Private sector investment will not rebound till the end of AMLO administration, experts say

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After the cancellation of the Texcoco airport in 2018, the capitals are waiting for better conditions, experts considered.

Since the construction of the Texcoco airport was canceled in 2018, there has been an “investment strike” by the private sector, which has maintained a gap with the authorities. At the same time, it is unlikely that the disbursement of public capital will recover in the remainder of the six-year term, experts considered.

Within the framework of the Private Equity Summit 2022, organized by the Mexican Association of Private Equity (Amexcap), Gordon Lee, an analyst at investment bank BTG Pactual, stated that although there is greater optimism on the part of foreign investors about the situation of the country, in general, the markets have a more encouraging outlook for Mexico after 2024, the year in which the administration of President Andrés Manuel López Obrador ends.

“The lack of investment in Mexico has been an issue for many years, not only since this six-year term, although it has increased, in part because I believe that public investment has been little and bad. It is highly unlikely that in the remainder of this administration there will really be a pick-up in investment,” he stated.

The Business Coordinating Council (CCE) has asked on several occasions that the rules of the game not be changed, that a true rule of law be guaranteed to attract investment, since the ideal is that the resources that both sectors contribute represent 25 percent of the GDP.

In this context, Lee said that Mexican businessmen are more pessimistic than foreigners, and it is difficult to convince them that the country also has positive aspects, such as the management of public finances, and that the investment-grade has not been withdrawn due to some rating agency, as was thought at the beginning of Amlos term.

He recognized that there are three important aspects that could inhibit private investment in Mexico: the approval of the electrical reform in the terms that it is proposed and that the investment-grade is lost, although in both cases he considered that it is unlikely to happen; as well as the conflicts that have been had with the USMCA.

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They ask for a long term plan

Tessy Rivera, partner and executive director of Finance at AINDA Energy & Infrastructure, asserted that in general projects and works are consolidated in up to 20 years and urged to plan them long-term, and not by the conditions that a government imposes.

“A project must survive beyond the political situation or an issue that pushes the market,” said the expert.

In this sense, Lee, from BTG Pactual, also added that work must be done on security in the country since there is a risk that it will have a negative impact on the tourism sector, which represents almost 10 percent of the Gross Domestic Product (GDP) of the country. Mexico.

In this regard, Armando Armenta, senior economist at Alliance Bernstein, stated that “the cost of fiscal stability has been a drop in public investment, I would say due to a political decision.”

For José Carlos Sánchez, chief economist of HSBC Mexico, it is necessary to provide greater certainty for investment to rise, since factors such as inflationary pressures and monetary policy could drive them away, coupled with signs such as a change in the energy sector.

The banking institution estimates that this year the country will report economic growth of 2 percent, but “the reality is that in Mexico we are still going to need a few more quarters to be able to return to the levels of economic activity that we had before the pandemic,” he pointed.

He added that “we will probably only see that towards the second or third quarter of 2023 and I think a good part of that has to do with a slower pace of recovery in sectors such as the investment issue.”

Source: elfinanciero.com.mx

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