Water Infrastructure in Latin America: Key Challenges and Business Opportunities in 2009 Omar Del Valle Colosio CG/LA Infr...
<ul><li>Disclaimer </li></ul><ul><li>The following presentation of Infrastructure Projects in Latin America does not const...
<ul><li>“ Two features distinguish the water sector from other infrastructure. First, the supply is finite and location-sp...
Goals <ul><li>Present an overview of water infrastructure market in Latin America  </li></ul><ul><ul><li>Infrastructure sp...
Agenda <ul><li>Latin American Water/Infrastructure Overview </li></ul><ul><li>Key Challenges: Technical & Institutional </...
1. LAC Infrastructure Overview <ul><li>Economics, series 2000-2009 </li></ul><ul><ul><li>The region will experience a deep...
1. LAC Infrastructure Overview <ul><li>Current infrastructure spending as a percentage of GDP </li></ul><ul><ul><li>Spain,...
1. LAC Water Infrastructure Overview Generation Transmission Distribution Access Quality Clean water Sewage Safe drinking ...
2. Key Challenges: Technical/Institutional <ul><li>5  non-exclusive challenges in the water sector in Latin America  </li>...
2. Key Challenges: Technical/Institutional <ul><li>Top 10 Challenges to Finance Water Projects and the Degree of Difficult...
2. Key Challenges: Technical/Institutional <ul><li>Small operation but huge responsibilities </li></ul><ul><li>The Case of...
3. Infrastructure Spending, Fiscal Stimulus <ul><li>Fiscal stimulus sums up to more than US$50 billion in the region    m...
3. Infrastructure Spending, Fiscal Stimulus <ul><li>The Fiscal Stimulus Effect on the Water Sector  </li></ul><ul><ul><li>...
<ul><li>Share consumption among agriculture, industry, human needs </li></ul><ul><li>Growing demand at urban areas - low i...
4. Business Opportunities Generation Transmission Distribution Source: Ringskog (1998) Option Ownership Financing Operatio...
Investments opportunities  by industry and sectors in 2009  (1= more likely) Sector/Industry Financing Engineering & Const...
4. Business Opportunities <ul><li>Debt/Equity – who gets what and how? </li></ul><ul><li>Financing Equipment & Technology ...
4. Business Opportunities Country Project Sponsor Value US$m Phase Type BRA Vale do Sao Francisco Irrigation Public Privat...
Water Infrastructure in Latin America: Key Challenges and Business Opportunities in 2009 Omar Del Valle Colosio CG/LA Infr...
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Water Infrastructure in Latin America

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Present an overview of water infrastructure market in Latin America:
- Infrastructure spending as a catalytic tool to overcome the financial-economic crisis
-Structuring the process “getting it right!”
-Strengthening the Water Sector: Confronting The Challenges

Discuss the role/participation of private sector:
- Finance projects in distressed markets
- Emerging new opportunities

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Water Infrastructure in Latin America

  1. 1. Water Infrastructure in Latin America: Key Challenges and Business Opportunities in 2009 Omar Del Valle Colosio CG/LA Infrastructure LLC Water Executive Forum 2009 Philadelphia, PA. March 30-31, 2009
  2. 2. <ul><li>Disclaimer </li></ul><ul><li>The following presentation of Infrastructure Projects in Latin America does not constitute in any case, a request for tender, by the agencies mentioned. The information is used merely to exemplify trends in infrastructure spending. </li></ul><ul><li>Moreover, this presentation does not represent the views and ideas of CG/LA Infrastructure LLC. The presenter is responsible for any information or omissions. </li></ul>
  3. 3. <ul><li>“ Two features distinguish the water sector from other infrastructure. First, the supply is finite and location-specific. Second, because safe water is crucial for life and health, its availability and affordability for the entire population are of enormous welfare (and political) importance” (ADB, 2000) </li></ul>
