Financing secured for first section of US$500 million road PPP in Paraguay

Financing secured for first section of US$500 million road PPP in Paraguay

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The consortium Rutas del Este SA has secured a US$50 million financing package for "Section Zero" of the project to upgrade National Routes 2 and 7 in Paraguay. Route 2 links Asunción, the capital city, to Coronel Oviedo to the east. Route 7 connects Coronel Oviedo to Ciudad del Este, the second-largest city in the country. 

The financing has been provided by a consortium of local banks, comprising Sudameris BankBanco Atlas, Banco Regional, Banco Continental and Visión Banco. It will fund the rehabilitation of the section of Route 2 that links San Lorenzo and Ypacaraí, around 25km, and the temporary operation and maintenance of Route 2 and a section of Route 7. This work commenced in November 2017 and is expected to take 11 months.

The loan was structured by Goldman Sachs. This participation of international leading financial institutions has no precedent in Paraguay, making it the first loan of its kind. This is fitting, given that the project is itself unprecedented - it is the first project to be developed through a public-private partnership since the government passed a PPP law in 2013.

The consortium will receive the loan once the overall financial close of the project has been achieved. This is currently being negotiated with an undisclosed international bank.

Rutas del Este SA consists of internationally-renowned developers Sacyr and Mota Engil, and Paraguayan firm Ocho A. As reported on this platform, the consortium were one of eleven teams to respond to the Request for Qualifications in May 2015, but the only team to submit a proposal, even after a deadline extension. The consortium was awarded the project in October 2016 and secured commercial close in March 2017.

The estimated total investment required is US$527 million. Once the works are completed, the six-hour journey from Asunción to Ciudad del Este will be reduced to three and a half hours. 70% of all economic activity in Paraguay is concentrated around the roads in question, highlighting the importance of these upgrades.

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