Ecuador's public works plan: Solving past mistakes to pave the way for the future

The Ecuadoran government is looking to complete a series of pre-feasibility and feasibility studies this year in order to push ahead with a program of infrastructure projects that are considered priorities, with the first tenders expected to be launched in the second half of 2024.

Five highway corridors are among those priority projects: Guayaquil-Quito, Guayaquil-Cuenca, Manta-Quevedo, Montecristi-La Cadena and the Guayaquil south viaduct, but there are also various other initiatives that are on the agenda.

BNamericas speaks to transport and public works minister Darío Herrera to find out more about the US$900mn investments program, the contracts up for grabs and the talks with international companies interested in taking part.

BNamericas: After two years of this government, why haven't any tenders for major public works been launched?

Herrera: There are several reasons. For example, there was a huge investment of US$1.65bn in 2013 in a road network that should have lasted 30 years but is now damaged. The country is in debt and the public works that were carried out at double or triple the actual cost were never maintained. Since 2014, almost US$38mn has been invested in the Cuenca-Girón-Pasaje highway and the road is destroyed, that's the reality.

The other reality is that the current government wants to do things well but we don't have the debt capacity that previous governments had and we aren't willing to continue putting the country in debt.

All of the work that was done in 2012-13 was never carried out as part of a strategic plan, it was just work. We're carrying out a measured and strategic plan.

Now we want to invest US$906mn in the road network, plus US$94mn in hospitals, schools and other social infrastructure.

That US$906mn, which will be invested through May 2025, will solve at least three urgent requirements for roads in each province and improve the state of highways.

BNamericas: Where will the funds for the strategic plan come from?

Herrera: They're not difficult to obtain from multilateral organizations because we have a plan and because they know that the money is going to be invested properly. They know that the bidding processes are going to be transparent and done properly.

All of this adds up to create a better institutional framework and transparency in the processes.

We already have pre-approval from the World Bank and the program that's going to be presented could be as large as US$700mn for road infrastructure alone.

In addition, the World Bank previously approved a US$150mn loan for urgent roadworks that will become effective as of June 9. Of that US$150mn, US$135mn is for works and US$15mn for certain components related to public policies, control of assets, studies, among other things.

It's important to carry out the studies because of the US$1bn plan for 27 months approved by President Guillermo Lasso last February. Two thirds of the projects either have no studies or they're out of date.

BNamericas: What other funds do you have from multilaterals?

Herrera: With CAF we have US$300mn in credit just for public works. With the IDB we've concentrated on other things, on the issue of delegations, that is, the leverage of pre-feasibility and feasibility studies for delegating the road corridors to the private sector.

BNamericas: When will the processes start to be launched?

Herrera: We'll continue gradually launching packages of projects that have studies. For the rest of the projects, we're going to set up an execution unit with 12 people from the World Bank plus a project leader to carry out the studies.

BNamericas: What are the main bottlenecks in public works to carry out the bidding processes?

Herrera: There are three: the lack of studies that prevents contracting – that's why the execution that I mentioned is important.

When I entered the ministry, I carried out a survey of the pending projects with studies and I found projects that date back to 2013. Investments were made in the studies, but the work was never done because it wasn't necessary and there was no funding.

We have studies for works for around US$1.75bn that can't be done or weren't needed. They may even be good projects, but they're not what's needed now.

From 2013, in the governments of Rafael Correa and Lenín Moreno, US$35mn was invested in carrying out studies for 11 provinces, but the works were never carried out. We'll only conduct studies for the works that are going to be done because they're essential. That is to say, the studies will be done and the works will be contracted immediately.

The second bottleneck is terribly cumbersome public procurement, which is why we have a reform of the public procurement law almost ready.

The third bottleneck is financing – obtaining resources from the multilaterals, which we've already achieved.

BNamericas: What is being changed in the reform to make the process more expeditious?

Herrera: Simplification of processes, which doesn't mean that there's no security and transparency.

Currently, it's almost impossible to do public contracting because 212 days are needed from the beginning of the studies until the start of the works, which has nothing to do with the ministry but with the laws and processes in various institutions. It's a disaster.

We've already mapped out everything, with schedules. With the reform, we're seeking to simplify the tangle of procedures so that the processes take no more than 60 days, for both urgent works and for normal public contracting.

As a ministry we have 18 projects in the pipeline: five strategic partnerships and 13 public-private partnerships.

The strategic partnerships are between the government and public companies from friendly countries, such as the agreement we recently signed with the South Korean government for pre-feasibility and feasibility studies, and eventually the construction, operation and maintenance of the Quito-Guayaquil and Guayaquil-Cuenca highways.

BNamericas: So the same company could build those roads?

Herrera: Of course, because it's a strategic partnership, contemplated in the public companies law.

BNamericas: When will you sign the pre-feasibility contracts with Grupo Puentes for the Manta-Quevedo and Montecristi-La Cadena highways?

Herrera: After May 24.

BNamericas: What other projects does the strategic plan include to be carried out as PPPs?

Herrera: Among others, the Bahía-Cojimíes, El Descanso-Gualaceo-Paute, Loja-Catamayo, Pifo-Y de Baeza, Ambato-Puyo, Ambato-Babahoyo and Puerto de Esmeraldas roads. The projects will depend on the studies.

BNamericas: And when will the contract with Canadian Commercial Corporation (CCC) for the pre-feasibility and feasibility studies for the Guayaquil south viaduct be signed?

Herrera: We've agreed with the presidency that we'll sign the agreement once the turbulence of President Guillermo Lasso's impeachment passes. We've been fine-tuning the details since March 28 so that the contract is done properly.

BNamericas: Will CCC also build the viaduct?

Herrera: Of course. The five projects include pre-feasibility, feasibility, construction, operation and maintenance.

BNamericas: Why have different cost figures been given for the Guayaquil-Cuenca and Guayaquil-Quito highways?

Herrera: Because the real amount will emerge from the pre-feasibility studies and how much Ecuadorans are willing to pay, through tolls, to have a solution to the problem, to reduce travel times from 7 hours to 3.5 hours.

The pre-feasibility studies include at least four components: the technical, financial, environmental, and socioeconomic parts of the community impact on those who live in the area and those that feed the road.

The structuring of these projects is very important, which is why we're doing it with companies with extensive experience.

Korea Expressway Corporation (KEC) bills US$10mn a day in tolls in Korea.

BNamericas: What is the expected date for the delivery of the studies conducted by KEC?

Herrera: Technically, the pre-feasibility studies have already begun with the exchange of a lot of information between the two sides. Delivery will be done in four to six months.

In general, for all road projects we want to have the contracts signed in the second half of 2024.

BNamericas: How are the talks going with Korea Airports Corporation regarding the possible concession of Manta airport?

Herrera: They've expressed their interest in the airport, which would be granted under concession through a strategic partnership. We're holding preliminary talks.

BNamericas: Is there any progress on the plans to offer a concession for the San Cristóbal airport and other less attractive ones such as Santa Rosa and Esmeraldas?

Herrera: One of the possibilities is to create a package of airports with Korea Airports Corporation, especially San Cristóbal and Santa Rosa. In fact, they were interested in Santa Rosa a long time ago and San Cristóbal is an iconic airport. We've had talks; we're still doing that.

As for Esmeraldas, we don't have any interested parties yet, since the province needs a complete turnaround in terms of security, job creation and roads, among other things.

The concession of the airport would go hand in hand with the concession of the port and to do that it's essential to fix the roads first, especially the Quinindé-Esmeraldas road. These works have already been contracted with the army corps of engineers at 30 critical points.

It's necessary to resolve a series of prior issues so that there's interest.