Latin America projects and trends

Energy and infrastructure 2016 is the fourth edition of our sector specific guide to the legal markets of Asia-Pacific, Central and Eastern Europe, Latin America, the Nordic and Baltic region and Sub-Saharan Africa.

In the last six months our team of legal journalists in London, Hong Kong and New York have interviewed lawyers, industry figures and in-house counsel active in the relevant sectors to source their opinions on law firm performance and the state of the energy and infrastructure sectors in their jurisdiction and regions, and what they see as the main talking points, challenges and areas of activity.

From these conversations and their extensive research, the IFLR1000 team in New York has summarised, by country or sub-region, the main trends and developments across Latin America below.

Energy and infrastructure 2016 is the first research project to utilise IFLR1000's new Deal Database, a fully searchable database of significant deal records from over 120 countries. Our New York team has selected some of the most significant LatAm energy and infrastructure projects which emerged from this research period, and you can view these data records below.

Energy and infrastructure project records

Trends and developments


Argentina has substantial hydrocarbons resources. According to Energy Informational Administration data from the EIA website, the country’s shale gas reserves are the second largest in the world, and Argentina is the fourth largest petroleum producer in South America.

A notable legislative development during the research period saw, in September 2015, Argentina pass a renewable energy law, which states the country’s plans to obtain 7% of its electricity from renewable sources by 2017 and 20% by 2025.

December 10, 2015 marked the inauguration of President Mauricio Macri. Since the beginning of his presidency Macri has enacted a series of financial reforms, intended to make Argentina more market-friendly and open up the country to investors. Upon taking office in December, the president removed capital controls, allowing people to buy and sell dollars freely. He also abolished taxes on fish, meat, corn and wheat. Although Macri has been lauded by some for his effectiveness for passing these reforms, others have accused him of acting against the interests of the poor and the country’s indigenous people.

While many of these reforms affect the energy and infrastructure sectors indirectly, some are specifically targeted towards them. For example, in February 2016, Macri abolished a 5% tax on mining corporations.

The new president has also attempted to negotiate with Argentina’s creditors. Since the country defaulted on its debt in 2001, regaining financial stability has been a priority for the country. Although 93% of bond holders accepted the terms of the debt restructuring the country offered, 7% did not, and Argentina had been involved in ongoing legal battles with many of its creditors. In a bid to meet its debt obligations, Argentina returned to the international bond markets in April 2016.

Rani Mehta – Journalist Latin America



Natural gas is a particularly significant form of energy for Bolivia. According to Energy Informational Administration data, hydrocarbons (mostly natural gas) represent 8% of Bolivia’s GDP, and exports of hydrocarbons made up 54% of the country’s total export revenue in 2014. In July 2015, president Evo Morales also agreed to allow oil companies to explore seven of Bolivia’s 22 national parks for deposits.

Other developments during the research period include a scandal related to China CAMC Engineering Co’s operations in Bolivia - including a railway contract valued at over $500 million. The scandal relates to the relationship between China CAMC Engineering senior manager Gabriela Zapata and President Evo Morales and whether this affected Zapata’s position at China CAMC Engineering and the contracts that her company received. In February 2016, Zapata was arrested and imprisoned on charges of corruption.

These accusations were a blow to the president, who was elected for a third term in 2014. In February 2016, Bolivia held a referendum to determine whether or not Morales could run for a fourth term. Morales narrowly lost the referendum, which many attribute to the aforementioned scandal. It is unclear what the long-term affect these accusations will have on his presidency, China CAMC Engineering Co, or the country.

Despite these internal issues, China continues to be a major investor in Bolivia’s energy and infrastructure sectors. In March 2016, Sinosteel, a Beijing based mining and engineering company signed a contract to operate and build El Mutún steelworks (El Mutún is an iron ore deposit in Bolivia), while in April 2016, China's Beijing Urban Construction Group (BUCG) won a contract to construct a new cargo airport.

Rani Mehta – Journalist Latin America



Although Brazil is a significant player in the energy, mining and infrastructure industries, recently crises have plagued the country.

