Developing and financing toll road PPPs in Latin America


Financier Worldwide Magazine

April 2019 Issue

Following the collapse of the Morandi Bridge in Genoa, French economist Jacques Attali wrote “we place a stronger importance on cars that circulate on a bridge than on the solidity of the bridge itself”.

For the development of transport infrastructure in Latin America, this very sad lesson from Italy raises an essential question: how can governments respond to the existing gap between the need to build and maintain infrastructure and their budget constraints, while adopting a long-term, integrated view of the assets?

For Mexico, Colombia and, to a lesser extent Peru, the answer has been to promote PPP schemes, which bring a short-term solution to the limitations of public finances, while granting greater responsibilities to the private partner for the quality of the building, and for the maintenance of the infrastructure in the medium and long term.

This article aims to identify the key factors that make PPP schemes attractive for international investors looking for long-term returns. In this article, we focus on road PPP schemes with real tolling (where the user is the payer), contrasting different contract schemes in three of the most dynamic economies in Latin America.

The first key to reassuring equity investors and facilitating the work of lenders is drafting a standard contract so it is easily readable and compliant with international standards.

In Mexico, the ‘maintenance, rehabilitation and operation’ (MRO) contract is a model that has been adjusted since 2012 to progressively integrate private sector financing.

In Colombia, the division of PPP contracts between a general and a specific part makes them easily readable and secure.

Peru’s model is currently being designed, and Proinversion (the Private Investment Promotion Agency of Peru) should be equipped with a new contract model and PPP contract guide in 2019. Proinversion will receive the counsel of an international advisory firm and law firm to design and reflect on the contract.

These contracts, based on key performance indicators (KPIs) and service-level standards, give a lasting vision to both investors and the public authority as to the level of quality to maintain over the life of the infrastructure. The MRO Golfo Centro attributed to Banobras in January 2018 is the most accomplished model, with 18 standards for operation (including technology, lane availability, and incident response) and 17 for maintenance and rehabilitation.

KPIs not only act as a guarantee for the public client and final owner of the infrastructure, but also represent a security for long-term investors to ensure toll revenues are well managed, maintenance plans are realistic and sociopolitical risks are controlled.

Secondly, to give confidence to international investors, each government should raise a dedicated institution capitalising on skills and experience to help structure and communicate around the country’s PPP programmes.

For example, the Agencia Nacional de Infraestructura (ANI) in Colombia, Proinversion in Peru and Banco Nacional de Obras y Servicios (Banobras) in Mexico, all make a strong effort to publish project information before launching a tender process. They organise roadshows, roundtables and meetings to define how to best align public and private interest contractually. During the whole process, these institutions favour transparency through a project-focused communication on their dedicated websites, designed to make information easily accessible in English to investors.

In Mexico, Banobras went even further and listed on its platform all of the infrastructure projects that could require private investment in the coming years, including those already attributed. ANI is cited as an example, with fourth generation toll roads (4G) in 2014 and the attribution of 22 toll road PPP projects in the space of two years, with 14 financial closings obtained up to February 2018.

Last but not least, the involvement of local and international development banks in financing projects is central to reach financial close and to convince investors to accept certain risks, such as currency or right-of-way issues.

A significant example is the role of Colombian development bank Financiera de Desarrollo Nacional (FDN) in the financial closing of 4G toll road financing, such as Ruta del Cacao which benefitted from an investment of 280,900m Colombian pesos (around US$90m). FDN also participates in raising capital to further invest in fourth generation toll roads with the recent creation of a US$1bn equity fund with Caisse des Dépôts et Placements du Québec (CDPQ).

Banobras offers another telling example of how local development banks can secure private investors at bid stage. On the Golfo Centro project, Banobras offered a letter of intent to finance the project, as part of the tender documents. Though the developers did not have any obligation to use the proposed credit line, their capacity to reach financial close was secured as long as they ensured the required equity investment of 20 percent.

In Peru, international development banks are eager to participate in infrastructure projects – BID Invest announced last year the bank’s intention to allocate US$500m to Peruvian projects per year, should Proinversion revive its PPP programme. The involvement of multilateral lenders is good news for investors as they ensure the sustainability of projects and compliance throughout their attribution and development.

Mexico, Colombia and Peru are undergoing a rapid and challenging industrialisation process, which places strong pressure on transport infrastructure. James Scriven, from BID Invest, evaluates the Latin American infrastructure gap to be US$150bn, with varying project sizes, which leaves a space for all kinds of equity investors: from small concession companies to large pension funds looking to allocate capital outside their traditional market.

In order to remain attractive for long-term investors, Mexico, Colombia and Peru will have to sustain their efforts, bolstering the rule of law and respect for institutions, lowering the burden of bureaucracy and finally disconnecting infrastructure projects from political timing.


Agathe Vigne leads LATAM & Caribbean Business Development for Egis Projects. She can be contacted on +52 155 91 85 41 33 or by email:

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