Back to the future: Setting up projects for success in Mexico
A report published in October in 2018 by thinktank México Evalúa drew some shocking conclusions about large public projects in Mexico: they tend to double in both programme and cost.
The reasons for these overruns, according to the authors of the report, ‘¡Ojos a las obras!’ (Watch the Construction Works!), is poor planning and preparation in the early stages of a project, leaving too many unanswered questions for later. Underlying this is a lack of competition and transparency.
It is ironic that poor planning is a problem in a country which is built using an orthogonal grid pattern. One only has to look at the layout of ancient cities, such as Cholula in Central Mexico, to understand how advanced the planning and execution of major developments were over 8,000 years ago.
If Mexico is to improve the performance of its projects today, it must reject its prevailing culture and return to its proud heritage of planning.
Despite its challenges, Mexico has come a long way since joining the North American Free Trade Agreement (NAFTA) in 1994. It is now perceived as a country rich in natural resources and agriculture, bursting with potential.
PwC considers the shift in global economic power from the established economies of the G7 to the emerging economies of the E7 will continue up to 2050. By then, Mexico, with its large internal market and growing export capabilities, could become the seventh-largest economy in the world.
To enable its economic growth, Mexico desperately needs new infrastructure, as people migrate en masse to its cities. As well as a chronic lack of quality housing, the 77 percent of Mexicans who live in urban areas require new transport systems and utilities to improve the quality of their lives.
To enable its economic growth, Mexico desperately needs new infrastructure, as people migrate en masse to its cities.
Work is underway to increase social mobility. Mexico’s US$97bn National Infrastructure Plan (NIP), launched in 2013, encompasses NAIM, rail projects train, port upgrades and 6,500km of road works. However, this investment equates to just 1.6 percent of the country’s GDP, compared to some of its Asian counterparts, which are investing between 7 and 8 percent. Additionally the change in government after presidential elections brings with it a change in priorities.
Some ambitious projects remain on the drawing board due to funding problems. A Mexico City - Queretaro high-speed railway, which was to be backed by the Chinese has faltered in this way.
Like many countries, Mexico needs to attract private sector finance if it is to create the new infrastructure it needs. To do this, those leading its projects must demonstrate to would-be funders that the necessary governance and controls are in place.
Setting up projects for success is not just about defining the scope, cost and schedule, though these things are important. It’s also about defining the organisation that will oversee the project or programme: what its culture will be, how it will operate, and what the management controls will be.
As well as the immediate benefits of cost and time certainty, proper planning delivers a host of far-reaching outcomes. Greater efficiency creates more value for businesses and communities; the environmental impacts of a development can be better understood and controlled; and the teams who work on such projects will develop new skills and go on to deliver more successful jobs. Ultimately, well-delivered projects will lead to greater confidence and encourage more investment into Mexico.
Changing culture will take time and requires robust change management processes. However, if Mexico can go back to the future and return to its proud heritage of project planning, it can unleash huge opportunity.
This content is part of the 360°View, issue 10