Latin Infrastructure Quarterly - Issue 7

XXXXXX XXXXX Latin Infrastructure Quarterly 1
Latin
Infrastructure
Quarterly
Oil & Gas
Infrastructure
Odebrecht:
Project Financing in Latin America
Company profiles:
Abengoa,
Neoenergia and
Grupo Hermes
Lessons
Learned in
PPPs
Moffatt & Nichol
at the Puerto de
Cartagena
Peru - UHE Chaglla.Picture:Almir Bindilatti

Letter From the Editor
W
elcome to the 7th issue of Latin Infrastructure
Quarterly! As always, we are proud to bring you
coverage of key industry issues, projects and
companies. As with the letter from our 6th issue
I would like to, besides introducing you to the content, offer
some brief observations of what I consider to be relevant devel-
opments that occurred during the last quarter.
LIQ 7
The ideas for most of this issue’s content came from two con-
ferences organized by the Inter-American Development Bank
(“IADB”) that I was invited to earlier this year. So I would like
to thank the IADB as well as the contributors for making this
issue possible. I certainly hope it is of interest to practitioners.
This issue covers the topics of Oil & Gas and Logistics in-
frastructure. As the economies in the region grow, infrastructure
investments in these sectors are absolutely necessary to improve
competitiveness and avoid bottlenecks. The articles discuss,
among other things, the need for the public and private sectors to
work together and the challenges to finance these investments.
We are also featuring an interview to an executive of the Uru-
guayan Corporación Nacional para el Desarrollo. This entity is
critical for the successful development of the industry under the
PPP model in that country. It is interesting to see how smaller
markets, such as Uruguay, are beginning to be subject of analy-
sis and conversation in industry gatherings due to the political
and institutional support for private sector involvement in the
industry.
Brief Observations
Reviewing LIQ’s weekly newsletters for the past quarter, I
would like to bring to your attention the following topics:
• The importance of roadshows. We read about the regular
international roadshows conducted by public sector of-
ficials from Peru, Colombia and Brazil. Not surprisingly,
these were also the jurisdictions from where the majority of
the relevant news came this quarter. The takeaway is clear:
it is imperative for government officials from all around
the region to regularly plan, at least, a yearly roadshow to
showcase their project portfolio. Jurisdictions compete
against each other. That is a fact that should be remembered.
• The right course. Uruguay has been on the right course for
quite some time now and the market has noticed. Investments
were announced in the renewables sector (solar and wind) by
various international actors.
Contributors
Baquero, Andrés
Center for Latin American Logistics Innovation
Cabello, Richard
International Finance Corporation
de Araújo Gagliano, Ulisses
Nelson Wilians & Advogados Associados
de Sivory, Charles
Neoenergia
Duke, Russell
National Standard Finance
Espelt, Ramón
Esteruelas Aguirre, María José
Abengoa
Fonseca, Vinicio
Odebrecht Engineering & Construction
Gomez-Pardo, Federico
Stratlegal
Horton, Michael
Moffatt & Nichol
Ladeuix, Hernán
Márquez Certucha, Eduardo
Pérez, Marcelo
Corporación Nacional para el Desarrollo
Vaz Nogués, Camila
Vouga & Olmedo Abogados
Vouga Zuccolillo, Rodolfo
Vouga & Olmedo Abogados
Wu, Manuel
Metro de Lima
To our readers:
Latin Infrastructure Quarterly2

Latin Infrastructure Quarterly 3Letter From the Editor
• MTC’s announcements. During this past quarter we
saw a very active Peruvian Ministerio de Transporte
y Comunicaciones (MTC) with announcements relat-
ing to the 2nd tranche of the Metro de Lima, Lima’s in-
ternational airport, Jorge Chávez, and a large pipeline
of projects to be marketed during the next few years.
• News overload. News came out from numerous sectors in Co-
lombia:(i)rail–FFCCCentraland“CorredorVerde”;(ii)roads
– Bucaramanga-Cúcuta; (iii) waterways – Magdalena river;
(iv) airports – Bogotá and Cartagena; (v) ports – Buenaven-
tura. But perhaps the most significant announcement is the
creation of a unit for large works within the Banco de Bogotá.
• Brazilian ports. As was expected, we saw announcements
of tender processes in this sector relating to the ports of
Santos (São Paulo), Belem (Pará) and Paranaguá (Paraná).
• Logistics hub. It is commendable how Jamaica has sought
assistance from international experts and is actively look-
ing to attract international investors and operators to im-
prove its port and related infrastructure to take advantage
of the increased regional and world-wide cargo traffic.
• The usual suspects. Despite all the exciting news we read
on a daily basis, the usual suspects keep reminding us that
the region is still an emerging market. Political interfer-
ence, strikes and social activists were subject of news af-
fecting the industry in Argentina, Brazil, Mexico and Chile.
I would like to conclude with a thought. At a conference I re-
cently attended in Kiev, I heard about the challenges CIS coun-
tries are facing when trying to develop much needed social and
2013 Latin Infrastructure Quarterly. No statement in this magazine is to be construed as a recommendation for or against any particular investments. Neither this
publication nor any part of it may be reproduced in any form or by any means without prior consent of Latin Infrastructure Quarterly.
economic infrastructure under the PPP model. A lot of these
challenges are the same Latin America continues to face.
Some of these challenges relate to technical matters such as
regulatory approaches, capacity building techniques or project
finance structures. However, the most significant challenge they
face, the same way we do, is securing long-term political support
to the idea of involving the private sector in the development of
infrastructure. This is certainly not an easy obstacle to overcome
as politicians tend to see infrastructure as a source of short-term
opportunities and PPPs represent a complete overhaul to the tra-
ditional procurement model that grants, with certain exceptions,
too much discretion to politicians and government contractors.
Should you have any questions and/or comments please do
not hesitate to contact me.
I hope you enjoy this issue.
Sincerely,
Patricio Abal.
Editor
patricio@liquarterly.com
1.202.446.7367
@LIQEditor

Latin Infrastructure Quarterly4 Sponsors

5Contents
Contents
New Frontiers for Public-Private Partnerships: The 2013 PPPAmericas
Conference.............................................................................................................6
Moffatt & Nichol at the Puerto de Cartagena.........................................................9
After the Boom… Investments Required............................................................13
Lessons Learned and Good Practices on PPPs....................................................18
Company Profile: Abengoa ................................................................................22
Uruguay: The Corporación Nacional para el Desarrollo.....................................28
IFC Advisory Services on PPPs..........................................................................31
Odebrecht: Project Financing in Latin America..................................................34
Logistics Infrastructure.......................................................................................38
The Evolution of the Mexican Public-Private Partnership..................................41
Colombian PPPs’ Legal Framework in a Nutshell..............................................46
Planning, Developing and Financing Public Hospitals and insight into the grow-
ing MedicalTourism Industry..............................................................................51
New Regulation for Construction Financing and Engineering Projects in Brazil ...
............................................................................................................................55
Company Profile: Neoenergia.............................................................................60
Benefits for Industrial Parks in Paraguay............................................................62
Public-Private Partnerships Focus of the 2013 Inter-American Development Bank
AnnualMeeting...................................................................................................67
Company Profile: Grupo Hermes........................................................................70
9
22
34
70

Latin Infrastructure Quarterly6 Institutions
New Frontiers
for Public-Private
Partnerships:
The2013PPPAmericas
Conference
Public-private partnerships (PPPs) are an increasingly important
tool for infrastructure development in Latin America and the Ca-
ribbean. But the speakers and participants at the 2013 PPPAmer-
icas conference, held in February in Cartagena, Colombia, made
it clear that PPPs are a versatile and powerful instrument that
can be used in a wider variety of projects and settings than they
have traditionally.

Latin Infrastructure Quarterly 7Institutions
P
PPAmericas drew over 500 peo-
ple from 27 countries, represent-
ing government, international
organizations, the private sector
and NGOs, for discussions centering on
the theme “PPPs in Latin America and the
Caribbean: New Frontiers, New Actors.”
The conference, organized by the Multi-
lateral Investment Fund (MIF), a member
of the Inter-American Development Bank
(IDB) Group, has become the leading
event focusing on PPPs in infrastructure
and basic services in Latin America and
the Caribbean. The National Planning
Department of Colombia co-organized
the conference.
Colombia was well-suited to host the
conference, given the country’s important
developments concerning PPPs and the
high level of interest in the topic. Last
year Colombia approved a new PPP law
that could support a larger project pipe-
line through more standardized processes
and improve risk allocation. The Colom-
bian government has committed by 2014
to grant USD 26 billion through public-
private partnerships for highways and
railways alone. Many at the conference
were interested in learning more about
Colombia’s new PPP framework and en-
joyed a related panel featuring prominent
members of the Colombian public and
private sectors.
The theme of the conference, New
Frontiers and New Actors, was ad-
dressed throughout the event. One pan-
el, New Frontiers: PPPs in the Social
Sector, explored PPPs as an innovative
means of not only building schools and
hospitals, but also of providing im-
proved health and education services.
The panel featured Cecilia María Vé-
lez, a former Secretary of Education
of Bogota and Colombian Minister of
Education who was responsible for de-
veloping Bogota’s successful program
of school concessions.
At the same time, PPPs are no lon-
ger limited to larger or more developed
markets, as was demonstrated at the con-
ference. Another panel, PPPs in Small
Economies, featured participants from Ja-
maica, Guatemala, Trinidad and Tobago
and Honduras, all of which have launched
ambitious PPP programs.
The conference made it clear that
governments continue to consider PPPs
an important option for developing their
infrastructure and providing essential
services, notwithstanding the global eco-
nomic problems of recent years. During
the panel New Sources of Funding for
PPPs, there was a discussion of the im-
portance of local sources of funding,
including pension funds, for closing fi-
nancing gaps exacerbated by reduced in-
ternational bank activity.
There were knowledgeable and high
profile speakers throughout the event
including at a special “Davos-style”
dialogue, “Public-Private Partnerships:
When and How?” There, participants dis-
cussed the potential benefits of PPPs and
under what conditions these contracts are
successful. The panel was moderated by
Alexandre Meira Da Rosa, Manager of
the IDB’s Infrastructure and Environment
Sector, and featured Luis Fernando An-
drade Moreno, President of Colombia’s
National Infrastructure Agency, Sandro
Testelli, Director for Mexico and Central
America at KPMG, and Antonio López
Corral, Professor of Applied Economics
Alexandre Meira Da Rosa, Manager of the IDB Infrastructure and
Environment Sector
Luis Fernando Andrade Moreno, President of Colombia National
Infrastructure Agency

