Calderon unveils $234 billion Mexican Infrastructure Investment Plan

Shares in Mexican construction and infrastructure providers have been helped by an announcement from Mexican President Felipe Calderon of a plan to invest USD 234 billion on infrastructure over the next five years.

The plan, which involves partnerships with the private sector, includes building three new airports, more than 17,000 km of roads, upgrading sea ports and the railway network, as well as investment in energy and telecoms infrastructure. The Government’s commitment will depend in part on additional financing from fiscal reform, now under review. At present the World Economic Forum ranks Mexico’s infrastructure as less competitive than those of core emerging markets such as China and India.

According to Chris Palmer, Head of Global Emerging Markets at Gartmore, “The Calderon Government knew it had to invest to improve the capital base of the economy. This package should ease bottlenecks in the country’s antiquated transport system and improve productivity. Over the short term, the stimulus should offset any contraction from fiscal reform. Over the longer term, more effective allocation of capital and labour, will, I believe, improve Mexico’s potential growth rate. This should have important consequences for the country’s wealth and its distribution”.

The Government expects the package to boost Mexico’s GDP growth by approximately 0.6% a year. Key stock beneficiaries are expected to include Mexican cement producer Cemex, billionaire Carlos Slim’s construction, roads operator IDEAL, and the Brazilian highways operator CCR. All of these stocks are contained within Gartmore’s SICAV Latin America Fund. The Fund returned 62% over one year to June outperforming the benchmark index by over 5%. The Fund ranks in the top decile relative to its peers.