On November 5, 2015, the Bento Rodrigues dam burst, killing 17 people and injuring 16. Samarco, which is a joint venture of BHP Billiton and Vale, owned the dam and, as a result of the incident, Brazil filed a claim against the two companies with Samarco agreeing to pay $5 billion to the government. In the aftermath, some questions remain unanswered. Chiefly, to what extent, if at all, this environmental disaster was preventable and, if it were, are Vale and BHP Billiton are responsible?

Another scandal that rocked the country was the events dubbed ‘operation carwash’, centring around the allegations of corruption within state-owned oil company Petrobras. In January 2016, Petrobras cancelled a planned $750 million debt issuance due to what it deemed unfavourable market conditions. This led to calls for President Dilma Rousseff, who chaired Petrobras from 2003 to 2010, to resign and for her to be impeached. In April 2016, the country’s lower house voted in favour of impeachment, although this was on charges of allegedly breaking budgetary laws and, at time of publication, the process was yet to be finalised.

Oil and gas continue to be major industries in the Braxil, although it is hydro-power that dominates the country’s energy matrix. Like many countries, however, Brazil wants to reduce its dependence on fossil fuels and invest more in renewables. In June 2015, Brazil pledged jointly with the US to increase its annual consumption of electricity produced from renewables (excluding hydro-power) to 20% its 2030. A recent drought in the country and the surrounding area has reduced water for many of its citizens and, as such, has made hydroelectricity somewhat unreliable, leading to a push for wind and solar investment.

In infrastructure, the government announced plans to encourage $64 billion of investment into developing Brazil in June 2015. The investment is required for the improvement of transport facilities: roads, airports, ports and railways. The plan included a $40 billion bi-oceanic railway (which was part of an earlier agreement), but the process for this is still ongoing. As of 2015, it was expected the country will receive R$86 billion investment in railways, R$66 billion in highways, R$37 billion in ports and R$8.5 billion in airports. According to BNAmericas, Minas Gerais is offering bids to construct and operate Pouso Alegre airport and to operate Prefeito Dr Antônio de Barros Lisboa airport.

In April 2016, ports minister Hélder Barbalho resigned from his position alongside energy minister Eduardo Braga (both are members of a political party whose members predominantly voted to impeach Rousseff). Before Barbalho resigned, TCP, which operates the Paranaguá port, agreed to invest around $310 million in ports and, in turn, had its concession renewed until 2048.

In the wider economy, general adverse economic - Bloomberg estimated Brazil’s economy shrank 3.71% in 2015 - and political conditions have caused several ratings agencies to downgrade Brazil’s credit rating. Fitch downgraded the country to junk status in December 2015; Standard & Poor’s did the same in September, with Moody’s following suit in February 2016. Two days after Fitch downgraded Brazil, finance minister Joaquim Levy resigned and was replaced by Nelson Barbosa.

Rani Mehta – Journalist Latin America


Central America

For lawyers, financial players and developers, Central America is full of potential for innovation in the energy and infrastructure sectors. Though different countries are at different stages in their development and projects, the countries are grappling with and planning how to best develop their energy and infrastructure. For much of Central America, undeveloped infrastructure remains an obstacle to further economic development. Still, significant projects are underway.

Sponsored by Chinese corporation HKND, the $50 billion Nicaragua Canal will be one of the most significant infrastructure projects in Central America. The canal is supposed to begin construction in August 2016. If successful, the 259.4 km project will connect the Atlantic and Pacific oceans.

Panama is also working on expanding the Panama Canal, a project which should double the canal’s capacity. The development involves the installation of locks and is valued at $5.3 billion and expected to be complete by June 2016.

Both canals have, however, experienced delays. June 2016 represents a two year delay from when the Panama Canal was initially intended to open, and construction on the Nicaragua Canal originally began in 2014, but has continually been pushed back.

Although the two canals are two of the most significant infrastructure projects in the region, important projects have been cropping up throughout Central America, particularly in the transport sector. For example, the Panama City Metro, which opened in 2014, is now constructing its second line. Development begun October 2015 and the 21 km line, which will run across 16 stations, should be operational by 2019.

In Costa Rica, following an OECD (Organisation for Economic Co-operation and Development) report stating that just 5% of roads in Costa Rica are in good condition, in 2011, the country launched a National Transport Plan, designed to improve roads, seaports and railways by 2035. Since then, the country has been working to improve its infrastructure. In November 2013, the country received a $400 million loan from the Inter-American Development Bank to improve roads. This came with a $50 million loan from the China Co-financing Fund for Latin America. A consortium made up of Ineco and Acciona Ingeniería have agreed to advise Costa Rica on the transport infrastructure program (PIT) in March 2016.

