Viva México
Hi Carlos. How are things going with the museum?
We are 75% complete and looking to open and things are going crazy at the moment. It’s the only project I am working on at the moment.
How does it compare to other PPPs you are seeing in the Mexican market?
It’s been a great experience working on a project that is a museum. Lots of projects are highways or water treatment [in Mexico] but the museum was a real challenge. It’s the first time a museum has been bid out as a PPP here.
The complexities of being a project manager are different from dealing with the bidding team to the bank side. It widens the scope and the stakeholders you have to deal with, the government, the bank etc: complex but interesting.
What feedback have you been getting from the financial stakeholders on the project along the way?
You always have certain surprises and problems that have to be faced. [You must] be very clear in communications to address any problems to keep them at ease. While there might be problems we are going at a very quick pace.
What’s the general mood in the Mexican financial community around PPPs at the moment?
I think Mexico is experiencing a moment of impasse after the elections and there will be a political transition. When the new government comes to power it seems to be an ambitious agenda in terms of infrastructure development. From his time as governor in the state of Mexico the new president should be able to push forward this ambitious agenda. So the financial community is waiting to see how projects will be pushed. We can expect to see new things coming up.
Remember he was [involved with] the first local government to bid out PPPs at that level.
Is there a new infrastructure plan expected for the country?
There are always new plans but hopefully the right strategy would be to take a look at the current infrastructure plan and see what was working and what wasn't. It was published at a time just before the economic crisis so there were a lot of things that couldn't get done.
But I believe there will be new priorities: plans to bid out suburban rail to promote growth of communities, for example.
Are you seeing any new international bidders circling?
Traditional companies see the results we get and the stable cash flows that projects like this provide. Also companies that have skills that are not widespread in the Mexican market – facilities management, for example. The market is always in flux.
Do you see many more opportunities in Mexico’s prison programme?
We decided not to move forward with that programme. The risk of running a prison – it’s always nice to run a hospital or a museum but we analysed it carefully and our stakeholders decided to wait and see how the projects move forward. I know there were very attractive rates of return in that sector and there were good advisers there. They were very careful to see how much risk the investment community was able to take.
Is current legislation enough to support a new wave of PPPs?
The new law passed last year. Things have been slow passing regulation. I think there are challenges and the new government will take a look at the new law and make some tweaks to make it more marketable, using it to push more projects through the pipeline. I am a believer that we should get negotiated bidding or competitive dialogue in the PPP market. I think if it’s done well it has been able to extract value for money from the project.
The restriction in the state law in Yucatan comes from another time of getting officials used to public bidding. Not much has changed since the 1970s, but with the level of complexity of projects competitive dialogue enriches the projects and can have positive results.
[Otherwise] you end up with a rigid framework where you always bid for the lowest prices and that's not always best for the lifecycle of the project.