at Polytechnic University of Madrid.
The institutional framework for PPPs
has always been an important topic at the
conference, and in Cartagena it was ad-
dressed by a panel on How to Develop
an Institutional “Architecture” for PPPs.
This issue is closely related to the MIF’s
own work in the region, supporting the le-
gal, regulatory and institutional environ-
ments for PPPs through 19 projects total-
ing US$20 million.
The MIF also plays a leading role in
disseminating knowledge on the enabling
environment for PPPs, both through the
PPPAmericas conferences and through
the Infrascope, an interactive index and
learning tool produced in partnership
with the Economist Intelligence Unit that
evaluates the readiness and capacity of 19
countries in Latin America and the Carib-
bean to implement PPP projects in the
transport, water and sanitation and elec-
tricity sectors. At PPPAmericas, the MIF
celebrated the release of the third edition
of the Infrascope, which shows that the
gap between emerging and developed
PPP market readiness in Latin America
and the Caribbean is narrowing. For the
first time, this year’s edition also high-
lights the opportunities for “green” PPPs
as a growing and innovative area for the
region. The Infrascope has also attained
global reach; the Asian Development
Bank has recently released a version fo-
cusing on the PPP capacity of countries in
the Asia Pacific region.
At PPPAmericas, the MIF also un-
veiled its new regional program, New
Frontiers in Public-Private Partnerships,
which aims to strengthen government
capacities in the design, execution and
management of PPPs using a new modal-
ity of advisory services and will address
gaps that prevent the launch of specific
PPP projects.
Luis Alberto Moreno, President of the
IDB, and Mauricio Cárdenas, the Colom-
bian Minister of Finance, closed the con-
ference. Minister Cárdenas spoke of the
important progress made by the Colom-
bian economy, the continued need to de-
velop the country’s infrastructure, and the
important role that PPPs can play in this
process. President Moreno outlined the
important support the IDB has provided
throughout all stages of the PPP develop-
ment process.
As announced by President Moreno at
the conference, the MIF plans to host the
next round of this successful event in ear-
ly 2015 in Uruguay. All those interested
in gaining insight on PPPs from important
players in Latin America and worldwide
are encouraged to attend. In the mean-
time, the MIF will continue to share up-
dates on its PPP-related activities through
its website, FOMIN.org.
Luis Alberto Moreno, President of the IDB

Latin Infrastructure Quarterly 9Companies
Longterm Client-Consultant Partnerships –
Relationship Readies CONTECAR and Manga for
Profitable Future
Moffatt & Nichol
at the Puerto de
Cartagena
Container stacks at CONTECAR Terminal

Latin Infrastructure Quarterly10 Companies
For more than a decade, Moffatt &
Nichol has maintained a continuous and
solid relationship with Sociedad Portuaria
Regional de Cartagena (SPRC) and CON-
TECAR S.A. on Colombia’s Atlantic coast.
Unlike many client-consultant relation-
ships that live from contract to contract,
Moffatt & Nichol and the organizations
have become true strategic partners, with
a shared goal of making these facilities
among the best in the hemisphere.
SPRC had taken over the Manga Ter-
minal from COLPUERTOS in 1992 and
had quickly embarked on improving the
efficiency of the terminal assets with new
equipment, demonstrating to shippers that
they could have confidence that their con-
tainers would not be damaged or lost in
“Moffatt &
Nichol and SPRC
teams work
closely together
in a partnership
that is able to
quickly adjust
to the dynamics
and challenges
of the aggressive
expansion
program and
operational
pressures”
Manga Terminal
Moffatt & Nichol engineers working alongside SPRC staff

transit. At the same time, Moffatt & Nich-
ol had been involved in designing phased
development for the CONTECAR Termi-
nal for the Flota Mercante Grancolombi-
ana and assisting SPRC with improve-
ments to its Manga Terminal container
operations and yard systems.
Over the next 10 years, the organiza-
tions established a professional rapport.
In late 2007, when SPRC bought the
CONTECAR Terminal, both develop-
ment projects were brought under the
same umbrella and Moffatt & Nichol
was contracted to assist SPRC with the
strategic investment plan for both facili-
ties.
This contract became the foundation
of a close working relationship between
Moffatt & Nichol and SPRC that has seen
the Manga Terminal conversion and the
partially built CONTECAR facility de-
velopment emerge as two of the most
modern and efficient container terminals
in South America and the Caribbean to-
day.
SPRC and CONTECAR are targeting a
capacity of 5 million TEU by 2017, look-
ing to become the 25th busiest container
port in the world.
Further reinforcing the consulting rela-
tionship is the close involvement by SPRC
Executive Director Captain Alfonso Salas
and his team at all levels of the expansion
program and terminal operations – a team
that includes approximately 900 perma-
nent staff and port workers. As a result,
Moffatt & Nichol and SPRC teams work
closely together in a partnership that is
able to quickly adjust to the dynamics and
challenges of the aggressive expansion
program and operational pressures.
As designer, the Moffatt & Nichol
team contributes strategic development
and design recommendations used to
prepare conceptual and final designs for
expansion. The CONTECAR and SPRC
engineers prepare and administer the
contracts and oversee the construction.
They are also fully involved in the chal-
lenges of constructing new facilities
with the added pressure of terminals
that continue to operate at full strength
even as demand for new capacity in-
creases daily. Teamwork and commu-
nication have proved essential during
such times.
In 2007, as can be seen in the images,
the CONTECAR Terminal was essential-
ly an unpaved yard of some 18 hectares
with 350 meters of berth. The facility had
no container cranes and boasted extremely
modest gate and storage facilities. While
the total area is about 100 hectares, much
of the site was covered with poor quality
dredged spoils lagoons left over from the
original construction and completely un-
suitable for storage of anything, let alone
containers. The local name for these con-
tainment cells was the “piscinas” because
a stone thrown into the mud would im-
mediately sink out of sight 10 years after
the material was originally pumped there.
The cost to clear approximately 3 mil-
lion cubic meters of this dredged spoil
from the terminal area was estimated at
up to US $50 million, after which some
2 million cubic meters of clean fill was
needed to bring the site to the level re-
quired for development – at an additional
cost of US $60 million.
These initial technical and financial
challenges were met with the preparation
of a carefully phased ground improve-
ment program that permitted the incorpo-
ration of this poor material into the site
improvements. This approach avoided
the costly dredged material removal and
drastically reduced the need for imported
fill to develop the container yard.
However, it was necessary to pre-load
most of the expansion area to a height of
some 3 to 5 meters, which meant that the
paving plan had to be carefully phased
to allow terminal expansion. At the same
time, the demand to store vehicles and
non-container traffic in the terminal was
increasing daily and it was not unusual to
see vehicles and equipment stored on top
of the pre-loaded areas while the settle-
ment was taking place.
With the ground improvement plans in
place, Moffatt & Nichol designed a series
of berth extensions at CONTECAR, with
the last section designed in late 2012 to
provide the full terminal length of almost
1,000 meters.
As the CONTECAR Terminal expan-
sion moved ahead, SPRC turned its atten-
tion to the Manga Terminal where Moffatt
& Nichol designed a berth extension of
169 meters and storage area expansion in
2011, which was constructed in 2012 and
is now in operation.
The success of the SPRC operation and
its rapid pace of expansion has proven to
be a major attraction to large international
shipping companies and has established
2007 2012

Cartagena as a “must call” port on South
America’s east coast and the Caribbean
trade routes. At this time, 70 percent
of the container traffic through the two
terminals is brought by Hamburg Sud,
which has also established Cartagena as
its regional transshipment hub.
As a result, 30 percent of the 2 million
containers that arrive and leave the port
are destined for Colombian customers,
while the other 70 percent are transshipped
to other destinations. The large volume
of business reduces port handling costs,
which in turn is economically beneficial to
Colombian shippers and importers.
Further expanding the terminals’ han-
dling capacity, the new facilities have
also been designed to accommodate the
largest vessels that will be able to pass
the Panama Canal after 2015, with new
cranes that can reach out 24 containers
wide, as compared to the previous stan-
dard of 13.
The two terminals, now modernized
under the SPRC banner, have received
numerous accolades over the past 10
years and have been named “The Most
Efficient Port in the Caribbean” by the
Caribbean Shipping Association six
times.
Over the course of the US $1 billion
expansion program for both terminals, in
addition to design, Moffatt & Nichol has
prepared a series of commercial studies
that include market analyses, evaluations
of the implications of the Panama Canal
expansion program and assessments of
potential long term expansion alterna-
tives.
The firm has also prepared feasibility
studies and design for a new deeper water
access channel to Cartagena Bay and will
shortly begin preliminary design work on
a new river port about 500 kilometers up
the Magdalena River that will connect
to the SPRC facilities bringing contain-
ers, coal and other commodities by river
through the Canal del Dique.
Moffatt & Nichol is proud to be as-
sociated with every facet of this exciting
program and is delighted to be part of the
project team at SPRC. The working re-
lationship between SPRC and Moffatt &
Nichol has been a great success and it has
also led to major economies of scale in
the cost of the facilities. The cost of the
expansion work at Cartagena consistently
comes in at about 60 percent of the av-
erage cost for terminal projects in South
America.
This incredible change in the con-
version of both container terminals to
state-of-the-art, high capacity facilities
has been a clear demonstration of the far
sighted and ambitious goals of the man-
agement team and the SPRC board, which
is constantly looking toward the future
and improving the attractiveness of Carta-
gena and Colombia as a place to do busi-
ness.
M
ichael Horton, PE,
CEng mhorton@mof-
fattnichol.com www.
moffattnichol.com Mi-
chael Horton, a vice president of
Moffatt & Nichol, is a specialist in
the evaluation and implementation
of port and waterfront develop-
ment projects. During his 35 years
in the port planning sector, he has
worked in more than 85 countries
and is familiar with most of the
major ports in the world. He has
managed or participated in port
projects, large and small, in both
developed and developing coun-
tries. His international project ex-
perience includes the Panama Ca-
nal Expansion, the Port of Tanjung
Pelepas in Malaysia, the CONTE-
CAR and Manga Container Terminals in Cartagena, a national port de-
velopment plan in Algeria, a port master plan in Jordan and numerous
projects in South America, Asia, Africa and the Middle East.

