Mexico is the second largest economy in Latin America, with a moderate annual rate of growth of 2.5% in 2015. Despite its size and general positive growth rate, the Mexican economy has yet to make much progress in reducing poverty. It is estimated that 46% of Mexico’s population of 122 million remains under the poverty line; a figure that has essentially remained static over the past two decades.

Mexico is also a highly vulnerable country to the adverse impacts of climate change. Its location between two oceans, as well as its latitude and topography significantly increase Mexico’s exposure to extreme climate events. This climate vulnerability is compounded by Mexico’s status of the 13th largest GHG emitter in the world.

The transportation sector is the second highest source of GHG emissions in the country (26% of total), after electricity generation. In fact, the transport sector, based almost exclusively on fossil fuels, has significant negative effects on local pollution and congestion particularly in Mexico’s urban areas where close to 80% of the population live.

Moreover, local pollution, lack of access to public transport, congestion (i.e. lost time), and poor quality of service are felt disproportionately by the poor. Deficiencies in the public transport system present significant challenges to Mexico’s sustainable development goals and the development of green, productive cities.

The Government of Mexico (GoM) clearly understands the impact of the country’s transportation system on GHG emissions, public health, quality of life and productivity. For example, in the megalopolis of Mexico City, one of the most traffic-congested cities in the world, billions have been invested in public and mass transit infrastructure. However, the goal to create an integrated, multi-modal and sustainable transportation system is yet to be realized. This is also true for most other cities in the country.

Public transportation in the Megalopolis region of central Mexico continues to be heavily based on outdated business models using old buses that deliver unsafe, inefficient, polluting and uncomfortable service. Furthermore, the current regulatory and concessions frameworks hinder the renovation of the bus fleet, the efficient integration of buses with other modes of transport, such as BRT and subway, and the creation of formal and efficient enterprises. Improving the public transport system will have benefits in the three pillars of green growth: environmental (GHG and local pollution), economic (reduced congestion leading to improved productivity; creation of formal enterprises and jobs) and social (improved access and service for the poor).

The project builds upon GGGI’s support to the Environmental Commission of the Megalopolis (CAMe) and its six member states over the last two years. GGGI will take the lessons learned so far and undertake new activities to move the project to the right of GGGI’s value chain by working specifically with one state willing to implement developed recommendations and by leveraging a financial instrument to support public transport. It is important to point out that transportation is in the purview of state governments, although state governments coordinate with municipal governments as necessary.

This work will rely on previous related efforts to create a trust fund for bus replacement, development of new bus concession models, the development of a calculator to estimate externalities, and the economic modelling of bus operators.

GGGI will support the implementation of recommendations related to improved concession models, and financing mechanisms in a selected Mexican state.

PROJECT OUTPUTS FOR 2017-18:

• Develop policy recommendations on improving public transport in one state or municipality of Mexico and submit to government
• Develop recommendations on mechanisms to improve access to financing for public transport reform in one state of Mexico and submit to government

PROJECT OUTCOMES FOR 2017-18:

• Government adopts policy recommendations on improving public transport for implementation
• Government adopts recommendations on mechanisms to improve access to financing for public transport for implementation

The overall outcome of the project is to support the transformation of public transportation systems in Mexico, by modernizing the regulatory and concessions frameworks, establishing financial mechanisms, and strengthening institutions. This will be accomplished by delivering the following outputs:

Policy recommendations for improving public transport in one state or municipality of Mexico are developed and submitted to the government. Based on the needs identified for the improvement of public transport, GGGI will work with stakeholders to develop tangible recommendations that the government can implement. To do this GGGI will conduct analyses to further evaluate and quantify interventions. These will then be prioritized by taking into consideration their cost, their system transformation potential, institutional capacity needed, and ease of implementation. To ensure these recommendations are realistic and implementable, extensive consultations will be carried out with key stakeholders. Based on the results of these exercises recommendations will be delivered to one state government. Opportunities will exist to replicate these measures in other states of the CAMe region.

Recommendations for mechanisms to improve access to financing for public transport reform in one state of Mexico are developed and submitted to the government. Based on the prioritized reform intervention, GGGI will recommend a financing mechanism that will support implementation. To do this GGGI will identify similar cases in developing countries and demonstrate the alternative mechanisms utilized. In consultation with local government, the most suitable financial mechanism will be selected to support intervention implementation. GGGI will then engage with local government and relevant financial institutions to implement a financial mechanism to support reform.