infrastructure and air transport infrastructure rankings falling the most. The country’s demand for transport infrastructure continues to increase but budget cuts and ROW issues continue to set back the completion of projects. The government continues to look to PPPs and USPs to complete infrastructure projects, but tendering processes must be made more efficient to accomplish more goals.

With only a year to go, there are many NIP Infrastructure commitments that are not close to being completed. “Planning is a skill that the Mexican market has yet to master completely, even though it is the base for any public or private project,” says Julio Amodio, Director General of CAABSA. “For 2017-2018, we expect to be more active constructing projects for the private sector than the public sector, given the proximity to presidential elections and budget cuts.”

The NIP placed significant importance on boosting the country’s road and highway network, detailing 76 road and highway projects: 15 highways, 29 roads, 16 beltways, seven junctions and bridges and nine rural roads. By mid-2017, the federal government had completed 59 road and highway commitments that added up to more than 700km and an investment of more than MX$28 billion. From June 2016 to June 2017, the government allocated MX$335 billion and concluded 17 projects. Of the 59 commitments, the most important were the Jala-Compostela-Bahia de Banderas highway and the modernization of the Portezuelo- Palmillas road.

Nevertheless, the big projects have yet to be marked off SCT’s to-do list. Cardel-Poza Rica in Veracruz, TuxpanTampico, Oaxaca-Puerto Escondido and Oaxaca-Istmo, to name a few, have been under construction for years, and some even since Felipe Calderon’s presidential term in 2006-2012.

There have been other setbacks on the way for SCT. On April 5, 2017, the federal government alongside SCT inaugurated the Express Way in Cuernavaca, Morelos. With a price tag of MX$1.45 billion, it was designed to help relieve the dense traffic of the saturated Mexico-Cuernavaca highway, which is the fastest route from Mexico City to popular tourist destination Acapulco on the Pacific coast. Three months later, a sinkhole took the lives of two people on the new road. This incident placed SCT and the infrastructure sector under the microscope as the country began to question the planning and correct construction of the country’s roads and highways.

The 2018 budget allocation has been announced as MX$15.2 billion for the construction and modernization of 423.2km of the federal network, MX$1.37 billion for the liberation of ROW, MX$559.5 million for pre-investment studies and MX$5.27 billion for the provision of services. Just like in 2016, the conservation and maintenance of roads subsector will be the most active. For this, MX$11.07 billion will be used to reconstruct 6km of roads and 21 bridges, the periodic conservation of 2,100km and routine conservation of 40.262km. All of this will be done through various maintenance and conservation PPPs that will serve more than 2,103km of the network, which means that the private sector will be more involved in 2018.

OFF THE RAIL

The NIP detailed four rail commitments: the AguascalientesGuadalajara railway, the Colima Rail Tunnel, the Coatzacoalcos Rail Beltway and the Celaya Rail Beltway. These projects have all started construction but have not yet been delivered. Between December 2012 and June 2017, the Matamoros rail beltway and the Multimodal Railway Terminal in Durango were both completed, although they were not government commitments. In 2018, the subsector’s budget will be MX$20.65 billion for the construction of rail beltways, preliminary studies that will be shared with three mass transportation projects and the expansion of line 12 of the Mexico City Metro, a number dwarfed by the amount required for the NIP projects.

For freight infrastructure, the private sector has been investing the most in maintenance and construction. Ferromex-Ferrosur invested more than US$250 million, of which 45 percent was for rail, bridge, tunnels and telecommunications infrastructure. The remaining 22.7 percent was for the construction of new terminals, platforms and double rails. KCSM also committed US$156 million in 2017 and entered joint ventures with WTC and Watco to create a fuel storage facility in San Luis Potosi. Because railways and adjacent land belongs to the government, it is up to legislators to release the ROW and tender new projects to boost the country’s freight capacity and efficiency. José Zozaya, President of KSCM stresses the importance of boosting Mexico’s rail connectivity with the US, given the trade relationship between both countries. “Border crossings like Brownsville-Matamoros and Laredo-Nuevo Laredo require better rail infrastructure and logistics for trains to cross the border efficiently,” he says.

