Companies                     Latin Infrastructure Quarterly   1            Brazilian Airport              PrivatizationPO...
2      Latin Infrastructure Quarterly                                                                            Contribut...
Contents                                                                                                               3CO...
24   Latin Infrastructure Quarterly                                      Airport                                      Infr...
Deals                                                                                            Latin Infrastructure Quar...
26      Latin Infrastructure Quarterly                                                                                    ...
Deals                                                                                             Latin Infrastructure Qua...
64   Latin Infrastructure Quarterly   Companies
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Li qissue1 september2011-fpm

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Brazil’s deficient airport infrastructure was not a major issue until the country
was awarded the 2014 World Cup and the 2016 Olympic Games, yet for
years it had impaired the blossoming of high-value-added industries. Historically
Brazil has been able to manufacture high-added-value products at
low costs, but the costs of shipping those products to Europe, Asia or North
America – which purchase 70% of Brazil´s exports and are only reachable by
sea or air -- inhibit its competiveness. Many factors account for these costs,
but the country´s airport infrastructure should take much of the blame.

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Transcript of "Li qissue1 september2011-fpm"

  1. 1. Companies Latin Infrastructure Quarterly 1 Brazilian Airport PrivatizationPORT OF Guatemala PPP LawCALLAOMultipurpose North Cleantech InfrastructureTerminal A New Investment Frontier?
  2. 2. 2 Latin Infrastructure Quarterly ContributorsContributors Welcome to first issue of Latin Infrastructure Quarterly (LIQ)! LAna Fernández González atin America is going through an impressive economic expansion. We, here at LIQ, agree that economic growth can only be sustained overRoger Miralles time with a strong development of social and economic infrastructure with the private sector actively involved in the process. Every gov-Anadi Jauhari ernment in the region agrees as well. Many countries have chosen toEmerging Energy & Environment take action to foster said development. In those countries, the public and the private sectors have struck partnerships that have resulted or will result in stronger econo-Adrian Barrios mies. This is perhaps why David Roseman, of the Macquarie Group, said that “SouthPricewaterhouseCoopers America is the next logical step”. A few other countries, for different reasons, presentAndrew Bogan less appropriate scenarios for infrastructure development. We intend to provide youBogan Associates with valuable insight from both set of countries. The infrastructure professionals responsible for this process are not looking forDavid Bloomgarden news coverage because they already know in advance the developments of the indus-Multilateral Investment Fund try. We know these professionals are looking to read how their colleagues solved a client’s contractual, regulatory, financial or bureaucratic problem or how they struc-Dennis Blumenfeld tured a specific deal and what lessons were learned. Practitioners also appreciateMultilateral Investment Fund reading about how a certain development will impact the future of the industry, and what ideas are out there that may help address some of the current obstacles to theDiego Harman further development of infrastructure.Rubio Leguia Normand Our proposal with LIQ is for you, the infrastructure professional, to use it as aFabiana Peixoto de Mello mean through which you can access hard-to-find analysis and actionable information from your colleagues in the form of articles and interviews, case studies, project pro-Jorge Figueredo files, and, "logistical" issues to have in mind.Vouga & Olmedo Abogados With the above purposes in mind we intend LIQ to be an accessible space for you to share your ideas and experiences with a relevant audience: fund managers, govern-Luis Pedro Del Valle ment officials, lawyers, bankers, and consultants. Should you be interested in doingArias & Muñoz so please do not hesitate to contact us at info@liquarterly. Also, we look forward to your feedback on things to improve and topics to cover.Manuel UgarteEstudio Delmar Ugarte Abogados We hope you enjoy the magazine.Miguel RoncerosEstudio Delmar Ugarte AbogadosMilagros MaravíRubio Leguia NormandPaulo de Meira LinsInternational Finance CorporationRoberto TapiaRodolfo VougaVouga & Olmedo Abogados
