Governor Luis Fortuño has led Puerto Rico's efforts to address its fiscal crisis through large-scale privatization of infrastructure projects. He oversaw deals to lease the Luis Muñoz Marin International Airport and Highway PR-22 to private operators through public-private partnerships. Fortuño argues that privatization is necessary for Puerto Rico to improve its infrastructure, attract private investment, and compete globally. However, some oppose privatizing existing public assets and Puerto Rico remains in debt and recession despite these deals generating hundreds of millions in upfront payments. Fortuño is campaigning for re-election on his record of establishing Puerto Rico as a leader in public-private partnerships for infrastructure development.

1. ‘This is the future’
In hisfirst term, GovernorLuis Fortuño reinvented Puerto Rico as a pioneering infrastructurestatein
orderto staveoff fiscal ruin. Nowfighting forre-election,the erstwhilecorporatelawyeris adamant:
privatisation is here to stay—and Puerto Rico is proof. ChrisGlynn reports.
CHRIS GLYNN | 07 NOVEMBER2012
Witha cut of a ribbonona June afternoon,Terminal A,the latestadditiontothe LuisMuñoz Marin
International Airport(LMM) in SanJuan,openedtothe public.
A sleek,white,concrete andmetal edifice withagiant,tiltedsaucerrestingatopitsentrance anda
curtainwall facade made-to-measure forthe sun-drenchedlocale,the terminalisthe upshotof a
decade-longexpansionandmodernisationeffort—a$400 millionundertakingthatbore fruitinMarch,
whenJetBlue agreedtomove in. Today,low-costJetBlue,the largestaircarrierinPuertoRico,isthe
sole occupantof Terminal A.
But inthe case of LMM, whichopenedin1955 and isnamedafterthe firstdemocraticallyelected
governorof PuertoRico,the attention-grabbingarchitecturalpretense isjustthat—a pretense. Insum,
LMM ispart Potemkinvillage,partobjectlessoninhow tounderwhelm.
Here,the dearthof the hustle andbustle associatedwithairporttravel isunnerving,asisthe relative
quiet,lendingLMMa somnambulantfeel. ExceptforTerminal A,the rest of the airport isnarrow and
rundown. There isno hummingconcessionarea. Noqueue forataxi cab outside. Evennewlyminted
Terminal A ispracticallydeserted.
'EMBARRASSMENT'
‘Our airportisan embarrassment’,complainsaSanJuan woman,a mediaconsultantandformer
newspaperreporter,whileattendingalocal networkingevent. ‘Hopefully,mostpeoplecome in
throughJetBlue’.
Eightmillionpeople visitedanddepartedPuertoRicoviaLMMin 2011. Compare thatto Los Angeles
International (61.8million),Miami International (38.3million),orNewarkLibertyInternational (33.8
million),thentake intoconsiderationthatPuerto Ricoisa global destination. LMMitself isbilled ‘the
gatewayto the Caribbean’, makingthe rationalebehindprivatisingmanagementof the airport—which
culminatedinadeal to lease LMMin Julythisyear—obvious.

