COVID-19 offers Guatemala a chance to boost highway investment

A highway infrastructure investment bill could be Guatemala’s best chance to recover from the economic fallout of the coronavirus pandemic. 

The current situation presents an opportunity for congress to pass the general law for road infrastructure, Juan Carlos Zapata (pictured), executive director of local development foundation Fundesa, told BNamericas.

“It may also be a good opportunity for the infrastructure committee to meet and debate. We obviously hope that it can be approved in the coming months,” he said, adding that congress resumes legislative sessions in August. 

But lawmakers have not debated the law since March 2019.

Zapata said debate was interrupted due to last year’s presidential elections and recent changes in congress that led to 100 new lawmakers entering the 160-seat body.

“We have had to explain the proposal to them again and inform them about the importance of the process,” Zapata said.

THE LAW

Fundesa drafted the bill and presented it to congress about two years ago. The foundation concluded the existing infrastructure laws hinder especially private investment.

“When you look at the global competitiveness index, one of the issues where Guatemala lags behind is clearly road infrastructure,” Zapata said. 

“We are the least urbanized country in Latin America, also the one that invests the least with respect to its GDP. Investment today is around 14% of GDP and let's say that this is one of the most important limitations that we see in terms of economic development,” he said. 

Among the proposed solutions under the new law is easing the acquisition of rights-of-way, improving competitiveness in tenders, tightening contract obligations for highway operators and increasing private and public investment. 

It would also enable a research fund and create a regulatory agency (Sivial).

In April, Fundesa organized an online conference to revive the topic. Speakers at the forum agreed Guatemala needs to increase investments in highway infrastructure to compensate for a deficit of 21,000km.

“It is estimated that [the infrastructure sector] could generate around US$1.3bn in the next 15-20 years, generating around 200,000 jobs,” Zapata said. 

PPPs

The new law would also allow the government or investment promotion agencies to award tenders without the approval of congress, which is mandatory for PPPs under the existing law that was passed 10 years ago. 

“Not a single [PPP] contract has been approved ever since the law was passed,” Zapata said. 

Over the years, PPP promotion agency Anadie has developed a US$1.5bn portfolio of seven infrastructure PPPs for congress to approve. 

Project	Stage	CAPEX
MetroRiel light train	Early studies	US$770mn
La Aurora international airport	Early studies	US120mn
Tecún Uman II intermodal logistics port	Early studies	US$40mn
Vía Exprés highway	Early studies	US300mn
Guatemala City underground metro	Early studies	To be determined
Government administrative center (CAE)	Ready to tender	US240mn
Escuintla-Puerto Quetzal highway	Not approved	US80mn

The closest the country came to approve a PPP was in October. But lawmakers feared the already awarded US$80mn 41.2km Escuintla-Puerto Quetzal port toll highway would impact the region negatively. 

According to the law, the government had to pay compensation to the winning group Consorcio Autopistas de Guatemala, comprising Mexican construction firm Marhnos and Guatemala's Precon.

In March, President Alejandro Giammattei asked business leaders during a meeting with members of the industry chamber (CIG) to send a petition to congress and persuade lawmakers to act in favor of PPPs. So far, these efforts have been in vain.

Anadie has still six other projects in its portfolio, but Zapata thinks it is unlikely that congress will approve one this year. 

The US$770mn MetroRiel light train has the highest probability of being approved because the Guatemala City is promoting it to improve mobility, he said. 

Construction remains mostly suspended because of the pandemic, Zapata said. 

"The only sector that has already begun to recover is the real estate industry, especially the construction of housing, some office buildings, shopping centers, and apartments and houses.”