Infrastructure business opportunities in Mexico

11.04.2008

Below you will find a brief memo that deals with the Federal Government's infrastructure investment program for 2007-2012, which outlines some of the areas in which spending will be focused in Mexico during this period. The estimated investment for the duration of this program is 2 billion 532 million pesos (152,5 million euros), which represents an annual average of 422 thousand million pesos. This investment will be distributed 47% to hydrocarbon, 30% to communications and transportation, 15% to electricity and 8% for water supply and treatment related actions.

The National Infrastructure Program 2007-2012 establishes the objectives, strategies, goals and measures designed to increase the coverage, quality and competitiveness of the country's infrastructure. For the purpose of this Program, the sectors taken into account are: communications and transportation, water and energy.

In order to achieve the main goals of the Program, the following measures will be taken:

  • Establish a long-term vision that will comprehensively define the priorities and strategic projects that present Administration will support.
  • Substantially increase public and private resources allocated for the development of infrastructure.
  • Encourage the authorization of multiyear expenditure for infrastructure investment projects.
  • Provide efficient monitoring with the highest standards for the development of strategic projects and identify and control in a timely fashion those factors that might jeopardize their execution.
  • Improve the planning, preparation, administration and implementation of the projects, using the best practices and highest standards in the field.
  • Encourage projects that offer the greatest social benefits, based on their technical, economical and environmental feasibility.
  • Resolve the problems related to the acquisition of rights of way and simplify the formalities for obtaining environmental authorizations.
  • Strengthen the legal certainty and actively promote public-private partnerships schemes for infrastructure development.
  • Eliminate unnecessary regulations and investment inhibitors, including, among others, the revision and simplification of contracting procedures.
  • Improve coordination among federal, state and municipal authorities as well as with the private sector for infrastructure development.

Starting from a base scenario, the Program is intended to achieve a minimum investment in infrastructure equal to 4.0% of the national GDP between 2007 and 2012, primarily obtaining its sources from private investment.
The main sectors of investment are: highways, railways and multimodal infrastructure, ports, airports, telecommunications, water supply and sanitation, irrigation and flood control infrastructure, electricity, oil and gas production and refinery, gas and petrochemicals.

The most important elements of the strategic planning established in the Program for the years 2007 to 2012 are:

Communications and Transports Infrastructure

 

  1. Highways network extension. The goal is to build or modernize 17.6 thousand kilometers of highways and rural roads. In particular the construction of 100 highways are intended to be concluded at the end of the present Administration (12.3 million kilometers).
  2. Improvement of the highways physical shape. The goal is that at the end of the present Administration, 90% of the highways network must be in good operational conditions according to international standards and the accident rate is reduced by half.
  3. Railroad network extension and improvement. The competitiveness of the railroad transport will be strengthened, building new lines and improving the existing ones.
  4. Development of suburban trains. The suburban trains constitute projects of high social rentability, because they reduce the commute time from people's homes to their studying and working centers. In particular the construction of suburban train networks of the metropolitan area of Mexico City will be supported, as well as the development of similar systems will be initiated in other cities of the country.
  5. Development of containers management infrastructure. The movement of containers is a key element for the international transportation of freight goods and for Mexico to become an important logistic platform at a international level. One of the most relevant projects to impulse is the Punta Colonet multimodal project located at Baja California which is intended to develop ports and railways infrastructure of world class level for the competitive transportations of containers between East Asia and North America.
  6. Ports infrastructure in the Pacific. The most important projects are the extension of the Manzanillo and Lazaro Cardenas ports.
  7. Ports infrastructure in the Gulf and the Caribbean. Priority will be given to those ports projects that generate the better social rentability. Under the considered projects are the extensions of the Veracruz and Tuxpan ports.
  8. Cruise ships docks. A strategy will be developed in order to impulse the cruise ships dock construction in order to promote the tourist activity development. The main goal is to build 13 docks.
  9. Multimodal corridors development. The construction of multimodal terminals will be promoted in order to develop an easier freights movement between the different types of transportation.
  10. Airports construction and extensions. The construction of new airports and the extension of the existing airports will be driven from an integral point of view. Under the main priorities is the valuation of long term alternatives in order to cover the demand of airport services in Mexico's Valley and the country's center zone, as well as the development of air freight transportation infrastructure, considering its intermodal connectivity.
  11. Increment of the telephone, internet and broad band services and its coverage. The necessary investments of licensed companies will be promoted in order to increase in a substantial matter the coverage of these services. One of the main goals for the year 2012 is that the broad band coverage increases to 22 users for every 100 habitants.

Water supply and sewerage infrastructure

 

  1. Extension of the water supply and sewerage system services coverage. Priority will be given to the extension of these services in rural zones, while in urban zones measures will be taken in order to improve the global efficiency of the water systems and long term water distribution feasibilities will be encouraged in order to reduce the overexploitation of aquifers. The goal for potable water is that by 2012 97% of urban zones and 76% of rural zones are covered, while the goal for sewerage is to cover 96% and 63% respectively. This will enable the national coverage to increase up to 92% for potable water and up to 88% for sewerage.
  2. Development of sewage waters treatment infrastructure. This is one of the top priorities for the present Administration. The goal for 2012 is to meet treatment coverage for at least 60% of the country. To achieve this goal, the most important projects are the construction of the treatment plants in Guadalajara and in Mexico's Valley.
  3. Development of hydro-agriculture infrastructure. The necessary infrastructure works will be carried-out in order to modernize 1.2 million hectares for irrigation, in order to use more efficiently the available resources, as well as to increase by 160 thousand hectares the irrigation and watered seasonal surface.
  4. Flood control. The necessary infrastructure will be increased to protect the population centers and productive areas from the risks from hydro-meteorological events, so that the number of benefited inhabitants increases to 6 million and the agricultural protected surface exceeds 150 thousand hectares.

Electrical Infrastructure and Hydrocarbon

 

  1. Increment of the electricity generation and distribution capacity. The net increment of the capacity of electric generation estimated for this period is 9 thousand megavolts, while in distribution the goal is to start the operation of over 14 thousand circuit-kilometers on different voltage levels.
  2. Renewable sources. An important goal for the current Administration is to increment the participation of the renewable sources of electric generation. In order to achieve this, a 4 thousand megavolts increment, generated by renewable sources, is necessary. The goal is that by 2012 the renewable energy sources represent 25% of the total generation capacity.
  3. Larger coverage and electrical service quality. The goal for this Administration is that 97.5% of the population will have electricity. At the same time, measures will be taken in order to reduce the service interruption times per user and develop other quality indicators of the electric service.
  4. Production of unrefined oil and natural gas. Regarding hydrocarbons, there will be measures to support the investments on hydrocarbon exploration. Also, the development of natural gas production infrastructure will be promoted.
  5. Infrastructure on refinery, gas and petrochemicals. Investments on areas such as transportation and storage of natural gas, as well as the production of oil products. One of the goals in this matter is to reduce the sulfur content in fuels in order to protect the environment and population health.

For additional information regarding the projects please do not hesitate to contact us.