Latin Infrastructure Quarterly Issue 2

Companies Latin Infrastructure Quarterly 1

China’s
Investment
In Latin American
Infrastructure

Value
BNDES
Project Structuring Division
for Money
and PPPs

APM Terminals: Ecuador
Costa Rica’s Largest Infrastructure
Infrastructure Project pushed from the top

2 Latin Infrastructure Quarterly

3
Welcome to the second issue of Contributors
Latin Infrastructure Quarterly (LIQ)! Adrian Barrios

T
PricewaterhouseCoopers

he content and design of our first issue was object of great feedback Ana Fernández González
from many practitioners so we are now bringing you the second issue
hoping for it to be up to the standards set by LIQ 1. We have assembled Aniceto Zaragoza
a second issue that covers a lot of very interesting issues and features a Foro de Infraestructuras y Servicios
couple of new ideas.
Antonio De Santiago
We conducted insightful interviews with the Vice President of the Colombian
Infrastructure Ontario
Infrastructure Chamber, the Managing Director of APM Terminals Moin, and the
management of the influential ForoPPP. Cesar A. Guimarães Pereira
Added to the interviews we are bringing you numerous articles submitted by Justen, Pereira, Oliveira &
practitioners from all around LatAm. These articles cover a wide array of subjects Talamini advogados
ranging from project profiles in Central America and Paraguay to the growing partici-
pation of China in the region and infrastructure development in Ecuador. Darin Bifani
Puente Pacífico Investment
As was mentioned, LIQ 2 also features a couple of new ideas: Advisory Ltda.

1. research on the Project Structuring Division of the BNDES and many of the Eduardo Zúñiga
infrastructure projects it is currently working on; and Arias & Muñoz
2. coverage of infrastructure development outside LatAm. It is our intention to of-
Gustavo Morales Cobo
fer in each issue going forward an outlook on the industry in one other emerging
Colombian Infrastructure Chamber
market and in a more consolidated market. LIQ 2 covers, through to the con-
tribution of two experts, infrastructure development in Ukraine and in Ontario, Ignacio Galvez
Canada. We feel that, as it happens in every other field, LatAm infrastructure Ineco
practitioners can learn from the state of the industry in other parts of the world.
Irina Zapatrina
Personally, I am very excited to be presenting at the AgReturn InfraReturn Latin Ukrainian Public-Private
America conference on January and the Latin American Energy & Infrastructure Fo- Partnership Development
rum on February and I certainly look forward to meeting you personally at any of Support Center
those events.
Jaime Jesus Betalleluz Fernandini
Infrastructure, Government &
Utilities Advisor

Julian Sastre
Foro de Infraestructuras y Servicios

Luis Pedro del Valle
Arias & Muñoz

Patricio Abal. Ofilio Mayorga
Arias & Muñoz
Director & Editor
Paul Gallie
APM Terminals

Rodolfo Guillermo Vouga
Vouga & Olmedo Abogados


CONTENTS
Spain’s Foro de Infraestructuras y Servicios.................................................................6
The relationship between Spain and Latin America

16
The titanium industry in Paraguay (project profile).....................................................11

Infrastructure development in Ukraine.........................................................................12
A look at what is needed to attract the private sector.

The Colombian Infrastructure Chamber.......................................................................14
An authoritative outlook of one of LatAm’s most active markets

Ecuador: infrastructure pushed from the top................................................................16
Politics and infrastructure

Value for Money............................................................................................................20
A necessary methodology

Mexican Highways.......................................................................................................24

38
A comprehensive analysis on Mexico’s push to improve its road network

Infrastructure debt funds and exchange rate risk..........................................................29
Ideas on risk management

Chinese investment in Latin America Infrastructure....................................................32
Synergies, Opportunities and Challenges

Ontario’s Infrastructure.................................................................................................38
A look at the most active infrastructure market in Canada

The Moin Container Terminal......................................................................................42
APM Terminals’ project in Costa Rica

The Brazilian Development Bank................................................................................44

48
A focus on the Project Structuring Division

Company profile: Vestas...............................................................................................48

Guatemala – Generation Expansion Plan (project profile)...........................................53

Costa Rica – Reventazón Hydroelectric Project (project profile).................................55

Nicaragua – Brito Hydroelectric Project (project profile)............................................57

Infrastructure and Dispute Resolution in Brazil...........................................................59
The Compagás Case and Brazilian Arbitration

59

6 Latin Infrastructure Quarterly Institutions

Foro de
Infraestructuras
y Servicios
LIQ speaks with
Aniceto Zaragoza and Julian Sastre

Please describe the purpose of the Foro place for discussion which would serve tion and a better working relationship
de Infraestructuras y Servicios (“Infra- as a meeting point for likeminded per- between the involved parties;
structure and Services Forum”)(www. sons, and for the exchange of experiences • being aware of and publishing
foroinfra.com) amongst professions in a sector which is up-to-date data and information
All agents involved in the development at the forefront of modern economies. for its members and those ex-
of infrastructures and services are faced The main aims of the Infrastructure ternal agents who have a say in
with a new challenge, set out by a series and Services Forum are the following: these infrastructures and services.
of guidelines, among which the scarcity
of resources, the development of new and • promoting the development and shar- In order to achieve these aims, the
more efficient management techniques, ing of knowledge and innovation Infrastructure and Services Forum has
the incorporation of new technologies regarding new technologies which, undertaken a wide range of activities
and the need to put into practice new fi- through the creation, management worthy of special mention: conferences,
nancial instruments in order to guarantee and financing of infrastructures, may seminars and studies, appearances in
the constructions, operation and mainte- be of use to the agents involved and the mass media, the drafting of studies
nance of future projects cannot be stressed to the society which they serve; and reports on issues of its concern, the
enough. • fostering the acceptance on the part creation of working-groups to analyze
With this framework in mind, the In- of society of said infrastructures; specific problem areas, the promotion of
frastructure and Services Forum was born • Provide criteria in terms of quality publications on issues relating to infra-
as an independent and multi-disciplinary and profitability which aid efficiency structures and services, etc. The Forum
task force formed by sector professionals in the decision-making process and is based mainly on individual members
(lawyers, economists, engineers, journal- thus affect the associated infrastruc- but institutions can also be partners of
ists, etc.) with the aim of sharing these tures and services; the Forum.
aforementioned concerns and creating a • striving towards improved coordina-

Institutions Latin Infrastructure Quarterly 7
We are aware of examples of Spanish
bankers, architects and lawyers that, LatAm is a huge opportunity for
due to the current economic downturn
affecting Spain, are developing busi-
ness relationships in LatAm. Do you
private investors due to the culture
see that as a growing trend? How can
these professionals and their compa- of development based on PPP
nies compete against local players?

