Financing
In Mexico, many long term sources of funds, in different currencies, are available to finance the development of infrastructure projects: federal funds, the National Infrastructure Fund (FONADIN), development banks, commercial banks, and a wide variety of investment vehicles listed in the stock exchange. Likewise, in recent years many multilateral development organizations, like the Inter-American Development Bank (BID), the International Financial Corporation (IFC), among others, have provided financing for the development of infrastructure in Mexico, based on sustainable and comprehensive projects that provide wellbeing to society.
PEF
Development Banks
FONADIN
Multilateral Development Banks
Commercial Banks
Investment Vehicles
Federal Expenditure Budget (PEF)
The Federal Expenditure Budget is prepared by the Ministry of Finance, and is one of the most important public finances documents. The PEF defines the amount, distribution and destination of public resources to the three powers of government, to autonomous organizations, and transferences to state and municipal governments.
Budget approval is a joint effort between the Federal Government (Ministry of Finance), and the legislative power through the House of Representatives (Budget and Public Account Commission). The Commission analyses the budget proposed by the Ministry of Finance, and issues an opinion for the House of Representatives to vote. If approved, it is returned to the Federal Government for its publication in the Official Gazette. In case of rejection, the proposal is sent back to the Commission for new assessment and discussion. It is important to mention that within this process there are specific terms to comply with.
Development Banks
Mexico has a solid development bank system, consolidated recently as an important long term financier of infrastructure and energy projects , thus benefiting the Mexican economy. Development banks complement commercial banks funds with tailor made financial products, according to the specific needs of each project.
Banobras
Banco Nacional de Obras y Servicios Públicos (BANOBRAS) is a development bank that makes the development of infrastructure projects with high social profitability possible, by providing long term funding to private developers, and state and municipal governments, and by promoting the participation of the private sector and commercial banks. The principal sectors that receive BANOBRAS financing are:
- Communications and transport (roads, ports, airports, railways, telecomm, federal auto transport, etc.)
- Energy
- Water (treatment plants, aqueducts, etc.)
- Solid Waste
- Social Infrastructure
- Urban Infrastructure
Bancomext
Banco Nacional de Comercio Exterior, S.N.C. (BANCOMEXT) is responsible for providing trade finance through loans and guarantees, directly or through financial intermediaries (commercial Banks and other financial institutions) to increase Mexican companies’ productivity and competitiveness. BANCOMEXT offers working capital, project finance, and equipment financing, basically to the following sectors:
- Power
- Industrial parks
- Mining-Metallurgy
- Telecomm
- Transport and logistics
- Tourism
Similarly, it supports different infrastructure sectors such as: power, industrial infrastructure development and tourism infrastructure.
Nafin
Nacional Financiera (NAFIN) contributes to the economic development of the country by facilitating access to small and medium enterprises, entrepreneurs and high priority investment projects, to funding and other corporate development services. Additionally, NAFIN fosters financial markets formation, acting as trustee and financial agent of the Federal Government.
National Infrastructure Fund (FONADIN)
FONADIN is the National Infrastructure Fund that supports the development of communications, transport, water, environmental and tourism sectors by providing grants, venture capital, subordinated debt, credit and guarantees for the design and execution of high impact infrastructure projects.
FONADIN’s principal objectives are to:
- Support the implementation of the National Infrastructure Program.
- Foster private capital flows to infrastructure projects.
- Encourage the participation of the public, private and social sectors in infrastructure development.
- Assume risks that the market is not willing to take.
- Create bankable projects with social or low economic profitability.
- Provide long term financing with competitive conditions.
In addition, FONADIN is concessionaire of a network of more than 50 toll highways, whose revenue allows this fund to finance the development of new infrastructure.
Multilateral Development Banks
The financial support of multilateral organizations such as the Inter-American Development Bank (BID), International Finance Corporation (IFC), and the World Bank (BM) has been crucial in the execution of social projects in the water and sanitation, education, health, power, transport and urban development sectors.
