47889 PPI data update note 16 December 2008 Investment commitments in Latin America and the Caribbean increased in 2007 Investment commitments to infrastructure projects with private participation in Latin America and the Caribbean grew by 28% to US$38.3 billion in 2007, according to just-released data from the Private Participation in Infrastructure Project Database.1 The region accounted for 24% of the year's total investment commitments in developing countries. Despite having grown for four consecutive years, investment commitments (hereafter, investment) remained well below the region's peak levels reached in 1997­98 (figure 1). Investment in 2007 was just 44% of the peak in 1998. Previously implemented projects largely drove the 2007 investment. Projects reaching financial or contractual closure in 1990­2006 attracted US$22.3 billion, while the 46 new projects implemented in 2007 accounted for US$16 billion. Investment in physical assets amounted to US$32.5 billion (figure 2). Indeed, if only investment in physical assets were counted--that is, excluding payments to the government (such as divestiture revenues and spectrum or concession fees--investment in 2007 would be just 22% below the peak level of 1998. Figure 1 Investment commitments to infrastructure projects Figure 2 Investment commitments to infrastructure projects with private with private participation in Latin America and the Caribbean, 1990­2007 participation in Latin America and the Caribbean by type of investment, Projects 1990­2007 90 2007 US$ billions* 160 90 2007 US$ billions* 80 140 80 70 120 70 60 100 60 50 80 50 40 60 40 30 30 20 40 10 20 20 0 0 10 1990 1995 2000 2005 2007 0 1990 1995 2000 2005 2007 New projects Previously implemented projects New projects Investment in physical assets Payments to the government Source: World Bank and PPIAF, PPI Project Database. * Adjusted by the 2007 US CPI. Source: World Bank and PPIAF, PPI Project Database. * Adjusted by the 2007 US CPI. As in previous years, Brazil and Mexico attracted most of the private activity in the region in 2007 (figure 3). Brazil accounted for 9 of the 46 new projects and 42% of investment, and Mexico for 14 new projects and 26% of investment. In Brazil new projects attracted just US$5 billion of the This note was produced by Ada Karina Izaguirre, infrastructure specialist, and Alexander Nicholas Jett, consultant, Finance, Economics, and Urban Development Department, Sustainable Development Network, World Bank. 1 Data on infrastructure projects with private participation include primarily medium-size and large projects as reported by the media and other public sources. Small-scale projects are generally not included because of lack of public information. Additional investments in some projects may have been omitted for the same reason. Barbados, the Czech Republic, Estonia, and Trinidad and Tobago became high-income countries according to the 2007 World Bank country classification (released in July 2007) and are therefore excluded from the PPI Project Database beginning with the 2007 update. All dollar amounts in this note are expressed in 2007 U.S. dollars adjusted by using the 2007 U.S. consumer price index. 1 US$15.9 billion in investment, while previously implemented projects accounted for the other US$10.9 billion. In Mexico the situation was reversed: of the US$9.9 billion in total investment, new projects accounted for US$6.8 billion and previously implemented projects for US$3.1 billion. The remaining US$12.5 billion of investment in the region was spread among most of its other countries, with the biggest shares in Colombia (7%), Argentina (6%), and Peru (6%).2 Greenfield projects (build, own, operate [BOO] and build, operate, transfer [BOT] contracts and merchant projects) were the most common, representing more than 39% of investment and 29 of the 46 new projects. Divestitures accounted