Gridlines ─ A new Mexican mix welcomes infrastructure investors

Mexican infrastructure overview with a focus on transportation.

Mexico is Latin America’s second-largest economy — and, from a macroeconomic standpoint, it’s a highly attractive environment.

Key findings

Opportunity on the road to a modern, urban nation

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.

Tremendous opportunity for investors

The huge gap in Mexico’s basic infrastructure represents a tremendous opportunity for domestic and foreign investors alike. For example:

  • Investors are attracted by Mexico's strong economic tailwinds and a much-improved regulatory environment.
  • Investors appear to be taking a more nuanced view of what the country has to offer. For example, security concerns are limited to very specific areas of the country, while the vast majority of Mexico offers a safe and stable environment in which to work, invest and do business.
  • There is a growing interest in Mexico’s green energy sector, which includes wind, solar, hydro and geothermal power.
  • Mexico is a very open economy and has trade agreements with 44 countries.
  • Mexico has a new PPP law that provides greater clarity and protection for the private sector. This law delineates more clearly the rights, obligations and risks that each party assumes.

As with many nations, investing in Mexico is not without its risks

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.