Economics: PPP Infrastructure Plan, good news but uncertainty remains
President Andrés Manuel López Obrador along with the Business Coordinating Council (CCE) released a text last week entitled Actions and Projects for Supporting the Economic Recovery confirming 39 infrastructure projects that are supposed to contribute to reactivating the country´s economy.
This news is viewed optimistically by the private sector as it is the most significant display to date of a willingness on the part of AMLO’s 4T government to enter into public-private partnerships, simplify red tape and fast track project approval and implementation.
The finance ministry says this will be just the first in a series of such projects, with this initial tranche expected to attract 297 billion pesos in both the public and private sectors, and with the latter accounting for at least 50% and sometimes a much greater share of investment on each project. These undertakings appear to mark a reactivation of the National Investment Accord the private sector proposed in November 2019. At that time, the joint undertaking was supposed to include government and private sector partnerships in 147 investment projects worth an estimated 859 billion pesos. That list eventually grew to 227, but by early this year the effort essentially stalled amid the pandemic, the related economic crisis, red tape, flagging confidence about investing in Mexico and renewed attacks from the National Palace against proposals emanating from the private sector leaderships.
One source of concern at this point is the extent to which the 39 tally of entirely disconnected undertakings appear to have been culled from the full 227 project agenda list entirely by picking out those that were farthest along in the execution or planning stages, with no regard for how they might fit into any comprehensive economic reactivation or regional plan, hardly the best way to maximize results.
The fragility of some of the undertakings might undercut their desired economic impact. A case in point is the Mexico City-Queretaro high speed train, with a 51.3 billion peso price tag that is surpassed on the list only by a 57.71 billion coking plant. The train obviously will demand a significant amount of public sector funding as well as a commitment to line up support for a PPP. The government has yet to budget anything for the project.
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