  3. 3. Contents 3CONTENTSGrup TCB..........................................................................................................4A terminal operator with a worldwide presence 40Cleantech Infrastructure:................................................................................8New Investment Frontier?...............................................................................12Multipurpose North Terminal:(Muelle Norte) of Callao’s PortPublic Private Partnership in Chilean Hospitals..............................................20A new market in developmentAirport Infrastructure in Brazil.......................................................................24Mezzanine Finance forLatAm’s Infrastructure..............................................28 12Spain’s Infrastructure P3 Program...............................................................32Infrastructure Projects in Peru:....................................................................36Are Regional Governments Still under the.Paternalism of the Central Government?Privitization Models for Latin American Airports &..................................40Implications for Brazilian Airport PrivatizationInfrascope:......................................................................................................44An interactive learning tool and benchmarking index 28EU Debt Crisis and Spanish PPPs..................................................................46The Impact of the Regional & Local Elections in Spain................................48Itaipú-Villa Hayes Electric Transmission Line..............................................53Hidrovia on the Paraguay River.....................................................................54Airports Concession in Paraguay...................................................................55Peruvian Infrastructure Projects....................................................................57 48Public Private Partnerships Act in Guatemala...............................................59LIQ Speaks with Paul de Meira Lins of the IFC...........................................61
  4. 4. 24 Latin Infrastructure Quarterly Airport Infrastructure in Brazil Fabiana Peixoto de Mello
  5. 5. Deals Latin Infrastructure Quarterly 25Brazil’s deficient airport infrastructure was not a major issue until the coun-try was awarded the 2014 World Cup and the 2016 Olympic Games, yet foryears it had impaired the blossoming of high-value-added industries. His-torically Brazil has been able to manufacture high-added-value products atlow costs, but the costs of shipping those products to Europe, Asia or NorthAmerica – which purchase 70% of Brazil´s exports and are only reachable bysea or air -- inhibit its competiveness. Many factors account for these costs,but the country´s airport infrastructure should take much of the blame.I nfraero, a company wholly owned by the Government of why. In Brazil, however, direct subsidization programs are like- Brazil, manages 67 Brazilian airports, only 11 of which ly to cause a very tough political discussion and to reinforce the are currently profitable. It uses cross-subsidy mecha- existing antagonism between regions, mainly the Northwest and nisms to support the network. The aviation agency Southwest. The country’s historically uneven wealth distribu- (ANAC) issued new regulation that will change cross tion and huge dimensions have ignited these feelings in the past,subsidy calculation (Res 180/11). Instead of setting different and it is not politically wise to stoke them.tiers of tariffs by passenger movement, as Infraero used to do, Brazilian investment capacity is exhausted and infrastruc-negative operational results will be set off with disproportionate ture investments can only be borne by tax increases. Taxationdistribution of the network´s commercial revenues. is already very high and increasing it will reduce the country’s Airports with higher operational results will have higher tar- competitiveness. Moreover, Brazilian regulations are unfriendlyiff increases. The challenge is that most airports have negative to private investment in airport infrastructure.operational results because they do not move enough passengers The Governors of the States of Rio de Janeiro and Minasto break even. Experts estimate that an airport needs to move Gerais are facing a lot of pressure to meet the deadlines for theabout 1.5 million per year to break even, but 66% of Brazil- Olympics and World Cup and are pushing for the total transferian airports move fewer than 1 million passengers per year, and of management of Rio de Janeiro/Tom Jobim and Confins air-24% move fewer than 450,000 passengers. ports to the private sector. The new regulation will increase the rigidity of the network President Dilma Roussef has raised the possibility of trans-and make it even more complicated to receive private invest- ferring the management of some airports to special purpose ve-ment into individual airports. The airports will only be viable as hicles in which Infraero would have minority participation, andparts of a whole. Hence, the privatization of airport infrastruc- then selling the Government’s majority equity in Infraero.ture currently under discussion will maintain 49% Infraero’s Official documents confirming these statements will notnetwork ownership. be unavailable until December 2011. But the recently created There are alternatives for making the network more flexible, Civil Aviation Secretary has just created two additional agen-including direct subsidies to unprofitable routes, as the Essen- cies named CONAERO and CAA and has taken measures totial Air Services (EAS) program in the U.S. and Public Service improve Infraero’s governance.Obligations (PSOs) in Europe do. CONAERO is a committee made up of representatives of the These programs bring transparency and make it very clear Agriculture Ministry, Defense Ministry, Revenue Ministry, De-what portion of the deficit is being borne by the taxpayer and velopment Ministry, Health Ministry, and the aviation agency.
