Financing much needed oil, hydro electric and road infrastructure projects in Ecuador is not a problem, as the sovereign enjoys what finance minister Fausto Ortiz de la Cadena calls the best financial position in its history. Ecuador has received an additional $3bn in oil revenues and reduced debt payments by $1.2bn since the star of 2007, Ortiz tells LatinFinance. The county has also accumulated $2bn in international reserves and $1bn for potential investment in social security. Combined, the Andean nation has a comfortable cushion. “To face the crisis and improve its infrastructure, now Ecuador has close to $8bn [in extra reserves]. That never happened in the past,” Ortiz states. Additional savings of $50m could come as a result of the reduction in Libor, over which much of the country’s debt is priced. The minister adds that dollarization will remain in place, since devaluation of the US currency makes exports more competitive.
Category: Regions
Colombia Seeks $18bn for Infrastructure
Colombia is looking for $18bn in private capital to build infrastructure, according to Carolina Renteria, Colombia’s minister of planning and development. This is part of a $38bn in infrastructure investment plan for 2007-2010, in which the Andean nation is trying to attract interest. Recently, several airports in the country were snapped up by a group of Chinese and Colombian investors. “We are becoming known to different investors in the world,” says Renteria. “This is very good because it’s a new source of investment.” Colombia plans to invite investors to bid in the Ruta del Sol project, a highway connecting Bogota with the Caribbean coast, as well as a highway to link Bogota to Buenaventura, and the La Linea tunnel project, among 15 road concessions expected in 2008. The electricity sector will also be opened up for investors, with auctions planned in May, Renteria says. “There is a public commitment and we are putting in money from the budget, but we are inviting all investors for what we think will be great opportunities,” she adds. Besides roads, Colombia is also developing airports, ports and logistics.
Ecopetrol Foreign Tranche Talk Revived
Foreign investors could eventually buy shares in state-controlled oil company Ecopetrol, says Carolina Renteria, Colombia’s minister of planning and development. The offering of 10% of company shares would be a sequel to last year’s blowout IPO, which was targeted at locals. Renteria declined to state when the overseas tranche would be done. The first placement of 10% to retail and pension funds was so well bid that the company achieved its financing target in the first round, precluding the need for further raises. “It has become a driver of change in the Colombian stock market,” says Renteria. Bancolombia led the local offering and Credit Suisse and JPMorgan were slated to underwrite the international portion. Merrill Lynch and Citi were valuation advisors. The law allows up to 20% to be sold.
Colombia Mulls Mexico-Style Fund
Colombia’s finance ministry is considering starting a national infrastructure fund similar to Mexico’s Fonadin, finance minister Oscar Ivan Zuluaga tells LatinFinance. Encouraged by the recent appearance of private equity in the country, he explains, the government would like to start a vehicle where public and private money would join to fund infrastructure projects. Colombia is in discussions with banks about possible advisory roles in such a fund. Zuluaga declined to comment on the size of the fund, or a timetable for its creation. The government is planning a roadshow in the coming months to promote both its sovereign credit and investment in its infrastructure projects. Public credit director Viviana Lara tells LatinFinance that the finance ministry is not planning to issue any new debt at this time, as its funding needs are met. It may, in the second half of the year, begin considering COP debt options, with the goal of getting its peso debt to 60% of its total debt from the present level, around 40%.
Ecuador Puts Infrastructure and Relief First
Liability management is not a priority for Ecuador, which is focused on financing much needed infrastructure projects, the country’s finance minister Fausto Ortiz de la Cadena tells LatinFinance. “We need to channel our resources to building oil and hydro electric infrastructure, and the reconstruction of several roads,” says Ortiz. Relief efforts for recent floods on the coast are also top of the list. “We don’t want to put liability management above an emergency,” Ortiz says. Ecuador will continue to focus on cost-cutting measures that have saved the country $400m in Q1, the minister says. “In our policies to lower financial costs, we take into consideration everything, including our global bonds,” Ortiz adds.
