This content is from: Local Insights

Mexico

The Zedillo administration continues to privatize the nation's most valued sectors, making1998 a promising year for international investors. Privatizations in 1996 and 1997, particularly in telecommunications (satellites, PCS auctions and long distance telephone competition) and transport (railways and ports), indicate Mexico's commitment to the long-term economic development model. Privatizations in 1998 will involve permits or concessions in natural gas, airports and telecommunications.

Natural gas

Regulatory efforts to privatize natural gas distribution began in 1995, and since then five distribution permits have been awarded mainly for areas in northern Mexico. In 1998, the Mexican Energy Regulatory Commission (CRE) will oversee the bidding process for four of the nation's largest regions: Mexico City, the Cuautitlan ­ Texcoco Valley, Monterrey and Northern Tamaulipas. The Mexico City and Cuautitlan-Texcoco concessions are expected to be the most sought after, with capital investment expected to exceed US$1 billion. To promote greater regional competition, the privatization rules specifically state that the same consortium cannot win both Mexico City and Texcoco. Each 30-year concession allows the operator 12 years to develop the required infrastructure. Later this year, the CRE auctions off five other distribution permits for central and northern Mexico, expected to bring in investments of US$20 to US$100 million each.

Airports

The Mexican Ministry of Communications and Transport (SCT) is expected to publish, in late January or early February, the guidelines for awarding 50-year concessions for 35 of the nation's 53 airports. The privatization process divides Mexico's most valuable airports into four regions: Central, Southeast, Pacific and North. There is still no official list specifying which airports will be in which regions, but Mexico City is expected to have a single terminal due to its size and traffic volume. According to the authorities the most lucrative terminals are located in the Central and Southeast regions; the Southeast region, containing 12 of the 35 airports, is most likely to be sold first. The 23 terminals not privatized will be transferred to state governments. Record profits for the national airport network reached US$200 million during 1997, with the 35 airports to be privatized accounting for 95% of the profit margins. Industry analysts and government authorities expect the privatization to consist of two stages: a public bidding process and, within about six months, after a winning bidder is chosen, a placement of shares on the Mexican stock market.

Telecommunications

Mexico continues to promote competition in major sectors of the telecommunications system, while expanding the regulatory framework. As a result of privatizations and competition openings, which began in 1993, the telecommunications sector is expected to grow at a rate of 7% annually. During 1997, the Federal Telecommunications Commission (CFT) auctioned the government-owned satellite system. At the end of 1997, the CFT also approved reciprocity protocols for satellite transmissions from direct broadcasting and fixed sources, to provide services between the US and Mexico. A reciprocity protocol for satellite mobile services is expected to be approved by mid-1998. Numerous radio spectrum bands used for radio and television and local telephony districts have been demarcated for auctioning purposes. Megacable, Midicel, DIPSA, Qualcomm, Telmex, Grupo Hermes, Alestra, Telnor and SPC, among others, have already obtained, or applied for, local telephony concessions for a total investment amount estimated at US$389 million. Bidding for cable and radio spectrum bands reached an estimated US$15 million. The 1998 auction calendar, according to CFT officials, will be published in mid- to late January.

John Rogers, Adrian Zubikarai, Dan Nirdlinger

Instant access to all of our content. Membership Options | One Week Trial