Part 1: Negotiating with the Government
Mr. Miguel reached out to the government of the State of Mexico with a proposal to develop Ciudad Azteca Station in 2004 and, according to Mr. Miguel, “this type of project was not even on their radar.” The plan for the station that Mr. Miguel took to the state government consisted of the following elements:
- The state government would acquire the land and lease it to PRODI to build and operate a transfer station.
- Individual vendors and transportation operators would be charged for their use of the space, while PRODI would be responsible for ensuring the safety and functionality of the station, as well as safeguarding the workers, clientele, and infrastructure.
- The company would make a return on its investment through income from retail, transport operator fees, advertising space, bathrooms, and parking facilities.
Although Mexico had past experiences with public-private partnerships (PPPs) for transportation infrastructure, mostly around highways, Ciudad Azteca was one of the first to leverage private resources to build mass transit infrastructure. The project included the acquisition of land for the construction and rehabilitation of two buildings comprising the CETRAM infrastructure, as well as the incorporation of technology for controlling and charging public transport. Needless to say, approval from the state government was necessary. According to Mr. Miguel, the state had two questions:
“[..] They mentioned only two things: First, is it going to cost users? Secondly, is it going to cost the government?” (Interview with Jose Miguel Bejos, 2017)
Since the answer to both questions was “no,” the state and local governments were quite receptive to the proposal, perceiving a benefit in having private resources dedicated to improving a key element of the transit infrastructure with no direct cost to public coffers. A few months later, the State of Mexico’s government agreed to PRODI’s plan and moved to purchase the vacant lot.
Part 2. Acquiring the Land
The day the state government was to sign the deeds for the land, the Electricity Workers’ Union, which had been identified as the owner of the plot, was unable to verify its ownership. Uncertainty around land ownership put the whole development in jeopardy. Rectifying the land titling problem subsequently took over a year. When titling was finally cleared, with PRODI covering the related legal expenses, political winds had shifted. With state elections approaching in July 2016, the government had already committed the money, originally set aside to purchase the land, towards building the first line of a new BRT line, Mexibus, and had no room to maneuver.
Facing this predicament, PRODI took a gamble, purchasing the deed from the Electricity Union in 2006, absorbing the cost of the property, and handing the parcel over to the state government, with an agreement that PRODI could purchase the concession to develop the lots next to the Ciudad Azteca station. That same year, the government of the State of Mexico granted PRODI a 30-year concession for the construction, rehabilitation, operation and maintenance of the new Azteca intermodal station.
Part 3: Finding Financing
Since the project had no precedent, finding financing sources posed many challenges for PRODI. A key one was finding the right partners. While looking for potential investors, PRODI came across Impulsora del Desarrollo Económico de América Latina (IDEAL), the construction arm of Grupo Carso, one of Mexico’s largest conglomerates with a portfolio that spans from telecommunications to retail. According to Mr. Miguel, Grupo Carso decided to participate in the project because they could see the potential for creating social benefit along with private profitability. IDEAL and PRODI became partners in a new enterprise, Constructora, Conservación y Mantenimiento Urbano (COMURSA). PRODI created a joint financing plan with COMURSA, which took a 60% equity stake in the project, with the remaining 40% held by PRODI. COMURSA managed the retail and construction side of development, while PRODI was responsible for hiring the architects, handling all government relations, and negotiating with both formal and informal transit operators.
Part 4. Assembling the Team
A key asset that PRODI brought to the project was Dr. Florencia Serrania. Having initially learned of the project in her position as the head of the STC (the Mexico City Metro agency), where she oversaw the technical issues arising in connecting the new station to the city’s Metro infrastructure, she played a crucial role in future relations with the government. After leaving the STC, she founded Urban Travel Logistics (UTL), a transportation planning arm within PRODI, and assumed responsibility for all aspects related to mobility, including consultation on the design of the transfer area, negotiations with the public transportation service providers (e.g. colectivos) and relevant government agencies, and the design and development of the technology for the operation of the automated payment and vehicle tracking system.
On October 2006, PRODI hired Softec, a local real estate consulting firm, to conduct a study of the market potential for the site. Softec carried out a survey of the demographics, preferences, and needs of its potential consumer market: those already using Line B and/or living in Ecatepec. During this time, PRODI also hired Manuel Cervantes, who would serve as the chief architect of the project, and the Canadian real estate firm Thomas Consulting, that would develop the project’s commercial strategy.
Part 5 - Negotiating Informality
According to those involved in the project, the most difficult element of developing the PPP was negotiations with the informal economy actors who dominated the area. First, the development plan sought to organize a formerly chaotic passenger transfer process by instituting a set of conditions to formalize the informal transit operators. Transport operators did not agree to the new conditions — including a required fee to pass through the station — lightly. Riots broke out. After a year of negotiations, drivers eventually came to find that systematizing the public transit services within the station benefitted their business and they agreed to the station’s conditions. The revenues from the fees imposed on the operators went towards part of the project financing, contributing to maintenance services, lighting, cleaning, and the use of technology for control of operations and services.
The second dimension of informality had to do with commercial issues. The plan would replace 178 irregular businesses with 88 regular ones, implying an important share of displacement. Problems emerged almost immediately. Informal food and retail vendors who occupied the street bordering the property demanded compensation while the project was still under construction. The vendors organized and demanded reparations and PRODI eventually agreed to offer them financial compensation in order to complete the construction process. By the spring of 2009, 66 informal vendors were peacefully relocated from the area, and Phase I of the project, the east building, opened by November of that year. The west side of the building opened in August of 2011.