Mexico Infrastructure and Sustainability Summit 2017 Highlights - Mexico Business Events (mbe)
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Mexico Infrastructure and Sustainability Summit 2017 Highlights

NAICM: Mexico’s ‘Door to the World’ Promises to Open Opportunities

Mexico’s “Door to the World” won’t open for another two years at least, but it promises to usher the country into a new era of prestige. Most pundits agree that despite public skepticism and with presidential elections just around the corner, the new Mexico City International Airport (NAICM) project has not only taken off, it will fly unabated.

“This project is unstoppable as it is so advanced already,” Eduardo Andrade, Director of Sacyr Mexico, said during the first day of the Mexico Infrastructure & Sustainability Summit 2017, held at the Sheraton Maria Isabel hotel in Mexico City on Tuesday. The event continues on Wednesday.

The airport project is led by SCT and Grupo Aeroportuario de la Ciudad de México (GACM). Norman Foster of prestigious international firm Foster + Partners is the master architect, and renowned UK firm ARUP is in charge of the design. Among other partners are Fernando Romero Enterprises and the Netherlands Airport Consultants.

With the current 770ha AICM saturated with passenger traffic, the new airport located 5km northeast of AICM covers a massive 5,000ha. The most ambitious infrastructure project in Mexico, it will be the first airport outside the US with triple simultaneous operations, with three planes able to take off and land at the same time over six runways. “This will be the second-biggest airport in the world after Istanbul,” said Ricardo Dueñas, CFO of GACM.

The first six works have already been completed: the perimeter fence, 48km of access roads, cleaning of the land, temporary drainage, the GACM camp and the moving of debris. Twenty-seven works are under construction, with 292 companies involved and 40,000 direct and indirect employees.

With this scale, not only does the NAICM project have a direct impact on quality of life and employment opportunities for Mexico, it extends beyond just a new airport. “This project goes further than just NAICM,” Dueñas said. “It also opens up opportunities in connection links, such as the metro and new highways that will be necessary, as well as the reuse of the AICM land.” It also has the potential to boost Mexico’s international clout, given no major airports have been built in the region for over two decades.  The country “can be a global logistics air hub and NAICM is urgently needed,” Juan Torres Landa, Partner at Hogans Lovells, told the audience.

Panelists during the event identified three key axes for NAICM’s agenda: transparency, sustainability and governance.

 The first, transparency, is essential to foster the required investment and gain the approval of the people, some of whom remain skeptical. Alicia Silva, Director and Founder of Revitaliza Consultores, understands that there is a lot of disbelief about how the project is being carried out, given its magnitude. “This project almost seems unreal, but Mexico indeed has a transparent project,” she said.

The OECD has published two reports on NAICM, stressing the importance of corporate governance throughout the project, the second axis. Jacobo García, Senior Specialist in Policies of Integrity and Public Purchasing at OECD, said that “infrastructure is a source of investment and competitiveness for any country.” It is key to focus on the importance of governance of infrastructure projects to plan their strategic execution, as “the megaproject is a conglomerate of projects of such a magnitude that will carry a high-impact social dynamic,” he added.

GACM’s Dueñas said that transparency has been a hallmark of the development. “We are following the best international practices,” he explained, referencing GACM’s collaboration with the OECD and with INAI to promote the greatest level of transparency, both in the bidding rounds and oversight of the project.

Strategic planning through optimum governance will also help secure the continuity of the project, especially as Mexico enters into a presidential election in 2018. “A logistics air hub implies certain complexities,” said Joseph Woodard, Head of Contracts and Procurement at Parsons. The fact that there will be no simultaneity of operations between AICM and NAICM increases the need to comply with construction deadlines, especially since AICM already has a closing date. In this regard, Héctor Ovalle, President of construction firm COCONAL, said, “I can guarantee you will see the second airstrip paved and finished on time.”

Regarding sustainability, the third axis, Silva believes “this is one of those projects in which sustainability works in synergy with the finances.” NAICM’s financial scheme has been internationally awarded the highest ratings for its green bonds. Likewise, “sustainability is being perceived as a reference point on how things are being done well,” and it is a type of metric being used to evaluate the project, she said. Torres Landa agreed: “I believe that it is fundamental to have an environmentally friendly project.”

Financing structures also play a significant role in project viability, and Dueñas explained that NAICM follows a forward-thinking mixed financing scheme, with funds taken both from the government budget (PEF) and private financing. “This is a very viable investment scheme for the government because after debt service is paid, all this profit will go to the public purse,” he said.

Private credit for the project comes from investment banks and bonds, and a flexible scheme with a revolving credit facility. “A few months ago, we raised US$4 billion in the capital markets, equaling a total private financing of US$6 billion,” he said. This amount comes from 750 investors, 45 percent of which are from the US, 21 percent from Asia, 14 percent from Latin America and 20 percent from Europe. “This financing model has won 14 prestigious international prizes.”

Perhaps the new airport’s most significant impact may be on Mexico City’s – and the country’s – competitiveness. “The economy of a city moves at the pace of its transportation network,” said Roberto Calvet, Director General of AECOM, the world’s largest engineering and construction firm that is also involved in the NAICM development. “Three things really impact the economy: a country’s entry and exit points, transit networks within cities and transport routes between different cities and states,” he said.

While not talking specifically about NAICM, José Zozaya, President of railway group Kansas City Southern Mexico (KCSM), hinted at the country’s potential and the importance of thinking internationally. “Considering Mexico’s geographical position, the country should strive to not only be an important regional hub for logistics but a global one.”

A world-class airport would go a long way to facilitating such an ambition.

Wasted Resource: What to do About Mexico City’s Water Troubles?

PANEL 2 MISS DAY2

Mexico City’s water issues are highly problematic for the population and require a nuanced methodology to combat shortages. But according to Ramón Aguirre, Director General of the city’s water system SACMEX, budget cuts could put a damper on those efforts.