IADB
The Inter-American Development Bank (IADB) was created to finance viable projects for economic, social and institutional development, and to promote a regional trade integration of the Latin American and the Caribbean regions. One of its objectives is to reduce the poverty gap by providing financing to infrastructure projects and technical assistance for the consolidation of its member nations.
IDB Invest
As part of its mission, BID Invest supports the private sector and state-owned enterprises through financing in the form of loans, equity investments, and guarantees. BID Invest also partners with clients to provide advisory and training services.
IFC
IFC is member of the World Bank Group, and is the largest development institution focused exclusively on supporting the private sector in developing countries. IFC has a wide experience in PPP projects, and provides technical assistance and training to governments for the development of effective policies and successful models.
CAF
CAF is committed to the sustained development and regional integration by providing financing to private and public sector customers located in member countries. It is a competitive financial institution, client oriented, sensitive to social needs and backed by highly specialized personnel.
NADBANK
The North American Development Bank was established by the governments of Mexico and the United States in a joint effort aimed at conserving and improving the environmental conditions and quality of life of the people residing along the border between the two countries. NADBANK works with municipal governments and other project developers to support them in the implementation of sound business and financial processes to establish a solid foundation for debt financing. As part of this strategy, NADBANK promotes comprehensive and long-term planning of environmental infrastructure and its financing, as well as offers technical assistance to strengthen the institutional capacities of the entities and support the development of sustainable infrastructure.
World Bank
World Bank provides credits, and grants to developing countries to support a wide array of investments in such areas as education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management. Some of the projects are cofinanced with governments, other multilateral institutions, commercial banks, export credit agencies, and private sector investors.
European Investment Bank
The EIB is the European Union’s bank. Owned by the EU Member States, it is the world’s largest multilateral borrower and lender. In 2017, the EIB Group provided nearly EUR 80 billion for sound and sustainable investment projects in Europe and beyond. The EIB is headquartered in Luxembourg and has a network of some 40 local offices.
Commercial Banks
Within the Mexican banking system there are international banks that operate worldwide, consolidated national banks and emerging banks. One of the strengths of the Mexican commercial banking system is the soundness of its financial indexes, since the banks comply with the requirements issued by Basel III. Likewise, Mexico has regulatory entities like the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores or CNBV), the National Commission for the Protection and Defense of the Users of Financial Services (Comisión Nacional para la Protección y Defensa de los Usuarios de Servicios Financieros or Condusef), the Institute for the Protection of Bank Savings (Instituto para la Protección del Ahorro Bancario or IPAB), the Ministry of Finance, and the central bank, Banco de México.
Commercial banks have participated actively in the financing of important infrastructure projects, offering tailor made transactions according to the specific needs of each project; some of these banks have infrastructure areas specialized in roads, airports and ports. Commercial banksoffer financing according to the needs of each client and project, varying in amounts, terms and rates, which is reflected in an attractive credit offer for investors and developers.
Investment Vehicles
Mexico has a mature capital market. In the case of infrastructure financing, the private sector and institutional investors can diversify their debt and equity portfolios that include CEBURES (stock exchange certificates), FIBRA (real estate trusts), CKD’s (development capital certificates), and private equity funds. Some of these vehicles are allowed to invest during the different stages of the projects. In 2015, the Federal Government launched two new types of vehicles: FIBRA E (energy and infrastructure) and CERPI’s (investment projects certificates).
A large number of projects have been financed through these vehicles, which are listed in the Mexican Stock Exchange.
Depending on the particular characteristics of these vehicles, some of them specialize in brownfield financing (FIBRA and FIBRA E), while others finance principally greenfield projects (CKD’s and CERPI’s).
For more information on current investment vehicles, please refer to the sectionListed Vehicles
FIBRA
FIBRA’s are trust certificates generally documented as fiduciary stock certificates, and are designed to invest in real estate. Its yield (totally or partially) is linked to assets placed in a trust, and the investors have a right over the income generated by such assets. Additional features of these instruments are:
- There is no obligation to pay principal or interests.
- The cash flows are variable and uncertain, linked to the after tax profit generated by the rent / lease of the assets.
- There is a transfer of ownership of the assets or their rights thereof to a trust.
