Latin Finance - October 2008 - 46

investment in uruguay 60% of their capacity. The ships will then sail to a special transfer zone off the coast of Montevideo, where they will be topped up to 100%. Rio declines to discuss financing for the mine. Getting Wired Up The list of new infrastructure investments in Uruguay is impressive. Ancel, the cellphone arm of Antel, the state-owned Uruguayan telecoms company, is spending $81 million on a new network for cell phones in the country between this year and next year, according to KPMG. Claro, the cellphone company owned by América Móvil, and Telefónica are each committed to investing $70 million in new cellphone infrastructure, so that full 3G capabilities are available in Uruguay. Antel is increasing annual capex to $140 million next year, a 16% jump from $120 million this year. It will construct a new submarine fiber-optic cable between Uruguay and Argentina, giving the country direct access to the main international internet network for South America for the first time. Elsewhere, the main international airport at Carrasco will see a new $134 million terminal open at the end of the year, developed by its Argentine owner, Aeropuertos Argentina 2000. As well as constructing a new 45,000 square meter terminal at Carrasco, Aeropuertos Argentina 2000 has upgraded the airport at Punta del Este. The government has also announced plans to modernize airports at Salto and Durazno. The government also wants to enter into public-private partnerships to upgrade the road network, in particular the corridor between Rio Blanco and Colonia on highways one, eight and 11. Total investment for this upgrade will be $176 million, initially financed by the government. It will grant concessions to private operators, which will finance the road’s upkeep by levying tolls. The government is also considering building a ring-road around Montevideo for the first time, so that heavy trucks do not have to enter the city center, and is expected to give shortly the green light to a new $1.2 billion port at La Paloma, in eastern Uruguay. This is a controversial move, as the area is a tourism destination, but it is essential for the Portucel pulp mill to go ahead and for agribusiness in this region to be fully developed. And the fashionable tourism destination, Punta del Este, is also experiencing a wave of new investments in hotels, resorts, and towers – since 2001, more than $1 billion has been invested in new projects, according to KPMG. A big proportion of this investment has come from European property developers, especially Spanish, which want to diversify beyond the depressed European real estate market. FDI Inflows to Uruguay (millions of USD) Holding steady Year 2001 2002 2003 2004 2005 2006 2007 Source: Eclac Amount 296.80 193.70 416.40 332.40 874.40 1,399.00 879.00 Carrasco airport was financed through corporate bonds issued via ABN AMRO in the local capital markets in April 2007, according to KPMG. “This case is exceptional; most capital raising takes place in the form of loans granted by banks within the countries in which the companies are headquartered,” says Rodrigo Ribeiro, a partner at KPMG in Uruguay. “The Uruguayan government finances its investments with debt from multilaterals,” he adds. Local Limits Citi’s Varese says it is difficult for private companies to raise funds for infrastructure within Uruguay, because of limited capital markets. “The size of some of the projects is just too big for the domestic financial system,” he says. Typically, projects fund from a variety of sources, including multilaterals, syndicated loans and the domestic bond market. “New infrastructure projects create an opportunity for the development of the local capital markets,” says Varese. “The banks can offer loans but often in the case of these megadeals, it’s better if the companies seek longerterm financing.” Varese adds that local pension funds – with the equivalent of $4 billion under management – are eager for new kinds of investment. Regulators allow up to one quarter of assets to be invested in the private sector, but only $120 million has been committed so far, leaving plenty of scope for more. Uruguay has come a long way since 2001, when it almost suffered a similar economic meltdown to Argentina, because of overdependence on its bigger neighbor and contagion. It is attempting to decouple itself from Argentina and Brazil, which it feels have not treated it fairly as a Mercosur member. A section of the left-wing government of Tabaré Vázquez would like to see the country play a smaller role within Mercosur and follow the Chilean model of forging bilateral trade agreements with the US, Europe and Asia. However, it seems more likely that Uruguay will remain a member of Mercosur while also pursuing trade deals with other countries. Uruguay heads to the polls for presidential elections in October 2009, and Vázquez will not be standing. José Mujica, a populist left-wing national senator and leader of Espacio 609 is favored to win. It is not clear if he would follow Vázquez’s relatively orthodox economic policy. Some Uruguayan commentators are concerned that the economy may be showing the first signs of overheating, as inflation has been moving northwards. Others are worried that the small economy will not be able to absorb so much investment. However, most people embrace the mega-investments, believing they pave the way for a wealthier society. As long as commodity prices remain high and planned infrastructure projects come nto being, Uruguay looks set to attract ever-greater FDI flows and become a much more prosperous country. LF U.S. Postal Service STATEMENT OF OWNERSHIP, MANAGEMENT AND CIRCULATION (Required by 39 U.S.C. 3685) LatinFinance publication #004-662, is published at 2600 Douglas Road, Suite 410 Coral Gables, Florida 33134 Publisher: Stuart Allen; Editor: James Crombie Owned by: EII Holdings, Inc. 15, East North Street, City of Dover, County of Kent, Delaware Published monthly, except bimonthly December/ January and July/August. 10 issues published annually. The annual subscription price is $495.00 U.S. Dollars. Extent and Nature of Circulation: Average # Copies Preceding 12 months Total # of copies (net press run) 14,283 Paid and/or Requested Circulation 8,616 Paid or Requested Mail Subscription Total Paid and/or Requested Circulation 8,616 Free Distribution by Mail Free Distribution Outside the Mail 4,793 Total Free Distribution 4,793 Total Distribution 13,409 Copies not Distributed 874 Return from News Agen Total 14,283 Percent Paid and/or Requested Circulation 64% # Copies Sept 08 14,231 8,928 8,928 4,572 4,572 13,500 731 14,231 66% 46 LATINFINANCE October 2008

Latin Finance - October 2008

Table of Contents for the Digital Edition of Latin Finance - October 2008