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MAY 2012 | infrastructureinvestor.com 

FOR THE WORLD’S INFRASTRUCTURE MARKETS 

MEXICO 

An Intelligence Report 

THE BIG PICTURE 

Creating a world-class logistics platform 

TRANSPORT 

The 10km-a-day road programme 

HEALTHCARE 

The story of the $6bn-plus hospital PPP 

FINANCE: CREATING 

SOLUTIONS 

Channelling pension fund investment 

A NEW PPP LAW 

How PPPs are set to change 

procurement 

WIND POWER: 

CLEAN COMPETITION 

To compete, no subsidies needed 

IN ASSOCIATION WITH:

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m ay 2012 i n f r a s t r u c t u r e investor: mexico intelligence report pa g e 1 

Seizing the day 

editor’s letter 

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Published by PEI Ltd. 

www.InfrastructureInvestor.com 

Second chances are rare – in life, in work, in nation-building – and those who are 

able to seize them are rarer still. But a second chance is precisely what the Mexican 

infrastructure market is now facing – the kind of fork in the road where, if the 

right direction is chosen, Mexico may be catapulted into the A-list of emerging 

infrastructure markets. 

In a way, President Felipe Calderón’s administration was a little unlucky. 

It came to power with the ambition and political drive to transform Mexico into 

a world-class logistics platform, leveraging its proximity to the United States to leap-frog the country up world 

competitiveness ratings – and, in the process, improve the lives of its 115 million inhabitants, nearly half of 

which still live below the poverty line. 

In order to do this, President Calderón proceeded to implement the sort of mechanisms many developed 

infrastructure markets still lack. He drafted a five-year, $234 billion National Infrastructure Plan (NIP), 

outlining some 300 projects covering the breadth and length of infrastructure sectors. 

He courted foreign companies openly, attracting marquee infrastructure names like Australian investor 

Macquarie Group and law firm Greenberg Traurig – both profiled in this report – to set up shop in the country. 

While other countries spoke wistfully of attracting pension fund investment into infrastructure, Calderón’s 

administration rolled up its sleeves, changed regulations, and created an instrument – capital development 

certificates (CKDs) – that will allow the country’s pension funds to channel up to $15 billion into Mexican 

infrastructure. 

Not content with having a development bank, Banobras, to help fund infrastructure projects on the 

debt side, the government created the National Infrastructure Fund (Fonadin) to do whatever it takes, on the 

equity side, to make socially important projects as bankable as they can be. 

But as resourceful as the Calderón administration was, the Mexican infrastructure market arguably 

failed to catch fire with international investors. Part of the reason for that was timing. The NIP launched in 

2007 and, in 2008, the global financial crisis burst onto the stage. 

There were also other problems. The NIP outlined 300 projects, but as Fonadin head Federico Patiño 

puts it in these pages, “not all of those 300 projects were ready – some of them were in different maturity 

stages”. Others were less charitable, and said many of those 300 projects were not projects per se, but rather ideas. 

A recent report by Mexican audit body Auditoria Superior de la Federacion (ASF), analysing 80 infrastructure 

projects procured between 1999 and 2010, was particularly damning, pointing out that 65 percent 

of projects started construction without having a completed project spec backing them. As a result, the ASF 

said the vast majority of these projects – encompassing both public and private works – went over budget and 

were delivered late. 

But these stumbles aside, the NIP created two very important conditions: firstly, it set in place all of 

the ingredients for successful private sector infrastructure procurement; and secondly, it created momentum. 

The final, and probably one of the most important pieces of the Mexican infrastructure puzzle, fell 

into place last December, when, after three years of arduous discussion, Congress passed the country’s first 

public-private partnership (PPP) law, infusing investors with renewed confidence in the infrastructure market. 

With a second edition of NIP around the corner and with the two main parties currently disputing the 

July 1 presidential elections firmly committed to developing Mexican infrastructure, the stage appears to be 

set for Mexico to experience a decade of remarkable growth. 

But like all those who are offered a second chance, it will be up to Mexico’s new rulers to fully seize the day. 

Enjoy the report, 

Bruno Alves 

Editor, InfrastructureInvestor.com 

bruno.a@peimedia.com

pa g e 2 i n f r a s t r u c t u r e investor: mexico intelligence report m ay 2012 

contents 

MEXICO 


3. INTRODUCTION 

BUILDING ON FIRST STEPS 

Mexico has recognised the importance of infrastructure to its economy 

with some bold initiatives, notably a new PPP law 

7. INTERVIEW: JOSÉ ANTONIO MEADE KURIBREÑA, 

MINISTER OF FINANCE 

THE BIG PICTURE 

The Finance Minister tells of transforming Mexico ‘into a world class 

logistics platform’ 

12. INTERVIEW: GABRIELA HERNÁNDEZ CARDOSO, 

PRESIDENT & CHIEF EXECUTIVE, GE MEXICO 

SUPPLYING AN ENERGY BOOST 

Why Mexico is a key market in the context of expected Latin American 

growth 

14. GUEST ARTICLE: GE 

WIND POWER AS A CATALYST FOR DEVELOPMENT 

Rafael Alcalde Navarro talks about wind power potential in Mexico 

16. INTERVIEW: FEDERICO PATIÑO, FONADIN 

THE FACILITATOR 

On making projects bankable and Fonadin’s role in kick-starting the 

local infrastructure fund market 

18. INTERVIEW: JUAN MANUEL GONZÁLEZ AND PEDRO 

J. RESÉNDEZ, GREENBERG TRAURIG 

GREENBERG TRAURIG’S INTEGRATED INFRA 

APPROACH 

The two lawyers tell why the firm decided to set up shop in Mexico 

24. INTERVIEW: DIONISIO ANTONIO PÉREZ-JÁCOME 

FRISCIONE, MINISTER OF TELECOMMUNICATIONS 

AND TRANSPORT 

BETTER CONNECTING MEXICO 

On road-building 10km a day and bringing the country firmly into the 

digital age 

28. INTERVIEW: MARK RAMSEY, MACQUARIE CAPITAL, 

MEXICO 

‘THE TRUE INTENT IS THERE’ 

The story behind a first-of-its-kind emerging markets infrastructure 

fund 

31. INTERVIEW: MIGUEL DONOVAN, DIRECTOR 

GENERAL, CURRIE & BROWN MEXICO 

PROCUREMENT REVOLUTION 

How the country’s hospital PPP programme was the start of a sea 

change in infrastructure procurement 

34. INTERVIEW: SANTIAGO SEPULVEDA, PARTNER, 

CREEL, GARCÍA-CUÉLLAR, AIZA Y ENRIQUEZ 

‘A WHOLE TOWN GREW’ 

The lawyer speaks of the transformational impact of infrastructure 

projects for the wider economy 

36. GUEST ARTICLE: CREEL, GARCÍA-CUÉLLAR, 

AIZA Y ENRIQUEZ 

POWERING MEXICO’S NORTHWEST 

Sepulveda sheds some light on the Federal Electricity Commission’s 

$6bn-plus Northwest Project 

21. GUEST ARTICLE: GREENBERG TRAURIG 

ARE CONDITIONS RIPE FOR SIGNIFICANT GROWTH IN 

MEXICAN INFRA? 

González and Reséndez argue all the pieces are in place for a decade of 

infrastructure growth


introduction 

m e x i c o i n t e l l i g e n c e r e p o r t 2 0 1 2 

Building on first steps 

President Calderón has recognised the importance of infrastructure to Mexico’s 

economy with some bold initiatives, notably a new public-private partnership law. 

With elections around the corner, stakeholders are hoping that the momentum will be 

maintained 

When Mexican President Felipe Calderón 

took office six years ago he set out to transform 

the nation’s languishing infrastructure 

sector into a critical driver of economic 

development and employment across 

Mexico. 

His administration quickly launched 

the National Infrastructure Plan 2007- 

2012, which calls for close to $234 billion 

in public and private infrastructure 

investments and identifies some 300 

projects in numerous sectors, including 

toll roads, seaports, oil and gas production 

and water distribution systems. Infrastructure 

spending in Mexico has since 

jumped from the lowest among Latin 

American nations to about 4.5 percent 

of its gross domestic product (GDP). 

Analysts herald the infrastructure 

plan as a successful first step toward the 

country’s economic rise. They say the 

new public-private partnership (PPP) 

law, authorised by Congress in January, 

will enable more contracts and foreign 

investment to enter Mexico at a faster 

clip. 

“There is little doubt that Mexico is 

very well positioned right now to have a 

decade’s worth of growth, similar to what 

you saw in Brazil 10 or 15 years ago,” says 

Antonio Garza, a former US ambassador 

to Mexico and counsel in Mexico City for 

White & Case, a global law firm. 

But Calderón’s first and final term 

is winding down as the July 1 elections 

draw near. The two leading candidates 

for Mexico’s presidency are both promising 

drastic changes for the nation 

of nearly 115 million people. The private 

sector, however, is optimistic that 

Calderón: outgoing President spearheaded 

$234bn infra plan 

whoever wins at the ballot box will stay 

committed to Calderón’s ambitious infrastructure 

plans. 

“There is a general sense in this 

country that [the next leader] has to 

continue to […] make attracting capital 

and investing in infrastructure more 

competitive,” says Garza. 

The National Infrastructure 

Plan 

Shortly after becoming president in December 

2006, Calderón unveiled ‘Mexico 2030’, 

his long-term vision for improvements in 

five key areas: national security; social equality; 

environmental sustainability; a more 

accountable government; plus economic 

competitiveness and job creation. In that 

last area, goals included bumping Mexico 

into the top 25 countries on indices for 

global competitiveness and infrastructure. 

The World Economic Forum currently 

ranks Mexico 58th out of 125 countries for 

competitiveness and 64th for infrastructure. 

To accomplish those economic 

targets, the Calderón administration 

launched its National Infrastructure Plan 

in July 2007, outlining a five-year-long 

programme to drive public and private 

investments of $234 billion by 2012 – a 

50 percent increase over the last administration. 

Along with increasing national competitiveness, 

the policy aims to improve 

life for all Mexicans – nearly half the 

country lives below the poverty line – 

by building better water, electricity and 

sewage systems and constructing more 

schools and hospitals. The administration 

also wants to make Mexico one 

of the world’s key logistical platforms, 

where goods and services can flow freely 

in and out of the country’s ports and 

airports. 

Calderón’s plan signaled a major 

departure from the way Mexico had 

addressed infrastructure spending in the 

past. Previous administrations offered 

limited public resources and few financing 

mechanisms to the private sector, and 

aggressively targeted specific projects – 

namely, toll roads and highways – rather 

than a more comprehensive approach. 

Since the start of the initiative, Calderón 

has earmarked more than $200 

billion for infrastructure investment by 

the public sector. 

“One of the highlights of the current


introduction 

administration is that they define an integral 

infrastructure programme. They 

consider the needs of each sector,” says 

Alejandro Villarreal, a partner at KPMG’s 

global infrastructure and projects group 

in Mexico City. 

Tapping into oil & gas 

Nearly half of Calderón’s infrastructure plan 

is geared toward investments in the statecontrolled 

oil and gas industry. Mexico’s 

daily oil output has fallen dramatically over 

the past decade as onshore reserves dry up, 

heightening the need for private capital 

and foreign expertise in boosting offshore 

oil exploration and improving production 

on land. 

The country’s oil monopoly Petróleos 

Mexicanos (Pemex), the world’s fifthlargest 

oil exporter, is the only company 

that can build and operate oil refineries 

or hold rights to extracted crude oil. 

Under past administrations, companies 

that contracted with Pemex for crude 

drilling projects signed set-fee agreements, 

with no extra benefits for successful 

oil production and little flexibility to 

implement new technologies during the 

life of the contract. 

Calderón’s 2008 energy reform 

aimed to loosen Pemex’s grip on the 

country’s oil industry and usher in more 

private sector involvement. While Pemex 

still holds full rights to Mexico’s oil 

reserves and crude, the monopoly now 

offers incentive-based contracts (IBCs) 

to private energy firms. The contracts 

allow companies to collect performancebased 

cash payments if oil production 

exceeds established targets, as well as 

payments for using energy-efficient and 

cutting-edge technologies or for keeping 

production costs down. 

Pemex has since awarded three IBCs 

for the right to drill oil fields: one to 

Schlumberger, the world’s largest oilfield 

services provider, and two to Petrofac, 

a London-based oil services company. 

Each of the three oil fields requires a 

minimum investment of $250 million 

Vicente Corta Fernández 

and could reach five or six times that, 

according to Pemex. 

Brazilian firm Braskem – which is 

owned by Brazilian developer Odebrecht 

and is the largest petrochemical company 

in the Americas – recently formed 

a joint venture with Mexican petrochemical 

group Idesa. The firms have signed 

a $2.5 billion agreement with Pemex to 

invest in and supply raw materials for a 

petrochemical complex called Etileno 

XXI, to be built in Veracruz. 

“Pemex is opening up the petrochemical 

sector to private investment, and 

the Etileno XXI polyethylene project 

[…] represents the first investment by 

a Brazilian company in Mexico of that 

magnitude. We are looking for increased 

investment from Brazil in coming years,” 

says Sean Goldstein, a partner with White 

& Case in Mexico City. 

Other staples: Transit, 

electricity & water 

The remainder of Calderon’s National 

Infrastructure Plan calls for $35 billion for 

electricity generation, as well as $26.5 billion 

for roads and $26.1 billion for telecommunications. 

Water and sewerage systems would 

get $18.6 billion with seaports, airports and 

railroads amounting to $16.6 billion. Hidrocarbons, 

at $110.9 billion, round out the rest 

of the National Infrastructure Plan. 

To help finance these projects, in 

February 2008 the government created 

the National Infrastructure Fund (Fonadin) 

under the auspices of Banobras, 

Mexico’s state-owned development bank. 

Each year, the Congress approves a set 

amount of funding for government agencies 

involved in public-private projects. 

The agencies can apply the funds to 

grants, loans and guarantees worth up 

to half of the project’s investments, as 

long as the private partner provides the 

other half. 

“Fonadin offers special guarantees 

or direct investment in these projects 

in order to increase the confidence of 

investors,” says Astra Castillo, director 

of infrastructure and project finance 

for Fitch Ratings Mexico. “The trust is 

intended to support the investors.” 

The fund makes investments in four 

major areas: highways, roads and bridges; 

water, irrigation, drainage and sanitation; 

railroads, ports, airports, urban 

and inter-urban transport; and projects 

designed to preserve the environment 

and biodiversity. 

The Calderón administration has 

enabled Fonadin to invest some $757 

million in capital development certificates 

(CKDs), which are structured as 

capital funds to be exclusively acquired 

by authorised institutional investors, 

namely the private pension fund managers, 

called Afores. Fonadin’s participation 

will be capped at 20 percent. 

“That may help in the future to 

enhance infrastructure investments,” 

says Vicente Corta Fernández, a partner 

at White & Case in Mexico City. 

Overall, Calderón aims to tap into the 

close to $120 billion held by the nation’s 

pension funds to help increase private 

financing in infrastructure projects. 

Perhaps Calderón’s most dramatic 

proposal was the PPP law, which the 

president introduced in 2009 but wasn’t


introduction 

La Yesca: one of the world’s tallest hydraulic dams 

formally adopted by Congress until January 

12, 2012. The government has agreed 

to match private infrastructure investment 

up to $18 billion. 

