Publications

ANALYSIS OF THE LAW FOR THE PROMOTION OF INVESTMENT IN STRATEGIC INFRASTRUCTURE FOR DEVELOPMENT WITH WELL-BEING

Yesterday, the Senate of the Republic approved the bill for the Law for the Promotion of Strategic Infrastructure Investment for Development with Well-being, submitted by the federal executive to Congress on March 18th, within the framework of the various federal government plans and programs, most notably the Mexico Plan and the Infrastructure Investment Plan for Well-being 2026–2030.

Its general objective is to develop affordable, quality infrastructure based on performance standards and risk-sharing, through mixed co-investment schemes—open to the public, private, and social sectors—with long-term durations of up to 40 years, financed through periodic payments or tariffs.

This model aims to catalyze investment in priority sectors for strategic infrastructure development, service provision, or the acquisition of goods and equipment aligned with economic and social development goals. New financing rules are established: funding may come through contributions of money, assets, or permits; financial and corporate instruments such as Special Purpose Vehicles (SPVs); issuance of securities or debt, including through specific companies or trusts; and may even allow the structuring of special-regime schemes for strategic economic sectors such as energy.

A new advisory body is created—the Strategic Planning Council—responsible for evaluating and determining the admissibility of projects based on technical, legal, financial, and viability criteria, which have not yet been fully defined. Although there is currently an investment unit within the Treasury (Hacienda) that serves as the technical authority responsible for authorizing investment programs and projects and managing the federal government's portfolio, the law does not contemplate the involvement of this body in approving projects under its scope.

One aspect that has drawn the attention of public finance specialists is the proposed amendments to the Federal Budget and Fiscal Responsibility Law—specifically, the provision granting the SHCP authority to authorize the initiation of procurement procedures or project calls even in the absence of definitive budget sufficiency, on the grounds that no financial commitments have been generated at that stage. Although the law specifies that this will be used only on an exceptional basis and that authorization is conditioned on securing definitive budget sufficiency prior to contract award, this provision conflicts with the general principles of public expenditure established in Article 134 of the Constitution and reflected in budget and public procurement legislation.

The bill contains elements already established in the 2014 Public-Private Partnership Law, and also revives aspects from earlier regulatory frameworks, such as Service Provision Projects (PPS), infrastructure projects with deferred expenditure registration known as PIDIREGAS—used by PEMEX and CFE—and other financing and contracting models previously unified under the PPP law: budget-funded, self-financed, unsolicited proposals, among others.

In short, it consolidates approaches that already existed across various laws, regulations, and guidelines governing co-investment, but organizes them under an ad-hoc structure tailored to the needs and characteristics of each project.

Additionally, the methodology for evaluating and authorizing projects is "casuistic"—i.e., case-by-case. Each project must adhere to the specific rules applicable to its subject matter and the participating entities. As a result, assessing the risk and fiscal impact of each project requires compliance with the requests and authorizations established under the applicable legal framework. This encourages a fragmentation—or "atomization"—of the investment rules governing infrastructure projects.

While the proposal offers a more flexible model than traditional investment schemes—facilitating project financing through more streamlined budget allocation and execution processes, which could prove attractive to investors—critical aspects for its operation remain to be defined, including specific procedures, operational methodologies, and rules, in order to provide legal certainty to all parties.

Furthermore, as a model grounded in principles of state stewardship, its success depends on the public sector creating the conditions needed to guarantee legal certainty for investments—generating the right competitive incentives to secure the most favorable terms for the state in terms of financing and timeliness, beyond mere social development promotion. What is clear is that this regulation also seeks to shield social welfare programs and projects from potential budget cuts.

In conclusion, it is a wide-ranging model that requires strict controls to guarantee transparency and efficiency in the use of public resources and to ensure proper monitoring of financial commitments, without jeopardizing long-term fiscal sustainability.

TRANSPARENCY AND ACCOUNTABILITY OF PPPs: PUBLIC POLICY RECOMMENDATIONS

Ethos Public Policy Laboratory

PPPs are a long-term contracting scheme (5 to 40 years) between the public and private sectors for the provision of quality infrastructure and better public services to citizens. International governance organizations such as the UN and G20 have emphasized the importance of incorporating new objectives and values into PPPs beyond efficiency. A new conception of PPPs must include two guiding principles: 1) guaranteeing maximum transparency; and 2) integrating mandatory accountability obligations for all PPP projects.

This document focuses on analyzing the planning, approval, and contracting stages of PPPs, identifying the main areas of opportunity in public policy regarding the use of the scheme.