Indeed, the economic downturn is having
projects, foreseeable economic
a significant effect on Spain, and Spanish
professionals and companies are looking growth and urgent need.
towards internationalization on an increas-
ingly greater scale. Though fortunately our
most important representatives in the busi-
ness world already had a major presence
before the recession. To quote from their
figures, the following stand out:
Spanish construction companies are
present in 68 countries spread over all
five continents.
Spanish companies hold seven of the
top ten places of the main transport con-
cessionaries in the world.
If we observe the worldwide ranking
in terms of capital invested, Spain has
participated in US$133.677 billion divid-
ed between 173 concessions, representing
47.7% of the world top.
In terms of percentage of the tenders
operating worldwide per country, Spain
occupies the first place on the list, with
39% of the operations, following by
France with 15% and China with 10%.
Likewise, specific contributions from
Spain to LatAm are notable:
• Aside from the technical ability
which can be seen from transport,
energy and hydraulic infrastructures,
fields in which we are world lead-
ers, a common language and cultural
similarities make it easier for us to
work together.
• Also, the rapid economic growth of
LatAm countries such as Brazil, Ar-
gentina, Colombia, Peru, Ecuador
and Mexico means that they urgently
require infrastructural developments
in order to prevent any stifling of this
economic growth. This demand of be-
ing able to carry out a project properly
and swiftly has meant that these coun-


tries turn to Spanish companies first.
.
Do you see Spanish financial institu-
tions (commercial and/or development
banks) partnering up with Spanish
professionals and companies when de-
veloping projects abroad, particularly
in LatAm? If so, can you name a couple
of examples?

Of course we could name numerous ex-
amples; however, I shall focus on Spanish
institutions that are partners of the forum:

• OHL is one of the world’s top 10
concessionaire companies and has
a very strong presence in Argentina
and Brazil.
• INECO, the Spanish public sector
agency for consultancy on trans-
port infrastructure and engineering
issues, is undertaking the transport
master-plans in Costa Rica and
Ecuador.
• INDRA, with thousands of work-
ers already operating in Brazil and
Chile, for example, is at the fore-
front of modern technology.
• ALSA, a company with over one-
hundred years of history, is another
leading light in the transport sector,
running services as far afield as Chile
and China, and operating internation-
ally for more than 20 years.

Where do you see LatAm in terms of
private sector involvement in infra-
structure development?

LatAmis a huge opportunity for private
investors, firstly due to the culture of de-
velopment based on PPP projects, though
also for other reasons which have already
been touched on, such as its foreseeable
economic growth and urgent need for
infrastructures which can withstand the
increase in mobility and consumption as-
sociated with development.

There is obviously room for improve-
ment. Can you name some areas
and give some examples?

The Regional Government of Madrid has signed with the IADB, the CRTM has
developed a program of technical assistance which it lends to the Brazilian Gov-
ernment as part of the definition of the integration framework of Line 4 of the Rio
de Janeiro Metropolitan Railway.
In terms of transport: Underground Rail collaboration among Spanish companies in in the field of public transport. Its yearly
Networks and BRT systems in the urban the field of internationalization. In any case, budget is EUR2.2 billion without taking
and metropolitan areas, expansions of air- we would like more support on the part of into account investments, and it has a
ports and trains with the latest technology the embassies for Spanish companies. highly qualified and renowned technical
and features. The great challenge and way forward staff. This Forum’s Secretary, Mr. Dioni-
Reservoirs and supply networks. for an even more pronounced presence of sio González, is the Technical Director of
In terms of energy the range of pos- Spanish companies is by SMEs joining the CRTM.
sibilities is extensive, including thermal forces and working together, rather than Through the collective agreement
and nuclear power stations as well as re- working alone, as the effort required is ti- the Regional Government of Madrid has
newable energy sources. tanic and not always fruitful. signed with the IADB, the CRTM has de-
veloped a program of technical assistance
Needless to say, Spanish players have Can you tell us about the agreement which it lends to the Brazilian Govern-
invaluable resources and experience, between the Inter-American Develop- ment as part of the definition of the in-
what are the most suitable channels for ment Bank and the Madrid Regional tegration framework of Line 4 of the Rio
Latin American actors to reach out to Transport Consortium? de Janeiro Metropolitan Railway. Finally,
those resources? (Embassies, forums studies are being performed into mobility
such as yours, banks, etc.) The Madrid Regional Transport Consorti- and the planned Quito Metropolitan Rail-
um (CRTM) is the transport authority for way in association with the Madrid Metro
From the viewpoint of state institutions, the the Madrid region and runs all the modes and Spanish companies such as Taryet
ICEX body of the Spanish Foreign Secre- of transport. It is a flagship throughout the and ETT- Deloitte.
tary’s Office is making great strides towards world thanks to its major developments

Tenth Anniversary of the Foro de Infraestructuras y Servicios
More than one hundred professionals from the infrastructure and services sector in Spain met Monday, November 7, to debate
the policies followed in this sector during the last ten years, with an eye to future challenges. The meeting took place as part
of the events marking the tenth anniversary of the Infrastructure and Services Forum, with awards were given to outstanding
projects undertaken in the sector.
Held at the Association of Civil Engineers, the meetings attracted more than 100 attendees, all sector professionals keen
to discuss the sector’s past, present and future. For this reason, the seminar’s agenda included specific addresses and three
round-table discussion groups: one geared towards listening to the opinion of the different associations that constitute the sector
(AERCO, ANCI, CNC, TECNIBERIA and SEOPAN) expressed through the thoughts of their MD’s; a second round-table in
which Forum members highlighted the most relevant aspects of their professional activities over the last ten years; and, finally,
a third table in which the political parties (Andrés Ayala-PP, Montserrat Candini-CIU and Rafael Simancas-PSOE) and the
Trade Unions (Juan Carlos Barrero-UGT andVíctor Sánchez-CCOO) were represented, expressing their viewpoints on the poli-
cies regarding infrastructure and services developed over the last ten years, and the possibility of new, future strategies.
After the seminar came the moment for the prize-giving ceremony, with awards given by the Infrastructure and Services
Forum acknowledging the most outstanding projects and workers from the sector.
The award for the most outstanding professional in the sector was given to the MD of Albertis, while the Barcelona Eco-
nomics Round Circle Award went to Salvador Alemany Mas, who was present to collect the award himself. The Saragossa
Logistics Platform was considered the most outstanding infrastructure project, while the recognition for the best service fell to
the team at Canal Isabel II, led by Adrian Martin. Finally, the 2011 Special Award was given to the former MD of the Spanish
Transport Association and International Railways Union, Antonio Carbonell, who sadly passed away recently.


Aniceto Zaragoza:

Aniceto Zaragoza, Oficemen CEO, has a PhD in Civil Engineering from the Poly-
technic University of Madrid (UPM). He has a Degree in Economics and Business
Administration and a Degree in History from UNED . He is also associated profes-
sor in the Transport Department at UPM.

He has participated in over one hundred research projects and technical re-
ports, co-authored 15 books, published more than 40 articles and given more
than 300 speeches in 15 different countries all over the world. Among his major
research projects, Mr Zaragoza has been the Project Director of GIROADS, with
a budget of over EUR6 million, and of the Oasis Project, with a budget of over
EUR30 millions.

He is President of EUPAVE (European Concrete Paving Association), President of
the Infrastructures and Service Forum, Vicepresident of PTECO2, former President
of IVIA (Latin American Road Institute), former President of the ERF (European
Road Federation) and former President of ITS Spain.

In his previous role as Head of the Spanish Motorways Association, he took part
in the beginnings of the development of Chilean concessions, which was a
pleasure.

Julian Sastre

Julián Sastre González holds a PhD in Civil Engineering from the UPM, specializing
in the fields of Transport and Town and Land Planning, and has twenty-five years’
professional experience.