The law seeks to correct the government’s 

earlier tendencies to award private 

contracts to the lowest bidder rather 

than the best bidder, says Villarreal. In 

the past, many projects were canceled or 

contracts broken when projects failed to 

deliver results under the low-price agreements. 

Public funding was also subject to 

budget availability, creating uncertainty 

and greater risk for investors. 

Under the new PPP regime, private 

firms can negotiate the terms of longterm 

infrastructure contracts with the 

Mexican government, based not on 

myriad local and state procurement 

laws, but market standards. In order 

for government to award the contracts, 

which can last up to 40 years, the state or 

federal agencies must conduct thorough 

legal, financial and technical analyses 

of each proposal and select the winners 

based on merit, not lowest cost. Private 

companies can also propose projects 

before an agency solicits bids. 

“You have the private side focusing on 

what they’re experts on and the government 

taking on regulation and policies. 

Key players are focusing on what they 

do best,” says Alberto Santos, the New 

York-based senior director of Fitch Ratings’ 

global infrastructure group. 

And unlike in the past, these new PPP 

contracts clearly lay out the rights, risks 

and obligations that each of the parties 

would assume throughout the project’s 

development. The bidding process does 

not distinguish between Mexican and 

international applicants, opening the 

partnerships up to any company qualified 

for the project. 

“You will see more investment, more 

movement and more tender processes” 

in Mexico as a result of the PPP law, says 

Villarreal. 

Projects in the pipeline 

The infrastructure plan has not been without 

challenges, however. The global economic 

downturn and subsequent liquidity 

crisis struck less than a year after Calderón 

launched the initiative, reducing interest 

from private investors and slowing the pace 

of projects – particularly for airports, seaports 

and railways. 

The highly regarded PPP law took 

three years to implement, which temporarily 

curbed investor demand for 

contracts. Mexico also lacks a central 

entity to prioritise projects, weed out 

unviable proposals or coordinate the 

public entities that develop infrastructure 

with the entities that actually spend 

the resources. 

Some projects under Calderón’s plan 

ultimately failed because government 

officials could not obtain local right-ofway 

permits quickly enough to proceed. 

Electricity projects floundered somewhat 

after the Mexican government shut down 

the electrical utility monopoly Light and 

Power. For now, the country’s power grid 

is run solely by the state-owned Federal 

Electricity Commission (CFE). 

Between 70 percent and 80 percent 

of the 300 projects outlined by Calderón 

have been completed since the plan was 

launched five years ago, says Castillo. 

One of the largest infrastructure 

projects awarded is the $3.3 billion toll 

road package of 30-year federal highway


introduction 

re-concessions. In 2007, Mexican construction 

firm ICA and US investment 

bank Goldman Sachs won the package, 

agreeing to develop or expand four highways 

in western Mexico, spanning 558 

kilometres. 

In 2010, contracts for one of the 

world’s largest wastewater treatment 

projects went to a consortium lead by 

IDEAL, the Mexican infrastructure firm 

controlled by billionaire Carlos Slim. 

The $710 million plant will be built in 

the agricultural state of Hidalgo, just 

north of Mexico City. 

Growing demand for power generation, 

spurred largely by Mexico’s rising 

middle class, has also increased interest 

in hydropower and natural gas projects. 

In 2007, CFE awarded ICA a $768 

million contract to build La Yesca, one 

of the world’s tallest hydraulic dams, 

near the border of western coastal states 

Jalisco and Nayarit. The dam and its 

750-megawatt (MW) hydroelectric power 

station should generate 10,000 direct 

jobs when completed (potentially later 

this year), according to government 

estimates. 

Canadian energy company Trans- 

Canada Corp won a $320 million contract 

with CFE in 2009 to build, own and 

operate a natural gas pipeline from the 

Pacific Coast to Guadalajara. Last year, 

Tarahumara Pipeline, a subsidiary of 

Mexican natural gas firm Fermaca, beat 

out Pemex and others for a $310 million 

contract with CFE to transport natural 

gas down a 385-kilometre pipeline from 

the US to three northern Mexican states. 

Mexico’s renewable energy and 

alternative fuel industries are increasingly 

attracting investments, though 

they primarily come from the private 

sector alone. Odebrecht, for instance, 

has announced plans to invest $900 million 

in a sugar cane ethanol mill in the 

Caribbean state of Veracruz. 

Marena Renovables recently raised 

about $700 million in project financing 

for a 396MW wind farm in the 

southeastern Oaxaca state. The Marena 

consortium is made up of Australian 

bank Macquarie’s Mexican infrastructure 

fund, Japan’s Mistubishi Corporation 

and PGGM, the Dutch pension fund 

service provider. 

Although the Calderón administration 

touted plans to build a $1.2 billion 

suburban rail system, the two-phase 

project folded in 2009 when Mexico’s 

transport and communications ministry 

voided a tender from Spanish rail 

company CAF, the project’s sole bidder. 

CAF could not provide all of the financing 

required for the train line through 

Mexico’s central valley. However, the 

ministry announced in February that it 

intends to re-launch a tender for the rail 

concession sometime this year. 

Looking forward: Mexico’s 

infrastructure future 

The recently passed PPP law is expected 

to generate more investment and stimulate 

more interest in Mexico’s infrastructure 

sector for decades to come. But over 

the next few months, new projects will 

be somewhat paralysed as investors await 

the outcome of the July 1 presidential 

elections, Castillo says. “People are waiting 

to see what happens in the elections 

[…] to get an idea of what strategy to 

follow,” she says. 

On March 30, the official start 

of Mexico’s campaign season, polls 

showed Institutional Revolutionary Party 

(PRI) candidate Enrique Peña Nieto 

with a double-digit lead over Josefina 

Vazquez Mota of Calderón’s conservative 

National Action Party (PAN). 

Peña Nieto served as governor of the 

State of Mexico, which embraces the 

capital district, between 2005 and 2011. 

He pushed hard to improve public works 

in his state, often in cooperation with 

the Mexico City government, and has 

pledged as president to double spending 

on infrastructure projects and expand 

the public budget. He says that his 

administration would spur bank lending 

in Mexico by cutting the proportion of 

peso-based bonds the country issues and 

replacing it with foreign currency debt. 

Whichever candidate wins the 

presidency must present “a credible 

infrastructure plan early in the administration 

[…] so that people and other 

players know what the pipeline is going 

to look like,” says Corta Fernández. The 

next leader will need “a very competent 

team of people who are familiar with 

the new rules of the game so they can 

implement these projects rapidly”. 

Analysts agree that Calderón’s successor 

must convince investors that the 

Congress will make PPP projects a top 

priority with speedy and efficient payments. 

Politicians must also account for 

the multi-year obligations of PPP projects 

in their annual budgets. Delayed or dubious 

participation from the public sector 

“has always been a risk that investors felt 

uncomfortable with” in other countries 

with PPP laws, says Santos. 

The next administration should aim 

to complete the remaining initiatives in 

Calderón’s 300-project infrastructure 

plan, as well as roll out a continuous 

flow of new projects in a diverse number 

of industries and sectors. 

And new leaders must make it “a 

little bit faster for both federal and 

local entities to develop infrastructure 

projects and obtain the necessary budgetary 

and technical approvals in order to 

do so,” says Ariel Ramos, a local partner 

in Mexico City with White & Case. “The 

next administration is going to have to 

continue this trend, no matter what.” 

He added that his firm is “quite optimistic” 

that Mexico will remain an attractive 

climate for infrastructure investors 

beyond the 2012 elections. 

“All parts of the world are suffering 

financial stress right now, but I think 

that Mexico could be a safe haven for a 

number of the developers of highly specialised 

projects [and] Mexican companies 

with experience would like to team 

up with them,” he says. n


interview 

j o s é a n t o n i o m e a d e k u r i b r e ñ a , m i n i s t e r o f f i n a n c e 

The big picture 

Mexican Finance Minister José Antonio Meade Kuribreña tells of the key role 

infrastructure development can play in transforming Mexico ‘into a world class 

logistics platform’ 

Historically, how much has Mexico spent 

on developing its infrastructure as a percentage 

of gross domestic product (GDP) 

and how has the current government 

changed that? 

Since 1980, the mean budgetary investment 

in infrastructure as a percentage of 

GDP was 4.2 percent per administration. 

Between 1990 and 2005 there wasn’t a 

single year where budgetary investment in 

infrastructure surpassed 4 percent. The current 

government, on the other hand, has 

made infrastructure investment a top priority. 

Budgetary investment in infrastructure 

reached 5 percent of GDP during 2010 and 

4.7 percent in 2011.This figure is above the 

infrastructure investment of OECD [Organisation 

for Economic Co-operation and 

Development] countries which is around 

3.3 percent of GDP. 

The current administration has also 

proposed new legislation – the publicprivate 

partnership (PPP) law – which was 

approved by Congress to increase investment 

in infrastructure and provide a clear 

and comprehensive legal framework. 

Can you explain how important developing 

Mexican infrastructure is in the context 

of stimulating the country’s GDP growth? 

Infrastructure plays a key role in stimulating 

the country’s growth in more ways 

than one. First, there is the countercyclical 

nature of this type of investment which 

helps keep the economy growing even 

when facing the lower end of the business 

cycle or even at times of crisis. Second, this 

type of investment provides key inputs and 

facilitates private enterprise, for example, 

by ensuring the energy supply, or reducing 

travel times and transportation costs. These 

investments promote domestic sources of 

growth and give Mexico a competitive edge 

in the worldwide economy. 

It’s precisely with this in mind that the 

administration has set out as an objective to 

use infrastructure investment to transform 

Mexico into a world class logistics platform, 

taking advantage to the fullest of its proximity 

to the United States, one of the world’s 

most important markets. Thus, investment 

in roads and highways, for example, has 

been a central priority, precisely because it’s 

seen as vital to the growth of the economy. 

Why private capital for Mexican infrastructure? 

Is this a capacity issue, where the 

state just can’t finance Mexico’s infrastructure 

needs? 

The financial needs for infrastructure 

are massive, especially when the aim is 

to overcome the great lag that exists in 

certain areas. 

For example, in 2003 we had 0.13 road 

kilometres per square kilometre of territory, 

behind countries like Brazil, Korea and the 

United States. Or, to give another example, 

in 2006, the percentage of treated waste 

water was just 36 percent. 

At the same time, a key aim of this 

administration has been to maintain solid 

public finance with a manageable debt. 

Thus, we generally consider it prudent not 

to rely excessively on public debt as a means 

of financing infrastructure investment. In 

line with this, at the end of 2011, the public 

sector net debt of the federal government 

as a percentage of GDP was 32 percent. 

The Mexican government has a large 

agenda of infrastructure projects that can 

be financed by private capital and there are 

mechanisms to ensure that these projects


interview 

The administration has 

set out as an objective 

to use infrastructure 

investment to transform 

Mexico into a world class 

logistics platform 

have a social return. On the other hand, 

domestic financing savings have increased 

considerably in the last years, mainly 

through pension funds and this provides 

a useful alternative to finance infrastructure. 

In fact, the recently launched Certificados 

de Capital de Desarrollo (CKDs) are 

the instrument through which much of this 

potential investment can be channelled to 

infrastructure in particular. These types of 

instruments may provide higher returns 

and greater diversification and they represent 

part of a worldwide trend. 

Finally, using private capital and the 

incentives it brings with it has a series of 

benefits, most notably allowing greater discipline 

in carrying out projects, which is, 

naturally, a very desirable feature. 

Are you happy with the performance of 

the CKDs so far? 

These instruments have had a strong performance 

since they were launched in 

2009. They have been used, among other 

things, to finance highways, renewable 

energy projects, land development and 

social infrastructure. By the end of 2011, 

issuances of CKDs totalled a market value 

of almost $3.3 billion. 

A large majority of these CKDs were 

acquired by institutional investors, basically 

private pension funds. In this respect 

it is important to understand that until very 

recently, a few years back, pension funds 

were not allowed to directly invest in infrastructure. 

With the changes in the regulation, 

there is an enormous potential for increased 

investment, about $12 billion more could 

go into CKDs, so there is plenty of room 

for growth. 

It is also worth mentioning that there 

have been recent changes in the investment 

regime of CKDs which are designed to differentiate 

between CKDs geared towards 

infrastructure and housing, and CKDs 

used for other purposes – and specific 

investment limits for pension fund investment 

in each of these sub-groups have been 

established. 

It is expected these changes will facilitate 

registration of the issuances of CKDs 

in the stock market and make information 

more transparent for potential investors. 

Mexico has two robust, state-backed 

development institutions – Banobras and 

Fonadin – to help fund infrastructure. But 

how do you assess local bank appetite 

for PPPs/concessions and other project 

finance transactions? 

Of course, recent economic events have 

made banks have a lower risk appetite; however 

there is still willingness to participate 

in these types of projects. 

Stimulating funding sources requires a 

three-pronged approach: First, there is the 

need to have a clear operating framework 

which will entice private participants and 

funders to take part in projects. This was 

achieved with the PPP law that was passed 

in December of last year, which provides 

a broad framework in which individual 

projects can operate with greater certainty 

on the rules of the game. 

In particular, the law allows for several 

improvements during the life cycle of a PPP 

project: the law now considers the role of 

unsolicited proposals for projects, profiting 

from the dynamism of the private sector; 

bidding may now be done through electronic 

means; in obtaining government 

permits, PPP projects are to be prioritised; 

there is an increased role for the use of 

eminent domain when PPP projects are 

being considered; bidding is less prone to 

be affected by legal controversies; and the 

law explicitly considers the possibility of 

contract modifications. 

We are currently working on the guidelines 

and secondary regulations for that law. 

Second, there is a key role to be played 

by development banks, taking risks that 

the market is not willing to take, due to 

the amount of resources needed and the 

perceived risk of certain infrastructure 

projects. To increase these projects’ marketability, 

credit guarantees, grants and other 

instruments allow these institutions to share 

risks and thus stimulate the participation


interview 

of private funding sources. Additionally, 

offering funding alternatives helps reduce 

market imperfections within the financial 

system that may be preventing resources 

from flowing more freely to infrastructure 

projects. 

Of course, this is already the role of institutions 

such as Banobras and the National 

Infrastructure Fund (Fonadin). On the one 

hand, Fonadin is really looking to develop 

new infrastructure in very diverse areas, 

including ‘brownfield’ and ‘greenfield’ 

projects. One of its main activities is providing 

funding grants for initial investment in 

projects so it also has become a key player 

in advancing the ambitious infrastructure 

agenda of the government, centred on getting 

important infrastructure projects off 

the ground. 

Banobras, for its part, is also heavily 

invested in infrastructure but it does so 

exclusively through financing, which gives 

it a more conservative outlook and is much 

more geared toward pooling resources from 

different sources and financing projects 

that are almost ‘market ready’. 

How would you assess the health of Mexico’s 

banking sector? 

Mexico’s banking sector is robust and has 

shown its resilience facing the last global 

financial crisis due to a number of factors, 

including: a solid and resilient regulatory 

and supervisory framework, developed after 

the experiences of past financial crises; the 

fact that subsidiaries of foreign financial 

institutions are required to hold their own 

capital and are subjected to Mexican regulation; 

and a relatively low exposure to toxic 

assets and a stable structure of funding 

largely based on domestic sources. 

As of December 2011, the total capital 

ratio of the commercial banking sector was 

16 percent and Tier 1 ratio was 14.1 percent. 

