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Capital Markets

Mexican infrastructure: Funding fogs Farac

Uncertainty over bridge loans for infrastructure projects.

Uncertainty about how banks in Mexico will take out the Ps37.1 billion ($2.74 billion) bridge loans that they provided to infrastructure projects last year is jeopardizing further development initiatives that are the cornerstone of the government’s plans to boost the economy. Refinancing of the loans is proving difficult, as liquidity in Mexico’s local markets is restricted.

In 2007, all Mexico’s leading banks, including Banamex, HSBC México and Banco Santander Mexicano, offered financing to one or more of the several large infrastructure projects. But today banks are facing refinancing difficulties.

"Bankers are unsure if anyone would buy the subordinated tranches of these deals and this issue needs to be resolved. It is holding the whole banking loan system back"

Gabriel de la Concha, ICA

"The banks are a bit stuck in terms of syndication and in terms of taking out the loans they have in projects that are still under construction. This is also the case for the locally funded Farac 1 deal," says Gabriel de la Concha, financing director at ICA, the construction company that won the Farac 1 toll road package auction in August 2007.

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