Honduras has also been looking at its transport connections and plans are in place for the construction of the $213 million Palmerola International Airport, which should be operational by 2018. The country has also invested in its road network and in 2015 Autopistas del Atlantico obtained a concession to build a $260 million toll road.

Along with developing its infrastructure, the region is also aiming to develop and refine its energy supply. Several Central American countries have joined, or even led, the world in striving to shift towards renewables in an effort to fight climate change. Many of these countries are not natural oil and gas producers, so innovation in renewable energy will have clear economic benefits.

Costa Rica, in particular, has been hailed as a leader in renewable energy, with about 99% of the country’s electricity coming from renewable sources in 2015. According to the ICE, the country went 285 days without using any fossil fuels for electricity in 2015.

This shift towards renewables can also be seen in Nicaragua, which intends to produce 90% of its electricity from renewable sources by 2020. It is a similar story in El Salvador and, in October 2015, the country extended tax incentives - scheduled to end that year - for renewable energy projects. The law also allowed projects with a capacity of over 20MW to benefit from the incentives. In August 2015, the country said it would auction 150MW of renewable energy projects which should be operational by 2019.

Other flagbearers for renewables in the region include Honduras, which is now the second largest solar user in Latin America, and Guatemala, which, according to a report published by AS-COA (American Society/Council of the Americas, secures 65% of the power it consumes from renewable sources.

Despite this shift towards renewable energy, oil and gas companies continue to have a presence is Central America, and the region remains reliant on fossil fuels. Even in Costa Rica, which generates almost all of its electricity from renewable sources, fossil fuels are a significant source of non-electric forms of energy. A recent project in the sector in Nicaragua, saw Statoil awarded four licenses to explore the Sandino basin in 2015.

While all the countries in Central America share many traits, each country comes with its own laws, its own opportunities and its own problems. Some of these problems are posing difficulties for energy and infrastructure projects, and hindering the development of some of the nations. Throughout Central America, tensions lurk among indigenous groups and environmental activists on one side, and corporations and developers on the other. For example, a petition opposing the Nicaragua Canal received 28,000 signatures. Oil and gas companies’ desire to exploit the land, conflicts the hopes of environmentalists and indigenous groups to conserve it and, in some countries, these differences are extreme enough to result in death.

In Honduras, a global witness report on said 40% of the victims of these conflicts were indigenous people. An environmental activist, Berta Caceres was killed in 2016, and her daughter blamed the murder on DESA-SINOHYDRO, a company aiming to build a hydroelectric dam in Honduras, though these allegations have not been proven in court, it highlights the tensions that surround many development projects.
As it is attempts to develop its infrastructure, Central America is still grappling with issues. But the region is undeniably thriving and, for legal professionals, the is a mix of challenges, opportunities.

Rani Mehta – Journalist - Latin America



Mining remains a key sector in Chile and according to Trading Economics, 49% of the country’s total exports are copper. State-owned company Codelco is the largest copper producer in the world, and mining companies BHP Billiton and Anglo American are also active in the country. However, Chile, like other mining focused countries, has been hit hard by declining global commodity prices.

In energy, the country has recently committed, in October 2015, to generating 70% of its electricity from renewables by 2050. The country is not a natural oil and gas producer, and has relied on expensive imports in the past to supply its energy needs. Now wind and solar have become important sectors, and Chile is trying to rely more on wind, solar and other forms of non-conventional renewable energy. Small wind and solar projects continue to crop up around the country; last year Aela Energía won a bidding process to construct and operate 265MW of wind projects. Mini-hydro plants are also a sector to watch. The country plans to build 100 new mini-hydro plants by 2018.

Chile was one of many countries where US-based renewable energy company SunEdison had assets. After SunEdison announced it was filing for bankruptcy, it revealed it was selling the 145MW Olmué Solar Park and 57MW Santa Sofia Solar Park to Colbún, a Chilean electric company.