Latin Infrastructure Quarterly 13Projects
After
the Boom...
An energy consumption boom following one of the most prosperous decades in recorded
history has unveiled an urgent need to expand oil and gas infrastructure.
Investments Required
T
he past decade has been one
of most economically prosper-
ous periods in recorded his-
tory, leaving the period dubbed
“the lost decades” behind. This has been
translated into a strong oil and gas con-
sumption growth. As a consequence, en-
ergy infrastructure has been significantly
stretched, forcing countries to increase
imports and to think about capacity ex-
pansions in several points along the en-
ergy chain. Argentina and Brazil are both
at a critical juncture. Both with massive
hydrocarbon resources, they face finan-
cial, operating and political constraints
to properly develop them. But there have
recently been signals that improved the
outlook for energy investments in both
countries. Forced by circumstances, gov-
ernments appear to have slowly accepted
that proper economic incentives – rather
than mere political considerations – are
the only way forward to achieve a proper
energy supply.
In contrast to the declining trend in the
developed world, emerging markets have
enjoyed an impressive wave of economic
Hernán Ladeuix
growth over the past ten years. Despite
the great recession of 2008-09, they have
accumulated an average growth of 6.6%
over the decade that ended in 2012. That
is 1.5 times the growth experienced in the
previous decade. A similar picture has
been emerged in Latin America, leaving
two decades of meagre growth behind.
Brazil and Argentina, South America’s
two largest economies have also recov-
ered strongly in economic terms. After
the severe financial and economic crisis
of 2001-2002, Argentina had a spectacu-
lar average growth of 7.2% per year over
the past decade. Brazil has had a less ex-
plosive but much more consistent eco-
nomic growth over the past several years.
It is clear that growing economies
need more energy. Depending on the eco-
nomic structure, the intensity of energy
needs varies, but an increasing supply of
energy is a necessary fuel for economic
growth. The so-called oil and gas elastic-
ity (oil and gas demand growth divided
GDP growth) could be as low as 0.1-0.2
for developed economic and as high as
1.5-2x for economies at initial stages of
development. Brazil and Argentina are in
the middle of the range. While Argentina
has had an elasticity of close to 0.5x over
the past 20 years, Brazil has been close to
1x. The strong economic growth over the
past decade has translated into increasing
needs for energy in Latin America.
The strong economic growth, how-
ever, has stretched energy infrastructure
– particularly oil and gas related – to the
limit. This has been particularly acute
regarding refining capacity, which had
barely been expanded over the past two
decades. As a consequence, oil products
imports have increased in Argentina and
Brazil, evidencing a shortage of refining
capacity. The decline in oil production
in the case of Argentina and the plateau
in oil output in Brazil have reduced the
export balance in crude oil. In Argentina,
declining natural gas production has pro-
voked the suspension of exports to Chile,
the resumption of imports from Bolivia
and a rapid increase of liquefied natural
gas imports.
Refining has been the most underinvest-
ed area within the oil chain with very little

Latin Infrastructure Quarterly14 Projects
Argentina: Refining capacity vs oil consumption
Source: IMF – World Economic Outlook
Source: Indec, IBGE
Net oil and oil products imports
Figure 1
Figure 2
Figure 3
investments in new capacity over the past
three decades. This has been due to several
factors. First, construction costs have been
increasing at a rapid pace, making it dif-
ficult to budget costs and estimate a proper
profitability. The US$20bn Abreu e Lima
refinery in Brazil to be completed in 2014,
where costs are expected to be 9 times the
original estimate is a case in point. Second,
even after a surge in refining margins over
the past ten years, grassroots refineries
economics are still poor with refining prof-
itability lower than most upstream proj-
ects. Third, domestic prices in LatinAmer-
ica have been typically below international
Source: BP Statistical Review of World Energy 2012
prices due to strong government interven-
tion. Despite those obstacles, Petrobras is
expected to increase its refining capacity
by 20% over the next five years to 2.4m
bpd, an issue that has been quite controver-
sial in the investment community and have
dragged down the price of the stock in re-
cent years. Argentina seems to be quite far
from undertaking significant investments
in refining, as the focus is on the declining
upstream sector.
“The strong
economic
growth,
however, has
stretched
energy
infrastructure
– particularly
oil and gas
related – to the
limit”

Brazil: Refining capacity vs oil consumption
Figure 4
Figure 5
Figure 6
Argentina: Oil output vs oil consumption
Argentina: Gas output vs gas consumption
After peaking at 850k bpd in 1998,
Argentina’s crude oil production has de-
clined at an average of 3% pa over the
past 15 years, with current production
closer to 550-570k bpd. Although ma-
ture geology could have exerted some
influence, the severe decline has a lot to
do with a lack of economic incentives to
replace reserves as prices have been well
below international prices over the past
ten years. This has been cruel for YPF,
Argentina’s largest oil company, whose
reserves were devastated, declining 60%
in terms of oil and 80% in terms of natural
gas over the past ten years, reducing the
average life from 9 to 6 years in the case
of oil and from 17 to 5 years in the case
of natural gas.
After the Argentine government ex-
propriated the majority stake in YPF in
hands of Repsol, new management has
been aiming to boost spending levels to
“Petrobras
has one of the
most aggressive
capital
spending
budgets among
international
oil companies,
with an average
of US$45-50bn
per year over
the next 5-10
years”

stimulate production growth, particularly
from shale hydrocarbons in the Neuquina
basin. A good sign is that the government
appears to be more prone to allow oil
prices to catch up with international pric-
es both in the upstream and downstream
segments. That will be key for companies
to restore profitability. In the latest stra-
tegic plan, YPF envisioned a multi-year
US$37bn plan to develop the Vaca Muer-
ta field, which is considered one of the
YPF oil and gas reserves
Source: YPF SA
Figure 7
Figure 8
Figure 9
Brazil: Domestic versus US Gulf fuel prices
Brazil: Gas output vs gas consumption
Source: Market data
Source: Market data
world’s most promising shale properties.
The potential seems to be huge, although
YPF needs to attract a world class partner
and be able to get large financial resourc-
es to achieve that goal something that is
not coming easy so far, at least until there
is some kind of clarity about how the con-
flict with Repsol will be solved.
In Brazil, Petrobras has its hands full
with the development of the areas discov-
ered in the pre-salt layers in the Santos
and Campos basins. This is expected to
more than double current production lev-
els by year 2020 when oil production is
expected to reach 4.2m bpd, making Bra-
zil one of the world’s largest oil produc-
ers, even surpassing Iran’s current pro-
duction levels. Petrobras has one of the
most aggressive capital spending budgets
among international oil companies, with
an average of US$45-50bn per year over
“In Argentina,
declining natural
gas production
has provoked the
suspension of
exports to Chile,
the resumption
of imports from
Bolivia and a
rapid increase of
liquefied natural
gas imports”

the next 5-10 years. About 60% of the
budget will be allocated to the Explora-
tion and Production segment, with about
50% of it dedicated to the pre-salt areas
development. Petrobras is expected to
have an influencing role in the world oil
market over the next decade.
BrazilandArgentinaareonthewaytore-
construct and expand oil and gas infrastruc-
ture. Hydrocarbon resources appear not to
be a limiting factor. Problems are more
related to financial, operating and energy
policy factors. On the financing side, invest-
ment budgets largely exceed internally gen-
erated funds for both companies, meaning
that have strong needs of external financing.
Operationally, both companies face a com-
plex investment process. For Petrobras, the
pre-salt development is the most demand-
ing project line up it has ever faced, creating
a strong pressure on management and there-
fore easily prone to delays. The new CEO,
however, looks quite determined to put and
end to Petrobras’ never ending failure to
keep up with production targets.
For YPF, negotiating partnerships with
international companies seems to be an ar-
duous task until the conflict with Repsol is
solved as companies appear to be extremely
careful at negotiating business conditions.
Finally, politics is a major factor in Latin
America, as the largest companies in the
region are typically controlled by the gov-
ernment. Pricing is one of the main issues.
Being Petrobras the dominant oil company
in Brazil and being Petrobras a company
controlled by the government, prices are the
facto set by the government. Petrobras has
historically justified the lack of timely ad-
justments by the objective of not translating
the volatility of international oil markets to
domestic consumers. However, long periods
of prices below international levels have put
in evidence that there is an attempt to con-
trol inflation though fuel prices. As a result,
Petrobras has reported losses from its down-
stream unit for eight quarters in a row. Over
the past year, however, the government have
given some positive signals by reducing in-
ternal taxes a few months ago and increasing
prices both in January and March.
Although government seems to have
a more understanding position and have
allowed decent price increases over the
past years the fact is that prices continue
to be under their control. And over the
past decade, fuel prices both in Argentina
Brazil: Domestic versus US Gulf fuel prices
Argentina: Domestic versus US Gulf prices
Figure 10
Figure 11
Source: Market data
Source: Market data
and Brazil have been mostly below inter-
national prices. This has not only reduced
cash flow generated by the downstream
segment but it has become an obstacle to
convince foreign partners - which put a
strong emphasis on getting international
prices for the new investments - about the
price path going forward. Governments
have been comfortable at giving pricing
issues a lower priority over the past sev-
eral years, but as infrastructure becomes
a more pressing matter, there is a chance
that technical and economical factors
dominate over politics-driven ones, creat-
ing a much healthier investment environ-
ment.
H
ernán Ladeuix is an en-
ergy research analyst.
For over 20 years, he’s
been covering global
oil & gas and refining markets
as well as energy companies in
Asia, Latin and North America
for leading financial institutions.
He has lived and worked in Latin
America, Europe and Asia. He
holds an Industrial Engineer-
ing degree from the University
of Buenos Aires, an MBA from
CEMA and is a Chartered Finan-
cial Analyst.