His career in the sector began at the Madrid Regional Transport Consortium (PTA
of Madrid), where he worked from 1986 to 1989, later devoting his time to transport
consultancy and assessment in diverse fields both in Spain and abroad (since
early 90ths, Europe, Latin America, Maghreb and Asia). He speaks English, French
and Portuguese.

As well as being Vice-president of this Forum, he is also an independent consult-
ant, mainly focusing on international projects, most importantly as a consultant
for the IADB and the World Bank. Specializing in PPP projects, he has worked as
advisor for projects such as the bullet train from Rio to Sao Paulo, various public
and private partnerships for building intermodal stations in Montevideo and the
Rosario city public transport network (Argentina) as well as projects in El Salvador.
In Chile he has dealt especially with ITS issues applied to the field of transport since
2000.

He is also the author of the following publications, among others:

• Manual for the planning, financing and implementation of urban transport
systems.” Madrid Regional Transport Consortium (June 2004). (ISBN: 84-86803-
60-8).
• Manual for tramways, light rail networks and systems using reserved platforms.
Design, project financing and implementation.” Madrid Regional Transport
Consortium (2006).
• Green Paper on Town Planning and Mobility.” Civil Engineering Association
(2008).
• Green Paper on Transport and Climate Change.” Civil Engineering Associa-
tion (2010).

Projects Latin Infrastructure Quarterly 11

The titanium industry’s
inroads into Paraguay
In November 2010, David Lowell, CEO of CIC environment, experts already pointed out
the dangers the pilot plant poses to the
Resources Inc., announced the discovery of what environment are minimal, not yet being a
is thought to be the largest titanium deposit in the full-fledged plant. At this stage, the pilot
world, in the Paraguayan district of Minga Porã, plant will only wash the soil to separate
the ilmenite and the clay, a process which
near the border with Brazil.

M
in itself is not contaminating.
Metálicos y No Metálicos Paraguay
etálicos y No Metáli- The company invested US$5 million S.R.L. is now carrying out studies to ex-
cos Paraguay S.R.L., in setting up the pilot plant. During the actly determine the project’s infrastruc-
a subsidiary of CIC experimental period, the plant is projected ture and energy needs. The results are
Resources Inc., has to produce 500 tons per month. However, due this December. If the studies show
secured a permit to once the plant goes into full production, the project is economically viable and the
explore 30,000 has in the Minga Porã area production is estimated to increase hun- Paraguayan Congress gives it the green
and is concluding the construction of a pi- dredfold and reach 5 tons per hour. light, Metálicos y No Metálicos Paraguay
lot plant to precisely assess the deposit’s Currently, the Project is in the process S.A. will enter into a concession contract
real prospects. The company started the of obtaining the approval for its Environ- with the Paraguayan Government.
project expecting to eventually obtain be- mental Impact Study. Although some ob- This will in turn probably entail the
tween 5 and 10 million tons of titanium jections have been raised fearing the pilot need for numerous infrastructure projects
ore per year. plant might have a negative impact on the to supply the energy and transportation
needs of the potential mine.
Although LatAm has played a crucial
RODOLFO G. VOUGA ZUCCOLILLO role in the mining industry for a long time,
is a Senior Associate at Vouga & Paraguay’s mining potential remained
Olmedo Abogados. He graduated unexplored until now. All of this is set
with Honors from the National Uni- to change as the latest news from pros-
versity of Asuncion (J.D., summa pecting efforts put Paraguay on the center
cum laude, 2007) and was award- stage of the international mining industry.
ed a Masters in Law (LL.M.) degree Between 2008 and November 2010, the
from Columbia Law School (LL.M., Ministry of Public Works and Communi-
2010). He passed the New York Bar cations (MOPC) granted 14 permits to 10
exam. His fields of expertise are: Liti- companies for the prospecting of different
gation, Arbitration and Mediation; areas showing mining potential.
M&A; Foreign Investments; Cor- Mining projects are known to be
porate and Commercial; Capital closely and almost inevitably linked to
Markets; Tax and Customs Law. He very demanding energy and communica-
has been actively involved in vari- tion needs, for which reason it would not
ous projects related with foreign be surprising to expect that, assuming the
investments. He is a former assistant professor in Legal Technique at mining efforts become successful, Para-
the National University of Asunción. Languages: Spanish, English, Por- guay could become a hot spot for interest-
tuguese, German. ing infrastructure ventures.


Public-private partnership and its LIQ Speaks with I. Zapatrina:
Chairman of the Board of the Ukrainian Public-Private Partnership
Development Support Center

U
kraine is now taking its many normative-legal acts that regulate
first steps in the devel- the procedures of preparation of the simi-
of infrastructure

opment of public-private lar projects, competitions, the selection
partnerships (PPP). Today of winners, and the monitoring of PPP
in Ukraine

there is a lot of conversa- projects. We can not say the current leg-
tions regarding the necessity to attract the islation is perfect. It contains a number
private sector for infrastructure moderni- of contradictions, difficulties and conflict
zation, and a number of normative-legal clauses. The most problematic issue in
acts that regulate preparation of projects this field is absence of regulation of state
in the form of PPPs have been adopted, as support, both methodological and institu-
role in modernization

well as mechanisms for their implemen- tional, for PPP projects. At the same time,
tation. Currently, however, there are no projects in the form of PPPs could be pre-
examples of successful PPP projects in pared and implemented in the conditions
Ukraine. of current legal regulation. The legisla-
tion could be improved later based on the
Why is this so? What are the prerequi- experience of the implementation of such
sites for changing the situation in this projects.
field? Investment climate and political sta-
It is well known that in order to prepare bility (succession of public authority) are
and implement viable projects in the form much more problematic issues for poten-
of a PPP it is not enough to have the leg- tial private investors that consider oppor-
islation regulating relations in this field, tunities to implement similar projects in
even though the availability of such regu- Ukraine.
lation is certainly an extremely important
element for the development of PPPs. Political Stability
The most important factors for intro-
duction of similar long-term, complicated Unfortunately, for the last 20 years, as a
and high-risk projects are: investment cli- result of many political changes, the in-
mate in the country, political stability and stitutional memory of public authority
a well developed institutional environ- has been very weak, and there has been
ment. These factors are now indeed the no succession of ideas, approaches and
most critical for the development of PPPs management decisions. The priorities and
in Ukraine. personalities among the authorities are
changing all the time and this results in
Legislation complications with the preparation and
implementation of any strategic long-
The laws on concessions, production term projects, in particular PPP projects.
sharing and rent have been effective in
Ukraine for more than 10 years. In 2010 Investment Climate
laws were adopted on PPPs and the pe-
culiarities of transfer into rent or con- The investment climate in Ukraine is
cession of such objects as DH heating, extremely low according to the evalua-
water supply and sanitation, along with tion of the international community. Our

