110 813 Viewpoint Note No. 125 September 1997 A Retrospective on the Mexican Toll Road Program (1989-94) Jeff Ruster Mexico's private toll road program more than by the Mexican currency crisis of December doubled the national toll road network-from 1994. The combination of macroeconomic and 4,500 kilometers in 1989 to 9,900 kilometers in project-level factors brought new project de- 1994. Fifty-three concessions were awarded for velopment to a virtual standstill, despite gov- the approximately 5,500 kilometers of roads, ernment estimates that another 6,500 kilometers and by the first quarter of 1995 forty-four were of roads are needed by 2000. Restructuring of in full or partial operation, representing 5.120 both project debt and equity investments has kilometers. The investment of approximately been the main focus of recent efforts.2 US$13 billion in the program over the period 1989-94 was sourced from local commercial The financial and economic repercussions have bank debt, concessionaire equity, and federal been widespread. Local commercial banks were and state government grants and equity con- saddled with nonperforming toll road loans es- tributions (figure 1).' timated at USS4.5 billion to US$5.5 billion. Con- cessionaires and their affiliates were faced with However, gross miscalculation of investment writing off significant portions of their invest- costs and operating income led to an unsus- ments. iMIoreover, the government has been un- tainable set of operating conditions for these able to unclog the road construction program limited recourse financings. The financial equi- and has been under severe pressure to inject librium of the sector was further undermined scarce financial resources to rescue investors. Users, in the meantime, were left with some of the most expensive road tolls in the world. FIGURE 1 SOURCES OF FUNDING FOR THE TOLL ROAD In retrospect, some industry observers have CONCESSIONS characterized the toll road program as a rushed and poorly designed effort to develop the in- Concessionaire frastructure the country needed to compete ef- equity ~~~~~Domnestic fectively in an era of free trade. Others have commercial banks simply labeled it a mechanism to lift the con- struction industry out of the economic depres- sion of the 1980s. Whatever the diagnosis for the poor performance of the sector, from a private investment perspective the impact was (US;2.5 to shut off capital flows to the sector and to \ billion} add to the Mexican banking system's non- Federal and state performing loan portfolio. government grans and equity This Note presents a diagnostic of key policy, Source: Author's compilation. regulatory, and institutional gaps that under- mined the financial equilibrium of the sector. A checklist of recurrent problems illustrates The World Bank Group Finance, Private Sector, and Infrastructure Network 2 A Retrospective on the Mexican Toll Road Program (1989-94) BOX 1 THE TOLL ROAD CONCESSIONS Legal framework. Underthe program, the Secretary of Communica- tions and Transport granted concessions to special-purpose entities, how the failure to address these issues mani- which in almost all cases were either directly owned by or were fested itself in the course of implementation. affiliates of one or more local construction companies. The conces- M i a sion agreements were issued under the federal law of General Major issues and sector performance Means of Communication, which governs, among other things, roads Although the program attracted significant pri- that connect two or more Mexican states and bridges along any such vate investment, well-publicized problems road. Under this legal framework, concessions could not exceed negatively affected sector performance. These fifteen years,though this was laterextended tothirty years, and a revolved around the following issues: free, parallel alternative to each highway was required.3 Inadequate tendering process and concession design. The prequalification standard was not Concession party responsibilities. The concessionaire was respon- nrigorous enough (for example, hidders were sibleforfinancing,building,operating,andmaintainingthetol road plan). Also, the project award criteria lim- subjecttogovernmentregulationforaspecifiedperiod of timein ited the pool of potential candidates (and exchange for the right to receive toll revenues generated by the thus potential competition for the market) to project. The role of the Secretary of Communications and Transport a handful of local construction companies centered on project definition, including highway path, location of that were more interested in the construc- interchanges and toll booths, and number of lanes; establishment of tion work than in the long-term financial vi- ability of the projects. (See box 1 for an design and construction standards; design and implementation of outline of the concessions.) tendering procedures; and supervision of the concessionaire. * Inadequate financial discipline in government- owned commercial banks. This led to large Concession design. The concession specified the duration of the amounts of nonrecourse financing with little agreement, the work to be undertaken, operational and maintenance or no due diligence undertaking. It was not standards, government supervision, required maintenance reserve uncommon for lenders to waive important funds, concessionaire reporting requirements, certain fees payable to conditions precedent to initial and subsequent the gover , ad te tl to be