for 36% of investment, thanks primarily to investment in previously divested companies. Only two new divestitures were implemented in 2007 (both partial divestitures of generation companies in Colombia). Concessions (build, rehabilitate, operate, transfer [BROT] and rehabilitate, operate, transfer [ROT]) accounted for 25% of investment and 15 new projects. Activity by sector. Telecommunications garnered the largest share of investment in 2007 (41%), followed by transport (31%), energy (26%), and water and sewerage (1%). Telecommunications investment grew for the fifth consecutive year, though it was still well below peak levels (figure 4), even when only investment in physical assets is compared. Transport investment almost doubled compared with the level in 2006, returning to a level close to those in 1997­98. Energy investment reached US$10.1 billion, the highest level since 2001. Water and sewerage projects attracted US$0.5 billion in new investment. Figure 3 Investment commitments to infrastructure projects with Figure 4 Investment commitments to infrastructure projects with private private participation in main recipients and rest of Latin America and participation in Latin America and the Caribbean by sector, 1990­2007 the Caribbean, 1990­2007 2007 US$ billions* 90 2007 US$ billions Projects 80 90 160 70 80 140 60 70 120 60 50 100 50 40 80 40 30 60 30 20 20 40 10 10 20 0 0 0 1990 1995 2000 2005 2007 1990 1995 2000 2005 2007 Rest of the region Brazil Mexico Energy Telecoms Transport Water and sew erage New projects Source: World Bank and PPIAF, PPI Project Database. * Adjusted by the 2007 US CPI. Source: World Bank and PPIAF, PPI Project Database. * Adjusted by the 2007 US CPI. In energy eight countries implemented 15 new projects (table 1). Brazil closed on financing for five new hydropower plants with a total capacity of 2,078 megawatts (MW) and investment of US$3.4 billion. Chile secured financing for two projects: the 158-MW La Confluencia hydropower plant and a 204-kilometer (km) electricity transmission line. Colombia sold through its local stock exchange 20% of Isagen, its state-owned electricity generation company, and divested the 52-MW Hidroprado hydropower plant. Guatemala began construction of the 94-MW Xacbal hydropower plant. Mexico did the same for the 450-MW Norte I power plant. Nicaragua secured financing for the 40-MW Eolico Amayo wind farm. Panama started construction of the 223-MW Changuinola hydropower plant and secured financing for the 81-MW Sante Fe wind farm. Peru began construction of the 210-MW El Platanal hydropower plant. In telecommunications 21 countries reported investment. Most went to previously implemented projects, which attracted US$15.5 billion, while two new mobile licenses amounted to US$140 million. Digicel Group (Bermuda) was awarded both licenses: one in Honduras and the other in Suriname. Mobile and multiservice operators accounted for US$12.3 billion of that investment of the total investment in the sector. 2 When investment is reported for projects reaching closure in 1984­2007 rather than 1990­2007, Chile (which divested many of its electricity and telecommunications companies in the 1980s) has the fourth largest investment share in the region, after Brazil, Mexico, and Colombia. 2 In transport eight countries implemented 25 projects. In Argentina a 20-year seaport concession was signed for the Bahia Blanca container terminal. In Brazil three projects were implemented: a 25-year concession for State Highway MG-050, a 30-year concession for Norte Sul railroad, and a greenfield container terminal project. In Chile the 40-year BOT contract awarded in 2004 for Acceso Nororiente reached financial closure. In Colombia two contracts were signed, a 20-year concession for San Andres and Providencia Airports and a BOT contract for Bucaramanga Highway. In addition, five existing seaport projects