Rocky Roads

By Hannah Wallace October 31, 2008

As Tallahassee seeks bids from private corporations to operate Alligator Alley, the tale of Mexico’s broken toll roads makes me wonder why Florida chooses to fix something that is not broken.

The most expensive leg of a road trip from Sarasota to my new home in Guadalajara was the Mexican part. The four-lane toll road sections from the border to Guadalajara were smooth and near-empty. I was able to set the cruise control at 80 miles per hour and zoom. At the same time, though, my wallet was hemorrhaging bills at frequent toll stops, altogether a whopping $90 for a measly 300 miles.

At one point, I decided to take “la libre”—one of the free roads in Mexico—to save a few bucks. But as soon as I could, I returned from the “free” Third World to the expensive First-World roads. On the regular road, I averaged maybe 30 mph, sharing the potholed, narrow pavement with rusty Beetles, 1980s pickups and convoys of tractor-trailer-trailers (Mexican regulations allow drivers to hitch a trailer behind a semi-trailer) creeping up inclines at 5 mph. Plenty of curves aside, the “libre” came with multiple speed bumps at every village crossing, and wild passing maneuvers by desperate drivers.

All this sparked my curiosity. What I found was a statistic showing that Mexico’s road tolls are the world’s second most expensive, and a tale on how not to privatize highways.

To be sure, as you are reading this, most of Mexico’s toll roads are not private. For more than a decade, the federal government has owned and managed them. It wasn’t intended that way, however, when Mexico went through a highway construction boom in the early 1990s and gave private operators control over 23 highways. The deal ended in financial disaster just a few years later, and the government used $2.1 billion in taxpayer funds to “indemnify” the private operators, and assumed nearly $6 billion in debt.

This doesn’t mean that privately run toll roads are history in Mexico. This year the Felipe Calderón administration granted a 30-year concession for one package of existing roads to a U.S.-Mexican consortium, and it is intent on granting two more packages to private operators—possibly European—by early next year.

So what’s controversial about this re-privatization?

For one, the re-privatization benefits some of the very same companies and Mexican oligarchs bailed out by taxpayers a decade ago, such as the joint venture between a Goldman Sachs entity and the politically well-connected Mexican construction giant ICA.

Second, users aren’t going to save any money in the re-privatization; there’s no indication Mexico’s toll roads will stop being the world’s second-most expensive. CAPUFE, the labor union created in the 1940s to operate Mexico’s toll roads and bridges, says it could operate these roads at half the cost of the private companies.

Third, the re-privatization is expected to yield billions of dollars less than the cost of the bailout. Taxpayers will continue to shoulder most of the debt. And that debt has grown like weeds, from less than $6 billion in 1997 to more than $16 billion today.

In essence, Mexico’s rocky toll road privatization politics are a lesson in lack of political will, ineptitude, little transparency, probably a dose of corruption and popular resistance. You will inevitably encounter the same ingredients here.

If you are convinced that Florida is entirely different, and that—in spite of decades of sound management—the state ought to keep its fingers away from operating infrastructure, fine. But consider some bottom-line questions.

First of all, FDOT has a decades-long successful and profitable track record of managing toll highways. Why should Florida taxpayers give away Alligator Alley for 50 years or longer to a private monopoly for a one-time payment, plus some revenue-sharing, if FDOT could reap a multiple in the same time span? Is the one-time windfall really the best way of funding road projects in Broward and Collier counties, as FDOT says it will do?

If you lose that argument you can, of course, always de-fund the state entity, as the Mexicans have done with their federal transportation ministry, and then yell “bad government!” when the potholes don’t get fixed, or “impossible!” when new road construction must be financed.

What’s more, a Mexican-style crash-cum-bailout in Florida isn’t such a remote possibility either.

The failure of Mexican concessionaires in the 1990s happened because of lower-than-expected traffic during the post-1993 recession, as well as higher-than-expected interests and other costs due to a devaluation of the Mexican peso. FDOT hasn’t shown the public the qualification documents submitted by six consortia in July. But what we do know is that the six groups that submitted their qualifications to FDOT in July to be accepted to bid for Alligator Alley are all led by European corporations. Assuming that the U.S. dollar continues its fall—which is likely—what does that mean to companies that receive revenues in dollars but must pay interests and some services in euros?

Finally, although the concession would be for a road with two decades of traffic statistics, who says a sustained recession in Florida could not push projected traffic growth down in the long term? The Department of Transportation emphasizes the state will receive some revenue-sharing and keep a lid on toll increases, but if the numbers are down and costs are up, I’ll bet grandma’s home that private operators will put pressure on the state to boost tolls. Right now, crossing the Glades on I-75 costs $1.50. But who will guarantee it couldn’t be $15 if that happens?

Kudos to state Sen. Dave Aronberg for demanding an independent review of the plans by the Council of Efficient Government. We want to know much more before going down this slippery slope.

In the meantime, I’ll continue to grudgingly pay my $20 weekly dues to Goldman Sachs/ICA for a once-a-week, 30-mile commute from home in Guadalajara to teaching a class. My full-time university colleagues who do the same commute can’t afford the toll road. They prefer to leave home half an hour earlier and arrive tired. For some reason, I don’t feel good about this.

Johannes Werner is a Sarasota-based business journalist who has worked in Europe, Mexico, the Caribbean and the United States. He is the editor of Cuba Trade & Investment News and hosts the Florida-Caribe radio show on WSLR 96.5 FM.

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