country comes in last positions in the methodology, the preparation of training (1.5 years). But for such a short period,
world ratings that appraise the environ- program and the development of commu- quite a lot have been done: a number of
ment for business activity, taxation sys- nicative strategies. analytical researches and scientific and
tems, court systems, corruption, etc. At In the current situation it is very im- scientific-popular publications on PPP
the same time, in 2010 the President of portant to attract scientists, professional issues have been prepared, a number of
Ukraine,Victor Yanukovych, adopted the consultants and specialists to prepare the conferences and round tables on PPP is-
program of economic reforms that covers methodological basis in the PPP field, as sues have been conducted and trainings
wide circle of issues, including adminis- well as study the experience of infrastruc- for the representatives of the public au-
trative, court, budget, tax, housing and ture project implementation in countries thorities have been held. It has started
regulatory reforms. It is very difficult to that have started the similar processes work on the development of pilot projects
implement such serious reforms simulta- in conditions similar to Ukraine’s to- that will allow for the preparation and im-
neously in many fields of economic activ- day, spreading the experience among the plementation of PPP projects in Ukraine
ity. It requires attracting highly qualified public authorities and population. In our in various different spheres of economic
specialists, experience conducting such opinion the most useful for our country activities and ensure its replication. The
reforms in the world, and of course time. could be the experience of LatAm, where Center actively cooperates with the Na-
Yet there is optimism over the beginning the active implementation of PPP projects tional Academy of Sciences and public
of wide-ranging reforms of the economy started in the 1980’s. authority bodies in Ukraine and aboard,
and social sector in Ukraine, with im- The establishment of the Ukrainian and it participates in international activ-
provements to the climate for conducting Public-Private Partnership Development ity on PPP issues. The specialists of the
business, allowing the country to attract Support Center (www.ukrppp.com), a Center have started serious scientific re-
international capital in the near future for non-governmental, non-commercial or- searches on the development of public-
the implementation of large-scale infra- ganization representing Ukrainian scien- private partnership in Ukraine. We hope
structure projects based on PPP. tists, was realized due to an understand- that our activity will make it possible to
ing of the importance of attracting private speed up the creation of a favorable envi-
Institutional Environment capital for infrastructure modernization in ronment for attracting of private business
Ukraine. The center is still very young to modernization of economy of Ukraine.
At the moment Ukraine is not ready in-
stitutionally to actively promote PPP
projects. Only this summer, the Decree I. Zapatrina:
of the President of Ukraine established a
specially authorized body on PPP issues, • Ph.D. in economics, 1985
the Ministry of economic Development • Doctorate in economics
and Trade. There is still no regulation (finance), 2009
of its work on PPP projects. The role of • Professor, 2011
ministries in this process is not specified. • Member of the UNECE Team of
The role of the institutions authorized in Specialists on PPP 2011
,
the PPP sphere regarding the objects of • Member of the expert council
municipal property is not determined. on macroeconomics, trans-
(In Ukraine such objects include district formations, international and
heating, water supply and sanitation sys- regional development (eco-
tems, objects used for utilization of sol- nomic sciences) of the High-
id waste, local electrical transport, city est Attestation Commission of
roads, bridges, etc.). The public author- Ukraine.
ity lacks the knowledge and experience • The Honorary Award of the N
necessary for the implementation of PPP ational Academy of Sciences
projects, which causes over-expectations of Ukraine for assisting the sci-
in this field and increases the probability ence, 2009
making non-optimal decisions for society. • The Honorary Award of the National Agency of Ukraine on Ensuring
Certainly, it is easier to change the situa- of Efficient Use of Energy Resources, 2010
tion in this sphere than to implement eco- • The Honorary Award of the Ministry of Economy of Ukraine for many years
nomic reforms. It requires a system and of diligent work related to economic policy implementation, 2011.
weighted approach, the development of


The Colombian
LIQ Speaks with

Infrastructure Chamber
a significant number of projects, due to the
technical weaknesses of the governmental
agencies, is currently the main issue block-
ing private sector investment in public in-
frastructure. This issue could be solved with
more generous incentives for the private
companies that, at their risk and with their
money, assume the task of preparing and
structuring infrastructure projects.

What are the sectors receiving most of
the infrastructure investment money?
The 10-year plan issued by the Santos´s
Administration calls for an investment in
roads of about US$31 billion, of US$21.1
billion in railroads, and of US$14 billion
in urban massive transportation systems.

What are the main projects in those
sectors? And what projects are in the
What´s the overall environment and think that the government agencies in works (planning, procurement)?
reality for private sector participa- charge of the structuring of new projects The single most important infrastructure
tion in the development of public – and of the monitoring and follow–up of project in Colombia in the next 10 years
infrastructure? current projects – could be strengthened, will likely be the new subway for Bogotá,
In general, Colombia´s government in so as to have better technical and manage- the capital. But this project still depends on
the last two decades has been a friendly ment capabilities. We also think that in aligning the political will of the city admin-
promoter of private sector participation in the case of “private initiatives” –projects istration and the national government.
the development of public infrastructure. where the initial proposal and the viabil- In roads, the state agency in charge
Since the early 90´s, Colombia has turned ity studies don´t originate from the gov- of promoting private sector investment
to the private sector for the building, op- ernment but from private investors – the in public infrastructure (Instituto Na-
eration and maintenance of roads, ports incentives regime is still not adequate cional de Concesiones, INCO, soon to
and airports, with successful results. The enough. President Santos´s administra- be renamed as Agencia Nacional de In-
current government is also a believer in tion is working on a new bill to improve fraestructura, ANI), is currently struc-
the free market and in the benefits of rely- the current regulation on this subject. turing the upgrade of the corridor that
ing on the private sector for tasks that can connects Bogotá with Buenaventura,
free public resources for other vital state Other than legislative obstacles, what the main Colombian port at the Pacific
duties, such as education and health care. are the main issues blocking private sec- Coast, and the construction of two high-
tor investment in public infrastructure? ways that connect Bogotá with two dif-
What´s your take on the current PPP Security and safety concerns used to ferent points of the Venezuelan border.
framework in Colombia? What could be the main obstacles, but thanks to the
be improved? strengthening of our law enforcement in- Who is mainly responsible for infra-
Within a general positive take on the stitutions in the last decade, this is not cur- structure development: central or local
current PPP framework in Colombia, we rently a main issue. We think that the lack of governments?

