CG/LA Infrastructure's InfraBlog
Mon Jul 15, 2013 5:20pm EDT
By Lizbeth Diaz
(Reuters) – Mexican President Enrique Pena Nieto said on Monday he expects to see 4 trillion pesos ($300 billion) in spending on major infrastructure projects aimed at beefing up the country’s economy during his six-year term.
Pena Nieto said public and private investments in transportation and communications infrastructure would reach nearly a third of that total, at an expected $1.3 trillion pesos ($100 billion) between 2013 and 2018.
The long-awaited plan will fund new highways, rail lines and telecommunications infrastructure, as well as port upgrades that will help improve logistics for the country’s exporters.
“One of the key components for transforming our country is developing infrastructure the length and breadth of the country,” Pena Nieto said in a speech in Mexico City.
Mexico’s last six-year plan involved about $200 billion in spending and analysts expect the new plan to include greater involvement from the private sector. The government did not give details on the breakdown between public and private investment.
The president wants to boost investment in Mexico to ramp up economic growth to around 6 percent a year from an average of barely 2 percent since the millennium began.
Part of that project involves opening up state oil monopoly Pemex to more private investment, though Pena Nieto has yet to provide details of the plan, which is to be submitted to Congress by early September.
“In our opinion, we think the investment program … presented today will have a very positive impact on the Mexican economy from 2014,” said Alejandro Cervantes, an economist at Banorte.
The president said 582 billion pesos would go to transportation-related projects, while 700 billion pesos would go toward developing telecommunication infrastructure.
Earlier this year, Congress approved a reform of the country’s telecom laws aimed at opening up the sector to greater competition and allowing more foreign investment.
The government also restated its desire to close Mexico’s “digital gap,” although details were thin.
Only about 20 percent of the population has a broadband subscription and just under 40 percent has Internet access.
Including investments by state-run energy and water companies, infrastructure spending during his six-year term could reach 4 trillion pesos, Pena Nieto said, though he did not detail plans for energy sector spending.
Among the government’s other plans were two new satellites to be put in orbit, a tender process for two new national television networks and 15 new highways.
But the government did not commit to building a new airport for Mexico City, as many had speculated, saying only that it would continue to analyze the options.
In a research note, Credit Suisse took a positive view of the plan, calling it “highly ambitious.”
A broad swathe of Mexican companies will likely benefit.
Mexican billionaire Carlos Slim’s conglomerate Grupo Carso , miner Grupo Mexico, cement giant Cemex, chemical producer Mexichem and airport operators Gap, OMA and Asur are all potential winners.
Shares in Mexican construction firm ICA, which is facing heavy debt and a weak cash position, rose more than 4 percent after the plan was announced.
Both ICA and OHL Mexico, the local arm of the Spanish construction company, have been hit by the government’s delay in announcing details of its infrastructure plans.
Last month, Pena Nieto, who took office in December, said Mexico would spend more than $20 billion on roads, train lines and ports, among other projects this year.
Investors and developers have already begun eyeing Pena Nieto’s plan to oversee a passenger rail renaissance in Mexico, which includes a high-speed connection between Mexico City and Queretaro, about 200 kilometers north of the capital.
Canada’s Bombardier Inc, the world’s biggest train manufacturer, anticipates bidding on all six of the new Mexican passenger rail projects it expects to be tendered later this year.
Markus Mildner, executive vice president of Siemens Mexico , has said the German industrial conglomerate, which also manufactures trains, is interested in bidding on a project he called “viable.”
There was also good news for Mexico’s rail freight sector, which has become a key trade thoroughfare with the United States, after the announcement of four railroad bypasses aimed at improving speed and efficiency.