Is Peña Nieto’s Infrastructure Program on the Right Track?

The announced infrastructure investment plan is extremely ambitious in terms of the amounts of money involved, as well as the wide variety of projects contemplated. In making the announcement, President Peña Nieto was partially responding to complaints from the private sector that after seven months in office, government spending has been far below expectations and less than is usually the case at the outset of a new administration. One hundred billion dollars is a huge amount when compared to previous infrastructure spending, especially during the two PAN governments between 2000 and 2012.

Then-President Calderón also announced a very ambitious infrastructure spending strategy back in 2006, with specific plans to build a new port on the Pacific coast (Punta Colonet), a new Mexico City airport, thousands of kilometers of new highways and other expensive projects. Neither the port nor the airport was ever built during Calderón’s presidency, so it’s important to take the Peña Nieto announcement with a grain of salt. Much will depend on whether the pending energy and fiscal reforms are finally approved by Congress and the extent to which private sector investment in the energy sector becomes a reality. Among the projects announced by Peña Nieto are three passenger railroads connecting Mexico City with Toluca and Querétaro, as well as one crossing the isthmus in Yucatán state. Mexico hasn’t had passenger train service for decades, and it isn’t clear how to make expensive rail projects such as these economically viable.

Read the full article »