LatinFinance - September/October 2016 - 77

partner with IDEAL and Grupo Slim. When
we look to do investments in emerging
markets, and in any new market we don't
have experience in, we tend to try to pick
a partner first, then look at the deal attributes. In terms of being able to work with
the Slim organization, that was something
we thought would be very attractive.
LF: Are there any other projects in
Mexico that have caught your interest?
AC: Part of the reason that Mexico is one
of our core markets is because it is a positive business environment, it has strong
macroeconomic fundamentals and it's a
relatively mature market for infrastructure. There are a number of infrastructure
assets there that pique our interest. There
are many reforms that are happening in
Mexico. There is a large-scale privatization
program around the energy sector to bring
more foreign capital and more foreign
know-how into Pemex. It's an interesting market for us. We like transportation
assets, so I think you'll continue to see us
look at transportation assets as well as
things like power generation and the oil
and gas sector.
LF: Looking across the region, what
other markets are drawing your attention and why?
AC: We're quite focused on the Andean
region in South America. We're very West
Coast focused as opposed to East Coast
focused. If you go down the West Coast
- Mexico, Colombia, Peru, Chile - that is
where we've been spending most of our
time. We've historically had very large
positions in Chile. We've been an investor
in Chile for close to a decade. So there are
other markets that we'd like to demonstrate putting money to work in, including
Colombia and Peru. Those are the primary
markets. Brazil is a country that is on our
radar screen. But Brazil is more complicated. It's a country that in our mind requires
a more opportunistic approach than the
others.
LF: What do you mean by more opportunistic approach?
AC. One of the issues that I've seen
in Brazil over the years is that there is a
number of uncompensated risks in the
country. One of the things we always think
about whenever we're looking at investing
in infrastructure is how an infrastructure
investment compares to other potential
investments we could make in the country.

ANDREW CLAERHOUT, ONTARIO
TEACHERS' PENSION PLAN

"ALTHOUGH
ARGENTINA IS
SAYING ALL THE RIGHT
THINGS AND MACRI IS
DOING ALL THE RIGHT
THINGS, IT'S A PLACE
WHERE WE'RE GOING
TO TAKE A WAIT-ANDSEE APPROACH"

How do infrastructure returns in Brazil
compare to bonds that we could buy in
Brazil or equities or real estate or any other
asset class? This an area where frankly it's
been hard to justify some of the returns
we've seen in infrastructure in Brazil, particularly if you look at it versus the sovereign
long bonds.
So you have to ask yourself, if I can buy
something that has a sovereign guarantee at
12.5%, what do I need to get compensated
for illiquid, leveraged equity? It would be
materially more than that. So a lot of times
there seems to be disconnects in terms of
how different assets are priced versus the
sovereign long bond. We felt that the equity
risk premiums have not been near adequate
to motivate us to invest. If we're going to
do something in Brazil, it's certainly going
to be with a local partner. And we've seen
with the "Car Wash" scandal, choosing one
is a challenge. We are taking some time with
Brazil.
LF: Could you participate in the 4G
toll road concessions program in Colombia?
AC: The 4G projects are more complicated. The way the procurement process
has been set up, it's better catered to debt
providers or construction companies.
It just seemed if you were a pure equity
provider, that may not be the sweet spot
in those roads. I would say, though, that
Colombia and Peru have a lot of greenfield
opportunities.

LF: Turning to Cubico, do you see
other opportunities in renewables in
Brazil, Mexico and Uruguay?
AC: We do see continued opportunity
there. There's also opportunity for us to
grow Cubico away from some of those
markets. You can expect us to invest more
broadly in the region, but also don't be surprised if you see us invest in places where
Cubico has not invested historically.
LF: Argentina is getting a lot of
attention right now on renewables.
Argentine President Mauricio Macri is
making a push to attract more investment. Do you think there's an opening
for buy-and-hold investors like Ontario
Teachers'?
AC: It's complicated. Argentina has
had a long history of not being very favorable to foreign capital. Certainly with the
change of government, they are saying
all the right things and trying to do all the
right things in order to attract foreign capital. However, I'll come back to my point
that we need to get compensated for the
risks we take. We look to develop assets
and hold them for the long term. Although
Argentina is saying all the right things and
Macri is doing all the right things, it's a
place where we're going to take a wait-andsee approach.
LF: Chile is making a push to revamp
its infrastructure. How do you see the
Chilean market?
AC: There are certainly some opportunities in Chile. What we have found is that
given the maturity of the market and how
positive the investment environment has
been, returns have compressed during
the time we've been in Chile. Now they're
largely on par with developed markets. We
certainly think that as the most developed
market of Latin America and given the
competition, the returns reflect that. We
are glad we invested in Chile when it was
not fully appreciated as a mature market
by the broader investment community. We
invested at a time when it was much less
competitive and returns were much more
attractive. Now the challenge becomes,
given the amount of capital that is there
and the returns, is it suitably attractive for
us versus some of the other markets we're
seeing in Latin America?
LF: So what's the next Chile?
AC: That is the question. If I knew I
certainly wouldn't tell you (laughs). LF
September/October 2016 - L ATINFINA NCE.COM 77

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