Capital adequacy in all banks shows high 

levels and most of the regulatory capital 

is comprised of Tier 1 capital. Capitalisation 

rules in Mexico already adopted most 

of the new guidelines recently proposed 

by the Basel Committee. The soundness 

of the banking sector allows authorities 

to introduce in advance Basel III capital 

requirements (in the second quarter of 

2012) since this would have little effect on 

banks’ capital position. 

From December 2006 to December 

2011, the total loans of commercial banks 

to the private sector grew 45.3 percent in 

real terms. Within the last five years, commercial 

loans, housing as well as consumer 

portfolios showed positive growth rates, in 

real terms, of 74.1 percent, 42.2 percent 

and 6.5 percent, respectively. In this context, 

banking finance to the private sector as a 

percentage of GDP as of December 2011 

was 13.4 percent, an increase of 2.9 percentage 

points with respect to the end of 2006. 

The Mexican banking system shows reasonable 

levels of asset quality ratios. As of 

December 2011, the non-performing loan 

ratio of commercial banks was 2.5 percent 

and the past due loan coverage ratio was 

189.6 percent. 

Long-term funding is one of the holy grails 

of infrastructure financing, especially since 

the 2008 global financial crisis. Would you 

say Mexican institutions are in a good position 

to provide this sort of funding? 

Mexican institutions are certainly in a good 

position to provide this type of funding. For 

example, the funding for the Atotonilco 

Waste Water Treatment Plant, one of the 

biggest in the world, has a syndicated 18-year 

credit in which Banobras and five other private 

banks are participating. Another waste 

water treatment project which reached 

financial close after 2008 has also been able 

to access long-term funding of upwards of 

15 years. Of course, this is in part due to the 

participation of Fonadin in these projects. 

Additionally, projects have kept coming 

in spite of the crisis. In the last 18 months 

there have been various mass transit projects, 

for example, that have been moving forward, 

including projects in cities such as 

Monterrey, Chihuahua, and the metropolitan 

area of Mexico City. These projects have 

seen funding from private local banks. 

On the government side, financial 

Mexico’s banking sector 

is robust and has shown 

its resilience facing the 

last global financial crisis


interview 

Pension funds could still 

allocate almost $12bn 

to infrastructure-related 

instruments 

support and guarantees provided by 

Banobras have increased from a total of 

$4.7 billion in 2006 to $12.2 billion in 

2011, boosting access to long-term funding. 

Also, regarding the capital markets, 

there is still an enormous potential for 

institutional investments. As I mentioned, 

pension funds could still allocate almost $12 

billion to infrastructure-related instruments 

such as CKDs. And infrastructure projects 

provide precisely what they are looking for: 

long-term, attractive returns. 

Does it concern you that PPP contracts, 

especially those using structures like availability 

payments, will effectively lock Mexican 

taxpayers into long-term, somewhat 

rigid contracts? 

PPP contracts, given the complexity of 

many of the projects that are undertaken, 

will be designed to take competitive advantage 

of all the actors involved. 

The new PPP law has many features 

that promote transparency and accountability. 

For example, the new law establishes 

a budgeting exercise for PPP projects to 

be approved by Congress that takes into 

account its impact in the public finances 

during the project’s entire life-cycle; additionally, 

periodic reports on PPP projects 

have to be sent to Congress. 

With regards to transparency, a publicly 

accessible data base with all PPP projects, 

as required by the new regulations, will be 

created. All of these changes have allowed 

Mexico to be in a better position to promote 

interest in PPP projects. 

How is the government approaching risk 

transfer in its recently approved PPP law? 

International practice shows us there is no 

single answer with regard to risk sharing 

and risk transfer. Risk can be shared in different 

ways. 

In this sense, the new PPP law gives us 

a great deal of flexibility in that different 

risk sharing arrangements can be included 

in contracts. The specific risk sharing 

scheme is for the most part to be decided 

on a case-by-case basis among the different 

actors within a PPP project. 

The PPP law establishes that contracts 

must state who bears the risk in different 

areas of a project, including technical risks, 

project execution risk, financial risks, force 

majeure events, unforeseen circumstances, 

and other risks. 

In this sense, it makes clear that government 

agencies will not be able to make 

payments for risks that have not been previously 

established in the contract or are not 

foreseen in the law itself. Additionally, contract 

modifications may not transfer risks in 

ways that were not previously agreed upon. 

Unless otherwise stated in the contract, the 

PPP law assumes that operation and service 

risk, and given the case, construction and 

financial risks, must be borne by the developer 

of a project. 

Is there a limit to the amount of PPP liabilities 

you would be comfortable with carrying 

on the balance sheet as a percentage 

of Mexican GDP? 

We welcome private sector participation as 

a powerful tool to generate more and better 

projects for the benefit of our citizens. 

Given the challenges we face and the 

many infrastructure needs that are still to 

be covered, a great deal of participation 

from both the public and private sectors is 

needed in the area. This has been a priority 

of this administration. 

With regards to potential liabilities, we 

must differentiate between two types of PPP 

projects: those that generate income and 

those for which there is a regular charge 

covered by the government. 

In the first case, we must make sure 

that projects that generate cash flows are 

designed in such a way that makes them 

self-sustainable, which allows for a lower 

probability that public resources would be 

needed. 

With regards to payment for service 

projects, we need to encourage a good balance 

that will result in a healthy economic 

policy that fosters clarity of the obligations 

assumed by the government. n


interview 

g a b r i e l a h e r n á n d e z c a r d o s o , p r e s i d e n t & c h i e f e x e c u t i v e , g e m e x i c o 

Supplying an energy boost 

Gabriela Hernández Cardoso (GHC), president and chief executive of GE Mexico, 

explains why Mexico is an important platform for GE and tells how the firm is assisting 

the country towards a sustainable future 

Could you provide a brief summary of 

GE’s infrastructure activities in Mexico? 

GHC: We are the biggest manufacturing 

platform outside the US, with 21 manufacturing 

plants, including three new acquisitions 

in the oil and gas sector. We also 

have eight service centres, 51 sites and 

offices around the country with almost 

11,000 employees and 35,000 including 

joint ventures, of which we have four very 

important ones in Mexico. 

Several of our businesses and products 

are focused on the infrastructure 

sector. We are working with countries 

to create “smart cities”, and the basis for 

this is improving the infrastructure of the 

countries. 

GE is able to provide better and sustainable 

lighting, such as the project we 

have in Othon P. Blanco, Chetumal, a 

municipality where 25.507 GE LED lighting 

systems were installed generating 51 

percent energy savings compared with the 

previously used technology. 

We also contribute to reducing tons 

of contaminating gases in Mexico City 

through our charging stations for electrical 

vehicles. The Mexico City government 

is running the electric taxis project, which 

is estimated to cut more than 1,500 tons 

of contaminating gases per year. 

Through several GE energy projects 

in the country we are generating around 

2,000 megawatts (MW), which means 

powering nearly 22 million households 

with electricity. As well as this we help our 

customers to grow through new investments, 

strong partnerships and optimisation 

of assets. 

All solutions from GE, such as 

The financing/ 

availability of money 

is not an issue in 

the country. Not too 

many countries can 

say this 

recycling organic waste, water technologies, 

and renewable energies, among 

others are inserted into the smart grid 

and the cities of the future. 

How does Mexico fit in with GE’s broader 

strategy – both within Latin America and 

globally? 

GHC: Emerging markets play a key role 

in GE’s strategy and Latin America has 

become an increasingly important market, 

which will approach $10 billion in revenue 

in 2012, and could double again 

in a few years. Mexico, being one of the 

largest, more stable economies in the 

region, will have a significant impact on 

this figure. 

GE Mexico is a reliable and highintegrity 

partner for our clients and 

communities. In 2011, our industrial 

businesses grew 25 percent and 15 percent 

including GE Capital, our financial 

business. 

The last four projects of GE Energy 

will generate around 2,000MW. Our 

Center for Advanced Engineering in Queretaro 

(GEIQ) participated in projects 

which represent about $1.7 billion for 

Latin America. And this year, GEIQ, the 

most important centre for aviation and 

second for energy, signed an agreement 

with IPN [Instituto Politécnico Nacional] 

in order to launch an energy and aeronautics 

masters’ degree. 

We also announced in Mexico the 

first transatlantic flight using bio jet fuel 

in GE90 engines; the largest installation 

of GE LED lighting for roads in Latin 

America; and we were the first company 

to set up electric charging stations that


interview 

will be partly loaded by solar power in 

the region. 

What are the priorities for GE in a Mexico 

infrastructure context? 

GHC: Mexico has historically invested in 

infrastructure projects in strategic sectors: 

energy, health and transportation, for 

example. The public sector has invested 

in infrastructure according to a National 

Plan and we know public investment is an 

excellent driver for private investment. I 

think this path will continue in the near 

future and GE will participate as a key 

player. 

You have worked in both the public and 

private sectors. What observations have 

you made (either positive or negative) 

about the way the public and private sectors 

work together in Mexico? 

GHC: The private and public sector work 

positively in Mexico and this is improving. 

The private sector requires certidumbre legal, 

which translates to clear rules and application 

of rules. This requires two aspects: 

the correct legal framework and a strong 

judiciary. The legal framework has been 

improving, especially with the new law on 

Asociaciones Publico Privadas. It is important 

that these rules be implemented at a state 

and municipal level; and it is crucial for 

both public and private sectors to continue 

working together, keeping in mind that the 

progress of a country relies on both sectors. 

Does regulation of infrastructure development 

and investment work well in 

Mexico? Are there any things you would 

like to change? 

GHC: They are working well. In 2007, 

Mexico created Fonadin and a plan to 

implement the infrastructure fund. This 

has enabled the country to invest 5 percent 

of its GDP [gross domestic product] in 

infrastructure. According to specialists this 

should rise to 7 percent. In order for this to 

be achieved, we need to continue working 

on the legal framework and especially have 

a mid- and long-term infrastructure plan 

which should not be tied to government 

changes. It is critical that the new administration 

presents plans with the input of the 

private sector. The financing/availability 

of money is not an issue in the country. 

Not too many countries can say this, so it 

is great timing for both public and private 

sector to work together and reach at least 

7 percent of GDP investment in infrastructure. 

This would translate to the wellbeing 

of the nation. 

Where are your priorities within the energy 

sector? How much of a focus is there now 

on renewable energy – and which types 

of renewable energy? 

GHC: Innovation: offering greener, more 

competitive and productive new technologies; 

and boosting renewables like wind 

and solar. In order to do it, GE has four top 

priorities: reducing the high cost of solar 

power; integrating renewable power into 

the grid; slashing emissions and fuel costs 

for jet engines; and connecting the world’s 

machines, making systems run smarter and 

more efficiently. 

The future will call for flexible energy 

solutions and a sturdy infrastructure to 

keep power flowing to consumers and 

industry. Our complete solutions, combined 

with the unique synergy between our 

products and services with over 100 years 

of technological knowledge and experience, 

will enable us to aid our customers 

in meeting or exceeding productivity and 

business growth targets. 

Do you think infrastructure funds will 

have much of a role to play in Mexico? 

Have you partnered much with funds, and 

would you be likely to do so in future? 

GHC: Infrastructure funds are now playing 

a relevant role in the Mexican infrastructure 

market and we expect that they 

will continue to be a relevant investment 

source. Given new regulation allowing for 

private participation in several infrastructure 

sectors, more investment sponsored 

by funds will continue to flow into Mexico. 

In GE we have a good commercial 

relationship with infrastructure funds 

since we are one of the most important 

suppliers of equipment for a variety of 

infrastructure-oriented projects. GE has 

also participated as an investor in some 

projects, but our approach is slightly different 

to the approach of an infrastructure 

fund. The federal government launched 

the National Infrastructure Plan 2007- 

2012 to develop infrastructure projects 

in Mexico. To achieve these goals, the 

Mexican government set up Fonadin to 

encourage private investment for planning, 

financing, design, construction and transference 

of national infrastructure projects 

with social impact or cost-effectiveness that 

will boost the economy and social welfare 

of the country. 

Are you optimistic about the new publicprivate 

partnership (PPP) framework in 

terms of attracting increased capital flow 

into Mexican infrastructure? 

GHC: Certainly, both at federal and state 

level, the PPP regulation will be a catalyst 

for infrastructure investment in the future. 

We believe that real efforts have been 

made to align both the government and 

private investors’ interests, so the basis for a 

successful, long-term development framework 

is being implemented. Mexico has an 

attractive launching off point because the 

financing community is familiar with the 

electricity sector’s structure. 

What are the keys to successful investing 

in Mexican infrastructure – and the 

potential pitfalls? 

GHC: Clear rules, good partnerships and 

a long-term vision. 

What is GE looking to achieve in Mexico 

over the next five years? 

GHC: At GE, we are building the future. 

We’re growing global leaders, investing 

in the country, developing advanced 

manufacturing skills, applying intelligent 

software to make things work smarter, 

and partnering with customers and 

communities. n


guest article 

x x x x x x x x x x x x x x x x x 

Wind power as 

a catalyst for 

development 

Rafael Alcalde Navarro, commercial director of 

GE Energy Power & Water Renewables talks about 

wind power potential in Mexico and the government’s 

ambitious goals for 2012 

The growing need to develop new sources of energy in order to 

satisfy global demand has led companies to invest an important 

part of their income in the research and development of innovative 

solutions that enable cleaner energy generation and that will 

replace conventional sources that produce high levels of polluting 

emissions. 

Within this context, governments are focused on promoting 

the use of renewable energy and setting short-term and mediumterm 

goals for an increase in energy generation through alternative 

technologies such as wind and solar power. 

In Mexico, the wind power map has grown significantly in the 

last few years, given that it is one of the most promising locations 

for the development of this sector. The Mexican government estimates 

that wind power generating capacity is potentially up to 71 

gigawatts (GW), which only takes into account 10 percent of the 

viable areas for the installation of wind farms in 22 out of 31 states. 

While at the end of 2010, more than 50 percent of the generating 

capacity of the country continued to be obtained from 

thermo-electric sources, investment in alternative technologies is 

growing. Proof of this is that in the state of Oaxaca alone, there 

are well-advanced projects which require investments in the order 

of $2 billion. Right now, the investment in wind power projects in 

Mexico is close to $1.5 billion. 

This type of investment has been possible thanks to the government’s 

recently implemented regulations which strengthen the 

legal framework for renewable energy. Also, on June 1 2011, the 

government approved a decree that amends the law governing 

renewable energy, which will recognise the externalities associated 

with this form of energy. These are the positive environmental 

impacts of clean energy, versus the negative environmental impacts 

of conventional energy.


guest article 

Wind turbines in Mexico’s Oaxaca region 

In addition, it assigns responsibilities 

to public services with respect to achieving 

and reporting goals. This is a very important, 

forward-thinking step to enable the development 

of a sustainable market for renewable 

energy in Mexico. There are also other, 

different plans which aim to incentivise the 

development of renewable energy projects 

throughout more Mexican states. 

These demonstrate the real commitment 

of the authorities to the improvement 

of the environment and to providing social 

and health benefits to the population at the 

same time as developing this new industry 

within the country. In Oaxaca alone, wind 

power could contribute up to 10GW in the 

medium term. 

The Energy Secretary announced the 

goal of achieving a generating capacity of 

2,200 megawatts (MW) in 2012 through 

wind power projects, which opens a window 

of opportunity for the principal investors in 

this sector. Going down this route means 

that the country will benefit in both energy 

generation and environmental terms. An 

example of this is the reduction of approximately 

200,000 of CO2 which, with each 

100MW of installed wind power capacity, 

would no longer be released into the atmosphere 

– and which is equivalent to eliminating 

the pollution from approximately 

27,000 cars a year, or planting three million 

mature trees. 

