Mexico - Country Commercial Guide
Construction

This is a best prospect industry sector for this country.  Includes a market overview and trade data.

Last published date: 2021-09-02

The construction sector—including building materials and specialized expertise such as sustainable building technologies and seismic stabilization—is a best prospect industry sector for Mexico. This section includes a market overview and trade data. It is expected that in 2021 Mexico’s construction industry will recover from the impacts of the COVID-19 pandemic, driven by an improving economic outlook and public investment in priority infrastructure projects.

Overview

Mexico’s USD 1.3 trillion economy makes it the second largest economy in Latin America and the 15th-largest in the world. Its infrastructure plans are an important consideration for any U.S. engineering or construction supply firm.

According to Business Monitor International (BMI), a Fitch Solutions data and analytics company, Mexico’s construction industry is expected to recover after a significant decline of 17 percent in 2020. BMI estimates the construction industry will grow by 12 percent in 2021 as the Mexican economy recovers from the COVID-19 pandemic, with average annual growth reaching 3.1 percent between 2022 and 2025. This expected growth will be offset by weak investor sentiment, limited public investment, changes in public policies, and the duration of the COVID-19 pandemic that could affect the economic recovery.

In its decree on the COVID-19 public health emergency, the Mexican Government identified construction and infrastructure projects as essential industries. President López Obrador specifically directed key infrastructure projects to continue during the national COVID-19 related shutdowns. These large “signature” projects include the new airport to serve Mexico City at the Santa Lucía Military Base; the Isthmus of Tehuantepec Inter-Oceanic Corridor; the “Maya Train” on the Yucatan Peninsula; rural roads; and various sector-specific developments in oil and gas production, refinery development, agricultural production, and mines. President López Obrador announced these projects in December 2018 under his National Development Plan (Plan Nacional de Desarrollo or PND) 2018–2024. This plan seeks to increase infrastructure investment from 2.5 to 4.5 percent of GDP by 2022.

In 2019 and 2020, President López Obrador, along with private sector representatives, announced multiple projects as part of the nation’s infrastructure plan. The overall plan covers transportation, telecommunications, water and sanitation, energy, tourism and social welfare. For more details on these projects, please see our sections on transportation infrastructure, energy, oil and gas, and water.

The following table indicates the value of the Mexican construction and infrastructure industry. These figures were estimated by BMI based on data provided by the Mexican National Institute of Statistics and Geography (Instituto Nacional de Estadística y Geografía or INEGI).

Construction and Infrastructure Industry Data
(Figures in USD billions)

 

2018

2019

 

2020

(estimated)

2021 (forecast)

Construction Industry Value

93.22

90.47

72.89

82.56

Construction Industry Value, Real Growth, % y-o-y

0.6

-5.0

-17.2

12.0

Infrastructure Industry Value

33.83

32.82

26.72

29.90

Construction Industry Value, Real Growth, % y-o-y

0.5

-5.1

-16.2

10.7

Exchange Rates

19.23

19.26

20.00

21.00(e)

Sources: Secretariat of Finance and Public Credit (SHCP), National Institute for Statistics and Geography (INEGI), Fitch Solutions Business Monitor International (BMI).

Macroeconomic conditions in Mexico will improve over the next several years as consumption recovers and key economic sectors return to normal levels of activity post COVID-19. The construction of new manufacturing and industrial plants will be a crucial driver of investment and Mexico will benefit as a result of the implementation of the United States-Mexico-Canada Agreement (USMCA), which may shift supply chains to the region from countries such as China.

Analysts and industry experts have agreed about elements that could affect investment during the upcoming years, preventing a significant recovery of the Mexican construction industry. The COVID-19 pandemic has been one of the most influential, as firms may continue to limit capital expenditure. This adverse environment would be exacerbated by a combination of project cancellations and abrupt changes to key policies under the current López Obrador Administration.

