Latin America is a remarkably Anglophile part of the world, and the success of British consulting companies in the development of PPP models, programmes and projects has demonstrated the value that UK companies can add to the most needed infrastructure development of the region. But while the consulting side of the story has been a success, on the building, operating and investment sides of the equation, Britain is losing ground against other European players.
Latin America offers a very exciting PPP market with growing opportunities for international companies, but while most Latin American countries look to Britain in search of expertise for developing their own projects, the participation of UK companies in most SPVs has remained elusive.
Part of the reasons behind British companies’ apparent lack of interest can be traced down to the good old language and cultural barriers we all know about.
That would make sense, but in my limited experience of living in the UK for almost a decade, I cannot say that Chinese is spoken in many households or that the classic healthy and tasty bowl of chips (to the delight of my English sons) has been replaced by pita and humus in most pubs. But still Latin America remains more ‘foreign’ to many UK corporations than China and the Middle East.
Albert Einstein once said that it is easier to disintegrate an atom than a preconception, and even though we have been trying to get the Brits’ attention with heroic attempts via Shakira, Taco restaurants and the Gaucho Grill, the British preconception about the Latin American markets remains the same.
So what could be the underlying rationale for this?
The main problem seems to be the perception of UK companies about their ability to compete against the Spanish giants in what is perceived to be their own playground.
There is some truth in the perception of the strength of Spanish companies in Mexico and companies from other Spanish-speaking countries in Latin America, but this is clearly not the case in Brazil, and especially not the case when you consider PPP projects with a need for a long-term efficient operation of highly complex projects.
While both local and Spanish companies are experienced and efficient in the construction of infrastructure projects, there is a clear opportunity for UK companies to get involved in the operational phase of these projects. This has been recognised by some large European players such as Dalkia, who have recently won, in partnership with local construction companies, two of the most important PPP hospitals developed in Mexico, the first one already in operation.
In Mexico, the National Infrastructure Programme is moving ahead, and it is becoming clearer by the day that President Calderon really meant what he was saying when he stated that his presidency would be the "presidency of the infrastructure".
All around the country, exciting programmes are being developed in the roads, ports, water, waste, energy and healthcare sectors. In the security sector, a massive prisons programme is being developed, with 12 new projects to be awarded before the end of 2010.
What started as a national initiative has now evolved. In addition to the federal government programmes, several state government programmes have emerged, including healthcare, roads and cultural centres in the State of Mexico. We now also have a whole new city in the State of Tabasco.
The involvement of several NGOs in the bidding processes, including Transparency International, has added to the transparent business environment Mexico has created in the PPP market.
In Brazil the opportunities created by the combined wins of the 2014 World Cup and the hosting of the 2016 Olympic Games has pushed ahead the already impressive infrastructure programme of one of the fastest and strongest economies in the world. A solid legal framework, specific guarantees for projects developed under PPP schemes and a strong economy will create what will most likely be the largest PPP market in the world.
In a smaller scale in Chile, Peru and Colombia, the development of new PPP projects, especially in the healthcare sector, is creating a solid base for the growth of these initiatives in the Andean region.
So the question remains, are UK companies going to rise to the challenge and tackle the enormous opportunities Latin America is offering?
Even though the perception of risk remains, recent events in what seemed to be low-risk markets have shown that looking into new horizons may be a reasonable strategy for minimising the impact of high exposure to mature and well-established and known markets.
So, why not look into Latin America, where the opportunities are great, the sun always shines and both life and wine are sweet? And before you ask, we do have great dry wine as well!