Mexico Infrastructure Report Q2 2008

In February 2008 the Mexican government announced the creation of a National Infrastructure Fund. The fund - created to help finance the agenda President Caldern previously laid out in his 2007-2012 National Infrastructure Program - will be launched with liquid assets of more than 40 billion pesos.

The President said the fund would be used to finance projects in four main areas: highways, roads and bridges; railways, ports, airports and urban transit; water, irrigation and sanitation; and environmental protection. He also said the fund would help in mitigating the adverse effect on the country as a result of the current deceleration of the US economy.

In addition to Mexico's infrastructure plan, the country is literally buzzing with housing-construction projects, credit-lending programs, tourism development and diversification of its export markets.

The construction industry, which has displayed impressive growth over the last few years, shows no signs of abating. Among other significant projects the recent announcement of plans for a new airport for Mexico City will make way for an array of new building opportunities, boosting the metropolitan area's northeast development by offering office buildings, parks, business centres, restaurants, hotels, malls and convention centres.

Recent reports also showed the ministry plans to invest US$1.96bn in the construction and upgrades of commercial ports by 2012. Among the largest projects that were authorised were the construction of the Punta Colonet port and the Manzanillo II.

Spurred by the government's major infrastructure programme and buoyant US demand for manufactured exports (particularly automobiles), Mexico posted the strongest quarterly GDP growth of 2007 in Q3, at 3.7% y-o-y. Nevertheless, despite the momentum of now three successive quarters of growth, Mexico remains vulnerable to the possibility of a slowdown in the US, and we expect Q407 results, once released, to be revealing.