LessonsLearned
andGoodPractices
inPPPs
LIQ talks to
Ramón Espelt
Please describe the initiative linking
you with the IADB/MIF.
I
am currently carrying out work, in a
consultancy role, for the Multilater-
al Investment Fund (MIF) that seeks
to identify lessons learned and good
practice in the implementation cycle in
public-private partnerships (PPPs). This
will analyse eight projects undertaken by
the MIF in the region, in particular Brazil,
Colombia, Mexico and Uruguay.
The MIF of the Inter-American De-
velopment Bank (IDB) has seen almost
10 years of activity in which it has sup-
ported the governments of the Caribbean
and Latin America in improving their
ability to plan, design and manage PPPs
in infrastructure and related services.
This period has entailed 18 collaboration
projects, with varying degrees of scope,
in 12 countries at both national and sub
-national levels.
Moreover, both the IDB and the MIF
continue to receive requests from other
countries and sub-national authorities
interested in receiving support to launch
PPP programmes. These are usually
countries with small and less-developed
economies and sub-national authorities
that lack the skills to select, implement
and manage PPPs.
There is little doubt that the experience
accumulated by those that have already
commenced work with such PPPcontracts
may be of significant value for those new
to PPP frameworks. It is for this reason
that the MIF has set up a project with the
aim to collate and document the lessons
learned and good practices to be used in
improving decision-making processes as
PPP programmes evolve.
The methodology that I am using
involves meeting and interviewing in-
dividuals who have played important
roles in their respective projects, not
only on the MIF side but also on that
of the recipient agencies and invest-
ment bodies. The reflections and con-
clusions drawn are the main source of
information for the preparation of a list
of lessons learned that enable public
bodies to receive advice on the regu-
lation, skills and institutional frame-
works required for successful imple-
mentation of PPPs in the provision of
public infrastructure.
.
The MIF finances PPP capacity build-
ing. What does this mean? Why is it so
important when bringing projects to
market? How does a technically well-
prepared public sector facilitate the de-
velopment of projects together with the
private sector?
As I mentioned earlier, the MIF is sup-
porting the development of PPPs in the
region with the conviction, as internation-
al experience shows, that private-sector
participation in the financing, construc-
tion and operation of infrastructure pro-
motes efficiency and generates value for
money. However, this participation needs
to be based on proper contract design
that not only assigns responsibilities and
rights but also distributes risk with the
public sector covering future contingen-
cies, though in a way in which the project
remains attractive and viable to the pri-
vate sector.
Although private-sector participa-
tion in the region has existed for some
The MIF has seen
almost 10 years of
activity in which
it has supported
the governments
of the Caribbean
and Latin America
in improving
their ability to
plan, design and
manage PPPs in
infrastructure and
related services

decades, it has generally been under the
framework of the conventional conces-
sion agreement and privatisation. This
has not always provided success. In some
cases, as a consequence of inefficient and
at times unbalanced distribution of risk in
favour of the private sector, it has given
place to some degree of social rejection.
The introduction of PPPs in accor-
dance with international standards, which
is something that is relatively recent, has
– in some countries – reversed this opin-
ion. This has meant that the PPP frame-
work, without any doubt, has become an
essential tool for the development of pub-
lic infrastructure. The implementation of
these ever-complex programmes, though,
requires preparation by the public sector
in creating the framework that makes PPP
projects feasible and efficient and by the
private sector in gaining an understanding
of these schemes and in preparing itself
for participation.
In this context, the MIF supports the
respective authorities around the region
in the creation of the fundamental pillars
needed to implement PPPs: those of ad-
aptation of the legal framework, develop-
ment of the institutional framework and
overall preparation of the public and pri-
vate sectors.
What is the importance of enacting
PPP laws?
Although in the majority of the coun-
tries in the region there are existing legal
frameworks that enable – though in cer-
tain cases with some minor modifications
– the development of PPPs, it is clear
that the enactment of specific legislation
to regulate this type of contract is desir-
able. First, as it clarifies and prepares the
frequently complex and dispersed legal
framework, enactment establishes gen-
eral criteria for the distribution of risk;
and second, given that it differentiates the
concept of the PPP programme from pri-
vatisation, it nurtures social acceptance.
Subsequent regulatory development is
fundamental, as it allows inadequacies or
inconsistencies in the new legislation to
be resolved.
Enactment is also important in another
way, given that it sends a message to the
private sector that highlights the continu-
ity, credibility and robustness associated
with PPPs. Therefore, it is imperative that
legislation be passed through receipt of
significant levels of parliamentary sup-
port. That is to say, what it really takes for
PPP laws to be enacted is strong political
leadership and commitment.
Some commentators, nonetheless,
hold the view that when the current le-
gal framework is sufficiently robust and
enabled to host PPPs, it may be plausible
to structure projects under the existing
legislation and postpone the design and
debate surrounding new PPP legislation
until experience is obtained. This, they
suggest, allows design of legislation in a
more specific and efficient manner.
What does seem clear is that the exis-
tence of legislation that covers PPPs does
not guarantee success in their implemen-
tation, given that this depends on several
factors. There are examples in the region
of authorities with legislation enacted
some years ago that have not yet managed
to structure any project.
What are the common elements of the
new PPP laws in the region?
There are many likenesses in the new leg-
islation governing PPPs across the region.
The reasons are that it has involved inter-
national standards and that there has been
some degree of permeability among au-
thorities, which would seem logical, with
similar clauses and designs being adopted
in many cases.
In general, the new legislation defines
PPPs and governs the distribution of
risk in a conceptual way, conceives and
implements availability payments as a
tool to support the PPP structure through
public budget support (when the revenues
from the users are insufficient to make the
project viable or in projects without pay
for use, such as social infrastructure), and
regulates the possibility to submit initia-
tives for the private sector (identifying
those projects which may be feasible with
limited public support or without any at
all). Only in certain cases does it define
and assign specific institutional bodies
tasked with the study, structure and pro-
motion of PPP projects.
Why are PPP units important, what
should they be prepared to do and what
have been the main obstacles to their
action?
The existence of specific institutional
frameworks with responsibility for PPPs
is paramount for the implementation and
development of these contractual arrange-
ments to be successful. Furthermore, it is
clear that a primary theme in the devel-
opment of PPPs is the design of a road
map for the project to follow. This should
define both the studies and reports to be
prepared during structuring and the bod-
ies responsible for their resulting analysis
and approval.
The creation or designation of PPP
units as entities to be responsible for the
development and dissemination of meth-
odology and training to investors in the
principals of the PPP is, thus, highly rec-
ommendable. The mission of these units
The MIF has set up a project with
the aim to collate and document the
lessons learned and good practices
for be used in improving decision-
making processes as PPP new
programmes evolve

should be to support agencies and inves-
tors, not only in the preparation of these
studies but also in project structuring.
There is no rule of thumb either for the
design and location of these units within
the institutional framework or the defini-
tion of their specific skills, given that in
each case the existing institutional state
of affairs, the regulatory environment and
the balance of power all require evalua-
tion. Whereas some PPP units are located
directly or indirectly in the respective
finance ministry, others are independent
entities and at times are under private law.
Likewise, it is also advisable that these
PPP units have as counterparts specific
investor agencies that serve as partners in
the project structure. At times, obstacles
emerge that hinder the implementation
of these units. Such stumbling blocks
entail reluctance by investors concerning
the role of the unit, given the surrender
What are the main elements of the
methodologies used in evaluating and
structuring PPP projects?
At the early stage the main element is the
social and economic evaluation, or cost-
benefit analysis (CBA), of the project.
While a public infrastructure may origi-
nate in political will alone, even in this
case the CBA is critical and the results
should be taken into account.
After the CBA, and using more refined
data, a public-sector comparator with a
value for money (VfM) analysis is the
main element used to evaluate whether
the PPP approach is the most efficient or
R
amón is Co-head for In-
frastructure Finance and
PPP at Deloitte Spain, at
present focussing his pro-
fessional activity on Latin America
and teaming up with the local De-
loitte offices.
Previously, he was founder as-
sociate of Asesores de Infraestruc-
turas, a company which Deloitte
absorbed in 2008. Before that he
held an executive position at CIN-
TRA-Ferrovial, one of the main in-
frastructure promoters.
He enjoys more than 25 years
of experience in the infrastructure
promotion and finance disciplines.
In recent times he has led more
than 50 projects of infrastructure
structuring under PPP schemes in
several countries (Spain, the United States, Mexico, Colombia, Uruguay,
Turkey, Romania and Bulgaria).
Ramón has advised public bodies on PPP schemes on matters such
as feasibility analyses, project structuring, bid evaluation and contract
monitoring.
Currently, he leads one of the advisory groups in structuring the
Fourth Generation (4G) of Road Concessions in Colombia and several PPP
projects in Uruguay (freight-rail infrastructure, a border crossing pro-
gramme and a waste to energy plant)
He also has experience as a lecturer in PPP training programmes in
Spain,Colombia and Mexico,having participated as coordinator and / or
speaker in many national and international PPP forums.
He has been appointed as a specialised consultant in PPPs to the Inter-
American Development Bank (IDB) and the Multilateral Investment Fund
(MIF) in several opportunities.
He holds a Degree in Civil Engineering from the Universidad Politéc-
nica de Madrid and an MBA from the Instituto San Telmo in Seville.
of control and decision-making capacity
perceived by civil servants as regards the
traditional nature of the methods involved
in public works contracts.
Whereas on some occasions the units
perform the structuring, in others they
are led by the investors and the unit only
monitors and / or supervises operations.
In either case, when there is a lack of har-
mony between the teams, coordination
problems usually emerge.
not, and whether it generates greater value
than the traditional one. It is at this stage
when risk allocation takes place, with the
right decision about this issue being criti-
cal for project success. When VfM is ei-
ther very low or negative, a multi-criteria
comparison analysis is necessary to take
the right decision about the project pro-
curement path.
Then, the final structuring phase is
that which entails the design of the tender
documents and contract framework, with
the approach to the project monitoring
during the construction and the operation
phase being important.
The enactment
of legislation to
regulate this type of
contract is desirable
but what does
seem clear is that
the existence of a
PPP law does not
guarantee success in
their implementation

