Paraguay's quest to be a logistics hub

Although the public-private partnership law in Paraguay is more than 10 years old, there is currently only one project under development, namely the expansion of routes PY02 and PY07 involving US$530mn, while another contract for route PY01 is being tendered. 

President Santiago Peña, who took office last August and faces fiscal limits on public investment, seeks to promote the use of concessions and PPPs to boost investments in infrastructure, with the goal of turning the country into a transportation node for the region given its location between Brazil, Argentina and Chile.

To learn more about the PPP projects and goals of the public works ministry (MOPC), BNamericas spoke with the head of the strategic projects authority (DIPE) at the ministry, Amilcar Guillén, who was in Chile for the OECD’s International Transport Forum.

BNamericas: The MOPC is currently putting out for bidding the PY01 PPP. What other PPP projects are on DIPE's agenda?

Guillén: We’re structuring several projects. The next PPP project after route PY01 is route PY09. There’s a private initiative that’s of interest, and we’re working with CAF at the study level.

We set an agenda during the first 100 days of this government to define our goals in terms of infrastructure. In the end we set an investment goal of US$5.5bn in five years and with the expectation of generating around 300,000 jobs.

One of the central axes of our agenda is to consolidate Paraguay as a multimodal logistics hub. Route PY01, which is the most important route in Paraguay, is very important in this process.

Within this logistics hub goal there are several corridor works such as route PY01 and consolidating the bi-oceanic highway.

At the bi-oceanic level we’re talking here in Chile with the minister [of transport, Juan Carlos] Muñoz, who wants to coordinate the ministries of infrastructure, transport and foreign relations of the two countries. We want to establish a bilateral table to promote this project so that it benefits both Paraguay and Chile, as well as Argentina and Brazil.

Last week there was a bilateral meeting where our minister of public works, Claudia Centurión, spoke with minister Muñoz to establish a working table to place the bi-oceanic corridor as a priority axis of joint bilateral work between both countries.

Now we’re also preparing the tender for the sanitation works in the city of Pilar. This is part of our objective of turning Paraguay into a logistics hub, since Pilar is one of the few deepwater ports and it’s now more important than ever due to the lower water levels that we’re seeing in the river Paraguay which is making problems for exports and imports from Asunción and nearby ports. Therefore it’s a good alternative to consolidate Pilar as a port hub.

We’re also in talks at the foreign ministry level for a new bridge with Argentina.

One of the challenges to bring in that US$5.5bn is to consolidate financing alternatives for infrastructure such as PPPs and concessions. Paraguay currently has limitations in its debt capacity that would prevent us from achieving our global investment goals through traditional means of financing.

BNamericas: In December, congress passed a law to establish special provisions to develop the Asunción commuter train. What's the status of that project?

Guillén: We passed that law within the first 100 days of government after coordinated work with congress. This law allows us to begin the structuring, financial analysis and business model of the project, and from there analyze whether it's the most convenient for the country.

This project is also among the priorities of our government, which is to consolidate a series of works with a citizen focus.

We’re also working on school PPPs, which are an interesting model that we’re exploring, and we also want to work on hospital PPPs.

Projects such as Asunción's urban resilience plan also fall into this group, since it benefits several vulnerable neighborhoods in the city.

BNamericas: During his visit to Chile in November, President Peña mentioned that a PPP for Asunción international airport is also being studied. There was an attempt in 2017 to tender a PPP in this regard, but this was stopped by the comptroller's office and later ruled out by the previous government. What’s the status of the airport modernization project now?

Guillén: Without a doubt the airport is a strategic project for us. It’s in the package of projects that we want to launch in the next five years. What we’re defining now is the most convenient business model for Paraguay based on the asset we have operating today. That should be defined within the first half.

Right now we’re closing an agreement with expert consultants at an international level in airport developments that will allow us to draw up a roadmap regarding a policy in the medium and long term for the development of air transport in Paraguay.

BNamericas: The Chilean concessions system, despite having its own problems, is frequently cited as an example for other countries in the region to follow. Do you think there are aspects of the Chilean model that could be adapted to Paraguay?

Guillén: Of course. We, and especially President Peña, have the objective of consolidating PPP models. For this reason, the DIPE is being strengthened to consolidate it as a concessions and PPP unit. We call it DIPE 3.0 and we’re also reviewing the legal framework of PPPs.

We started a working group a couple of weeks ago together with the economy ministry, representatives of the legal sector, and operators. We want to have a bill to reform PPP processes this year.

We’re very clear that for Paraguay to reach the investment levels it requires in the next decade, PPPs are an excellent tool and very necessary given the debt capacity we have.

We’re also working on institutional strengthening. We want to provide technical equipment not only to the MOPC, but also to the MEF [economy and finance ministry] and other state agencies that are part of the PPP process.

BNamericas: In 2020, MOPC reached US$1bn in investments. Do you aim to return to those levels despite fiscal restrictions?

Guillén: We hope to have US$1bn on average in the next five years. In some years they will be less, in others more, but with the goal of reaching a total of US$5.5bn in five years, and through different financing means that include bonds, multilateral financing, PPPs, concessions and turnkey projects with private financing under law 5,074.

Paraguay today arouses a lot of interest, not only in the construction sector, but it’s also consolidating at a macroeconomic level.

That's what companies are looking for. They want a concrete vision, they look for a certain predictability regarding the projects, and I think the government is working very well.