Patino to Lead Mexico Infrastructure Fund
Federico Patino will run Mexico’s new MXP270bn national infrastructure fund, Fonadin, which should be up and running within weeks. The fund is part of Banobras and Patino, formerly at Nafinsa, will report to Alonso Garcia Tames, Mexico’s public credit head Gerardo Rodriguez tells LatinFinance. It will start with MXP40bn from last year’s FARAC toll road auction and channel approximately MXP270bn into infrastructure projects over the next five years. It will invest through guarantees, subordinated debt, risk capital and other vehicles that support loss-making projects. Mexico sees infrastructure investment as part of a counter-cyclical economic policy and an important measure to counter the negative impact of a US slowdown this year.
Mexico Says No Plans to Issue
Mexico has no plans to issue debt in the overseas markets to break the sovereign logjam, head of public credit Gerardo Rodriguez tells LatinFinance. “We very have a very good dialogue with all the banks, we try to get them involved in our strategy,” says Rodriguez, who was at IDB meetings in Miami this weekend. “We are in a relatively comfortable position of not needing funds,” says the official. “Perhaps what makes sense, with all this uncertainty in this environment, would be to wait and see how markets go back to a more normal dynamic,” he adds. State oil giant Pemex plans to raise $5bn in 2008, including $2bn from local and international capital markets. “Most of that can be done in the local markets,” says Rodriguez. “They are taking a look as usual at external potential funding activities but markets would need to go back to more normal dynamics.”
FARAC III Seen Before Year-End
Mexico expects the third highway concession package from its MXP270bn Fonadin national infrastructure fund to be bid by the end of the year, head of public credit Gerardo Rodriguez tells LatinFinance. Mexico will have further details out in a few months. Materials for the second, so-called “Pacific Package” were distributed in February. It incorporates some existing roads – Guadalajara-Tepic, Mazatlan-Culiacan and Aeropuerto Los Cabos-San Jose del Cabo – and a few others to develop the Mazatlan bypass, Culiacan bypass, Guadalajara southern bypass, Compostela-Puerto Vallarta and San Jose del Cabo-Cabo San Lucas. The third concession is also expected to mix greenfield and brownfield projects. The first package from Mexico’s Fideicomiso de Apoyo para el Rescate de Autopistas Concesionadas (FARAC) trust was sold in 2007 to Empresas ICA and Goldman Sachs Infrastructure Partners. The MXP37.1bn loan package secured was the first such international financing done in pesos, and the biggest local currency syndication the LatAm project market has ever seen. Lenders holding big peso tickets nervously await a swift takeout, but Rodriguez says the project will want to accumulate a track record before coming back to market.
Correction:
In an April 6 brief entitled, “Mexico’s TRIG Readies $1bn PF,” the bank on Peru LNG’s project finance was incorrectly stated. The leads are BBVA and Socgen.
US Slowdown May Hit LatAm Via China
A US slowdown could contribute to a decline of up to 2% in China’s economy for the coming year, albeit to a still high 9%, according to William Rhodes, senior vice-chairman at Citigroup. That in turn may have an effect on LatAm, as the region relies heavily on strong Chinese demand for commodities. The executive, who believes decoupling is a myth, notes the direct impact of the US slowdown on LatAm has been muted, but that reverberations in other markets may still find their way to the region. “If you break down the GDP figures for Latin America, you will see the importance of China to the region,” said Rhodes, speaking at LatinFinance’s 20th Anniversary Gala Dinner in Miami. “The Chinese are now concerned that in addition to the steps they’ve taken to cool down their economies, that if the economy in the US goes into a deep dive that this could impact them more than they thought earlier,” says the executive, echoing a frequently noted concern among economists at the IDB meetings. In the long run, however, Rhodes has a positive outlook on China, and points to changes in the government’s approach to sustainable development that will provide an important source of stability for LatAm.