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Hungry for cash and new ideas

MARKET REPORT: MEXICO

Cash strapped municipal authorities across Mexico are crying out for finance to modernise obsolescent water and power supply, sewerage, transportation and waste disposal systems. Federal law prohibits private firms and private capital from involvement in many areas of the public sector - municipal infrastructure is particularly tightly controlled. However, legislative change is expected to slowly but steadily open up opportunities for entrepreneurial investors.

As important as legislative reform, however, is an overhaul of Mexico's tarrif structures. Rates for water, for example, are so low that in some instances there is little or no incentive for companies to collect them.

Tarriffs are a politically touchy area in a country where earnings are still measured by many workers in terms of the basic commodities they will buy. Most public services are heavily subsidised by government; in the case of water, high charges for big industrial consumers compensate for the token revenue collected from domestic users.

There is little scope for private investment in improving and expanding water and wastewater treatment systems or public transport networks until companies start breaking even and heading into profit, says Oscar Bulnes Valerio, secretary general of the northern state Nuevo Leon's urban design and public works secretariat. The best short-term prospects for engineering design, construction, equipment supply or management work in the municipal engineering field, therefore, are on the back of international loans and grant aid.

However, municipal and regional governments are increasingly hungry for ideas about how they can manage their existing assets more efficiently.

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