Data Insights: LatAm's public-private partnerships

Public-private partnerships (PPP) remain an attractive model for public works in Latin America.

Awarding projects to the highest bidder – for design, financing, construction, and operation and maintenance – is still a popular option in the region and the portfolio of projects developed via PPPs has grown by more than 60% in the last three years.

According to the BNamericas database, PPPs in the region – being planned, in pre-feasibility studies, being tendered or under construction – climbed from 294 in June 2020 to 474 in June 2023, an increase of 61%.

Mexico leads the region in number of PPPs with 106 in its portfolio.

Source: BNamericas project database

There is a total portfolio of public and private projects involving capex of more than US$50mn, numbering 9,532 initiatives and involving combined investments of around US$2.3tn. 

Of this amount, PPPs account for US$210bn, or 9.2% of the total, up from US$149bn in June 2020.

Source: BNamericas project database

MAIN SECTORS  

Latin America has 474 PPPs either under development (in the pre-construction, construction or expansion stages) or in preparation for development (planning, feasibility or bidding stages). 

Four sectors in the region predominate regarding PPPs: highways and bridges is the most significant sector, with around 160 projects in the pipeline – 34% of the total – involving total estimated capex of US$72.5bn.

Rail and subway lines are also important. Despite the fact that there are only 44 PPP projects in this sector, they involve investments of US$48.6bn due to the greater complexity of these infrastructure works.

Meanwhile, the two other major sectors for PPPs have gained prominence in recent years: water and sanitation, and hospital construction. 

The former, which includes wastewater treatment plants, desalination facilities, dams and irrigation systems, has more than 40 such projects underway in the region and committed investments of US$9.2bn.

There are also 45 hospitals in the portfolio, with the investments adding up to US$5bn. 

Although these two sectors involve lower total investments than highways and rail lines, they have considerable economic and social impacts for the public.

The electricity transmission sector is also worthy of mention, with 19 projects underway for US$2.38bn, as is the port sector, with 20 initiatives totaling US$8.3bn.

COUNTRIES

The preference for PPPs is higher in certain countries than others. Mexico, Peru and Colombia have a large and diversified portfolio of such projects given the stances of state-run agencies such as ProInversión in Peru and Colombia's national infrastructure agency.

There are also countries with a small portfolio of PPPs, but a strong preference for using them to carry out public works, such as Uruguay and El Salvador.  

MEXICO

Mexico is the leading country in the region in terms of PPPs. The country went from having a portfolio of 61 projects in June 2020 to 106 in the same month of this year. 

The main PPPs are the Punta Colonet multimodal port project, sections of the Maya train, the future rail corridor for the Monterrey international airport, and the construction and modernization of various highways across the country.

In general, Mexico's commitment to PPPs has mostly gone hand-in-hand with rail and highway projects. There are 31 PPPs for highways and 13 for rail lines in the BNamericas database. 

Hospitals are also a sector in which PPPs are considered apt, since there are 14 initiatives, two of which are under construction, six already in operation and the rest at earlier stages.

PERU

Peru has the second highest number of PPPs. It went from having a portfolio of 51 PPPs to 83, with some of the most important initiatives involving rail works such as line No. 2 of the Lima metro, the Lima-Ica railroad and the Huancayo-Huancavelica train.

As in Mexico, highways are another important sector for Peruvian PPPs. The BNamericas database shows more than 15 initiatives in this area, with the Lima beltway being the largest, at US$2.38bn. The contract is expected to be awarded in the fourth quarter of this year.

There are two areas that also stand out in particular: water treatment (desalination and wastewater plants) and electricity transmission lines, where there are 19 initiatives for the former and 12 for the latter. In both cases, many of the PPPs are in the tender stage and are areas in which the government plans to make heavy investments in the coming years.

COLOMBIA

Colombia is ranked third in number of PPPs, with an increase from 43 in 2020 to 62 this year. 

Of the 62 projects in the country, 39 involve highways and bridges. Some 13 of these are currently under construction. The Pacific highway in Antioquia department is one of the flagship initiatives underway, along with the Santana – Neiva corridor in Huila department.

Five hospitals in Colombia are also being built under the PPP model and there are also five rail developments in the feasibility, bidding or basic design stage, as in the case of the rehabilitation of the La Dorada - Chiriguaná rail corridor, for which the updated capex is now US$507mn. The Colombian government is about to contract a consultancy to work on the pre-feasibility of the project

BRAZIL

Brazil has seen rapid growth in PPPs in the last three years, with only 22 in the portfolio in 2020, but it now has 52.

The aggressive expansion in these contracts suggests that authorities plan to continue using this model for contracting. According to Marcus Cavalcanti, director of the federal investment partnerships program (PPI), the focus will be largely on sanitation, public lighting, ports and railroads in the coming years.

Brazil has a number of highway and road-paving projects (17) under preparation or awaiting the start of construction, mainly in Minas Gerais state.  

CHILE/ARGENTINA

Chile and Argentina’s portfolios of PPPs have remained largely unchanged in the past three years. Chile had 31 in June 2020 and now has 37, while Argentina had 26 and now has 27.

In the case of Chile, most of the contracts are in the health sector, with 16 projects in the pipeline to build hospitals in the Biobío, Coquimbo, Los Lagos, Maule and Metropolitan regions. Chile also has 11 PPP highway initiatives and two power transmission line projects. 

In the case of Argentina, the portfolio mainly consists of highway projects (10) and rail lines (3), but many of them are currently suspended, largely for financial reasons.