Mexico is Latin America’s second-largest economy with increasingly sophisticated businesses and a growing middle class — and, from a macroeconomic standpoint, it’s a highly attractive environment.
In recent years Mexico has made significant advances that are enhancing the ease of doing business there. With a business-oriented government is in place, the regulatory environment has greatly improved providing increased transparency. For example, with the passing of the PPP law, the government is providing greater clarity and protection for the private sector. The economy appears well positioned for a sustained period of robust growth.
While the country has made great progress, it still faces a significant infrastructure deficit. In the World Economic Forum’s Global Competitiveness Report, 2013-14, Mexico ranked only 66th out of 148 countries for the quality of its overall infrastructure. Nowhere is the need for enhanced infrastructure greater than in cities, now home to 72% of Mexicans. Rapid urbanization is placing an acute strain on everything from roads to electricity to clean water. The government recognizes that it’s critical to address these challenges in order to enhance Mexico’s productivity and competitiveness. Among other things, the new infrastructure program calls for 582 billion pesos (US$46 billion) to enhance the nation’s transport-related infrastructure.
The huge gap in Mexico’s basic infrastructure represents a tremendous opportunity for domestic and foreign investors alike. For example:
The country must still contend with knotty issues such as violence and corruption, powerful business monopolies, and a judicial system in need of reform. Given these pitfalls, anyone looking to invest in the nation’s infrastructure sector would be wise to do careful due diligence — and, in many cases, to seek the help of well-informed advisers and reputable local partners. It’s also worth noting that Mexican governments have not always lived up to expectations when it comes to investing in infrastructure. Right now, ironing out all the details involved in financing will be one of the government’s most important challenges.
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