obtained contract extensions and committed additional investments totaling US$1.1 billion. In Costa Rica the 25-year BOT contract for San Jose Caldera highway reached financial closure. In Ecuador a 20-year concession for Guayaquil Port was implemented. Mexico reached financial closure on nine road projects, involving 1,080 kilometers and investment of US$6.1 billion. The first FARAC highway concession package accounted for US$4.1 billion. This project includes four roads that were concessioned in the early 1990s but bought back by the government in 1997 because of financial difficulties experienced by the concessionaires. Six of the other Mexican road projects include government support through revenue guarantees or variable payments. Mexico also implemented a BOT contract for a seaport terminal and another for an airport cargo terminal. In Peru the BOT contract for Muelle Sur port terminal and four road contracts were implemented. The road projects involve investment of US$875 million and 2,000 kilometers. Three of these projects are sections of the Inter-Oceanic Highway connecting Brazil and Peru and include government payment commitments to cover the gap between project costs and revenues. The other road concession includes fixed government payments to cover the expected construction and operational costs. In water and sewerage four new projects were implemented. In Brazil the provincial government of Rio Claro signed a 30-year BROT concession contract for the Rio Claro Sewerage System. Chile implemented a 15-year BROT concession for the Izarra de Lo Aguirre utility. In Mexico construction began on two BOT greenfield projects in the state of Queretaro--a water treatment plant and a wastewater treatment plant. Potential projects. There are at least 36 projects that were awarded in 2007 but did not reach financial or contractual closure before the end of the year. Thirteen of these potential projects are in energy: 10 greenfield power plants (two hydropower plants for 3,140 MW in Brazil, a 9-MW wind power project in Costa Rica, two waste-to-energy projects in Mexico, a 54-MW hydropower plant in Panama, and four hydropower plants for 720 MW in Peru) and three new transmission lines (one in Argentina and two in Brazil). Two are in telecommunications: one in the Dominican Republic and another in Guatemala. In transport the potential projects include 15 roads (one in Argentina, seven in Brazil, two in Colombia, one in the Dominican Republic, three in Mexico, and one in Panama), three seaports (two in Colombia and one in Ecuador), and two airports in Chile. In water the one potential project is in Brazil, an 18-year BOT contract for sewerage service in the state of Bahia. Canceled and distressed projects. In 2007, 11 projects were canceled or became distressed, while two previously distressed projects became operational, bringing the total number of those canceled or distressed in the region by 2007 to 117. These contracts represent 9.4% of all infrastructure projects with private participation, and 11% of investment commitments, in the region in 1990­2007. In energy two contracts were canceled, one became distressed, and two others left the distressed status. Ecuador terminated a five-year management contract for CATEG, Guayaquil's electricity generation and distribution utility, signed in 2006. República Bolivariana de Venezuela nationalized Sistema Electrico de Nueva Esparta, an integrated electricity system serving 90,000 customers on the islands of Margarita, Coche, and Cubagna, which had been divested in 1998. This event was 3 part of a larger nationalization process in the country that has also affected other energy companies and other sectors.3 In the Dominican Republic the divestiture of Empresa Distribuidora Electrica Este became distressed when the main shareholder (Societe Generale) filed an international arbitration claim