Odebrecht Latinvest on Lima’s PPP success
World Finance speaks to two representatives from Odebrecht Latinvest about their work in reinvigorating Peru's economy
A novel private-public partnership is paving the way for road developing in Peru. World Finance speaks to two representatives from Odebrecht Latinvest, Jorge Barata (Executive Director) and Raul Pereira (CEO), to discuss what lessons can be gleaned from this local success story.
World Finance: Now I understand that there were some complexities around financing this project through bond financing. Can you tell me something about that, Jorge?
Jorge Barata: There were two phases in the financial-structuring process. The first: we took out a bridge loan of 27 million, which allowed us to do the initial works before implementing the improvements needed immediately on roadways, in addition to reforming the tollbooths and other small works. Immediately afterwards, we finalised the final financing structure.
Said final financing structure had a significant impact on the country, as financing of PVS 1.4bn was generated, which exceeded other financing structures significantly.
We then issued an additional US$200m dollars to be used one year afterwards, just when we were about to start the expropriation process on the land in the Ramiro Priale district and start works.
[T]he political situation in Peru is stable, which has allowed for quick growth in recent years
World Finance: So Jorge, tell me about the role that Odebrecht Latinvest played in financing this deal.
Jorge Barata: The experience of Odebrecht Latininvest in the case of Rutas de Lima, as the company responsible for developing this project, which is quite ambitious and very important to the development of the city of Lima, has been quite successful.
Odebrecht is a company that is very committed to the development of countries. This range of experience in various countries makes it possible for the company to guarantee, both funders and partners and, primarily, clients, a level of certainty that we will deliver on-time, on-budget and pursuant to the conditions established in contracts.
World Finance: Now Raul, I know that the municipality of Lima was very much in need of this sort of an upgrade. Can you tell me what it means for the local community?
Raeul Pereira: Lima, the country’s capital, is home to nine million people. One of the local government’s priorities is reducing the gap in infrastructure and, as a result, the objective of Rutas de Lima is to increase the connectivity and efficiency of the system.
Our contract, in addition to covering operations and maintenance, involves constructing new roads, and maintaining existing roads.
As regards operations, we offer users the entire range of emergency and roadside assistance services, regardless of whether they have driven through a toll booth or paid a toll or not.
World Finance: Well Jorge, why couldn’t the government coffers be used in terms of financing this project?
Jorge Barata: We believe that, firstly: financing, when private, is a much faster option. It is available immediately, you can build and start works within a period of time that the government is normally unable to match. So, for example, in this project, once the financing process is complete, within two years we will complete work on the two main roadways.
Furthermore, the political situation in Peru is stable, which has allowed for quick growth in recent years. This growth has accelerated the infrastructure gap issue that affected the country. So today, Peru is losing its ability to compete due to the lack of infrastructure. So the government has had to make a tremendous effort along with private companies to overcome this difficulty and ensure that the country could return to the desired level of competitiveness
World Finance: Further Jorge, can you explain to me how other road urban construction projects can be replicated through PPPs?
Jorge Barata: This concession has quite strong characteristics.
For example, there are currently more than 200,000 vehicles being used each day in the city. Therefore, we needed to carry out all the work without interrupting traffic and ensuring that it continued flowing.
Odebrecht is a company that is very committed to the development
Everything that we do has to be approved by the Ministry of Transport and Lima city council. So, we submitted studies, which were not only approved and checked, but they were tested using up-to-date software systems.
This made it possible to see that the model developed was going to work, even under the most severe and demanding traffic conditions in the region against the current projected level of growth.
So, then you are left with the issue of traffic volumes, with the issue of the models and engineering used and you also have to have the capacity to intermediate between the private sector and the government.
All of this effectively becomes a very representative development and quite a significant model to be replicated by other PPPs.
World Finance: Finally Jorge, can you tell me about some of the other PPPs you’re planning on embarking on in the future?
Jorge Barata: The entire region has been facing the same problem. This problem involves a transport system that needs to be developed and updated. People believe that the same model that we are applying could be replicated in different cities; at least five.
The fact that Odebrecht Latininvest is working in more or less 10 countries in the region is really going to help us replicate this model and help us to identify opportunities and together, with the governments of each region and each city affected, work on developing these projects.
World Finance: Fascinating to hear. Jorge, Raul; thank you so much for joining me today.
Jorge Barata, Raul Pereira: Thanks a lot.