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An interview with Grupo Indi

Diana Muñozcano
Diana Muñozcano
Chief Investment Officer


Despite recent political uncertainty, Mexico’s infrastructure sector shows signs of strength, says Grupo Indi’s Chief Investment Officer Diana Muñozcano.

“The government has passed through the learning curve that comes with the first year in office and they are ready to start with new projects with more strength.”

The infrastructure sector in Mexico has seen an important evolution in the past decade.  An increasing number of small companies have been able to access more contracts with longer and improved terms.

Not many new players have entered the fray, however. At the federal level, the same companies tend to compete for contracts. This is largely due to the high sophistication of contracts, more stringent capital requirements on aspects like debt financing and how capital is contributed.

At more local levels, there is more leeway for new entrants, says Muñozcano. “I do think that at the state and municipal level we are starting to see new players. These are companies who've been able to stabilise their business, and companies that have grown to be medium-to-large with more stable cashflows.”

Generally speaking, Mexican government policy towards infrastructure is leaning towards brownfield rehabilitation and maintenance PPP projects, particularly in the roads sector. 

In the short-term, there will be few new-build greenfield road projects.  However, the relatively low levels of traffic make them unsuitable as toll concessions and hard to justify as availability-based contracts. . If there are projects, they will probably be in the north of the country.

Brownfield works do not create a great opening for new entrants, but given that this a new government, and new governments in Mexico tend to be followed by economic deceleration, it is good that a brownfield drive is being pursued to drive the sector in the short term.  

“Going forward, the important thing is that investment starts to flow and that money is spent on infrastructure, so the recent infrastructure PPP plans give a lot of confidence,” says Muñozcano.

Reason for optimism in Mexican infrastructure 

In the past year, the government has prompted serious concerns after cancelling a new airport project and a renewables auction.  However, the real impact of the airport cancellation was not as severe as widely perceived due to the legal process through which it was carried out and the fact that contracts were generally honoured. 

“The government has passed through the learning curve that comes with the first year in office and they are ready to start with new projects with more strength,” says Muñozcano.

Banks in Mexico find themselves with high amounts of liquidity and are consequently on the lookout for existing assets to refinance and monetise, as well as waiting on the sidelines for new projects. 

Investors, for their part, are also ready and waiting to deploy capital despite macroeconomic decelerations. 

Muñozcano says, “We're also seeing many contracts on the horizon in the maritime and port sector, which is a very important one for Grupo Indi.”

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