- At least 70% of the assets must be invested in real estate that generates rents.
- The certificates should be listed as equity instruments in a stock exchange.
- The trust does not have a credit risk rating.
- FIBRA’s must comply with the requirements of disclosure and corporate governance that are established in the applicable provisions.
CKD
CKD’s are trust certificates generally documented as fiduciary stock certificates, and are used to finance one or several projects, or one or more companies. Its yield (totally or partially) is linked to the income generated by underlying assets placed in a trust, and to the sale of such assets. Additional features of these instruments are:
- There is no obligation to pay principal or interests.
- The cash flows are variable and uncertain, linked to promoted companies or financed projects.
- CKD’s have a fixed term or expiration date.
- There is a transfer of ownership of the assets or their rights thereof to a trust.
- Disbursements should be done according to a detailed schedule and must be compatible with the development of the financed projects or business plan of the promoted company.
- The certificates should be listed as equity instruments in the Mexican Stock Exchange or in the Bolsa Institucional de Valores.
- The trust does not have a credit risk rating.
- CKD’s must comply with disclosure requirements and corporate governance that are established in applicable provisions
CERPI
CERPI’s are financial instruments with characteristics of corporate governance and design similar to those of private equity funds, which can invest in any economic sector, and receive funding from domestic and foreign investors.
Funds can be received through two vehicles:
- CerPI, which is a listed vehicle in the stock exchange that issues certificates through a restricted public offering, in which only institutional and qualified investors can participate.
- A co-investment fund in which investors other than pension funds may participate.
FIBRA E
FIBRA E is a financial vehicle that invests in mature assets in the energy and infrastructure sectors. The funds are used to develop new projects. This investment vehicle is a derived from the FIBRA’s and the master limited partnerships.
FAQs
How do you finance a project? ›
Project finance may come from a variety of sources. The main sources include equity, debt and government grants. Financing from these alternative sources have important implications on project's overall cost, cash flow, ultimate liability and claims to project incomes and assets.
What are the limitations of project finance? ›The disadvantages of a project financing include: Greater complexity. Higher transaction costs. Greater lender involvement.
What is an example of a project finance? ›Project finance is long-term financing of an independent capital investment, which are projects with cash flows and assets that can be distinctly identified. Real estate project finance is a classic example. Other examples of project finance include mining, oil and gas, and buildings and constructions.
What percentage of Mexicans have a bank account? ›In 2017, approximately 35 percent of Mexicans had an account at a bank or other financial institution, down from almost 39 percent in 2014.
What are the 3 stages of project financing? ›The process of development of a project consists of 3 stages: pre-bid stage. contract negotiation stage. fund-raising stage.
What are the method of financing? ›There are two types of financing: equity financing and debt financing.
What are the factors to be considered when financing a project? ›- Calibre of the business principals. Principals are the primary source of fuel for business projects. ...
- Business environment risks. ...
- Project credibility. ...
- Company's ability to pay and financial structure. ...
- Principals' financial history. ...
- Security.
Project finance refers to the funding of long-term projects, such as public infrastructure or services, industrial projects, and others through a specific financial structure. Finances can consist of a mix of debt and equity. The cash flows from the project enable servicing of the debt and repayment of debt and equity.
Who are involved in project financing? ›The most usual parties to a project financing are: Sponsor (typically also an Equity Investor) Lenders (including senior lenders and/or mezzanine) Off-taker(s)
What is a simple example of finance? ›Examples of Finance
This includes buying and selling, taking out a loan, maintaining accounts, investing, moving money from one account to another, refinancing and asset, going public.
How is project finance different? ›
In the case of corporate finance, in the first stage of the company, financier looks for “commercial proof of concept” and that is revenue. In the case of project finance, they look for the projected cash flow as usual. As the company is starting, the investor's risk is much higher than normal.
