Mexico - F. Construction Mexico - Construction
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
The López Obrador 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 housing and commercial building construction—such as September 2017 earthquake reconstruction and urban development in marginalized communities—to large infrastructure projects such as a newly proposed airport in Mexico City, development of the Isthmus of Tehuantepec, 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.The following table provides the most recent statistics for construction sector products and services in Mexico.
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 |
| Total Exports | 37.95 | 38.1 | 38.3 | 38 |
| Total Imports | 42.43 | 42.7 | 42.7 | 42 |
| Imports from the U.S. | 32.23 | 32.5 | 32.3 | 32 |
| Total Market Size* | 94.61 | 94.9 | 95 | 94.8 |
| Exchange Rates | 18.68 | 18.91 | 19.22 | 19.15 |
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)
The first half of 2018 showed a positive outlook for construction, even exceeding expectations by rising above the level of the economy. However, in the third and fourth quarters, the GDP results from this sector showed a slowdown, generating growth of only 0.6 percent during that year.
As this has been continuing for almost a decade, building works is the component that exhibits modest but positive growth. In contrast, the number of civil engineering works continues to fall, at lower rates, but still at negative levels. On the building side, the construction of higher value housing and productive building has helped the sector to a modest extent. Meanwhile, lower public investment keeps infrastructure works lagging behind, although there could be a slight upturn if the 2019 Federal Expenditure Budget (Presupuesto de Egresos de la Federación or PEF) is implemented.
The slowdown in the production activity of the construction sector is reflected in its demand for labor. For the first time in several years, the number of employees in the sector is decreasing. Companies are demanding fewer workers. We expect the slowdown to continue for at least the first two quarters of 2019. This may also be influenced by a drop in work factor productivity as measured by the number of employed persons, which is already negative in its annual comparison. In terms of hours, productivity is also slowing, but remains positive. This contributes to the prospect of less employment in the sector, at least in the short term.
These factors include global economic conditions and the drop in international oil prices, both affecting the value of the peso. Due to the large number of private projects in 2018 (mainly housing buildings, mixed-use buildings, commercial malls, industrial and distribution facilities), it was primarily the private sector that drove overall industry growth. It is expected that the private sector will continue to invest in 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.
Growth of the building and construction sector in Mexico is highly influenced by federal government infrastructure and development programs. As of the writing of this guide, the National Development Plan (Plan Nacional de Desarrollo or PND) for the 2019-2024 administration of Mexican President Andrés Manuel López Obrador was announced with a planned investment of USD 586 billion. A significant portion of these projects have already been put out for bid, and much of the work involves private sector funding and/or formal public-private partnerships (Various sections in this Country Commercial Guide include sector-specific PND information, including the section on energy and the one on transportation infrastructure). Leading private sector organizations also presented an infrastructure plan, including 1,600 projects, for the Lopez Obrador Administration’s consideration.
It is important to keep in mind that the majority of PND projects are being completed as public-private partnerships. A 2012 modification to the Public-Private Partnership Law allows the government to enter into infrastructure and service provision contracts with private companies for up to 40 years. The Public-Private Partnership 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 total value of Federal Government construction projects during 2018 was estimated at USD 110 billion, of which 30 percent was allotted to Pemex (government-owned oil company); 35 percent to highway construction; another 22 percent to housing developments and multi-purpose buildings; and the remaining 13 percent was assigned to other infrastructure projects. The Mexican states that received the most funds were Guanajuato (9.1%), State of Mexico (8%), Nuevo Leon (7.3%), Veracruz (7%), Mexico City (6.8%), and Jalisco (6.5%).
Mexico ranks second among top markets for U.S. building product exporters due to its proximity, established transport links, and duty-free status under NAFTA. For 2019, we will continue to see opportunities related to major PND government infrastructure projects, including work on specific highways and roads, 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, another important raw material for the construction industry. 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
The housing market is still undergoing growth originally projected at a five percent annual average from 2014 to 2018. Housing industry sources continue to expect future growth primarily in the construction of houses valued at USD 26,000 to USD 50,000.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 (Petroleros 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.
The housing initiatives announced during the prior administration were intended to address a shortfall of an estimated seven million housing units; to promote growth in the housing industry in the short- and medium-term; and to increase vertical housing developments in major cities across the country. While it remains to be seen how policies will evolve in the López Obrador Administration, 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). 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).
The economic downturn has continued in the housing market. As long as there is no recovery in this type of housing, there will be no expansion phase. The construction plans, along with the housing inventories shown to us by the Registro Único de Vivienda (National Housing Registry), show that units remain below the initial plans from the housing developers and the Federal Government.
There are no major barriers to the importation of housing building materials if they comply with NAFTA (or in the future USMCA) Certificate 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, Mexico is 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.
In February 2019, the U.S. Green Building Council announced during its annual meeting that Mexico moved forward one position from last year evaluations and now is ranked eighth globally, with a total of 370 new LEED project certifications alone in 2018, representing over 8.41 million square meters with an estimated investment of USD 99 million. Projects included tourism real estate development, marine projects, and thematic and recreational parks, along with more standard residential, industrial, and commercial developments.
With the aim of promoting sustainable architecture and increasing buildings of this type, 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), aimed at incorporating systems that ensure the energy efficiency of current and future buildings, so that they adapt to the sustainability criteria.
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 improve and offer houses with better equipment and quality to their clients. Mexican buyers are searching for quality homes with more green products, yet that are affordable. Housing developers and construction companies located in border-states have greater access to the latest trends in design, products, and accessories, which they can incorporate into their projects. Nonetheless, developers and construction companies in Central Mexico are also interested in U.S. products that can improve the quality of the final product they offer their clients.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; green roof systems and equipment; 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; and 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 | 78% |
| Air filters for AC systems | 842139 | 63% |
| Aluminum doors, windows and frames | 761010 | 69% |
| Bulbs for incandescent lamps | 701110 | 30% |
| Clear glass with UV protection, thickness >6mm | 700490 | 80% |
| Kitchen cabinets and fixtures | 940340 | 28% |
| Prefab construction systems | 940600 | 31% |
| Solar panels for lighting | 854140 | 25% |
| Solar water heaters | 841919 | 21% |
| Steel doors, windows and frames | 730830 | 68% |
| Toilet articles of porcelain or china | 691090 | 28% |
| Tubes and pipes – cooper | 741110 | 84% |
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.
- Expo Ferretera 2019, September 5–7, 2019, Guadalajara, Jalisco
- Expo CIHAC 2019, October 15–19, 2019, Mexico City
Contacts
For more information on the construction sector in Mexico, please contact:
Adrián Orta
Commercial Specialist
U.S. Commercial Service—Mexico City
Tel.: +52 (55) 5080-2000 ext. 5220
Adrian.Orta@trade.gov