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Friday, January 15, 2010
Today's News Headlines
* Chamber of construction documents development priorities - Costa Rica
* ANALYSIS: Have conflicts of interests caught Acepar in a smear campaign? - Paraguay
* After Haiti, govts will look to scale up risk management efforts sensibly - Swiss Re - Haiti, Regional
* Spanish firms eye water, santiation PPPs in Cali - Colombia
* Inco plans to award 3rd stretch of Ruta del Sol in June - Colombia
* ProInversión to concession new transport system for Arequipa - Peru
* Arias reiterate decision, will not approve any new open pit mining concessions - Costa Rica
* Bidding rules for dark fiber to go on sale this month - Mexico
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* Chamber of construction documents development priorities - Costa Rica
Costa Rica's chamber of construction (CCC) has drawn up a document to help the government create a national transport plan for 2010-35, CCC president Ricardo Castro told BNamericas.
The document was prepared with the national road association and includes the areas considered priorities for the country's infrastructure development.
"It is important for the government to start planning and listing objectives and goals for infrastructure development, as well as the processes that must be followed to achieve them. That is why we are interested in making this contribution," Castro said.
The list of recommended priorities includes the expansion of the highway that runs from capital San José to the city of San Ramón; expansion of the Interamericana Norte highway connecting Barranca to Peñas Blancas; conclusion of pending works at the Juan Santamaría international airport; modernization of the Limón port; and maintenance works on the national road network.
Urban sewerage and water expansion were also listed as priorities, as were different energy generation initiatives to be carried out by the state power company ICE.
By Indiana Corrales
Business News Americas
Editor's Choice
* ANALYSIS: Have conflicts of interests caught Acepar in a smear campaign? - Paraguay
In early November last year, the government of Paraguay requested that an arbitration tribunal be set up to study the history of and circumstances under which state steelmaker Acepar (http://) was transferred to private control in 1997 in order to terminate or at least change the company's purchase and sale agreement.
Oddly, the decision to set up the tribunal was made despite the fact the company and the government had already reached agreements on issues such as how much the state would be paid for the plant and on Acepar's supposed breach of an agreement to be self-sufficient in the supply of charcoal.
Both parties had also agreed on the investments that Acepar would make, keeping all jobs and guaranteeing the supply of steel for the local metallurgical industry.
According to Acepar manager Néstor Méndez, the company had also received "all the guarantees and the encouragement it needs to continue investing in the country."
SUPPOSEDLY INTERESTED
In a recent interview with BNamericas, Méndez said that Chilean iron and steel manufacturer [2]CAP[/*2] was interested in taking over Acepar.
A group of legislators linked to the ruling party in Paraguay have also been holding meetings with Brazilian company Ciafal to stimulate interest in taking over the company, should Acepar be nationalized.
There is also major media pressure coming from local newspaper ABC, which is also interested in allying with Brazilian parties to take over the company.
Likewise, a group of socialist-leaning legislators are using the company as a rallying point to encourage President Fernando Lugo to take control of Acepar the way that Hugo Chávez and Evo Morales have done with companies Venezuela and Bolivia and show that the state can retake control of privatized companies.
CHANGING THE RULES
In another notable development, the agreement between Grupo Taselli, which controls Acepar, and the government of Paraguay was also changed.
According to the agreement, the US$29mn cost of purchasing Acepar was to be paid in five installments of all a little more than US$5mn plus interest each, with the last payment due on November 10, 2009.
"However, on November 10 we went to the national treasury to pay the last installment and the finance ministry told us that they would not receive the last payment and, of course, would not give us the stocks [which the government was withholding until all installments were paid], even if payments were completed," Méndez said.
He said that he could not fathom why the government suddenly changed its course, "and in light of how things played out, we believe that a number of officials might not be able to explain it either."
SMEAR CAMPAIGN?
The government decision to ask for the contract privatizing Acepar to be revoked leads to the conclusion that Acepar may be the target of a smear campaign.
This conclusion has stirred up suspicion that there is a group of people or organizations that will work, on different levels, to undermine the company, lead it into the most severe crisis possible and by doing so justify its re-nationalization and later re-privatization to one of the parties that have already expressed their interest.
Acepar, it seems, is caught up in the middle of a number of conflicting interests, with various parties wanting to getting a slice of a company which, according to its general manager, is quite healthy, has investments underway, wages up to date, social benefits unique in this type of company, and profits of more than US$13mn over the last few years.
By Harvey Beltrán
Business News Americas
* After Haiti, govts will look to scale up risk management efforts sensibly - Swiss Re - Haiti, Regional
After the disastrous earthquake that destroyed large sections of Port-au-Prince, Haiti on Tuesday (Jan 12), governments in the region will be looking to scale up their risk management efforts, taking into account the various tools available, Nikhil da Victoria Lobo, public sector VP at Swiss Re, told BNamericas.
