Half of the Projects in Mexico’s $25B Infra Package Delayed Or Shelved

The government and the private sector failed to comply with their pledge to have all works in progress by end-2021

Mexico's former Finance Minister Arturo Herrera attends the launch of works on the Colima-Villa de Álvarez bypass in October 2021, one of the projects announced as part of the federal government's infrastructure package. The project was part of a concession awarded by Colima state but work has not begun due to changes to the financing scheme. (Photo courtesy: @ArturoHerrera_G)
January 21, 2022 | 09:04 PM

Mexico City — In a bid to boost Mexico’s economic recovery, in late 2020 President Andrés Manuel López Obrador and the private sector announced two infrastructure investment packages comprising 68 projects that would imply a planned disbursement of 525.97 billion pesos ($25.7 billion).

The plans of the government and private sector pointed to late 2021 for work having commenced on all of the projects, but a review of the portfolio of projects by Bloomberg Línea in mid-January shows that work has not begun on half of them, and that some of them have been shelved.

One year after the announcement of the 68 projects, only 34 have been started or are completed, and which have required an investment of 315.65 billion pesos ($15.4 billion), according to government website Proyectos México.

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The obstacles to their development include budget adjustments, modifications to financing and to contracts, protests regarding their environmental impact, the processing of right-of-way and communal land permits, legal disputes, the lack of a calendar for the start and completion of each phase, as well as delays due to the pandemic.

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Reviewing the status of the projects started, and which represent 50% of the total, it was found that being ‘in execution’ or ‘in operation’ could refer to a whole range of possibilities, from construction having commenced to months-long delays being reported due to environmental protests, ongoing tenders, consultations of local inhabitants and the carrying out of pre-investment studies.

Roadblocks to Development

Of the 68 infrastructure projects, there are 14 that, although they remain listed as part of the package and are even reported to be in operation, are registered as “not having budget availability”. Most of those projects were submitted with public financing from state governments.

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And of those 14 projects, the Caminos del Sur Estado de México highway project implied the largest investment, of 15.35 billion pesos ($749.7 million), but it is now listed as not having budget availability.

According to the Proyectos México portal there are seven projects under way, but their budget has been reduced, an example of which is the Conexión Oriente Estado de México highway that will link to the Felipe Ángeles International Airport (AIFA).

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The budget earmarked for that project was 4.77 billion pesos ($233 million), but is listed on Proyectos México as having been reduced to 3.30 billion pesos ($161 million).

But there are also projects that have been given a budget increase, with eight requiring more funds in order for their construction to continue.

Of those, the Lechería-AIFA stretch of the Suburban Train (Tren Suburbano) has seen the highest budget increase, with an original cost of 12.5 billion pesos ($613.4 million), but which will likely cost around 22 billion pesos ($1 billion), according to Infrastructure, Communications and Transport Minister Jorge Arganis.

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Among those on which work has yet to begin are projects to be developed by state oil company Pemex and state utility CFE. Although the government and the private sector included such projects for those state-owned companies in the infrastructure package, their development depends on the companies’ business plans.

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For example, the CFE has six combined-cycle generation plants (Baja California Sur, Tuxpan Phase I, González Ortega, Mérida, San Luis Río Colorado and Valladolid) included in the portfolio of projects that should have begun development between June and August 2021.

However, by the close of 2021 work had not begun on any of the plants as the CFE is still carrying out the tender process, and which demonstrates the discrepancies between the dates set out by the government and the CFE’s plans.

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Four Projects Put on Hold

Of all the projects in the package, only one has been completed, the Autopista Urbana Siervo de la Nación highway, which will connect with the AIFA, and which was opened by the governor of Mexico state, Alfredo del Mazo, in October 2021.

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That highway project was not started during the government of López Obrador however, but in February 2016, when Eruviel Ávila was state governor and Enrique Peña Nieto was the country’s president.

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Bloomberg Línea’s perusal of the data found that there are four projects, totaling 66.12 billion pesos ($3.2 billion) in investment that have been reported as shelved or received no bids during their tender processes, and have now been ruled out for 2022.

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Proyectos México shows that maintenance, refurbishment and operation works on highways in the country’s southeast, in the states of Veracruz, Tabasco, Campeche and Chiapas have been cancelled due to a lack of budget availability. Those works were being financed by Mexican bank Banobras.

The Zaragoza Elevated Viaduct, which was being financed by the Mexico City government, received no bids during the tender process and does not have budget availability either, although the project is planned as one of the roads to connect the capital city to the AIFA.

The Proyectos México portal also states that the planned construction of the Tepic-Compostela highway has been canceled as it has “ceased to be an investment opportunity”.

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Mexico-Querétaro Train Stopped in its Tracks

The Mexico City-Querétaro passenger train project has also been canceled, according to Querétaro state governor Mauricio Kuri. Although the project was included in the 2020 infrastructure package, it was initially announced during the 2012-18 government of President Peña Nieto, but canceled in 2014 due to alleged irregularities in the tender process.

President López Obrador has said that he will present another public-private infrastructure package before the end of January 2022, and which would be the third to be launched during his presidency, which began in December 2018 and runs until December 2024.

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