On the other hand, in order to consolidate 

the wind power sector, one of the 

challenges facing Mexico is the limited 

infrastructure that exists in those regions 

In the next few 

years, therefore, 

Mexico could go 

from producing only 

4% of its electricity 

via renewable 

energy sources, to 

approaching 10% 

with good potential for wind power generation. 

Despite this, the country will 

see substantial growth in its wind power 

market over the next few years, especially 

in Oaxaca, Baja California, Zacatecas and 

Tamaulipas, where there is high potential 

for wind power. 

In the next few years, therefore, Mexico 

could go from producing only 4 percent of 

its electricity via renewable energy sources, 

to approaching 10 percent, supporting 

and promoting the government initiative 

to reduce the emission of greenhouse gases 

by 50 percent by 2050. 

The Mexican Wind Power Association 

estimates that in 2011, 717MWs from 

new wind power projects will come online, 

which would increase the installed capacity 

across the country to 1,200MWs. 

So, to construct a solid base for the 

development of wind power generation 

in Mexico, both government and business 

must work hand-in-hand. The private sector’s 

view is very optimistic, as it assumes that 

in 2015 there would have to be investment 

of around $6 billion in wind power generation, 

which translates into the creation of 

thousands of jobs and the acceleration of 

the economy. 

As one of the important participants in 

the sector, General Electric is confident in 

investing in Mexico’s future, to support its 

economy and to progress the development 

of its population. It has also shown itself 

open to contributing to the various areas of 

government in order to develop an energy 

project that is sustainable and competitive. 

Within this context, its support for 

development and innovation is substantial, 

and its principal focus is in continuing to 

improve its wind turbines, including the 

1.5MW-1.6MW turbines. These are currently 

recognised as the point of reference 

for the industry, with 16,000 units installed 

across the globe. 

Recently the company has introduced 

the 1.6-100 meter turbine, where 

the increase in the diameter of the rotor 

blades creates a significant improvement in 

generating capacity and with it, additional 

benefits for clients through a 47 percent 

increase in the length of rotor blades (compared 

with model 1.6-82.5 meters) which 

delivers increased annual energy output. 

Finally, over the last few weeks, the 

company has signed its first contract in 

Latin America with Mexico, based on its 

operational experience and the design of 

the 1.5/1.6 turbine. From this multi-MW 

turbine development, other important 

contracts have been signed with the USA, 

Canada and Europe. n


interview 

f e d e r i c o p a t i ñ o , d i r e c t o r , f o n a d i n 

The facilitator 

Mexico’s national infrastructure fund – Fonadin – was set up to make socially important 

projects as bankable as possible. Boss Federico Patiño speaks of the $8.5bn the fund 

has committed so far and its role in kick-starting the Mexican infrastructure fund market 

Ask Fonadin head Federico Patiño what 

Mexico’s national infrastructure fund 

was created for and you get a concise, 

crystal-clear distillation of its mission 

statement: 

“Fonadin was created in 2008 to 

advance the procurement of the 

National Infrastructure Plan and to 

facilitate the mobilisation of private capital 

for that programme. We have been 

designed to take risks that the market 

is not willing to take and we support 

those infrastructure investments which 

provide very high social returns, but not 

necessarily market- attractive internal 

rates of return. What do we have to do 

to make those projects happen? Whatever 

is needed.” 

Put simply, Fonadin is Mexico’s 

equity development institution – the 

twin brother to Banobras, the country’s 

development bank – and one of the 

most important pieces of the Mexican 

infrastructure puzzle. As Patiño stated, 

Fonadin was created to make sure those 

projects that would otherwise not be 

bankable have a fair chance of getting 

off the ground. 

“The government announced some 

300 projects as part of the [first] 

National Infrastructure Plan, but not 

all of those 300 projects were ready – 

some of them were in different maturity 

stages. So we had to invest a lot of 

resources in feasibility studies in order 

to increase our pipeline of projects,” 

Patiño explains. 

As bold as it may sound, Patiño 

isn’t exaggerating when he says Fonadin 

is ready to do whatever it takes 

to make projects bankable. The fund 

We are the only 

institution in 

Mexico providing 

subordinated debt 

and we’ve found 

that there’s a big 

demand for it 

has a formidable array of instruments 

which it is ready to deploy when needed, 

including early-stage equity for feasibility 

studies, grants, traditional equity 

investments, subordinated debt and 

guarantees. 

“We provide two types of support to 

projects – refundable and non-refundable 

support,” Patiño points out. Many 

of the instruments Fonadin offers “are 

common in markets all over the world, 

but were not available in Mexico. So we 

started providing equity, subordinated 

debt and guarantees. As you can see, we 

do not compete with the private sector, 

we complement it,” he adds. 

Since its inception, Fonadin has 

already committed some $8.5 billion 

across 88 projects worth over $19 billion. 

Most of the money it has deployed 

– about 80 percent – has gone to transportation 

projects, with highways 

receiving the lion’s share of Fonadin’s 

investments and urban mass transport 

projects emerging as the second most 

important sector. Of the $8.5 billion 

Fonadin has deployed, some $185 million 

have been channelled towards feasibility 

studies. 

“The crisis had a big impact on bank 

financing and created a situation where 

there was a huge backlog of projects 

that were having difficulty in getting 

financed,” Patiño says. 

In addition, the crisis, as project 

finance professionals around the world 

quickly discovered, also changed the 

rules of the funding game. Whereas 

before concessions and public-private 

partnerships were funded with large 

quantities of debt – sometimes as much 

as 80 percent or even 90 percent of a 

project’s total cost – after 2008, debtto-equity 

ratios becomes less leveraged. 

“After this crisis, the world has 

changed to a situation where lenders 

are looking for 40 to 50 percent of 

equity financing. But 50 percent of 

equity is inefficient and in some cases 

reduces the number of sponsors. That’s 

where Fonadin has an important role 

to play,” Patiño explains. 

To help sponsors write more digestible 

equity cheques, Fonadin started 

providing subordinated debt – and in 

the process, created a whole new market 

from scratch. 

“We are the only institution in Mexico 

providing subordinated debt and we’ve 

found that there’s a big demand for it,” 

Patiño says. By injecting subordinated 

debt into a project’s financing structure, 

Fonadin allows sponsors to provide 

smaller equity contributions, ensuring 

deals cross the finishing line. 

Patiño acknowledges that subordinated 

debt has easily become Fonadin’s 

most popular product, but adds that the 

fund can also provide guarantees – at the 

senior debt level – to make banks more


interview 

National Infrastructure Fund Annual Support 

The National Infrastructure Fund has supported 88 projects with more than 

Mx$107bn ($8.5bn) for an investment of Mx$245bn ($19.5bn) 

2008 

13,591 

29,558 

comfortable with a project. “And even, 

in some cases, to make a project bankable, 

we end up providing a mix of grants, 

equity, subordinated debt or guarantees, 

for specific projects,” Patiño notes. 

But there are limits to Fonadin’s participation, 

with Patiño remarking that 

“for instance, in the case of subordinated 

debt, our limit is up 30 per cent of total 

project debt”. 

Funding the funds 

15,967 

Perhaps in recognition of its limitations, 

Fonadin has been keen to encourage 

other players to enter the market and 

has been instrumental in nurturing the 

development of Mexico-focused infrastructure 

private equity funds. 

“Fonadin has played an important 

catalytic role in order to promote the 

creation of infrastructure private equity 

funds in Mexico. So far, we have authorised 

investments of some $500 million 

across nine infrastructure funds,” Patiño 

recalls, adding that “we continue promoting 

the development of new players 

for the Mexican infrastructure market”. 

Perhaps the highest profile fund 

Fonadin has invested in has been the 

Macquarie Mexican Infrastructure Fund 

(MMIF), the debut Mexican vehicle of 

FNI Annual Support 

(million pesos) 

59,121 

29,563 

95,641 

36,520 

107,709 

2009 2010 2011 2012 

n Annual support n accumulated support n 2011 

12,069 

Australia’s Macquarie Group, targeting 

upwards of $1 billion to invest in roads, 

rail, water, energy, airports and social 

infrastructure projects across Mexico. 

Fonadin initially committed some 

$80 million to MMIF, becoming one 

of the fund’s cornerstone investors. 

Another infrastructure fund Fonadin 

has sponsored is I Cuadrada, the brainchild 

of real estate group Black Creek, 

which managed to raise some $243 million 

from Mexican institutional investors. 

Both funds are listed on the Mexican 

Stock Exchange and have raised 

the majority of their funds through 

the use of development capital certificates 

(CKDs), stock certificates that have 

allowed local pensions to invest in private 

funds that were previously barred 

to them. 

Patiño is optimistic about the performance 

of CKDs so far and is enthusiastic 

about the behaviour of the Mexican 

pension market. 

“An important change in Mexico is 

that the government has decided to 

change regulation for the country’s 

pension funds. Pensions can now invest 

up to $15 billion in infrastructure. So 

far, they have invested a total of $1.6 

billion in infrastructure,” Patiño says, 

highlighting the sector’s untapped 

potential. 

But the Fonadin boss sees a larger 

role for the country’s pensions – and 

other institutional investors – that goes 

beyond providing equity. 

“We are now analysing the creation 

of a new programme, which is basically 

a credit enhancement programme for 

the capital markets. Considering that 

commercial banks are only capable 

of providing seven- to eight-year miniperms, 

we need the capital markets to 

finance infrastructure over the long 

term,” Patiño begins. A mini-perm is a 

short-term loan, usually lasting between 

five to seven years. 

Considering the Mexican government 

wants to invest at least 5 percent of 

Mexico’s gross domestic product (GDP) 

in infrastructure – and considering also 

that it wants the private sector to participate 

actively in funding its National 

Infrastructure Plan through the use of 

PPPs – Mexico will certainly need all the 

funding it can get its hands on. 

“I think we learned a lot from the first 

National Infrastructure Plan. One of the 

most important lessons we learned is to 

have an open dialogue with investors. 

Projects have to be simple and with the 

right size – not too big and not too small. 

It is important to hire the right technical 

advisors to develop quality studies 

to guarantee the success of the projects. 

The risk allocation is crucial. If you try 

to allocate all the risks to the private 

sector, they are going to charge you for 

that,” Patiño reflects. 

“One of the most important things 

that we have done in order to promote 

the participation of the private sector 

into infrastructure projects has been the 

creation of a new legal framework for 

PPP projects to provide legal certainty 

to both the public and private sector,” 

he adds. 

“So I think we are now better at all 

of this,” Patiño concludes. n


interview 

j u a n m a n u e l g o n z á l e z a n d p e d r o j . r e s é n d e z , g r e e n b e r g t r a u r i g m e x i c o 

Greenberg Traurig’s integrated 

infra approach 

Juan Manuel González and Pedro J. Reséndez tell of Greenberg Traurig’s aim to become 

one of Latin America’s premier infrastructure law firms 

Greenberg Traurig (Greenberg), the international 

law firm with 34 offices across the 

United States, Latin America, Europe, the 

Middle East and Asia, opened its first Mexican 

office – the firm’s thirty-third, in Mexico 

City – last October. 

It did this with the typical verve of a 

marquee international law firm, entering 

the market via the hiring of a number of 

established Mexican lawyers. 

One of Greenberg’s key hires earlier this 

year was Juan Manuel González (JMG), of 

storied Mexican law firm Galicia Abogados, 

who brought with him a group of six lawyers 

from different law firms to beef up Greenberg’s 

Global Energy and Infrastructure 

practice. 

González is an infrastructure veteran 

with over a decade of experience in the 

space, including work on landmark transactions 

such as last September’s securitisation 

of two greenfield contracts by Mexican 

developer ICA, worth some $709 million. 

Infrastructure Investor caught up with him 

and Pedro J. Reséndez (PJR) – a well known 

energy sector lawyer with more than 15 years 

of experience – in Mexico City a day after 

the capital’s worst earthquake since 1985. 

Greenberg has been expanding its Mexican 

operations at a rapid pace. How happy are 

you with the team’s size and its capability? 

JMG: The office’s size today is five partners 

and I would say 35 associates. We consider 

that to be a real player in the market you 

need to have a certain critical mass, from 

Juan Manuel González 

different backgrounds, in order to have the 

ability to handle big projects. That’s why 

each one of our partners brings different 

angles, different experiences, and came with 

a team that has already worked with them 

and has experience. 

In the case of infrastructure, we bring an 

integrated approach to the asset class where 

we are able to handle all stages from the 

awarding of the contract, negotiating with 

the authorities during the bidding process, 

financing and then managing the contract. 

Why did Greenberg decide to open 

an office in Mexico? Was this a case of 

Greenberg, as an international firm, having 

its international clients saying they wanted 

to do business in Mexico and requesting 

your presence on the ground? 

JMG: I think you’re right. The clients that 

we are handling today are a mixture of clients 

that were already Greenberg clients and 

other clients which the partners brought 

with them from their previous practices. 

But it was the need to fulfil Greenberg’s 

international expansion objectives, 

especially in Latin America, that led to the 

opening of the Mexico office, which will 

not only work on Mexican projects, but will 

help our office in Miami – which has a very 

strong group for Latin America – to explore 

all infrastructure-related endeavours. 

What infrastructure sectors are catching 

your attention? 

JMG: In terms of sectors, we are interested 

mostly in transportation – including toll 

roads, airports and ports – oil, gas and water. 

The Mexican government has put together 

a very important development programme 

covering all transportation sectors as well 

as hydropower and water treatment plants. 

Do you have specific targets for these different 

infrastructure sectors? 

JMG: We don’t have sector-specific targets – 

we are more client-oriented. As we said, we 

have an integrated approach where we help 

the client obtain the contract, finance the 

contract, manage the contract and if it has 

any issues, negotiate the dispute mechanism

Connecting Clients With Opportunities 

Greenberg Traurig’s Global Energy & Infrastructure Practice provides multidisciplinary legal 

services encompassing the development, construction, financing, ownership and operation of 

virtually any type of infrastructure project. Our global resources and reach enable GT attorneys 

to advise clients on projects throughout Latin America and around the world. 

1800 ATTORNEYS IN 34 LOCATIONS° 

Greenberg Traurig, S.C. 

Paseo de la Reforma No. 265 PH1 

Colonia Cuauhtemoc 

Mexico, D.F. C.P. 06500 

+52 55 5029.0000 

www.gtlaw.com 

The hiring of a lawyer is an important decision and should not be based solely upon advertisements. Before you decide, ask us to send you free written information about our qualifications and our experience. Prior results do not guarantee a similar 

outcome. Greenberg Traurig is a service mark and trade name of Greenberg Traurig, LLP and Greenberg Traurig, P.A. ©2012 Greenberg Traurig, LLP. Attorneys at Law. All rights reserved. Contact: Juan Manuel Gonzalez in Mexico City at +52 55 5029.0000. 

°These numbers are subject to fluctuation. Images in this advertisement do not depict Greenberg Traurig attorneys, clients, staff or facilities. 13966


interview 

throughout the life of the contract. We 

have clients across many infrastructure 

sectors, including oil, electricity, toll roads, 

airports and water. 

So more than focusing on a specific 

sector, we would like to have long-standing 

relationships with all the key players in all 

of these different sectors. 