against the government for alleged breach of contract. The two projects that left the distressed status were both in Argentina, where Camuzzi and the government discontinued an international arbitration case for Empresa de Energia de Rio Negro (divested in 1996) and Empresa Distribuidora Electrica Atlantica (divested in 1999). In telecommunications one project was canceled. The Venezuelan government nationalized the incumbent telecommunications operator Compania Anonima Nacional de Telefonos de Venezuela. The company had been divested in phases during the 1990s: a 40% stake was sold to a consortium led by the U.S. GTE Corp in 1991, and subsequent shares were sold on the local stock exchange and the New York Stock Exchange in 1996­97. In transport five projects were canceled. In Argentina the federal government, citing lack of compliance with service obligations, canceled two railway concessions (Transportes Metropolitanos Belgrano and Transportes Metropolitanos Roca) granted in 1994. In Guatemala, Railroad Development Corp. stopped operating Guatemala Rail Network (Ferrovias Guatemala), which had been under a 50-year concession granted in 1998. The operator also filed for international arbitration, claiming that recent government actions had amounted to indirect expropriation and direct interference with its contractual rights. In Mexico, Genessee and Wyoming Inc. requested cancellation of the 30-year concession for Coatzacoalcos Port­Merida Railway and then stopped operating the railway because of damage caused by a hurricane in 2005. In Peru the 30-year Callao expressway concession granted in 2001 was canceled by the local government, which cited lack of compliance with investment obligations as the reason for the cancellation. In water and sewerage one project was canceled and another became distressed. In Bolivia the national government finalized the announced termination of the 30-year concession for water and sewerage services in La Paz and El Alto (Aguas del Illimani). The concession fell into difficulty in 2005 after public protests indicating concerns over high tariffs and limited service expansion and demanding that the water system be returned to public control. In Colombia the Bogotá city government proposed to the concessionaire that they cancel the 20-year BOT contract for the Tibitoc water treatment plant in March 2007. The government had concluded that changes in macroeconomic conditions and water consumption patterns made the additional capacity provided by the project unnecessary. The concessionaire rejected the proposal, however, and appealed to the Arbitration and Conciliation Center of Bogota's Chamber of Commerce ( Centro de Arbitraje y Conciliacion de la Camara de Comercio de Bogota), which is expected to resolve the dispute. Concluded projects. Two projects were concluded in the region in 2007. The first was a 14-year BOT contract for a wastewater project in Cuernavaca, Mexico, that began in 1993. The second was a 13-year concession for the Montevideo­Punta del Este Toll Road in Uruguay, granted in 1994. 3República Bolivariana de Venezuela also nationalized the electricity utility Electricidad de Caracas in 2007. This company is not included in the database because it had been private since 1895 and the database covers projects beginning in 1984 or later. 