The Decade Of Infrastructure: PPPs Drive New Investment

The Cartes administration entered office facing a severe infrastructure deficit. Public Works and Communications Minister Ramón Jiménez Gaona worked quickly to increase investments, more than quadrupling those of the previous administration. Infrastructure investment reached $800 million in 2017 and is expected to grow to $1 billion in 2018.

To support investment in infrastructure, the government established the framework for public-private partnerships (PPPs) for the first time in Paraguay. This opened the door to Paraguay’s initial PPP to upgrade Routes 2 and 7, the arterial highway that links the capital, Asuncion, with Ciudad del Este on the Brazilian border, thereby connecting the two regions responsible for 70% of Paraguay’s GDP. The international airport is also earmarked for redevelopment under the new laws.

“We welcome international companies that are bringing new technology into the country and increasing competition with Paraguayan companies, and that are hiring more local professionals and professionals from overseas,” explains Jiménez. “By improving the pace and the quality of public works, we have reduced costs by around 20%. We are witnessing bigger, more complex projects in terms of engineering and financing, which is helping us move faster and improve the lives of millions of Paraguayans.”

“Paraguayan construction companies can be excellent partners because we are serious, eager to work together, and we have good local expertise to bring to the table.”

— eMILIo GILL, President of CaVIaLPa, the Paraguay road Builders association

For the Routes 2 and 7 project, leading Paraguayan construction firm Ocho A has partnered with Spanish company Sacyr, Portuguese firm Mota Engil and Paraguayan construction firm Tecnoedil. “The hardest part of this project is financing it, and this is a hurdle that we have overcome already,” says Ocho A President Luis Pettengill. “Routes 2 and 7 will be funded by bond emissions via Goldman Sachs and backed by the IDB. It is a good structure. In addition, the government is attracting a great deal of interest from international investors who are buying government bonds. If Paraguay can achieve investment grade, this will be a key step.

“Once we complete this project and investors see how successful it was, it will be easier to get financing,” Pettengill adds. “Investors are usually afraid of buying bonds and not seeing a project become a reality. In our case, this risk does not exist, as we have the expertise to execute the project, which is not a complex one. Building highways is what we do best.”

Tecnoedil founder Roque Ardissone echoes Pettengill’s comments, explaining that his company has worked hard since its incorporation 40 years ago to develop the necessary expertise and capacity to be a strong local partner for international construction companies.

With the largest turnover in the construction sector, new ISO certification and the new U.S. Embassy build on its radar, Tecnoedil welcomes more international partnerships to access long-term financing for largescale infrastructure projects. “Our company is specialized in all aspects of construction, from roads to highways, ports to industrial complexes, factories to large buildings,” says Ardissone. “It is important to note that Paraguayan companies are very serious and highly skilled, and they are reliable.”

A more recent addition to the local offering is Tecsul, whose youthful founder Joaquin Fernandez brings an innovative, can-do attitude to his business. “So much still needs to be done: Infrastructure is lacking, real estate investment is required, and we have shortfalls in the sewage network which covers only 20% or 30% of the country. But it is impossible for us to do it alone. We do not see foreign companies as taking away work from us, but rather expanding the total opportunities so that we can catch up on our infrastructure deficit faster,” says Fernandez.