The general policy on infrastructure, and Plan, the royalties from oil and mining (Ruta del sol), and (iii) a tunnel (La Línea
the execution of the main strategic infra- projects will also be a new source of fi- Tunnel) that will cut through the central
structure projects (national highways, ports, nancing for infrastructure projects. mountain range, to connect the capital
railroads, airports), is part of the central more rapidly with the Pacific Coast.
government´s constitutional responsibili- Is there a specific political leader, par- On the local level, the expansion of
ties. The local governments are responsible ty, NGO, think-tank, ministry, that has Bogotá´s massive transit system is the
for infrastructure with a local scope (streets, pushed for and/or is pushing for increas- main project currently under construc-
provincial highways, mass transportations ing involvement of the private sector in tion. This does not include the subway,
systems). In general, the legal framework the development of infrastructure? which is still in a preliminary phase.
aims to promote coordination and joint ef- In general, the Colombian govern-
forts. For example: Bogotá´s subway is ment, led by President Juan Manuel San-
mainly a local responsibility, but it cannot tos, is the main promoter of increasing
be done without the financial and technical involvement of the private sector in the
support of the national government. development of infrastructure. In pursu-
ing this policy, the current administration
Have those governments made the is deepening a strategic vision that has
development of infrastructure with been promoted by various administrations
private sector participation a state in the last two decades. Congress has sup-
policy? ported these policies, at least since 1993.
At the national level, there is indeed The Colombian Chamber of Infrastruc-
an explicit policy for the development ture, the main trade association that rep-
of infrastructure with private sector par- resents the builders, consultants and con-
ticipation. It has been in place since the cessionaires of infrastructure, has been
early 90´s, and nowadays most of the an active participant and promoter of the
main national highways are operated by public policy discussions in this area.
private companies, as well as the airports
and ports. The new national development Last year we saw the launching of a few
Gustavo Morales Cobo is a
plan includes many provisions aimed to infrastructure funds in Colombia. Have lawyer. This year he joined
promote public-private partnerships, not these funds allocated part of their capital? the Colombian Infrastructure
only in this sector, but also in education, What projects are they looking into? Chamber as deputy C.E.O.
health, and housing. We do know for certain that at least one He has also worked as deputy
At the local level, some provinces of these funds has allocated some capital justice at the Colombian Con-
stitutional Court, deputy C.E.O
have also promoted private sector par- in one of the main highway projects cur-
of the national insurance as-
ticipation, in state highways, for example. rently under construction: the highway sociation, and legal coun-
But they still depend mostly on traditional connecting Bogotá with Girardot, a port selor of various governmental
public works schemes that do not involve located on the shore of the main riverway agencies such as the Ministry
risk-taking from private companies. in Colombia, the Magdalena River. We of Finance, the National Plan-
also know that some of these funds are ning Department and the
Ministry of Communications
What are the main sources of fi- looking into new ports or the projected and Transportation.
nance available for big infrastructure expansion of existing ones. At the end
projects? of September, the administration will an-
The national state budget and the pro- nounce a set of new projects, specifically
vincial and municipal budgets are still structured with these kinds of funds or
the main sources of financing available other institutional investors in mind.
for big infrastructure projects. But in the
last couple of decades, airports, ports What are the most important projects
and highways have financed themselves currently under procurement and
through various schemes or private sec- construction?
tor participation, such as tolls. Pension There are at least three very big impor-
funds and private equity firms are willing tant projects under construction right now:
to participate, but they feel the regulatory (i) the upgrade of Bogotá´s airport; (ii)
framework needs some adjustments. Ac- the construction of a 1,000-kilometer high-
cording to the new National Development way from Bogotá to the Caribbean Coast

16 Latin Infrastructure Quarterly Politics

Ecuador:
Infrastructure pushed from the top
As one of the most popular presidents in Ecuador dur-
ing recent years, Rafael Correa began 2011 strong. His
referendums on constitutional reforms showed without
a doubt that there is popular support for an extension
of his mandate, which has August 2013 as a horizon,
with the option of being re-elected until 2017.

C
orrea therefore has time work to improve the Pedernales-San Vi-
to deliver one of the main cente highway for refurbishment, expan-
concerns of the population: sion and maintenance. Also, the Montec-
infrastructure investment. risti-Jipijapa highway should be finished
As we mentioned in a pre- by this year.
vious article in LIQ, economic develop- The country has around 40,000 km of
ment cannot be achieved if infrastructure highways, of which only 20% are paved.
development is not in place. Without Buses and even cheap taxis provide non-
roads, bridges, ports, airports you cannot stop city transport for reasonable fares.
export or import products. Without ef- The poor quality of the network has to
ficient infrastructure facilities, transport date hindered the country’s competitive-
costs will increase and you will become ness. The trans-Ecuadorian railway, built
less competitive in the global market. towards the end of the 19th century and
It seems that the Ecuadorian gov- terminated in 1908, unites Guayaquil, at
ernment has this clear. In March 2011, sea level, with Quito, high in the north
President Correa announced that the gov- central Andes. This railway which ex-
ernment is seeking US$7 billion in infra- tends for about 800 km needs renovation
structure concessions over the next five and is used mostly for freight purposes.
years, with a focus on port, airport and Because of the significant changes in
highway concessions. terrain and altitude in Ecuador that make
Highways will be necessary for the road travel slow and difficult, the use of
potential development of the mining in- in-country flights is common. Ecuato-
dustry. There are expected investments of riana, Saeta, and Tame are national com-
at least five mining projects that involve panies that provide flight services within
Canadian, American and Chinese com- Ecuador and from the international air-
panies. Ecuador is preparing the table ports in the capital Quito and the port
for these investment demands by setting city of Guayaquil to international routes.
up an $800 million program of highway MTOP is seeking to invest nearly US$200
projects. Ecuador’s transport and public million to overhaul airports under its na-
works ministry (MTOP) is carrying out tional airport modernization plan.


In March 2011, President Correa announced that the
government is seeking US$7 billion in infrastructure
concessions over the next five years, with a focus on
port, airport and highway concessions.


The main ports in Ecuador are (PPP) projects. Judicial shortcomings to in 2001 setting out the structure of the
Guayaquil, Manta, Esmeraldas and Puer- regarding concession dispute arbitration, new Quito International Airport. The City
to Bolivar. Ecuadorian ports specialize contract enforcement and protection of of Quito accepted the proposal and signed
in the movement of products related to investor rights could be especially prob- the concession and construction contracts
the action area: Esmeraldas movement lematic. There is always the concern of with CCC in 2002 for the design, financ-
predominates in the northern part of the the risk of government expropriation. ing, construction, and operation of the new
country, Manta specializes in sea prod- Regulations established that the eco- Quito International Airport, as well as the
ucts, Guayaquil in general cargo and Bo- nomic equation of a contract must be administration and operation of the current
livar in banana transport (80% of Ecuado- maintained, paving the way for multiple Mariscal Sucre International Airport.
rian banana production goes to Europe). contract renegotiations and excessive In 2005, CCC signed a $400 million
The country’s largest port is Guayaquil, transfer of commercial risk to the state. contract to act as prime contractor for the
which is facing problems with its access Still, the new 2008 state constitution construction of the New Quito International
channel, which only allows the entry of made significant changes to the previ- Airport in Ecuador. Since then, the project
ships with drafts (partially submerged in a ous frameworks. Article 314 states that has been expanded to over $400 million to
boat) of 9.75 up to 11 meters. The move- the government is responsible for public accommodate increasing passenger traffic
ment of cargo into and out of this main and universal service provision, ensur- and demand for cargo space.
port is around 70% of the total. Other ing “fair” prices. Article 316 of the con- Corporacion Quiport S.A. was a 100%
smaller private terminals, such as Balao stitution states that “the state may, as an privately owned capital firm originally
and La Libertad, maintain the largest flow exception, delegate…exercising these formed by Canadian companies AECON
of movement by transporting oil from services…out to private initiative”. Arti- and Airport Development Corporation
eastern Ecuador. cle 318 points out that public water and (ADC), which later added U.S.-based
Granted that there is a strong political drainage services and the supply of drink- HAS Development Corporation (HAS-
will supported by the population to upgrade ing water will be rendered exclusively by DC) and the Brazilian Andrade Gutierrez
aging and insufficient infrastructure, how state-owned or community legal bodies. Concessões (AGC). Quiport won the con-
well prepared Ecuador is to fulfill this? These constitutional rules make ex- cession, which awarded a 35 year-conces-