c . On t n of te : funding (insurance and bonding requirements, the government, and the tolls to be charge n termination of the securing permits and rights of way, satisfac- concession, the right to operate the highway and to collect toll tory review of traffic studies geotechnical and revenues reverted to the government. The government wasto remain environmental studies, and the like). As the the owner of the project throughout the term of the concession. story goes, such behavior was guided by an implicit understanding that even if the projects Tariff and adjustment mechanism. Each concession set forth a proved commercially nonviable, ultimate re- schedule of tolls by category of vehicle. Tolls were allowed to course was indeed to the government. increase semiannually in accordance with the consumer price index * Underdeveloped local financial markets. Le- ; :: .0 :0 :;0 U X i 0 0 . : : : 0gal and regulatory limitations comnbined wTith (CPI) or whenever the CPI increased by 5 percent or more since the gal an reg oromitationsecomhinedbith poor macroeconomic fundamentals inhibited previous adjustment. All other toll adjustments beyond the levels set the capacity of local markets to provide long- forth in the concession required the government's written approval. term fixed rate financing. Peso-denominated debt featured very short maturities rarely ex- Guarantees. Each concession also contained guarantees of traffic tending beyond five vears, with interest rates volumes by category of vehicle. Most concessions provided that if the often 1,000 to 1,500 basis points above those actual traffic volumes on the highwayfell short of those specified in paid by the government. This situation was the concession, the concessionaire would be entitled to request an exacerbated by the currency crisis of Decem- ber 1994, when all-in interest rates rose to extension of the term of the concession to permit recovery of its more than 100 percent a year for most investment. projects, which were already strapped to meet their debt service obligations. The World Bank Group 3 Underdeveloped institutional capability. The quentlyv investors were unable to determine above three issues were aggravated by the whether a project fit well into the long-term fact that the program's scope simplv ex- development plans of a region, especially ceeded the technical and administrative ca- given concurrent plans to privatize the rail, pacity of the local construction industry, the port, and airport sectors. liquidity of domestic financial markets, the Understaffing and limited institutional capa- project finance experience of most financial bilities within the Secretariat of Communica- intermediaries involved, and the institutional tions and Transport often led to problems in capabilities of regulatory officials. Conse- obtaining permits or approvals for change quently, the control mechanisms needed to orders on a timely basis and to inadequate develop the roads within such a short time enforcement of the concession requirements were never adequately addressed. regarding construction and maintenance qual- ity control standards. A summary follows of how these four prob- In addition to the problems relating to bid lems manifested themselves in project imple- selection criteria, there was no efficient pre- mentation-in the regulatory and institutional selection process to screen out potential bid- framework for the concessions, the operative ders that lacked the capacity to assume the period, and the financial and legal arrangements essential risks of construction design and of the projects. management, completion of large projects, and commercial management of toll road op- The regulatory and institutional framework erations. While operating a toll road is fairly simple (mostly consisting of collecting tolls Problems relating to the regulatory and institu- from passing vehicles), managing a toll road tional framework for the concessions included program is much more complex. It includes vague project selection criteria stemming in large estimating demand in the face of competi- part from the lack of an intermodal strategy and tion from toll-free roads or other forms of inadequate planning criteria at the federal and transport, adjusting tolls to optimize revenues, state level, inadequate prequalification and planning maintenance to minimize long-term award criteria, uncertain tariff adjustment pro- costs, and managing short- and long-term fi- cedures, and lack of an independent regulatory nancial commitments. Ideally, the bidding authority to supervise the contractual arrange- consortia should be able to demonstrate that ments. The major recurring issues included the these skills are available to them. The lack following: of a good screening process led, for example, * This greenfield program sought to establish to the selection of medium-size concession- five main road corridors, three of which were aires that financed their equity contributions to run between the main industrial centers in through commercial loans. When projects Mexico and the principal border crossings into began to suffer financial difficulties, these the United States.) Nonetheless, some high- concessionaires were often unable to meet priority segments were never concessioned, their equity infusion requirements. Others did while others that were constructed lacked con- not have the necessary technical capabilities, tiguous sections that would integrate them into including specialized machinery, skilled