  4. 4. Goals <ul><li>Present an overview of water infrastructure market in Latin America </li></ul><ul><ul><li>Infrastructure spending as a catalytic tool to overcome the financial-economic crisis </li></ul></ul><ul><ul><li>Structuring the process “getting it right!” </li></ul></ul><ul><ul><li>Strengthening the Water Sector: Confronting The Challenges </li></ul></ul><ul><li>Discuss the role/participation of private sector </li></ul><ul><ul><li>Finance projects in distressed markets </li></ul></ul><ul><ul><li>Emerging new opportunities </li></ul></ul>
  5. 5. Agenda <ul><li>Latin American Water/Infrastructure Overview </li></ul><ul><li>Key Challenges: Technical & Institutional </li></ul><ul><li>Infrastructure Spending, Fiscal Stimulus </li></ul><ul><li>Role/Participation of Private Sector </li></ul>
  6. 6. 1. LAC Infrastructure Overview <ul><li>Economics, series 2000-2009 </li></ul><ul><ul><li>The region will experience a deep slowdown and will likely remain as such until 2010 </li></ul></ul><ul><ul><li>GDP Growth Estimates in 2009 < 1.5% </li></ul></ul><ul><ul><li>Currency depreciation (Mexico & Brazil most affected) </li></ul></ul><ul><li>Current scenario, the effects of the financial crisis </li></ul><ul><ul><li>Lack of finance  delayed projects in pipeline </li></ul></ul><ul><ul><li>Government expenditures  announced, but on hold </li></ul></ul>
  7. 7. 1. LAC Infrastructure Overview <ul><li>Current infrastructure spending as a percentage of GDP </li></ul><ul><ul><li>Spain, roughly above > 5% </li></ul></ul><ul><ul><li>USA , between 1% and 2% of GDP </li></ul></ul><ul><ul><li>LAC spends less than 3% of GDP in infrastructure </li></ul></ul><ul><ul><li>Mexico, approximately 2.5% of GDP </li></ul></ul><ul><ul><li>Costa Rica, approximately 1.6% of GDP </li></ul></ul><ul><ul><li>Peru, 3.1% of GDP </li></ul></ul><ul><ul><li>Argentina > 10 % on a combined public + private investments </li></ul></ul>
  8. 8. 1. LAC Water Infrastructure Overview Generation Transmission Distribution Access Quality Clean water Sewage Safe drinking water Safe sanitation Private Sector Participation Facing Challenges New Business Opportunities
  9. 9. 2. Key Challenges: Technical/Institutional <ul><li>5 non-exclusive challenges in the water sector in Latin America </li></ul><ul><li>Increasing water scarcity, lack of new sources, raising costs to preserve current water sources </li></ul><ul><li>Inefficiencies – operation/management </li></ul><ul><li>Water losses – not accurate measure, it ranges between 40% to 60% </li></ul><ul><li>Unplanned decentralization : more autonomy vs lack of capacity to implement new/better projects, few financial resources to invest </li></ul>
  10. 10. 2. Key Challenges: Technical/Institutional <ul><li>Top 10 Challenges to Finance Water Projects and the Degree of Difficulty (10 = highest) </li></ul><ul><li>Political Leadership (4) </li></ul><ul><li>Affordability (6) </li></ul><ul><li>Information, Transparency and Monitoring (3) </li></ul><ul><li>Law enforcement (6) </li></ul><ul><li>Sustainability (5) </li></ul><ul><li>Risk management/allocation (7) </li></ul><ul><li>Managerial capacity (6) </li></ul><ul><li>Public acceptance (6) </li></ul><ul><li>Commercializing water (7) </li></ul><ul><li>Social justice (4) </li></ul>
  11. 11. 2. Key Challenges: Technical/Institutional <ul><li>Small operation but huge responsibilities </li></ul><ul><li>The Case of El Salvador </li></ul><ul><li>High energy cost in operations </li></ul><ul><li>Lack of investment resources </li></ul><ul><li>Process is publicly owned </li></ul><ul><li>No profits – selling below half the production cost per cubic meter </li></ul><ul><li>Needs: </li></ul><ul><li>New water sources </li></ul><ul><li>Increase access in rural areas – rural population accounts for 40% of total population </li></ul><ul><li>Rehabilitation of current system </li></ul><ul><li>Development of new water treatment facilities </li></ul>
  12. 12. 3. Infrastructure Spending, Fiscal Stimulus <ul><li>Fiscal stimulus sums up to more than US$50 billion in the region  main goal: overcome effects of the financial crisis </li></ul><ul><li>Announcements (approximates): </li></ul><ul><li>Argentina – US$4.4 billion for public expenditures </li></ul><ul><li>Brazil – US$ 8.6 billion (mainly tax cuts) </li></ul><ul><li>Chile – US$4 billion </li></ul><ul><li>Costa Rica – US$2 billion (shield program) </li></ul><ul><li>Mexico – US$40 billion (2009 – 2012) </li></ul><ul><li>Peru – US$ 500 million fund (public-private) for Infrastructure investments; national urgency decree </li></ul>