4 Table 1 Infrastructure projects with private participation reaching financial or contractual closure in Latin America and the Caribbean in 2007 Note: .. = not available; n.a. = not applicable. Energy Investment commitments (US$ millions) Private Payments Capacity Contract PPI type equity to the Physical size and period Country Project name Subsector (subtype) (%) government assets type (years) Main sponsors 1 Brazil Da Ilha Small Electricity Greenfield 100 0 56.8 26 MW .. Bolognesi Group (100%, Hydroelectric Plant project (BOO) Brazil) 2 Brazil Foz do Chapeco Electricity Greenfield 51 97.9 1,160.2 855 MW 35 CPFL Energia (51%, Brazil) Hydroelectric Power project (BOO) Plant 3 Brazil Retiro Baixo Electricity Greenfield 51 0 150.3 82 MW 30 .. Hydroelectric Plant project (BOO) 4 Brazil Veneto Small Electricity Greenfield 100 0 61.1 28 MW .. Bolognesi Group (100%, Hydroelectric Plant project (BOO) Brazil) 5 Brazil Estreito Hydroelectric Electricity Greenfield 100 12.9 1,846 1,087 MW 35 Companhia Vale do Rio Doce Power Plant project SA (CVRD) (30%, Brazil), (merchant) SUEZ (40%, France), Alcoa (26%, United States) 6 Chile Charrua Temuco Electricity Greenfield 100 0 68 204 km 23 Alusa (51%, Brazil), Transmission Line project (BOT) Companhia Energetica de Minas Gerais (CEMIG) (49%, Brazil) 7 Chile La Confluencia Electricity Greenfield 100 0 334 158 MW .. Pacific Hydro Pty Limited Hydroelectric Plant project (PHL) (50%, Australia), SN (merchant) Power (50%, Norway) 8 Colombia Hidroprado Electricity Divestiture 87 51 52.4 52 MW n.a. Union Fenosa (87%, Spain) Hydroelectric Plant (partial) 9 Colombia Isagen SA Electricity Divestiture 19.9 284.8 0 2,182 MW n.a. .. (partial) 10 Guatemala Xacbal Hydroelectric Electricity Greenfield 100 0 226.8 94 MW .. Grupo Terra (100%, Plant project Honduras) (merchant) 11 Mexico Norte I Combined Electricity Greenfield 100 0 400 450 MW 25 Union Fenosa (100%, Spain) Cycle Plant project (BOO) 12 Nicaragua Eolico Amayo Wind Electricity Greenfield 100 0 95 40 MW .. Centrans Energy Services Farm project (45%, Guatemala), Arctas (merchant) Capital Group LP (45%, United States) 5 13 Panama Changuinola Electricity Greenfield 83 0 320 223 MW .. AES Corporation (83%, United Hydroelectric Plant project States) (merchant) 14 Panama Santa Fe Wind Farm Electricity Greenfield 100 0 150 81 MW .. Santa Fe Energy SA (100%, project Panama) (merchant) 15 Peru El Platanal Electricity Greenfield 100 0 220 210 MW .. Cementos Lima SA (60%, Hydroelectric Plant project Peru), Cemento Andino SA (merchant) (30%, Peru) Telecommunications Investment commitments (US$ millions) Private Payments Capacity Contract PPI type equity to the Physical size and period Country Project name Subsector (subtype) (%) government assets type (years) Main sponsors 1 Honduras Digicel Honduras Mobile access Greenfield 100 80.1 0 .. .. Digicel (100%, Bermuda) project (merchant) 2 Suriname Digicel Suriname Mobile access Greenfield 100 0 60 .. .. Digicel (100%, Bermuda) project (merchant) Transport Investment commitments (US$ millions) Private Payments Capacity Contract PPI type equity to the Physical size and period Country Project name Subsector (subtype) (%) government assets type (years) Main sponsors 1 Argentina Bahia Blanca Seaports Concession 100 0 9.5 .. 20 Terminal de Servicios Container Terminal (ROT) Portuarios Patagonia Norte SA (100%, Argentina) 2 Brazil Norte Sul Railroad Railways Concession 100 760 33.9 720 km 30 Companhia Vale do Rio Doce (BROT) SA (CVRD) (100%, Brazil) 3 Brazil State Highway MG- Roads Concession 100 0 366 372 km 25 Grupo Equipav (100%, Brazil) 050 (ROT) 6 4 Brazil Tecon Santa Catarina Seaports Greenfield 100 0 230 450,000 .. Batistella Group (70%, Brazil), project throughput Hamburg Sud (30%, (merchant) Germany) 5 Chile Acceso Nororiente Roads Greenfield 100 0 273 22 km 40 Sacyr Vallehermoso SA (SyV) project (100%, Spain) (BOT) 6 Colombia Bucaramanga Roads Greenfield 100 0 77 83 km 20 Grodco SA (..%, Colombia) Metropolitan Highway project (ZMB) (BOT) 7 Colombia San Andres and Airports Concession 100 0 20 2 runways 20 Aeropuerto San Andres y Providencia Airports (ROT) Providencia SA (ASAP) (100%, Colombia) 8 Costa Rica San Jose Caldera Roads Greenfield 100 0 330 77 km 25 Sacyr Vallehermoso SA (SyV) Highway project (35%, Spain), Caja Madrid (BOT) (18%, Spain), Grupo Soares da Costa (17%, Portugal), Fomento de Construcciones y Contratas SA (FCC) (18%, Spain) 9 Ecuador Guayaquil Port Seaports Concession 100 30 170 600,000 20 International Container Concession (BROT) throughput Terminal Services Inc. (ICTSI) (..