pistum
October 20th, 2005, 12:20 AM
Mexico to Seek Bids for $3.7 Billion Hospital, Roads Contracts
Oct. 19 (Bloomberg) -- Mexico will seek bids from private companies for contracts worth as much as 40 billion pesos ($3.7 billion) to build and run hospitals and schools and to upgrade toll-free roads, presidential advisor Eduardo Sojo said.
The plan, which includes eight hospitals, four polytechnic schools and 12 toll-free roads, would be the biggest initiative yet in Latin America to have private companies invest in infrastructure and provide public services in exchange for a fee paid by the government. All projects will be awarded by the end of President Vicente Fox's term in December 2006, Sojo said.
``It's a way to develop the infrastructure the country needs in the absence of a fiscal reform,'' Sojo, President Vicente Fox's Public Policy Advisor, said in an interview in Mexico City on Oct. 14.
The increase in public-private partnerships in Mexico, Latin America's second-largest economy, prompted billionaire Carlos Slim to set up a new company last month to bid for the new contracts. The Mexican partnerships are modeled after the U.K., where the government has awarded 12.4 billion euros ($14.8 billion) worth of such contracts, more than any other country in the world, according to PricewaterhouseCoopers.
Return Rate
Mexico City-based Empresas ICA SA, Slim's main competitor, in August won the nation's first concession to upgrade and maintain a 75-kilometer (46.6-mile) toll-free road in the central state of Guanajato. ICA will invest 735 million pesos in the road as part of a 20-year contract, a proposal that outbid three other local competitors.
``We hope it's the first of many,'' said Jose Luis Guerrero, chief financial officer of ICA, which obtains about half of its 16 billion pesos in annual revenue from traditional government concessions such as toll-roads. ``For us, the return rate of the project is about the same'' in both models, he said in a telephone interview from Mexico City.
ICA doesn't invest in projects that return less than 15 percent, Guerrero said.
The project allows the government to spread out the investment over 20 years as it will pay ICA quarterly fees for managing and maintaining the road, Sojo said.
ICA will begin receiving the fees, which are per road segment, once the upgrade works are completed. The fee payments are 90 percent-based on the service quality and 10 percent-based on traffic volume, Sojo said.
Shares of ICA fell 9.5 percent this year through Oct. 18 as the Mexican stock index gained 17 percent. Impulsora del Desarrollo y el Empleo en America Latina SA, the company Slim created to invest in infrastructure, surged 40 percent since it started trading on the Mexican stock exchange on Sept. 15.
Four analysts that cover ICA have a ``buy'' recommendation on the stock, according to data compiled by Bloomberg. There are no analysts covering Slim's Ideal, according to Bloomberg.
First Hospital
Mexico's government plans to award the first hospital contract, estimated at 971 million pesos, this month, Sojo said.
The winner will be in charge of the design, construction, management and provision of secondary services such laundry and cleaning for 25 years in a 184-bed hospital in Guanajato state.
The private contractor will also have to buy furniture, equipment such as microscopes and X-ray machines and medical supplies. The government will be responsible for hiring and paying doctors and nurses.
School contracts will be similar to hospitals: The contractor will design, build and maintain the school in exchange for a fee while the government staffs and pays the teachers.
The first polytechnic school project is in the northern state of San Luis Potosi and will require an estimated 340 million pesos in investment, Sojo said.
To contact the reporter on this story:
Adriana Arai in Mexico City at aarai1@bloomberg.net
Oct. 19 (Bloomberg) -- Mexico will seek bids from private companies for contracts worth as much as 40 billion pesos ($3.7 billion) to build and run hospitals and schools and to upgrade toll-free roads, presidential advisor Eduardo Sojo said.
The plan, which includes eight hospitals, four polytechnic schools and 12 toll-free roads, would be the biggest initiative yet in Latin America to have private companies invest in infrastructure and provide public services in exchange for a fee paid by the government. All projects will be awarded by the end of President Vicente Fox's term in December 2006, Sojo said.
``It's a way to develop the infrastructure the country needs in the absence of a fiscal reform,'' Sojo, President Vicente Fox's Public Policy Advisor, said in an interview in Mexico City on Oct. 14.
The increase in public-private partnerships in Mexico, Latin America's second-largest economy, prompted billionaire Carlos Slim to set up a new company last month to bid for the new contracts. The Mexican partnerships are modeled after the U.K., where the government has awarded 12.4 billion euros ($14.8 billion) worth of such contracts, more than any other country in the world, according to PricewaterhouseCoopers.
Return Rate
Mexico City-based Empresas ICA SA, Slim's main competitor, in August won the nation's first concession to upgrade and maintain a 75-kilometer (46.6-mile) toll-free road in the central state of Guanajato. ICA will invest 735 million pesos in the road as part of a 20-year contract, a proposal that outbid three other local competitors.
``We hope it's the first of many,'' said Jose Luis Guerrero, chief financial officer of ICA, which obtains about half of its 16 billion pesos in annual revenue from traditional government concessions such as toll-roads. ``For us, the return rate of the project is about the same'' in both models, he said in a telephone interview from Mexico City.
ICA doesn't invest in projects that return less than 15 percent, Guerrero said.
The project allows the government to spread out the investment over 20 years as it will pay ICA quarterly fees for managing and maintaining the road, Sojo said.
ICA will begin receiving the fees, which are per road segment, once the upgrade works are completed. The fee payments are 90 percent-based on the service quality and 10 percent-based on traffic volume, Sojo said.
Shares of ICA fell 9.5 percent this year through Oct. 18 as the Mexican stock index gained 17 percent. Impulsora del Desarrollo y el Empleo en America Latina SA, the company Slim created to invest in infrastructure, surged 40 percent since it started trading on the Mexican stock exchange on Sept. 15.
Four analysts that cover ICA have a ``buy'' recommendation on the stock, according to data compiled by Bloomberg. There are no analysts covering Slim's Ideal, according to Bloomberg.
First Hospital
Mexico's government plans to award the first hospital contract, estimated at 971 million pesos, this month, Sojo said.
The winner will be in charge of the design, construction, management and provision of secondary services such laundry and cleaning for 25 years in a 184-bed hospital in Guanajato state.
The private contractor will also have to buy furniture, equipment such as microscopes and X-ray machines and medical supplies. The government will be responsible for hiring and paying doctors and nurses.
School contracts will be similar to hospitals: The contractor will design, build and maintain the school in exchange for a fee while the government staffs and pays the teachers.
The first polytechnic school project is in the northern state of San Luis Potosi and will require an estimated 340 million pesos in investment, Sojo said.
To contact the reporter on this story:
Adriana Arai in Mexico City at aarai1@bloomberg.net