A Retrospective on the Mexican Toll Road Program (1989-94)
Author: Jeff Ruster Date: 9/1/1997 (PDF, 200KB)
In 1989, Mexico initiated a private toll road program of fifty-three concessions involving an investment of about US$13 billion in limited recourse financing over the period 1989-94. The program more than doubled the size of the national toll road network, but miscalculations of investment costs and overoptimistic forecasts of operating income undermined the viability of the toll roads. An already bad situation was made worse by the Mexican currency crisis of December 1994, and the private toll road initiative came to a virtual standstill. Local commercial banks were saddled with nonperforming loans estimated at US$4.5 billion to US$5.5 billion. Concessionaires and their affiliates have been faced with writing off large portions of their investments. And users were left with some of the highest tolls in the world. Jeff Ruster diagnoses the flaws in the design of the program and shows how the failure was manifested in the implementation of different phases of the projects.