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LIQ talks to María José Esteruelas Aguirre, General
Director, South America
Abengoa
Construction of Transmission Tower Agua Prieta

What kind of businesses does Abengoa
perform in Latin America?
Abengoa is present in Latin America
since 1968. Abengoa has two main ac-
tivities in Latin America: engineering &
construction (EPC) and concession-type
infrastructures in the energy and envi-
ness, both renewable and conventional
energy, as well as water, treatment and
transmission, are more and more relevant
in this market. According to the Engineer-
ing News Record ranking 2012, Abengoa
ranks fourth in the international contrac-
tor in Latin America region ranking. 2012
is the sixth consecutive year that Abengoa
ranks first as the largest international con-
tractor in transmission and distribution.
Latin America had been very relevant for
obtaining this position.
Which are your largest markets in Lat-
in America? What factors make these
markets attractive to your company?
Abengoa has a strong presence in Argen-
tina, Brazil, Chile, Mexico, Colombia,
Peru, and Uruguay, even though Aben-
goa has also developed projects in other
countries in the region. At the moment,
Abengoa´s largest markets are Brazil,
Mexico and Peru, and according to the
pipeline identified, these countries will
continue being the most relevant mar-
kets, even though others will also earn
more importance. Regarding the fac-
tors that make these markets attractive,
I would highlight the political stability,
the government´s commitment with the
“Abengoa´s largest markets
are Brazil, Mexico and Peru,
and according to the pipeline
identified, these countries
will continue being the most
relevant markets”
ronment sector. Traditionally, EPC and
concession business of transmission lines
are the most relevant business in Latin
America. Nowadays, generation busi-
improvement of the population´s quality
of life and economic standard as well as
ease of doing business since, for example,
there are no language barriers for us.
Palmucho

How does the company finance its La-
tAm projects?
As in other regions, Abengoa finances
projects with its own equity as well as
third parties equity. For the concessions-
type business Abengoa gives a global
solution for the customer where Aben-
goa does the construction of the project,
operates it and finds a financial solution
and the costumer just pays a tariff for the
output of the project.
For these projects long-term finance is
needed, where the recourse against Aben-
goa is limited to the performance during
the construction. The amount of this debt
is around the 60-75% of the funds that are
necessary for the construction of the proj-
ect. The rest of the money comes from
equity of Abengoa or/and other partners.
With the tariff that is paid by the final cus-
tomer, the debt is repaid and the share-
holders obtain their return. The recurrent
payment must be enough so that it covers
all the project necessities and the spon-
sors do not have to put additional fund
after the construction.
4. Has the retreat of European banks
as providers of long-term financing af-
fected the company?
Of course, the retreat of the European
banks has affected the company, but in a
minor percentage if we compare it with
other companies. One of the main as-
pects of Abengoa´s internationalization
is its ability to finance the projects with
local and international banks wherever
the infrastructures are located. Besides,
the kind of projects that Abengoa usually
builds are very attractive for the com-
mercial banks and even though they have
restricted the limit of the amount that
they can finance, they are still financing
our projects. Local banks are very active
and also, other financial institutions like
multilaterals and ECA’s that in the past
were not very competitive, are now very
important actors and are helping Abengoa
to find financial solutions for our projects.
5. What do you look for in project
sponsors for your engineering and con-
struction business and in partners for
your concession-type infrastructures
business?
In both kind of activities, Abengoa looks
for reliable consolidated partners with ex-
perience in the business. In technological
partners, we look for proven technology
know-how with international scope. As
for investing partners, experience in the
sector is very welcome.
“One of the main
aspects of Abengoa´s
internationalization is its
ability to finance the projects
with local and international
banks wherever the
infrastructures are located”
ATE V LT 230 kV Londrina-Maringa

Montes del Plata (Uruguay)

M
aría José Esterue-
las Aguirre is an
industrial engineer
(Ingeniero Indus-
trial Especialidad Eléctrica)
from Universidad Pontificia de
Comillas. She also holds a Mas-
ters in Operational Manage-
ment (Máster en Dirección de
Operaciones) from Instituto de
Empresa and has completed a
program in General Manage-
ment at IESE. She started at
Abengoa in 1997 and, since
then, has held different posi-
tions in many of Abengoa’s cor-
porations. She has held the title
of Director of South America
since June, 2011.
6. Can you describe two or three proj-
ects in which you are currently work-
ing on in Latin America?
At the moment our main projects in Latin
America are:
1. A high voltage direct current trans-
mission line in Brazil, from Porto
Velho to Araraquara, with a total
length of 2.412 km at 600 kV DC.
This project is a concession and the
client is Aneel. The construction will
be finished this year.
2. 300 MWe Cogeneration plant for
Nuevo Pemex in Tabasco, Mexico. It
is also a concession with a capacity
of 800 tn/hour of steam. This project
will be completed this year too.
3. The ATS project in Perú, consists of
a 900 km 500 kv Transmission Line
from Chilca (60 km south of Lima)
to Moquegua. This transmission line
will provide energy to five regions in
the southern part of Peru and, there-
fore, contribute to develop those ar-
eas of such country. Abengoa will fi-
nance, own operate and maintain the
project for 30 years. The investment
required is of around 500 million dol-
lars and will operate by the fourth
quarter of 2013.
What are the main lessons learned from
engaging in long-term projects in LatAm?
There are two key elements that guaran-
tee our success:
1. Adaptation to the local markets.
2. Development of human capital based
on selection and training of local pro-
fessionals.
Is your leadership in solutions for sus-
tainability something that the market
values in Latin America? Or is Aben-
goa involved in projects because of the
vast experience in engineering and con-
struction?
Both. The sustainability, with its three main
aspects, economic, social and environmen-
tal, and the experience in engineering and
construction, makes Abengoa the perfect
partner for infrastructure development.
LEAT AGECO Tranch

Latin Infrastructure Quarterly 27Company Profile

Can you describe the current political atmosphere and le-
gal framework regarding having the private sector involved
in the development and financing of infrastructure through
Public-Private Partnerships in Uruguay?
U
ruguay has one of the most stable democracies in
America and is considered the best democracy in
South America according to the index of democracy
in “The Economist Intelligence Unit”. It is also the
second country with greater economic freedom according to the
Heritage Foundation after Chile. In Uruguay there is a stable
political system where State policies are developed on specific
themes considered strategic. They are diagramed in consensus
between the Government and the opposition and oriented to-
wards the long term. If to this aspect we add on an independent
judicial system and a strong tradition of fulfilling obligations
and contracts even in the circumstances more pressing as during
the crisis of the year 2002, we can say that our country is a good
candidate for investing in long-term projects.
Regarding the legal and institutional framework for the de-
velopment of infrastructure, Uruguay was the Latin American
country that ascended the most according to the general index
of Infrascope 2012 for PPP development in infrastructure. This
growth was mainly given by the implementation of a new regu-
latory framework, the development of a institutional framework
with the creation of a professionalized and specialized PPP unit
Uruguay: the
Corporación
Nacional para
el Desarrollo
within the Ministry of Economy and Finance and the granting of
new responsibilities to the Corporación Nacional para el Desar-
rollo (CND).
This context was generated by the legislative approval, in
July 2011, of Law 18.786, or the law for private public partici-
pation, and its subsequent regulation by the Executive branch. It
gives a very complete and appropriate legal framework for the
development of infrastructure in Uruguay through PPP contracts
according to the best international practices. Thanks to this law
any public administration can carry out PPP contracts entrusting
a legal entity of the private sector with the construction, opera-
tion, maintenance, design and/or financing of infrastructure for
a certain time period.
This legislation has as principles the transparency of informa-
tion, the protection of the public interest, economic efficiency,
proper distribution of risks, equanimity, not discrimination, pro-
motion of competition, respect for labor rights, and protection of
sustainable development, among others.
In this context, what is the role of the National Corporation
for Development (CND)?
The CND acts as a concessionaire or fiduciary for public trans-
port, energy, telecommunications or any other infrastructure
projects that are for public use. For this purpose the CND can
create or acquire corporations or participate in consortia and/
LIQ talks to Marcelo Pérez, Project
Evaluation Manager