The earthquake certainly brings parametrically triggered insurance coverage into focus as a strong tool for risk protection, the executive said, pointing to the US$8mn maximum payout from the Caribbean Catastrophe Risk Insurance Facility (CCRIF), which Haiti will receive after a 14-day waiting period.
"We don't believe they are the solution to everything, but they do help alleviate some of the anguish and pain by providing governments at least some liquid financing to at least help get on their feet," da Victoria Lobo said.
However, given the country's low level of private sector insurance penetration and lack of other major risk management tools, the rebuilding process will be extremely challenging.
In particular, the government will be even more dependent on donor aid, which comes with donor-imposed restrictions, and likely has no protection for its lost future tax revenues, given that the government will likely be unable to collect taxes for the next several months, if not years, the executive said.
MEXICO EXAMPLE
While certainly much wealthier than Haiti, Mexico may prove an example of the steps that governments can take to broaden their options for risk management, according to da Victoria Lobo.
Mexico currently has a US$290mn parametrically triggered catastrophe bond, but it also has other risk management tools through more traditional insurance instruments and normal budgetary processes, he said.
"We believe these efforts should be scaled up, but they should be scaled up in a sensible manner in line with other risk management philosophies and tools," the executive said, "[so that governments can] optimize how they fund disasters before they happen."
By James Newman
Business News Americas
* Spanish firms eye water, santiation PPPs in Cali - Colombia
Spanish firms have contacted Colombia's Cali-based multi-utility Emcali to express interest in forming JVs with the firm to develop large projects, the planning manager of Emcali's potable water and sanitation division, Eduardo Arbeláez, told BNamericas.
Emcali is a state-owned utility but the firm is open to reaching agreements with private firms to form public-private partnerships (PPP), Arbeláez said.
Since the contact is preliminary and no agreements have been signed yet, Arbeláez preferred not to name the Spanish firms involved.
The utility is not analyzing any PPP in particular, but its development plan includes projects that could well use the support of the private sector, according to the planning manager.
The project to build a reservoir with the capacity to hold 11Mm3 of water is an example of an initiative that could be developed with the help of a private firm, said Arbeláez. Emcali is currently studying the environmental feasibility of this project, which has an estimated construction cost of 80bn pesos (US$41mn), Arbeláez added.
The initiative includes the construction of a 180m dam with the capacity to produce 2.5m3/sec of water.
Emcali's current potable water production capacity guarantees full supply to the city's population until the year 2035. The reservoir would guarantee supply until 2050.
The project's main attraction, however, is its hydroelectric potential, said Arbeláez, as the 180m fall would be used to generate electricity.
PPPs could help Emcali finance projects that cannot be covered by the utility's own profits. The company was intervened by Colombia's basic service authority in 2003 and must first improve its financial management before being granted permission to request loans to finance new projects.
By Eva Medalla
Business News Americas
* Inco plans to award 3rd stretch of Ruta del Sol in June - Colombia
Colombia's concessions institute Inco will award the concession of the third section of the 5.7tn-peso (US$2.6bn) Ruta del Sol highway in June, an official from Inco's project management division told BNamericas.
The entity plans to launch the concession tender on January 26.
The new tender schedule gives companies about four months to submit enquiries about the 465km highway stretch and the bidding rules before presenting their proposals.
Inco will take another month to review the technical and financial offers and expects the concession contract to be awarded around June or at the beginning of H2, said the official.
In the meantime, a team of specialists is working to make the project more attractive so as many companies as possible participate in the process, the official said.
Inco launched the tenders for the concession of the US$2.6bn highway's three sections last year. In December, the entity awarded the first and second sections.
The first section was awarded to Consorcio Vial Helios, which submitted a 1.54tn-peso (US$770mn) offer, while the second section was awarded to Sociedad Futura Concesionaria Ruta del Sol, which submitted a 3.54tn-peso bid.
The tender to concession the third section was declared void after Inco rejected a proposal submitted by the sole bidder, Concesión RDS, formed by Colombian firms Inversiones Grandes Vías e Ingeniería and Gas Kapital, in partnership with the China Railway Shisiju Group Corporation.
The offers presented for the first two stretches were lower than the official budget allowing authorities to save about 400-500bn pesos. These resources will be used to increase the state counterpart for the third stretch, transport minister Andrés Uriel Gallego announced this week, according to local press. The counterpart will increase from 1.9tn pesos to 2.3tn pesos (US$1.2bn), according to Gallego.
Ruta del Sol's three sections are: the new 78.3km Villeta-El Korán stretch; the existing 528km stretch from Puerto Salgar to San Roque; and the 465km stretch between San Roque-Yé de Ciénaga and Carmen de Bolívar-Valledupar.
PROJECT FINANCE
Inco hired the World Bank's International Finance Corporation (IFC) to draw up the financial structure of the project.
