Mexico offers China US$300b in infrastructure deals

Latin American country is seeking Chinese partners for US$300 billion of projects, providing investors a back door for entry into the US market

PUBLISHED : Wednesday, 11 September, 2013, 12:00am
UPDATED : Wednesday, 11 September, 2013, 4:49am

Mexico is looking to China to boost its economy while offering Chinese companies a share of US$300 billion of infrastructure projects being planned for the country, which could serve as a back door for mainland manufacturers to export their goods to the United States.

"Mexico requires large investments in infrastructure, such as oil platforms, trains, ports, bridges and highways. China has premier quality in infrastructure and time-to-market delivery," said Banco Interacciones managing director Fernando Moreno, who is in Beijing seeking mainland investment and building relations with potential Chinese partners.

Mexico has a large border with the US. There is going to be a lot of interest from Chinese companies in putting up factories to supply to the US market. This infrastructure can help

"Mexico has a large border with the US. There is going to be a lot of interest from Chinese companies in putting up factories to supply to the US market. This infrastructure can help.

"Our bank is looking for Chinese industrial companies to invest in Mexico to supply the US market."

Banco Interacciones is Mexico's largest infrastructure-financing bank. Under the North Atlantic Free Trade Agreement, there are no tariffs on most goods moved between the US and Mexico.

Previously, Mexican factories that exported to the US were seen as competitors by Chinese manufacturers.

As one example of a Mexican project seeking Chinese investment, Pemex, the state oil monopoly, will require 52 oil platforms in the Gulf of Mexico in the next six years. Each platform would cost about US$280 million, Moreno said.

Other projects for which Chinese investment was being sought were three railway lines with a total cost of US$2 billion to US$2.5 billion to be completed within six years.

Mexico also required large investments in the renovation of two ports and the construction of a new port, Moreno added.

"The Mexican government wants to upgrade ports," he said. "Chinese technology is very state-of-the-art."

Earlier this year, Mexican President Enrique Pena Nieto announced a transport and communications infrastructure investment programme for the six years to 2018, under which the government would allocate US$300 billion for building highways, railway, ports, airports and telecommunications infrastructure.

Pena Nieto also announced the opening of opportunities for foreign investment in energy and mining, which were previously closed to foreign investment.

"There is greater possibility of Chinese companies investing in Mexican oil," Moreno said.

The government aimed to boost infrastructure spending from about 4 per cent of gross domestic product in the past to 7 per cent, he said.

Moreno said the two previous governments had neglected foreign investment, but Pena Nieto, who took office in December last year, was more proactive in courting foreign investment.

Chinese investment in Mexico was still small, he said. The US was the biggest investor last year with investments reaching US$7.52 billion, according to government data. China invested US$80.7 million.

China was also Mexico's second-biggest trading partner after the US, with trade between the two countries soaring to US$62.7 billion last year from just US$3.2 billion in 2000, Mexican data showed.