water infrastructure in latin america
DESCRIPTION
Present an overview of water infrastructure market in Latin America: - Infrastructure spending as a catalytic tool to overcome the financial-economic crisis -Structuring the process “getting it right!” -Strengthening the Water Sector: Confronting The Challenges Discuss the role/participation of private sector: - Finance projects in distressed markets - Emerging new opportunitiesTRANSCRIPT
Water Infrastructure in Latin America:Key Challenges and Business Opportunities in 2009
Omar Del Valle ColosioCG/LA Infrastructure LLC
Water Executive Forum 2009Philadelphia, PA. March 30-31, 2009
Disclaimer
The following presentation of Infrastructure Projects in Latin America does not constitute in any case, a request for tender, by the agencies mentioned. The information is used merely to exemplify trends in infrastructure spending.
Moreover, this presentation does not represent the views and ideas of CG/LA Infrastructure LLC. The presenter is responsible for any information or omissions.
“Two features distinguish the water sector from other infrastructure. First, the supply is finite and location-specific. Second, because safe water is crucial for life and health, its availability and affordability for the entire population are of enormous welfare (and political) importance” (ADB, 2000)
Goals
1. Present an overview of water infrastructure market in Latin America – Infrastructure spending as a catalytic tool to
overcome the financial-economic crisis– Structuring the process “getting it right!”– Strengthening the Water Sector: Confronting The
Challenges
2. Discuss the role/participation of private sector– Finance projects in distressed markets– Emerging new opportunities
Agenda
Latin American Water/Infrastructure Overview
Key Challenges: Technical & Institutional
Infrastructure Spending, Fiscal Stimulus
Role/Participation of Private Sector
1. LAC Infrastructure Overview
• Economics, series 2000-2009– The region will experience a deep slowdown and will likely
remain as such until 2010– GDP Growth Estimates in 2009 < 1.5% – Currency depreciation (Mexico & Brazil most affected)
• Current scenario, the effects of the financial crisis – Lack of finance delayed projects in pipeline– Government expenditures announced, but on hold
1. LAC Infrastructure Overview
• Current infrastructure spending as a percentage of GDP– Spain, roughly above > 5%– USA , between 1% and 2% of GDP
– LAC spends less than 3% of GDP in infrastructure– Mexico, approximately 2.5% of GDP– Costa Rica, approximately 1.6% of GDP– Peru, 3.1% of GDP– Argentina > 10 % on a combined public + private investments
1. LAC Water Infrastructure Overview
Generation Transmission Distribution
Access Quality
Clean water
Sewage
Safe drinking water
Safe sanitation
Private Sector ParticipationFacing Challenges
New Business Opportunities
2. Key Challenges: Technical/Institutional
5 non-exclusive challenges in the water sector in Latin America
Increasing water scarcity, lack of new sources, raising costs to preserve current water sources
Inefficiencies – operation/management
Water losses – not accurate measure, it ranges between 40% to 60%
Unplanned decentralization : more autonomy vs lack of capacity to implement new/better projects, few financial resources to invest
2. Key Challenges: Technical/Institutional
Top 10 Challenges to Finance Water Projects and the Degree of Difficulty (10 = highest)
• Political Leadership (4)
• Affordability (6)
• Information, Transparency and Monitoring (3)
• Law enforcement (6)
• Sustainability (5)
• Risk management/allocation (7)
• Managerial capacity (6)
• Public acceptance (6)
• Commercializing water (7)
• Social justice (4)
2. Key Challenges: Technical/Institutional
Small operation but huge responsibilities
The Case of El Salvador
High energy cost in operations
Lack of investment resources
Process is publicly owned
No profits – selling below half the production cost per cubic meter
Needs:
- New water sources
- Increase access in rural areas – rural population accounts for 40% of total population
- Rehabilitation of current system
- Development of new water treatment facilities
3. Infrastructure Spending, Fiscal Stimulus
Fiscal stimulus sums up to more than US$50 billion in the region main goal: overcome effects of the financial crisis
Announcements (approximates):
Argentina – US$4.4 billion for public expenditures Brazil – US$ 8.6 billion (mainly tax cuts) Chile – US$4 billion Costa Rica – US$2 billion (shield program) Mexico – US$40 billion (2009 – 2012) Peru – US$ 500 million fund (public-private) for
Infrastructure investments; national urgency decree
3. Infrastructure Spending, Fiscal Stimulus
The Fiscal Stimulus Effect on the Water Sector
– Structuring new projects?