or trusts specialized in exploitation of granted concessions or
projects.
It can also advise the Executive branch in the identification,
design, structuring, promotion, selection and procurement of
PPP projects. In addition, the CND develops and promotes the
implementation of PPP projects through the application of the
best technical criteria and adherence to the principles and guide-
lines contained in the law.
In the current PPP projects, the CND has collaborated with
various sectorial ministries in the structuring of projects. In
this regard, Eligibility, Profile, Feasibility and Value for Money
studies have been carried out, in addition to designing the bid-
ding terms and contracts.
Furthermore, the CND prepared technical guidelines that ap-
ply to PPP projects through the preparation of guides of rec-
ommended best practices, standardization of procedures, and
preparation of manuals, models and tools that contribute to the
design and execution of the concerned projects efficiently and
effectively.
What are some of the projects under the PPP model that the
CND has worked on?
In terms of infrastructure, our country has in first instance fo-
cused to resolve two key aspects of our current public policy.
Firstly improve the productivity of the logistics sector and there-
fore the competitiveness of the country, and secondly collabo-
rate in the strengthening of citizen security. In this sense, the first
projects have been a corridor road of 170 kms and a center for
the detention of 1,960 persons deprived of liberty.
The road project involves expansion, modification of struc-
tures and reconstruction of 170 kms of Routes 21 and 24 located
in the west coast of Uruguay together with a project to bypass
the city of Nueva Palmira (main bulk carrier port of the country).
This city is located in an area that has strongly developed the
grains and wood production both for export and for industrial
production of cellulose. This development has generated an in-
crease in truck traffic where these routes require a path of fast,
efficient and safe exit to the scale of charges which are currently
transported.
The prison compound responds to a citizens’ need for greater
security and the rehabilitation and re-education of persons de-
prived of their liberty. The prison system in Uruguay is currently
overpopulated and fails to fulfill the functions for which it was
created: the deprivation of the liberty of offenders and their de-
tention in a dignified manner that allows for their rehabilitation
and personal development.
This project engaged a space specifically for the entry of in-
mates to the prison system where they are diagnosed and clas-
sified according to their profile to determine their destiny. With
the installation of these 1,960 places the objective is to eliminate
overcrowding in the Montevideo metropolitan area allowing
spaces for educational development, recreational areas and vis-
its. It also provides for the management of the services of food
and cleaning, laundry and commissary with the aim of improv-
ing the environment for both inmates and guards and make the
State specialize in providing only the services of health, educa-
tion and safety of the premises.
In addition to these two projects which are the most ad-
vanced, six projects of roads, two railways and three projects to
reform and improve areas of control in border crossings are in
the preliminary stages.
Integrated control areas projects consist of the installation of
infrastructure necessary for the proper functioning of the Areas
of Integrated Control of Fray Bentos, Paysandú and Chuy. It
aims to make more agile the border crossing with Argentina and
Brazil by minimizing waiting times and boosting controls ac-
cording to what the MERCOSUR regulations stipulate. Regula-
tions that Uruguay is currently failing to comply.
Still on early stages we can also find the creation of a deep
water port in La Paloma with direct access to the Atlantic Ocean
for deep-water ships.
How about the state-owned companies?
In Article 3, the PPP law considers included in the term “Pub-
lic administration”, the autonomous entities and decentralized
services. Because State-owned companies have this legal form
they are enabled to establish PPP contracts with private sector
actors. Currently, the main infrastructure projects involve the
State-owned power company UTE and the National Administra-
tion of Fuel, Alcohol and Portland (Administración Nacional de
Combustibles, Alcoholes y Portland – ANCAP).
“The PPP law gives
a very complete
and appropriate
legal framework
for the development
of infrastructure in
Uruguay according
to international best
practices”

UTE is in process of completing the frequency converting
for the electric interconnection with Brazil along with the es-
tablishment of a 500 kilovolt line. The installation of a 500 MW
combined cycle thermal power plant will also be awarded. In
the field of energy distribution, UTE aims at reaching 100% of
electricity supply in the rural areas.
ANCAP has as objectives in 2013 the conclusion of a series
of works such as a biodiesel plant in Montevideo, a plant for
production of lime in Treinta y Tres, together with the beginning
of the construction of a plant of cement in the same area. At the
same time it has as an aim to finalize a non-sulfidizer plant to
reduce the amount of sulfur in fuels allowing for the recovery of
30 tons/day of sulfur destined for the production of fertilizers.
By the middle of the year and in conjunction with UTE, AN-
CAP will also begin the process for the construction of a re-
gasification plant. Moreover, ANCAP continues with the tasks
of hydrocarbon exploration in the north of the country as well
as through its maritime platform. ANCAP will invest approxi-
mately USD 250 million in 2013. However, if we add private
investments in investment projects promoted by ANCAP the
figure reaches USD 1 billion.
How do you promote Uruguay abroad and what level of in-
terest is out there towards the country?
Uruguay being a small country at the regional level should have
as a base for its foundations its competitive advantages in opera-
tion and not in economies of scale. In that case we must promote
investment through active policies for the development of stra-
tegic sectors.
These active policies include the Law of Free Port whose re-
gime transformed the port of Montevideo into a logistics center
specialized in goods in transit and that positions itself as a re-
gional hub. The Law of Free Zones allows industrial establish-
ments and services with the guarantee of the non-imposition of
taxes created or to be created.
Uruguay Road Corporation (Corporación Vial del Uruguay
– CVU) is a company wholly owned by CND which has more
than 1,500 miles of roads under management. It seems like a
successful venture, can you comment on the experience?
CVU was created in 2002 in order to reconstruct, maintain,
finance and operate a series of highways that needed State co-fi-
nancing. Initially, it was expected from CND to sell shares of the
CVU, but various authorities have expressed interest in keeping
the ownership of the company. In my opinion, the latter has been
a successful instrument to manage roads that originally were
low in traffic, but had an important proportion of heavy traffic.
However, the growth of recent years has led to change the sta-
tus of such circuits, from low-traffic roads to middle, and where
the proportion of trucks has been growing over time. The de-
crease in variability in the traffic and the contemporary increase
of transit as a result of economic growth, makes one think that
at the end of the current lease, the possibility of concession to a
private sector agent for many of such circuits should be evalu-
ated. Also, some of the roads that are currently not in concession
could change management mechanism from being completely
in the public orbit to a scheme similar to the one of the CVU.
“State-owned
companies are
enabled to establish
PPP contracts with
the private sector”
M
arcelo Pérez
is an Econo-
mist special-
ized in Infra-
structure and Transport
Economics with particular
emphasis on risk analysis,
eligibility of PPP projects
and analysis of value for
money. Since 2006, he has
been economic advisor of
the Uruguay Road Corpo-
ration. During the years
2008 and 2010, he worked
as a specialist for the firm consultant CSI Engineers
where he participated in studies on aspects related
to the fixing of road toll rates and their impact on
future revenues,economic efficiency,and feasibility.
Since 2008,he has worked in projects related to are-
as of Economy of Transport, Environment and Ener-
gy, both in the academic and professional fields. He
has performed consultancies for theWorld Bank,the
IDB and ECLAC. Since 2010, he has been the Man-
ager of Project Evaluation of the National Corpora-
tion for Development. In this institution he has led
the feasibility studies, eligibility and public private
comparator in more than 15 infrastructure projects
from different areas (roads, railways, hospitals and
prisons).
HeholdsaMaster’sDegreeinEconometricsfromthe
University Torcuato Di Tella of Argentina, and speciali-
zations in Financing of Infrastructure Equipment and
Services of Fundación CEDDET in Madrid and Regula-
tion of theTransport of the University ofValencia.
He is a professor and researcher at the Faculty of
Social Sciences and Management from the Univer-
sidad ORT Uruguay, and a visiting professor teach-
ing Transport Economics at the Master’s degree in
Economics offered by the University of the Republic
in Uruguay.

What is your title and role at Interna-
tional Finance Corporation (“IFC”)?
I’m the Manager for IFCAdvisory Servic-
es on PPPs (Public-Private Partnerships)
for Latin America and the Caribbean
(C3P). Our group advises governments at
IFC Advisory
Services on
PPPs LIQ talks to Richard Cabello,
Manager
structuring and financing PPPs in emerg-
ing markets in all infrastructure sectors,
including social sectors (health and edu-
cation).
What is the geographical scope of your
operations and what sub-sectors (ports,
roads, hospitals, etc) is your team pre-
pared to work in?
the national or sub-national levels in the
structuring, promotion and bidding pro-
cess of infrastructure PPP projects.
What makes IFC Advisory Services -
Public Private Partnerships attractive
to governments?
What makes our services attractive is
IFC’s vast international experience in
“During project
implementation,
government
officials also learn-
by-doing when they
interact with the
IFC team”

Our team is distributed in regional
hubs: (i) Mexico, from where we cover
Mexico and Central America; (ii) Co-
lombia, to cover the Andean region;
(iii) Trinidad, to service the Caribbean;
and (iv) Brazil.
We cover all typical infrastructure sec-
tors: transport in all forms (ports, airports,
roads, rail), energy (generation, including
renewable energy, distribution, and trans-
mission), water, telecoms, etc.; as well
as social sectors (health and education).
In addition, we are venturing into non-
typical sectors: forest, irrigation, among
others.
How do you generate a project pipe-
line? Do governments reach out to you
or vice-versa? What criteria do you
use to determine: (i) which govern-
ment to advise and (ii) what project to
work on?
Our team interacts directly with the gov-
ernments’ PPP units both ways, we visit
them and they call us. Main criteria to se-
lect our projects include: (i) government’s
commitment to do PPPs, (ii) whether the
project has a high development impact,
(iii) whether the project is at the right
stage of maturity, meaning whether the
basic technical analysis has already been
conducted (including cost-benefit analy-
sis if possible), (iv) whether the project is
in a pioneer sector, etc.
What makes the public sector con-
cerned from involving the private sec-
tor in infrastructure development?
And, what makes the private sector
uncomfortable from involving in infra-
structure development in certain juris-
dictions?
In my opinion the main concerns gov-
ernments have are: (i) how to reconcile
public interests with the private sector’s
need for reasonable financial returns in
a long term contract; and (ii) how to do
transactions as quick as possible.
The private sector is mainly interested
in: (i) working in a stable political and
economic environment, (ii) the project’s
bankability, (iii) efficient and transparent
selection process, (iv) a knowledgeable
government counterpart for project su-
pervision, among others.
How do you finance your operations
and how close do you work with the
investment department of IFC, other
multilaterals and commercial/invest-
ment banks?
IFC C3P charges retainer and success
fees. The retainer is paid by government
clients and success fees are paid by se-
lected private sector bidder.
We interact with potential financiers
during due diligence to get a sense of po-
tential financial conditions prevailing in
the marketplace and during the promotion
stage to support the marketing to spon-
sors. This may include the IFC invest-
ment department in which case we apply
protocols to avoid any potential conflict
of interest.
How much of your work is capac-
ity building and how much is project
structuring? Regarding the former,
how can you best improve the chances
that the knowledge/know how passed
on to public sector officials stays in the
public sector?
Knowledge sharing is one key compo-
nent of our service, we participate and
promote capacity building events with
the World Bank Institute and other mul-
tilaterals or national development banks
like IADB, CABEI, CDB and BNDES.
During the project implementation phase,
government officials also learn-by-doing
when they interact with the IFC team. In
addition, we develop concession mod-
els and standard transaction documents
which governments could use in future
transactions.
If you had to point out three lessons
learned from assisting governments in
structuring projects, what would those
be?
Three main lessons for governments
would be: (i) although speed is a high
government priority, allocate sufficient
resources (funds, staff) and time to proj-
ect preparation, that includes all technical,
legal, financial, environmental and social
studies needed to properly structure the
transaction. This will enable governments
to take solid and credible transactions
to the market; (ii) be ready to compete,
everybody is knocking the doors of the
same group of investors, therefore imple-
ment a comprehensive promotion cam-
paign; (iii) listen to the market, maintain
open interaction with potential investors,
market conditions change and you have to
be able to adapt.
“Allocate sufficient resources
(funds, staff) and time to
project preparation […] This
will enable governments
to take solid and credible
transactions to the market”

