Regulatory, cultural shift needed to up private investment in water projects - CIFI

Wednesday, May 25, 2011

Regional lender Corporación Interamericana para el Financiamiento de Infraestructura (CIFI) sees a need for a clearer regulatory framework in order to attract more private investment in Latin America's water sector, managing director Cesar Cañedo-Argüelles told BNamericas.

"We see a major need to continue investing in water projects, but it's a sector where we have to look at public-private type structures, primarily because of the cultural issues," Cañedo-Argüelles said.

"Today, people in many countries in the region don't pay for water. So projects developed by the private sector, which charges a fee for water use, will require a cultural change. To date the only project we've been able to finance is a desalination plant in Trinidad and Tobago, where there is an agreement with the government to purchase potable water to supply its citizens," he added.

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That cultural change will not be an easy one, Cañedo-Argüelles said, equating the shift to that required for people to accept tollroads in the region.

"There was an education process there, and little by little people began to accept that you have to pay a toll to use a less congested highway. So perhaps, little by little there will be better quality of water service and a fee to access that water," the executive said.

CIFI has not had any direct experience with any countries in the Central America region that are pushing these issues. In Mexico, the lender has seen a lot of projects for municipal water treatment plants, but there is no clear scheme for private operators to repay debt, according to Cañedo-Argüelles.

"We tend to concentrate on areas where the private sector invests and where we see them investing in the coming years. We see water as the sector that will be developed, but not in the immediate future," said Cañedo-Argüelles.

CIFI is a privately owned corporation specializing in the financing of private infrastructure projects in Latin America and the Caribbean.

The corporation's shareholder group consists of multilateral organizations (36%) and private banks (64%), led by Spain's Caja Madrid. The International Finance Corporation (IFC) is the second largest shareholder.