PJR: For example, [the partners] advised 

some years ago on the privatisation of 

Mexico’s first airport, a deal involving several 

European companies. We advised the 

winning consortium. So we are really active 

in all infrastructure sectors. 

And it’s not just on the deal front – we 

are also very active on the project management 

side of things because a lot of 

these contracts involve maintenance and 

negotiations. 

How does dispute resolution work in 

Mexico? 

JMG: I think that Mexico, since the inception 

of NAFTA [North American Free 

Trade Agreement], has been a friendly 

place for arbitration. I think since the 

early 1990s there have been many experiences 

of arbitration, in the corporate world, 

and more and more in infrastructure as 

projects have developed. I think that has 

produced a bulk of cases that show how 

these disputes can be solved. 

In terms of our involvement, we have 

done mostly mediation and conciliation 

out of court. But we see all sorts of dispute 

mechanisms being used. And the 

good thing in Mexico is that you have a 

legal framework that provides for all sorts 

of remedies to resolve legal disputes. So in 

general terms we see courts enforcing contracts 

and therefore we see predictability 

on the outcomes. 

PJR: Also, it’s important to note that in 

the courts – at the federal level – there is 

a new generation of judges coming, some 

of them former colleagues. These are guys 

educated abroad, with international experience, 

not only in the US but elsewhere. 

What are your thoughts on Mexico’s new 

PPP law? 

JMG: I think the new PPP law is a great 

tool. It establishes the foundations that 

will allow for better allocation of risk, 

better contract management in the longterm 

and it also offers more flexibility and 

more creativity in areas like right-of-way, 

for example. 

It also offers new features, like the 

ability to receive unsolicited bids, which 

takes the pressure off government to 

be the sole source of project ideas and 

the only one responsible for the design, 

management and overall preparation of 

a project. 

We see a lot of good things in this law. 

As with any other law we will have to see 

how it’s applied in practice, but we view 

it as very nice-to-have feature. 

Is the Mexican public sector wellequipped 

to handle unsolicited bids 

though? 

PJR: The way the new law has been 

drafted ensures these projects need to 

be approved by a specialised committee. 

It’s an inter-secretarial commission specialised 

in infrastructure and finance, so 

these bids will be decided by a real highend 

team. 

JMG: I think it’s also important to see 

the new PPP law as a change in the mindset 

of the Mexican government. We had 

the concessions – which were this mechanism 

where you took most of the risk 

and passed it on to the private sector and 

where the authorities only had to exercise 

regulatory oversight. And then you 

had public works. This new [PPP] regime 

represents a real partnership, where the 

mind-set of the private partner is different 

from that of traditional government 

procurement. 

The government’s National Infrastructure 

Plan (NIP) is fairly ambitious. With 

a second edition about to be launched, 

what’s your opinion of the NIP and will 

it be able to deliver a big pipeline of 

projects? 

JMG: I’ve seen many presentations on the 

level of completion of the NIP. And of 

course when you hear presentations from 

the government side, you hear they are 

very close to the objectives they outlined 

– and when you hear presentations from 

the private sector, you hear that there is 

still a lot of work to be done. 

I don’t want to get into that debate – but 

what is clear is that much has been learned 

from the first NIP. There were a lot of 

projects in different sectors, such as energy, 

transportation, airports, ports, water. So 

you have all the players in the market better 

understanding the system now, and you can 

see that with Mexican companies, which have 

become much more sophisticated. 

So when you combine that with the 

fact that you have a better financial 

system – with the Afores (Mexican pension 

funds) debt market and the CKDs 

(capital development certificates), as well 

as the National Infrastructure Fund (Fonadin) 

– I believe you now have all of these 

elements – which had been developing at 

different speeds – converging. This leads 

me to believe that what is coming next 

will not be ad-hoc growth, but rather a 

geometrical growth. 

I think all institutions in Mexico 

are more capable of absorbing a larger 

number of projects today. So while it’s 

debatable whether the previous NIP 

was successful, I think it has created the 

momentum, with all the elements there. 

Finally, where does Greenberg want to 

be in the Mexican infrastructure market 

over the coming years? 

JMG: We want to be one of the premier 

law firms when people speak of infrastructure 

generally – not only in Mexico, but 

in Latin America. We have a team that 

is capable of advising clients across all 

infrastructure sectors in Latin America 

and across the key infrastructure sectors 

in the region. That’s where we want to be 

over the coming years. n


guest article 

g r e e n b e r g t r a u r i g 

Are conditions ripe for significant 

growth in Mexican infra? 

Greenberg Traurig’s Juan Manuel González and Pedro Javier Reséndez explain how 

all the pieces of the infrastructure puzzle are now in place for Mexico to experience 

exceptional growth over the next decade 

Most would agree that infrastructure is 

a key factor for development and the 

Mexican government appears to have 

made a strong bet on making it one of 

the country’s growth engines. 

Mexico has done its homework over 

the past two decades: the legal regime has 

been substantially improved, country risks 

have decreased, government institutions 

have been modernised and developers 

are better positioned – with each having 

gained valuable experience through 

projects currently in development. The 

domestic equity and long-term debt markets, 

both based in local currency, have 

also strengthened. All of these facts 

underline that conditions are ripe for 

the coming decade to be remembered 

as the decade of infrastructure in Mexico. 

Today, the challenge for the government 

is to increase and improve project 

execution, which would allow for multiple 

and more efficient processes and for 

projects to be implemented simultaneously. 

To this end, leadership by the new 

Mexican administration, which is to be 

elected into office this coming summer, 

will be essential. 

A better legal framework 

Mexico has advanced significantly in 

terms of enacting laws that permit and 

promote investment in the infrastructure 

sector, as well as formalising treaties for 

the protection of such investments. Both 

of these advancements have resulted in a 

legal framework that provides more certainty 

and stability and offers investment 

Pedro Javier Reséndez 

protections similar to those in more developed 

countries. 

Without implying that everything is 

done and accomplished, it is important 

to recognise that the executive and legislative 

branches of the Mexican government, 

during several past government 

administrations and beginning with the 

signing of the North American Free Trade 

Agreement (NAFTA), have substantially 

improved the legal regime applicable 

to the transportation and energy sectors. 

These improvements have, in turn, 

allowed for new forms of private investment. 

Some of the more relevant examples 

of projects resulting from improvements 

to the legal regime include the following: 

• Several port and airport privatisations, 

arising mostly from the implementation 

of NAFTA; 

• Two generations of highway concession 

projects; 

• The development of several important 

projects relating to water pipelines 

and wastewater treatment plants; 

• A new generation of public-private partnership 

(PPP) projects involving longterm 

concessions in the highway, health, 

education and, more recently, social 

infrastructure sector (e.g., prisons); 

• And two major dams and several cogeneration 

and independent power 

producer projects, which have been 

made possible by recent reforms to 

the energy sector. 

It remains true that each of the aforementioned 

projects or reforms involved 

their own unique challenges and that, 

with the passage of time, the lessons 

learned in implementing those projects 

and reforms will undoubtedly be analysed 

and improved upon. However, the result 

is that today Mexico has an infrastructure 

base in terms of airports, ports, highway 

transportation, water systems and energy 

generation that puts the country above its 

Latin American neighbours and allows it 

to look ahead to the next level of development. 

New and capable developers 

In addition to providing for the growth 

and improvement of the country’s infrastructure, 

the projects and reforms


guest article 

completed to date have attracted a new 

generation of market participants to 

Mexico. 

These participants, which include 

companies of all sizes and levels of expertise 

from Mexico and abroad, have been 

attracted to Mexico by increasing development 

activity and favorable market conditions, 

especially with respect to ports, airports, 

highways, water projects, oil, energy 

and, more recently, social infrastructure. 

The result has been a strengthening 

in the supply of projects, which has 

also led to a revitalisation of industries 

through the application of newer and 

better technologies. Also, it is important 

to emphasise that Mexico, in contrast with 

many other Latin American countries, has 

encouraged the participation of foreign 

entities in its infrastructure sector. 

Today, after a period of great difficulty 

for Mexican developers due to the 

government’s lack of a clear and focused 

development policy, the sector has made 

its comeback (arguably, based largely on 

the efforts of the private sector itself) and 

has allowed a strong group of Mexican 

construction companies and concessionaires 

to develop sufficient experience and 

resources to compete at the international 

level. 

To continue building on that success, 

the Mexican government should continue 

to promote policies that permit 

the development of Mexican infrastructure 

operators, construction companies 

and engineering firms, and encourage 

the participation of the world’s best construction 

companies and developers in 

Mexican infrastructure. 

Project experience 

After overcoming significant challenges 

and with much effort under circumstances 

beyond those ever imagined, most of 

the public-private projects commenced 

in Mexico have been, or will shortly be, 

completed. 

These projects will be remembered 

as pioneering and, perhaps more 

The growth of pension 

and retirement funds in 

Mexico has led to a wide 

range of options for the 

participation of capital in 

Mexican projects 

importantly, as the projects that helped 

Mexico overcome the steep learning curve 

often encountered when undertaking 

large and ambitious projects. 

Undoubtedly, the different branches 

of the Mexican government, developers, 

financing parties and investors will also 

surely remember these two past decades 

as a period during which expertise was 

acquired in developing, bidding, winning, 

financing, executing, launching and refinancing 

infrastructure projects in Mexico. 

The new Public-Private Associations 

Law (APP), among its other intents and 

purposes, has served as a tool through 

which to gather and make use of much of 

the expertise gained over the past decade 

by public agencies, banks and developers, 

particularly from the execution of successful 

transportation and water projects. 

As a result, the APP is today much 

improved and more flexible than the prior 

legal regime. By providing for a more 

solid and unified legal base that reflects 

collective industry experience, the APP 

also serves to foster the development of 

new infrastructure projects by providing 

a legislative framework that avoids many 

of the ‘dead ends’ and other difficulties 

endemic under the prior regime. The 

APP also streamlined a public procurement 

process that previously did not 

provide for a comprehensive, long-term 

partnership between the public and private 

sectors. 

Better government 

institutions 

The Mexican government, having now 

completed more than a decade under the 

new legal regime, likely appreciates more 

than ever the dual functions of a government 

entity that is striving for a dynamic 

and successful infrastructure sector: in 

other words, government’s primary role as 

a public authority and its complementary 

and equally important role as a partner to 

private enterprise. That duality, and all 

of its accompanying conflicting objectives, 

requires an institutional framework that 

establishes clearly defined roles for market 

participants. 

One of those institutions is the 

National Infrastructure Fund (Fonadin), 

which today is considered perhaps the 

most important vehicle in the promotion 

of infrastructure development in Mexico. 

Fonadin has a clear legal mandate and 

a reputation for exceptional technical 

capacity. Above other institutions, it is 

widely respected as a leading force behind 

infrastructure projects and an excellent 

public sector partner. 

Another important institution is the 

office of the Secretary of Finance and 

Public Credit (SHCP), a government 

agency established by the Mexican legislature 

under the APP. The mandate of the 

SHCP is to administer Mexican government 

funds under any long-term contract 

to which the Mexican federal government 

is a party. 

In essence, the SHCP acts to align the 

interests of the Mexican federal government 

with those of its private sector partners. 

Under the prior legal regime, in 

contrast, private parties were more often 

likely to enter into direct and indirect 

discussions with the Secretary of Public 

Function, with such discussions tending 

to focus more on issues of liability and 

accountability, rather than on pragmatic 

issues related to actual business. 

The success of government participation 

in the Mexican infrastructure 

market can be largely attributed to the


guest article 

appointment of qualified persons to 

positions of leadership within the public 

agencies and other entities charged with 

the development of projects. Working 

together with infrastructure finance 

professionals, these public officials have 

been able to execute and implement 

infrastructure development policies based 

on long-term objectives that avoid shortterm 

political considerations. Building 

upon this successful base, future governments 

should be able to take advantage of 

these favourable conditions to continue 

large-scale infrastructure development 

that accomplishes the country’s longterm 

vision. 

Long-term financing 

The growth of pension and retirement 

funds in Mexico, known locally as Afores, 

has led to a wide range of options for 

the participation of capital in Mexican 

projects, including in the form of equity, 

preferential and subordinated debt 

instruments or other securities that are 

then able to be sold through the Mexican 

Stock Exchange. 

Participants are able to invest in a variety 

of companies, from those formed to 

develop one or more projects to private 

equity fund-type structures enabled by 

capital development certificates (CKDs). 

As such, Afores are beginning to complement 

the dynamic domestic and international 

banking sectors in Mexico with 

respect to infrastructure, and they have 

broad experience in supporting both 

‘greenfield’ and ‘brownfield’ projects. 

The availability of such investment 

instruments has allowed a diverse number 

of national and foreign fund managers 

specialising in infrastructure projects to 

enter into the Mexican market. These 

fund managers have earned the Afores’ 

confidence and today these vehicles 

represent a real alternative for those 

interested in participating in the market 

in terms other than working with Mexican 

and international developers. In 

the end, the result is a more active and 

Mechanisms for dispute resolution 

Unfortunately, infrastructure projects have not been immune to disputes arising between 

private investors and government authorities. However, such disputes have allowed 

for the development and implementation of various judicial and alternative dispute 

resolution mechanisms. 

The disputes that are seen on one hand as unfortunate individual cases can be seen 

on the other hand (and in full perspective) as providing a wealth of experiences and 

solutions to problems that presently allow us to reaffirm that judges and the administrators 

of alternative mechanisms of dispute resolution (i.e., arbitrators and mediators) have 

sufficient precedent to make the market more mature, sophisticated and predictable 

for new investors. 

sophisticated market for infrastructure 

projects in Mexico. 

The combination of a more robust 

institutional framework, including Fonadin, 

a well-capitalised commercial and 

development bank, the existence of 

investment funds dedicated to Mexican 

infrastructure, and a robust market with 

heavy interest in the financing and refinancing 

of infrastructure projects are 

important ingredients for success that, 

even in developed markets, is difficult 

to find. These essential factors will continue 

to support the development of the 

infrastructure market in Mexico. 

From a market financing perspective, 

one of the most important factors 

contributing to the increasingly active 

participation by Afores and other institutional 

investors – including the Institute 

of Social Security for the Service of State 

Workers (ISSSTE) – in the infrastructure 

market is the efforts of development 

banks, in particular the National Bank 

for Public Works and Services (Banobras), 

in attracting institutional investor 

participation, primarily by identifying 

and assuming risks that, in principle, 

are difficult for institutional investors to 

assume. 

The importance of these institutional 

investors is also key because, from a regulatory 

and capital requirement perspective, 

they are often better suited for the 

development of long-term infrastructure 

projects than more heavily regulated commercial 

banks. 

Conclusion 

The stage for infrastructure investment in 

Mexico has been properly set and, if the 

actors perform their roles properly and 

within the scope of their expected abilities, 

we should experience exceptional 

growth in Mexican infrastructure over 

the next decade. 

Both Mexican and foreign developers 

participating in the Mexican market are 

better equipped than ever before to carry 

out the infrastructure projects that Mexico 

needs. Combining clearly identified infrastructure 

needs with the fact that many 

projects are already in development, as 

well as innovative legislation and capable 

professionals who have learned much from 

years of infrastructure experience, assures 

that the road to success in the Mexican 

infrastructure sector is no longer blocked. 

Equity capital, bank funding and the 

securities market are also well capitalised 

to finance infrastructure projects that 

properly balance risk and return within 

market parameters. The market also 

expects a new Mexican administration 

to make infrastructure a top priority and 

to reinforce and build upon the success 

already seen in the Mexican infrastructure 

marketplace today. 