%, Philippines), PSA Corp (..%, Singapore) 10 Mexico Coatzacoalcos Roads Greenfield 100 0 186.7 2 km 30 Fomento de Construcciones y Underwater Tunnel project Contratas SA (FCC) (50%, (BOT) Spain), Caja Madrid (50%, Spain) 11 Mexico Morelia-Aeropuerto Roads Greenfield 100 0 69 26 km 30 Empresa Purepecha (100%, Highway project Mexico) (BOT) 12 Mexico Puente Internacional Roads Greenfield 100 0 60.1 10 km 30 Grupo Marhnos (..%, Mexico) Reynosa ­ Anzalduas project (BOT) 13 Mexico Saltillo-Monterrey Roads Greenfield 100 0 277 115 km 30 Isolux (80%, Spain), Elsamex Highway project (20%, Spain) (BOT) 14 Mexico Arriaga-Ocozoautla Roads Concession 100 0 287 140 km 30 Aldesa Construcciones SA Highway Package (BROT) (..%, Spain), Agrupacion de Companias Constructoras de Veracruz SA de CV (..%, Mexico) 15 Mexico First FARAC Highway Roads Concession 100 4,030 137 558 km 30 ICA SA de CV (20%, Mexico), Concession Package (BROT) Goldman Sachs & Co. (80%, United States) 7 16 Mexico Nueva Italia ­ Roads Concession 100 0 51.6 32 km 20 Impulsora Del Desarrollo Y El Apatzingan Highway (BROT) Empleo En América Latina SA de CV (IDEAL) (..%, Mexico), Corporacion de Constructora de Vias Terrestres SA de CV (..%, Mexico), GAMI Ingeniera e Instalaciones SA (..%, Mexico), Supra Construcciones SA de CV (..%, Mexico) 17 Mexico Nuevo Necaxa ­ Roads Concession 100 0 650 85 km 30 ICA SA de CV (50%, Mexico), Thuatlan Highway (BROT) Fomento de Construcciones y Contratas SA (FCC) (50%, Spain) 18 Mexico Rio Verde­Ciudad Roads Concession 100 0 341 113 km 20 ICA SA de CV (100%, Mexico) Valles Highway (BROT) 19 Mexico Nuevo Laredo Cargo Airports Greenfield 100 0 7 .. 20 Tecnologia en Sistemas Terminal project Ambientales SA de CV (..%, (BOT) Mexico), Operadora de Puentes Internacionales SA de CV (..%, Mexico) 20 Mexico Lazaro Cardenas Seaports Greenfield 100 0 50 .. 25 Techint SA (25%, Argentina), Mineral Terminal project Cemex (50%, Mexico), Grupo (BOT) Mexicano de Desarrollo SA de CV (25%, Mexico) 21 Peru Inter-Oceanic Roads Greenfield 100 0 562 306 km 25 Construtora Andrade Gutierrez Highway Section 4 project (33%, Brazil), Construtora (BOT) Queiroz Galvao (33%, Brazil), Construcoes e Comercio Camargo Correa (33%, Brazil) 22 Peru Costa Sierra Section Roads Concession 100 0 31 78 km 15 Grana y Montero SA (100%, 1B (BROT) Peru) 23 Peru Inter-Oceanic Roads Concession 100 0 98.9 758 km 25 Grana y Montero SA (..%, Highway Section 1 (BROT) Peru), JJC Contratista (..%, Peru), Ingenieros Civiles y Contratistas Generales SA (..%, Peru) 24 Peru Inter-Oceanic Roads Concession 100 0 183.9 828 km 25 Hidalgo and Hidalgo SA (..%, Highway Section 5 (BROT) Ecuador), Cono Norte- Construccion y Administracion SA (..%, Peru) 25 Peru Callao South Dock Seaports Greenfield 100 0 400 750,000 30 DP World (70%, United Arab Container Terminal project throughput Emirates), Uniport SA (30%, (BOT) Peru) 8 Water and sewerage Investment commitments (US$ millions) Private Payments Capacity Contract PPI type equity to the Physical size and period Country Project name Subsector (subtype) (%) government assets type (years) Main sponsors 1 Brazil Rio Claro Sewerage Treatment Concession 100 0 257 160,000 30 Odebrecht SA (100%, Brazil) System plants (BROT) connections 2 Chile Izarra de Lo Aguirre Utilities Concession 100 0 3.1 2,000 15 .. Water Concession (BROT) connections 3 Mexico Queretaro Aqueduct II Treatment Greenfield 100 0 246 130,000 20 Mitsui (26%, Japan), ICA SA plants project cubic meters de CV (37%, Mexico), (BOT) per day Fomento de Construcciones y Contratas SA (FCC) (26%, Spain) 4 Mexico San Pedro Martir Treatment Greenfield 100 0 32.8 65,000 cubic 20 Mitsui (50%, Japan), Tyco Wastewater plants project meters per International (50%, United Treatment Plant (BOT) day States) 9