Mexico Infrastructure Report Q3 2008

The economic downturn in the US and the recession in the construction sector will have a great impact on Mexico's own economy and construction sector. Mexico's Achilles heel has always been its dependence on the US economy that has been a blessing during prosperous times and a curse during a downturn. In BMI's Q308 Mexico Infrastructure Report, we forecast that in 2008 the construction industry will grow by a mere 0.8% as a direct result of the slowdown in the US. However we anticipate that the country's infrastructure needs will soon lift the gloom from the sector and kick start a significant infrastructure spending programme.

Mexico is soon to see a massive overhaul of its infrastructure system, including upgrades and improvements to its highways, airports, seaports, and rail systems. This was announced in November 2007 when Mexican communications and transport minister Luis Tellez announced details of President Felipe Calderon's plan for boosting economic growth and reducing poverty during the remainder of his six year term in office (which ends in 2012).

The National Infrastructure Plan forecasts public and private average annual investment of MXN420bn (US$38.44bn) across the 2007-2012 period. It is designed to address current transport bottlenecks, which have acted as a drag on economic growth The plan came in the context of presidential announcements aiming to boost average annual GDP growth in the country to 5%. The government also announced a 2008 budget that boosted public sector investment by 45%, the highest annual increase in over two decades, based on a tax reform package which boosted expected government revenues. Deputy finance minister Alejandro Werner said that spending on public sector investments would total around US$50bn in 2008, and would help the Mexican economy weather the expected slowdown in the US. 'These things are going to act as mechanisms to compensate for whatever might be happening externally', he was quoted as saying by Reuters news agency.