Which LatAm countries will lead project finance, and why?

Brazil, Chile and Mexico are emerging as leaders in infrastructure project finance this year, in a region that has vast infrastructure needs and offers plenty opportunities.

Meanwhile, uncertainty in Argentina does not allow any forecasts.

Edson Ogawa, head of project finance for Banco Santander Brasil, the local unit of Spain’s Santander, told BNamericas his bank was focusing on three leading countries.

Santander is a regional leader in project finance, with 25 project finance executives for Brazil and 25 more focusing on other countries of the region, according to Ogawa.

BNamericas takes a look at the four countries.

BRAZIL

Infrastructure concessions and privatizations, and the opening of the natural gas sector will ensure a strong need for project finance.

“The natural gas sector in Brazil is in a transformation process. Petrobras is divesting gas transportation assets and major thermal power projects. Without a doubt, the natural gas sector presents an avenue of opportunities for banks to offer financing,” Marcelo Girão, head of project finance at Itaú BBA, the investment banking unit of the country’s largest bank, Itaú Unibanco, told BNamericas.

Electric energy has historically provided opportunities even during recessions. And the “sector will continue to be important, but now we have other fronts of expansions, such as infrastructure, mainly in the highway and airport sectors, both segments are already attracting the appetite of local and international investors,” Ogawa said.

CHILE

Despite social unrest and some turbulence expected this year stemming from a debate over a new constitution, experts continue seeing the country as important for project finance.

“Chile is an investment grade country in a region marked by instability. Various global investors put Chilean assets automatically in their portfolio and that generates a constant demand for projects and operations there,” Pablo Sorj, a lawyer specializing in infrastructure at law firm Mattos Filho, Veiga Filho, Marrey Jr e Quiroga, told BNamericas. 

However, the long-term stability carries a price for investors, despite some short-term issues.

“Yields from Chilean assets are tighter compared with other countries in the region,” Santander’s Ogawa said.

MEXICO

Geographical proximity to and strong trade links with the US make Mexico a relevant player for new projects, but some policies of President Andrés Manuel López Obrador (AMLO) have also raised red flags.

“The issue involving the airport project over there is a concern and represents a major discomfort for investors,” Sorj said.

“Mexico faced difficult moments but investors see that country with a relevant size to be an interesting arena for new projects,” Ogawa added.

ARGENTINA

Argentina is a major headache for project finance, as the country is negotiating to restructure its US$44bn debt with the IMF.

This week, Argentine foreign minister Felipe Solá visited Brazil to ease tensions between both countries. On the occasion, he asked President Jair Bolsonaro for support in the negotiations.

"From Brazil, with whatever our economic team can help Argentina, we will help. After all, Argentina is our major trade partner in South America", Bolsonaro said. "We are interested in a strong Argentina."