ON EQUITABLE TERMS

Mexico 2014 | FINANCE | INTERVIEW

TBY talks to Manuel Rodríguez Arregui, Director General of GBM Infraestructura on reading investment opportunities, and Mexico's growing commercial appeal.

Manuel Rodríguez Arregui
BIOGRAPHY
Manuel Rodriguez Arregui is currently the Director General of GBM Infraestructura. He graduated from the Department of Economics at MIT and has an MPA from Harvard University. In the private sector he has been Managing Director of Mercer Management Consulting, where he developed the business plan from Toluca airport, the strategy of oil drilling for Pemex, the operating model of a maritime fleet, the commercialization of LNG in the Pacific region and the strategy for a global logistics company. He also participated in negotiations for the development of CFE’s telecommunications business and the design of structures for the divestiture of assets held by local governments. In the public sector, has acted as Undersecretary of Transport and Chief Administrator Officer of the Department of Governance. Manuel has taught economics and finance at the ITAM and at the Universidad Iberoamericana.

Why did you decide do place your Private Equity Fund through capital development certificates on the Mexican Stock Exchange?

There are listed and unlisted private equity funds all around the world. We decided to list our Fund on the Mexican Stock Exchange because in Mexico we have a pension system with defined contributions pensions, which prevailing regulations only permit to invest in traded securities. These pension funds are called afores and are managed by the private sector. Ours was the first listed fund to be issued with capital calls. Initially Limited Partners invested 20% and we have been doing capital calls ever since.

What have been the main products you financed with the initial $400 million fund?

The fund is for infrastructure and energy, including highways, airports, ports, trains, water systems, electricity, and midstream and upstream oil & gas. Once you have invested in the first fund, we raise the second fund in order to keep investing in the pipeline of opportunities that exist. Our infrastructure and energy fund can invest in both greenfield and brownfield projects. For example, we won the bidding process for the first Toll Road project of this administration. At the same time, we invested in the water system of Cancún which has been operated by the private sector for more than 20 years and it's a mature brownfield project.

What are the defining criteria for choosing the projects in which you will invest?

We invest in projects that have sufficient certainty in the incoming cash flows, such as an airport with assured long-term use. And by first considering a conservative scenario, we better understand the upsides and risks involved. The next step is to understand who our partners are, whether they are the right partners and whether they bring to the table what we really need for the project to be successful. The next stage involves aligning interests and ensuring proper corporate governance compliance. If we are to invest in a minority position then we need to have minority rights sufficient to protect our investors. The last consideration is a clear exit strategy, as our role is a temporary one.

What is the importance of the Pacific ports for the transportation sector in Mexico?

The most important port in the Pacific today is Manzanillo. A new terminal was established to the north of Manzanillo. Future growth will take place in the Laguna de Cuyutlan next to the LNG regasification plant. In addition, we expect that the Port of Lázaro Cárdenas will grow in the numbers of terminals it has.

Why is Mexico a solid destination for investment?

Mexico is a strong choice for investment because it has learned a lesson, namely the need to do things correctly. Mexico is today a country that implements conservative monetary and fiscal policies. We have worked on strengthening our institutions for the past 20 years. We have a judicial system that is independent. We have built on and worked on transparency. However, challenges remain. We still need to educate our children better, for example, and recently we have established a legal foundation to be able to implement educational reform. We are a country that has trade agreements with the most important nations in the world. And while we enjoy our proximity to the US, we also have a strong relationship with Asia and Europe. In terms of our competitiveness, what has happened with the automobile sector reflects our sheer potential. Today, Mexico is one of the most important producers of vehicles, confirming our ability to produce well and competitively.