  6. 6. 26 Latin Infrastructure Quarterly Deals CAA is an airport operating authority that will oversee thedirection and operations of most important Brazilian airportswhich are expected to be privatized soon: Guarulhos (SP), Con-gonhas (SP), Galeão (RJ), Santos Dumont (RJ), Brasília (DF),and Confins (MG). The specific functions and responsibilities of each agencyare very unclear, particularly because Infraero itself will be theCAA and hence oversee direction of the companies in which ithas minority interest. The Civil Aviation Secretary measures to improve Infraero’sgovernance suggest that the Government may open the compa-ny’s capital in the future. The current privatization model developed by the BrazilianAviation Agency and used for the construction, operation, andexploitation of a new airport in the city of São Gonçalo do Ama-rante, in the State of Rio Grande do Norte, called ASGA. The existing airport in the city of Natal is also located inRio Grande do Norte and is only 11 kilometers away fromASGA. According to a study conducted by the IPEA (Institutode Pesquisa Econômica Aplicada, or Institute of Research in Ap-plied Economics), the capacity of the existing airport in Natal isabout to be exhausted considering the projections of passengerdemand. But according to ANAC’s information, dated February2011, the existing airport is not profitable, as the chart below to the Government of Argentina. The joint venture has alreadydemonstrates. stated that will proceed with aggressive bids in other Brazilian A joint venture of Corporación America and Engevix won airports’ privatizations and that it will seek Brazil’s Exim Bankthe bid for ASGA offering a 228.82% markup. The 8% return es- (BNDES) financing. Nonetheless, the result of the bid boughttimated by the joint venture is deemed impossibly high by other some time to the regulatory agencies in a sector that is facing acompetitors and some analysts. Corporacion America is known severe leadership and organizational crisis.for having defaulted its concession fees of Ezeiza Airport due Investors interested in the São Paulo airports’ bids are de- manding non-compete guarantees, such as the prohibition of construction of another airport to serve the congested metro-There are rumors that politan area of São Paulo. There are rumors that the Federal Government does not want to bid for a brand new airport in São Paulo because the State Government belongs to the oppo-the Federal Government sition. Numerous studies prove that São Paulo needs another airport, regardless of any improvements made to the existing ones. Investors’ requests may well suit Federal Government’sdoes not want to bid for a intentions, but they would be very detrimental to the city and the State. President Roussef’s special-purpose-vehicle model obligesbrand new airport in São the private investor to complete the necessary construction for increasing a given airport’s capacity. The problem is that Infrae- ro itself has not been able to complete the necessary constructionPaulo because the State for years, even though it had been given the resources to do so, mainly because of environmental and regulatory restrictions. The risk of not obtaining environmental and regulatory au-Government belongs to thorizations has jeopardized many energy projects in Brazil. Bidders have won the rights to develop projects only to face immense difficulties in getting the necessary licenses and hencethe opposition to honor their delivery obligations. According to the abovementioned study by the IPEA in 2010, the average processing time for an environmental license to start
  7. 7. Deals Latin Infrastructure Quarterly 27 With depreciation and interest (R$) Without depreciation and interest (R$) Activity Revenue (R$) Cost Result Cost Result Cargo handling fees 705.962 1.865.972 -1.160.010 1.347.463 -641.501 Non regulated fees (mainly 8.749.305 3.051.655 5.697.650 2.064.163 6.685.143 commercial fees) Domestic boarding fees 10.223.027 17.383.742 -7.160.715 11.442.416 -1.219.389 International boarding fees 1.443.684 1.243.722 199.962 815.731 627.954 Domestic Landing fees 987.505 13.451.201 -12.463.696 8.841.410 -7.853.905 International Landing Fees 953.941 1.656.211 -702.270 1.081.407 -127.466 Total 23.063.424 38.652.503 -15.589.079 25.592.590 -2.529.166building a project was 50 months. authorization only lasts for five years and can be revoked at any Recently the energy sector has developed a Pre-Tender Li- time. Nevertheless, their number has grown substantially andcense (Licença Prévia para Leilão) for projects, granted before the network is getting denser quickly in and around the cities ofthe tender. The winning bidder still has to pursue other envi- São Paulo and Rio de Janeiro.ronmental licenses after being granted the authorization for the Brazil does not lack the demand or resources for, nor theproject. There have been no discussions over implementing a overall interest in, improving its airport infrastructure. It lackssimilar license for airports. coordinated action oriented toward the long-term development Even though obtaining an environmental license involves of the country. No measure taken now will adequately preparea lengthy process, analysis of the difficulties Infraero faces to Brazil for the World Cup or Olympics Games. Brazil needscarry out its investments has been focused on its challenges strong leadership that understands the development challengeswith project management. In July, the Civil Aviation Secretary facing us and communicates them clearly to the population.has announced measures of improvement in this regard that in-clude the creation of a new business directorship to be filled byAugust. As the clock ticks and the debate over the best methods con- Brazil does not lacktinues, some players have decided to take action. In an effort to avoid a total fiasco and build the very mini-mum capacity for the events, keeping away from major regula-tory and environmental issues, Infraero has decided to build op-erational modules (Módulos Operacionais Provisórios) for theexisting terminals, sarcastically nicknamed “puxadinhos” (an- the demand or re-nexes) by the population. According to Infraero, these modules sources for, nor theare cheaper, less comfortable, but temporary. These modulesaugment the check-in, boarding, and deboarding areas, but donot increase the number of aprons and lanes. They will merelyincrease the area where passengers will have to wait too long forthe same number of flights. President Roussef has passed a law that loosens up procure- overall interest in,ment rules for all airports within a 350km radius of the World improving its airportCup host cities. Numerous entities and legal authorities havecriticized this law for facilitating corruption and abusive prac-tices in the Government’s procurement and for reducing thetransparency of public actions and expenses. Investors, on the other hand, are exploring less regulated op-portunities, such as private airports. The challenge is that private infrastructure.airports cannot be explored for commercial purposes, as their
  8. 8. 64 Latin Infrastructure Quarterly Companies

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