“Little by little, we need to increase the budget for water in Mexico City, and this is why it makes no sense to me that, this year, the budget for the department was reduced,” he told the audience at the Mexico Infrastructure & Sustainability Summit in Mexico City on Wednesday. According to Aguirre, Mexico City could be a global reference in water infrastructure given the fact that probably no other city in the world is built directly atop a lakebed.

The water lost in Mexico City’s pipeline system due to leaks in distribution networks amounts to 41 percent. Aguirre highlighted that these are normally small, dispersed leaks that require extensive repair programs. But with the current deterioration of the city’s drainage networks estimated at around 30 percent and an average pipeline age of 58 years, the budget cuts mean Mexico City is drowning in its water issues. “If we do not resolve our problems with water, the city has no future,” said Aguirre.

Leaks are directly related to the pressure on pipelines, and Aguirre said that stress on water in Mexico City is similar to that in Middle Eastern countries. “The degree of pressure is calculated by dividing the authorized volume of water extraction by the volume of water available, and this serves as an indicator to evaluate the sustainability of the extraction of this resource in the long term,” he said. Its use is also suggested as a measure of the vulnerability of the country or of a particular region in the face of water scarcity.

After his presentation, Aguirre was joined by Architect and Urbanist Iñaki Echeverría, Judith Maas, Deputy Ambassador of the Kingdom of the Netherlands in Mexico and Javier Arce, Development Director of Hoteles City to discuss Mexico’s water issues in depth.

Arce explained that he believed the way to alleviate pressure on water systems is through fines and punishment for those that exploit the resource. “I agree with punishment of water waste at all levels, whether in Las Lomas or in Iztapalapa,” he said, referring to two areas of the city, one rich and one poor.

But Echeverría took a much more nuanced view. “We do need fines but we also need to think about creating solutions to eliminate the need for overconsumption,” he said. “In the future, over 95 percent of the population is expected to live in cities and policies in these cities are likely to define practices over the rest of the country.”

In Mexico, in 2012 the estimated pressure rate on water resources was 17.5 percent, which placed it in the category of moderate pressure above the average estimated for the OECD countries, which is 11.5 percent. Worldwide, Mexico ranks 53rd among the countries with the highest levels of pressure of a total 180 countries.

In Mexico City, the goal for sustainable consumption of water sources should be 210l per inhabitant per day but the city’s consumption exceeds this amount by 60l per inhabitant per day.

Arce said that subsidized tariffs contribute to this problem, since if people do not have to pay for their water, they tend to be more wasteful. “The problem is that water can be overly subsidized in areas with issues accessing water,” he said. “The fact that people do not pay the full tariff for water is problematic as they fail to recognize its value.”

He believes that a large part of this problem could be solved by simply increasing consciousness of behaviors and their impact. “In our hotels, we have a sticker on the bathroom mirror in each room that tells the amount of water consumed per minute,” Arce explained. “People are often unaware that they consume around 5 liters of water per shower.”

Maas agreed that consciousness plays a great part in the use and misuse of water. “We can all play a part in saving water, whether by choosing to stay in a hotel that uses less water or simply by taking shorter showers in the morning,” she said.

She said that there should be an increase in education and knowledge sharing, especially among countries, cities, governments and the private sector. “The water management problems in the Netherlands are slightly different, but I think we can implement similar solutions here in Mexico,” she said. “We would love to export our knowledge in water solutions and I think we could also learn a lot from you.”

Putting the Environment First

Martha Garcíarivas, Deputy Minister of Environmental Protection Management at SEMARNAT
Martha Garciarivas

Mexico is committed to putting the environment first and moderating the impact of climate change, Martha Garcíarivas, Deputy Minister of Environmental Protection Management at the Ministry of Environment and Natural Resources (SEMARNAT), told the Mexico Infrastructure and Sustainability Summit 2017, held at the Hotel Sheraton Maria Isabel in Mexico City. “Mexico is a country with social global responsibility, vulnerable to climate change due to its geographical position, among other factors,” she said, adding that President Peña Nieto’s administration will continue promoting sustainable development in the country.

Mexico is on board with the UN’s sustainable development goals because “climate change does not cause meteorological phenomena per se,” such as the earthquakes in September, “but it does certainly increase their intensity,” said Garcíarivas. The government’s focus is set on a number of projects to prevent and reverse climate change. One example, she said, is the ProAire program that is currently being implemented in 18 states and which aims to ameliorate air quality and reduce pollution levels. “Each one of us has to do our part to improve air quality,” Garcíarivas stressed.

Accordingly, “Mexico is committed to reducing 22 percent of greenhouse effect emissions by 2030.” As 65 percent of these emissions come from industrial activity, the Energy Reform and the Transition Energy Law are two of the strategies implemented to accomplish the goal. “The contribution of the Energy Reform is that 35 percent of all energy generated will come from clean sources,” Garcíarivas said. Likewise, the government is fostering massive urban transportation means to reduce the environmental impact of transport. Garcíarivas gave the example of the Mexico City-Toluca Interurban Train and the New International Airport of Mexico City, two projects that are designed to be sustainable infrastructure that will not undermine the environment.

The current administration, she pointed out, has authorized 8,000 environmental projects “that will benefit the population’s health. “We have eliminated 99 percent of the substances that degrade the ozone layer,” in compliance with the Montreal Protocol, she said. Also, “the aim for 2030 is to have a 0 percent deforestation rate. This administration’s goal is to reforest 1 million hectares.” Garcíarivas added that environmental concerns were global in nature and the government is working closely with the international community for the common goal of preserving the Earth’s environment and biodiversity. “It has been a tough time. The international community agrees on the need to stop climate change. The president has reiterated Mexico’s commitment to the Paris agreements,” she said.

