NCPA - National Center for Policy Analysis

Foreign Investor Confidence Depends On Mexico Privatization

November 27, 1996

Many investors fear that Mexican leaders may be losing the will to continue to privatize state-owned enterprises.

  • The current government of President Ernesto Zedillo has managed to privatize just $240 million of holdings in its first two years -- despite a goal of trying to sell $12 billion in assets over six years.
  • The prior administration of President Carlos Salinas de Gortari managed to sell off $23 billion in stated-owned properties.

Experts say the low rate of sales may signal that most of the easy privatizations have been accomplished. But politics is still a major factor.

In September, the ruling Institutional Revolutionary Party voted overwhelmingly to cancel the sale of the nation's petrochemical facilities which had been expected to bring as much as $3 billion and attract investment to plants that have long deferred technological upgrades. Rather than fight, the Zedillo administration backed down.

Mexican privatizers are also concentrating on selling concessions to use 16,000 miles of railroad track. But these efforts are being politically thwarted by rail unions and even the protests of squatters living along the routes.

Privatization advocates warn that a stall out in the effort will have dire consequences for foreign investment and for the future of free market reform.

Source: Joel Millman, "Privatization Program in Mexico Now Turns to Nation's Railroads," Wall Street Journal, November 27, 1996.

 

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