la- the network. This piecemeal pattern of con- bor, and adequate quality control procedures. tracting reduced the near-term attractiveness Even some of the larger companies wvere of the toll roads to long-distance traffic, par- stretched too thin, given the speed at which ticularly to truckers, who pay the highest tolls. different concessions were awarded to the * Somewhat related is the lack of an intermodal same firm. development strategy. Thus, project devel- Formal mechanisms were never established opment in the various transport sectors often for soliciting or channeling inquiries or re- occurred without due coordination. Conse- quests from private sector participants before, 4 A Retrospective on the Mexican Toll Road Program (1989-94) during, or after the bidding process. Thus, pected, the final number reached almost sixty the relationship that developed between the as a result of government-mandated change public and private sectors often lacked trans- orders, often required to appease local in- parency and wTas at times adversarial. terest groups. M Many projects were financed under very loose Project cost structure cost-plus construction arrangements or none at all. This, combined with the fact that lend- Cost overruns and delays frequently arose be- ers only rarely hired an independent engi- cause of information deficiencies, problems neer to assist them with their due diligence with securing rights of way, lack of effective investigation before financial closing or with turnkey construction arrangements, unantici- supervision of the contractors' efforts, cre- pated design changes, local community resis- ated a void in terms of monitoring quality tance, and permitting issues. As a result, the control programs, permitting issues, and the average cost per kilometer of new highway rose progress of construction budgets, critical path to about US$2.6 million to US$2.8 million, com- activities, and the like. pared with the original estimated cost of US$1.7 * In some projects, construction came to a vir- million. This figure does not reveal the full tual standstill because of poorly defined pro- extent of the overruns associated with the 'hard cedures and bureaucratic delays regarding costs" of construction, that is, the costs associ- the issuance of permits for purchase and use ated with required equipment, material, and of chemicals or dangerous substances. In one labor, and as opposed to "soft costs" (interest project, time delays resulting from problems payments during construction, cost escalation in securing permits for dynamite directly re- due to inflation, advisory services, and the like). sulted in cost increases of nearly 30 percent. The dramatic drop during 1990-94 in both in- flation and interest rates offset in part the real Project revenue structure increases in hard costs. Cash flow generated by the sector has been Reasons for the cost overruns included the far below base-case expectations as a result of following: traffic shortfalls and higher-than-expected * Projects often broke ground with only verv operations and maintenance expenditures. The preliminary engineering and design work. In December 1994 currency crisis led to a sharp the case of the 267 kilometer Cuernavaca- decline in disposable income and thus road Acapulco toll road, for example, this led to usage, along with a drop in economic activity cost overruns of 200 percent and time de- that resulted in a marked decrease in commer- lays of thirty months. cial activity and freight transportation. As a * Construction often began without first secur- result, of the thirty-two projects for which op- ing the right of way. This failure was often erating data were available in March 1995, less exacerbated by mounting resistance from lo- than five could meet their base-case revenue cal farmers and community groups, environ- projections. On average, actual project revenues mentalists, and historical conservationists, were 30 percent below original projections. and resulted in delays and even rerouting of some projects. As problems occurred, ma- Important factors leading to this situation in- chinery and material sat idle while mobiliza- cluded the following: tion and interest costs mounted. * Shortcomings in the traffic studies reflected * One of the most frequently recurring prob- a general lack of expertise by the conces- lems related to supervision and unilaterally sionaires, the lenders, and their consultants mandated change orders by the Secretary of in developing adequate methodologies (box Communications and Transport. In a project 2). On only five of the thirty-two toll roads in which four pedestrian bridges were ex- for which traffic data are available has the The World Bank Group 5 BOX 2 TRAFFIC STUDIES Traffic study methodologies often suffered fromthe following: averagedatily (taffic been above base-case Lack of analysis of specific traffic characteristics, including time expectations (table 1). * In some projects, trucks were expected to and seasonal variations by type of vehicle, trip origins and account for 20 to 45 percent of users. In re- destinations, and purpose and frequency of trips. ality, trucks were less than 5 percent of the * Failure in projections to identify key economic parameters that traffic on many roads, leading to a weighted would affect road usage, such as population, employment, per average tariff much lower than originally ex- capita auto ownership, per capita and disposable income, and pected. In some cases, the existence of a