How Convia wants to help turn Guatemala into the 'jaguar of Central America'
The Autopistas de Guatemala (Convia) consortium, comprising Mexican company Marhnos and Guatemala's Grupo Precon, snatched Guatemala's first public-private partnership contract.
The US$125mn, 25-year contract involves rehabilitation, administration, operation, maintenance and complementary works for the Escuintla-Puerto Quetzal highway. Convia will charge tolls to recover the investment.
In this interview, Convia's president Sandro Testelli tells BNamericas about the process and how it could transform the country's economy.
BNamericas: How did this project come about?
Testelli: It arose in the communications, infrastructure and housing ministry some 10 years ago, as a strategic project under a law that was structured to attract public-private investment (more private) to strategic infrastructure.
In 2017 and 2018, development agency Anadie carried out the tender in which 10 companies participated. Of these, only five complied with the background and the financial and technical needs, and only three companies participated in a formal delivery of the bidding documents.
In 2018, we obtained the best rating after the evaluation of the process and were declared the winner. In November last year, the project was voted in congress, where we obtained 107 of 160 votes, that is, we had almost 70%.
At that time, we could be ratified through a decree. The signing of the contract took place on Tuesday last week.
BNamericas: What does it mean to open the door for PPPs in Guatemala?
Testelli: For us, it is a pride and a challenge. Intensive processes were required that involved publicizing the benefits and scope of these tools, which ultimately complement federal investment.
It is extremely important that the country sends these good signals, these good initiatives to attract institutional and international investment, and that the participants are protected in some way.
BNamericas: What are the stages of this project and when will it be finished?
Testelli: There is a pre-construction stage that involves eight service indicators divided into the construction and maintenance categories. This stage ends when the project is validated at the executive level and authorized by the communications, infrastructure and housing ministry.
In other words, we have around nine months of pre-construction, in which we will have to carry out vehicle capacity counts, emergency coordination, assign signaling crews, do cleaning, rights of way, and preliminary patching.
In addition, we will have to clean the drainage of the area. We will start with the fencing of the land to have the project well identified, and we will carry out cleaning and vegetation control work.
It will be necessary to implement some safety systems, especially for highway use, as well as horizontal and vertical signaling systems. We will have the executive project ready by the end of this year and then would begin the construction stage, which will be intense since we are talking about 102km of highway plus 20km of acceleration and deceleration lanes.
Five large distributor [roads] and other works will also be built that will connect this road and the south of the country.
BNamericas: And when will it be definitely finished?
Testelli: I think the pre-construction phase and the construction phase could take between 22 and 24 months. A very important incentive is that the faster we have the project ready, the faster we will have the asset available and generate profit for the shareholders.
BNamericas: What are the challenges?
Testelli: We face several challenges, including the legal one. There is intense co-participation with the ministry as the technical entity, Anadie as the regulatory entity, and us as the executing consortium.
Next is funds. We hope to get local financing, since we noticed that there is a market that is very interested in being able to structure the project. Nor can we ignore the social component, called canon in the tender, which implies offering the surrounding communities discounts [for usage].
BNamericas: How much will the toll cost?
Testelli: It will be 15 quetzales (US$1.95) for light vehicles and for heavy vehicles 15 quetzales per additional axle.
BNamericas: And what about the discounts for locals?
Testelli: In the bidding process, there were social assistance requirements for the nearby communities that are most affected. The bidding bases proposed a discount of 75%, but we increased that discount and exempted these communities 100%. Also, [we have] a 50% discount for local urban buses.
BNamericas: Analyses suggest the project could contribute 3.4% to GDP. How will this be achieved?
Testelli: It's a competitive issue because this route transports between 60% and 65% of the total cargo circulating in the country. The project also has an important effect on connectivity with El Salvador and Honduras.
It must be considered that countries that lack adequate infrastructure can register a negative impact on the cost of products that reach the final consumer of up to 30% ... I would add the fact that the southern zone of Guatemala contributes more than 40% of national GDP.
BNamericas: Will you hire mostly locally?
Testelli: Without a doubt, even for cost reasons. We are going to make the most of the local muscle and we will generate 1,700 direct and indirect jobs.
BNamericas: What impression do you get from the processes?
Testelli: This first initiative did cost work, but I think it opens up a very interesting panorama for the country and sends a very positive signal to the markets. This great step Guatemala took is the spearhead for it to be the jaguar of Central America. It leaves an excellent taste, since the country offers different alternatives and several lines of action.
BNamericas: Are Convia or Marhnos participating in other projects in the country?
Testelli: We have been in direct and very close contact with Anadie, and without a doubt we, as international developers and investors, view PPPs very favorably and we will be very attentive to the different calendars. Everything derives from this good experience where we feel sheltered by the process, regardless of whether it has been difficult.
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