EconomyAn opportunity to consolidate the Oaxaca Pact

An opportunity to consolidate the Oaxaca Pact

(Expansión) – On August 14, 2019, nine states in the south-southeast of the country (from Puebla to Quintana Roo) signed the Oaxaca Pact in Santa Lucía del Camino, Oaxaca. In said document, the federal government, the state governments and the private sector agreed on an agenda to attract national and foreign investment, in order to develop commercial and industrial infrastructure to generate jobs and promote the development of the region.

For February 2021, CONCAMIN presented a list of “anchor” projects in order to strengthen the agreements of said pact and complement the works of the Mayan Train and the Interoceanic Corridor of the Isthmus of Tehuantepec. Projects that, since the beginning of the present federal administration, are considered as the trigger for the development of this area of the country.

After the electoral ban last June, many of us are awaiting the announcement of the third infrastructure package and we also hope that it will be directed particularly at the development of the area of influence of the Isthmus of Tehuantepec.

This sentiment has been fueled by a couple of announcements that have been made public recently:

1) The general director of the Interoceanic Corridor project announced that it will be in September when the tax incentives decree will be announced, which contemplates, among other things, reducing ISR and VAT for companies that settle in the area and

2) the IDB, the SHCP, the SE and Nafin presented a preview of what they called “Financing scheme to promote investment in Mexico”, where the resources will be used to take advantage of the opportunities of the reconfiguration of value chains and, therefore, therefore, the generation of jobs via the financing of private companies.

Personally, I would expect the IDB’s participation to cover technical assistance, seed capital, and the offering of guarantees for the financing requested. Likewise, given that the mechanism is still not very clear, in my opinion the supports must permeate small and medium-sized companies to consolidate them as suppliers of those industries that come to be located in the area.

Despite this, it seems that all the chips are on the table and that the incentives, public and private, point towards the same objectives that were agreed upon in the Oaxaca Pact at the time. If we also consider that the federal government intends to develop at least 10 industrial parks in the Interoceanic Corridor as of 2023, the south-southeast could become a more attractive region for the relocation of supply chains. In this sense, the increase in investment in the area would seem to be something that could occur naturally.

Under these circumstances, we could also add the fact that Mexico is one of the most competitive countries to attract those industries that are looking to relocate. The 23 trade agreements that we have, especially the T-MEC, our industrial capacity, geographic location, natural resources and human capital give us advantages over other countries that struggle to attract these companies, as is the case of Brazil, Colombia , Turkey or Poland.

On the other hand, imagining the interoceanic train as a comprehensive project, we would expect to see progress not only in the rehabilitation of the Isthmus railway, but also in the modernization of the airports in Ixtepec and Minatitlán, as well as in the ports of Salina Cruz and Coatzacoalcos. Taken together, this would create greater connectivity and facilitate trade between Asia and the East Coast of the United States.

If we are able to meet these objectives, we could expect the Interoceanic Corridor project to have a positive multiplier effect on our economy and this would be based, among other things, on the simple fact that, as some experts say, it would be very likely to reduce up to six hours the transfer that usually takes a ship to cross the Panama Canal.

However, and as I have said on several occasions, it is important to improve the rule of law, guarantee public safety and, as far as possible, maintain a stable economic environment in order to aspire to the economic and social development of the area.

Additionally, it is essential that the country can guarantee the supply of energy in the medium and long term (electricity and natural gas) for the industry that intends to establish itself in the region and that wishes to produce some good or offer some service. If you don’t work on all this, the investments simply won’t come.

With the intention of improving energy availability in the region, it is intended to expand the natural gas transport and storage system, modernizing the existing infrastructure of the Pemex Nuevo Teapa – Salina Cruz pipeline and building, in parallel, the Liquefaction Unit in Salina Cruz. in charge of the CFE and the Comprehensive Port Administration.

To conclude, there are many expectations generated and little information that the market has about the progress of these works. It has been said that the railways should be ready by the end of 2022 and the container terminals in 2023, which would be inaugurated in phases. In addition, we know that the Secretary of the Navy will be in charge of tendering the public works for the railway no later than November of this year.

What is clear is that today we have an unparalleled opportunity to trigger the flow of investment, public and private, towards the signatory entities of the Oaxaca Pact and specifically to the area of the Isthmus of Tehuantepec. Promoting and maintaining the flow of resources is essential to trigger economic activity that helps equalize the economic growth rates of the south-southeast with the rest of the country.

Editor’s Note: Roberto Ballinez is Senior Executive Director of Public Finance and Infrastructure at HR Ratings. Follow him on . The opinions expressed in this column belong exclusively to the author.

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