Can Ecuador's govt steer the Guayaquil-Cuenca highway project forward?

In March last year, Ecuador signed two agreements with highway operator Korea Expressway Corporation (KEC) to conduct prefeasibility and feasibility studies for the Guayaquil-Quito and Guayaquil-Cuenca corridors.

However, when then-president Guillermo Lasso called early elections, progress on the projects stalled.

Now, President Daniel Noboa is offering to reactivate the Guayaquil-Cuenca project. The country's public-private investments authority SIPP is working toward that goal and is negotiating with KEC for the completion of the prefeasibility study.

SIPP is also seeking to advance the Manta-Quevedo, Pifo-Y de Baeza and Montecristi-Jipijapa-La Cadena highway projects, as well as incorporate three new projects in the national PPP registry.

BNamericas speaks to PPP investments secretary Pablo Cevallos about the status of the negotiations with KEC as well as other road projects in the pipeline.

BNamericas: Ecuador has resumed the Guayaquil-Cuenca highway project. Will KEC carry out the prefeasibility and feasibility studies as planned?

Cevallos: Connectivity in the province of Azuay is one of the national government's priorities. At the public-private investments authority, we're promoting the project within the framework of the government-to-government agreements signed last year with KEC.

We're currently in negotiations with the company to begin the prefeasibility stage. Afterwards, with the results of this analysis, both parties will be able to make decisions on how the project could proceed.

The company's interest in continuing with the feasibility study and subsequently with the negotiation of the contract and signing of the project will depend on the results of the prefeasibility study.

Discussions are currently focused on the scope and budget for carrying out the prefeasibility study. We cannot provide estimated investment figures or a preliminary layout until the prefeasibility study is carried out.

BNamericas: What basic aspects will the prefeasibility study cover in addition to the different alternatives for developing the project?

Cevallos: This will include a financial and risk analysis to determine the strategies for financing the project. It will analyze the legal feasibility and the best contract model to carry it out.

In addition, elements of social and environmental analysis will be included, which are essential to determine the continuation and viability of the project.

Preliminary information will also be collected on the ability of road users to pay a potential toll, because it’s not the same if the users are mostly private, those who go to tourist destinations or freight transporters.

BNamericas: Could KEC itself build the highway?

Cevallos: That's part of the analysis that will be carried out with the results of the prefeasibility study. With those results the government must decide whether it’s viable to continue with the project, and the Korean company must decide whether it maintains its interest in moving on to the next phase.

BNamericas: Considering that the road is a long-standing aspiration of the south, especially the province of Azuay, one could preliminarily consider a road that would serve tourism and cargo transport.

Cevallos: One particularity of the project is that demand is quite stable, considering that the province of Azuay, in particular its capital Cuenca, is industrial, with a high level of production and a significant part of that production is exports that leave through the port of Guayaquil.

So, there will undoubtedly be a cargo component, which we hope will be high and can support the project and, in addition, can provide stability to Azuay production, because in addition to having export flows, Guayaquil, due to its proximity, is a natural market for Azuay products.

Cargo transport will be one of the fundamental pillars to support the importance of the project, in addition to the tourist character due to the attractiveness of Cuenca, which is a World Heritage Site, and because the province of Azuay has a series of other attractions.

BNamericas: Although Cuenca is an industrial hub, could the road also be used to transport minerals from new mines that are expected in the coming years, including Loma Larga in Azuay?

Cevallos: Without a doubt, this is one of the aspects that we’re going to analyze. We have not only Loma Larga but other projects on our radar. We’re going to request official information from the energy and mines ministry with the estimated schedules for the entry into operation of these projects to determine what the capacity of the road should be, because if these projects start operations the volume of heavy cargo will increase significantly.

This is one of the aspects that will be analyzed in the prefeasibility study that we hope to finalize by December 31 this year.

BNamericas: The agreement with KEC was also for the Guayaquil-Quito highway. What's happening with that project?

Cevallos: The national government's decision is to begin negotiations on the prefeasibility for the Guayaquil-Cuenca highway due to the difficulties with transportation and the connection with Guayas on Azuay highways, but it hasn't ruled out venturing into the project for the new Guayaquil-Quito highway.

However, it must be made clear that this will be analyzed at a later stage since at this time the priority and all efforts are focused on the Guayaquil-Cuenca route.

BNamericas: Have the feasibility processes for the Manta-Quevedo and Pifo-Y de Baeza highways begun?

Cevallos: We've already received the prefeasibility studies for these two routes, which were carried out under a non-reimbursable cooperation agreement with the World Bank. We're now preparing the fiscal risk sustainability files that we must submit to the finance ministry.

Once we have the ministry's approval, we will publish the respective studies for the market's information. In parallel, we're working to be able to sign the agreements with the IFC, an entity with which we have a framework agreement to execute the feasibility phase.

BNamericas: Is there any estimate of how long the feasibility process might take?

Cevallos: On average, between six and eight months. Once we have the report from the finance ministry, we will have much more clarity on the elements that we need to analyze in the project.

BNamericas: What is the status of the Montecristi-Jipijapa-La Cadena highway project?

Cevallos: We're working on the prefeasibility studies. According to the schedule that has been presented to us, in the last week of November we will receive the prefeasibility report that the IFC is preparing, within the framework contract that we have signed.

The IFC will also be responsible for the feasibility study.

BNamericas: Given the time required, would the concession of the two highways be awarded at the end of next year, in the best case scenario?

Cevallos: It will depend a lot on the results of the evaluation carried out by the finance ministry, but we could say that we will have more concrete results in the second half of next year.

It should be noted that, for these projects, prefeasibility studies were initiated within the framework of an agreement with the World Bank, under the previous regulations, so a lot of additional evaluations and adjustments had to be carried out.

The assessment of the finance ministry is critical, and that assessment may determine that additional efforts or adjustments that lengthen schedules are needed.

We can tentatively think of a timeframe of between six and eight months, but we will have the timeframes adjusted to reality after the evaluation.