Tag Archives: neoliberalism

Paying the Cuota to Neo-Liberalism on Mexican Highways

Oaxaca    Google Maps and common sense conspire on Mexican highways to eliminate your choices when the signs driving to Mexico City or Puebla or Oaxaca say either Cuota or Libre, essentially toll road or free road, especially when in this case “libre” means an extra thirty to sixty minutes on the road, if you are both good and lucky.

Once on the cuota road there are few more disheartening signs on the Mexican public highway system than caseta de cobro meaning a toll both is ahead.  Driving on these roads between Mexico City and Oaxaca we found none cheaper than $1.50 USD and some stretches as high as $6.00 USD, making the New Jersey or Oklahoma turnpikes look like pikers.  My guess is that we paid at least $25 in tolls over the seven hours on the roads, though my companera claims it was closer to $50.

We need to add up our tickets.  We were advised to keep them before we began driving, and, as a travel tip, it’s essential advice.  Why?  According to mexbound.com:

It is important to keep this ticket because it will be your insurance while traveling on the toll road. If you crash, or are involved in an accident, your toll receipt will help you avoid paying road repair and maintenance charges. Also, if your car should break down, your ticket covers roadside assistance. The roadside assistance is provided while driving on the toll roads by the Green Angels, which are the Mexican equivalent of the AAA in the United States.

The roads are built to US interstate highway specifications, and driving through the southern Sierra Madres, I couldn’t help but notice how magnificently the twisting curves had been engineered.  Nonetheless, the real story of these highways is the story of neo-liberalism and financial shenanigans of the worst kind where the front-end cost to the Mexican government is paid by bonds to private banking institutions in other countries mortgaged with up to fifty years of these payments.  As the promotion for these PPPs, worldfinance.com notes, “Lenders normally come from major Europe-based international commercial banks – with France and Spain especially well represented – as well as Asian banks, particularly from Japan and South Korea.”    Depending on your perspective, Mexico is either the poster child or the horror story of the wave of private-public partnerships that have been the hallmark of neoliberalism.

The reason this is all so noxious is of course the fact that we are really driving on the private securitization of public assets and public goods, and paying the piper while doing so.  In the twenty years that this has been a common financialization scheme in Mexico, these projects have fueled highway construction, big construction companies, and, rather than returning the assets to the public, have usually led to renegotiations and extensions far into the 21st century before the bill is paid, according to a brilliant analysis from authors with UNAM, the major university in Mexico (https://probdes.iiec.unam.mx/en/revistas/v48n189/body/v48n189a4_1.php)

In a case study included in the paper (see below), the conclusion is inescapable:  securitization makes these projects vastly more expensive with the public paying the price.  Usually driving at your own risk is just a caution to keep your eyes on the road, but public-private partnership on Mexican highways should come with an additional warning sign for the public to make sure their hands are not just holding the wheel tightly, but also their pocketbooks.


The Tenango-Ixtapa de la Sal highway is a state highway located in the south of the State of Mexico, running for 40 kilometers. The concession opened in December 1994, and was initially awarded to the company Tribade, a subsidiary of Promotora y Operadora de Infraestructura (PINFRA) (formerly known as Triturados Basálticos, Tribasa).

The project operates under the COT scheme. When the term is up, the concession rights return to the State. The concession was initially set to expire in 2013, but following various renegotiations, was extended by the Secretariat of Communications of the State of Mexico to December 2054.9

In 2003, PINFRA ceded the concession to its subsidiary ATISA. Two years later, on August 23, 2005, ATISA liquidated the obligations it had acquired from the Banco Nacional de Obras (Banobras) and was able to set up as an issuing trust for the highway. The companies Pinfra Sector Construcción (Pinseco) and ATISA established a stock certificate issuance program backed by the toll-collection rights for the highway.

ATISA is the concession operator for the Tenango-Ixtapa de la Sal project, but Opervite performs operations. Both are subsidiaries of Pinfra. So there is a revenue stream on toll fees coming from the highway, which support the stock issuances.

It is important to mention that the State of Mexico government receives an amount equivalent to 1.5% of the gross monthly income (excluding VAT) generated by the highway as part of the concession.

On the other hand, Pinfra is one of the leading companies working on infrastructure project development in Mexico. The company has 16 road concessions and a port terminal. The former include 25 tollways and a bridge. Moreover, it produces asphalt and additives. In 2015, Pinfra operated a length of 989 roadway and bridge kilometers driven by 58.8 million vehicles (Pinfra, 2014: 16).

In 2014, nearly 70% of Pinfra’s revenue was derived from the transportation infrastructure concession division. The rest of its revenue was from its own operations in the construction branch. In particular, the Tenango-Ixtapa de la Sal highway contributed 2.2% of its total income.