What are financial methods in project management? ›Financial Method: Payback. Financial Method: Discounted Payback. Financial Method: Net Present Value (NPV) Financial Method: Profitability Index. Financial Method: Internal Rate of Return (IRR)
What percentage of Mexicans are millionaires? ›| Country or subnational area | Number of millionaires | Share of global millionaires (%) |
|---|---|---|
| Russia * | 353,000 | 0.6 |
| New Zealand * | 347,000 | 0.5 |
| Mexico * | 318,000 | 0.5 |
| Saudi Arabia | 313,000 | 0.5 |
| Characteristic | Share of national wealth |
|---|---|
| Bottom 50% | -0.2% |
| Middle 40% | 21.5% |
| Top 10% | 78.7% |
| Top 1% | 46.9% |
Yes, a foreigner can open a bank account in the U.S., it just takes some additional paperwork to make it happen. If you have a foreign government ID, passport or resident alien number from a green card, those will help. If you don't have a Social Security number, you'll need an ITIN.
What are the three C's of finance? ›Character, capital (or collateral), and capacity make up the three C's of credit. Credit history, sufficient finances for repayment, and collateral are all factors in establishing credit. A person's character is based on their ability to pay their bills on time, which includes their past payments.
Who are sponsors in project finance? ›In the context of a project finance transaction, one or more substantial entities (usually private entities but sometimes governmental bodies) who own the ultimate equity interests in a project.
What are the 4 stages of finance? ›The financial life cycle consists of four stages: wealth accumulation, growth and management, preservation, and distribution.
What is the best financing mix? ›The optimal capital structure of a firm is the best mix of debt and equity financing that maximizes a company's market value while minimizing its cost of capital. In theory, debt financing offers the lowest cost of capital due to its tax deductibility.
What are the two major types of financing? ›Do you remember the two major types of financing? debt financing and equity financing.
What are two types of financing? ›
External sources of financing fall into two main categories: equity financing, which is funding given in exchange for partial ownership and future profits; and debt financing, which is money that must be repaid, usually with interest.
What are sources of finance? ›The source of finance is a provision of finance for a business to fulfil its operational requirements. This includes short-term working capital, fixed assets, and other investments in the long term.
How do you secure funding for a project? ›- Plan ahead. One of the best ways to get budgetary approval for a new project is to make sure that it's clearly being requested for a future budget before the budget is approved. ...
- Be clear on the benefits. ...
- Secure the right buy-in. ...
- Use the data. ...
- Get a grant. ...
- Delay another project.
- Cost: The cost of raising finance from various sources is different and finance managers always prefer the source with minimum cost.
- Risk: ...
- Cash Flow Position: ...
- Control Considerations: ...
- Floatation Cost:
Types of financing include credit card financing, mortgage financing, and personal loans.
Why is finance so important? ›Finance is important in strengthening business finance because it helps companies take risks and grow. Businesses could do what they wanted without any financial support in the past. But now, with the increased use of technology and globalization, businesses are becoming more reliant on money to accomplish their goals.
What are the benefits of finance? ›- Boost sales. Financing can help your business close more sales by giving customers the flexibility to make regular loan payments that work with their budget constraints. ...
- Increase average order value. ...
- Improve cash flow. ...
- Attract new customers. ...
- Earn repeat business.
Due to the large scale of projects, high debt, and significant cash flows that accompany project finance, this risk can have a significant impact on the success of a project and its ability to repay debt. This group includes inflation risk, currency risk, and interest rate risk.
How do you evaluate a project financially? ›Financial evaluation is the process of comparing the financial benefits of a project or a project component as indicated by the financial internal rate of return (FIRR) with the financial cost as indicated by the weighted average cost of capital (WACC).
How do you measure project financial performance? ›- Payback period analysis. The payback period measures the amount of time it will take to recoup, in the form of net cash inflows, the net initial investment in a project. ...
- Accounting rate of return. ...
- Net present value. ...
- Internal rate of return.
What are the five types of financial planning? ›
- Cash Flow Planning and Budgeting. The first step in the financial planning process is to develop a budget and cash flow plan. ...
- Insurance Planning. ...
- Retirement Planning. ...
- Investment Planning. ...
- Tax Planning. ...
- Legacy Plan for Wealth Distribution.
