Ecuador , Canada and Republic of Korea

How Ecuador is paving the way for a series of new infrastructure tenders

Bnamericas Published: Wednesday, December 07, 2022
How Ecuador is paving the way for a series of new infrastructure tenders

While a series of infrastructure tenders have been announced in Ecuador this year, authorities have been restructuring them.

The aim is to make them more attractive to investors and upgrade the necessary regulations to enable the required financing, paving the way for various significant projects in the period until 2025, when President Guillermo Lasso's term comes to an end.

One of most important tenders in the pipeline is for the south Guayaquil viaduct, which is a long-awaited development to improve access to the southern Ecuador city and its port facilities.

In this interview with BNamericas, Roberto Salas, the government's technical secretary of public-private partnerships (PPP), talks about the administration's efforts to give the tenders more appeal, the reforms that authorities are preparing and the upcoming bidding processes to be launched.

BNamericas: How is work progressing to improve the bankability of projects and have more competitive instruments that facilitate private sector financing?

Salas: There's a marked trend toward recession in the world, which increases the cost of access to financial capital. Although there's liquidity, there are certain restrictions to allocate that liquidity and determine which projects it will go to.

As the PPP secretariat, our aim is that when the projects go out to tender there will be funds available at reasonable terms and costs so that they're viable.

For renewable energy projects it's easier to obtain resources and at more reasonable costs. In the case of infrastructure, it's essential to establish greater participation of the multilateral banks and the development banks of countries with strong financial resources so that they support funding. For this reason, we've approached the governments of Canada and South Korea, and we continue to approach countries that not only have financial resources, but also technological resources to support the structuring of projects, since these are 70-75% leveraged with debt.

The development banks and the multilateral banks should participate in these projects, providing around 60% of their financing, which would give confidence to the private banks to complement the scheme.

BNamericas: Have you already talked with multilateral and development banks to obtain that level of financing?

Salas: Of course. That's a daily issue and we've been working on it for a few months now.

In fact, the IDB and the IFC, the World Bank and CAF are the main allies we have. We're establishing a scheme so that they know the projects in detail so they can support their financing.

This scheme has to be turned into firm commitments. That's something that we're prioritizing now.

In the case of the development banks, we've strengthened our approaches with governments such as Canada, South Korea and others so that they commit support to certain projects in our investment portfolio.

BNamericas: Will the south Guayaquil viaduct and the new highways be prioritized in that scheme?

Salas: Exactly, and also renewable energies, since the policies of the most important banks, at the level of multilateral banks, national banks and private banks, are aimed at supporting the objectives of the transition towards decarbonization, which is a long-term global policy.

BNamericas: How are the approaches going with Colombia to obtain advice for infrastructure tenders?

Salas: We formalized an agreement of intent with the national infrastructure agency [ANI] several months ago that should result in a cooperation agreement.

BNamericas: A few months ago there was talk of building hospitals and schools with PPPs.

Salas: The PPP secretariat and the transportation and public works ministry (MTOP), with the support of IDB consultants who are health experts, are working on a project that allows the identification of the opportunities that are most applicable to PPPs. This process will end in April next year and then we'll have much more up-to-date information regarding the first health PPPs.

We don't have any other projects in the social sector. In the education sector, a support project is being assessed for a PPP in a culture project – a museum in Cuenca.

BNamericas: Is there any progress in work to establish regulations that can curb the discretion of officials when it comes to giving approval for projects?

Salas: We're going to start promoting the modernization of PPP regulations. The inter-institutional PPP committee was restarted, which established a single registry of projects through a platform promoted by multilaterals throughout the world and which Ecuador is adopting.

The national PPP registry will be constructed through the SOURCE platform, created by the G20 multilateral banks through the sustainable infrastructure foundation (SIF).

This platform's main objective is to support the delegating entities in the preparation, coordination, registration, execution, promotion and monitoring of projects under the PPP format with the supervision of this secretariat.

This tool contributes significantly to the transparency of PPP processes throughout their life cycle and allows exhaustive monitoring of the achievement of each project's goals.

The regulation seeks to protect contracts or tenders from discretionary issues and other risks of corruption.

The technical guidelines will be issued in late December or early January.

BNamericas: Doesn't this require new laws being sent to congress?

Salas: No. We're going to do it through an update of the regulation of decree 1190, which has regulated PPPs since 2020.

We're going to promote the new decree that will allow us to strengthen the way in which public-private partnerships are created in Ecuador.

BNamericas: What progress has been made in terms of the road sector with a view to future tenders?

Salas: A plan has been established to resolve the problems inherited from a series of contracts first. Together with the MTOP we're working to improve the quality of the structuring and execution of the contracts for the upcoming tenders.

The MTOP has done a good job so that the projects are structured within the State, in the department of concessions with the support of the PPP secretariat.

We will support and aid so that road concessions and other projects are managed in accordance with modern regulations.

BNamericas When will the first tenders be issued and what projects will they involve?

Salas: We're establishing a priority scheme, in which the most iconic project is the south Guayaquil viaduct.

This project is now being structured by the State, with the support of institutions, particularly from friendly countries, for the pre-feasibility and feasibility studies.

On July 25, a memorandum of understanding was signed with the Canadian Commercial Corporation (CCC), which allows identification of infrastructure projects in Ecuador and cooperation in their development.

This project was identified as a flagship initiative given its importance.

The process of planning and structuring the pre-feasibility and feasibility studies for the south Guayaquil viaduct is already underway.

Another priority project is the Manta-Quevedo highway, which is an expansion and requires a concession process. The studies are being supported by the World Bank. The final contract and award should be completed by late 2024.

We also have other projects that have been given priority, whose investments total around US$1bn and for which the contracts should be signed in 2024.

These roads are: Loja-Catamayo, Manta-Quevedo, Pifo-Baeza, Montecristi-La Cadena, Bahía-Pedernales-Cojimíes, Cumbe-Biblián-Cuenca, El Descanso-Gualaceo-Paute, Ambato-Baños-Puyo and Ambato-Guaranda-Babahoyo.

In order to award the contracts and start the works towards the end of 2024, it's likely that the tender will be issued in the last quarter of 2023 or in early 2024.

Meanwhile, we've also prioritized extensions of already existing contracts such as Chongón-Salinas, which could reach the Spondylus route [a series of highways along Ecuador's entire coastline].

We're also working on two other big priority projects: the Guayaquil-Quito and Guayaquil-Cuenca roads.

BNamericas: How are the studies for the two new highways advancing?

Salas: Progress is being made in the contracting process.

These are fairly large highways, especially the Guayaquil-Quito road. The studies should be contracted next year. The tender for the studies will be launched early next year.

BNamericas: So 2023 is going to be more a year to structure projects and call tenders for studies, with bids for the major projects being received in 2024?

Halls: That's right. We hope to have the contracts by the end of 2024.

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