Latin Infrastructure Quarterly34 Infrastructure Financing
What is your current role at Odebrecht
Engineering & Construction, how
many people make up the team you
lead and what is the geographical scope
of your work?
I am responsible for supporting our proj-
ect directors in the development of fund-
ing for their projects within Latin Amer-
ica, excluding Brazil and Venezuela. I
also have a coordinating role in terms
of our relationship with international fi-
nance institutions, such as the multilat-
eral agencies, for the projects located in
this region. As a decentralized and flat
organization, most of the transactional
work in Odebrecht is executed by the fi-
nancial managers located at the project
level. We are client oriented and in order
to provide a better service we have to
work very close to the client. However
this decentralization, together with the
geographical dispersion, also represents
challenges for us. In order to overcome
these, for the last few years we have
been developing knowledge communi-
ties, which are groups of highly special-
ized professionals who form a forum on
specific themes, such as sustainability
and energy, for the exchange of ideas
and solutions encountered in projects.
These knowledge communities mitigate
the loss of synergy caused by the physi-
cal and cultural obstacles.
Let’s dissect the LatAm region, which
would you say are the markets Ode-
brecht would like to expand? As the
person in charge of securing the much
needed long-term financing, what are
your main concerns when exploring a
new jurisdiction?
We are in the majority of countries in
Latin America and when looking for new
markets we usually assess different as-
pects at the country, project and sector
levels. Let´s start with the relationship
between the host country and Brazilian
foreign policy. It is very important that
the Brazilian Government has a solid re-
lationship with the host country and our
prospective government client. Among
other factors, this facilitates the viabil-
ity of export credit finance from Brazil,
which is always a significant benefit for
our clients. Secondly, the project has to
be of national interest and a priority for
Odebrecht:
LIQ talks to
Vinicio Fonseca,
Director of
Structured
Finance at
Odebrecht
Engineering &
Construction
Project Financing in
Latin America
“It is very important that the
Brazilian Government has a
solid relationship with the host
country and our prospective
government client”

Latin Infrastructure Quarterly 35Infrastructure Financing
the country, not only for a specific gov-
ernment. This is fundamental, because
most of these projects take several years
to complete and often the later stages of
construction take place under a new dif-
ferent elected government. Finally, the
projects have to be socially and environ-
mentally sustainable, bringing benefits to
the local community. For instance, proj-
ects which satisfy the basic needs of the
society such as energy, transportation,
water and sanitation are the most appeal-
ing in this regard.
How about those markets in which
Odebrecht has already worked and
would like to consolidate its presence?
From a finance perspective, what are
the elements of a particular market
“The project has to be of
national interest and a priority
for the country, not only for a
specific government”
that make long-term financing sources
available?
What makes long-term finance available
is the perception of the financial commu-
nity that the country and project risks are
acceptable for a given rate of return. In
addition, in case of local finance, a well-
developed capital market and efficient
regulatory framework are also an impor-
Construction of Panama City Metro

Latin Infrastructure Quarterly36
tant factor. Most countries in Latin Amer-
ica have proven to be resilient to recent
financial crises, but still suffer from lack
of capital for infrastructure finance.
What services does the BNDES provide
you in your LatAm projects?
and services which are necessary for the
construction of much needed infrastruc-
ture in other countries, not only in LatAm
but also around the world. It is a win-win
situation for both sides. The client ben-
efits from long-term finance in competi-
tive terms and Brazil promote its export
we subcontracted with 2,000 medium and
small suppliers representing more than
250,000 jobs in Brazil. And with the fo-
cus we have on supporting local people,
with the payment of the local costs by the
client, we generate thousands of jobs also
in the communities which surround our
The export division of BNDES (BNDES
EXIM) plays a fundamental role in sup-
porting the finance of Brazilian goods
sector. And these exports benefit not only
the main contractor, such as Odebrecht.
For example, in 2012 through our exports
projects. For instance, although are not
a footwear manufacturer, at a given mo-
ment in time Odebrecht I recall that we
“In 2012 through our exports we
subcontracted with 2,000 medium and small
suppliers representing more than 250,000
jobs in Brazil”
Infrastructure Financing
UHE Chaglla - tunnel

Latin Infrastructure Quarterly 37
“I would like to see more cooperation between the
main players in the financial markets, especially
commercial banks and political risk insurers”
were among the largest exporters of boots
from Brazil!
Which are the ECAs with which you
have worked the most and what kind
of services have they provided?
In addition to BNDES EXIM we fre-
quently work with Euler Hermes from
Germany on the finance of the purchase
of Tunnel Boring Machines for our proj-
ects, such as metro and hydro plants, and
with US EXIM for the purchase of other
heavy construction plant and machinery.
More recently we closed our first buyer
credit transaction with US EXIM, under
which they are financing the exports from
our US trade company to a client in the
Dominican Republic. So now Odebrecht
is also financing exports from US in the
same way we do from Brazil. The abil-
ity to arrange long term finance for our
projects is a very important feature of our
service.
What are your thoughts on project
bonds?
They are an interesting development that
work very well for brownfield projects,
those with a stable income stream. Green-
field projects still represent a challenge
for investors, because they are not often
comfortable with the construction risks.
In addition, bonds are also more exposed
to systemic risks in the capital markets.
So markets sometimes are closed even for
good risks and irrespective of the under-
lying asset. I would say that it is one more
tool which is available for developers.
Are there any financing mechanisms
in the region that you would welcome?
And, is there a financial instrument
that you would like to see used more
often? Why?
I would like to see more cooperation be-
tween the main players in the financial
markets, especially commercial banks and
political risk insurers. This has improved
substantially in recent years, but there is
much more to be done. For instance, in
most markets in LatAm they will not go
beyond 5 years, which may be not enough
for large projects. As an example, despite
financial crises, over the last 10 years we
have arranged more than US$1 billion in
finance from commercial banks for our
clients, without any defaults. So, it is im-
portant to have the right partners but re-
cently it has been more difficult to obtain
support from the banks.
What do you think of the decision by
the BRICS countries to create a devel-
opment bank focused on infrastruc-
ture? Is it needed? How may it affect
our region?
The finance of infrastructure is challeng-
ing and any additional support is always
welcomed. South-to-South cooperation
has always been seen as a major devel-
opmental factor for the region, and infra-
structure plays a key role in this. So, yes,
although still in its early stage, we see this
is as an important instrument which will
contribute positively to our region.
“We frequently work with Euler
Hermes from Germany on the
finance of the purchase of Tunnel
Boring Machines for our projects,
such as metro and hydro plants, and
with US EXIM for the purchase of
other heavy construction plant and
machinery”
Infrastructure Financing

What is the history and purpose of the Center for Latin
American Logistics Innovation (the “Center”)?
T
he Center for Latin American Logistics Innovation
(CLI) was created in 2008 as the Latin American
node of the Supply Chain and Logistics Excellence
(SCALE) Network. The SCALE network itself was
created by MIT’s Center for Transportation and Logistics, as
a means to expand the reach and scope of logistics and sup-
ply chain-related research, as well as to learn from practices
around the world. The role of CLI as the Latin American node
of the Network is to lead and engage in relevant research on the
Logistics and Supply Chain for the region, and to share it and
strengthen it through interaction with the other 3 members of the
network: MIT CTL itself, the Zaragoza Logistics Center (ZLC) -
the European Node, and the Malaysia Institute for Supply Chain
Innovation (MISI), the Asian node of the network.
Although it may seem as Latin America has little to offer
in terms of logistics, the fact is that here we have developed
practices tailored to our particular conditions that can contrib-
ute greatly to the global knowledge pool of logistics and supply
chain. In particular, peer to peer distribution networks have been
developed more extensively in emerging economies to enhance
and expand the reach of distribution networks without adding
too much cost to the product, a concept that could find new uses
and benefits in developed economies where large distribution
networks already exist and dominate the market.
CLI operates in three main lines. The first of them is educa-
tion, with academic and executive courses aimed at profession-
als that work in the logistics and supply chain management. The
second line is research, which in the case of CLI means applied
research, focused on identifying best practices or on developing
new or better ways to perform logistics or supply chain manage-
ment tasks. The third strand is outreach, which means liaising
and interacting with leading companies to transfer the knowl-
edge created within CLI and also identifying their challenges or
opportunities in order to generate new research.
What is your role there?
My role within CLI is to research and further the ways in which
public and private stakeholders can work closer together to
achieve logistics and supply chain competitiveness goals. My
research began on the divide that I perceived to exist between
the public and private sector stakeholders that impact upon the
performance of logistics and transport systems, having traced
back the cause to a significant mismatch between the interests
of three main groups: the private sector companies (shippers),
private sector infrastructure and equipment producers, and pub-
lic sector policy-makers. The public sector strives to design and
implement policies that aim to satisfy a wide spectrum of private
sector stakeholders. The shippers seek to optimize their distribu-
tion network and improve their profits and normally care little
for the impacts their actions may have on others. Finally, private
sector infrastructure and equipment providers, seek normally to
push for policies that will benefit more their particular lines of
business. With these conflicting interests, it is seldom strange
that policies, infrastructures and regulations fail to meet their
desired outcomes, even if this means having to bail out infra-
structure concessions that get into trouble after the traffic and
revenue expectations fail to materialize.
I have sought to approach these problems through complex
and dynamic systems theories to analyze the issues and propose
solutions to them. I have come to realize that acknowledging
transport and logistics as complex systems does not mean “giv-
LIQtalkstoAndrésBaquerooftheCenter
forLatinAmericanLogisticsInnovation
Logistics
Infrastructure

