Focus: Public investment in mobility in the south

Get Moving

Jul. 15, 2021

Billions of pesos have been earmarked for infrastructure projects in southern states as a means of boosting economic activity and development.

In late 2020, President López Obrador announced a series of infrastructure packages aimed at increasing mobility throughout the country while stimulating private sector involvement and financing. This initial announcement called for some MXN300 billion in investment, which, in addition to transportation projects, would be directed at water, tourism, communications, and energy projects. Since the initial announcement, a slew of infrastructure projects have been penned for the south of the country, with a total price tag of around MXN52.2 billion. For some, these projects are long overdue; for years, many of Mexico's southern states have been passed over for infrastructure projects, resulting in a relative disparity between the economic and social development of the north compared to the south. A key objective of the new infrastructure projects is to raise development standards in the south on par with those in the north.

Such plans have been in place since the end of 2019, though due to the global outbreak of COVID-19 and subsequent lockdown measures, the initiatives were shelved. The ambitious plan, according to the Ministry of Finance, will create more than 185,000 jobs across the country and represent at least 1% of GDP. The package essentially seeks to encourage continued growth of both investments for projects as well as Mexico's GDP by enabling greater economic activity through infrastructure. Over time, initial projects are expected to activate, or ultimately require, additional projects, further developing and connecting the country. In addition to just strengthening links within the country, the plan seeks to boost Mexico's role in the USMCA agreement through the reinforcement and enhancement of its supply chains, investments, and partnerships. The plan will also improve border crossings, enabling trade for companies both large and small.

While already in progress, the plan has seen the acceleration of construction of Tren Maya, located in the Yucatán Peninsula. In January, it was announced that work shifts would double or triple on the first four stretches that have already been awarded. These four stretches were awarded in 2Q2020 after a competitive bidding process that saw ICA Infraestructura winning the bid. The first four stretches constitute 922km of the 1,500-km passenger and freight track that will be extended. The fifth stretch has been split into two sections, and Fonatur, the country's sustainable tourism development agency, will award the tenders sometime in 2021. The final two stretches will be constructed by 2022 by Mexico's armed forces. The entire project, spanning five of the country's southeastern states, is expected to be completed before the end of 2023.

Another major multifaceted infrastructure project taking place in south of the country is the USD2-billion investment in the Tehuantepec Isthmus rail corridor, which will provide a better connection between the narrow strip of land between Coatzacoalcos on the country's Gulf coast and Salina Cruz on the Pacific. In 2019, Interoceanic Multimodal Corridor of the Isthmus of Tehuantepec was created by the government to oversee the various projects, which have several primary objectives. The project's main goal is to bolster the social and productive infrastructure in Oaxaca and Veracruz states. Other objectives include preserving the region's natural environment, fighting poverty, preserving local cultures, and boosting overall economic development.

The Tehuantepec Isthmus will see three main infrastructure projects, in addition to complementary initiatives that seek to boost economic activity in the impoverished region. The first major initiative is the rehabilitation of the 316-km rail line that connects the ports in Coatzacoalcos to the one in Salina Cruz, followed by the expansion of both ports, and finally the construction of 10 new industrial parks along the train line. Ancillary projects will include new highways and roads in the region, as well as a gas pipeline to supply local consumers and businesses. While the state of Veracruz is Mexico's largest energy producer, some 50% of the residents of the isthmus do not have access to electricity, gas, sewage, or potable water—an issue the series of infrastructure projects seeks to alleviate.

The government's national infrastructure plan indicated that part of the funding for the port expansions will come from the private sector, and following the initial announcement, authorities revealed that a number of private companies had pledged MXN2 billion. In 2019, the government noted funding for projects would be limited to investors from Mexico. Construction works for industrial parks along the rail line will all be awarded to private firms. The government will first acquire land and then designate it under a special regime before offering a tender to private companies to transform the plots into industrial parks. A number of airports in the region are also poised to receive considerable investments. These include Minatitlán Airport in Veracruz and Ixtepec Airport in Oaxaca.