Pinfra has five securitized highways,10 which account for one third of its income. It becomes clear that these financing schemes are intimately bound up in the company’s high profitability.

In 2014, operation and maintenance costs per kilometer of Pinfra’s securitized highways were nearly double the costs for the non-securitized highways it operates. This is a sign that securitization raises the financial costs for companies who hold road concessions.

As an example of the dynamics of stock issuances in the development of roadway infrastructure, the Tenango-Ixtapa de la Sal is a useful case study. Pinfra, through the SPV, issued a series of 1,949,812 preferential stock certificates for a total amount of 195 million UDIS (equivalent to 575.2 million pesos) with a 17-year term on October 4, 2005, which are traded in the BMV under the ticker symbol “TENANCB 05U.”

For at least the last five years, Fitch Ratings has rated ATISA issuances AA+ (very high security) with stable prospects, considering factors such as traffic and income performance, additional traffic, structural strengths, and the nature of the highway.

This rating is granted in spite of the fact that vehicle traffic on the highway has fallen over the past five years (see Figure 5).

In short, the case of the Tenango-Ixtapa de la Sal highway demonstrates that PPPs that enlist asset securitization have not been efficient. On the contrary, companies seek to manage more public assets so that the scheduled profits on the project will materialize, at the cost of user income. In other words, private does not make public more efficient. If it’s securitized, it actually makes it more expensive.


Philanthropy’s Desertion: You Just Can’t Count on the Rich

moneyNew Orleans      As Lilliputians living in the land of the giant rich 1%, it is hard to avoid the heavy helpings of bad news coming in daily about how their habits and highly selective generosity imperils us everywhere, especially because we also live in a world dominated by neo-liberalism that has too often ceded the responsibilities of the state to private and personal interests. Here’s the emerging lesson, as you might have already guessed: when we come knocking, no one is hearing us, and no one is home.

Recently, there was yet another report establishing that with the increasing concentration of wealth, even more of the burden of giving is falling towards those with lower incomes. The percentage of giving by the rich has decreased almost 1%, while the percentage of total income donated by lower income families has increased by more than 1%.

A professor at Stanford noted that inequities of wealth are showing up in local philanthropic fundraising, which is of course unregulated and tax-deductible for donors, mirroring the growth of the 1% with money raised for schools attended by their own children at the expense of efforts on a broader basis to get public dollars to be enough for all kids. In other words they are giving, but only to the public schools where their own children are going, self-interest being what it is and has always been. This translates into a new gym for them, and broken glass in the playgrounds across the street from the school for us, pottery and dance classes for them, and police in the hallways for us, and so on. Others argue that we should shut out mouths, at least they are donating to public schools, since the rich, unlike the rest of us, retain the threat of exit and can move their money and children over to private or parochial schools, if they hadn’t already.

Even the desperate Ebola crisis in lower income countries in West Africa like Liberia, Guinea, and Sierra Leone where groups like Doctors without Borders have been heroes, leading the way for even governmental responses, has revealed the gaps in philanthropic response compared to other global crises. At one level groups are not asking, claiming no boots on the ground in some cases, but that was also true in Katrina and other disasters. One worries that part of the issue is race and a disinterest in Africa. One or two of the big boys have stepped up, Mark Zuckerman and his wife for example, who I have to admit have funded public institutions in need before like the Newark school system, though wrongheadedly perhaps in that case, but for the most part, Ebola and West Africa doesn’t interest the rich, so thank goodness the military still knows how to pitch tents for field hospitals.

I read an interesting piece the other day on something called philanthropy-capitalism in connection with the political scene in Vancouver, British Columbia. The argument was strained, but the phrase was interesting, largely because the proof seems clear that in reality, despite what many might have hoped, it just doesn’t exist.

And, that spells trouble for all of us living in the shadow of the rich and under the rule of neoliberalism, because the shrinking and privatization of the state at every level, means there’s no safety net anywhere and no calvary will be coming over the mountain to save us. A report from Ceres, a new sustainability research outfit, finds that in weather-related disasters the level of insurance coverage is plummeting. Where 45% of the losses from Hurricane Katrina were covered, only a bit over a 30% of Hurricane Sandy were covered. Future disasters couldn’t depend on insurance or massive donations to help, leaving more and more communities stuck with only beleaguered public and private resources.

Despite some of the conservative, libertarian, and Republican rhetoric, the facts are rolling in again everywhere we look that we simply can’t count on the rich to save us. They’ve concentrated the wealth, and have different plans and interests than the rest of us or in the rest of us.

Neoliberalism crashes and burns at the point we all realize there is no Plan B, and once again the only justice is just us.