Proper execution of new infrastructure 

projects, coupled with leadership at 

both the public and private level, should 

finally allow Mexico to capitalise on the 

gains and successes of the past for the 

benefit of the Mexican people today and 

in the future. n


interview 

d i o n i s i o a n t o n i o p é r e z - j á c o m e f r i s c i o n e , 

m i n i s t e r o f t e l e c o m m u n i c a t i o n s a n d t r a n s p o r t 

Better connecting Mexico 

Dionisio Antonio Pérez-Jácome Friscione, the head of Mexico’s transport and 

communications ministry (SCT), talks of building 10km of road a day since 2007 and 

outlines his 3Cs policy – Competition, Convergence and Coverage – to bring Mexico 

firmly into the digital age 

How would you assess the government’s 

implementation of its infrastructure 

plans? What has worked and what is 

lagging behind? 

Current levels of investment in infrastructure 

in Mexico are unprecedented. 

Since 2007, overall annual investment 

has averaged 4.5 percent of GDP and the 

amount invested in communications and 

transportation during this administration 

is approximately $48 billion as of December 

2011. 

Mexico’s investment rate is higher 

than the OECD’s recommendations to 

serve infrastructure demand by 2030 (2.5 

percent to 3.5 percent of GDP). Currently 

OECD countries dedicate on average 3.3 

percent of their GDP to infrastructure, 

1.2 percentage points less than Mexico. 

This achievement has been possible 

due to the strategic guidelines set by the 

National Infrastructure Plan and to the 

commitment and leadership President 

Calderon has brought to infrastructure 

planning and execution. 

It is important to maintain the current 

pace to ensure that the infrastructure 

gap is breached and the benefits of 

infrastructure investment reach the entire 

population of the country. A key element 

is to strengthen the collaboration with 

the private sector through public-private 

partnerships (PPPs) to gain efficiency and 

long-term quality service provision at competitive 

prices, among other goals. Mexico 

has a new law for PPPs, approved last January 

by Congress that is expected to further 

boost investment in infrastructure. 

What are Mexico’s key infrastructure 

objectives and what are the priority sectors 

for the government? 

The National Development Plan (NDP) 

and specifically the National Infrastructure 

Plan (NIP) portray this administration’s 

infrastructure objectives, including: 

• Increasing the coverage, quality and 

competitiveness of infrastructure; 

• Transforming the country into an 

international logistic platform leveraging 

our geographical position and 

our free trade agreement network; 

• Increasing access to public services; 

• Promoting balanced regional 

growth; 

• Promoting sustainable development; 

• Developing the necessary infrastructure 

to promote tourism activities. 

I would like to highlight two priority 

sectors in infrastructure: highways to 

increase connectivity and telecommunications 

to seize the digital era. 

This administration has invested 

more than $20 billion in roads and has 

built or modernised more than 18,000 

kilometres –- an average of 10km a day 

since January of 2007. As a matter of fact, 

the NIP’s ‘ambitious goal’ of 17,598km 

has already been surpassed. There is special 

attention to highways, since modern 

roads reduce travel times, increase safety, 

and reduce transport operating costs 

(for example with less fuel consumption), 

and maintenance costs (less wear 

of tires, breaks, etc.), all of which bring 

benefits to producers, consumers, and 

communities.


interview 

This administration has 

built or modernised more 

than 18,000km [of roads]. 

As a matter of fact, the 

National Infrastructure 

Plan’s ‘ambitious goal’ 

of 17,598km has already 

been surpassed 

Additionally, more and better transport 

services provide better opportunities 

for those that live in rural areas; for 

instance, by increasing access to better 

products and services. They also foster 

social and cultural development as well 

as tourism. Finally, rural and less advantaged 

regions with low mobility standards 

benefit the most from new infrastructure 

projects, allowing for a more balanced 

distribution of wealth. For example, 

during this administration we have built 

or modernised over 11,000km of rural 

roads, which ensure easier and faster 

access to public services such as education 

and health to previously isolated 

communities. 

With regards to telecommunications, 

in Mexico we promote several strategies 

to accelerate the incursion into the digital 

age. To do so, the current administration 

has implemented a 3Cs policy: 

Competition, Convergence and Coverage. 

Through these, Mexico has managed to 

achieve price reductions, further penetration 

and foster the participation of new 

providers. 

We work to build a stronger regulatory 

policy to favour competition alongside 

a social coverage policy. In January, 

the SCT published a document outlining 

a set of actions to shrink the digital 

gap. Additionally in March we published 

a policy document called the Digital 

Agenda focused on bringing access to 

broadband to all Mexicans and promoting 

the use and development of information 

and communication technology 

tools. 

Next generation networks are also a 

priority. Mexico is preparing to implement 

a series of measures designed to 

promote and deploy such networks. It 

is important to highlight our priority 

to seize the digital age by adapting and 

encouraging the use of innovative technology 

such as long term evolution (LTE). 

Social coverage policy is critical and 

Mexico’s goal in 2012 is to have 24,000 

digital community centres in operation 

offering internet, education, and health 

services. This strategy aims to reduce the 

digital gap among adults while offering 

advanced tools, training and entrepreneurial 

support to younger generations. 

What role has private capital played in 

helping the government implement its 

infrastructure plans? 

Private capital has been critical to execute 

and operate infrastructure, transportation, 

and telecommunications projects 

with more than $25 billion invested by 

private parties since 2007. 

To a large extent this is due to an 

improved regulatory framework. Today 

the public sector plays a stronger role 

as a catalyst for private investments. For 

example, to boost private investment 

Mexico has leveraged three distinctive 

PPP schemes: project finance initiatives, 

concessions of new assets, and concessions 

of existing assets. 

We are confident the private sector 

will continue to play a greater role in 

financing and operating infrastructure 

due to the publication of the new law 

for PPPs. 

This law gives the private sector the 

opportunity to present unsolicited proposals 

and, because the project can be 

bidded in parts (design, construction, 

operation, etc.), the private sector can 

participate in several bidding processes 

in contrast with the concessions framework. 

Most importantly, transparency and 

equity are strengthened and risks are 

clearly identified and balanced. Finally, 

the bidding process under the PPP law 

does not distinguish between domestic 

and international participants; it leaves 

the respective laws (for example the foreign 

direct investment law) to determine 

the limits within which foreign participants 

may take part in the sector. 

What strengths does the private sector 

bring to infrastructure procurement? 

Several reports by the World Bank, OECD, 

International Monetary Fund and other


interview 

interview 

academic and multilateral institutions 

observe that the demand for infrastructure, 

especially in developing countries, 

is typically greater than what government 

can finance on its own. 

Hence the importance to create strategic 

partnerships with the private sector 

to leverage its technical, financial, and 

operational expertise in order to raise the 

amount of investments across highways, 

transportation, and telecommunication 

networks. In addition, the private sector 

brings greater capacity to manage economic 

resources which helps to optimise 

investment allocation. 

Mexico has experience working with 

the private sector for infrastructure and 

services provision. In the late 1980s we 

began the privatisation of the telecommunication 

sector followed by the highways 

sector. 

The main economic model was the 

concession scheme that brought the private 

sector’s know-how to design, finance, 

build, and operate infrastructure projects. 

Between 2003 and 2004, policy makers 

decided to explore additional schemes 

that could strengthen the relationship 

between government and private sector. 

As a result, project finance initiatives 

began in Mexico and in 2005 a free 

toll road (Irapuato-La Piedad) and a 

high-tech hospital in Guanajuato were 

awarded under this new scheme. Since 

then, more than 10 project finance initiatives 

have been executed in highways, 

regional hospitals, and universities. 

Finally, the participation of private 

capital in infrastructure development 

allows government to release funds to 

attend other needs such as education, 

health, housing, etc. With the new PPP 

law the private sector can also participate 

in the provision of infrastructure and 

services for such social sectors. 

Are there some sectors which you 

believe are particularly suited to private 

sector participation and, conversely, 

some sectors where you wouldn’t allow 

private sector participation? 

In general, both the telecommunications 

and transportation sectors are suitable to 

private sector participation. However, it 

is important to mention that our Constitution 

imposes restrictions to private 

capital (and in some cases foreign capital) 

participation in strategic sectors such as 

the postal service, oil exploration and 

production, hydrocarbons, among others. 

The private sector participates 

highly in telecommunications including 

broadband services, satellites, internet, 

landlines and mobile phones. The law 

on foreign direct investment regulates 

foreign capital participation in telecommunications. 

For example in mobile communications, 

foreign capital is allowed up 

to 49 percent. During this administration 

more than 50 percent of all investments 

in telecommunications have been made 

by the private sector, and in the last 10 

years overall investments in telecommunications 

have averaged $3 billion annually. 

Moreover, the private sector has 

increased its involvement in financing 

and operating transportation projects 

through the PPP schemes discussed 

before. In the highways sector, we have 

seen the growth of project finance initiatives 

as well as concessions. Several 

ports are built or operated through private 

funds. Finally, railway companies in 

Mexico have obtained long-term concessions 

(up to 50 years) to modernise, 

maintain, and operate rail lines. 

What is the federal government’s role 

in coordinating the implementation of 

the infrastructure programme vis a vis 

the regional authorities? How much 

autonomy do the regions have to procure 

their own projects? 

In Mexico the federal government is 

responsible for designing and executing 

a National Development Plan (NDP) that 

outlines a strategy to advance the transformation 

of the country. In addition, in 

2007 this administration launched the 

National Infrastructure Plan 2007-2012 

During this administration, 

more than 50 percent 

of all investments in 

telecoms have been 

made by the private 

sector


interview 

interview 

(NIP), which establishes the objectives, 

goals and projects needed to invest in 

three critical areas – ports, railways, and 

airports – to position Mexico as one of 

the top international logistics platforms, 

including greater connectivity of the 

transportation system, and the integration 

and modernisation of logistic chains. 

Each of the 31 states is responsible 

for the creation of their own development 

plans. This gives the states the 

autonomy to pursue their own infrastructure 

projects and they can request technical 

and financial assistance from the 

federation to design, fund, or execute 

their projects. More specifically, this is 

established in Article 124 of the Constitution 

which explains that all powers that 

are not attributed to the federation are 

reserved for the states. 

There has to be great coordination 

between national and state policy to 

implement the necessary infrastructure 

considered in the NIP. For example, in 

order to finance a project proposed by 

a state with funds from the federation, a 

special investment unit at the Ministry of 

Finance evaluates, among other criteria, 

how much that project in particular supports 

the NIP or the NDP. 

There are other sectors in which the 

states have greater autonomy to propose 

policies. An example is urban transportation 

policy. Municipalities and states can 

work together to define this policy and 

the federal government can participate 

with technical and financial assistance, 

if required, but the policy itself is not 

dictated by the federal government. 

Mexico has put a lot of tools in place 

and attracted a fair amount of attention 

from international investors. But it arguably 

hasn’t attained the level of PPP/ 

concession development that a country 

like Chile has. Why has this been so and 

is this something we can expect the new 

PPP law to change? 

It can be complicated to measure 

and compare a specific level of PPP/ 

concession development between two 

countries. However, it is worth mentioning 

that the Chilean experience in 

concessions is recognised and several 

countries have adopted or harmonised 

their regulatory framework accordingly, 

very much like other countries have 

followed the legal framework of the 

UK’s Private Finance Initiative, which 

has also been successful in promoting 


In addition, concessions in Chile 

have been in operation for longer than 

in Mexico. In our country, concessions 

began in 1989 and during the past few 

years, Mexico has undertaken strong 

actions leading to a stronger and more 

competitive regulatory framework to provide 

greater legal certainty to operators 

and concessionaires. 

For example, during this administration 

19 highway projects have been 

awarded under concession schemes 

which account for an investment of 

nearly $3 billion for 1,113km. More 

than seven highway projects have been 

awarded under PPP initiatives, which 

account for an investment greater than 

$1.5 billion, covering 557.8km. 

I can foresee that private investments 

will continue to leverage on the 

regulations that this administration has 

promoted and thus we believe we can 

expect a boost for this type of project. 

In addition, we expect PPP/PFI initiatives 

to increase given the new PPP law, 

which provides greater legal certainty 

with regards to the provision of services 

and the amendments and extension of 

projects operated by the private sector, as 

well as greater transparency and fairness. 

As a foreign investor, what competitive 

advantages does Mexico’s infrastructure 

programme offer compared with 

other infrastructure hotspots across the 

globe? 

There can be several factors that give 

Mexico a competitive advantage. Mexico 

is one of the more stable and largest 

economies in the world with a highly 

dynamic internal market, and it neighbours 

one of the largest markets in the 

globe [the United States]. We have a 

clear understanding of the infrastructure 

needed to take advantage of such factors. 

The NIP provides the guidelines that 

help to identify the necessary projects 

to attend to the growing infrastructure 

demand and to reduce the infrastructure 

gap. In addition, Mexico has 

strengthened its regulatory framework to 

increase legal certainty for private sector 

participation in infrastructure. 

Other competitive advantages 

Mexico has are its unique international 

position given its geographic location 

and its openness to free trade (we 

have signed more than 40 free trade 

agreements). To take advantage of this 

potential, Mexico is developing, along 

with the private sector, modern and 

efficient transportation and logistics 

infrastructure including ports, airports, 

and railways. 

More specifically, for road infrastructure 

our work is committed to complete 

the modernisation of nine transversal 

and six longitudinal trunk corridors. 

They add up to more than 19,000km and 

connect major cities, ports, borders and 

resorts in the country, with roads of high 

specification. The objective is to improve 

communication between regions and the 

road network, and to give special attention 

to the construction of bypasses to 

facilitate the continuity of traffic flows 

and accelerate trade. 

Finally we recognise that various 

countries in Latin America, in South East 

Asia, and in Africa continue to improve 

their infrastructure plans and regulatory 

frameworks. This process will allow countries 

to compete for greater amounts of 

foreign investment with a likely scarcity 

of private capital. Therefore, Mexico will 

have to continue to promote its infrastructure 

plans internationally as well as 

to promote its PPP expertise to remain 

competitive. n


interview 

m a r k r a m s e y , e x e c u t i v e d i r e c t o r a n d p r e s i d e n t o f m a c q u a r i e c a p i t a l , m e x i c o 

‘The true intent is there’ 

Mark Ramsey established himself as a central infrastructure executive for Macquarie 

Capital in Australia before lighting out for Mexico, a frontier brimming with economic 

potential 

Mexico is the only 

market where wind 

power can compete 

without subsidies with 

ordinary power 

A decade into his career with Macquarie 

Group, Mark Ramsey found himself 

itching for his next challenge – and 

perhaps a change of scenery. 

The native of Australia and dogged 

Macquarie executive had joined the 

Sydney-headquartered financial-services 

group in 1997 after a stint as a practicing 

lawyer, going to work in its private 

equity and infrastructure fund private 

placement programme and, in the 

process, becoming a tested world traveler, 

for example visiting Africa to help set up 

the Macquarie African Infrastructure 

Investment Fund. 

“It was time for a change,” Ramsey 

admits, before adding, “and I was anxious 

to try to stop travelling so much. I wanted 

to build a business in one place. As a 

location, Latin America was the obvious 

choice”. 

