Latin America and the Caribbean continue to face strong headwinds from internal and external forces but there is no shortage of liquidity for solid infrastructure projects in the region, according to a panel of experts at an event hosted by LatinFinance.
While growth forecasts for the year have been deteriorating throughout the year, signaling a tougher operating environment, participants of the Financing Projects in a Volatile World Roundtable were decidedly upbeat about the region’s outlook.
“There might be volatility, but liquidity is there,” said Benoit Felix, global head of structured finance at Santander, said at the Oct. 5 event in New York.
A standout is the energy transition, with the region’s natural conditions — mineral wealth, solar and wind capacity — creating the potential for it to play a key role as the world’s countries strive to keep temperatures from rising beyond 1.5 degrees.
“Latin America is extremely well-positioned because of commodities to fuel the [energy] transition,” said Nicola Simic, a managing director at Carlyle.
The region is home to the so-called lithium triangle formed by Argentina, Bolivia and Chile, which holds an estimated 60% of the white metal’s reserves, according to the U.S. Geological Survey. Lithium is the critical ingredient for batteries, whether to power machinery or store power produced by solar and wind plants.
It also has the world’s top two copper producers, Chile and Peru, in that order, and copper projects are underway from Mexico to Argentina. Copper, among other uses, is essential in the production of wind turbines, lithium ion batteries and the power transmission lines.
“There are a lot of bankable projects, but it depends on the country and the sector,” said Martin Menski, a partner at White & Case. “We are seeing a great deal of volatility and change, but they are creating new kinds of products.”
The Economic Commission for Latin America and the Caribbean (ECLAC) announced a growth forecast for the region at 1.7 percent in its annual report released in early September. The forecast for next year is a bit lower at 1.5 percent.
Renewable energy, whether large hydroelectric facilities, or the solar and wind farms now dotting the region, accounts for a growing share of power generation. In Uruguay, renewables account for more than 90 percent of electricity generation. Wind and solar power are also critical to a boom in green hydrogen and related products, such as fertilizers.
Alex Miquel, CEO of Chile’s Aguas Horizonte, which is building a desalination plant for Chilean copper giant Codelco, said there is appetite for project financing, but it requires creativity in working with investors and project sponsors.
His project took 10 years to get off the ground and grew from seven to 14 banks when the $1-billion project closed.
“Generating a common goal is what gets you to the finish line,” he said.
Pilar Vizcarra, CFO of Lima Airport Partners Vizcarra stressed flexibility as key to closing a $1.25-billion loan for expansion of Peru’s main international airport. The process started in 2018 and closed last December. “Flexibility and open communication with all parties were the main lessons,” she said.
Santander’s Felix drove home the points that helped Aguas Horizonte and Lima Airport Partners successfully close project financing amid the region’s newest bout of turbulence.
“Flexibility, creativity and diversification. Volume is down in the world, but with creativity and flexibility, a lot can be done,” he said.