– More transfers to sub-national water projects?
– Supporting current but long-term delayed projects?
– Procurement opportunities?
– Public/Private funds?
Share consumption among agriculture, industry, human needs
Growing demand at urban areas - low income, mid-low income dwells paying up to 4 times (or more) for drinking water
Increasing needs to renew equipments, foster efficiency, reduce water losses
Increasing needs for control management, operations, equipment and technology
Increasing need for finance local operations
4. Opportunities
4. Business Opportunities
Generation Transmission Distribution
Option Ownership Financing OperationsService Contract Public Public Public then some
private
Management Contract Public Public Private
Lease Contract Public Public Private
Concession Public Private Private
BOT Private then public Private Private
BOOT Private then public Private Private
Reverse BOT Public then private Public Private
Joint ownership Private then public Private and Public Private and public
Sale Private Private Private
Source: Ringskog (1998)
Investments opportunities by industry and sectors in 2009 (1= more likely)
Sector/Industry Financing Engineering & Construction
Equipment and Technology
Services
Water / Waste Water 2 2 1 1
Highways2 2 2 2
Ports & Logistics3 3 2 2
Tourism3 3 3 1
Oil & Gas1 1 1 1
Electricity2 2 1 2
Urban Massive Transportation 1 2 1 1
4. Business Opportunities
Debt/Equity – who gets what and how?
Financing Equipment & Technology• Public vs Private Financing• The Role of Export Credit Agencies• Supply Credit – getting best technology where
needed
Performance Contracting
Project bonds
Country
Project Sponsor Value US$m
Phase Type
BRA Vale do Sao Francisco Irrigation Public Private Partnership
Brazilian Ministry of Planning
100.00 Feasibility Private Operation/ Concession
BRA Wastewater Network Expansion in Eastern Rio de Janeiro
Rio de Janeiro City Government
Feasibility Private Operation/ Concession
BRA SABESP Ambiental, Partnerships and Water Loss Reduction
Sabesp 600.00 On-going Performance Contracts
CRI Wastewater Management Program in San Jose - environment improvement
JBIC & AyA 230.00 Construction/Procurement
Public Procurement
DR Clean-up of the Ozama River 1,000.00 TBD TBDDR West Aqueduct (Santo Domingo) CAASD 300.00 TBD Public ProcurementSLV Procurement Projects and Water
Treatment PlantsANDA 20.00 Construction/
ProcurementPublic Procurement
MEX Aqueduct Zapotillo CONAGUA 385.00 Tender Public ProcurementMEX Aqueduct Falcon-Matamoros CONAGUA 634.00 Tender Public Procurement
MEX Aqueduct El Realito CONAGUA 120.00 Tender Public ProcurementMEX Agua Prieta Water Treatment Plant CONAGUA 139.00 Tender Design-Build/TurnkeyMEX Atotonilco Water Treatment Plant
(Valley of Mexico)CONAGUA 583.00 Tender Design-Build/Turnkey
PER Project Majes-Siguas II: Hydric Reinforcement
ProInversión 373.00 Tender (IV T 2009)
Private Operation/ Concession
PER La Chira Water Treatment Plant and Submarine Emissor
ProInversión 141.00 Tender (II T 2009)
Private Operation/ Concession
4. Business Opportunities
Water Infrastructure in Latin America:Key Challenges and Business Opportunities in 2009
Omar Del Valle ColosioCG/LA Infrastructure LLC
Water Executive Forum 2009Philadelphia, PA. March 30-31, 2009