Ecuador states explicitly in its constitution and laws that water and sanita-
tion services must be provided publicly, making any concession projects in
this sector an exception rather than the rule.
Ecuador must improve the consisten- isting concession initiatives highly vul- sion contract for the new airport and the
cy and quality of its legal, regulatory and nerable to expropriation and obligatory management of the existing Quito airport
institutional frameworks to better facili- contract changes, also decreasing the through the CCC. Since then, Quiport
tate concession projects. Also, compared likelihood of developing new projects. claims to have invested more than $70
to other countries in LatAm, Ecuador Better regulation will require the estab- million of its equity investment as well as
must improve its investment and finan- lishment of dispute-resolution options more than $350 million in international fi-
cial climates. Ecuador states explicitly in for both the concessionaire and the state nancing for this US$650 million project.
its constitution and laws that water and that will limit hold-up and expropriation On 2009 a decision by the transitional
sanitation services must be provided pub- risks, more reliable arbitration schemes, Ecuadorian Constitutional Court which
licly, making any concession projects in improved criteria for awarding bids, more found that the financing plan for the con-
this sector an exception rather than a rule. transparency and fairness for contract struction of the new airport found in the
However, legal and regulatory frame- adjustments and better definition of risks original concession contract was partially
works tend to be more open to road, port that by law must be borne by the State. unconstitutional under the new constitu-
and airport concessions. The Ecuadorian government has al- tion of 2008. Under the concession con-
Another issue is that Ecuador is in- ready attempted to annul existing contract Quiport was supposed to pay loans
creasingly reluctant to recognize inter- cessions such as the Port of Manta, the to international lenders, recoup its invest-
national arbitration rulings, which makes Quito airport and select drinking-water ment and make a profit through the fees it
the competitive playing field highly une- concessions. was given the authority to charge to airport
ven for private-sector firms that base their A concession experience: the New users both at the old Quito Airport, which
strength on efficiency grounds, reducing Quito International Airport it also manages, and at the new airport dur-
their incentive to participate in conces- The Canadian Commercial Corporation ing the life of the concession. However
sions or in Public-Private Partnership (CCC) made a proposal to the City of Qui- the Constitutional Court ruled that the fees

Politics Latin Infrastructure Quarterly 19
charged to airport users were actually taxes “technical objections.” Correa criticized under a PPP approach is higher than un-
which could not be handled by a private the business model assumed by the Mu- der a traditional approach. But they forget
company under the new Constitution law. nicipality for the construction of a new air to quantify the amount of risks that a gov-
Following the decision, the sides were terminal and said that there was minimal ernment would save by transferring them
forced to enter renegotiations of the conces- investment made by the Canadian consor- through a contract to a private party. These
sion contract. The Municipality of Quito, tium partner in the project. include environmental risks, design and
which was set to receive US$1.5 million “Unfortunately, the news is not good construction risks, financial risks, opera-
per year as a concession fee, took the op- with respect to the Quito airport, which tion risks, etc., many of them, if allocated
portunity to seek a larger share of the profits is being built by the Municipality, with to the private partner, would represent a
from the new airport. After 18 months of in- money from all Ecuadorians, by the way,” tangible relief to the government.
tense negotiations, the parties successfully Correa said in his regular Saturday radio To talk about risk-identification and
reached agreement on legal, commercial program. He also said that “it was a lie” risk quantification could be a matter for
and financial terms for the project. that the Canadian partner of the Munici- another article, but part of the “PPP cul-
In August 2010, during a ceremony pality is investing enough, since, accord- ture” that must be known and spread
with President Correa, the Mayor of ing to the President, the bulk of the fund- around our infrastructure environment is
Quito and a range of other high-level of- ing comes from revenues generated by that you cannot compare a PPP approach
ficials, the parties executed the strategic the existing Mariscal Sucre airport. with a traditional approach without quan-
alliance agreement, an amendment to the Airport charges that travelers pay to tifying the transferred risks.
concession contract and an affirmation exit the airport Mariscal Sucre are among Another thing of course is that a bad
of the investment protection agreement, the highest in the continent, with a value agreement was made between the gov-
which set forth the renegotiated terms of exceeding $40, Correa recalled, stressing ernment and the private partner. A bad
the concession for the Project. that this item is what, in his view, supports value-for-money analysis could certainly
The new airport will have a 4.1 km truly the construction of the new terminal. be detrimental for a government’s inter-
runway and be equipped to handle more “There is no foreign investment. The ests. But in this case, Correa’s comments
than five million passengers and 270,000 investment is all from Ecuador. Maybe referred only to the “lack of investment”
tonnes of cargo each year. The Ecuado- there has been US$40 or US$70 million of the private party without mentioning
rian government is set to receive nearly from the Canadians over a proposed 600 anything about how the risk and responsi-
$900 million from the concession. million” in total, added the President. bilities were allocated.
But things from the top were not as Therefore, he reiterated that “in addition Despite this incident, we consider Ecua-
smooth always. to an extremely questionable business dor a good prospectus for infrastructure in-
President Correa was initially very model, the problem is that (the new air- vestment. It is a country that is pushing from
critical to this project and made a typi- port) has serious technical limitations.” the top of the government an open agenda
cal mistake many government authorities However, President Correa did not to receive foreign investments (as President
commit when they evaluate concession or mention anything about the transfer of Correa noted some months ago). Potential
PPP projects. risks within the contract and who was as- deals at pre-procurement stage also in-
In 2007 Correa said that the new air- suming them. The typical (and sometimes clude mining (over US$6 billion), oil (over
port in Quito, built by the Municipality of intentional) mistake of many government US$1.5 billion), ports (over US$300 mil-
Quito in an area near the city, had several authorities opposing PPPs is that the cost lion) and tourism (over US$200 million).

Author Biography
PwC Canada | Vice President, Infrastructure & Project Finance | Mon-
treal Office
adrian.barrios@ca.pwc.com

Adrian Barrios has 10 years of professional experience in project finance,
business valuation, mergers and acquisitions, financial modeling, feasibil-
ity analysis, microfinance and financial audit. In the last 5 years he has led
more than 50 business valuations and transaction projects in Canada,
Peru and Ecuador. His experience comprises the mining, energy, financial
services, agribusiness, infrastructure and commercial sectors. He holds
an MBA from ESADE Business School and is BA in Economics from the
Universidad del Pacífico.

20 Latin Infrastructure Quarterly Infrastructure Financing

Value for Money

When are PPPs the
best alternative?

