Data Insights: The rocky road ahead for Southern Cone highway projects

Although governments in Latin America’s Southern Cone are pushing alternative transport modalities – particularly trains – highways remain the biggest investment driver in the region.

That is especially the case for countries heavily dependent on exports and needing roads to get products to ports and distribution hubs.

This year, works are scheduled to start on seven major projects entailing 694km of highways in the Southern Cone involving capex of US$3.2bn, according to the BNamericas project database, though some of these face obstacles.

Nearly two-thirds of the 2023 investments are focused on Chile, with US$2bn for four projects comprising 341km (see graph below).

 Source: BNamericas database

However, of the four projects, one is suspended, one has not been awarded and another just lost its concessionaire. 

In general, concessions in Chile are facing an uncertain scenario as no new tenders have been launched since the current government took office in March 2022.

Facing mounting pressure from the local construction sector, public works minister Jéssica López has been trying to assure investors that five or six concessions will be auctioned this year. 

The four projects are:

Project	Status
AVO II Santiago beltway section	Awaiting construction start
Freire-Villarrica highway	Suspended
Route 5, Santiago-Los Vilos	Awaiting tender
G-21, Santiago-Farellones	Concessionaire pulled out

 
In terms of investment, Argentina comes second in the region with two projects involving US$955mn expected to start construction this year. However, it comes third in kilometers behind Paraguay (200km) with only 153km.

In Argentina’s case, construction costs have been spiking since last year, in line with high inflation. Construction costs have increased over 100% in the past 12 months in several provinces.

As a result, bids in public works tenders have been way higher than reference budgets, sometimes doubling or tripling them. 

Paraguay has only one project scheduled to start works in 2023, involving US$220mn.

Bolivia and Uruguay do not have any major highway projects in the BNamericas database that are expected to begin works between 2023 and 2026.

In Uruguay’s case, this is mainly because the government has ditched the PPP model for new highways, citing long delays in tenders – while keeping it for railways – and has instead shifted to CREMA (repair and maintenance) contracts that are on a smaller scale.

Bolivia’s infrastructure sector, meanwhile, is facing an uncertain scenario amidst political instability.

In recent months Bolivia’s central government and local administrations have come to blows over their respective responsibilities in funding public works projects, including some that are already under construction.

At the same time, public works minister Édgar Montaño is under fire over his handling of certain projects and his alleged involvement with a corruption scandal.

He already survived an impeachment vote last month, albeit narrowly, but legislators have signaled that they will try again. 

OPERATION

Regarding road projects due to wrap up this year, Paraguay leads the Southern Cone in kilometers with 832km. However, in 2024 Bolivia will take the lead with 860km. Overall, though, Argentina is due to have the most stretches completed between 2023 and 2026 at an estimated 1,580km (see graph below). 

 Source: BNamericas database

In the case of Paraguay, which will see a change of president on August 15, the government has boasted that it has completed more kilometers in five years than all post-dictatorship administrations combined, with nearly 4,000km finished as of this June. 

Incoming president Santiago Peña is expected to keep the outgoing administration's roads agenda intact, including the bi-oceanic highway, although the new authorities will have to deal with tighter fiscal requirements.