Latin Finance - July 2008 - (Page 32)

peru port investment Forging a Gateway to Asia by Lucien Chauvin here is a buzz in the air at Peru’s Callao port, the country’s principal point of entry. Huge ships are unloaded as others wait their turn in the Callao Bay, warehouses are brimming as trade booms and construction is underway on a new pier that should increase capacity by another 850,000 20-foot containers (TEUs) early in the next decade. The state is also investing for the first time in many years and the government sees Callao as a hub for regional trade. Brazilian firms are meanwhile stepping up to secure a passage to Asia. Both the government and port operators see Callao as a central point for trade between South America and Asia, with a focus on Brazil and China. “The Callao port is going to be the biggest, most profitable port on the Pacific Coast. It is going to be a platform for investment and trade,” president Alan García said during a mid-May powwow with his Brazilian counterpart. Many share the president’s view and for the first time there is capital to match rhetoric. There are estimates that Peru needs at least $1.5 billion in investment in Callao and regional ports if it is going to handle increasing trade and become a hub for regional container traffic. Callao ranked third in container movement – 938,119 TEUs annually– in South America in 2006 after Santos in Brazil and Buenos Aires, according to the UN Economic Commission for Latin America. TEUs topped 1.0 million in 2007, according to the transport ministry, which forecasts the number would shoot past 1.2 million TEUs this year. Callao handles nearly 80% of the cargo moving in and out of Peru. The government would like to see most of the investment come from the private sector, and it is offering several regional ports in concession this year with an investment target of $400 million. T Peru needs at least $1.5 billion in private investment to realize its ports potential. Investors face resistance form unions, congress and a discouraging history. Ports for Concession in 2008-2009 Pipeline builds Port Paita Ilo Chimbote Salaverry Pisco/San Martin Yurimaguas Iquitos Pucallpa Location Amount ($m)* Piura 160 Moquegua 100 Ancash 60 La Libertad 40 Ica 35 Loreto 20 Loreto 20 Ucayali 18 oils for human consumption. Jean-Valery Patin, VP at BNP Paribas in New York, says there should be few difficulties attracting foreign investors. “Provided that the government establishes clear rules of the game and legal stability, as it did in the transmission line sector, there would be interest in the port concessions,” he adds. Two Spanish companies, one entering Peru for the first time, won concessions recently to build power lines in the north and south of the county. Queues have already formed for the concession of other power lines, as well as Lima’s mass transit system, and a $1 billion upgrade of the country’s main oil refinery. Patin says the principal interest is likely to be in ports with potential for container traffic. This includes Callao, as well as in regional ports like Paita. Container traffic at Paita is still low, but has doubled this decade to nearly 100,000 TEUs. *Estimated minimum short-term investment for 30-year concessions Source: ProInversión Movement of 20-Ft Containers (TEUs) 2006 Callao number eight in LatAm Port Santos Kingston Colon Buenos Aires Freeport Manzanillo Balboa Callao Puerto Cabello Itajai Location Brazil Jamaica Panama Argentina Bahamas Mexico Panama Peru Venezuela Brazil TEUs 2.9m 2.2m 1.6m 1.6m 1.4m 1.2m 988,583 938,119 844,952 842,519 PPP Variations DP World, one of the world’s largest marine terminal operators active in 28 countries, began construction in April of a new container terminal, known as South Pier at the Callao port. Investment in phase one is calculated at $300 million. DP World will spend another $140 million in the coming five years on general port development at Callao. The former government, facing opposition to the privatization of the Callao port, chose to keep it public, but bring in a private operator to build a new terminal. This approach, a variation on a publicprivate partnership, has been dubbed the “DP World model” locally. Source: UN Economic Commission for Latin America and Caribbean There is another $700 million needed to build specialized ports, such as facilities that can handle exports of mineral concentrates or the import of grains and 32 LATINFINANCE July/August 2008

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Latin Finance - July 2008 Contents Investment Banking Outlook Compensation Survey Colombia Investment Banking Borrowers vs. Investors Banorte Profile Braskem Financing Strategy Brazil Hydro Finance Peru Port Privatization Panama Money Flows Argentina Local Markets Guide to Banking Technology Who Said That?

Latin Finance - July 2008

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