(Bloomberg) -- Mexico City intends to tap the local sustainable debt market to fund projects in electromobility, water and social inclusion, according to its new finance chief Juan Pablo de Botton.
The plan would allow the city to finance part of Mayor Clara Brugada’s landmark projects, which includes building 100 community centers known as “utopias,” expanding the service of electric cable cars that cross above the city’s traffic and repairing parts of the aging subway system.
By earmarking the funds raised to social and environmental projects, the new administration expects to address some of Mexico City’s fundamental problems while potentially lowering financing costs, de Botton said.
“There is a very important appetite from investors for these types of instruments,” the 32-year-old finance chief said in an interview Tuesday. “Of course we have to do important work to prepare our framework and refine it, in conversation with the banking sector and institutional investors in Mexico.”
The size of the new sustainable issuance is still to be determined. De Botton said the government is still deciding what projects it will prioritize, while making estimates for revenue and spending. Next year’s budget will have to be submitted and approved by Dec. 31.
His office will soon start approaching different banks and other institutional investors to discuss the issuance plan, he added, without yet specifying the date. Prior to his current role, de Botton was the head of expenditures at Mexico’s federal Finance Ministry and also held top roles at development banks Nafin and Bancomext.
Taxes and Austerity
Much of Mexico City’s development plans will rely on its ability to collect taxes, which represent around half of the municipal government’s income, according to de Botton, who also previously served as general manager of planning and technology at the federal tax agency SAT. By contrast, other cities in Mexico depend more on transfers from the federal government.
The digitalization of services is a strategy that not only meets a growing demand by the city’s residents, but also helps to boost the collection of taxes needed for development plans, de Botton said.
The other is austerity, which the finance chief promises to maintain, together with efficiency gains.
“We want to have responsible, stable and sustainable finances,” he said.
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