On the public works side, the majority of PND projects, such as the Maya Train, have shifted from being planned as public-private partnerships (PPPs) to being primarily government-funded. For those projects involving PPP financing, including some in the private sector-led package, the Public-Private Partnership Law allows the government to enter into infrastructure and service provision contracts with private companies for up to 40 years. This law provides more legal certainty to private investors by distributing risk more evenly, facilitating access to bank loans, and harmonizing existing state public-partnership models into one federal law. All investors can participate in the bidding process, except for some restricted sectors outlined in the existing Foreign Direct Investment Law. The COVID 19 pandemic could also have a negative impact in public investment as reduced tax revenue and the government’s reluctance to take on additional debt may generate cuts to capital investment.

Mexico ranks second among top markets for U.S. building product exporters due to its proximity, established transport links, and duty-free status under USMCA. For 2021, we will continue to see opportunities related to major PND government infrastructure projects, including work on specific highways and roads, railways, airports, ports, oil and gas-related infrastructure, telecommunications, and housing projects. In the private sector, we continue to see opportunities in mixed-use buildings (retail, corporate, and housing), corporate offices, logistic and manufacturing hubs, shopping malls, retail stores, and other small projects. The large private projects will be developed and executed by local and foreign investors. Most public projects will be developed and executed by local investors and a minority by foreign investors. As previously mentioned, interested companies should follow cautiously the development of these projects given possible changes in public policies related to investment as a result of continued effects of the COVID-19 economic downturn.

Leading Sub-Sectors

We see three leading sub-sectors in the construction industry: general construction, housing, and green building.

General Construction

Construction techniques in Mexico differ from those in the United States. Most of the houses, commercial and public buildings, industrial facilities (industrial manufacturing plants, logistical and distribution centers), and mixed-use buildings in Mexico are built with bricks and concrete, which are the traditional building materials in Mexico. Demand for cement, steel bars, glass, and air conditioner systems are growing and not always met by local suppliers. This presents a market opportunity for U.S. firms, especially in industrial areas along the U.S.-Mexico border where most facilities are being built with raw materials from both countries. Nonetheless, state-of-the-art panel systems for mixed-use buildings and facilities are gaining market share due to trends toward flexible spaces and areas in offices, distribution centers, as well as in luxury apartments.

There is also a high demand for plywood. Potential niche markets exist in the furniture manufacturing sector, the construction sector (which consumes large quantities of wood for concrete forming purposes), and the interior decoration sector, particularly in flooring, paneling, and molding.

Housing

Unfortunately, 2020 was not positive for the housing sub-sector. INEGI data shows that, for 2019 and 2020, a significant number of housing investment projects were postponed or canceled in several cities, but mainly in the metropolitan areas of Mexico City, Guadalajara, and Monterrey, which are the main engines of real estate development in the country.

Uncertainty over public policies accentuated housing project declines in the last 18 months. For 2021 we expect to see continued weakness in housing development, especially in the middle, residential, and residential–plus segments. Potential buyers have postponed purchasing decisions and will do so as long as they continue to perceive uncertainty. In addition, the Federal Law on the Remuneration of Public Servants reduced the income of federal government workers, further depressing home sales. The National Housing Registry (Registro Único de Vivienda) is a good source for information on housing inventories. It shows that units remain below the initial plans from housing developers and the federal government.

Mexico’s housing sector is dominated and funded by large independent government and parastatal agencies. These include the National Housing Commission (Comisión Nacional de Vivienda or CONAVI), INFONAVIT (Instituto del Fondo Nacional para la Vivienda para los Trabajadores, the largest housing fund for private workers in Mexico), FOVISSSTE (Fondo de la Vivienda del Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado, the largest housing fund for state workers in Mexico), FONHAPO (Fideicomiso Fondo Nacional de Habitaciones Populares, a government fund for creating low-income housing options), CFE (Comisión Federal de Electricidad, the government owned electric utility company), Pemex (Petróleos Mexicanos, the state-owned oil company), some state government housing agencies, and large private banks and other financial institutions. Government institutions provide almost 60 percent of the funds for the Mexican housing sector. The other 40 percent is covered by private banks and other financial institutions.

