Best Practices in PPP Financing Latin America - e-Institute - World ...

Best practices in Public-Private Partnerships financing in Latin America
to promote the diversification of PPP investments, allowing
for options in investment of bonds and shares issued by
companies that are executing infrastructure works.
The small local stock market and the lack of fixed-interest
instruments with long-term maturity drives pension fund
investments in alternatives, such as Concessions and
Infrastructure Projects. The possibility to invest in these types
of projects has been present since the year 2001. But as of
2004 the standards allowing Pension Fund Managers (PFMs)
to acquire a wider selection of instruments as the projects’
finance source were issued.
The investments made by PFM can occur through several
instruments: preferred stocks, common shares and bonds.
However, the major part of financing occurs through bonds
because investment in shares is made in Stock Exchange listed
instruments since the issuer is required to submit an additional
guarantee in the case of share issuance. Resources invested in
instruments can be destined to the financing of new projects,
infrastructure projects, concessions, housing, exploitation of
natural resources and forests, or other sectors that require
medium and long-term financing.
Nonetheless, issuers must comply with certain requirements.
First, PPPs or temporary concessions should derive from bidding
processes or tenders supervised by an agency representing the
Government. Secondly, the total amount of investments made or
committed for the financing of projects should not be lower than
US$10 million or its equivalent in national currency. In addition,
issuers or majority shareholders of issuers must substantiate their
credit solvency by attaching reports on risk rates for investment
instruments issued in the local or foreign market or letters of
credit by local or foreign financial institutions. The project
operators should also prove acknowledged experience in the
economic sector that corresponds to the project.
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