TBY talks to Dionisio Pérez-Jácome Friscione, the Secretary of Communications & Transportation, on the Secretariat’s main projects, private investment incentives, and the key role of logistics in the transportation network.
TBY How does the 2007-2012 sectorial communications and transport program fit into the government’s “Vision 2030”?
DIONISIO PÉREZ-JÁCOME FRISCIONE The telecommunications and transportation projects for 2007-2012 are part of Vision 2030. They are consistent with the goal to position Mexico among the top 20% of countries with the best infrastructure development and competitiveness by the end of 2030. In order to achieve this goal, we have established objectives, actions, and projects in three critical areas: connectivity of the transportation system, integration and modernization of logistic chains, and greater use and coverage for high-tech applications in the telecoms sector. During this administration, we have invested more than $45 billion in the development of road, railway, airport, ports, and communications infrastructure. This is an unprecedented investment. In fact, during this administration, the investment in all infrastructure sectors was close to 5% of GDP, which is considerably more than Mexico used to invest. For instance, 10 years ago investments were slightly above 3%.
What main projects has the Secretariat of Communications and Transportation (SCT) implemented to improve infrastructure development in the areas most critical to Mexico’s social and economic development?
Transport infrastructure is vital for economic and social development. It facilitates the movement of goods and allows people to get to school, work, and leisure activities. The current administration has focused on providing infrastructure in strategic locations to improve people’s standard of living. In terms of road infrastructure, we have built or modernized more than 18,500 kilometers of roads and highways. The Durango-Mazatlán highway, a 230-kilometer road, is one of our main road projects. It consists of a new 75-kilometer segment that forms part of a corridor linking Mexico’s Pacific and Atlantic coasts. It reduces travel times up to six hours for freight vehicles and 2.5 for private cars. It is a very complex and challenging project because it goes through the mountains, which are particularly difficult and expensive to access. It has 115 bridges, 61 tunnels, and includes the tallest cable-stayed bridge in the world; the Baluarte Bicentennial Bridge, valued at $1.5 billion. Another main project is the Mexico City Northern Bypass ($548 million). It is a 224-kilometer road that avoids traffic entering the city thereby easing congestion and reducing the environmental impact. Thanks to this project, about 1 million cars will no longer have to drive through Mexico City. With regards to rail infrastructure, we have built 24 railway underpasses to keep freight trains from having to run through major urban areas. We have also built the first suburban railway in the Mexico City metropolitan area; it started operations in 2008, and transports more than 130,000 passengers per day. Regarding airport infrastructure, we have built four new terminals in Mexico City, Monterrey, San José del Cabo, and Cuernavaca. We have also modernized 13 terminals across the country, built a second runway at the Cancún airport, and built a new airport in Puerto Peñasco. This administration has also updated Mexico’s port infrastructure. We have invested in specialized terminals and industrial facilities at five ports (Altamira, Tampico, Lázaro Cárdenas, Manzanillo, and Guaymas) and have built five specialized docks for cruises.
In terms of telecoms, we auctioned a pair of dark-fiber strands from Mexico’s electricity utility, amounting to more than 20,000 kilometers, which allows for the possibility of a third national broadband network for data, voice, and video. We allocated 30 MHz in the 1.9 GHz band and 90 MHz in the 1.7 GHz band. We have reduced interconnection rates for mobile and fixed telephone networks, and we are investing in a satellite system that includes three new satellites that will provide a platform for fixed and mobile communications, and will support the national security infrastructure, allow better natural disaster planning, and bring communications services to 70,000 communities with fewer than 500 inhabitants. The first satellite (for fixed satellite services) will be delivered to the SCT during the last quarter of 2012. The second satellite (for mobile satellite services) is planned to be delivered by the end of 2013 and the third satellite (for mobile satellite services) is scheduled to arrive during the second half of 2014.
How has private investment contributed to the development of infrastructure in the transportation sector?