Regarding biodiversity and its preservation, “we are working with local communities so they will be the main parties involved in caring for the preservation of wild species,” said Garcíarivas. “To care about our biodiversity is to care for our ecosystems. Mexico has 181 protected areas. This administration has tripled the number of hectares of protected land.” Three Mexican areas, she added, have been declared Human Heritage sites by UNESCO, including the Archipelago of Revilagigedo, which could also be declared a national park.

Concluding her keynote presentation, Garcíarivas emphasized the need for all the sectors to work together to achieve sustainability. “I want to tell you that we are your allies,” she said, referring to SEMARNAT’s willingness to work with the private sector. “Come to us so we can orient you and work together” in the pursuit of putting the environment first and preserving Mexico’s extremely rich and worthy biodiversity.

Diversified Energy Distribution Key in Creating More Sustainable Cities

MISS 17 Panel

Cities are some of the largest consumers of energy in the world and as the effects of climate change continue to raise concerns, metropolitan areas are increasingly under pressure to reduce their carbon emissions. The 2015 Energy Reform has placed Mexican cities ahead of the curve as it opened an array of renewable energy suppliers available in the country’s market, panelists told the Infrastructure & Sustainability Summit 2017 in Mexico City on Tuesday.

“More than two-thirds of global energy consumption derive from cities,” said Marcelino Madrigal, Commissioner at the Energy Regulatory Commission (CRE) at the Hotel Sheraton Maria Isabel. “The fact that the 2015 Energy Reform allows end users of all sizes, from households to large cities, to choose their energy supplier at cheaper rates implies a big advancement in the race to reduce carbon emissions.” He mentioned that in the last six months, the number of solar panel users in the country has increased 20 percent thanks to the transparent system.

Distributed generation has the added benefit of alleviating stress on public funds, an important factor behind its popularity. “Mexico has 2,400 municipalities and of these 400 are considered to be metropolitan areas,” said Santiago Creuheras, Director General of Energy Efficiency and Sustainability at the Ministry of Energy (SENER). “Approximately 80 percent of the population is concentrated in these areas, which implies that nine out of 10 people live in cities. Soon, the rest of Latin America will encompass a similar context in terms of urbanization.”

While the reform has opened new opportunities in the energy market for sustainability in highly populated Mexican cities, Guillermo Bilbao, the moderator of the panel and Director of PA Consulting, worried about country’s ability to achieve the high benchmarks that have been set. The Energy Transition Law, for example, mandates that at least 34 percent of the country’s energy must come from renewable sources by 2024, a short window of time.

Creuheras responded by emphasizing the commitment of the public sector to helping the country advance as planned in its energy transition through norms and committees unique in the world. “The Ministry of Energy is taking action on this matter to make sure that energy transition goals are met,” he said. “For instance, we established a program to substitute inefficient lightbulbs in rural areas. We also offer credit to households in Mexico that have an income higher than five minimum salaries to incorporate renewable energy. These programs are being incorporated in other Latin American countries as best practices.” The ministry also uses programs such as TRACE to compare the energy consumption of Mexican cities to others in the world.

Metropolitan areas also face the challenge of incorporating new technologies and making sure that they comply with the strict norms. “Cities need to make sure that the technologies they are incorporating comply with norms and requirements,” stated Creuheras. “Contrabanded technology can be an issue and we recommend municipalities to make sure that everything from lighting systems to air conditioners in public buildings are aligned to the new laws.” Santiago also mentioned that transportation systems in cities will face the most challenges in the energy transition. “Mobility is expensive and the Ministry of Communication and Transportation does not have the budget to incorporate all the technology that is needed. SENER is collaborating with the ministry to create viable solutions. It is an interesting area of opportunity.”

In the past, cities used to solely rely on CFE and its limited capacity to provide renewable sources of energy, but the Energy Reform is bound to create new benchmarks of efficiency and productivity. “The reform is creating more competition in the market and this is going to push public companies to be more efficient,” said Madrigal. “Companies will continuously seek better prices to compete in this market. Cities will benefit from the new context and will be able to incorporate renewable energies at a faster rate than previously if prices continue to become more competitive.”

NAICM: Economic Development on a Mega Scale

Ricardo Dueñas Espriu, CFO of Grupo Aeroportuario de la Ciudad de México (GACM)
Ricardo Dueñas

Ricardo Dueñas, CFO of Grupo Aeroportuario de la Ciudad de México (GACM), joined 250 key decision-makers during the Infrastructure & Sustainability Summit 2017 at the Sheraton Maria Isabel hotel in Mexico City on Tuesday to speak about the progress of the NAICM airport megaproject, named “Mexico’s Door to the World.” Transparency, he said, has been a hallmark of the development.

“We are following the best international practices,” he explained, referencing GACM’s collaboration with the OECD and with INAI to promote the greatest level of transparency, both in the bidding rounds and the overseeing of the project.

The airport project is led by SCT and GACM, which then select the leading companies in their fields to contribute to NAICM’s development. Norman Foster of prestigious international firm Foster + Partners is the master architect, and renowned UK firm ARUP is in charge of the design. Among other partners are Fernando Romero Enterprises and the Netherlands Airport Consultants.

“We also have a panel of experts to advise on the most technical aspects and the important decisions in the development of the project,” said Dueñas. “This is truly one of the most audited and transparent projects in the country.”

The project provides open, public data, meaning details of all bids and contracts can be accessed on GACM’s website. Bids are transmitted live, and notary and social witness protocols are followed. “We are also working to strengthen corporate governance with an independent board of advisers that extends beyond the current administration,” Dueñas explained. “This is very important to ensure continuity of the project.”

Financing structures also play a significant role in project viability, and Dueñas explained that NAICM follows a forward-thinking mixed financing scheme, with funds taken both from the government budget (PEF) and private financing. “This is a very viable investment scheme for the government because after debt service is paid, all this profit will go to the public purse,” he said.

