MEXICO Government bails out half its toll companies

MEXICO

Government bails out half its toll companies

The Mexican transport minister Carlos Ruiz Sacristan said Aug 22 the government proposes to take over about 23 out of 52 private toll companies, liquidating bad debts to the tune of $7.8 billion. For the time being the government would take legal title to the toll road operations. The concessionaires will in most cases be retained to run them in the interim for the government, which intends to attempt to re-privatize the concessions again by auction in 1999 or 2000.

1988 to 1993 private toll roads boomed in Mexico and an amazing 5,300km were built plus 6 major toll bridges at a cost of some $12 billion. But many of the business plans, if such existed, must have been based on wild figuring because a large number got into immediate trouble and were unable to service debt. Some of the loans were government backed or provided by government banks and the federal government has been trying to shore up the troubled toll concessionaires piecemeal ever since.

Ruiz said that 24 of the 52 federal concessions are “viable” and will continue unchanged. Another 5 are being studied. The minister said the Mexican government remains committed to the principle of private toll roads but acknowledged that the toll concession program, as originally implemented, was seriously flawed. Also he said planning had been poor, construction resources were overstretched and traffic overestimated. To court popularity the government of the time insisted that free roads continue or be built alongside the new toll roads, which then set quite high tolls (by US standards). Many attracted very little traffic. Tolls were in the range 10c to 25c/km for cars and a multiple of this for trucks. Mexico has rugged terrain which makes for high transport costs.

Ruiz said the government proposes an immediate 30% reduction in tolls. Some of the troubled toll roads were poorly built and many have been poorly maintained since built. The minister says resumption of proper maintenance is a priority. The government hopes to get back some of its money in the planned re-privatization but Ruiz said it is writing off some $2.5b. The Mexcian parliament passed a law calling for the kind of program now proposed in detail by Ruiz and details remain to be worked out with individual concessionaires, some of whom stand to take large losses.

The government has its own toll corporation CAPUFE (Caminos y Puentes Federales de Ingresos y Servicios Conexos) established in 1963. CAPUFE itself operates about 12 toll roads totalling 1600km and 35 bridges and manages a number of investor-built highways and bridges as well. CAPUFE has also invested in a number of private toll roads.

Among the more successful toll roads in Mexico is one north of Mexico City to Puebla, about 110km, which carries an average 57k tolls/day and a quite old toll road eastward about the same distance to Queretaro that reports 50k tolls/day. Also successful is a 42km toll road from Tijuna the border post opposite San Diego in the extreme northwest of the country 42km to Tecate.

Despite many problems Mexico is at the stage of economic development where motor vehicle ownership can be expected to surge, providing the traffic for toll roads that are built in the right places at the right price. And the toll roads that were built too early or at too high a cost may, after capital writedowns, be solid investments. (Mexican Association of Road Concessionaires AMICO tel 52 5264 5384 fax 52 5584 5191 CAPUFE tel 52 7329 2101 fax 52 5534 4848)