The ambitious NIP also included a plan to construct three MTS. The Mexico-Toluca Interurban Train, the Guadalajara Electric Urban Train and the Line 3 of the Monterrey Metro System. With more people migrating into Mexico’s cities, MTS projects are urgently needed to move people from point A to point B. “There needs to be more investment in MTS and urban transportation alternatives because options like second floors are extremely expensive and in the long term are not a viable solution,” says Cesar Monroy, Director of Infrastructure at PwC.

During this presidential term, MX$40.3 billion has been invested in MTS projects. As of June 2017, the Guadalajara Electric Urban Train is 81 percent complete and is expected to be completed by 2018. Line 3 of the Monterrey Metro advanced 85 percent and is also estimated to be completed by 2018. The Mexico-Toluca Interurban Train on the other hand is only 58 percent completed due to various changes in the route and ROW issues. “The Mexico-Toluca Interurban Train will drastically reduce the quantity of cars but any further notions of passenger trains between cities have been largely overlooked because the government has placed too much focus on the country’s road development,” says Monroy.

INCREASING PORT CAPACITY

The NIP’s goals for its port system is to increase its capacity to more than 520 million tons, and from December 2012 through June 2017, MX$56.05 billion was invested in port infrastructure. Of its seven project commitments, four have already been completed. The modernization of the Port of Guaymas, Port of Matamoros, Port of Seybaplaya and Port of Altura were finished in 2017. MX$9.2 billion was invested from September 2016 to June 2017, of which 52.1 percent came from the private sector and 47.9 percent from the public sector. Mexico’s ports moved more than 1.34 billion tons in the last five years and both the private and public sector have invested in various projects to increase capacity. One, if not the most important, project for 2018 will be the expansion of the Port of Veracruz that was 37 percent complete as of June 2017.

 

LOOKING TO THE SKIES

In 2017, NAICM took all the limelight, but seven commitments and 14 strategic airport infrastructure projects were detailed by the NIP. From September 2016 to June 2017, the modernization of AICM in Mexico City was completed, along with modernization of the Chetumal, Istmo, Poza Rica and Atlangatepec airports. With more than 71.9 million passengers and 588,600 tons of goods transported in that time period, a 13.2 percent and 5.6 percent increase compared to the previous year, there is a real need to accelerate infrastructure development. In 2017, the federal government invested more than MX$1.32 billion through the five airport groups – ASA, OMA, GAP, GACM and ASUR – to boost the efficiency of the national airport system. The main ongoing projects are T4 of the Cancun International Airport, the modernization of the Guadalajara Airport, the expansion of T2 of the Los Cabos Airport, the terminal building of the Acapulco Airport, expansion of terminal A of the Monterrey Airport and the beginning of the expansion of the San Luis Potosi Airport.

From 2013 to 2016, ASA invested more than MX$2.27 billion to improve its terminals, airstrips and interconnection. ASUR is operating the second-most important airport in Mexico, the Cancun International Airport. The completion of T4 will drastically increase its capacity to receive passengers and even help relieve some stress from AICM in Mexico City. But the country needs NAICM to serve the demand. “Mexico City is still the hub for most flights arriving from both domestic and international points of origin, and its airport is the tent pole that holds up the rest of the nation’s aeronautical infrastructure,” says Adolfo Castro, Director General of ASUR. “The construction of NAICM is therefore of the utmost importance for the development of air traffic in Mexico.”

WILL THE TARGETS BE MET?

If SCT wants to complete its list of commitments and truly transform the country’s infrastructure, many in the industry believe big changes must be made. Infrastructure development depends on the involvement of the private sector, but tendering processes for PPP projects are still among the country’s biggest challenges. “The root of all infrastructure projects stem from the urgency at which the public sector wants to construct them,” says Amodio. “Because the public sector is sometimes in a hurry to start building a project, the proper studies, preconstruction analysis and planning stages are not properly carried out.” This scenario can often leave the project vulnerable as important steps can be overlooked.

This is an exclusive preview of the 2018 edition of Mexico Infrastructure & Sustainability Review. If you want to get all the information, plus other relevant insights regarding this industry, pre-order your copy of Mexico Infrastructure & Sustainability Review 2019 or access the digital copy of the 2019 edition.

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