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Cablegate: Mexico's National Infrastructure Plan

VZCZCXRO2250
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #3937/01 2061637
ZNR UUUUU ZZH
P 251637Z JUL 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 8150
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 MEXICO 003937

SIPDIS

SIPDIS

STATE FOR WHA/MEX, WHA/EPSC, EB/IFD/OIA
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/GERI WORD

E.O. 12958: N/A
TAGS: ECON EINV ELTN ENRG MX
SUBJECT: MEXICO'S NATIONAL INFRASTRUCTURE PLAN

REF: A. MEXICO 2852

B. MEXICO 3246

Summary
------

1. (U) Summary. President Calderon presented the National
Infrastructure Program (NIP) on July 18. The NIP is the
infrastructure component of Mexico's National Development
Plan (ref A) and seeks to improve Mexico's competitiveness.
The plan presents ambitious goals for infrastructure
investment with the participation of both the public and
private sectors. Calderon also highlighted three different
outcomes based on the government's ability to pass structural
reforms. The NIP was well received and could prove a strong
foundation for increasing Mexico's infrastructure posture.
Calderon Administration (Presidencia) contacts expressed a
strong interest in encouraging the participation of U.S.
investment in the plan. End Summary.

National Infrastructure Program 2007-2012
-----------------------------------------

2. (U) Emboffs joined federal officials, state governors,
Mexican congressmen, and private sector representatives for
President Calderon's presentation of the National
Infrastructure Program 2007-2012: "Constructing a better
Mexico" (NIP) on July 18. The infrastructure program is
divided into four parts: the current situation, the long term
vision with objectives and strategies, the sectoral vision
with indicators and specific goals, and the investment
requirements to achieve the goals. Sectors covered by the
plan include highways, airports, intermodal terminals, water
projects, and telecommunications and information technology.
The Secretariat of Communications and Transportation (SCT),
the Secretariat of the Environment and Natural Resources
(SEMARNAT), the Secretariat of Energy (SENER), and the
Secretariat of Tourism (SECTUR) share roles in carrying out

SIPDIS
the proposal.

3. (U) The NIP calls on the government and private sector to
join together to increase the quality and quantity of public
investment in infrastructure, adding that Mexico needs to
take advantage of its economic stability to develop its
infrastructure. The World Economic Forum ranks Mexico 64th
out of 125 countries for infrastructure competitiveness.
Infrastructure investment averaged only 3.2 percent of GDP
for the previous 5 years with non-energy related
infrastructure investment only accounting for 1.8 percent of
GDP. This compares to Chile where infrastructure investment
is 5.8 percent of GDP and China at 7.3 percent.

4. (U) Calderon presented three objectives to be accomplished
during his term: improve water, electricity and sewage
systems and construct schools and hospitals to connect poorer
regions of Mexico to the rest of the country; construct and
improve the infrastructure necessary to increase national
competitiveness; and convert Mexico into a "logistical
powerhouse" by taking advantage of its geographical and
commercial advantages. The NIP calls for Mexico to be a
leader in Latin American infrastructure coverage and quality
by 2012 and among the top 20 percent of all countries by 2030.


Three Infrastructure Scenarios
------------------------------

5. (U) Calderon calls for investments of USD 231 billion over
the next 5 years, a 50 percent real increase in
infrastructure investment over the last administration. The
majority of the investment will be joint public-private with
55 percent from federal, state and municipal sources and 45
percent from the private sector. He noted that the
estimates depend on passage of the fiscal reform package (ref
B). He planted three scenarios for infrastructure
development termed "base", "inertia" (decreased investment),
and "outstanding" (greater investment). The "base" scenario
assumes that the Mexican Congress passes the fiscal reform
law and at least half of the increase in revenue is channeled
towards infrastructure. Under this scenario, with the
support of private sector investments, Mexico can expect an
additional 0.6 percent in economic growth and an additional
700 thousand new jobs. The "inertia" scenario assumes that
Congress does not pass the fiscal reform law and would call
for a decrease in infrastructure spending as moneys intended
for infrastructure projects are used to support other
government expenditures. The last scenario, dubbed
"outstanding", would require not only fiscal reform, but also
labor, energy, or telecommunications reform. According to

MEXICO 00003937 002 OF 002


Calderon, these structural changes would accelerate
development in the country and could free up nearly USD 300
billion over the next 6 years representing infrastructure
investment of 5.5 percent of GDP. To achieve the best
results, Calderon said that, in addition to pushing the
structural reforms needed his administration is taking other
concrete steps, including: increasing resources for
infrastructure development, increasing judicial certainty
(through the elimination of excessive regulation on
infrastructure investment) and improving coordination between
the government and private sector.

U.S. Business Sector Participation Encouraged
---------------------------------------------

6. (U) In meeting with Emboffs, Presidencia contacts
highlighted the time frame for the various projects presented
by Calderon. While the initial 300-plus projects under
consideration are set to be completed by 2012, Presidencia
would also look towards adding to the list of projects if
certain reforms are passed (i.e. adding energy projects after
the passage of energy reform), and adding projects with
completion dates into the next administration. To encourage
U.S. business participation, the Embassy FCS office is in
talks with the GOM over a possible TDA-supported conference
to be held in winter 2007-2008. Presidencia expressed a
strong interest in the conference whose purpose would be to
present key projects listed in the plan for consideration by
U.S. contractors and providers.

Comment
-------

7. (U) Comment: The groups in attendance supported the NIP.
Calderon added extra credibility to the viability of the plan
by detailing the various reforms that would be needed to
fully realize the program, as well as the outcome if the
fiscal reform package, on which the program is strongly
based, is not passed. If the administration manages to push
any number of the needed reforms through, the plan is a
strong foundation for the infrastructure development needed
to improve Mexico's overall competitiveness. As an added
benefit, there is ample room for American companies to
participate as private sector investors. End Comment.


Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity and the North American
Partnership Blog at http://www.intelink.gov/communities/state/nap /
GARZA

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