Private credit for the project comes from investment banks and bonds, and a flexible scheme with a revolving credit facility. “A few months ago, we raised US$4 billion in the capital markets, equaling a total private financing of US$6 billion,” he said. This amount comes from 750 investors, 45 percent of which are from the US, 21 percent from Asia, 14 percent from Latin America and 20 percent from Europe. “This financing model has won 14 prestigious international prizes.”

The impact of the project cannot be denied. With the current 770ha AICM saturated with passenger traffic, the new airport located 5km northeast covers a massive 5,000ha. The most ambitious infrastructure project in Mexico, it will be the first airport outside the US with triple simultaneous operations, with three planes able to take off and land simultaneously over six runways. “This will be the second-biggest airport in the world after Istanbul,” said Dueñas.

The first six works have already been completed: the perimeter fence, 48km of access roads, cleaning of the land, temporary drainage, the GACM camp and the moving of debris. Right now, 27 works are under construction, with 292 companies involved and 40,000 direct and indirect employees.

With this scale, not only does the NAICM project have a direct impact on quality of life and employment opportunities for Mexico, it extends beyond just a new airport. “This project goes further than just NAICM,” Dueñas said. “It also opens up opportunities in connection links, such as the metro and new highways that will be necessary, as well as the reuse of the AICM land.”

The Agenda for NAICM: Sustainability, Transparency and Continuity

MISS 17

In a region in which no major airports have been built for over two decades, Mexico stands out with a privileged position, enjoying access to two oceans. Hence, the country “can be a global logistics air hub and NAICM is urgently needed,” Juan Torres Landa, Partner at Hogans Lovells, said on Tuesday at the Mexico Infrastructure & Sustainability Summit 2017, held at the Hotel Sheraton Maria Isabel. The two-day event gathered several of the megaproject’s key players to discuss the agenda and expectations for Mexico’s door to the world. The leaders found three key axes for NAICM’s agenda: transparency, sustainability and governance.

The first, transparency, is quintessential to foster the required investment and gain the approval of the people. Alicia Silva, Director and Founder of Revitaliza Consultores, understands that there is a lot of disbelief about how the project is being carried out, given its magnitude. “This project almost seems unreal, but Mexico indeed has a transparent project,” she said. Moreover, Eduardo Andrade, Director of Sacyr Mexico, pointed out that “the one who finances really believes in the project, in the economy of the country and in the need for it,” but certainly requires accountability before placing its trust. The OECD has so far published two reports on NAICM, stressing the importance of corporate governance throughout the project, the second axis.

Jacobo García, Senior Specialist in Policies of Integrity and Public Purchasing at OECD, said that “infrastructure is a source of investment and competitiveness for any country.” It is key to focus on the importance of governance of infrastructure projects to plan a strategic execution of them, as “the mega project is a conglomerate of projects of such a magnitude that will carry a social dynamic of high impact,” he said.

Strategic planning through optimum governance will also help secure the continuity of the project. “A logistics air hub implies certain complexities,” said Joseph Woodard, Head of Contracts and Procurement at Parsons. The fact that there will be no simultaneity of operations between AICM and NAICM increases the need to comply with construction deadlines, especially since AICM already has a closing date. In this regard, COCONAL President Héctor Ovalle said, “I can guarantee you will see the second airstrip paved and finished on time.”

Regarding sustainability, the third axis, Silva believes “this is one of those projects in which sustainability works in synergy with the finances.” NAICM’s financial scheme has been internationally awarded the highest ratings for its green bonds. Likewise, “sustainability is being perceived as a reference point on how things are being done well,” it is a type of metric being used to evaluate the project, she said. Torres Landa agreed. “I believe that it is fundamental to have an environmentally friendly project.”

To this end, the OECD’s García pointed out that the project, which will be developed in an economically depressed zone of the city, promises to have a positive impact on boosting the local economy but also to increase the life quality of the local population. Silva agreed: “We can really generate a social impact in an area that was in recession and significantly increase life quality.” Moreover, she stressed that “we have many metrics on how this impact will regenerate this part of the city.”

Woodard defined NAICM as an “exemplary project, unique in Latin America and the world and a huge opportunity for Mexico.” Likewise, Andrade concluded with the remark that “this project is unstoppable as it is so advanced already.”

A Disruptive Solution to Mexico’s Mobility Issues

Diana Muñozcano, CIO of Grupo Indi
Diana Muñozcano

Disruption is a new concept that is facilitated by technological developments, especially the internet. For a city like Mexico City, where traffic consistently disrupts lifestyles, Diana Muñozcano, CIO of Grupo Indi, believes the cities can fight back by implementing disruptive mobility solutions.

At Mexico Infrastructure & Sustainability Summit at the Sheraton Maria Isabel hotel on Tuesday, Muñozcano shared her insights with 250 industry leaders. “Technology within mobility deals with traffic distribution and planning,” she said.

In this sense, Mexico City is constantly in the Top 15 of countries with the biggest traffic problems in the world. “Mobility affects citizens in very important ways that we often fail to consider,” explained Muñozcano. It can generate more insecurity due to longer transit times, cause problems with health due to stress and pollution, reduce productivity and affect family life.

“If a person spends just three hours per day in traffic, that is over 10 percent of the day,” she said. In Mexico, an average of 227 hours were wasted in traffic per person in 2017. The vehicle park increased in the metropolitan zone by 159 percent in just one decade.

But there are alternatives to car use, and Grupo Indi is working on disruptive public transport solutions to alleviate the stress caused by traffic and mobility. “In the case of the US, leaving the car behind in favor of public transport is much more complex than in Europe as it is a status symbol,” Muñozcano said. “This is a paradigm we need to combat in Mexico.”

