Public Infrastructure Law – A swift approach to implement
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Economic Research Mexico Public Infrastructure Law – A swift approach to implement the National Infrastructure Plan Yesterday, President Enrique Peña-Nieto presented an initiative to reform the Public Infrastructure Law (Ley de Obras Públicas y Servicios Relacionados con las Mismas, LOPSRM) This reform aims to speed up the procedures regarding the procurement and execution of public works The scope of the initiative is classified into 3 groups: (1) New mechanisms for the evaluation and management of projects; (2) Measures to increase their effectiveness; and (3) Transparency in the procurement and execution of public works We believe that this reform will accelerate the implementation of the National Infrastructure Plan November 5, 2014 www.banorte.com www.ixe.com.mx @analisis_fundam Saúl Torres Analyst, Mexico saul.torres@banorte.com President Peña-Nieto presented yesterday the initiative to reform the Public Infrastructure Law (Ley de Obras Públicas y Servicios Relacionados con las Mismas, LOPSRM). This proposal will set the new principles so that the new public infrastructure project can be developed with the highest quality and efficiency standards, optimizing the public economic resources. We highlight that the current goal of the Federal Government is to implement the National Infrastructure Plan. In this regard, in the first three quarters, the Federal Government has spent MXN$638bn (around US$ 48.5bn) in investment projects, which implies a 26%yoy expansion. The principal goal of the reform is to speed up the procedures regarding the procurement and execution of public works. This reform aims to promote the formality of the contractors, and to safeguard the security of their workers via the Mexican Social Security Institute (IMSS). The scope of the initiative is classified into 3 groups: (1) New mechanisms for the evaluation and management of projects; (2) Measures to increase their effectiveness; and (3) Transparency in the procurement and execution of public works. We highlight that this reform creates the institutional figure of "Project Management" is included to strengthen the administrative process of the public infrastructure programs. On the other hand, it also promotes the use of CompraNet as the online system to carry out contracting procedures. We believe that this reform will accelerate the implementation of the National Infrastructure Plan Among the biggest challenges of this administration are the goals established in the National Infrastructure Plan. This reform pretends to speed up the process of creating the infrastructure projects like the Mexico City’s new airport, the high speed train Mexico-Queretaro, among others (refer to table below). 1 Document for distribution among public Mayor infrastructure proyects Mexico City’s New Airport MXN millions 169,000 High-Speed Train: Mexico-Queretaro 59,000 Express Train: Mexico-Toluca 36,608 The Expansion of the Port of Veracruz 23,933 The Transpeninsular Train 17,954 The Expansion of the Port of Mazatlan 10,667 Tuxpan-Tampico’s Highway 8,070 Second Floor of the Mexico-Toluca’s Highway 3,500 Second Floor of the Mexico-Cuernavaca’s Highway 2,000 The Expansion of the Port of Lazaro Cardenas Total 1,921 332,653 Source: El Economista Finally, we believe that with the approval of this reform the NIP will heighten the implicit benefits of the NIP. The direct impact of the implementation of this reform will be on the construction sector, which is one of the major employers in the country; as well as the tourism sector and the aviation industry. In this context, the development of the NIP will be positive also for private consumption. In the longer term, the improved public infrastructure will have a positive impact on household’s income by reducing their utilization costs. Finally, we highlight that the current investment in the projects mentioned earlier represents 2% of Mexico’s GDP, which will eventually translate to better growth prospects for the Mexican economy. Disclaimer The information contained in this document is illustrative and informative so it should not be considered as an advice and/or recommendation of any kind. BANORTE is not part of any party or political trend. 2 GRUPO FINANCIERO BANORTE S.A.B. de C.V. 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