Spun off from Slims financial conglomerate Inbursa in June, shares in Ideal have risen 40% since its IPO in September and the fund has posted a $43 million net profit in its first four months. With almost $900 million in assets, Ideal now has four toll road concessions, the latest of which Slim bought at the end of September in northern Mexico, and sees returns of at least 10%, according to Ideals credit director, Frank Aguado.
Aside from the strong numbers, the fund is the first in Mexico seeking to make money from infrastructure projects, including roads, ports, water plants and power generation, as well as public-private partnerships in education and health, all areas in desperate need of investment after years of government neglect. Given Slims business savvy, Ideal hopes it could become a model for public-private projects. We must complement public investment, which is limited and restricted, with private investment to drive economic growth, said Slim, who is chairman of Ideal, in a recent speech.
Slim appears to have got his timing right. At 4.8%, growth in the construction industry in Mexico is expected to outstrip the countrys total economic growth this year.
Indeed, the government is expected to grant $17 billion in building contracts in the next 14 months. We will be participating in almost anything at auction in Mexico, Aguado says. He adds that Ideal would not get involved in the actual construction of projects. Ideals next move is to bid for the $800 million La Parota hydroelectric dam project in central Mexico near the Acapulco beach resort, which is expected to take five years to complete.
Ideal says it is considering investment outside Mexico. Peru, for example, has embarked on ambitious road network construction and Brazil and Panama are overhauling their ageing ports to deal with growing container traffic as exports boom. According to a recent World Bank report, Latin America will needs to double its infrastructure spending to reach the levels attracted by China and South Korea and foster additional economic growth.
However, Slims unique business empire in Mexico is likely to give Ideal an advantage that similar funds might not enjoy. Via Slims Inbursa, Ideal will have easy access to financing, and his Grupo Carso, with its construction arm Cicsa, is in a position to build the projects that Ideal can later run. Aguado says Ideal will give preference to Inbursa unless commercial banks can offer more competitive rates.