2. ‘If we want to be competitive,if we want toimprove qualityof lifehere,if we wantjobcreation,then
we needadequate—actually,we needexcellent—infrastructure’,saysLuisFortuño,whoasgovernorof
PuertoRicocut the ribbontoinaugurate Terminal A.
The 51-year-oldFortuñohashelmedthe emergence of the islandof 3.7 millionpeople asapublic-
private partnership(PPP;P3) hotbedaswell asa lodestar forinfrastructure investing—a
characterisationthatFortuñoisunabashedintalkingup.
‘We want to be a trailblazer’,he emphasises, ‘[and] we are atrailblazer’.
ACT 29
The 2009 arrival of GobernadorFortuñodovetailedwiththe passage of enablingP3legislation. So-
calledAct29 establishedalegal frameworkandstreamlinedprocurementprocessandiswidelycredited
as a model forPPP adoption. FloridaCongressmanJohnMica,headof the House Transportationand
Infrastructure Committee,haspraisedAct29 as worthyof duplicatinginthe mainlandUS.
The Fortuñoadministrationalsousheredinthe adventof the PuertoRicoPublic-PrivatePartnerships
Authority(PPPA),anindependentlyoperatedoffshootof the GovernmentDevelopmentBankforPuerto
Rico (GDB). Macquarie Group, the Australia-basedfinancial servicesconcernregardedasa PPPpioneer,
has assistedthe PPPA (‘We donotdiscussourrelationshipwithaspecificpartner’, saysJuanCarlos
Battle,presidentof GDB.)
The PPPA,Fortuñostresses,isdedicatedto P3 developmentinPuertoRico. Headingthe authorityis
DavidAlvarez,executivedirectorandalevel-headedeconomicadviser. UnderAlvarez,the PPPA has
embarkedonan ambitiousprivatisationprogramme.
September2011 saw a landmarkP3 deal reach financial close whenPuertoRicoHighway22(PR-22),a
51-mile highwaycitedasthe most-travelledroadonthe island, aswell asthe adjoiningPuertoRico
Highway5 (PR-5),wasleasedtoAutopistasMetropolitanas,aconsortiumteamingtollroadoperator
Abertisand$3 billionfundGoldmanSachsInfrastructurePartnersII(GSIPII).
The PR-22 toll roadconcession—a40-yearlease inexchangefor$1.4 billion—markedthe firstUS
brownfieldPPPsince 2006. But Fortuñoisapt to pointout that PR-22 has heldalarger significance:a
homegrowninfrastructureassetwiththe powertoattract bidsfromAbertisandGSIP,as well asCiti
Infrastructure Investors(CII)andMorgan StanleyInfrastructure Partners(MSIP).
PR-22 was an ideal maidenprojecttoestablishthe PuertoRicoP3campaignon the global stage,Fortuño
notes.
‘We were able to lookat the model usedinAustralia,andthe model usedinCanada’,Fortuñosays,
describingthe decisiontolease PR-22. ‘We were able tosee whatworkedandwhat didnotwork’.
The PR-22 procurementprocess,accordingto Fortuño,putthe assetclass—a‘global market,where
capital can be shifted’—onnotice.

3. ‘People sawwe rana quickand transparentbid’,Fortuñoremarksof the deal,whichbeganinJune
2010. ‘We guarantee our process—the tollroadtransactionwasprofessional’.
SETTING THE PACE
WithPR-22 as itsjumping-off point,Puerto Ricohasseta pace forprivatisationenviableonthe
mainlandUS,encompassingbothbrownfieldandgreenfieldinfrastructure.
In September,SanJuan,ina discrete project,announceditspursuitof a $473 millionlightrail transit
(LRT) P3. Earlyin 2012, the PPPA putout a bidon a greenfieldP3,a juvenile detentioncentre slatedto
become the first-eversocial infrastructure deal inPuertoRico.
Thenthere isLMM—long a target of criticismfornot livinguptoits operatingpotential,aswell asforits
shortage of commercial appeal.
AftercompetingagainstMacquarie andFerrovial Aeropuertos,HighstarCapital,a$5.5 billionUSfund
managerfocusedoncore infrastructure,togetherwithGrupoAeroportuariodel Sureste(ASUR) inJuly
paid$615 millionupfrontfora40-year lease of LMM, and will invest$1.4billiontowardimprovingand
renovatingthe airport.
‘LMM is nota world-classinternational airportnow,but itcouldbe’, saysa seniorinfrastructure
professionalfamiliarwiththe deal. ‘Itspotential iswhatmade itattractive’.
To Fortuño,the specificinfrastructure asset—be itLMMor PR-22—isa small part of a biggerdiscussion.
For PuertoRico,the US, and countriesall aroundthe globe,the die hasbeencast:privatise orperish.
‘The global economyhas changedforever’,he explains. ‘Thisisthe future of infrastructure
development’.
‘I TOOK A WRONG TURN SOMEWHERE’
‘We mightwant to checkthat out,just to be on the safe side’.
A piercingfire alarmisgoingoff inthe hotel where Fortuño,seatedatthe headof a conference room
table,isspeakingtome. Hisbaronial tone of voice isunbrokenand,afterinstructingastafferto
investigate,Fortuñoisable toresume recountinghisimprobable political career.
‘Justa corporate lawyerwhotooka wrongturn somewhere,ishow Idescribe myself’,he jokes,
demonstratingaself-effacinghumour. ‘Iwasjustfedup. People Iworkedwithgotsickof me
complainingabouthowbad[PuertoRico] wasdoing. Ineededtoputactionbehindit’.
Fortuñoshrugs. ‘Assimple asthat really,Iwishthere was more to it’,he says,smiling.
If Fortuñocan laughabouthisput-up-or-shut-upapproachtorunningforpublicoffice,there was
nothinglightheartedaboutthe fiscal climategrippingPuertoRicobythe time he became governorin
2009 as a memberof the pro-statehoodNew Progressive Party(NPP).

