In July 2007, President Felipe Calderon launched the National Infrastructure Program ("NIP") to increase coverage, quality, and competitiveness of Mexico's infrastructure. Through infrastructure investment, Mexico is seeking to advance its regional and global standing. The NIP, slated for 2007 through 2012, calls for approximately US$230 billion, comprised of federal and private investment, to finance 480 infrastructure projects. About half way through its duration, there are still ample procurement opportunities for U.S. Companies.
According to President Calderon, investing in infrastructure is the way to economic, social, and human development. The goal of the NIP is to bring Mexico to the top 20 percent of the World Economic Forum's Infrastructure Competitiveness Index by 2030. In 2007, Mexico ranked 64th out of 125 countries (it now ranks 69th). At the outset, President Calderon's goal was to bring Mexico's competitiveness on par with countries such as Korea, Spain, and Malaysia over the next 20 years. Mexico is on a long term strategy to not only increase its global competitiveness, but to promote balanced domestic development aimed at increasing access to public services and generating jobs.
The NIP identifies infrastructure projects in multiple sectors, such as energy, environmental, transportation, telecommunications, security, and tourism. The largest sector is the energy sector, which is poised to receive approximately 47 percent of all investment with goals of achieving oil production of at least 2.5 million barrels per day and maintaining production of natural gas at around 5 billion cubic feet per day. The NIP identifies 17,598 kilometers of new highways and rural roads to be constructed and 1,418 kilometers of railroad. The NIP calls for five new ports and 3 new airports, along with the additional modernization of 22 ports and 31 airports. Major investment in the telecommunications sector is aimed at increasing mobile line coverage as well as internet usage and significant investment in water supply and sanitation will increase drinking water to 92 percent and sewerage to 88 percent. The infrastructure projects outlined in the NIP represent contractor, subcontractor and supplier opportunities for U.S. companies. Through the end of 2009, about US$94 billion will be invested in the NIP so far.
On November 19, 2009, top Mexican officials convened at the Mexico Infrastructure Conference: Portfolio of Infrastructure Projects for 2010, sponsored by the U.S.-Mexico Chamber of Commerce and Banobras, the Mexican National Development Bank. The unprecedented conference was held in New York and was Mexico's plea to the private sector to join an accelerated effort to develop infrastructure projects in the remaining years of the NIP and President Calderon's term in office. Mexico's Ministers and Federal Agencies' CEOs gathered for the first time to describe recent policy, legal, and monetary changes that have been implemented to make the projects more attractive to potential investors. Multimillion dollar infrastructure projects which have not been launched were also presented and discussed.
In order to accelerate the infrastructure agenda, which was slowed down during the economic recession, the Mexican government has instituted a number of new regulatory changes. First, a new law on public private partnerships has been presented to the Mexican Congress in order to achieve a 15 percent reduction in construction costs. Savings are to be achieved by speeding up the preparation of projects and increasing certainty to investors. Additionally, the 2008 Energy Reform gave PEMEX (Mexico's state-owned petroleum company) a more flexible legal framework that allows it to operate more as a company and to conduct business with third parties. Lastly, recent adjustments to the legal framework around AFORES (private pension fund operators) will allow US$6 billion for new investments.
NIP investment will continue throughout 2010. Forty-six new infrastructure projects with private sector participation will be launched, totaling US$11.3 billion. SCT (Mexico's Ministry of Transportation and Communications) will commence projects in 2010 including construction of 2,535 kilometers of new highways and bypasses, the Port of Veracruz expansion, and construction of the Riviera Maya Airport. CONAGUA (the National Water Commission of Mexico) has plans to initiate several projects in 2010. Projects include the "El Zapotillo" and "Falcon Matamoros" aqueduct projects, and a desalination plant in Ensenada, Baja California is scheduled to launch in early 2010 with a price tag of US$27 million. The CEF (Federal Electricity Commission) also has projects which it plans to tender in early 2010, including a Cogeneration plant in Salamanca and a Combined Cycle Power Plant in Valle de Mexico. PEMEX has allocated billions of dollars for infrastructure projects in 2010 which include projects such as pipeline maintenance, well drilling, pipeline extensions, building 35 new facilities, and refinery maintenance.
The NIP is an unique opportunity for U.S. companies to procure work in Mexico at a time when demand for work in the U.S. is suppressed. The NIP calls for large funding by the Mexican government to continue, as well as efforts to increase private investment. Endorsement of NIP projects by the Mexican government should ensure that NIP projects continue to be well funded and sound opportunities.
If you are interested in identifying and securing infrastructure opportunities, the U.S. Commercial Service – Mexico, part of the U.S. Department of Commerce, can provide information upon request as well as commercial assessment to support business plans in Mexico. To visit the U.S. Commercial Service – Mexico click here. Sheppard Mullin has considerable experience representing owners, contractors, subcontractors, and design professionals with infrastructure projects worldwide including Panama, the Bahamas and Brazil in Latin America.