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

Best practices in Public-Private Partnerships financing in Latin America
possible. Multilateral parties then came in with bridge loans or
partial guarantees, which increased the project’s rating.
Nowadays, local banks are increasing the terms at which they
offer their loans. In this manner, a local bank is now working in
more aggressive ways, i.e., more competitors, with lower costs.
Among the fundamental risks of the financial close we can
find the level of returns for investors. This is the eternal conflict
between what governments offer, and what investors want.
Often, investors are in construction, and look for a profit from
construction, but not from long-term flows. Consequently,
there are potential problems, such as quality service reduction.
There is even an interest in selling projects, which may lead
investors to ask for renegotiation of the contract.
The Contract should allocate risks clearly. A critical issue is
compensation mechanisms. Guarantees are important in the
financial close, in the event of Contract termination. Another
fundamental clause is the economic-financial balance, as well
as tax stability clauses. Likewise, inflation-indexed incomes
are another important element to be considered upon the
financial closing.
Juan Carlos Javier presented the PPP project called “San
José-Caldera Road Public Service Work Concession”, which
was financed by the Central American Bank of Economic
Integration (CABEI). This project is important because it was
the first PPP road in Costa Rica. The highway has a total
investment of US$ 330 million, a length of 76.8 kilometers and
will join the cities of San José and Caldera. This Concession
consists in the design, planning, financing, construction,
rehabilitation, improvement, operation and maintenance
of the highway. To finance this work, a syndicated loan was
used, for an amount equal to US$ 246,186,294, lent by CABEI.
This loan required normal guarantees plus a mechanism of
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