Today, Mexico City has 226.5km of metro tracks, distributed across 12 lines and 195 stations. The Metrobús system extends 125km with 208 stations and the State of Mexico’s Mexibus stretches 53km and includes 96 stations. There are 200 cycle routes. “Yet, we have 5.5 million cars in Mexico City alone, which equates to 1.8 per inhabitant,” she said.

Muñozcano also stressed that disruption is not a new trend. “The idea for the metro was put on the table in the 1940s but there was a lot of fear surrounding land and seismic activity so it was not developed until 1967,” she explained.

From then until the 1980s, the main transport method was the Metro system. More recent solutions include the Metrobús and the second floor of Periferico, while nontraditional transport methods like electric bicycles and self-driving cars are creating lines for development. But Muñozcano warned that if the security issue in the cities is not resolved, public transport cannot develop.

Disruptive mobility solutions can also lead directly to better life quality and better urban development. Tesla Motors, Google and the Hyperloop are examples of companies creating disruption in mobility and infrastructure, but on a much greater scale, Muñozcano told the audience. She believes that smaller steps can be taken, such as creation of dynamic tariffs, whereby those drivers who want to park in saturated areas can pay more, or those who want to travel by car at rush hour should pay higher toll road tariffs.

New disruptive models like co-living and co-working are already taking hold in response to mobility issues, and Muñozcano said this trend will continue as people place more and more value on family life and life quality. “Just imagine being able to go back to what our grandparents did and eat lunch at home,” she concluded.

NAFTA, Boosting the Economic Potential of the Region

José Zozaya, President of Kansas City Southern Mexico (KCSM)
José Zozaya

The renegotiation of the North American Free Trade Agreement (NAFTA) has sparked a heated debate amid those in favor and against. Despite US reservations about the treaty, José Zozaya, President of Kansas City Southern Mexico (KCSM), highlighted its crucial role in the development of the region as a whole and of each country involved, during his presentation at the Mexico Infrastructure & Sustainability Summit 2017 in Mexico City on Tuesday.

The treaty represents 25 percent of the global GDP, in which Mexico plays a crucial role. “Every year, Mexico and the US trade over a billion dollars in goods and services,” Zozaya said. “This implies US$1 million of trade every minute and of each dollar spent on Mexican products, 40 cents go toward supporting jobs in the US.”

NAFTA has many benefits for the region such as the amount of importation and exportation among the three countries. “Mexico is one of the three largest suppliers of the US and is its second-most relevant client,” he said. “The treaty also offers a unique conflict resolution method that can be used between the countries.”

Addressing the renegotiation itself, Zozaya promotes the modernization of the treaty as the traded goods and the people that manage them are not the same as 20 years ago. “A new, more dynamic NAFTA should be created to create more certainty amid the changes in the flow of trade between the countries,” he told the audience at the Hotel Sheraton Maria Isabel. “Mexico is interested in making sure that the negotiation has a positive impact on the country and the region.”

The economic growth of the three participating countries – Mexico, the US and Canada – not only impacts the flow of trade but the efficiency of the railroad system as well. “Velocity, volume and distance are key to the success of railroad systems,” Zozaya said. “Economic development is interconnected to railroad systems and for this reason Kansas City is greatly involved in the new NAFTA treaty.”

Zozaya believes that borders should not be used as a brake for trade between countries but as a facilitator for all legal goods and services. And when it comes to international collaboration, Mexico has been a pioneer. “The country has one of the highest number of international treaties, which is significant considering it was once a quite closed country. The openness allows the country to take advantage of investment opportunities,” he said. “Considering the geographical position of Mexico, the country should strive to not only be an important regional hub for logistics but a global one.” KCSM is optimistic about the future of Mexico and trusts in the development and growth of region, Zozaya said.

Intelligent for What End? The Key question for Smart Cities Development

MISS 17 - Panel 3

Population trends reveal that by 2050 most citizens will live in urban areas; such population density makes the development of smart cities challenging. Bertha Ordaz, Partner at Jones Day and moderator of the Technology and Development of Smart Cities Panel at the Mexico Infrastructure and Sustainability Summit 2017, held at the Sheraton Maria Isabel in Mexico City on Tuesday, told the audience that “the idea of this conversation is to understand what a smart city is about and to be able to dimension what are the key aspects of building a city of this nature.”

In this regard, “Oracle’s perspective of a smart city is one that has integrated processes for monitoring and consumption of information. The analysis of this data allows a key and quick response that fastens and optimizes productive, administrative and strategic processes,” said Jorge Gálvez, Director of Consultive Sales for Oracle.

Besides focusing on the nature of a smart city, it is also fundamental to question the very purpose and reason for them. Roberto Martínez, Center Director at OECD in Mexico for América Latina, explained the need to understand and ask ourselves the question of smart cities for what end? His insight is that they must serve “to generate more opportunities for innovation and more resilient cities that can optimize services production through the use of technological tools such as Big Data and the Internet of Things, among others.”

The achievement of this goal carries several challenges. Roberto Calvet, Director General of AECOM, said, “the key challenge is population growth worldwide,” which implies that smart cities face the need to cover a specific social demand. Moreover, “we do not have the 4 P’s: we don’t prioritize, don’t plan, don’t protect, don’t provide,” said Calvet, emphasizing the need to implement this strategy to increase the competitiveness of Mexican cities. “There must be an interaction of all processes, the key is to carry out a well-done strategic plan.”

Intelligent cities are also a very powerful vehicle for social cohesion, which, the panelists agreed, implies that the inequality breach represents a key challenge for smart city development. Addressing this issue, Oracle’s Gálvez asked, “to what extent does technology really serve as a social equalizer?” His company, he said, has several initiatives to foster the development of innovative projects that aim to create more inclusive technologies.

