By Jules Gray
worldfinance.com
Wednesday, August 7th, 2013
Reforming President Pena Nieto announces plans to pump huge amounts into Mexico’s undeveloped infrastructure, and specialist investment funds are following suite
Financing the huge upheaval of Mexico’s infrastructure network will provide international investors with plenty of opportunities, and it will be bolstered by the governments plan to funnel $316bn towards such projects over the next five years.
Recently appointed President Enrique Pena Nieto’s proposals could potentially add five percent of GDP during this period, as his country sets about updating its roads, railways, ports and telecommunications infrastructure.
According to research by alternative investment analysts Preqin, many infrastructure funds specifically focused on Mexico have raised considerable amounts of capital in the last few years. Both 2010 and 2012 are described as being “strong years” for Mexican focused infrastructure funds, with the total amounts raised at $615m and $720m respectively. Funds currently seeking capital are reported to be targeting as much as $825m.
In 2010, local fund manager Navix raised over $300m for a fund focused specifically on Mexico’s energy sector, while another manager, Infraestructura Institucional, raised more than $200m. A number of other funds that looked at the wider Latin American region also invested significantly in Mexican projects.
Nicholas Jelfs, a senior analyst at Preqin, argues there’s serious demand from investors for opportunities in Mexican infrastructure: “Looking at the capital raised in recent years, and also of the amount currently being sought by fund managers, it is clear that there is appetite for infrastructure investment within Mexico. All three funds [that] closed in 2010, raising $615m, were for exclusive investment in the country, and over half the amount raised in 2012 was as well.”
In particular, the country’s energy sector is likely to undergo a series of reforms that many hope will open it up to foreign investors and reduce the dominance of state-owned firms like oil giant Pemex. The industry has been restricted to foreign ownership since nationalisation in 1938.
The industry has struggled to fully exploit the country’s vast quantities of natural resources, and with oil revenues in decline, observers think that reforming the sector is the only way it can develop into an international player.
Bank of America/Merrill Lynch said in a report in July: “Looking at the size of the package, and considering oil revenues have been falling, we believe the government will need both a fiscal and an energy reform to finance it.”
In their July infrastructure report, Preqin said that the country had been looking to pension funds to help finance major infrastructure projects: “Mexico has made particular strides to unlock institutional pension fund money for investment in unlisted equity, such as infrastructure. The use of CKDs – structured instruments traded on the Mexican stock exchange – has unlocked significant capital from institutional investors such as pension funds, which could be directed towards infrastructure funds.”
The governments proposed funding of new infrastructure projects would no doubt stir further interest from institutional investors keen to benefit from an expanding economy. Announcing the infrastructure proposals in July, President Nieto said: “With better infrastructure, more investment and transformational reforms, our nation will be able to grow at its full potential.”
Recently appointed President Enrique Pena Nieto’s proposals could potentially add five percent of GDP during this period, as his country sets about updating its roads, railways, ports and telecommunications infrastructure.
According to research by alternative investment analysts Preqin, many infrastructure funds specifically focused on Mexico have raised considerable amounts of capital in the last few years. Both 2010 and 2012 are described as being “strong years” for Mexican focused infrastructure funds, with the total amounts raised at $615m and $720m respectively. Funds currently seeking capital are reported to be targeting as much as $825m.
In 2010, local fund manager Navix raised over $300m for a fund focused specifically on Mexico’s energy sector, while another manager, Infraestructura Institucional, raised more than $200m. A number of other funds that looked at the wider Latin American region also invested significantly in Mexican projects.
Nicholas Jelfs, a senior analyst at Preqin, argues there’s serious demand from investors for opportunities in Mexican infrastructure: “Looking at the capital raised in recent years, and also of the amount currently being sought by fund managers, it is clear that there is appetite for infrastructure investment within Mexico. All three funds [that] closed in 2010, raising $615m, were for exclusive investment in the country, and over half the amount raised in 2012 was as well.”
In particular, the country’s energy sector is likely to undergo a series of reforms that many hope will open it up to foreign investors and reduce the dominance of state-owned firms like oil giant Pemex. The industry has been restricted to foreign ownership since nationalisation in 1938.
The industry has struggled to fully exploit the country’s vast quantities of natural resources, and with oil revenues in decline, observers think that reforming the sector is the only way it can develop into an international player.
Bank of America/Merrill Lynch said in a report in July: “Looking at the size of the package, and considering oil revenues have been falling, we believe the government will need both a fiscal and an energy reform to finance it.”
In their July infrastructure report, Preqin said that the country had been looking to pension funds to help finance major infrastructure projects: “Mexico has made particular strides to unlock institutional pension fund money for investment in unlisted equity, such as infrastructure. The use of CKDs – structured instruments traded on the Mexican stock exchange – has unlocked significant capital from institutional investors such as pension funds, which could be directed towards infrastructure funds.”
The governments proposed funding of new infrastructure projects would no doubt stir further interest from institutional investors keen to benefit from an expanding economy. Announcing the infrastructure proposals in July, President Nieto said: “With better infrastructure, more investment and transformational reforms, our nation will be able to grow at its full potential.”
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