Mexico Unveils $44 Billion Infrastructure Plan to Boost GDP

Mexico President Lopez Obrador
President Lopez Obrador, seen in December of 2018. (Alejandro Cegarra/Bloomberg News)

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Mexico President Andres Manuel Lopez Obrador announced an infrastructure plan worth 859 billion pesos ($44 billion) that includes highways, railways, ports and airports as well as investments in telecommunications, with most of the capital coming from the private sector.

Lopez Obrador announced the plan for the first 147 projects alongside Carlos Salazar and Antonio del Valle, heads of two of the country’s biggest business chambers. The plan includes heavy spending from the private sector as the government continues to cut public spending to meet fiscal targets.

The plan comes just a day after economic data showed that the Mexican economy suffered a slight recession in the first half of the year. Analysts forecast Mexico’s gross domestic product to grow just 0.2% this year, the lowest since 2009 amid stagnant oil output, slumping construction and stalled services activity.

“It’s a great initiative given that it recognizes weakness in the investment and construction segment, and recognizes the need and important role of the private sector,” said Gustavo Rangel, chief Latin America economist at ING Financial Markets in New York. “Having said that, implementation risks are still hard to assess at this stage.”

The first stage of the plan is expected to be implemented by 2020 with 431 billion pesos of outlays going to the tourism and transportation sectors. The second stage, which will be completed by 2022, includes nearly 256 billion pesos in planned spending with an additional 172 billion pesos invested by 2024.

In comments to reporters after the event, Salazar said that all the first 147 projects are new, and that it was merely a first step toward boosting the economy. He pointed to a project in his home state of Nuevo Leon where he says a road project has been waiting between 20 or 25 years for funding. He also said that the projects are ethical because they are being announced in public now and comply with standards set out by the business chamber CCE.

“What we want is that all this be done according to the code of ethics of the CCE and our member organizations, that everyone is aware, and that they are tendered as they should be,“ Salazar said.

Lopez Obrador has pledged to lift growth to 4%, but his decision to scrap a $13 billion airport project before taking office last year and a slump in construction have pummeled the nation’s building industry. During the press conference, the president was careful to emphasize that his administration did not have disputes with the business sector.

Luis Nino de Rivera, head of the Mexican Banking Association, joined Lopez Obrador on stage, saying that banks have 600 billion pesos ready to lend to boost growth.

“This is of the highest importance, because participation of the private sector in the country’s growth is necessary,” Lopez Obrador said.

Eric Martin contributed to this report.

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