Smart cities also face the challenge of having smart, but efficient infrastructure. “The economy of a city moves at the pace of its transportation network,” Calvet said, stressing the need to understand the importance of transport infrastructure in making cities competitive. “Three things really impact the economy: a country’s entry and exit points, transit networks within cities and transport routes between different cities and states,” all reaffirming the importance of transport, he said.

Concluding the discussion, the panelists addressed a key question from the audience: If it is possible to have a smart city in Mexico, which city would it most likely be? Martínez believes that the ideal would be to have a tabula rasa and to build it from the scratch. Nevertheless, given how challenging that would be, the panelists agreed that Queretaro would be the most likely candidate. But maybe it is not a matter of which city can become smart, as with the required technology almost any city could be; but why do countries need cities to be smart? Calvet pointed out that “there is not going to be one until we really understand the benefits and are willing to implement the required strategic actions. We are very focused on measuring these benefits. I am sure that once they are identified and understood, we will see smart cities flourish,” he said.  Added Gálvez: “The implementation of technology must be a planned endeavor with a holistic vision of what will it lead to.”

Betting on Mexico’s Future Through Long-Term Infrastructure Investment

Carlos Méndez, National Vice President of Strategic Projects at CMIC
Carlos Méndez

Even though Mexico is one of the largest emerging economies in the world, the global competitiveness of its infrastructure sector is rife with gaps that need to be filled, Carlos Méndez, National Vice President of Strategic Projects at CMIC, told the audience during his opening presentation on the second day of the Mexico Infrastructure & Sustainability Summit 2017 on Wednesday in Mexico City. “Infrastructure plays a crucial role in the economic growth of a country and its ability to attract investment,” he said at the Hotel Sheraton Maria Isabel. “The rise of the sector at a national level can help reduce production costs and boost the profitability of projects in the region.”

Méndez said there is a connection between a country’s development and the amount of capital it invests in infrastructure. “Between 1982 and 2016, the average growth rate in Mexico was 2.3 percent while China registered 9.8 percent, South Korea was at 6.4 percent and Chile at 4.3 percent. Mexico was also positioned at number 51 in the Global Competitiveness Index 2017-2018, released by the World Economic Forum,” he said. “These numbers show a lack of efficiency and productivity.” While the Inter-American Development Bank recommends Latin American countries invest at least 5 percent of their public budget on infrastructure, the region only invested an average of 2.6 percent.

The lack of infrastructure can also impact the cost of production. “In proportion to the cost of merchandise, infrastructure inefficiency can raise the costs of logistics. In this matter, Mexico is behind countries like the US.”

To combat and fill in the gaps in the industry, CMIC proposes a 2030 National Infrastructure Plan based on forums, studies and the integration of projects. “At the moment, very few projects are transexennial,” he said. “We want to help widen the vision of the sector and as part of the construction industry we are working on making this a reality.”

Through the long-term plan, the chamber hopes to show the country’s governing administration the importance of having better public policies in construction. “Aside from investing more in the country’s infrastructure, Mexico needs to improve its efficiency,” Méndez said. “There should be more transparency in contracts and the quality of projects need to improve through public policies based on an integrated diagnosis of the sector.”

Mixed-Use: Social, Responsible and Sustainable Infrastructure for the Future

panel 2 miss 17 day 2

Mexico’s commercial real estate boom its boosting the economy, but to ensure sustainable growth developers and the public sector must work closely together to foster the development of cities, panelists told the audience at the Mexico Infrastructure & Sustainability Summit 2017 held at the Sheraton Maria Isabel in Mexico City on Wednesday. Mixed-use projects reduce risk by combining shopping malls, offices and residential buildings in one place while meeting a social demand for an integrated real estate.

The industry leaders addressing the issue – Juan Bernardo García, Partner, Chair Real Estate Latin America at Baker McKenzie; Agustín Sarazola, Director General Mayakoba at OHL Desarrollos; Eduardo Orozco, Managing Director Latin America of Greystar; Jimmy Arakanji, Co-Founder and Co-CEO of Thor Urbana; and Javier Lomelín, CEO Latinoamérica at Colliers International – agreed on a key factor: real estate developments should ultimately pursue the goal of making people happier by fulfilling a need for certain services that will improve life quality. In this scenario, the role of real estate developers must aim to meet this demand in a responsible and sustainable way. Sarazola framed the debate in the experience of his company. “We know how important the construction of infrastructure really is in the development of a zone. Infrastructure is absolutely critical for people to be happy but also for businesses to thrive,” he said.

He shared the example of the development of Playa del Carmen, which significantly grew during the 1990s due to high tourism demand. This created a need for infrastructure to serve the people who came to fill the ensuing jobs. The developers of the area had to take into account the conditions in which workers lived, which led to the creation of the concept “cities for tourism and tourism for cities,” that is mainly “about offering tourism supply by creating the infrastructure for the workers to provide their services in a comfortable and happy way and with access to the resources they need,” Sarazola said, while speaking about the Mayakoba project that was a pioneer in this concept.

In providing infrastructure, it is also vital for developers to help the community in which they work to grow, Orozco said. “We believe we contribute to the zones in which we build by developing a product that puts homes in areas that are underused at the time.”

To accomplish this, Thor Urbana’s Arakanji stressed that it is fundamental for developers to focus on creating a sustainable development. “From the point of view of a developer, when we find opportunities in different parts of the country, we seek to collaborate with other developers, for example on mixed-use projects.” The goal is to complement the project with specialized developers in each sector. “What we seek is alliances,” he said.

Mixed-use developments appeared as an alternative to meet multiple demands, but they are not new. “We must remember that long ago residential buildings used to have some commercial spaces,” Lomelín said. Today, these projects not only satisfy the residential and commercial demand of users, but they also benefit developers. “Unquestionably, today, given land prices, we face the need to maximize the value of land and to balance the risks,” Lomelín added.