That prospect came when Macquarie 

Capital, with Ramsey at the helm, decided 

to establish an infrastructure-focused 

financial advisory business in Mexico 

and the Macquarie Infrastructure and 

Real Assets funds management business 

launched an initiative to establish a fund 

focused only on investing across all core 

sectors of Mexican infrastructure assets. 

The fund, which had its first close 

in December 2008, would be the first 

purebred infrastructure investment 

vehicle in Mexico and would serve as 

a first-of-its-kind emerging markets 

fund participating in a nation-building 

programme. 

As a vaunted emerging marketplace, 

Mexico boasted a well-educated, Englishspeaking 

middle class, a familiarity with 

global finance and a business-friendly 

climate. “Mexico has a free trade 

agreement with 44 countries, more than 

any other nation,” says Ramsey. “As far as 

being a trading partner, Mexico is at the 

top of the list.” 

There was also its distinction of 

being a sociopolitical exception in Latin 

America. 

“Unlike a lot of Latin America, Mexico 

has no history of communist or socialist 

government,” says Ramsey. “Historically 

the country has always accommodated 

itself to free enterprise.” 

Then there was also the federal 

government, led by President Felipe 

Calderón. Elected president in 2006, 

Calderón talked up infrastructure and 

private investment as a tenet of his 

platform, putting Mexico directly on 

the radar of infrastructure powerhouse 

Macquarie. 

“We want to assign more resources 

to building more infrastructure for 

development and public safety,” Calderón 

said in a national address to the nation 

in October 2009. 

“The true intent is there,” notes Ramsey. 

“Mexico under President Calderón has a 

very clear agenda for infrastructure. Its 

economy is rising, and infrastructure is 

really the skeleton that the economy is 

built on, so there is a need for strong 

efficient infrastructure. It [the support 

for infrastructure] was there, it was very 

public and it was a high priority for the 

government, so it attracted our attention.” 

And if Macquarie could break into the 

Mexico market based on its infrastructure 

expertise, then the prospect of a wider

How do you 

generate more 

powerful solutions? 

Infrastructure solutions, from roads to renewables and everything in between. 

How do you access infrastructure investments across 

the globe, including Mexico and other emerging 

markets? How do you finance Latin America’s largest 

wind farm, despite financial market headwinds? 

How do you source equity and debt for the region’s 

largest infrastructure projects? Macquarie is providing 

innovative solutions to infrastructure challenges like 

these every day. 

www.macquarie.com 

Macquarie has long been recognized as a pioneer 

in infrastructure investment, financing, management 

and advisory. Today, with one of the largest dedicated 

infrastructure teams in Latin America and a string of 

global awards, Macquarie combines independent 

funds management and advice with unrivalled sector 

expertise. Whatever your infrastructure challenge, the 

solution is Macquarie. 

Contact: 

Mark Ramsey 

President, 

Macquarie Capital, Mexico 

+52 55 9178 7701 

Mark.Ramsey@macquarie.com 

Nick O’Neil 

Head of Macquarie Infrastructure 

and Real Assets, Mexico 

+52 55 9178 7714 

Nick.ONeil@macquarie.com 

No information set out above constitutes advice, an advertisement, an invitation, an offer or a solicitation, to buy or sell any financial product or security or to engage in any investment activity, or an offer of any banking 

or financial service. Some products and/or services mentioned in this document may not be suitable for you and may not be available in all jurisdictions. Other than Macquarie Bank Limited, any Macquarie Group entity 

noted on this page is not an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia), and its obligations do not represent deposits or other liabilities of MBL. MBL does 

not guarantee or otherwise provide assurance in respect of the obligations of that entity, unless noted otherwise.


interview 

expansion into Latin America was within 

reach. 

“The world has long seen Macquarie 

as an infrastructure specialist, so this has 

historically been one way to break into a 

new market. As for Mexico, the country 

itself is very important to Macquarie, 

and also as a way to expand our global 

business into Latin America,” Ramsey 

reveals. 

So in the beginning of 2009, Ramsey 

boarded a flight to help set up shop 

as president of Macquarie Capital, 

Macquarie’s financial advisory business, 

in Mexico. 

The view from Mexico City 

The four-year-old Macquarie Mexico 

operation is run from Mexico City, the 

capital city and seat of federal and 

financial powers in the country. 

“We have 22 people here, about half 

of which are in Macquarie Capital,” says 

Ramsey who, despite his latest post, 

has been unable to bring a halt to his 

globetrotting (he was back and forth 

to India a week ago). “For a given deal, 

we can bring in an additional 10 to 15 

people.” 

To date, Macquarie’s Mexican 

infrastructure fund has made three 

investments: the Ps$1.54 billion (€89 

million; $117 million) purchase in 

late 2010 of Desarrollos Carreteros del 

Estado de Durango, a company with 

a 326-kilometre road public-private 

partnership (PPP) in the Mexican state of 

Durango; the purchase of 32.5 percent of 

a 396-megawatt wind farm development 

in the state of Oaxaca in March 2011; 

and, most recently, the acquisition of 199 

telecommunication towers across Mexico. 

The closing of the Mareña Renovables 

wind farm merits special attention for two 

reasons: firstly, when completed, it will be 

the largest single-stage wind farm in Latin 

America; and secondly, the $700 million 

We hear about the Asia 

decade; I think this is 

going to be the decade 

of Latin America 

or so of debt financing the Macquarie 

consortium – which also includes 

Mitsubishi Corporation and PGGM – 

managed to obtain for the project makes 

it the second-largest project financing in 

Mexico. 

“We continue to see significant 

development in renewable energy,” notes 

Ramsey, stressing: “Mexico is the only 

market where wind power can compete 

without subsidies with ordinary power. 

And the fact is electricity is expensive. 

But Mexico is going to become a major 

force in wind power.” 

Transportation infrastructure, a focal 

point for Calderon and his administration, 

will likely come to a standstill until after 

the upcoming general election in July 

(Calderon is ineligible to run), according 

to Ramsey, but water and wastewater 

infrastructure project work should 

continue unimpeded. 

“Mexico is heavily industrialised, and 

heavily urbanised,” explains Ramsey, 

“with a population that is going to keep 

on growing.” 

A new PPP law went into effect in 

January, named Ley de Asociaciones 

Publico Pravidas, for which Calderon 

ardently lobbied. The would-be law was 

first put forth in 2009, but stalled in the 

Senate until its recent passage. 

Ramsey calls the current regulatory 

environment “complicated,” but said the 

government has been “very helpful […] 

they will make an effort to aid, and if 

needed, will step in and try to fix whatever 

problem there is.” 

Expansion plans 

In evaluating Latin America as a whole, 

Macquarie has identified as the most 

promising markets: Brazil, based on the 

sheer size of its economy; Colombia and 

Peru because they are growing so fast; and 

Chile, because, Ramsey says, the country 

is already “so well developed”. 

Ramsey gave his overall forecast on 

Latin America as “bullish”. 

”We hear about the Asia decade; I 

think this is going to be the decade of 

Latin America,” he says. 

Ramsey is quick to acknowledge 

the potential lurking danger that could 

threaten Mexico, and by extension, Latin 

America, citing the European debt crisis 

as high on his list. 

“There is a threat of a contagion,” he 

says. 

“Mexico is a great place to do business,” 

Ramsey emphasises. “Our commitment to 

Mexico and Latin America is substantial 

and long-term. 

“We want to take what we do here, in 

Mexico, and reformat it onto the greater 

Latin America stage,” Ramsey says. n 

DISCLAIMER 

No information set out above constitutes advice, 

an advertisement, an invitation, an offer or a 

solicitation, to buy or sell any financial product or 

security or to engage in any investment activity, 

or an offer of any banking or financial service. 

Some products and/or services mentioned in this 

document may not be suitable for you and may 

not be available in all jurisdictions. Other than 

Macquarie Bank Limited, any Macquarie Group 

entity noted on this page is not an authorized 

deposit-taking institution for the purposes of the 

Banking Act 1959 (Commonwealth of Australia), 

and its obligations do not represent deposits or 

other liabilities of MBL. MBL does not guarantee 

or otherwise provide assurance in respect of the 

obligations of that entity, unless noted otherwise.


m i g u e l d o n o v a n , d i r e c t o r g e n e r a l , c u r r i e & b r o w n m e x i c o 

Procurement revolution 

interview 

President Calderón inaugurating a new PPP hospital in Tamaulipas, in 2009 

Currie & Brown’s Miguel Donovan recalls how the launch of Mexico’s $6bn hospital 

PPP programme was the start of a sea change in Mexican infrastructure procurement 

and explains why he believes all parties are now better prepared for the long-term 

commitment PPPs demand 

It can’t have been easy. Just picture the situation: 

in the mid-2000s, the Mexican government 

decided to begin procuring a mammoth, 

$6 billion-plus hospital programme 

with the help of the private sector using the 

public-private partnership model (PPP). 

The programme involved the construction 

and operation of seven new hospitals 

sprinkled liberally across the Mexican map, 

throughout places like State of Mexico, 

Tamaulipas, Sinaloa, Queretaro, Guerrero, 

Chihuahua and Coahuila. Just by virtue of its 

size and scope, it automatically became one 

of the largest healthcare PPP programmes 

anywhere in the world. 

So the Mexican government did the 

obvious: it took a look at that other country 

with a vast healthcare PPP programme – the 

UK – and decided to hire UK consultancy 

Currie & Brown to help it oversee and 

The launch of the 

PPP programme in 

Mexico represented 

a huge change in 

the mentality of how 

public infrastructure 

is procured 

structure its fledgling healthcare initiative, 

making the consultancy responsible for everything 

from carrying out feasibility studies 

for each of the hospitals, risk analysis, dispute 

resolution and generally supporting the 

government throughout the tender process. 

There was just one problem: Mexico 

had virtually no experience using PPPs and 

no centralised framework to speak of – its 

first-ever PPP law was only approved last 

December. 

“The government started this [healthcare] 

programme in 2004-2005 with a pilot 

project called the Bajio hospital and it took 

a lot of time and effort to get that project 

out to market,” recalls Miguel Donovan, the 

head of Currie & Brown’s Mexican operation. 

Whilst the 184-bed hospital took some 

15 months to get up and running once it 

was awarded, Donovan clocks in the whole 

procurement process at some three years. 

But what Bajio – and the Mexican healthcare 

PPP programme in general represented 

– was the first step in a much more important 

and larger process: the battle to change the 

way Mexican infrastructure was going to be 

procured in the future, opening sectors like 

education, cultural facilities, court houses,


interview 

water, transport programmes and others to 

private sector participation. 

“The launch of the PPP programme in 

Mexico represented a huge change in the 

mentality of how public infrastructure is 

procured. A huge change in the mind-set 

of the government, but also a huge change 

in the mind-set of the private companies and 

banks involved [in the infrastructure sector],” 

says Donovan. 

He continues: “It’s really a change 

for Mexico, because historically we have 

been very resistant to private investment 

in public services. But the government is 

now aware that procurement is a long-term, 

two-way relationship. In many ways, the 

government wasn’t ready to host this type 

of project before.” 

That change in mentality was not just 

confined to the federal government and 

local powers quickly followed suit, with the 

State of Mexico launching PPP projects 

like the Bicentennial Cultural Centre, the 

Zumpango Hospital, an ambitious road 

maintenance programme and several 

water projects. Other states like Yucatan 

and Sonora are now ready to successfully 

procure PPP projects as well, Donovan 

points out. 

Like many other players in the Mexican 

infrastructure market, Donovan believes 

that the creation of the National Infrastructure 

Fund (Fonadin) played a key 

role in helping to bring about this change 

in mentality. 

“I think Fonadin helped change the 

government’s mentality, as they really 

became aware that they had to become 

much stronger on the management and 

budgeting sides of infrastructure procurement,” 

he argues. 

“Because now, [with PPPs], the government 

is about to turn into a management 

contracting agency rather than a development 

agency,” Donovan adds. 

“What the PPP scheme brought to the 

table is that it has begun to harmonise relationships 

between the promoters, the public 

agencies that are trying to get projects done 

as quickly as possible, and the developers. 

The latter were mainly traditional construction 

companies which were used to operating 

more along the lines of: ‘Give me my 

contract, I’ll give you a cost estimate, I’ll 

deliver your public work, and then I’ll move 

on to the project’. This doesn’t work for a 

long-term contract,” he quips. 

Encouragingly, it’s not just the government 

that has been changing its approach 

to infrastructure procurement. 

“We are now seeing – regarding developers 

like ICA, IDEAL, Marhnos, Prodemex, 

Tlalnepantla Hospital is, in the pantheon of 

Mexican public-private partnerships (PPP), 

surely one of the country’s most innovative 

PPP projects. What makes the $80 million 

plus, 120-bed hospital in Tlalnepantla, State 

of Mexico so special? 

“The deal is significant because it features 

the first equity investment from pension 

funds in Mexico in a greenfield social 

infrastructure PPP project using a development 

capital certificate,” Miguel Donovan, 

the head of Currie & Brown’s Mexican operations, 

succinctly explained earlier this year, 

when the project received an award for its 

innovative structure. 

Development capital certificates, or 

CKDs, as they are known in the local market, 

are a financial instrument that, along with 

recent regulatory changes, has opened the 

door for Mexican pensions to invest up to 

$15 billion in Mexican infrastructure. 

But the deal is not just noteworthy 

because its sponsors and advisers managed to 

get a number of Mexican pensions to participate 

in a greenfield project – a milestone in 

itself, pretty much in any corner of the globe. 

The deal is even more significant 

because these pensions managed to get comfortable 

with investing in what is essentially 

a social infrastructure project procured by a 

local authority – the Social Security Institute 

of the State of Mexico, known locally as ISSE- 

MyM – sponsored by a Mexican developer 

GIA and others – a serious change in the way 

these companies operate. In the beginning, 

only foreign companies were bidding for 

Mexican PPPs. But we have very good construction 

and engineering industries here 

in Mexico. And these companies quickly 

understood that they needed to change 

their model and that they needed to look 

more into the long term,” Donovan explains, 

before concluding: 

“And now with the new PPP law, all the 

pieces are falling in place.” n 

Mexico’s most innovative hospital PPP – 

Tlalnepantla Hospital 

– Marhnos – and funded solely by a local 

bank – Banco del Bajio. 

It’s true that the majority of funds for 

the project – about $66 million – come in 

the form of long-term debt from Banco del 

Bajio, with the remaining funds broken 

down into some $7.5 million of subordinated 

debt and about the same amount in equity. 

But 70 percent of that equity has been provided 

by a group of Mexican institutional 

investors, via an earlier CKD issue conducted 

by Marhnos, while the sponsor itself provides 

the remaining 30 percent of the equity. 

Donovan sees Tlalnepantla Hospital as 

not just innovative, but a true public-private 

collaboration: 

“You have Marhnos, Banco del Bajio 

and pension funds financing the hospital. 

Marhnos will be responsible for construction, 

facility management and non-clinical 

services, such as providing all medical equipment, 

including replacements and consumables 

over the lifetime of the contract. The 

ISSEMyM, meanwhile, will be responsible 

for the hospital’s medical staff and pharmaceuticals. 

And Currie & Brown will secure 

and supervise the whole partnership, introducing 

private sector best practices to help 

deliver enhanced medical services for 6,000 

inpatients and 20,000 outpatients annually 

while reducing the overall cost of the hospital 

by a third.”

Why your 

company 

needs us! 

