Infrastructure and project finance in Latin America: growth in projects forecast for 2021

COVID-19 Pandemic

The COVID-19 pandemic initially caused a slowdown in the infrastructure and projects market in Latin America, particularly in terms of the planned timelines for awarding government contracts.  

Situation up to Q1 2020

Up until the first quarter of 2020, Latin American governments had a broad portfolio of projects to be awarded and carried out. In addition, in early 2020, new opportunities had arisen for securing infrastructure project contracts, such as through PPPs and public works arrangements.  

COVID-19 outbreak

After COVID-19 hit and the ensuring business shutdown, which in some cases included mandatory stay-at-home orders, many of the projects underway in the first quarter of 2020 came to a standstill or experienced other interruptions. In addition, the bidding and award timelines for concessions and projects were delayed, particularly during the first half of 2020. As economic activity ground to a halt around the world, the main market players took a step back to adjust their forecasts and prepare for the financial boomerang to swing back around after COVID-19.

2021 boomerang effect

The pandemic is already having a boomerang effect: the public health crisis further laid bare the infrastructure shortfalls in Latin America, the need for better essential public infrastructure and for economic stimulus, which has in turn prompted governments to add new projects to their portfolios and to allocate higher budgets to these undertakings. In this context, the main market operators agree that the coming years will see a greater emphasis on projects related with public health, social welfare projects, regional connectivity and digitalization.

On one side of the equation, companies interested in participating in public tenders processes should boost the sophistication of their protocols, readjust their resources as needed and modernize their processes to adapt to the “new normal”. On the other, governments will surely diversify their project portfolios and will tend to seek heavier involvement from private initiatives in the development of social and health care infrastructure, so as to leverage the efficiencies of the private sector. Furthermore, as the money behind these projects, financial institutions will aim to dole out their funds in socially responsible investments that meet environmental, social and governance (ESG) standards. 

A look ahead

What, then, are the key trends we can already make out in the main markets in Latin America? Which investments will continue to be made in these countries and under what conditions? As stated above, there is a clear shift in focus toward developing infrastructure through the award of social, public health and connectivity projects, increasing the private sector’s participation in these efforts.

Garrigues is pleased to share our summary of the main trends in this market, from both a legal and a technical standpoint, drawing from our on-the-ground network of offices in Brazil, Chile, Colombia, Mexico and Peru, as well as from G-advisory, the Garrigues Group consultancy arm specialized in technical and strategic advice in areas including Energy and ESG.

Check here the details of all the new developments planned for infrastructure projects in Latin America.