Perhaps one of the most important factors is the benefit these developments have on the quality of life. “To be able to have in one space multiple demand satisfiers offers the possibility of having more benefits without the need to move,” Lomelín said. This serves developers but also the residents of the area, given that they don’t necessarily have to commute to get access to the services provided in their mixed-use development.

The leaders, that according to the moderator Juan Bernardo García “come from companies with similar foreign backgrounds, which allows us to share a common perspective while engaging in discussion;” also agreed on the increasing need for developers to work collaboratively and to have effective communication. “We are working to develop infrastructure for the future, which I believe will increasingly imply collaborative work between developers,” said Orozco. Arakanji agreed: “I believe that communication is increasingly important; we should join forces instead of competing against each other. This will lead to responsible and sustainable developments,” he said.

Budget Cuts Have Capital Drowning in Water Problems

Ramón Aguirre, Director General of the city’s water system SACMEX
RAMON AGUIRRE MISS 17 DAY2

Mexico City’s water demand is so great, the government must put a plan in place immediately to address the issue, according to Ramón Aguirre, Director General of the city’s water system SACMEX. But at Mexico Infrastructure & Sustainability Summit at the Sheraton Maria Isabel hotel in Mexico City on Wednesday, he expressed concern about the department’s budget cuts.

“Little by little, we need to increase the budget for water in Mexico City, and this is why it makes no sense to me that, this year, the budget for the department was reduced,” he said. According to Aguirre, Mexico City could be a global reference in water infrastructure given the fact that probably no other city in the world is built directly atop a lakebed.

The water lost in Mexico City’s pipeline system due to leaks in distribution networks amounts to 41 percent. Aguirre highlighted that these are normally small, dispersed leaks that require extensive repair programs. But with the current deterioration of the city’s drainage networks estimated at around 30 percent and an average pipeline age of 58 years, the budget cuts mean Mexico City is drowning in its water issues. “If we do not resolve our problems with water, the city has no future,” said Aguirre.

Leaks are directly related to the pressure on pipelines, and Aguirre said that stress on water in Mexico City is similar to that in Middle Eastern countries. “The degree of pressure is calculated by dividing the authorized volume of water extraction by the volume of water available, and this serves as an indicator to evaluate the sustainability of the extraction of this resource in the long term,” he said. Its use is also suggested as a measure of the vulnerability of the country or of a particular region in the face of water scarcity.

In Mexico, in 2012 the estimated pressure rate on water resources was 17.5 percent, which placed it in the category of moderate pressure above the average estimated for the OECD countries, which is 11.5 percent. Worldwide, Mexico ranks 53rd among the countries with the highest levels of pressure of a total 180 countries.

To communicate the importance of budgetary resources being used for water infrastructure, SACMEX developed the Water Plan for the Future of Mexico City, which lays out the issues facing the city and the investment needed to address them.

The plan requires a MX$53.09 billion investment in drinking water, MX$101.83 billion in drainage and MX$15.5 dedicated to the environment. Combined with other costs, this equates to a total necessary investment of over MX$256 billion.

Aguirre acknowledged that this amount is significant. But in Mexico City, the goal for sustainable consumption of water sources should be 210l per inhabitant per day. With Mexico City’s consumption exceeding this amount by 60l per inhabitant per day, he insisted demand will rapidly overtake supply if no action is taken. “It is a lot of money but the truth is that it is worth much more,” he concluded.

Creativity Needed to Quench Mexico’s Thirst

PANEL 2 agua miss 17

Over 95 percent of the population will live in cities in the near future and what is being done in cities is likely to define humanity, Iñaki Echeverria, Architect and Urbanist at Iñaki Echeverria, said on the second day of the Mexico Infrastructure & Sustainability Summit 2017 in Mexico City on Wednesday. “In this matter, water is an important element that assures quality of life,” he said. “We need to start thinking outside the box and develop creative solutions that are almost science fiction, in the same way as self- driving cars that eliminate the issue of people driving and texting.”

Generating solutions for water consumption is increasingly important as water is becoming a scarce resource, not only in Mexico but the rest of the world. During the panel, “Sustainable Water Management Solutions for Mexico,” Javier Arce, Director of Development at Hoteles City, proposed creating more consciousness among the population to reduce water consumption. “We can continuously invest in mechanisms and projects that help minimize the use of water but these advancements are useless if people are not conscious of the issue,” he said.

Arce believes that one hindrance to creating consciousness is the highly subsidized tariffs that cause people to undervalue water. “Neighborhoods for communities with lower resources tend to leave their lights on all day and use large amounts of water because they pay so little for these resources,” he said.

The threat of punishment could make a difference in people’s water habits, according to Judith Maas, Deputy Ambassador of the Kingdom of Netherlands to Mexico. “Punishing the waste of water is a good way to make people aware of their habits. A proper tax system has the ability to create wáter-sensitive cities and make sure people do not take the resource for granted.”

Mexico, said Maas, could learn from the experience of the Netherlands. “The problems that these two countries have in water management may differ but we created solutions that can be applied in Mexico,” she said. “In the Netherlands, people are willing to pay taxes to better manage water in the country and it is a democratic system where all citizens are involved in the decisión-making process. People even organize themselves to create roof gardens that soak up rainwater while insulating homes.” These actions push people to be more informed about their decisions from what food they eat to the hotels they choose to stay in, she said.

But measures such as fines for overconsumption are not enough, Iñaki reminded the panel. He said a better solution involves the creation of a new system of water distribution that is more efficient and the development of adequate infrastructure. “People are already starting to become more conscious and we need to create projects that set the example.”

Iñaki also highlighted the contribution of industrial consumption to water scarcity. “One of the biggest challenges that Mexico faces is not urban consumption of water but industrial consumption,” he said. “We could solve all the water issues in the city but this would not make the problem disappear as agriculture and industrial consumption play a larger role in the issue.”