black market for toll tickets contributed to performance of key industrial indicators. this outcome. * Unrealistic growth rate assumptions for extended periods that, if * Despite obvious time and cost advantages realized, would have exceeded the capacity of the road. of the new roads, many potential users were * Failure to include an end-user learning curve or differences in simply unwilling to pay the toll. Aside from tariff elasticity between end users the extremely high tariffs, this unwillingness * Overreliance on increased demand due to the opening of intercon- was also due to the fact that the concession- necting roads, the construction of which was often delayed or aires did little to market the time and cost savings of the roads (for example, through never undertaken. monthly passes, volume discounts, and di- * Underestimation of the congestion relief that the opening of the rect negotiations with high-volume users such new toll road would bring forthe toll-free option, and thus as trucking or passenger bus companies). overestimation of the actual time savings of the new road. * In all but a few concession agreements, the *Insufficientattentiontogeneral conditionsofaltemativeand concessionaire could adjust the tariffs only feeder routes and the identification of factors influencing the with prior approval by the Secretary of Com- munications and Transport (even for down- t a o k st. ward adjustments). This greatly reduced the * Inadequate and attimes notreadilyaccessible data from the flexibility of the concessionaire in efforts to Secretary of Communications and Transport for traffic studies. maximize cash flow. * Though investors sometimes employed their own independent * Minimal attention was paid to the develop- consultants, actual fieldwork was limited to one to two weeks of ment of such auxiliary services as gas sta- traffic surveys. This was often the result of insufficient time tions, rest stops, hospitals, tow truck services allotted to bidders and financiers between the date of release of and restaurants. (For most projects, conces- sionaires were granted the right to operate the bid documents and the deadline for delivery of bids. these services for two years beyond the con- cession term.) A toll bridge expected to handle 5,000 trucks a day moving through a U.S. border crossing captured only 200 users underestimated. Though provisions for ma- a day. This shortfall was in large part due to jor maintenance reserve funds were included inadequate attention to access roads and to in most concession agreements. enforcement installation of customs clearing facilities. of these provisions by the Secretary of Com- * The government faced great resistance from munications and Transport and creditors was the trucking industry in implementing and often lacking, especially as concessionaires enforcing technical measurement and axle- began to experience financial difficulties. weight standards. Truckers for the most part * Inadequate toll collection operations and sys- continued to use the toll-free option, espe- tems, poorly designed fiduciary structures, cially in light of the very high tolls. and the inexperience of the trustees and com- * Operations and maintenance budgets often mercial banks responsible for supervising the were not heavily scrutinized by the conces- flow of project funds led to less than strict sionaire or its lenders, and in many cases controls over collection and proper applica- extraordinary maintenance costs were grossly tion of road revenues. 6 A Retrospective on the Mexican Toll Road Program (1989-94) Project financial structure The concession agreements contained an adjustment clause to shorten the concession Lack of liquidity in the local financial markets, term if traffic exceeded guaranteed levels. use of short-term, high-cost, floating rate debt, Because of the lack of any upside potential, currency risk (both devaluation and convert- this clause led to significant disincentives to ibility) faced by international investors, and the apply true risk capital. high cost and limited availability of surety and The only source of local debt financing was insurance coverage severely hampered sector the commercial banking sector. But the ten- performance. ors for such debt often extended only through Concessionaires' financial contributions were the construction period, with the expecta- in the form of "sweat equity" provided tion that once the project was in operation, through the retention of work from construc- cash flows would be securitized through lo- tion affiliates. These contributions originally cal or international debt offerings. However, amounted to 25 to 30 percent of investment as roads incurred cost overruns and the debt costs, but as lenders demanded higher eq- servicing ability of the projects proved far uity cushions and debt service coverage ra- less than had been expected. these construc- tios, the contributions increased to about 50 tion lenders soon were forced to restructure percent of project costs. This led to inflated and extend the terms of their bridge financ- construction budgets (and hence toll levels), ing. In addition, the loans were character- with some projects effectively financed with ized by high floating interest rates, often 1,000 100 percent or more leverage. Estimates of basis points higher than the local market ref- the average gross margins in the road build- erence rate. This combination of high inter- ing program range from 35 percent to 50 per- est rates and short