After carrying out a number of studies and analyzing each stretch, different financial structures were established.
The first section's price tag, established by the concessionaire in the offer presented, will be fully covered by the state.
The seven-year concession contract includes three years for construction works and another four years to operate and carry out maintenance works on the highway.
The concessionaire must begin construction in 2010, but the government will only begin to disburse the funds to cover costs in 2012. Therefore, the concessionaire is responsible for obtaining the funds to start work and will provide financing to the government, the official said.
In the case of the second and third stretch, however, authorities decided on a more conventional concession model, providing a state counterpart to support the project's development, said the official. In both cases, state funding will cover about 50% of project costs.
By Eva Medalla
Business News Americas
* ProInversión to concession new transport system for Arequipa - Peru
Peru's private investment promotion agency ProInversión is considering concessioning a new public transport system for the city of Arequipa.
The bus rapid transit (BRT) system, to be called Mistibus, will involve articulated buses that hold 160 passengers, and is expected to reduce traffic congestion and pollution in the city.
ProInversión has held meetings with the local authorities in charge of planning the system to discuss the concession, government news agency Andina reported.
The agency will also support the concession of the service's electronic payment and control systems. Work will begin over the next few months, according to the local government.
Mistibus will cost an estimated 227mn soles (US$78.7mn), and will be partly financed by a US$60mn loan from the Andean Development Corporation (CAF).
Work on the Bolívar-Sucre stretch of the city's new exclusive bus lanes will begin on January 18. The transport system is expected to be ready by September this year, the report said.
By Business News Americas staff reporters
* Arias reiterate decision, will not approve any new open pit mining concessions - Costa Rica
Costa Rican President Oscar Arias has reiterated that no new open-pit mining concessions have been approved during his presidency and none will be.
"I have not and I will not award any new open-pit mining permits," Arias told local press in a public statement.
The president said that he would not be granting new permits "since this is an issue that personally concerns me and, as I have said many times, Costa Rica's future must be green, or there will be no future at all."
CRUCITAS
Arias explained that the renewal of the concession for the Crucitas gold project, which is owned by Canadian company Infinito Gold (http://) (TSX-V: IG), does not mean that he or his government support open-pit mining as a way of doing sustainable business in Costa Rica.
"I want to make very clear that neither I or my government approved the Crucitas concession. The concession is a right that an international company acquired many years ago which we inherited upon coming into power," Arias said.
Activity has been at a standstill at Crucitas since October 21, 2008 due to a challenge from individuals in Costa Rica, which is allowed under the country's constitution despite the February 2008 approval of the project EIS. The company had begun tree clearing work just five days prior to the suspension.
Crucitas has an indicated resource of 1.2Mt grading 1.32g/t gold and in 2008 a bankable feasibility study outlined US$66mn capex for output of 85,000oz/y.
By Business News Americas staff reporters
* Bidding rules for dark fiber to go on sale this month - Mexico
The bidding rules for an auction of two strands of dark fiber - owned by state power company CFE - for a third party to offer internet services are ready to go on sale, Mexico's transport and communications minister SCT Juan Molinar Horcasitas was reported as saying by local press.
The rules should be made available some time this month, with the concession contract expected to be awarded before the end of the first quarter.
Preliminary bidding rules have already been published, however SCT has modified the rules taking into account comments and recommendations from a public consultation.
The fiber, measuring 19,467km, will have 300 access points. The concession license will be for 20 years and is renewable for another 10.
The concession is part of a drive this year by the Mexican government to boost the telecoms sector. The government is also planning to auction mobile spectrum over the coming months.
The CFE network represents an alternative to that of dominant fixed line telco Telmex (NYSE: TMX), giving other telcos and cable companies a choice for reaching certain parts of the country.
By Business News Americas staff reporters
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In-deph interview
*
Citibank Peru corporate finance VP Alberto Carrera
Peru
http://www.bnamericas.com/interviews/privatization/Citibank_Peru_corporate_finance_VP_Alberto_Carrera-/170073043
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Main companies covered in today's news
* Secretaria de Comunicaciones y Transportes
http://www.bnamericas.com/company-profile/en/Secretaria_de_Comunicaciones_y_Transportes-SCT_Mexico/170073043
* Japan International Cooperation Agency
http://www.bnamericas.com/company-profile/en/Japan_International_Cooperation_Agency-JICA/170073043
* Hannover Rückversicherung AG
http://www.bnamericas.com/company-profile/en/Hannover_Ruckversicherung_AG-Hannover_Re/170073043
* Ministerio de Transportes y Comunicaciones
http://www.bnamericas.com/company-profile/en/Ministerio_de_Transportes_y_Comunicaciones-MTC_Peru/170073043
* Autoridad Reguladora de los Servicios Públicos
http://www.bnamericas.com/company-profile/en/Autoridad_Reguladora_de_los_Servicios_Publicos-Aresep/170073043
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