Experts Discussed PPP Infrastructure Investment Opportunities

With the purpose of determining the potential of private-public interaction in infrastructure projects, CAF—development bank of Latin America—presented in Montevideo the publication “Public-Private Partnerships in Latin America: Learning from experience and its report: “Infrastructure in Latin American Development (IDEAL) 2014. The event was officially opened by Uruguay’s Minister of Transport and Public Works, Victor Rossi and CAF Director-Representative in Uruguay, Gladis Genua, and featured presentations by CAF advisors José Barbero and José Manuel Vassallo, who explained the content of the documents. Other panelists included Gabriel Oddone, partner at CPA Ferrere and president of the Construction Chamber Center of Studies, who described the economic outlook in Uruguay and spoke of the potential for the Public Private Partnership (PPP) system in the nation.

“At CAF we are convinced that the taking a leap in national development requires capacity building. First, there are human capacities, which require promoting education. And there also physical capacities, for which infrastructure is a pillar to achieve social progress, economic growth and sustainable development,” Genua said.

In the same vein, Minister Rossi highlighted the need to use all tools available to realize the “infrastructure shock” required by the nation. Using PPPs is one of the government’s responses to this challenge. “The growing production and cargoes are set to increase many-fold our needs in the coming years. Our nation must make an effort to build up the pace of infrastructure growth and live up to current circumstances,” Rossi said.

Barbero, who presented the IDEAL report, highlighted Latin America’s “lag” with respect to other regions in this area. “At the current pace, it would take Latin America 20 years to reach the level of infrastructure quality of OECD countries, while developing countries in Asia would catch up in about 15 years,” he explained.

The main shortcomings are related to urban mobility, but are also present in other areas, which is exacerbated by the economic slowdown affecting the entire continent. “The region is hauling a burden of infrastructure gaps, coupled with increasing demand based on new needs. While investment has grown slightly during 2012 and 2013, exceeding 3% of Gross Domestic Product (GDP), there is a significant gap between that and actual demands,” estimated at 6% of GDP, the expert noted.

Barbero explained that in order to undertake major projects, governments must “consider funding sources, have necessary policies and institutions in place to develop the projects, and include the social and environmental factor in the schedule. You can have the money and the institutions to carry out the projects, but if society is not a stakeholder, obstacles may come your way.”

In this connection, José Manuel Vasallo elaborated on the application of PPP models as a funding method, presenting five case studies from Spain, Costa Rica, Colombia, Mexico and Chile, in order to showcase investment experiences under this financing mechanism. The academic-practical document examines Latin America’s evolution in infrastructure investment through a global vision, and describes the future challenges facing the region for PPP implementation.

Vasallo explained that the system is a “tool” that governments have to promote infrastructure investment, but should not be considered the only model available. Its advantages include notably a higher technical efficiency and improved quality of service. He also explained that in order to promote a successful PPP model it is necessary to “appeal to investors and foster competition.”

In addition, Oddone touched on the slowdown facing Uruguay, which leaves the nation “without the fiscal room for maneuver to undertake the infrastructure investments needed. In addition, he spoke in favor of major fiscal corrections, and he warned that a key to success for PPP projects is to have private and public stakeholders see each other as partners.

“In Uruguay, there is a high-level political definition that the private sector will play more of a partner role than a public sector provider, but I doubt all parties feel the same. If a sign of political will is not conveyed properly to mid-ranking officials, it will be difficult to make the necessary progress,” he said. Oddone noted that even in the case of Costa Rica, where PPPs experienced delays and setbacks, work on private-public integration began back in 2000. “They have a 15-year head start. If there is no transformation, we run the risk of moving at an extraordinarily slow pace,” he concluded.

Genua reiterated CAF’s commitment to development and was confident that experience at regional level will enable progress in the design of increasingly efficient and productive public policies for society as a whole.