maturities resulted in cent of total costs. Like the distortions arising prohibitively high tariffs. from the bid selection criteria, these exces- * As many projects became increasingly un- sive margins in no small part were the result able to meet their debt service obligations, of a lack of competition among the limited lenders' appetite for new toll road invest- number of project bidders. ments declined. Consequently, many banks that had underwritten huge amounts for projects were later unable to syndicate or refinance the loans, and liquidity quickly dried up in the market. Once word spread : ;0 :00;TAB;LE 1 t; DAILY TRAFFIC tHAS NOTX 0about the actual financial situation of many MET EXPECTATIONS projects, other, untapped sources of funding (such as international institutional investors) Average daily traffic quickly turned their attention to other invest- :: t j; ;aas a pXercentage of ;;: ;i; g yg :ment opportunities, both within and outside g uaranteed traffic; W :: 0 t::Nmher 6fgroads 4:0; : Cguaranteed rfi Nb of ra X : g $ S ; S ;the country. Likewise, in the few international offerings, market liquidity and resulting pric- : ; Above 10011i ;g: U ; 0 ;;S :;;; 5:E;;: X ing were adversely affected by the presence 575100 :2 of currency risk, in the form of both exchange 50-74 8 rate depreciation and convertibility or trans- 25- 49i ferability concerns.5 6-24 9 Local commercial banks were lacking in credit analysis, loan documentation, internal :H Na tNofe:As oftDecemberl09S4. P M :V Xcontrols, and risk and liquidity management. Source: Authors compitaion. Thus, the skills needed for limited recourse financing-to analyze project credit, security arrangements, and operative agreements- The World Bank Group 7 simply were not adequate for the complex- Lenders were not allowed a collateral assign- ity of the projects and the huge demand for ment of the concession agreement. Conse- credit. quently, they could neither secure revenue Performance, advance payment, and hidden generated by the project nor exercise bor- defects bonds, as well as insurance for prop- rower substitution rights in the event of a erty damage, third-party liability, force ma- default. This greatly diminished their bargain- jeure, and delayed opening, were high cost ing power at the negotiating table with both and very scarce. Where coverage was se- the borrower and the government. cured, significant problems arose in collec- Some concessionaires were not single-purpose tion. These problems resulted as much from entities. In these cases, it was impossible for lenders inexperience in negotiating the terms lenders to isolate specific cash flows by project, of such policies as from cumbersome and and borrowers with multiple concessions were vague collection procedures. able to apply the cash flow from some projects to support the financial needs of related but Legal considerations separately financed ventures. * Under many trust agreements, local banks Legal aspects of the projects that weakened allowed the concessionaire the final word in financial discipline included issues associated technical decisions on such matters as change with lender security and enforcement riglhts, orders, change of material subcontractors. dispute resolution mechanisms, tax treatment, and toll collection procedures. This led to and procedures for securing government capi- major problems relating to construction and tal contributions. Key problems included the operating costs as well as quality control. following: * Certain tax aspects affected the financial vi- L Legal disputes in Mexico arising between a ability of the projects. Changes to the tax code private party and the government were to be were required regarding the 2 percent tax resolved within the constraints of the Mexi- on assets, application and calculation of de- can court system and were not subject to in- preciation and tax credits, and payment of ternational arbitration. Being subject to the value added taxes. But these modifications local court system represented a significant were made only after nearly twenty-five risk to international investors because of their projects had been concessioned, and in many lack of familiarity with the legal system. cases they required annual approval and thus * State governments were expected to provide subjected financiers to nonrenewal risk. grants or cash equity or to dedicate toll rev- enues from existing roads for certain projects Policy conclusions as part of the construction financing, as con- tingent obligations to cover cost overruns, or Policies to address such issues will vary de- to cover costs related to securing the right of pending on sector objectives, the current sta- way. But there were often delays or actual tus of the legal and regulatory framework, and defaults in the fulfillment of these financial the technical and financial capability of the obligations, in part because the contributions public and private sector participants. Of the were to be sourced from annual budget ap- many lessons to be learned from the Mexican propriations, a process subject to tremendous program, however, perhaps the most impor- uncertainty and discretion. As a result, state tant for governments developing a sector pro- governments were often left without any gram based on private investment is the means for meeting their obligations. Other necessity of devising systems of regulation and problems arose because of the lack of a clear support that provide the encouragement and registration