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Mexico announces second set of infrastructure projects to reactivate economy

Highlights

Plan includes six natural gas-powered combined cycled power plants

In line with strategy to aid utility increase generation capacity

Mexico City — Mexico has announced a second set of infrastructure projects aimed at revitalizing the country's economy and aiding the state utility CFE's strategy of increasing its generation capacity.

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The federal government and private industry announced on Nov. 30 a set of 29 new projects -- including nine in the electricity sector that are part of CFEs strategy and will require total investments of $11.1 billion.

The set, the second announced since the infrastructure plan was signed on Oct. 5 with private investors in Mexico, includes the construction of six natural gas-powered combined cycled power plants, one natural gas pipeline and one compression station, all to be operated by CFE, the government announced during the president's daily conference. The set also cites a liquefied natural gas export terminal to be constructed and operated by Sempra Energy, from the US.

The projects are in line with the strategy of the current administration to help CFE regain its market dominance in power generation through minimizing the participation of private players, as reported by Platts. The country's regulators have recently made moves to effectively eliminate the incentives in place for private investors to build new plants. The country has also recently published its five-year plan in terms of pipeline development that favors CFE.

So far the government has announced 68 projects with total investments of almost $25 billion, but the aim is to reach over $100 billion in private investment, Arturo Herrera, secretary of the Treasury, said during the presentation.

"Ten of those 68 projects are already in operation," Herrera said

Carlos Salazar Lomelin, head of Mexico's biggest business group, said the infrastructure projects are the most definite action the government is taking for the economic recovery of the country and estimated they would create over 400,000 new jobs.

Mexico registered a slowdown in economic growth during September, with the latest reading at 1%, compared with 1.4% in August, mainly explained by higher prices of services and basic goods.

The early data pointed to a slow recovery in October, with other high-frequency activity data seen as mixed, said economic analysts at Citi's Mexico unit in a Nov. 27 note to clients.