Private investment has played a crucial role in improving the quality and quantity of infrastructure in Mexico. In the period between 2007 and 2011, the private sector invested more than $22 billion in transport infrastructure. To boost private investment in road construction, Mexico has set up various public-private partnership (PPP) schemes. We grant concessions to bidders who request the least financial assistance from the federal government to build, operate, and maintain new highways. We also use Project Finance Initiatives (PPS) with which the government grants a concession to a private company to design, finance, build, maintain, and operate a road, again awarding it to the bidder who requests the least amount of federal funding, and the government pays them an amount that includes the amortization of the investment plus the amount necessary for the maintenance of the road.
According to the Competitiveness Index from the World Economic Forum, Mexico ranks 58th, gaining eight positions from 2010 to 2011. What measures should be taken in the communications and transportation sectors to keep improving Mexico’s position?
Over the past few years, Mexico has undergone important actions leading to a stronger and more competitive economy. With regards to communications and transportation, this administration has maintained steady levels of investments and has provided better regulations. In addition, new PPP legislation has recently been approved by Congress. Even though the PPP schemes in place today have brought about excellent results, now that this legislation has been passed we will be able to do much more. This legislation increases legal certainty for investors, which we expect will expedite the development of infrastructure projects in order to continue investing in infrastructure in the range of 5% of GDP annually.
How has the telecommunications sector evolved in the last 5 years in terms of regulatory framework?
I see the transportation and communication sectors increasing as a percentage of GDP. The telecommunications sector is one of the fastest-growing sectors in Mexico; it’s a very dynamic sector. As we continue to set the right regulatory framework and establish the right conditions to attract investment, we expect to see higher growth. From a regulatory perspective, we have already been working on the reduction of interconnection rates, publishing a fundamental technical plan for interconnection and interoperability, as well as guidelines for the formulation of cost models to resolve disagreements about interconnection between operators, and the portability of numbers. All of these regulatory decisions strengthen the sector and instill more confidence in potential investors. I expect there to be growth in that sector in terms of labor and employment as well. We also see the transport industry playing an important role. Over 70% of our exports to the US, for example, are transported by heavy weight vehicles, a sector that is being modernized. We are taking important steps to keep renovating and updating the truck fleet.
How is the SCT promoting competitive tariffs and a broader geographic coverage in order to improve service access to the general population?
Between 2007 and 2011, the prices of telecommunications services have dropped: broadband internet rates by about 37%, mobile phone rates by about 55%, and fixed residential phone lines by 24%. We have also increased coverage; for example, in terms of mobile telephone subscriptions, we have increased by 75.2%, today we have 97 million mobile telephone lines registered in Mexico, out of a total population of 112 million. In addition, COFETEL, the telecoms regulatory agency, promoted a drop in fixed and mobile interconnection rates by 68% and 57% respectively, for 2011 in comparison with 2010. We are doing quite well with regard to this comparison with other Latin American countries, but if you compare us with OECD countries we still need to keep going. The growth of mobile networks has allowed 73% of people living in areas with a population of less than 2,500 inhabitants to have access to telephone and internet services. We have a program to supply pre-paid residential telephone services for nearly 9,000 rural communities of between 500 and 2,200 inhabitants, covering a total of close to 8 million people, and another program for smaller communities, which provides service for nearly 13,000 communities with less than 500 inhabitants. Furthermore, by the end of 2012 we hope to have 24,000 Digital Community Centers, which will provide free internet access to close to 10 million people. Nowadays we have 6,788 centers located in areas with difficult access.
What actions has the Secretariat taken to turn Mexico into a logistical platform in the region, leveraging its strong geographic position and links with international markets?
The strategy we have followed is to complete the corridors linking Mexico from East to West, so that our Pacific ports can compete with others. Before this administration, some of these corridors were not complete, and some were incompletely modernized. We are trying to get them all modernized. That is the key focus of the development of roads. We have been working on nine vertical and six horizontal corridors that altogether amount to more than 18,500 kilometers of roads. We are also trying to invest in ports, so that they are in a better condition to receive merchandise, and thus better able to exploit the intermodal transportation system. The criteria used to define the longitudinal and cross-regional corridors include the integration of more population centers with main tourist destinations in Mexico, building direct communication and connectivity among states, linking capital cities, coast roads, and borders, and building lines of communication between seaports and inland ports. Related to this, between September 2010 and July 2011 we promoted the development of four intermodal terminals located in Querétaro, Nuevo León, and Aguascalientes.
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