Latin America: Chilean president to accelerate concessions investment

25 May 2018 - 12:00 am UTC

Sebastián Piñera said he plans to increase annual investment in infrastructure concessions and outlined a pipeline of projects at a 10 May breakfast during Chile ’s Construction Week.

The Chilean president (pictured above) pledged to implement policy measures to accelerate approval processes and facilitate investment.

“Our goal is to increase investment in infrastructure by around 10% on average,” Piñera said.

The government plans to tender eight highway concessions totaling 1,500km and six airports, among other concessions for railways and public transport projects. 

Combined, these concessions should generate USD 2bn in annual infrastructure investment between 2018-2022, Piñera said. 

Diego Muñoz, an associate at Morales y Besa, said the plan is “very ambitious.”

The government’s plan is balanced between new PPPs and concessions improvements and would remove barriers for “free flow” toll collection systems on existing highway concessions, Muñoz said 

Although many of the new projects were approved by the previous government or are re-tenders of expiring concessions, Piñera also announced plans to tender an expansion of the Santiago Metro system and award concessions for new inter-urban railways.

Projects launched by the previous government include the Camino de la Fruta highway, a new tender for the section of Ruta 5 between La Serena and Los Vilos, and an upgrade of the Farellones road that links Santiago to several ski resorts. 

New tenders for railroads will take longer because pre-tender studies can only begin following decisions about how to prioritize sections and award concessions, said Carlos Cruz, executive secretary of National Infrastructure Policy Council (CPI).

Even so, Piñera announced plans to award concessions for inter-urban railways linking the cities of Santiago, Valparaiso and Concepción, although these may take a couple of years, said Carlos Piaggio, head of infrastructure at the CChC.

“Studies for these projects will begin this year and we should see some signs [of tenders] in 2019 and 2020,” Piaggio said.

Piñera also plans to reactivate the hospital concessions program that was launched during his first term, but cancelled by the previous government.

“As for hospitals, things are more mature, although I do not know if there are enough projects,” Cruz said.

As for ports, future expansions will likely be awarded to existing concessions, Cruz said. “The case of Terminal 2 in Valparaíso remains to be seen and the expansion of San Antonio to serve as a large-scale port will likely be done through the existing concession,” he said.

The CChC, Chile’s National Association of Concessionaires (COPSA) and the CPI all welcomed Piñera’s announcement, but cautioned that work needed to be done to reduce red tape and reactivate stalled concessions.

Piñera signed on 14 May a “Pro-investment Agenda” to facilitate investments totaling USD 60bn in various sectors, including infrastructure, during the 2018-2022 period. 

In his message to Congress to promote the bill, Piñera emphasized the need to cut bureaucracy and speed up approval times for permits to facilitate new investment, a concern shared by concessionaires.

Projects that have faced problems include the AVO I highway project in Santiago and the Hospital del Salvador concession project.

Piaggio said there is a lack of coordination between government agencies responsible for managing concessions and other public institutions, such as those involved in approving environmental permits.

“The president’s announcement is a great boost for investment… However, it is necessary to manage expectations as to when this new infrastructure will become available since it can easily take eight years between an announcement and completion of the work considering the current delays in permits and bureaucracy,” said COPSA’s head, Leonardo Daneri.

In his speech, Piñera acknowledged delays to infrastructure investments and pointed to new agencies he is creating such as the Ministry of Economy’s Office of Sustainable Projects (Oficina de Gestión de Proyectos Sustentables, or GPS), which aims to cut red tape and facilitate approval processes for large projects.

COPSA’s Daneri suggested the office will act as a “single window” for investors in terms of permits and “will unlock many projects and reduce some of the red tape that has delayed many concessions.”

However, according to Cruz, what is needed to drive infrastructure investment are more pre-investment studies by the Ministry of Public Works, and the creation of the new infrastructure concessions agency (Dirección General de Concesiones de Obras Públicas), which will start operations this year.

Infra Fund pending
According to the CPI, Piñera’s investment plan could be financed with the help of private pension funds (AFPs) and local insurance firms, whose assets total around USD 45bn, said the CPI’s Cruz.

The new National Infrastructure Fund, which has been approved but is yet to be formally created, will be key to mobilizing these resources and providing financial guarantees for investors, Cruz noted.

Chile’s new USD 9bn infrastructure fund, to be managed by state-owned company Fondo de Infraestructura, is expected to begin operations by the end of the year, but concessionaires and builders say details are patchy about how it will operate. 

The fund’s statutes are yet to be created and its board appointed before it can make any investment decisions.

Read more