Sheinbaum Allies Rush to Lure Private Infrastructure Investment as Economy Sputters

President Claudia Sheinbaum’s allies in congress are in a hurry to lure more private investment by speeding up project approvals, clear-eyed that public spending alone isn’t sufficient to boost lackluster growth in Latin America’s second-biggest economy.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — President Claudia Sheinbaum’s allies in congress are in a hurry to lure more private investment by speeding up project approvals, clear-eyed that public spending alone isn’t sufficient to boost lackluster growth in Latin America’s second-biggest economy.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.The sense of urgency matches Sheinbaum’s rush for new streams of private sector money, especially for needed infrastructure that can generate more jobs and promote wellbeing ahead of next year’s midterm election. But questions remain over whether the latest proposal from her ruling Morena party will be enough to jumpstart investment during her presidency.“We need to speed up this plan,” said Alfonso Ramírez Cuéllar, an influential lawmaker who’s close to Sheinbaum and part of the Morena leadership team in the lower house. “Our main concern is the lack of sustained economic growth,” he said, in an unusually blunt assessment of the state of the economy.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Mexico’s gross domestic product is forecast to expand 1.4% this year, inching up from just 0.5% in 2025. Since Sheinbaum took office in late 2024, aggregate investment growth has slid from about 2% year-on-year to -6% at the end of last year. The leftist leader needs the economy to perform much better to sustain the generous social spending she favors.Speaking on the sidelines of a banking convention that gathers top executives across financial services, Ramírez Cuéllar pointed to highways, water infrastructure, ports, airports and rail projects as prime targets of the legislation.“Something we really need to do is speed up authorizations,” said the lawmaker, who also sits on the lower house’s powerful finance committee. He singled out the need to strengthen the framework for the so-called “mixed projects” that aim to boost private investment in strategic projects, something Sheinbaum has also promoted, including in the politically sensitive energy sector.Sheinbaum’s Morena party has long favored state-centric energy projects, suspicious of profit-maximizing firms exercising too much control. In the past, the party’s leaders have gone so far as to insist that would-be private partners to the country’s state-owned oil and power companies defer most operational decisions to them or only take minority stakes.Under the infrastructure investment legislation, Sheinbaum would lead a new investment council designed to speed up decision-making, bring in more private capital and avoid duplicate efforts from the various involved groups. The council would include business representatives, in a bid to better understand what they see as major bottlenecks. All of it aims to complement a new public-private contract framework unveiled last year for the power and oil sectors that so far has only led to a handful of mostly small deals.Investment MechanismUnder the new investment mechanism proposed by the bill, the government will always retain a 51% stake in major infrastructure projects, while ceding private companies the collection rights for a jointly-agreed period of time, said Jorge Mendoza, head of state development bank Banco Nacional de Obras y Servicios Publicos (Banobras).Using the example of a possible highway project, Mendoza explained that the government would seek to grant a concession to a majority-owned state company — such as sovereign infrastructure fund Fonadin — that would then contract with a private company and assign it collection rights from tolls and other services. The private company would be tasked with handling the project’s construction, maintenance and operations.“This company will provide capital and take on debt, secured by the collection rights granted by the concession,” Mendoza said. “We’ll introduce a governance system, because although this contract involves private entities and collection rights, it has a shareholder known as the federal government.”The bill will also allow for contracting of key infrastructure projects, subject to the Finance Ministry’s authorization, even if the final budget allocation has not yet been secured. It also seeks to improve a digital procurement platform to reduce project timelines and to allow the preliminary review of documents prior to a contract to prevent disqualifications due to procedural errors later. The legislative drive is seen bolstering Sheinbaum’s “Plan Mexico” economic development blueprint, which has so far struggled to get off the ground. Trade tensions with the US have compounded the effort, in addition to more recent inflationary pressures stemming from the war in Iran, including creeping prices for fertilizers as well as for motor fuels and natural gas that Mexico imports in large volumes.Despite the headwinds, some business leaders expressed hope for a turnaround.HSBC Mexico Chief Executive Officer Jorge Arce said there’s optimism inside the banking sector regarding Morena’s new investment plan. He said he believes lenders share the government’s rush to deliver new projects by expediting projects.“There is a strong sense of urgency,” he said from the conference. “This must be done quickly.”The banker pointed to projects in the energy sector, plus road and port construction, as generating the most interest in the financial sector, which he said is very receptive to Sheinbaum’s call to allocate more resources alongside public funding.“Joint investment frameworks are highly bankable,” he said. “There will be interest.”Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.