Mexico - Commercial Guide
Construction

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

Last published date: 2020-08-17

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.

Overview

Mexico’s USD 1.1 trillion economy makes it the second largest economy in Latin America and the 15th-largest economy in the world. Its infrastructure plans are an important consideration for any U.S. engineering or construction supply firm.

Mexico’s construction industry is forecast to continue to contract in 2020 albeit at a sharper rate than in 2019, according to GlobalData, a leading data and analytics company. Before the COVID-19 pandemic, GlobalData expected Mexico’s construction industry to grow by 1.1 percent in 2020. However, in view of the evolving economic effects of the coronavirus outbreak and uncertainty about its containment, GlobalData has cut its construction output growth forecast for Mexico to -7 percent in 2020, down significantly from the 5.1 percent contraction registered in 2019.

In its decree on the COVID emergency, the Mexican Government listed construction and infrastructure projects as essential industries. President López Obrador specifically directed key infrastructure projects to continue during the national COVID shutdown. Nonetheless, between looming economic recession and slow startup of projects, Federal Government infrastructure investment during 2019 decreased 17.8 percent in comparison to the previous year. The Administration continues focusing on development projects that will stimulate demand for construction materials and services. The President announced a series of priority national development initiatives, of which roughly half involve transportation infrastructure development or other types of construction. These range from large infrastructure projects to housing and commercial building construction—such as September 2017 earthquake reconstruction and urban development in marginalized communities (note that as of September 2019 only 30 percent has been rebuilt).

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 Desarollo or PND) 2018–2024. This plan seeks to increase infrastructure investment from 2.5 to 4.5 percent of GDP by 2022.

In November 2019, President López Obrador along with private sector representatives announced the first package of an ambitious “Private-Sector-Led” USD 424 billion infrastructure plan. The first package identifies 147 projects, out of an estimated 1,600, totaling USD 43 billion. Of the 147 projects, 72 will begin in 2020. 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 & gas, and water.

The following table indicates the Mexican market for construction sector products and services as we calculated in our 2019 Country Commercial Guide. The Government of Mexico has changed certain data sources, preventing updated 2019 full-year numbers and a 2020 market estimate. We will review our market size methodology for this sector in coming months. In the meantime, here are the prior figures:

Mexico Building Materials and Services Statistics
(Figures in USD billions)

 

2016

2017

2018

2019 (Estimated)

Total Local Production

90.13

90.3

90.4

90.0

Total Exports

37.95

38.1

38.3

38.0

Total Imports

42.43

42.7

42.7

42.0

Imports from the U.S.

32.23

32.5

32.3

32.0

Total Market Size*

94.61

94.9

94.8

94.0

Exchange Rates

18.68

18.91

19.22

19.15

*Total market size = (total local production + imports) - exports)
Sources: Secretariat of Finance and Public Credit (SHCP), National Institute for Statistics and Geography (INEGI), Central Bank of Mexico (Banco de Mexico), Secretariat of Economy (SE), National Bank for International Trade (BANCOMEXT), Mexican Chamber for the Construction Industry (CMIC), National Chamber for Consulting Firms (CNEC), National Housing Commission (CONAVI), & National Chamber for Housing Development (CANADEVI)

Mexico’s flat growth in 2019 will be exacerbated by the current COVID-19 crisis. Public sector policy uncertainty has slowed both public and private sector investment. In the January-November 2019 period, construction production decreased by nine percent annually, the largest historical drop for a similar period. This was due to the 19 percent contraction in public construction, while private construction increased by 2.1 percent. (INEGI).

Continuing a decade-long trend, the building works segment exhibits modest but positive growth. In contrast, the number of civil engineering works continues to fall—more slowly, but still at negative levels. The construction of higher value housing and productive building has helped the sector to a modest extent. Meanwhile, public investment remains below plan, although there could be a slight upturn if the 2020 Federal Expenditure Budget (Presupuesto de Egresos de la Federación or PEF) is fully implemented.

Other factors influencing the slowdown include global economic conditions and the drop in international oil prices, both exacerbating economic recession in Mexico and driving down the value of the peso to less than 23 pesos to the dollar in June 2020 (from a prior year average of 19 to the dollar).

For these reasons, we expect private sector investment to lag in 2020 and 2021, though we anticipate continued development of mixed-use buildings (commercial space, offices, and housing), logistics and distribution centers, industrial hubs around the country and housing developments (in all income levels) near new industrial and commercial centers. The November 2019 Private-Sector Led infrastructure plan mentioned above should help stimulate these and other projects.

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.

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 2020, 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.

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 Mexican-U.S. 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, the scenario for 2020 is not positive. Mexico’s statistics agency INEGI shows that for 2019 and 2020 a significant number of housing investment projects were postponed or canceled in several cities, 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 2020 we expect to see continued weakness in housing development in all segments, 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 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 if they comply with USMCA Certification of Origin rules. Certain regulated products will need to comply with local standards testing (e.g., wires, switches, back-up power batteries), so it is good 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 which 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 became home to over 755 LEED certified projects totaling 15,946,290 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 the 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 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 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

AC systems

841582

61%

Air filters for AC systems

842139

87%

Aluminum doors, windows and frames

761010

63%

Bulbs for incandescent lamps

701110

86%

Clear glass with UV protection, thickness >6mm

700490

48%

Prefab construction systems

940600

29%

Solar panels for lighting

854140

75%

Solar water heaters

841919

27%

Steel doors, windows and frames

730830

64%

Tubes and pipes – cooper

741110

61%

Source: Secretariat of Finance and Public Credit (SHCP), National Institute for Statistics and Geography (INEGI), Central Bank of Mexico (Banco de Mexico), Secretariat of Economy (SE), Mexican Chamber for the Construction Industry (CMIC), National Housing Commission (CONAVI), & National Chamber for Housing Development (CANADEVI), Descartes Datamyne

Web Resources

National Chamber for Housing Development (CANADEVI)

www.canadevi.org.mx

National Housing Commission (CONAVI)

www.conavi.org.mx

Mexican Chamber for the Construction Industry (CMIC)

www.cmic.org

National Chamber for Consulting Firms (CNEC)

www.cnec.org.mx

Construction and Housing Development Center (CIHAC)

www.cihac.com.mx

National Institute for Statistics and Geography (INEGI)

www.inegi.gob.mx

National Workers Housing Fund Institute (INFONAVIT)

www.infonavit.org.mx

Secretariat of Communications and Transportation (SCT)

www.sct.gob.mx

Events

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

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