Water management needs to be a priority in the country to secure future access to the resource and ensure the well-being of Mexican cities. “Water subsidies do not work in Mexico and we need to think of new possibilities for water management in the city,” said Ramon Aguirre, Director General of SACMEX, the city’s water operator.

Are We Building the Road Toward Integrated Mobility?

Mexico’s burgeoning cities must learn from the mistakes of the capital to ensure they flourish in an orderly, sustainable and inclusive manner. Mobility is a priority and developing efficient mass transport systems will be the main challenge Mexico’s cities will face, panelists at the Mexico Infrastructure and Sustainability Summit 2017 agreed on Wednesday in Mexico City. “Mobility is an everyday thing,” remarked Enrique Villanueva, Development Director of Pulso Inmobiliario.

Marco Priego, Director of Urban Mobility at WRI Mexico and moderator of the panel during the event at the Hotel Sheraton Maria Isabel, opened the discussion with a personal anecdote. “I used to live in the State of Chihuahua and once wanted to buy a house. When I consulted the credit institution they told me that in addition to the house they would also give me a loan for a car. Why? Because despite how good the residential development was, it did not have the required mobility infrastructure,” he told the audience.

It will be key for real estate developers to plan access roads for their projects and hence contribute to a better integrated urban mobility construction, added Villanueva. “For us, mobility and accessibility to our projects are fundamental; we don’t conceive a development without identifiable access routes for our users.” He added that it is fundamental “for developers to work in an integrated manner with the authorities. The regulations must be very clear and understood” so that problems can be addressed multilaterally.

Erika Kulpa, Chief of Programming at the Ministry of Mobility, complemented Villanueva’s insight by focusing on mobility as a generalized issue for all citizens.  Emphasizing that most urban transport infrastructure is designed for cars, Kulpa stressed that “space is finite, we don’t have anywhere else to grow our streets, and yet, the population keeps growing. We have built cities designed for cars and not for people.”

When asked by moderator Priego if Mexico’s cities were winning the mobility battle, Alfonso Vélez, Director General of Autottraffic, said: “Historically we have fostered the use of automobiles as an aspirational means of transportation.” Vélez believes the issue of integrated mobility also involves a huge need for integrated information and data on the matter. “I believe we all need more information, not only about road traffic, but also in matters of transport and the importance of sustainable mobility in cities. It is very important for any project to provide data before and after its realization to really measure how mobility was impacted,” he told the audience, remarking on the importance of understanding how people move and if mobility is really improving.

“We really are lacking a measurement of the data before and after mobility projects,” Kulpa agreed. It is necessary, she said, to prove and “show to the people that we are truly providing quality public transportation,” especially given that “people want more, they are demanding more mobility infrastructure, like Eco-Bici stations, in their neighborhoods.”

Neighborhoods, agreed Villanueva, are demanding the mobility they want. “To perceive the city as a megacity is a mistake. I believe that a sustainable city is composed of many pole-centers that conform it. That is what must be achieved in terms of infrastructure,” he said. “We must build centers in which people want to live, with entertainment, education, work and residences. It is a very complex project, but we can start to create these in small zones and start making sense of the puzzle that is a big metropolis.”

Concluding the panel, Mexico City’s Undersecretary of Planning for the Ministry of Mobility Laura Ballesteros emphasized the importance of “securing the continuity of the projects, this is the key challenge that the ministry has,” especially given that any significant change will be gradual. “Seven Metrobús lines are not built in one day, we must strive for a continuous change,” she said.

 

Creating New Forms of Government Through Collaborative Design

Gabriella Gomez-Mont, Director General of Laboratorio para la Ciudad
Gabriella Gomez-Mont

Cities are chaotic and complex spaces where people from a wide variety of backgrounds simultaneously interact with each other and Laboratorio para la Ciudad de México (LabCDMX) has found that these characteristics make cities prime locations to conduct urban experiments. “With a group of only 20 people composed of typical experts such as internationalists and political scientists and also atypical participants like artists and movie producers, LabCDMX strives to change the traditional concept of governments and democracy through collaboration,” Gabriella Gomez-Mont, Director General of Laboratorio para la Ciudad, told the Mexico Infrastructure & Sustainability Summit 2017 in Mexico City on Wednesday. “We strive to capture and catapult the talent of citizens and create a space where individuals that do not commonly get to collaborate have an opportunity to develop a creative urban ethos.”

Over the past four years, as an experimental muscle of the Mexico City government, LabCDMX has provided training and workshops to over 3,000 users. The laboratory believes that the cities of the future will not strive to replicate the model of European cities but of those in Latin America due to their dynamic characteristics. “Mexico City is unique as it is a bridge between an emerging country and developed countries,” said Gomez-Mont. “It has all the problems of an emerging nation and the infrastructure of a developed one, which makes its potential enormous.”

To achieve a new way of governing, the laboratory has prototyped a wide variety of successful experiments that strategically intervened in key urban issues. One example is the Mapatón the lab conducted to map out the routes of the city’s microbuses. “Microbuses carry over 70 percent of the population in the city and their routes had never been registered,” she said. “We wanted to create a database but had a very limited budget. We decided to make it a collaborative experience and created a game where teams of citizens acquired points by mapping different routes within the city.” To its surprise, in a matter of weeks and through the participation of 4,000 citizens, enough information was collected to map out the routes. Collaborative solutions are an example of the changes that cities are undergoing and the areas of opportunities that exist to create new forms of government, Gomez-Mont said.

To fully take advantage of the potential of the city, the laboratory strives to transform the concept of government from a supplier of services to a catalyst of change. “We are developing tools that speak the language of the public and engage citizens in a different manner,” Gomez-Mont said. “We have seen that simply opening the doors to the public is not enough and we must be able to create added value to truly engage citizens. We are intrigued by the possibilities in creating new ways to connect the government and society.”

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