Mexico Finance Chief Readies Infrastructure Plan to Jump-Start Economy

(Bloomberg) -- Mexico is preparing a multibillion-dollar infrastructure package with private companies and doubling efforts to attract U.S. investment that would otherwise go to China as it seeks to restart a stagnant economy.

The public-private investment package will include over 40 projects in areas like highways, energy ventures, telecommunications and ports, Finance Minister Rogelio Ramirez de la O said in an interview at the National Palace in Mexico City. The official announcement will come soon, he said, declining to provide details until the package is unveiled.

“We have it already”, Ramirez de la O said on Thursday, adding that the initiative was approved by private sector representatives. “There'll be an announcement of an infrastructure package in a few weeks, when the president is ready.”

While President Andres Manuel Lopez Obrador has made similar multi-billion dollar public-private announcements in the past, this new program comes as Mexico posted two consecutive quarters of activity contraction, putting Latin America's second-largest economy in the position of needing to jump-start growth.

Mexico under Lopez Obrador is already spending on big infrastructure projects, including the construction of the Maya Train in the country's southeast and the Dos Bocas refinery, intended to decrease Mexico's dependence on imported fuels.

Private investment fell during the pandemic and though it has picked back up in the construction segment, the government is looking to bolster it in other areas, Ramirez de la O said.

“For the first time in many years, public investment is higher than 3% of GDP,” he said.

Nearshoring Pitch

The minister is also reaching out to more investors in the U.S., pitching the advantages of putting resources in Mexico rather than China. Moving operations from Asia closer to home is beneficial in times of widespread supply shortages and rising shipping and labor costs, he said.

“We want to coordinate more with the U.S., with business groups and the government,” Ramirez de la O said. “We have to do roadshows in the U.S. to make people conscious of the fact that the advantages that made a lot of manufacturing move to China are not the same anymore. Salaries are higher and shipping costs are quadruple what they were.”

While companies have moved some production to border cities close to the U.S. and demand for exports have worked in Mexico's favor, growth has been slower than in other countries in Latin America. A law banning outsourcing that went into effect last year hit the services sector and a global shortage of semiconductors hurt operations in Mexico's powerful auto industry.

Mexico is suffering from stalled investment amid the pandemic and nationalist rhetoric from Lopez Obrador's administration. Gross fixed investment, which includes spending in factories and machinery, dropped 0.1%in November from the month prior, the country's statistic institute said on Friday.

The index, a leading indicator of long-term growth, is almost 17% below its peak, according to economist Gabriela Siller, from Banco BASE.