Govt support pivotal for Japan-LatAm infra bid

The lag on Latin American infrastructure projects limits the scope for Japanese
corporate investment in the sector, say industry specialists.

Japanese investors want more government backing for project financing and public-private partnership (PPP) structures
throughout Latin America and the Caribbean, said Kenichiro Koreeda, deputy director
of the Americas for Japan’s Ministry of Economy, Trade and Industry (METI).

Such buyers are conservative and need government guarantees before
considering possible investments, Koreeda said at LatinFinance‘s Latin America Japan Investors Forum in Tokyo on Wednesday. PPP deal flow remains hamstrung by weak
regulatory frameworks and an uneven dissemination of risk, he said.

Japanese companies are capable of providing technological support to PPPs in Latin America but have not done it so far, said Toshitaka Takeuchi, senior advisor to the director general for South America at the Japan International Cooperation Agency (JICA), 

The private sector needs to step up efforts to address the region’s infrastructure deficit, said Jorge Kogan, a senior advisor to the vice president of infrastructure at Latin American development bank CAF. Local financiers are
well placed to fill the financing gap, with the potential to lend in local
currencies and mitigate foreign exchange risks, he said.

In Colombia, for example, local and international banks have
been active in financing infrastructure concessions and PPPs. Local banks have provided peso-denominated loans, while international lenders have structured project bonds and US
dollar-denominated loans, he said.

Banks previously assumed the traffic risk in Colombian toll road financings, but the 4G concessions program has been structured so the central government assumes the risk, one banker said. Financing part of the projects in dollars also provides the country with more foreign direct investment, he said.

The Colombian government unveiled the 4G program more than two years ago and it has gradually ironed out a structure to support both local and foreign investment
to the point where private sector participants are willing to assume the financing
risks, the banker said.

“It’s the first true project financing structure in Colombia,” he said. “It was a steep learning curve for the government and they
needed time to understand how PF structures work.”

Three 4G projects have reached financial close so far this year – Pacifico 3, Corredor Via Perimetral del Oriente de Cundinamarca and Covipacifico – and at least two more could get financing in the coming months.

Autopistas del Nordeste is close to securing around $450m from a dual-currency syndicated loan for the Autopista Conexion Norte toll road, sources said. Concesion
Costera, which is building the 110km Cartagena-Barranquilla toll road, could issue both local and cross-border bonds this month. LF