Public works, mining, alternative energy are benefiting from government spending and private investment
- By Peter A. Buxbaum, AJOTThe Export-Import Bank of the U.S. recently announced that it will be providing $1 billion in loan guarantees under an agreement with Banobras, Mexico’s public works bank, for projects such as wind farms, ports, and roads. The $1 billion will be used to support the export of U.S. equipment for these infrastructure projects and would focus in part on small businesses that otherwise might not get such loans.
Infrastructure spending in Mexico is emblematic of similar activities taking place throughout Latin America. Oil and gas exploration and other mining activities appear to dominate this spending as countries such as Brazil, Colombia, and Peru seek to exploit their natural resources and grow their economies.
ExIm has been heavily emphasizing projects in Mexico in recent years but is also involved in providing finance support to projects in other Latin American countries. “Brazil and Mexico are the key countries we are focusing on this year,” said John McAdams, a senior vice president at ExIm Bank. “Mexico represents our largest exposure and is the cornerstone of our relationships in Latin America.”
About $7 billion in commitments from ExIm Bank, representing 10 percent of its total portfolio, have gone for Mexican projects in recent years. ExIm Bank’s commitments in Mexico could grow to $10 billion in coming years.
“Brazil is also very attractive,” said McAdams. “We have a preliminary commitment of $2 billion to support oil and gas projects in that country. We also have a preliminary commitment of $1 billion in Colombia. ExIm Bank sees opportunities in many of our Latin American neighbors.”
Mexico’s state-owned oil company Petroleos Mexicanos, or Pemex, acquired most of the U.S. exports backed by ExIm’s recent loan guarantees, at $5 billion. In 2009, ExIm bank provided long-term direct loans to support $1 billion of exports of oil and gas equipment from hundreds of U.S. companies to Pemex.
Mexico is embarking on an ambitious infrastructure plan over 10 years in order to create jobs and alleviate poverty. Mexico’s government is seeking a rebound this year after the economy contracted 6.5 percent in 2009. The recession in the U.S., which buys about 80 percent of Mexico’s exports, hobbled manufacturing and job growth in the $1.09 trillion economy. The new $1 billion in funds being committed to Mexico by ExIm Bank will help U.S. companies compete for pieces of those infrastructure projects.
“We are emphasizing infrastructure projects,” sad McAdams. “We have 147 infra projects on our list.”
In addition to oil and gas projects, ExIm Bank is also supporting environmental concerns, paper manufacturers, and food processing concerns. Other opportunities for investment in Mexico include communications, highways, and ports.
Colombia is also attracting a great deal of infrastructure spending and investment. The government spend $28.3 billion on infrastructure investments last year which is credited with helping mitigate the effects on Colombia of the global economic crisis. Experts estimate that the Colombian economy will expand 2 percent to 3 percent this year after little or no growth in 2009.
“One area that I see as particularly impressive and worthy of focus in next five to ten years is overall infrastructure,” said William Brownfield, the U.S. ambassador to Colombia at a recent ExIm Bank conference. “Colombia touched bottom in the 1990s and logic dictates that they have to invest in infrastructure for the 21st century.”
Geographically the area that is hungriest for infrastructure development is Colombia’s Pacific coast and region. “Colombia is the only country in South America that is both an Atlantic and Pacific nation,” noted Brownfield. “If they want to take advantage of that fact they must develop the Pacific region.”
High technology, tourism, and mining are three economic sectors likely to attract sign