Plans for gleaming railway stations plaster the walls of the “map room” at Mexico’s National Fund for Tourism Development (Fonatur) — grand central for the Mayan Train.
This is one of Andrés Manuel López Obrador’s signature projects to kick-start the economy of the poor southeast. The tourist, passenger and cargo railway around the Yucatán peninsula would be 90 percent funded by the private sector, the president promised.
But after receiving insufficient interest from major infrastructure investors for proposed public-private partnerships, those plans have been ditched. Despite a cratering economy, the US$7.4 billion project will now be 100 percent government funded.
“Major infrastructure firms looked at it with significant question marks over whether revenues would be realizable,” said Edmundo Gamas, executive director of the Mexican Institute of Infrastructure Development, in a recent article published by the Financial Times (full story here). “It was definitely a vote of no confidence in the project and its financial viability.”
Grand public works projects that can crown a president’s six-year term have long been the norm in Mexico. But López Obrador is more ambitious than most. He plans to build an US$8 billion refinery, a US$4.2 billion airport and a US$170 million Trans-Isthmus transport corridor, as well as 2,700 branches of a state development bank costing US$530 million — all in addition to the Mayan Train.
For López Obrador, these are not just priority infrastructure but urgent social projects aimed at lifting up underdeveloped parts of Mexico.
The problem is that with state finances under pressure after the economy contracted 0.1 percent last year, analysts and even some government insiders fear that AMLO’s dreams will be hard to deliver.
“They could end up as white elephants,” said Guadalupe Correa-Cabrera, an associate professor at George Mason University.
“I don’t have a problem with the state guiding the economy but I am very concerned that I still don’t see a plan or the capacity of the state to pull off these investments.”
One senior official agreed that they risked falling short of expectations — “if they get finished, that is.”
Fonatur chief Rogelio Jiménez Pons said studies had shown that the hybrid diesel-electric Mayan Train, which is scheduled to start test operations in 2023, would be “highly profitable,” a claim treated with skepticism by business groups.
“It’s doing an economic project because it is politically important,” he said.
“It’s hard to understand why, per peso spent, we wouldn’t want to use the money to build hospitals,” said Gamas. “We could, and probably will, have a white elephant. The only question is whether it’s a baby or a fully-grown male with big tusks.”
Abbreviated from a Financial Times story