Mexico Plans to Invest $316 Billion on Works Over 6 Years

Mexican President Enrique Pena Nieto will seek to spend about 5 percent of gross domestic product per year on infrastructure investment to accelerate growth in Latin America’s second-biggest economy.

The total investment would be at least 4 trillion pesos ($316 billion) over the six years of Pena Nieto’s term, which ends in 2018, and could exceed that amount should Congress approve a tax-system overhaul that the administration will send lawmakers in September, he said today at an event in Mexico City. The plan includes investment by the government and private companies in energy and about $100 billion in communications and transportation projects such as new ports and rail lines.

Pena Nieto has pledged to double Mexico’s growth rate in part by increasing private investment in the oil industry. The $1.2 trillion economy should lift private and public spending in public works, Pena Nieto said.

“With better infrastructure, more investment and transformational reforms, our nation will be able to grow at its full potential,” Pena Nieto said.

Mexico’s economy grew an average 2.5 percent annually over the past decade, compared with 3.6 percent for Brazil. It could expand at a 6 percent annual rate should Congress pass the legal changes the administration will propose on taxes and energy after approving telecommunications and education bills since Pena Nieto’s inauguration in December, he has said.

Mexico’s peso advanced 1.2 percent to 12.6672 per dollar in Mexico City today. Steelmaker Industrias CH SAB surged 3.3 percent and Empresas ICA SAB, the country’s biggest construction company, advanced 3.2 percent.

‘More Than Enough’

About 582 billion pesos will go to transportation infrastructure and 700 billion to telecommunications, Pena Nieto said. The projects will include three passenger rail lines and two urban commuter rail lines, he said.

“If you really get those going, it’s more than enough,” Alonso Quintana, ICA’s chief executive officer, said of the plan’s projects in an interview at the event today.

Pena Nieto’s predecessor, Felipe Calderon of the opposition National Action Party, seven months into his term in July 2007 proposed raising 2.5 trillion pesos in funds, or about $232.5 billion at the time and $254 billion today adjusting for inflation. That would make Pena Nieto’s proposal a 24 percent increase from Calderon’s.

While Pena Nieto’s plan is “highly ambitious,” details on how the government will pay for public-works projects remain unclear, according to Eugenio Amador and Julian Bravo, Credit Suisse Group AG analysts.

“We are yet to understand the breakdown of private and public investment and the details of breakdown of projects,” they wrote in a note to clients today. “More importantly, how projects will be financed including subsidies and government guarantees.”

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