Antonio Ortiz-Mena on AMLO's Infrastructure Plan in Mexico
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Will AMLO's Plan for Infrastructure Reactivate Mexico?
Antonio Ortiz-Mena, senior vice president at Albright Stonebridge Group: “Mexico needs to improve its infrastructure: it has one of the most extensive free trade agreement networks but ranks only 54th out of 141 countries in the WEF Infrastructure Competitiveness Index. It will not be able to fully use its network without world-class infrastructure.
Improving infrastructure would generate immediate jobs and long-term positive externalities to increase GDP growth and boost confidence—which is badly needed to get the economy out of its 2019 standstill.
There are no specifics on energy projects, and no electricity projects until 2021. Mexico, as a manufacturing powerhouse, needs reliable sources of energy at competitive prices. In fact, the agreement lists electricity generation, gas pipelines and fuel storage as opportunity areas, so it does not make sense to delay some of these projects.
There is no dearth of capital to finance the 147 priority projects. The question is who will be willing to risk capital and under what terms, given that the government has sent negative signals to infrastructure investors on at least three occasions: first, the ex nihilo cancellation of the new Mexico City airport; second, the renegotiation of gas pipeline contracts; and third, changes to rules on clean energy certificates.
Given these precedents, the implementation mechanism, over which AMLO would preside, will be critically important in providing assurances to investors so concessions can be part of the mix and not all projects are turnkey, for in the latter case the government could end up bearing a large share of risks and expenses.”