EXCLUSIVE: Paraguay preparing five major infrastructure projects

EXCLUSIVE: Paraguay preparing five major infrastructure projects

Capital Markets Corporate & Sovereign Strategy Economy & Policy Fixed Income Funds Project & Infrastructure Finance Paraguay Latin America Coronavirus

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Paraguay, having successfully closed an historic financing package for a major roadway project last year, is working on five more significant infrastructure projects with a combined price tag of roughly $1.34 billion that are expected to launch over the next one to two years, a top government official told LatinFinance.

Coming off of last year's first ever public private partnership structure to build out the Rutas 2 & 7 roadways, the pipeline of new projects include more roads, a light rail network, waterway and clean water systems, said Jorge Vergara, the director of the Strategic Projects Directorate within the Paraguayan government's Ministry of Public Works and Communications.

"Two of them are main roads, Rutas 1 & 6, which is a $500 million project now under study. We think this study will be completed in the first quarter of 2021 and launched by the end of the year. The World Bank and the IDB are working on this with us," Vergara said in a telephone interview from Asuncion.

Just under a year ago the Rutas 2 & 7 financing was completed with the sale of $457.6 million worth of zero coupon bonds at 5% in a deal managed by Goldman Sachs and Itaú Unibanco. The Inter-American Development Bank stepped in with a $200 million loan to help round out the deal which was the first one completed under Paraguay's seven-year old Public Private Partnership law.

The third project, Vergara said, was a $400 million PPP project to underpin the integrity of the water supply system for the north portion of the capital, Asuncion. "We are starting with pre-feasibility studies," he said.

A fourth project is now being studied to build the first third of a light rail system in Asuncion.

"The light rail for Asuncion is initially a 15 km project, which has a $300 million cost. A second phase would be to extend the project by 40km, but we don't know costs yet for that," he said.

And finally, the fifth project under study is a $140 million waterway project on the Paraguay River, which forms a large portion of its eastern border with Brazil.

PANDEMIC'S IMPACT

Paraguay's economy suffered like all the others in the wake of the COVID-19 pandemic, but it's downturn has not been as severe as its neighbors in the region.

According to the latest projections from the International Monetary Fund/World Bank World Economic Outlook data, Paraguay is expected to see gross domestic product contract by 1% this year and then grow 4% in 2021. The country has nearly 28,000 people who have tested positive for the coronavirus, with 525 deaths, according to the Johns Hopkins University Coronavirus Resource Center.

"The time of the pandemic for us was a time where we did not stop public works. We had to consider these things essential, but we took advantage to do more studies and advanced them to have a good prospect for our projects, make them more viable," Vergara said.

"We locked down very early and we are going through the storm, but it is not looking that bad. What the specialists say is that we are going through a grey situation at least until December, but them some kind of new normality will emerge. The economy is partly working. We are an agricultural country and we did not stop producing grains or meat," he said.

However, the government, according to Vergara is predicting a deeper economic contraction.

"As all economies in the region, we are affected and our GDP will decrease. It will likely be negative 2.5% to 3%" this year, he said, adding: "we have the fiscal stability law which allows our deficit to be 1.5% of the budget, but likely it is going to be 4%-5% this year."