  13. 13. 3. Infrastructure Spending, Fiscal Stimulus <ul><li>The Fiscal Stimulus Effect on the Water Sector </li></ul><ul><ul><li>Structuring new projects? </li></ul></ul><ul><ul><li>More transfers to sub-national water projects? </li></ul></ul><ul><ul><li>Supporting current but long-term delayed projects? </li></ul></ul><ul><ul><li>Procurement opportunities? </li></ul></ul><ul><ul><li>Public/Private funds? </li></ul></ul>
  14. 14. <ul><li>Share consumption among agriculture, industry, human needs </li></ul><ul><li>Growing demand at urban areas - low income, mid-low income dwells paying up to 4 times (or more) for drinking water </li></ul><ul><li>Increasing needs to renew equipments, foster efficiency, reduce water losses </li></ul><ul><li>Increasing needs for control management, operations, equipment and technology </li></ul><ul><li>Increasing need for finance local operations </li></ul>4. Opportunities
  15. 15. 4. Business Opportunities Generation Transmission Distribution Source: Ringskog (1998) Option Ownership Financing Operations Service Contract Public Public Public then some private Management Contract Public Public Private Lease Contract Public Public Private Concession Public Private Private BOT Private then public Private Private BOOT Private then public Private Private Reverse BOT Public then private Public Private Joint ownership Private then public Private and Public Private and public Sale Private Private Private
  16. 16. Investments opportunities by industry and sectors in 2009 (1= more likely) Sector/Industry Financing Engineering & Construction Equipment and Technology Services Water / Waste Water 2 2 1 1 Highways 2 2 2 2 Ports & Logistics 3 3 2 2 Tourism 3 3 3 1 Oil & Gas 1 1 1 1 Electricity 2 2 1 2 Urban Massive Transportation 1 2 1 1
  17. 17. 4. Business Opportunities <ul><li>Debt/Equity – who gets what and how? </li></ul><ul><li>Financing Equipment & Technology </li></ul><ul><ul><li>Public vs Private Financing </li></ul></ul><ul><ul><li>The Role of Export Credit Agencies </li></ul></ul><ul><ul><li>Supply Credit – getting best technology where needed </li></ul></ul><ul><li>Performance Contracting </li></ul><ul><ul><li>Project bonds </li></ul></ul>
  18. 18. 4. Business Opportunities Country Project Sponsor Value US$m Phase Type BRA Vale do Sao Francisco Irrigation Public Private Partnership Brazilian Ministry of Planning 100.00 Feasibility Private Operation/ Concession BRA Wastewater Network Expansion in Eastern Rio de Janeiro Rio de Janeiro City Government Feasibility Private Operation/ Concession BRA SABESP Ambiental, Partnerships and Water Loss Reduction Sabesp 600.00 On-going Performance Contracts CRI Wastewater Management Program in San Jose - environment improvement JBIC & AyA 230.00 Construction/Procurement Public Procurement DR Clean-up of the Ozama River 1,000.00 TBD TBD DR West Aqueduct (Santo Domingo) CAASD 300.00 TBD Public Procurement SLV Procurement Projects and Water Treatment Plants ANDA 20.00 Construction/Procurement Public Procurement MEX Aqueduct Zapotillo CONAGUA 385.00 Tender Public Procurement MEX Aqueduct Falcon-Matamoros CONAGUA 634.00 Tender Public Procurement MEX Aqueduct El Realito CONAGUA 120.00 Tender Public Procurement MEX Agua Prieta Water Treatment Plant CONAGUA 139.00 Tender Design-Build/Turnkey MEX Atotonilco Water Treatment Plant (Valley of Mexico) CONAGUA 583.00 Tender Design-Build/Turnkey PER Project Majes-Siguas II: Hydric Reinforcement ProInversión 373.00 Tender (IV T 2009) Private Operation/ Concession PER La Chira Water Treatment Plant and Submarine Emissor ProInversión 141.00 Tender (II T 2009) Private Operation/ Concession
  19. 19. Water Infrastructure in Latin America: Key Challenges and Business Opportunities in 2009 Omar Del Valle Colosio CG/LA Infrastructure LLC [email_address] 202.776.0990 Water Executive Forum 2009 Philadelphia, PA. March 30-31, 2009
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