Infrastructure investors have been downbeat in recent years when it comes to Mexico. President Andrés Manuel López Obrador, commonly known as AMLO, has publicly expressed contempt for private capital while showing little enthusiasm for sectors such as renewable energy and doubling down on public investment in hydrocarbons.
The mood is lifting, however, according to Scotiabank, which wins the award for Infrastructure Bank of the Year – Mexico.
“We are quite bullish on Mexico’s growth prospects for the next five years,” says James Neate, the president and group head of Corporate & Investment Banking at Scotiabank.
The main reason for that optimism is the performance of the Mexican economy, which is receiving a boost from companies that are relocating their supply chains away from China. Estimates suggest Mexico has attracted some 20% of all US exports lost by China, helping the economy to grow by 3.7% in the second quarter, compared to the same period in 2022.
“In 2023 Mexico’s GDP growth has exceeded most expectations and estimates,” Neate says. “We are seeing a lot of interest in Mexico and a lot of initial investment there linked to the nearshoring trend.”
The building of new industrial plants creates infrastructure demands, and this is why Scotiabank is sanguine about the perspectives of new investments in roads, ports, power generation and others. Even renewable energy is receiving fresh attention, as the two front runners for the 2024 presidential election have expressed more support for the sector than AMLO showed during his presidency.
“A lot of people are asking what the renewable industry will look like in Mexico after the election. Many believe that that will become more of a focal point,” Neate says.
If this is the case, Scotiabank, which also wins the award for Sustainable Infrastructure Bank of the Year, is well-positioned to help clients to ride a new wave of investment in renewables and other sectors in the country. Despite relatively subdued activity in the Mexican market during the awards period, Scotiabank participated in a number of standout deals, including several in the energy pipeline segment.
“Pipelines have been an incredibly busy sector in Mexico, with between kind of $5 billion and $6 billion of capital raised over the past 12 months,” Neate says. “We have been bookrunners in many of those deals and all of our pipeline syndications have been oversubscribed.”