Between 1989 and 1994, Mexico embarked on an ambitious road building program. More than 50 concessions were awarded for 5,500 km of toll roads. The concessions were highly leveraged. Debt financing for the projects was provided on a floating-rate basis by local banks. Many such banks were owned by subnational governments and faced pressure to lend money to concessionaires. Since the local governments had no own-source revenues, they could not compensate the concessionaires who ceased to repay the banks. In fact, because traffic volumes turned out to be lower than forecasted and interest rates rose over time, the banking system absorbed a considerable increase in liabilities.
Although there were no explicit federal government guarantees, these project failures exacerbated a banking crisis. Eventually, the government needed to restructure the entire toll road program. It bailed out the concessions, taking over 25 of them and assuming US$7.7 billion in debt (Ehrhardt and Irwin 2004).