The nation of Mexico's top five wealthiest individuals rank from the eighth to 411th richest in the world. They've made their fortunes in telecommunications, mining, retail, media, food and beverage, and financial investments. Carlos Slim Helu is Mexico's wealthiest person, with a net worth of $93 billion.
Who are the three richest Mexican? ›As of December 5, 2022, Carlos Slim Helu was the wealthiest man in Mexico, with an estimated net worth of 84.1 billion U.S. dollars, followed by German Larrea Mota Velasco (No. 2, $25.1 billion), Ricardo Salinas Pliego (No. 3, $11.2 billion); and Alejandro Bailleres Gual (No. 4, $7.2 billion).
What is the Mexican average income? ›What is average wage in Mexico? Average Wages in Mexico increased to 527 MXN/Day (620.539 USD/Month) in April 2023. The maximum rate of average wage for employees was 433 MXN/Day and minimum was 129 MXN/Day. Data published Monthly by Secretariat of Labor and Social Welfare.
What US city has the highest percentage of Mexicans? ›El Paso, Texas: one of the main cities on the southern border. El Paso has one of the highest percentages of Hispanic population of any city in the United States. It has 678,815 inhabitants, of which 551,513 are Hispanic, which represents 81.25% of the total population.
How much does the top 1% make in Mexico? ›| Characteristic | Average income in euros at PPP |
|---|---|
| Bottom 50% | 3,200 |
| Middle 40% | 14,500 |
| Top 10% | 99,400 |
| Top 1% | 452,900 |
- Bank of America in the U.S. is affiliated with Scotiabank in Mexico.
- HSBC in the U.S. is affiliated with HSBC Mexico.
- Santander, in the U.S., is affiliated with Santander Mexico.
Using your bank — whether it be BBVA Bancomer, Banco Santander, Banorte, or any other — is indeed a reliable option for sending money from your bank account to a bank account in the US. However, it's very expensive and transfers usually take a long time to arrive (between two and five business days).
Can I deposit a US check in Mexico? ›Some banks will cash a check drawn on a US bank into Mexican pesos. You usually need to hold an account at the bank where the check is cashed. Ask your local bank if it offers this service, and if it does, ask about what fees it charges and what exchange rate it applies to the exchange.
What does finance for a project mean? ›
Project finance refers to the funding of long-term projects, such as public infrastructure or services, industrial projects, and others through a specific financial structure. Finances can consist of a mix of debt and equity. The cash flows from the project enable servicing of the debt and repayment of debt and equity.
What is typical project financing? ›Project finance is comprised of a mix of equity and debt; typically 30-40% of the project is funded through equity contributions, while 60- 70% is funded through debt. Project sponsors typically contribute the equity and “own” the project, while debt finance can take two forms: loans and bonds.
What does finance do in a project? ›People in finance and banking who are responsible for project management oversee the planning, implementation, and monitoring of short, mid, and long-term initiatives from concept to completion; prepares project plans, and ensure activities are completed on time, within budget, and to satisfaction.
What are the three types of finance? ›Finance is a term broadly describing the study and system of money, investments, and other financial instruments. Finance can be divided broadly into three distinct categories: public finance, corporate finance, and personal finance. More recent subcategories of finance include social finance and behavioral finance.
What is project planning and financing? ›Project financial planning is the process of determining project costs and developing a budget. Good financial planning has many benefits, including estimating profit, reducing financial risk, and planning for unexpected costs.
Who are the key participants in project financing? ›The stakeholders in project financings are the sponsor(s), the customer or host country government ceding agency, the debt and equity investors, the project company, the offtaker or user of the project company's output, and the supplier of production inputs to the project company.
Who is responsible for project finance? ›A developer has many roles and responsibilities and works with a team to bring an idea from concept to completed construction. They are responsible for coordinating all parties involved in the development of the project including, finance, legal, and technical elements.
Who manages project finance? ›A finance project manager ensures that employees execute projects on a stipulated budget. They assign a cost to several areas of the project and balance a company's budget to suit its long and short-term goals. They also monitor the cash inflow of several projects and ensure that resources are managed adequately.