Infrastructure Financing Latin Infrastructure Quarterly 21

A
Value for Money may be used to indicate the cost of public The PSC is a hypothetical estimated
provision and determine if the best pri- cost of a project under the public sector if
growing number of vate sector quotation for a PPP contract the government runs it, and is also a cost
countries have created is more profitable for the state in terms model (and in some cases an income mod-
Public Private Partner- of optimizing the effectiveness and effi- el) associated with a project implemented
ships (PPP) to promote ciency of spending. This is called value by the government based on the most ef-
the offer of assets and for money (VFM). ficient method of providing a result that is
services of infrastructure by the private VFM is an analytical methodology that currently available to the public sector. It
sector. The experiences gained in dif- compares the cost of public infrastructure also takes into consideration the potential
ferent countries could indicate that eco- development under the traditional imple- impact of risks on the costs (and revenues)
nomic infrastructure is generally a more mentation approaches in charge of the associated with the project during its life.
conducive environment for the creation public sector and PPP with private sector Developing the Financial Model will in-
of these kinds of partnerships than social support. clude an estimation of the present value of
infrastructure (e.g., health care and edu- The comparison is performed based costs for the Government to develop and
cation) for three main reasons. on the total project cost over a period of maintain the project with exactly the same
First, the solid project designed to time. Because the costs are taken into con- standards required for performance from
solve obvious limitations of infrastruc- sideration for an extended period and the the private sector investor.
tures such as roads, railways, ports and costs are incurred in a comparable man- Alternatively, private execution of an
electricity. The economic infrastructure ner by the public sector, under a tradition- infrastructure project is measured through
projects usually have high rates of finan- al approach and under a PPP, the costs are a shadow bid, which represents the cost to
cial profitability and therefore are attrac- expressed at net present value. The VFM run a project as a PPP and constitutes the
tive for the private sector. Second, often also takes into consideration the risks, be- simulation of the cost that a bidder would
the collection of user fees becomes more cause the risks are an integral part of total propose, reflecting all costs that the pri-
feasible and more convenient in econom- project costs. This analysis will integrate vate partner will assume:
ic infrastructures projects. Third, usually the information from previous activities,
economic infrastructure projects have a of the financial models prepared: the pub- • Design and construction costs
more developed market to combine the lic sector comparator and the test result • Operating Costs
construction with the provision of serv- value for money. • Maintenance costs and life cycle
ices (e.g., construction, operation and The cost of implementing a project • Financing costs
maintenance of a toll road) than social in- under the traditional implementation ap-
frastructure projects. Given these consid- proach is called determined by what is Inside the structure of the private
erations, it is not surprising that PPPs are called a public sector comparator. The partner entities there are several differ-
used preponderantly for road infrastruc- cost of a project under a PPP approach is ent sources of funding. This should be
ture, as in several LatAm countries. given as a “shadow bid” or “shadow offer” reflected in the shadow bid, including any
In general, the decision to make a PPP because it represents the cost that a bid- user fee or revenues from third parties
should be adopted if it is properly justi- der may propose. The comparison of the that the private partner may receive.
fied, which can follow a two stage proc- PSC and the shadow bid shows whether The description of the shadow bid
ess. The first stage consists of defining if or not there is VFM to run a project under must be from the technical project and
it is desirable to undertake a particular a PPP. contain:
project, based on solid investment plan-

VFM is an analytical methodology
ning procedures and evaluation of projects
(e.g., using cost-benefit analysis). An
important step in this first stage is clas-
sifying all projects in order of importance that compares the cost of public infra-
according to their profitability (economic
or social) and decide which are accessible
from the fiscal point of view and worth
structure development under the tra-
undertaking.
The second step is to decide whether
ditional implementation approaches
a project that is considered convenient
should be approached through a tradition-
in charge of the public sector and PPP
al procurement system or PPP. For this
purpose a public sector comparator (PSC) with private sector support.

22 Latin Infrastructure Quarterly Infrastructure Financing

• Project description and evaluation the remuneration in exchange for certain regarding both economic and social infra-
horizon defined services that always comply fully structure development when determining
• Description of the services to be with a battery of performance indicators. the best choice for development. In the
contracted From the economic point of view APP particular case of Peru, the Law of Pub-
• Schedule of work scheme presents significant differences lic Private Partnerships the DL. No. 1012,
• Program investment and total with the traditional method as may be includes the extensive implementation of
investment seen in the figure below: the methodology of VFM to all projects
• Operation and maintenance That is, in the traditional scheme the of PPPs from 2012 with the application of
program government pays from the start the work the Comparator Public Peruvian.
• Structure of private financing and then the operation and maintenance
• Description of the payment while the PPP scheme only pay for serv- JAIME JESUS BETALLELUZ
mechanism ices when they are received (after the FERNANDINI
• Analysis of risks and conclusion of the work).
responsibilities. The test of value for money involves Infrastructure, Government & Utili-
comparing both values to which they have ties Advisor
In conjunction with the analysis of risks incorporated the most probable value of
and responsibilities, the shadow bid should the identified risks to determine if the PPP Business Administration, Master’s
include measured services to be contracted contract would be more convenient for studies concluded, with over 15
with the basic principle that responsibili- the government than traditional develop- years of professional experience,
mainly in consultancy work, coun-
ties and risks should be assigned to the en- ment methods. In the event that it would
seling and teaching. Among the
tity best able to develop them. not be beneficial to the state, other options
main areas of professional devel-
The result will be a document describ- should be explored that would yield simi- opment can be highlighted: or-
ing the Project, the determination of serv- lar results. ganizational improvement, finan-
ices to be contracted, the general descrip- The main objective of PPP projects is cial evaluation of projects and the
tion of the payment mechanism and the to achieve a higher VFM for the public promotion of investment in public
estimated annual payment for contracted sector. This specific point is one of the infrastructure. Financial Special-
services. most complicated in the structuring of ist of “El Metropolitano” project for
Finally, the shadow bid must be based PPPs because, to properly determine the the Metropolitan Institute of Trans-
on a partnership agreement (the PPP con- VFM, the costs must be well determined portation of Lima (PROTRANS-
tract) that the public authority must pro- and the risk well localized and quantified PORTE). He has worked the past
pose to the market if the project was ex- to avoid reaching erroneous conclusions. three years as General Coordi-
nator of Government Services in
ecuted as private sector participation. Public Sector Comparator is a tool that
PricewaterhouseCoopers Peru, re-
allows determine if you are getting value
sponsible for the implementation
Value for Money determination for money. The comparison to make is of projects for the improvement of
shown in the figure below: public services and infrastructure
For a VFM analysis, the same discount It is worth noting that the essential development through PPPs.
rate should be used to compare the cost of part of analysis is the initial estimate of
the PSC and shadow bid both expressed investment costs by a technical advisor to
as Net Present Value (NPV) calculated on the government, as well as the risks iden-
the same date. The discount rate should tified. This will include an estimation of
be based on the risk-free cost of funds ac- all investments according to the specifi-
cessible to the public sector authority. cations required for the project, operating
As already mentioned the PSC is the and maintenance costs. The cost estimates
present value of all costs incurred by the should reflect various adjustments that
government for services included in the will be determined in accordance with the
contract for the provision of long term accounting and tax treatment to consider
services for the duration of this, based on in the shadow bid. When the Public Sec-
cost estimates that are affected to reflect tor Comparator performs the VFM test,
the value of identified risks. the best alternative must correspond to
For its part the shadow bid is the what generates a lower NPV.
present value cost of the services con- Currently the implementation of this
tracted to an investor. It is not the pay- methodology allows countries like Can-
ment for work or specific activities but ada and Chile to make better decisions