One of the leading international providers of technical and related advisory services to a 

diverse and evolving PPP/PFI/P3 infrastructure market, Currie & Brown is involved across a 

wide range of PFI/PPP/P3 challenges, including lead, technical and financial remits. Our 

expertise covers strategic planning and preparation of business cases; project scoping and 

assessing affordability; technical outputs and advice; payment mechanism; service levels; and 

asset lifecycle across all aspects of transactions. 

With an extensive portfolio of health, education and infrastructure projects, we have significant presence in 

Latin America, as well as in the Middle East, the Far East and Europe. 

To find out more contact: 

miguel.donovan@curriebrown.com 

www.curriebrown.com 

Currie & Brown Mexico 

Aristoteles 77, 6th floor 

Mexico City 11560, Mexico 

Tel: + 52 55 52 81 00 63 

Currie & Brown 

Dashwood House, 69 Old Broad Street 

London, EC2M 1QS, United Kingdom 

Tel: +44 (0)20 7920 9220 

enquiries@curriebrown.com


interview 

s a n t i a g o s e p u l v e d a , p a r t n e r , c r e e l , g a r c í a - c u é l l a r , a i z a y e n r i q u e z 

‘A whole town grew’ 

Creel, García-Cuéllar, Aiza y Enriquez partner Santiago Sepulveda began his career 

in project finance law just as Mexico ushered in its present day era of privatisation, 

creating a thriving new infrastructure market which is achieving a human gain as well 

as financial significance 

For veteran attorney Santiago Sepulveda, the 

completion last month of the construction of 

a liquefied natural gas (LNG) storage terminal 

in Manzanillo, a Pacific Coast port town 

in Colima, Mexico, marked a professional, 

not to mention personal, highpoint for the 

Mexican national. 

Sepulveda is a partner in the energy and 

infrastructure practice of Creel y García- 

Cuéllar, Aiza y Enriquez (Creel), a full-service 

corporate law firm established in 1936 and 

headquartered in Mexico City, and the Manzanillo 

LNG Terminal – just the third-ever 

LNG receiving terminal in Mexico – was, in 

a sense, his accomplishment. 

To be accurate, Sepulveda and his firm 

represented a consortium, named Terminal 

KMS de GNL, which had designed, built, and 

would now, operate, the terminal . On Tuesday, 

March 27, Sepulveda listened as Felipe 

Calderón praised the freshly unwrapped 

project in a media covered speech the President 

of Mexico gave to inaugurate rail and 

road built to accommodate the terminal. 

The new PPP law 

A project is not 

going to transform 

just the economy; 

it is going to transform 

a community 

In 2009, President Calderon put forward a bill to carve out a legal public-private partnership 

(PPP) framework. The legal community in Mexico, used to witnessing previous pro-PPP 

legislation fail to pass, felt a sense of renewed confidence. 

The Calderon administration had made infrastructure a definite platform, accelerating 

building and upping federal government funding as part of a broader agenda to 

accelerate economic growth. 

As in the past, wrangling in the senate stalled the bill from becoming ratified. “Yes, I 

was frustrated – a lot of people were,” says Santiago Sepulveda, a partner in the energy 

and infrastructure practice of Creel y García-Cuéllar, Aiza y Enriquez . But by 2012, the 

Senate finally passed the bill, and Sepulveda is pleased. 

“There is a clear legal framework throughout Mexico, a clearer delineation between 

state and federal level funding,” Sepulveda says. “Going forward, it is going to be very, 

very useful.” n 

In 2008, Sepulveda and Creel began 

working with KMS – short for KoreaGas 

Corporation (KOGAS), Mitsui & Company 

and Samsung C&T Corporation – on the 

project, which totaled $2.8 billion. But question 

Sepulveda about the incentive of working 

on a long-term project from beginning 

to end, and get an answer veering toward 

nonfinancial success. 

“A project is not going to transform just 

the economy, it is going to transform a community,” 

explains Sepulveda from his Mexico 

City office. 

ACTUAL RESULT 

A successful infrastructure project, according 

to Sepulveda, is not just when an independent 

power producer (IPP), or LNG storage 

terminal – a project with an “actual result” 

– is built and is capable of generating a tangible 

positive economic impact. In his mind, a 

properly executed project can bring different 

people together for a single goal, and at 

the same time make a positive contribution 

to the surrounding locale. 

“You realise, ‘a whole town grew,’” he 

enthuses. “It can bring in an influx of bluecollar 

people, white-collar people, who work 

in engineering. The hotel business and the 

restaurant business can thrive. A road can 

be built to transport needed material to and 

from the worksite. A railroad track can be 

laid down.” 

Simply put, the economic ‘ripple out’ 

effect is visible. “The actual result is exciting, 

but not just financially,” he concludes. 

So while Sepulveda is prone to describing 

his career as a lawyer in project finance 

as ‘vital’ – it has less to do with the size of 

the hourly fee.


interview 

No one project is 

the same. No cookie 

cutting. Everything 

is tailor-made 

LEARN AS I GO 

Sepulveda did not become a lawyer with 

the expectation of working in project 

finance. In fact, energy infrastructure 

was the last field in which Sepulveda 

thought he would be practicing law. 

And his reasoning for that lack of prescience 

is simple: when he was in law 

school, there was no such profession 

as project finance lawyer for energy 


“The federal government controlled 

that,” recalls Sepulveda, who graduated 

from the Instituto Tecnológico 

Autónomo de México in 1996, before 

going on to Columbia University, and 

graduating from there in 1998. 

“It was not even a practice,” he continues. 

“For example: there was no gas 

sector.” But that changed shortly after 

he graduated from law school. “The 

government opened public bidding,” 

he says. “Back then, I had to learn as I 

go. Now, energy infrastructure is welldeveloped.” 

Sepulveda began his career with 

Mayer, Brown, Rowe and Maw (now 

Mayer Brown), operating as foreign 

associate to its New York office. There, 

he landed Sempra Energy, a publicly 

traded natural gas utility headquartered 

in San Diego, as his client. 

By 2001, he had joined Creel, 

making partner in 2005. Well into his 

career, Sepulveda the legal attorney is 

grateful to practice a field of law that 

is “vital…that can keep me on my feet. 

“No one project is the same,” he 

explains. “No cookie cutting. Everything 

is tailor-made.” n 

AT A GLANCE: SANTIAGO SEPULVEDA 

• Obtained law degree from the Instituto Tecnológico Autónomo de México in 

1996, and later obtained his LL.M degree from Columbia University in 1998; 

• Worked as foreign associate in the New York office of Mayer, Brown, Rowe 

and Maw (now Mayer Brown); 

• Joined Creel y García-Cuéllar, Aiza y Enriquez in 2001; named partner in its 

energy infrastructure practice in 2005; 

• Represented Terminal KMS de GNL, a consortium teaming KoreaGas 

Corporation, Mitsui & Company and Samsung C&T Corporation in a deal 

with the Mexican Federal Electricity Commission (CFE) to design, build 

and operate Manzanillo LNG Terminal, a liquefied natural gas (LNG) 

storage terminal in Manzanillo, Colima, providing commercial, financial 

and regulatory counsel; 

• Longtime counsel to Sempra Energy, a publicly traded natural gas utility 

headquartered in San Diego, representing its Energía Costa Azul LNG storage 

and regasification terminal in Ensenada, Baja, California; 

• Counseled Sempra Energy in the preparation and structuring of its successful 

participation in the public bid called by CFE for the supply of natural gas to 

its facilities in Baja California, Mexico, under a 15-year Natural Gas Supply 

Agreement worth over $1.4 billion; 

• Counsel to Sempra Energy in preparing and structuring the acquisition of 

Natural Gas Distribution Permits in Mexicali, Chihuahua and La Laguna- 

Durango Geographic Zones; 

• Represented Mitsui, in connection with the acquisition of 25 percent of 

Terminal de LNG de Altamira, a LNG storage and regasification terminal 

in Port of Altamira, Mexico, for $82 million; 

• Experienced counsel in energy infrastructure financing throughout Mexico; 

• Represented publicly traded Spain-based Gas Natural SDG, which acquired 

power generation and pipeline businesses from Paris-headquartered 

Electricité de France International, the second-largest electric utility company 

in the world; 

• Counsel to Bain Capital, the Boston-headquartered private equity firm 

co-founded by Massachusetts Governor and current US presidential candidate 

Mitt Romney, representing its $3 billion acquisition of Sensata, a former 

Mexico-based business unit of Texas Instruments; 

• Counsel to AIG Highstar Capital II, L.P., a Delaware-headquartered limited 

partnership, and Ontario Teachers’ Pension Plan Board (OTPP), in their 

$1.75 billion deal for InterGen.


guest article 

c r e e l , g a r c í a - c u é l l a r , a i z a y e n r í q u e z 

Powering Mexico’s Northwest 

Creel, García-Cuéllar, Aiza y Enríquez partner Santiago Sepulveda sheds some light on 

the Mexican Federal Electricity Commission’s $6bn-plus Northwest Project 

The outlook for new, large-scale infrastructure 

development in Mexico has received 

renewed interest in 2012 as a result of two 

important recent developments. 

Firstly, after more than two years of discussion 

in the Mexican Congress, the new 

public-private partnerships law (PPP law) 

was enacted last January. More recently, 

Mexico’s Federal Electricity Commission 

(CFE) announced a new package of bids 

for three new power plants and the necessary 

supply pipelines. 

The latter comprise CFE’s Northwest 

Project, which is expected to require investments 

of around $6 billion over the next 

five years – and much more as ageing power 

plants in the region are substituted with 

combined cycle projects through 2020. 

The Northwest Project is an integrated 

system of natural gas pipelines and power 

plants meant to address the needs of industry 

and population in the states of Chihuahua, 

Sonora and Sinaloa. 

The CFE has determined that, given 

the prospects of the natural gas sector in 

Mexico and the United States (US), the 

development of combined cycle power 

plants is the most cost-efficient and environmentally 

friendly alternative to address 

the large power demand expected for the 

region in the near future. 

The Northwest Project consists of two 

pipeline systems bringing natural gas from 

the US down to Sonora and Sinaloa along 

the Pacific coast to supply at least three new 

power plants in the area. 

This year the CFE will launch two tenders 

to award gas supply contracts requiring 

the construction and operation of four 

natural gas pipelines. 

The first set of pipelines will start at the 

US-Mexico border in Sásabe, connect to 

CFE’s Northwest 

Project is expected 

to require investments 

of around $6bn over 

the next five years 

Puerto Libertad through Guaymas, and go 

on to Topolobampo, totaling 710 kilometers 

to deliver 837 million of cubic feet 

of gas per day (MMCFD). 

The second set of pipelines will commence 

in Chihuahua and extend to 

Jimenez, through to Topolobampo, and 

from there down to the coast to Mazatlán, 

running over 1,123 kilometers to deliver 

up to 497 MMCFD. 

The CFE has budgeted approximately 

$1.4 billion for the Sásabe –Topolobampo 

pipeline and $1.5 billion for the El Encino 

– Mazatlán pipeline. Anchoring these pipelines 

will be at least three new power plants 

to be built along the Pacific seaboard in 

Topolobampo and Mazatlán. 

Following the now well-established IPP 

Programme, the CFE will first bid out the 

Topolobampo II power plant, to be commissioned 

in April 2016, which will have a 

700-megawatt (MW) capacity and require 

an investment of just over $1 billion. 

Next will be the Guaymas II power plant, 

scheduled for April 2017, which will have a 

747MW capacity and require an investment 

of approximately $1.1 billion. Finally, the 

Topolobampo III power plant, also commissioned 

for April 2017, will have a 700MW 

capacity and should cost around $1.03 billion. 

In addition to these energy projects, the 

new PPP Law provides the legal framework 

for PPPs to develop core infrastructure to 

increase social welfare and investment levels 

in Mexico. 

The new PPP law is meant to result in 

a reduction of development costs, faster 

project implementation, and offer security 

to investors by providing legal certainty to 

those private companies interested in investing 

in major and complex infrastructure 

projects requiring long maturities, longterm 

financing and development. 

A distinctive element to the PPP law is 

that the private sector may propose a specific 

project to the competent authority, 

which proceeds to analyse it and, if determined 

to be viable, will announce a tender 

to develop the project. 

The PPP law provides detailed requirements 

for these tender processes and specifically 

allows for incentives to the party that 

originally proposed the project, by affording 

it beneficial criteria that cannot exceed 10 

percent of the applicable evaluation criteria 

(i.e., price, efficiency parameters, etc.). 

We anticipate that the PPP law will trigger 

a large number of infrastructure projects 

in the coming years, especially since the 

federal government, through the Ministry 

of Finance and the state-owned banks, has 

already laid out the process for state and 

municipal governments to obtain financing 

for public works and services. n 

Creel, García-Cuéllar, Aiza y Enríquez is a 

full-service corporate law firm with extensive 

experience in structuring, financing and 

implementating large gas, electricity, 

telecommunication and infrastructure projects 

in Mexico, representing major energy companies, 

project developers, engineering and construction 

companies, as well as lenders and investors in 

infrastructure projects in Mexico.

mexico 


Contacts 

Mr. Miguel Donovan 

CURRIE & BROWN 

Aristóteles 77, Piso 6 

Col. Polanco, C.P. 11560 

México, D.F. 

Email: Miguel.Donovan@curriebrown.com 

Mr. Federico Patino M. 

Delegado Fiduciario Del Fondo Nacional De Infraestructura 

Javier Barros Sierra No. 515, Piso 8 

Col. Lomas de Santa Fe, Del. Alvaro Obregon 

Mexico, D.F., 01219 

Email: Federico.patino@banobras.gob.mx 

Mr. Santiago Sepulveda 

CREEL, GARCIA-CUELLAR, AIZA y ENRIQUEZ 

Paseo de los Tamarindos 60, 

Piso 3. Col. Bosques de las Lomas, 

05120 México, D.F 

Tel: +52 55 1105 0613 

Email: Santiago.Sepulveda@creelmx.com 

Mr. Juan Manuel Gonzalez 

GREENBERG TRAURIG LLP 

Paseo de la Reforma No. 265 PH1 

Colonia Cuauhtémoc 

México, D.F. C.P. 06500 

Tel: +52 55 50 29 0051 

Email: gonzalezjm@gtlaw.com 

Secretaria De Comunicaciones Y Transportes 

Avenida Xola, Esquina con Eje Central, 

S/N. Col. Narvarte, 

Del. Benito Juarez, Mexico, D.F 

Tel: +52 55 5723 9300 

Secretaria De Hacienda Y Credito Publico 

Palacio Nacional S/N, 

Edif.12, Piso 2, 

Col. Centro, Del. Cuauhtémoc, Mexico, D.F. 06000 

Mr. Mark Ramsey 

President 

Mark.Ramsey@macquarie.com 

Tel: +52 55 9178 7701 

Mr. Nick O’Neil 

Head of Macquarie Infrastructure & Real Assets 

Nick.ONeil@macquarie.com 

Tel: +52 55 9178 7714 

Jonathan Davis Arzac 

Chairman of Macquarie Infrastructure & Real Assets, Mexico 

Jonathan.Davisarzac@macquarie.com 

Tel: +52 55 9178 7721 

MACQUARIE CAPITAL [Mexico], S.A. de C.V. 

Av. Paseo de la Reforma 115 Piso 6 

Col. Lomas de Chapultepec, C.P. 11000 

Mexico, D.F 

Andrea Negrete Cantero 

External Communications Coordinator 

GE Mexico 

Tel: +52 55 5257 6297 

Email: andrea.negrete@ge.com

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