Wednesday, March 07, 2007

Privatizing Mexico's Roads-Again

Commerce, Labor, and Economics

The Great Highway Auction

January-March 2007

Frontera NorteSur (Las Cruces, New Mexico)
Copyright 2007

Drivers heading south through the Mexican border state of Nuevo Leon will pay a Spanish company money for the privilege of using the new Monterrey-Saltillo freeway.

Traveling recently to Nuevo Leon to formally inaugurate construction of the road, Mexican President Felipe Calderon used the occasion to promote a broader re-privatization program for Mexican highways. The Calderon administration initiative will affect highways that were taken over by the federal Mexican government from private companies during the financial crisis of the 1990s in a bail-out that cost tax-payers billions of dollars. The ownership rights to dozens of roads were previously handed over to the private sector during the 1988-94 administration of former President Carlos Salinas de Gortari.

More than a decade later, President Calderon is putting the highways on the auction block once again, and even offering partial subsidies to private companies that take over the road maintenance and user fee collection services.

According to President Calderon, income from the sales of highways will also bring in new money and permit doubling the amount of highway construction authorized in the congressionally- approved 2007 budget. The new policy, which could tap into a $250 million-dollar line of credit from the Inter-American Development Bank if needed, proposes awarding private highway concessions for a 30-year period.

Currently, Mexicans and foreign travelers pay very high fares to travel on toll roads in varying degrees of condition operated by the federal government. Earlier this year, Mexican broadcast media carried stories about the deplorable conditions between Cuernavaca and Acapulco on the popular Highway of the Sun, which once whisked millions of sun-seekers to Pacific Coast beaches in record time but is now plagued by rock slides, pot holes and even trench-like cave-ins. The road has deteriorated to such an extent that the federal government state recently slashed the popularly- criticized expensive fares as an incentive to keep tourism moving.

Guerrero state Governor Zeferino Torreblanca has made an urgent call to the federal government to finish its repairs on the Highway of the Sun, even if it means foregoing additional discounts for travelers.

Reaction to the Calderon administration's highway re-privatization package has been mixed. Jose Luis Flores, vice-president of business development for Moody's, assessed the program as attractive to big investors that partner with construction companies, but he cautioned that investors who are not in the business of highway maintenance might neglect "the operation of the highway."

In the Mexican Chamber of Deputies, representatives of the PRI and PRD political parties questioned awarding national roads to private companies, while Cristian Castano, vice- coordinator for President Calderon's PAN party in the legislative body, praised the highway project. In order to avoid a future public bail-out. Castano urged that conditions be attached to the program.

In an editorial, the left-of-center Mexico City daily La Jornada questioned the role of Communications and Transportation Secretary Luis Tellez in the re-privatization scheme. The newspaper criticized Tellez for his past record as a Salinas administration agriculture department official who promoted the North American Free Trade Agreement and the privatization of Mexican ejidos, and raised questions about Tellez's ties to the US-based Carlyle Group historically associated with former US President George Herbert Walker Bush. Tellez also served as Secretary of Energy during the presidency of Salinas’successor, Ernesto Zedillo.

Several Mexican and foreign companies have expressed interest in the new highway program. The firms mentioned include Gutsa, IDEAL and ICA, among others. In the case of the Monterrey-Saltillo road, the Spanish company Isolux-Corsan has been granted the right to collect fares for 30years.

In PRI-ruled Mexico state, meanwhile, a new state freeway system in the Toluca Valley has been contracted out for 15 years to magnates Carlos Hank Rhon and Carlos Slim Helu, the founder of IDEAL. Governor Enrique Pena Nieto has pledged that his administration will triple the number of miles devoted to freeways in Mexico state by the end of his administration.

Sources: La Jornada, March 3 and 6, 2007. Articles by Israel Davila and editorial staff.

Frontera NorteSur (FNS): on-line, U.S.-Mexico border news Center for Latin American and Border Studies New Mexico State University Las Cruces, New Mexico

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