Under the López Obrador Administration, housing analysts suggest we might see a continuation of (1) housing support for six million workers not covered by the INFONAVIT and FOVISSSTE housing funds; (2) a subsidy for houses valued between USD 12,000 and USD 25,000; and (3) subsidies for green housing projects (up to 25 percent of the mortgage). New home construction could account for approximately 22 percent of housing investments through 2024. These initiatives have been offering opportunities to the Mexican housing developers focused on the low-income market (e.g., Consorcio Ara, Gicsa, Frisa, Gigante Grupo Inmobiliario, Inmuebles Carso, ICA, Inmobiliaria Vinte, Thor Urbana Capital, and Acciona Parque Reforma, among several others).

There are no major barriers to the importation of housing building materials. Certain regulated products will need to comply with local standards’ testing (e.g., wires, switches, back-up power batteries, etc.), so it is necessary to check the requirements for your particular product.

For U.S. firms interested in entering Mexico’s housing industry, one of the best options is to partner with a Mexican housing developer or construction firm that is active in the housing industry. Mexican companies’ knowledge of the market and labor and legal aspects is invaluable to U.S. firms. Despite the Government’s focus on subsidized housing, there are outstanding business opportunities in providing housing for the mid- and high-income segment of the housing industry.

Building materials suppliers that have successfully entered the Mexican market typically have hired a representative to sell to the major distributors and construction companies in the country. In addition, it is important that manufacturers register as building materials suppliers with INFONAVIT, FOVISSSTE, FONHAPO, Pemex, CFE, and state housing institutes.

Green Building

Like other emerging economies, Mexico is moving rapidly towards green, or environmentally-friendly, construction activities. The construction industry has embraced the green building movement. Mexico joined the World Green Building Council (WGBC) and is learning best practices from Europe, Canada, and the United States to lower costs and enjoy health benefits derived from green and sustainable buildings. The Mexican construction industry also aims to demonstrate to other countries how to use simple, moderate-cost strategies acquired through its own longstanding building practices to achieve green building advantages.

Mexico has a tradition of architecture that favors environmentally-sensitive, small-footprint building practices and designs. Nonetheless, policy efforts to promote green buildings are relatively new and generally focused on the housing sector. The top organizations documenting and implementing green practices, as well as working to define criteria for green buildings and homes include CONAVI, INFONAVIT, the Mexican Chamber for the Construction Industry (Cámara Mexicana de la Industria de la Construcción or CMIC), the National Chamber for Consulting Firms (Cámara Nacional de Empresas de Consultoría or CNEC), the National College for Architects (Colegio Nacional de Arquitectos de la Ciudad de México), the Mexican Council for Sustainable Construction (Consejo Mexicano para la Edificación Sustentable), Sustainability for Mexico (Sustentabilidad para México or SUME), and the Association of Firms for the Saving of Energy on Construction and Buildings. Additionally, INFONAVIT has created a “green mortgage” program, supported by mandatory employer and employee contributions.

The worldwide green building certification program developed by the United States Green Building Council—a program known as LEED for “Leadership in Energy and Environmental Design”—is increasingly used in Mexico. As a result of these efforts and developments, by early 2019 Mexico was home to over 755 LEED certified projects totaling 15.9 million gross square meters of space. From hospitality to retail, whether single projects or LEED volume certification, the projects in Mexico represent the diversity and breadth inherent in LEED. Mexican public authorities have developed specific regulations and certifications to promote energy efficiency and buildings that respect the environment. One of them is the Certification of Sustainable Buildings Program (Programa de Certificación de Edificaciones Sustentables or PCES), an instrument developed by Mexico City’s Secretariat of the Environment (Secretaría del Medio Ambiente or SEDEMA) to ensure the energy efficiency of current and future buildings.

