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In 2010, the Guatemalan government approved the country’s first national public-private partnership (PPP) law, laying the groundwork for creation of the national PPP agency, Anadie.
The agency has been up and running since October 2012 and this year plans to tender its first infrastructure project, a US$25mn logistics zone along the Mexican border.
BNamericas spoke to Anadie’s director, Julio Estrada, about the sectors that present the most opportunities, and target levels of investment for the next few years.
BNamericas: The PPP law was approved in 2010, why are PPP projects only now being developed?
Estrada: The PPP law was approved in 2010 and the PPP regulation was approved in 2011, but the agency wasn’t set up until the end of last year. To date no PPP projects have been carried out. We now have to start to develop a portfolio of possible projects and encourage government departments to prepare the relevant studies in order to tender good projects. We are currently reviewing 12 projects, eight of which are well developed. No PPP projects have been carried out until now because they take time to develop, there was no one to organize them and there was a lot of rotation of government posts. Until now there has been a lack of pre-investment and project management capabilities within the government, especially as the average time in office for a government minister has only been a year or so.
BNamericas: Which sector presents the greatest challenges?
Estrada: Transport infrastructure. There has already been a lot of planning, legal regulation and heavy investments in the electricity sector and the telecommunications sector was privatized several years ago, so that sector already has a lot of competition. However, transport infrastructure still lags behind. The highway infrastructure sector isn’t so bad, as Guatemala is a small country, but there has been a lack of port development strategy, especially in terms of logistics. The rail sector has also been neglected over the past 15 years. The public transport sector also requires a lot of work as there has been no coordinated, central planning.
BNamericas: How much investment does transport infrastructure require?
Estrada: It has been estimated that we need to invest US$400mn to US$600mn more each year in transport PPP projects in order to manage a more accelerated economic growth and reduce the gap in service that we currently have. Next year we will jump from zero to around US$100mn in investments and this will increase to between US$300mn to US$400mn by 2015. After that we are looking at annual investments of US$1.5bn.
BNamericas: Which factors make the infrastructure sector an attractive proposition for investors?
Estrada: Guatemala has a long tradition of private investment in the electricity and telecommunications sectors. There is also no discrimination between local and foreign investors and the state has allowed such investors to get on with their projects without getting overly involved. We now have the right legislation to carry out PPP projects. In addition, the Guatemalan government has the lowest levels of public debt in Latin America and we have a lot of confidence that the government will secure an investment grade credit rating within the next two to three years. The rating is currently B+ and a jump in investment grade will make infrastructure projects far more interesting for investors, like it has done since Peru obtained its investment grade rating four years ago, Panama two years ago and Brazil five years ago. Now is a great time to invest in projects before the sector becomes expensive.