WE NEED BETTER AND MORE TRANSPARENT PPP PLANNING

Mexico lacks a long-term vision for the use of PPPs, which has negative effects on the transparency of how the scheme will be used for infrastructure development. It is recommended that Mexico have a PPP Master Plan that prioritizes all projects to be implemented at the national and subnational level, with a long-term horizon (15 years) and a transparency focus.

Public entities face difficulties in planning and preparing potential PPP projects due to the high costs required to carry out technical, legal, and engineering analyses. It is proposed to create a General PPP Fund that includes a sub-fund to support project structuring and a guarantee fund.

The absence of a specialized PPP public agency has created various obstacles in the implementation of projects. A specialized PPP agency is proposed with important functions to improve the management and transparency of PPP processes, in addition to providing technical support to contracting public entities.

PROJECT APPROVAL: DISPERSED TRANSPARENCY AND SELECTIVE ACCOUNTABILITY

At the federal level there are various registries or repositories that function as public "showcases" concentrating PPP project information, but they do not agree on the information they report. A single PPP project repository should be designed to concentrate information on all approved projects across the pre-investment, contracting, execution, and operation phases.

Technical dossiers are the backbone of PPP projects. Changes to PPP regulations are proposed so that public entities that approve new projects or modify existing ones are required to make public the respective technical dossiers and feasibility assessments.

NO TRANSPARENCY IN CONTRACTING OR FISCAL RISKS

The Ministry of Public Administration (SFP) has powers to oversee PPP projects during the preparation, initiation, and award stages. Our proposal is to restrict video recordings to only certain solemn acts and eliminate minimum thresholds to cover 100% of PPP tenders.

PPP contracts represent contingent liabilities and as such are a risk to public finances. It is proposed to make transparent the fiscal risks derived from PPP contracting by creating a methodology for calculating contingent liabilities, an annual report on contingent liabilities, and a single accounting registry for PPPs.

TOWARDS A SUSTAINABLE MEXICO: PUBLIC-PRIVATE PARTNERSHIPS IN ENERGY EFFICIENCY

Ethos Public Policy Laboratory / British Embassy in Mexico

Mexico currently faces major national and international challenges related to public finances, economic growth, social well-being, and sustainable development. It is important to recognize that the government requires strategic allies to address situations such as budget constraints, improving quality of life, and reducing environmental impacts.

This research aims to identify new financing mechanisms for the implementation of projects related to the reduction and efficient use of energy, employing strategic measures, new technologies, and raising awareness about energy consumption.

WHY DOES ENERGY EFFICIENCY MATTER?

Energy guarantees well-being and economic functioning with a major social impact. At the same time, energy generation and consumption has a significant environmental impact. It is estimated that two thirds of pollutant gas emissions come from energy generation. Given that global energy demand will grow by up to 30% by 2040, the pressure on countries to meet this energy need without compromising the environment will increase.

Energy efficiency projects have great potential given their characteristics: low investment levels compared to other clean technologies and shorter implementation times. Internationally, significant barriers to the implementation of energy efficiency projects are recognized, encompassing institutional, informational, financing, and market factors. By their nature, Public-Private Partnerships are mechanisms that have been used globally to overcome these barriers.

Mexico's energy matrix is based primarily on fossil fuel energy sources. Electricity generation depends on these sources by 80%; therefore, energy efficiency measures must be promoted to reduce the environmental impact of electricity consumption.

PUBLIC-PRIVATE PARTNERSHIPS IN ENERGY EFFICIENCY

The public sector is beginning to understand that PPPs are a financing scheme that enables the development of complex projects. At the federal level there are currently 16 approved projects worth $26,220.4 million pesos in road infrastructure and hospitals.

The PPP regulatory framework, at both the federal level and in the states, is adequate for the development of energy efficiency projects. The analysis of the laws of Jalisco, Nuevo León, Sonora, Tabasco, and Yucatán shows that they are generally good laws pointing in the right direction.

CONCLUSIONS AND RECOMMENDATIONS

Ambitious goals require ambitious projects, directing support toward the highest energy-consuming sectors and complementing with real incentives for the adoption of these practices. Awareness campaigns should be promoted to strengthen the adoption of better practices regarding energy consumption.

Mechanisms must be promoted to strengthen trust and reduce investment risk in high-impact energy efficiency projects, primarily through PPPs. Mexico has great potential for energy efficiency and requires new instruments that do not depend exclusively on public finances and involve greater participation from private banking and businesses to accelerate progress toward emissions reduction targets.