4. Fortuñohad representedPuertoRicoasresidentcommissioner,anon-votingmemberof Congress,since
2004 (‘Icame to realise Iwasunable todo muchthere’,he remembers),andwantedtobe ‘an
executive’.
Electedgovernorin2009, he inheritedaPuertoRicowitha $3.2 billiondeficit,lethargiceconomic
growth,and a Standard& Poor’s(S&P) BBB- creditratingwhichpromptedFortuñotovisitWall Streetto
argue that the islandwasbetterthanjunkbondstatus.
‘My wife wantedarecount’,jokesFortuño,whoisalsoafatherto three college-agechildren.
FISCAL HARDSHIP
PuertoRico,whichhadentereditsfiscal hardshipin2006, well beforethe global financial crisis,had
begunexaminingprivatisationinordertorefurbishitsexistinginfrastructure (whichAlvarezcitedhad
beenbuiltinthe 1960s) andspur growth.
‘If we want to grow,we needourfiscal house inorder’, Fortuñosays. ‘Two,we needinfrastructure, and
to attract private capital. Aswe all now know,noteventhe federal governmentorstate government,
has the capital neededtodevelopandkeep ourinfrastructure uptospeed. We have to tap intoprivate
capital to guarantee thatwe indeedhave the bestinfrastructure possible’.
‘We want to be competitive. We wantto compete forglobal business. If we donot do that, we will
not be competitive’.
But privatisationinPuertoRicohasnotcome withoutopposition. Battle hasadmittedthe $615 million
paidfor LMM will be usedtoretire debtonthe airport,while the islanditself hasremainedindebt.
PuertoRicois alsostill ina recessionbornin2006, with45 percentof the populationconsideredpoor.
In addition,while political supportforgreenfieldinfrastructureishigh,the pro-commonwealthPopular
DemocraticParty (PDP) andPuertoRicanIndependence Party(PIP)have opposedleasingexisting
infrastructure.
Still,Fortuño,whoisslightlytrailingPDPrival AlejandroGarcíaPadillabefore the November6election,
isadamant that PuertoRico,as well asprivatisation,are onthe righttrack.
‘We are comingfromfar down,and we are growing,andwe can grow faster’, he insists. ‘Asfaras
privatisation,whatwe care aboutisqualityof life,we care aboutcompeting. We want to compete for
inlandandforeigncapital’.
THE CLOSER
Presidingoverasuccessful PPPprogramme hasearnedFortuñoacclaimasa championforprivatisation.
Creditinghisbackgroundasa corporate attorney(he earnedhislaw degree havinggraduatedfromthe
Universityof Virginia),Fortuñocalledhimself awillingP3evangelist.

5. ‘I see myself asbasicallyasalespersontoalarge degree’,he says. ‘Peopleneedtounderstandthatwe
have the propertax regime andlegal framework,butwe alsohave aratherattractive businessclimate
and that we are goingtomaintainthat’.
FortuñoalsoemphasisesthatPuertoRico,as a P3 adopter,has beenable toestablishasolidPPP
programme viaeliminatingprocurementrisk.
‘It [private investmentinpublicinfrastructure] will take off onthe mainland, butithasnot [yet]’,he
says. ‘There isa lotof fearthere aboutreachinga contract agreementandhavingitfall through.
Procurementisa costlyprocess. Competingandnotbeingchoseninthe endisacceptable,butthe
worst-case scenarioistogo throughthe processand neverreacha conclusion.
‘The structure for procurement,toa certaindegree,isaboutwhatI usedtodo’,Fortuñocontinues.
‘Puttingtogetheratransaction,andthenclosingthattransaction.
‘Before becominggovernor,IconductedbusinessfromArgentinatoNew York,andthere has to be a
certaintyand simplicitytoatransaction’.
Fortuñosayshe has observedprivatisationinVirginia,OhioandFloridaandspoken,onaninformal
basis,withgovernmentpersonnel aboutinfrastructure onthe mainland,buthe expressedconcernthat
PPPdevelopmenthasnot increasedStateside.
‘That the mainlandhasnotadoptedit…thatis shocking’,he says.
Meanwhile,Fortuño,whosayshe hasnot giventhoughttowhat he woulddofor a livingif notre-
electedgovernor,stressesthathe isfocusedonsecuringa secondterm.
‘I came to do whatis right’, he says,‘andwhat isright,is working’.