Investment Opportunities to Meet Latin America Airport Demand by 2040

The airport sector in Latin America and the Caribbean showed an average annual growth of 8% in passenger traffic during 2006-2015, doubling the traffic volume from 162 million passengers per year (Mpax-year) in 2006, to 322 Mpax in 2015, with no double-counting. The sector benefited from economic growth in the region, internationalization of economies, and the growing tourist demand from North America and Europe.

Aviation in Latin America and the Caribbean has a direct economic impact of more than USD 37.5 billion a year and a total impact of over USD 152 billion, accounting for a 5% share of the global aviation industry. In addition, the sector provides more than 4.9 million jobs. 

In order to identify airport investment needs in the region and help devise a long-term strategic agenda to boost productivity in Latin America and the Caribbean, CAF—development bank of Latin America—presented the study Analysis of airport investments in Latin America – A 2040 outlook. The base scenario for projections in the region assumes a 5.2% average annual growth in passenger air traffic, from the current 322 million passengers to 1.1 billion passengers by 2040, i.e. tripling its volume in 25 years.

“Latin America and the Caribbean is a market with great growth potential and a smaller relative size compared to more advanced regions such as North America (27.5%) and Europe (30.2%). Current airport capacity stands at 741 million passengers (counting departures and arrivals, with no double counting), but a capacity of 1,727 Mpax-year will be required by 2040. The largest portion of the investment should be made in the Andean region (341 Mpax, 34.6%), Brazil (260 Mpax; 26.3%) and Mexico (229 Mpax; 23.2%),” said Rafael Farromeque, senior specialist of the Vice-Presidency of Infrastructure at CAF and author of the report.

Investment opportunities

Investments estimated in the report to close the demand-capacity gap in 2016–2040 amount to USD 53.15 billion at 2016 prices. Current investments are on USD 13 billion. Nearly 50% of the total investment (USD 25.54 billion) is required in the coming decade (2017-2026), due to the large capacity demand of the sector. Noteworthy is that more than 80% of the investment will focus on privately-run airports.

Almost 70% of the total investment will be concentrated in Mexico, Brazil and Colombia due to significant traffic growth projections and a lagging capacity in their major airports. Investments will fund over 220 projects as part of a preliminary portfolio that includes some ‘greenfield’ projects, new terminals, new runways, as well as capacity enhancements in different airport sub-systems (airfield, platform, passenger terminals and cargo terminals), etc.

The report notes that the investment in passenger terminals accounts for 69% (USD 36.93 billion), while the construction of new runways will require an investment of USD 8.98 billion (17%). Investments in logistics facilities to handle air cargo are estimated at USD 3.12 billion, accounting for 6% of the total investments in the airport sector of Latin America and the Caribbean until 2040.

“Investments will help meet the estimated capacity demand; however, the Latin America and Caribbean region requires an Airport Strategic Agenda 2040, to be developed and deployed around five action axes: governance and legal framework, airport infrastructure, air navigation, air connectivity, and airports in harmony with their environment,” added Farromeque.

These and other investment opportunities will be addressed at the CAF Conference: Infrastructure for Latin America Integration, held at Casa de América in Madrid, Spain, on July 16, was attended by José Luis Ábalos, Spanish Minister of Development; Ana de la Cueva, Spanish State Secretary for Economy and Business Support; Pilar Más, Director General of Macroeconomic Analysis and International Economy at the Spanish Ministry of Economy and Business; Esteves Colnago Junior, Chairman of CAF’s Board of Directors and Brazilian Minister of Planning, Development and Management; Mariana Prado, Bolivian Minister of Development Planning; Dyogo de Oliveira, President of the Brazilian Development Bank (BNDES); Mauricio Cárdenas, Colombian Minister of Finance and Public Credit; Humberto Colman, Paraguayan Deputy Minister of Finance; Pedro Grados, Chairman of the Board of Directors of Peru’s Financial Development Corporation; Mario Bergara, President of the Central Bank of Uruguay; Santiago Miralles, Director General of Casa de América; Salvador Marín, President of COFIDES; Narciso Casado, Director of Cabinet, International and Institutional Relations at the Confederation of Employers and Industries of Spain (CEOE), Isaac Martín-Barbero, President of INECO; and Juan Béjar, President of Globalvía, among others.