MEXICAN
HIGHWAYS
Towards a new service concept

Mexico’s Infrastructure Plan ing considered, to be split as shown • Improving coordination among fed-
(NIP) 2012 below: eral, state and local administrations.
• MXN$33.06 billion Private • The Government’s goals for 2012 are
In order to attain its 2030 goal of being Investment the following:
ranked in the top 30 of the World Eco- • MXN$8.7 billion National Infra- • Build or modernize 17,598 kilom-
nomic Forum’ s Infrastructure Competi- structure Fund (NIF) eters of highways and rural roads.
tive Index, Mexico has developed a new • MXN$5.33 billion Banobras: Na- • Increase from 72% to 90% the area
strategic plan that will steer the country tional Development Bank of federal highway network operat-
into raising the coverage and quality of • MXN$147.2 billion National Budget ing in good condition according to
its infrastructure net by 2012. international standards.
According to that index, Mexico was A total amount of MXN$226 billion • Reduce the accident rate from 0.47
ranked 71st out of 133 countries in 2009- will be invested throughout 2007- 2012, to 0.25 for every million vehicles per
2010, with the following itemization: of which MXN$150 billion will be de- kilometer.
AIRPORTS 56TH voted to roads.
RAILWAYS 66TH The NIP establishes priority projects Highways Strategic Plan: BANO-
PORTS 82ND and will increase public and private re- BRAS leading Role
HIGHWAYS 57TH sources allocated to their development by
TELECOMMUNICATIONS 65TH means of the following: Mexico has taken a decisive step in im-
The aim of the plan is to increase proving its road network, which is vi-
economic growth as well as permanent • improving the planning, prepara- tal for interconnecting the country’s
job creation by developing transportation, administration and execution vast territory of nearly 2 million square
tion, communications, water and energy of the projects by considering tech- kilometers.
to make Mexico one of the main logistic nical, economic and environmental The network now covers over 360,000
platforms and promote regional develop- feasibility; kilometers, of which nearly 4,000 are toll
ment and tourism. • actively promoting public-private roads administered by Banobras. One of
partnerships; these is the 148-kilometer main road join-
• Regarding the financial requirements • eliminating unnecessary regulations and ing Guadalajara, the country’s second-
for 2012, MXN$189.8 billion is be- simplifying contracting procedures; largest and second-most populous city, to

the town of Colima, and finally to Manza-
nillo, the most important port on Mexico’s
Pacific coast.
The following strategies are to be fol-
lowed in order to achieve the goals pre-
viously pointed by the NIP (www.infrae-
structura.gob.mx)

1. Complete the modernization of the
transversal and longitudinal road net-
work (national corridors) that com-
municates the country’s main cities,
ports, borders and tourist centers
with high-specification highways.
2. Build inter-regional roads to improve
communication among regions and
improve connectivity of the highway
network.
3. Place special emphasis on the con-
struction of bypasses and access
roads to facilitate the continuous
flow of vehicles.
4. Improve the condition of all highway
infrastructures and reduce the acci-
dent rate.
Banobras is the Mexican National De-
velopment Bank in charge of financing
infrastructure, acting both as a develop-
ment bank and as a Trustee of the Nation-
al Infrastructure Fund (NIF).
As a development bank, it provides
clients such as municipalities with limited
potential leverage capability, to pack their
infrastructure projects in order to create a
bankable standard vehicle that eases loan
requirements.
On the other hand, its project finance
helps to reduce the risk on the first stages
(with less cash flow) by offering financial
guarantees and loan syndications, there-
fore lowering equity requirements and
public resources.
As a trustee of the NIF, it promotes
private partnership by supporting projects
with limited financial profitability and
owning non-desired investor’s risks.
To sum up, Mexico will guarantee
macroeconomic stability and financial
markets development to proceed with the
infrastructure agenda, funding all projects
through Banobras and the NIF, though
international investment is possible for


Mexico has taken a decisive step in improving
its road network, which is vital for interconnect-
ing the country’s vast territory of nearly 2 mil-
lion square kilometers.

economical and improvements in services (which will support the development of the
are a way to get it. The highest traffic attrac- management and monitoring system)
tion will depend on the quality of possible al-
ternative routes. Mexican authorities looking Strategic Hub
for a way to change and to prioritize service
and safety decided to change these roles. On Located in Mexico’s Central-Western re-
the other hand, it’s a fact that in Mexican gion, the highway that links the towns of
Motorways the high toll payment evasion, Guadalajara, Colima and Manzanillo runs
sometimes, even by the own concessionary. northeast to southeast, crossing the Mexi-
In any toll highway we can separate can States of Jalisco and Colima.
five different actions to be done: An average of 10,000 vehicles trav-
The new idea, developed by Banobras in els it daily, of which 28% are for heavy
order to apply to its highways network, is to transport, largely from the port of Manza-
divide these functions in different individual nillo. It has two toll collection points and
agents – though some of these could be joined a four-lane roadway, except for one 58-
to get better results. To divide and make in- kilometer section where work has already
dependent the different tasks and to pay de- begun to enlarge the road.
pending on the real administration objectives It was built in 1983 and belongs to one
allows for better controls and checking. of the country’s five major logistical cor-
• External audits: AE agent ridors, linking east to west with another
• Technical direction and control: AAs major port, Tampico, on the Gulf of Mex-
agent ico. From there, it connects the country
• Operation: O agent to its two major markets in the north: the
strengthening financial structures and ac- • Maintenance: M agent United States and Canada. Once the five
celerate all processes. • Rehabilitation: R agent pending sections of main road are com-
By focusing investments towards Different models have been studied pleted, the Manzanillo–Tampico corridor
early stage projects, organizational speed and compared depending on their advan- will reduce the distance between the two
as well as portfolio size has considerably tages or disadvantages in order to find the coasts to less than a thousand kilometers
increased. best way to obtain the objectives and to
In this vein, legal and institutional make the project attractive for the differ- The Route
updates will accelerate tender procedures ent interested agents.
and will generate new investments by de- In February 2011, INECO, a leading a The main road connects four major popu-
leting private partners’ uncertainties. group of Spanish and Mexican companies lation centers (with over 100,000 inhabit-
won a contract for the total amount of 620 ants each) and 20 smaller towns. It starts in
From Guadalajara to Colima: a million pesos (roughly EUR 37 million) Guadalajara, capital of the State of Jalisco
route to efficiency for Mexico to perform this supervisory work for the and Mexico’s second-largest city. Ciudad
next 14 years. Guzmán, 139 kilometers to the south, is
A new, alternative concession model Two other Spanish companies will also located in the State of Jalisco.
is being applied to this new toll road, in be participating: APIA XXI (involved The section covered by the concession
which, unlike traditional models, opera- in project supervision and management, ends in the State of Colima, in the city by
tional, management, maintenance and structure monitoring and pavement the same name. Another 97 kilometers
other tasks are divided among different management) and TEKIA (in charge of away is the port enclave of Manzanillo,
independent companies, monitored by an electronic toll collection and Intelligent for which the main road represents an es-
“administrative and supervisory agent.” Transport Systems, or ITS). sential communications link. A total of
Traditionally, the organization of toll They will be joined by three Mexican 455,000 people reside in the metropolitan
highways has been assumed by a unique firms: SEMIC (which will be providing area located around Colima, Manzanillo,
operator that played all the possible roles support for instrumentation and control, Villa de Álvarez and Tecomán, compris-
and only reported to the Administration. preparing informative profiles and moni- ing 70% of the state’s total population.
This THC (Toll Highway Concessionary) toring standards), the law firm Casares- The area’s economic hub is the port of
was paid by highway tolls. Castelazo-Frías-Tenorio-Zárate (which Manzanillo. Its location gives it a privileged
A change was necessary, at least in Mex- will be responsible for legal mattress and position on commercial routes to Asian
ico Motorways, basically by two different consultancy on insurance, easements and markets in the west, the United States to the
reasons. The principal aim of concessions is administrative processes) and GRADO 3A north and South America to the south.

Latin Infrastructure Quarterly Issue 2

Latin Infrastructure Quarterly Issue 2

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