ing up” on finding solutions, but actually, it is the opposite.
Identifying the flows and variables and, more importantly, the
feedback loops that drive these systems can help to find “sim-
ple” and (relatively) cheap solutions. Solutions that, by target-
ing key variables and using virtuous circle dynamics, achieve
the objectives at a fraction of the cost and in a way that makes
them more prone to be sustained over the long run.
With this research I think I have become an “enlightened
middleman” that will help to align the goals of the private and
public sectors and, thinking more long term, even help to bridge
the existing gap between them and help them work together.
What is logistics infrastructure? Can you provide with some
examples?
From my personal experience I can say that there is not one
unique scope or definition for infrastructure, and even less so
for “logistics infrastructure”. Having made that clear, to me
there are two main types of infrastructure: physical infrastruc-
ture, and legal infrastructure.
The physical infrastructure is made up of all those nodes and
arcs that make up a logistics or transport network. Among these
are ports, airports, train stations or terminals, roads, and rail-
ways all of which tend to be developed by the public sector for
wide use by the citizens or firms. The physical infrastructure
also includes other more private elements such as warehouses,
distribution centers, logistics platforms, and cross-docking cen-
ters, that are built or adapted to the specifications or require-
ments of specific clients or groups of clients.
The legal infrastructure consists of all the laws that deter-
mine the way in which commercial, trade or labor relationships
are to be carried out, and also those that establish the ground
rules for the provision of the physical infrastructure. Within the
legal logistics infrastructure are bilateral or multilateral trade
agreements, trade and commerce statutes, competent and timely
justice services, and, also, the ground rules on how the physi-
cal infrastructure can be provided or maintained to support the
movement of the goods and services.
My experience has led me to believe that both subtypes of
infrastructure should allow, and even foster, research and devel-
opment that increase the performance of transport and logistics
systems and introduce new practices and technologies. Restrict-
ing the participation of people or firms in trade, the provision
or use of the physical infrastructure or in the creation of inde-
pendent certification institutions will only hamper the “creative
destruction” that is required to consolidate and renew the com-
petitive basis of a country, region, city or firm. By this I am not
calling for complete deregulation and laissez faire governments,
but for a smarter approach that focuses more on key issues and
the outcomes, which can only be done if it focuses on the inter-
faces and interactions between the different systems and a long-
term vision or goal of where all stakeholder wish to be in the
future.
Why is it important for governments to have a logistics in-
frastructure agenda?
Before discussing the importance of having a logistics infra-
structure agenda, I wish to make a few remarks on the origins of
that agenda. I stated before that the performance of the transport
and logistics systems is the compound result of the performance
of all of its elements, with the physical and legal infrastructures
provided by the government being just some of the factors in-
volved. Having the government come up with an agenda of its
own will do no good if it clashes with the plans of the private
sector. Therefore, the government’s logistics infrastructure
agenda should come out as one of the results of a larger effort
“We have developed
practices tailored
to our particular
conditions that can
contribute greatly to
the global knowledge
pool of logistics and
supply chain”
“With these conflicting
interests, it is seldom
strange that policies,
infrastructures and
regulations fail to
meet their desired
outcomes”

The Reventazón Project includes the construction
of a 130 meter high dam, flooding of a 6.9 km2
reservoir and a 4.2 km river diversion between the
dam and powerhouse.
of building a common vision and goals between all logistics and
transport stakeholders.
Besides the ability to convey the vision and the long
term goals to all stakeholders, I see two main areas where
the public sector agenda has the greatest impacts. First, it
has to confirm the engagement of the public sector with the
common vision and state clearly which types of actions the
public sector will pursue with regards to the provision of the
appropriate physical and regulatory infrastructures, which, as
I mentioned before, has more to do with creating the right en-
vironment for experimentation and development, than with
building warehouses or roads. The second issue has to do
with the need to clearly set out the limit of their interven-
tions, and stand by that limit, which should enable the private
sector to begin to develop their own solutions. Any gray ar-
eas may create areas of action into which no private stake-
holder will want to go for fear of losing their investment or of
spending large sums of money in infrastructures or services
that will end up being provided by the public sector for the
benefit of all.
A couple of years ago one of the directors of a logistics-
related company pointed out that current logistics businesses
are capital intensive in terms of the facilities and equipment
required to support the operation. The lack of government’s lo-
gistics infrastructure agenda, or any ambiguities contained in
it will de-incentivize investment and the logistics performance.
The government’s agenda is, then, the basis of the competitive
development of the sector, and has to be produced through prop-
er analysis, discussion and consensus-building processes.
How can such infrastructure be financed?
Considering that form me there are two types on infrastructure
I will discussed each one separately. Funding of logistics physi-
cal infrastructure can resort to traditional means of government
funding, project finance-type concession schemes based on
fares or tariffs charged to the users or by the rent of commercial
spaces in or around the infrastructure. These schemes have been
used over many years and there are recommendations on what
to do to reduce their risks and multiply the positive impacts.
Even though the financing of the physical infrastructure can
resort to traditional practices, I believe that innovation efforts
should be geared towards developing new institutional arrange-
ments that would allow that infrastructure to change and adapt
in a more fluid way. The current schemes of government fund-
ing or project finance-type concessions are too rigid to adapt to
the changing needs of the social and economic activities. New
schemes that maintain the flexibility in spite of the high capital
costs of the physical infrastructure should be introduced to opti-
mize the provision and use of the infrastructure.
With respect to the regulatory infrastructure, I believe that a
change is required from schemes in which the public sector and
its consultants come up with the policies and standards, towards
a more consensual approach, where the different stakeholders
get the opportunity to participate and where the solutions are
not defined by one stakeholder, but by many of them acting in
conjunction.
What are the main flaws of regulation affecting logistics in-
frastructure in the main Latin American markets?
Below I present the main issues with the regulation in Latin
America that affect logistics practices. These are mainly based
on my experience in Colombia, but can be extrapolated to other
countries:
There is little or no discussion or consensus between the pub-
lic and private sectors before adopting new transport or logistics
regulations. This practice may still work for other sectors where
providers must satisfy a minimum quality or performance to all
users, but in environments as diverse, interrelated and complex
as transport and logistics, failing to consult and build consensus
may lead to the adoption of regulation that turn out to provide
the wrong kinds of incentives.
Policies and regulations in Latin American countries are usu-
ally introduced as means to “catch up” or adapt practices of
more developed countries, instead of being used as tools to pro-
mote new and distinctive capabilities that help to consolidate a
competitive strength. These catch-up regulations tend to be too
restrictive on what can and cannot be done, hampering the cre-
ative destruction process that will build efficiency and competi-
tiveness over the long run in the transport and logistics sector.
Local economic development policies and land use regula-
tions are forcing logistics infrastructures and services out of the
cities as “undesirable” traffic congestion and pollution genera-
tors. Instead of focusing on expelling these activities, which
may actually end up causing more congestion and pollution, the
regulation should be aiming to improve their environmental and
operational performance by focusing, for example, on requir-
ing maximum loading/unloading times, instead of complete the
bans on cargo movements that are being sought on many cities.
Please comment on the main research projects of the Center
involving logistics infrastructure.
The center has currently three main lines of research, all of
which engage, in one way or another, logistics infrastructure.
The main lines that have been pursued within the last few years
are a study of the determinants of the location of regional distri-
bution centers for multinational companies, the analysis of the
food supply chain for Bogota, including the challenges faced by
new logistics platforms to become part of the system, and also
a review of some companies supply chain strategies and their
impact on their networks.
Besides the research lines, the Fundación LOGyCA, which
operates within CLI, also provides services to study the viability
and specifications of different types of transfer nodes such as
logistics platforms, distribution centers and fluvial ports.

Latin Infrastructure Quarterly 41Regulation
Market
Context
and
Policy
Framework
TheEvolutionof
theMexicanPublic
PrivatePartnership:
Eduardo Márquez Certucha
As of January 17, 2012, the Federal Law of Public-Private Partnerships (Ley de Aso-
ciaciones Público Privadas) (the “PPPLaw”) came into effect in Mexico. The PPPLaw
was conceived as an obligated response to the need for a specific regulatory frame-
work for public-private investments. Some of the PPP Law’s main objectives are to
generate certainty, transparency, and efficiency in the public-private investment pro-
cess as well as to allocate the risks of these projects between the parties; its result is
to prepare an adequate climate for foreign and domestic investment in infrastructure
projects. The following article will provide an overview of the evolution of public pri-
vate partnerships (PPPs) in Mexico, as well as the current market context and policy
framework in which the PPP Law was enacted.

Latin Infrastructure Quarterly - Issue 7

Latin Infrastructure Quarterly - Issue 7

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Latin Infrastructure Quarterly - Issue 7