NEW YORK & MONTERREY, Mexico--(BUSINESS WIRE)--Fitch sees the recent Mexican public-private partnership (PPP) laws as a dramatic change in the country's legislation, with the potential to last over the long term and create projects that could attract investment. However, awareness and implementation issues could hinder the growth of these programs, which became law on Jan. 17.
This PPP legislation is designed to address the principle challenges investors faced in past Mexican infrastructure projects: a lack of expertise and resources. We expect the expertise to come from strategic investors and resources from bondholders attracted by the backing of the Mexican federal government. In this initial phase, projects will focus on the construction of new infrastructure projects, among other social initiatives.
We believe that the biggest challenge to this legislation is educating the industry about it. This legal shift is uncharacteristic for Mexico. The other challenge is in the implementation. Some of the process around the legislation must be built quickly.
If these challenges are overcome, downward pressure on project interest rates is certain. We also believe that credit profiles for these projects will be enhanced and resemble the profiles of the Mexican federal government or the largest constructions corporations in the country.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
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