Opportunities

The U.S. Commercial Service in Mexico is happy to assist you in exploring construction sector opportunities. Residential U.S. building and construction products are generally well-received in Mexico by local construction companies seeking to offer their clients houses with better features and quality. When home construction recovers, Mexican buyers will once again seek quality, affordable homes with more green products. Housing developers and construction companies located in border-states have greater access to the latest trends in design, products, and accessories. Nonetheless, developers and construction companies in central Mexico are also interested in U.S. products that can improve the quality of their final product.

To the extent private sector construction continues, there are opportunities for U.S. suppliers in both residential and non-residential construction/building. These include wooden windows, doors, flooring, and frames from sustainable woods; ecological paints, coverings and coatings; ecological concrete pipes for potable water and sewage; energy saving light bulbs; ecological pipes and fixtures for electrical applications; skylights; green-certified electrical devices and home appliances; permeable concrete; and green roof systems and equipment. There is also demand for high-efficiency air conditioning systems and equipment; high-efficiency HVAC equipment for commercial buildings and hospitals; ecological water purification systems and devices; ecological indoor and outdoor furniture; natural insulation materials; ecological blocks and bricks; insulation; acoustics; and fire-retardant thermal protection materials. Business opportunities in engineering, design, architectural, electrical, plumbing, foundation, landscape, and other green services and technologies are also significant.

The COVID-19 pandemic will continue to have an impact in the construction market as multiple office, mixed-used spaces, and commercial facilities will have to be reconverted or adapted to the new reality. The market segments most affected by the pandemic will be office and commercial construction, as demand for such spaces decreased significantly as a result of the economic crisis and the different remote work schemes adopted by a large number of firms. Many commercial construction projects were put on hold or cancelled as a result.

Construction elements and supplies that allow spaces to be adapted to different needs and uses will be in high demand, whereas the office and commercial construction markets are only likely to recover in the medium- to long-term. Demand for IT tools, communication platforms, and software to facilitate construction processes, design, and materials management, among other, has increased during the last year and will continue growing in the near future. Industry experts have noted increasing interest by the Mexican construction industry in Building Information Modeling (BIM) tools, which are steadily becoming a major asset of the construction industry as it evolves and creates opportunities for owners, architects and contractors.

The following table provides additional details on specific opportunities.

Best Prospects in Mexico for U.S. Manufacturers of Building Materials
(% of U.S. Market Share in Mexico’s Construction Industry)

Description

HS Code

U.S. Market Share

Filtering or purifying machinery and apparatus for gases, others

842139

70%

Tubes and pipes—copper

741110

68%

Aluminum doors, windows, and frames

761010

65%

Bulbs for incandescent lamps

701110

63%

Air conditioning machines others, incorporating a refrigerating unit, other

841582

61%

Steel doors, windows, and frames

730830

58%

Source: Sistema de Información Comercial Via Internet (SIAVI0, Secretariat of Economy (SE).

 Resources

  • National Chamber for Housing Development (CANADEVI)
  • National Housing Commission (CONAVI)
  • Mexican Chamber for the Construction Industry (CMIC)
  • National Chamber for Consulting Firms (CNEC)
  • Construction and Housing Development Center (CIHAC
  • National Institute for Statistics and Geography (INEGI)
  • National Workers Housing Fund Institute (INFONAVIT)
  • Secretariat of Communications and Transportation (SCT)

We recommend the following events to connect with Mexican buyers, representatives, and industry officials.

  • Expo Ferretera, Guadalajara, Jalisco
  • Expo CIHAC, Mexico City

Contacts

For more information

on the construction sector in Mexico, please contact:

Juan Carlos Ruiz

Commercial Specialist

U.S. Commercial Service—Mexico City

Tel.: +52 (55) 5080-2000 ext. 5223

JuanCarlos.ruiz@trade.gov