Honduras turns to infra sector to become LatAm logistics hub

Friday, August 11, 2017

The Honduran government plans to increase infrastructure investment to boost the country's economy.

Due to the lack of public funds, the past few years have seen the government increasingly turning to the private sector as an additional source of funding in order to meet growing demand for infrastructure development.

One of the main goals of the country's public-private partnership promotion agency, Coalianza, is to turn Honduras into a logistics hub for Central America as well as for all of Latin America. 

BNamericas spoke with Miguel Ángel Gámez, commissioner president of Coalianza, to learn more about the plans for the logistics hub and how the PPP model has become a key strategy for economic and social development.

BNamericas: What are the main challenges facing Honduras in terms of infrastructure and what type of projects have the greatest priority for the country?

Gámez: The biggest challenge for Honduras, quoting our President Juan Orlando Hernandez, is to transform the country into a logistics center, not only for Central America, but also for Latin America. This can only be achieved by having good road, airport and port infrastructure. Hence, we are focusing our efforts on projects that can help us achieve said goal. For instance, we already awarded concessions for Cortés port, and the new airport in Palmerola. We want to develop new and better roads, as well as a rail line to connect our country's Atlantic and Pacific coasts, which could serve as a sort of bridge to increase trade between the East and the West. With that, we would be contributing to connect the great Asian tigers with the world's largest market, the United States.

BNamericas: What is the current status of the rail line project?

Gámez: We are about to enter the structuring phase. A prefeasibility study has already been conducted by an Italian company. We are working with two consortiums at the moment - international companies interested in developing this great project. 

BNamericas: What are the key infrastructure PPP projects promoted by Coalianza currently being developed in Honduras?

Gámez: The ones that are already underway, and which we consider as the most important, are a container terminal and the bulk terminal being built in Cortés Port. These works have helped Cortés position itself as the number 1 port in Central America. Likewise, there is also the construction of the new airport at Palmerola in the Comayagua valley, which will allow Honduras to receive transatlantic flights and also allow new airlines to enter the Honduran and Central American markets. Another project also under construction is the new government complex, which will host between 34 and 42 government agencies.

BNamericas: Of all the initiatives included in your portfolio of projects, which could be considered as the biggest and with most potential?

Gámez: The ones with the largest scale and potential would be the mega ports of Amapala on the Pacific, in Honduras' southern region, and Castilla on the Atlantic, as Honduras is privileged to have the largest deep water ports in Latin America, which do not need to be dredged to allow for post-Panamax vessels. A final engineering study for Amapala has already been completed by a Korean company, while studies for Castilla port have also been carried out.

The development of this port infrastructure would be complemented by the aforementioned rail line, the Inter-Oceanic railway of Honduras. 

BNamericas: What is the estimated investment for the project?

Gámez: The estimated investment for this project is US$12bn, based on the prefeasibility study. Once the final engineering study for the whole project is completed, we will have a more precise figure.

BNamericas: Honduras is investing US$1.3bn in PPPs and 72.6% of the public investment in infrastructure is being developed under this model. How many projects have been completed as PPPs and what has this represented for the country?

Gámez: We have developed 11 projects under PPP models through the tenders we have launched. In addition to the projects I already mentioned, the other initiatives include a logistics corridor, which is a road that runs from the capital Tegucigalpa to Cortés port, and then from Comayagua to the border with El Salvador; the tourist corridor; and the Lenca corridor.

Also under development is a new bus terminal and the new municipal market for the city of Danlí. Likewise, we are going to start another project for San Pedro Sula called New Era, which is now being structured with a tender scheduled to be launched in September. We consider the work that Coalianza has done to structure these PPP projects as having been beneficial for Honduras. Not only because of the US$1.3bn, but also because of the more than 112,000 direct and indirect jobs that have been created as a result of this. 

BNamericas: How does the process work of structuring a PPP project?

Gámez: PPP projects can be established in two ways: through a public or private initiative. The public initiative occurs when the project is co-sponsored by a state institution, with Coalianza in charge of structuring the process. For example, the public works ministry informs Coalianza of its interest to build a road, so our agency proceeds to carry out the relevant studies for structuring the project. 

In the case of private initiatives, an investor submits a project proposal for a service, a public work, or any other kind of project that can be beneficial for the population. Following submission of the proposal, Coalianza is responsible for determining whether the project is of national public interest. If the proposal is approved, the investor carries out all the relevant studies, which are subsequently reviewed by Coalianza's commission. Following a favorable opinion, a tender is launched within 30 days. 

BNamericas: What have been the main achievements of Coalianza since its creation in 2010?

Gámez: Our biggest achievement has been to convince investors from different countries to invest in Honduras. We have been able to position Honduras as a country where it is safe to invest and where investors can be guaranteed they will obtain a return on their investment. Another important achievement has to do with job creation. We have been able to reduce migration from rural to urban areas through the implementation of major PPP projects, which have directly supported municipalities. 

BNamericas: How would you describe the legal context and investment climate that Honduras offers to companies interested in participating in PPP projects in the country?  

Gámez: What the country has offered to all the companies that have participated in our tenders is real legal certainty. For instance, after a PPP proposal is approved by Coalianza, this has to be approved by the cabinet and then also by congress. Once it obtains final approval, it is published in the official gazette, becoming law. Therefore, investors can be certain that the state of Honduras will guarantee the investment. This is truly important, given that through our country's legal framework, including the PPP superintendence, the high court of auditors and the institute for access to public information, these projects are safeguarded. So even in the case of a change in government, the validity and legality of the contracts are upheld. All PPP contracts are medium and long-term; this is why congress' approval for them to become laws is so important.

BNamericas: What strategies will Coalianza implement to increase the investments in PPP projects for infrastructure?

Gámez: We have a specialized team that promotes our projects domestically and abroad. We have strategic allies, such as important publications that promote our efforts. In addition, our duty as commissioners is to visit partner countries such as Mexico, other Central American countries, the United States, countries in South America, the United Kingdom and Spain, whenever there is a project or particular investment we want to promote. Our strategy also includes presenting Honduras as a good country to invest in; one that has competitive advantages in terms of its geographic location and natural resources.

About Miguel Ángel Gámez

A civil engineer specialized in highway construction, Miguel Ángel Gámez is serving a second term as commissioner president of Coalianza.

Gámez previously served as minister of public works, transportation and housing, and was a member of congress for three consecutive terms. He also served as chair of the legislature's public works committee.

About the company

Functioning as a decentralized agency of the president's office, Coalianza has been operating since 2010 to promote and manage public-private partnerships.