process for public debt, which left room for maneuver that the private sector lenders with no clear understanding of where needs, while minimizing the government's ex- they stood relative to other state creditors. posure to the host of commercial and financial 8 A Retrospective on the Mexican Toll Road Program (1989-94) risks surrounding projects. The sector strategy tive schedule requires paytment (with a 1 percent added pre- must include sound and explicit incentives to mium for investors) in eighteen years if project revenues are impaired, wshethec because of insufficient traffic flows, Cuir- select worthwhile projects. Prices should be rency fluctuations, or similar risks. The deal was priced at set to ensure the viability of privatized enter- about 500 basis points over U.S. Treasuries at the time of prss ihotprotecting piaeparties frmclosing. prises vw-itiout protecting private parties from ^ The Mexico Citv-cuernavaca toll road, owned and operated bankruptcv. Prices should also be allowed to by Capufe. The placement of exchange rate-linked bonds in reflect actual demand-in this respect, the need Aogust1994vwasoriginally plannedasa UsS625 million, twenty- to develop congestion pricing is of fundamen- year final maturity transaction. But because of investor con- cerns about currencv risk and long-term interest rate volatiliry, tal importance. The regulatory framework the issue vwas cut back to a seven-year, US$265 imillion 144A should check the abuse of market power and placement (though also featuring a dual amortization schedule ensure adequate services. Besides protecting wiahanexpectedpayoue and a thirdyears) The ssue receied a investors, an appropriate regulatory and market local curcency-based "A" r-ating from Standard & Poor's. The structure protects the government and eventu- deal was initiallv placed at abouit 350 basis points over U.S. Treasunies. ally taxpayers from bearing ultimate responsi- A fourth financing of about US0300 million for the Tepici bilitv for the financial performance of privatized Guadalajara toll road wvas canceled at the last minute because of enterprises. the onset of the Decemher 1994 currency crisis. Federal fCinding also included contributions by Petroleos Mexicanos Jeff Ruster (Jruster@worldbank.org), Private (Pemex) and by Caminos y Puente Federales de Ingreso y Serv icio Sector Development Department Conexo (Capufe), the federal highwsays and bridge operator. for Viewpoint is an open more than 1,100 kilometers (kin) of public toll roads. forum intended to The WXorld Bank's Operations Fvaluation Department reports that encourage dissemina- by early 1997 nearly forty projects, accounting for I'5$11.5 billion tion of and debate on of debt and equity investments, had submitted requests to the ideas, innovations, and government for financial restructuring. In Auigust. the government best practices for ex- of Mexico announced a restrLicturing package of around 80 bil- panding the private lion news pesos fir 23 road projects-comprised of an assumption sector The views pgb- of 60 billion new pesos of project debt and a cash injection of 19 lished are those of the billion nesw pesos. As pan of the package, the govermnent also authors and should not plans to reduce the tolls for cars and trcicks bs 15 and 35 percent be attributed to the respectively. World Bank or any of The governments of several Mexican states also granted conces its affiliated organiza- sions under local las to build and operate highways; these have tions. Nor do any of the generally been imiodeled on those granted by the Secretary of conclosions represent Communications and Transporn under federal las. official policy of the The five major axis links are Nogales Culiacin-Tepic Guadalajara World Bank or of its Toluca Mexico City (721 kmi); Nuevo Laredi-Reynosa Mtonterrev- Executive Directors San Lois Potosi-Queretaro-Mexico City (480 km); Ciudad.Juarez or the countries they Mexico City Puebla-Oaxaca (340 km); Mexico Ctv-Veracruz- represent. Sayula-Ocozocoautla-Arriaga PuLerto 'Madero (428 krn): and Tluxpan-Pachuca-Mexico City (222 km). To order additional Three projects already in operation wvere nevertheless able to re- copies please call finance by tapping the intemational capital markets prior to the 202-458-1l lt or contact . December 1994 currency crisis. This wsas due in large part to ex- Suzanne Smith, editor, pectations that Mexico ssocild receive an investnment-grade rating. Room F6P-188, 'I'hese three projects ace as follows: The World Bank, The ten-sear, US5207 million placement for the Toluca toll road 1818 H Street, NW, in Jtine 1992. The deal initially ssas not swell received despite Washington, D.C. 20433, repricing of about 700 basis points over U.S. Treasuiries. Inves- or Internet address tor concerns centered on tight debt sen7ice coverage ratios of ssmith7@worldbank.org. 1.25 to 1, combined with the existence of currency risk, a par- The series is also ticularly sensitive issue at the time because the peso ssas esti- available on-line mated to be about 20 percent overnalued. (www.worldbank.org/ The US$110 million placement for the Ecatepec-Piramides and html/fpd/notes/ Manzanillo-Armeria toll roads. vwhich ssere jointly securitized. notelist.html). The proposed financing and security structure was perceived as much simpler than that in the Toluca placement, and it @ Printed on recycled provided for a dual amortization process. The target amor- paper. tization is based on a tselve-year final maturity. The alterna-