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Unlocking the Potential of Private Investment in Latin American Infrastructure – December 2015

by Tom Begley

  • 23 Dec 2015
  • INF

In the past decade, governments in Latin America have been attempting to meet their infrastructure needs and improve the region’s attractiveness to private investors. For example, in 2011, Peru, Chile, Colombia and Mexico formed the Pacific Alliance: an initiative of political cooperation aimed at promoting fiscal transparency, the creation of infrastructure funds, the deepening of free trade agreements, regulatory reforms, the harmonization of rules and the joint promotion of exports. Furthermore, the Mexican Government has been actively addressing the country’s lack of infrastructure and has issued plans to invest MXN 3.9tn over the next five years, as well as to open the state-run oil and electricity markets to private investment for the first time in decades.

Preqin’s Infrastructure Online contains detailed information on 719 Latin American infrastructure transactions completed since 2005, representing approximately 8% of global infrastructure deals in the period. These deals were completed for an estimated $151bn, with 2014 accounting for approximately 30% of that figure. So far in 2015, there have been 45 completed Latin American infrastructure deals for an estimated $14.2bn; however, it is likely that this figure will rise further as more information comes to light.

As expected, Brazil accounts for the largest proportion (30%) of infrastructure deals completed since 2005, with Chile, Mexico, and Peru accounting for 18%, 16%, and 11% respectively. Latin America’s largest nation has also increased its share of deals over this period; Brazil represented 23% of all completed infrastructure deals on the continent between 2005 and 2009, rising to 40% in more recent years (2012-2015). Economic reforms in recent years have had a strong impact on the number of infrastructure projects within these regions; however, in order for the growth to continue to increase and remain sustainable, there will be a need for further economic reforms and greater transparency to convince private investors to participate.

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