Mexico plans infrastructure blitz worth billions to shore up economy

MEXICO CITY (Reuters) - Mexico will soon unveil a set of major infrastructure projects drawn up by the private sector to lift the economy, President Andres Manuel Lopez Obrador said on Wednesday, seeking to banish the specter of recession from his young administration.

FILE PHOTO: Mexico's President Andres Manuel Lopez Obrador attends a news conference at the National Palace in Mexico City, Mexico August 30, 2019. REUTERS/Henry Romero

Speaking at a news conference, Lopez Obrador said some 1,600 projects were under consideration that would “reactivate” Mexico, Latin America’s second-biggest economy.

“This is really important, because it would help us to spur economic growth,” said the president, who took office in December pledging to deliver annual growth of four percent.

The investment package comprises projects worth more than $400 billion over the course of the 2018-2024 administration, according to two people familiar with the matter who spoke on condition of anonymity because discussions are ongoing.

Mexico’s economy has failed to gain traction since Lopez Obrador took power, stagnating in the second quarter after contracting during the January-March period.

Still, the central bank said last week it expected the economy to recover somewhat in the remainder of 2019, and Lopez Obrador said there was “no trace” of recession in Mexico.

A veteran leftist who has had an often strained relationship with business leaders, Lopez Obrador has blamed chronic poverty and violence in Mexico on what he has characterized as decades of misrule by a corrupt economic and political elite.

On Wednesday, however, he praised the private sector’s attitude and its role in crafting the infrastructure agenda.

“They made the proposal, they are financing the studies,” he said, adding the plans would be presented to the public soon.

Lopez Obrador raised hackles across the Mexican corporate landscape when, five weeks before taking office, he canceled a $13 billion, part-built new airport for the capital, the biggest infrastructure project of the previous administration.

He argued the airport was rife with graft and geologically unsound, but critics said he could have investigated and prosecuted any wrongdoing, then finished it anyway.

Lopez Obrador has also called into question other major projects agreed under the previous government, chilling investment in Mexico at a time it has had to contend with the threat of tariffs from U.S. President Donald Trump.

Nevertheless, the Mexican president has cheered markets by running a tight budget, and he suggested the private sector would play a major role in financing the infrastructure drive.

“We’re seeing ... what can be financed with public funds and what with private investment, how accords or associations between the public and private sector can be done,” he said.

Lopez Obrador says his top priority is to develop Mexico’s poorer south, and a substantial part of the infrastructure drive is likely to focus there, including his plan to better connect the Pacific port of Salina Cruz to the Gulf of Mexico.

Officials and business leaders have also underlined the need for Mexico to become more self-sufficient by developing its manufacturing value chains, thereby putting it in a better position to absorb the shock of potential trade wars.

Expanding that industrial capacity and the power generation infrastructure needed to supply it are likely to feature in the new plans, according to people familiar with the matter.

Reporting by Dave Graham, Editing by Deepa Babington; and Alistair Bell