Attempts have been made to renovate Chile’s infrastructure sector. In July 2014, Michelle Bachelet announced a $28 billion infrastructure plan and since then the country has been developing projects. For example, in April 2015, Grupo Nuevo Pudahue, a foreign consortium which includes Vinci, Aéroports de Paris and Astaldi, obtained a concession to expand and operate the Santiago airport. Furthermore, a 600 km transmission line, to be operated by Red Eléctrica and E-CL, to connect the Northern Interconnected System to the Central Interconnected System is under construction.

Rani Mehta – Journalist Latin America



Colombia is making attempts to reinvigorate its infrastructure. In June 2015, the country approved the 2014-2018 National Development plan (PND). Linked to this the country has created the fourth generation of road concessions or (4G) to implement $25 billion of toll roads throughout Colombia. This could include 40 concession agreements.

According to the Energy Information Administration (EIA) Colombia is the seventh-largest exporter of crude oil to the US and Latin America’s third largest oil producer. In the coming years, Ecopetrol, Colombia’s state-owned oil company has stated that it will primarily emphasise offshore oil exploration. In July 2015, the company announced a deep-water discovery at Kronos-1. Additionally, Ocensa has been expanding its pipeline by 135,000 barrels per day, which should help meet additional demand for oil transport in Colombia.

In other developments, in January 2016, Canada-based Brookfield acquired Isagen (the operator of Colombia’s largest hydro plant) for $2 billion. Although the funds from this sale will be used to help finance further infrastructure developments, some have criticised the president for the move, arguing that Isagen would be more beneficial for Colombia if it was owned by the state.

The country is taking steps to improve its environmental record. Bogota is instituting a public biking system, which BiciBogota won a concession to operate in March 2015, and is also attempting to grow its use of renewable energy passing a law in 2014 to encourage this.

Rani Mehta – Journalist Latin America


Dominican Republic

In March 2016, the Dominican Republic introduced the Monte Plata solar project. This 33.4MW project should significantly increase the country’s renewable energy production and a second phase of the project will increase the power of the project to 67MW. This increase in energy production is important. The Dominican Republic continues to face blackouts and is dependent on imported oil and gas.

The country is working on improving domestic energy project in other ways too. For example, the Punta Catalina project, which includes two coal plants and is expected to generate 770MW, should be completed in 2017. Regulatory difficulties do however sometimes slow the development of energy projects.

The Dominican Republic has a general elections on May 15, and current president Danilo Medina is up for re-election. It is expected potential investors and foreign players looking to do business in the country are awaiting the results of the elections before making commitments to the country and that once the election results are out activity will pick up.

There have also been developments in infrastructure, with the country expanding Line 2 of the Santo Domingo metro. According to BNAmericas the extension involves building a bridge and constructing four new stations. The original plans show the metro will eventually have six lines.

Elsewhere, a significant transaction in the aviation sector saw the acquisition of six airports (Las Américas, Gregorio Luperón, El Catey, La Isabela, Arroyo Barril and María Montez) by Vinci Airpots, a French-based international airport developer.

Rani Mehta – Journalist Latin America



Oil continues to be an important source of revenue for Ecuador. According to data from the Energy Information Administration (EIA), oil makes up half of Ecuador’s export earnings and about two-fifths of public sector revenues. Nevertheless, the country is the smallest oil producer in OPEC (Organisation of the Petroleum Exporting Countries).

Among recent developments in January 2016, Ecuador sold exploration rights in the Amazon to China National Petroleum Corporation and China Petroleum and Chemical Corporation for $80 million. Elsewhere after an arbitration dispute, in November 2015, Occidental Petroleum Corp received $1 billion from Ecuador due to a 2006 controversy where Ecuador seized Block 15, an Occidental oilfield.
Outside of oil, Ecuador also inaugurated its Coca Codo Sinclair Hydroelectric Project, its largest hydro plant, in April 2016.

The most impactful recent development however came in April 2016, when an earthquake in Ecuador devastated the country. More than 650 people were killed; thousands were left homeless; houses, roads and other infrastructure were destroyed; and it is expected it will cost billions of dollars to fix the damage.

Rani Mehta – Journalist Latin America


Recent regulatory developments have sparked activity in Mexico’s energy, infrastructure and telecommunications sectors. Mexico City’s new international airport is a particularly significant infrastructure project. It is expected to cost $13 billion and will replace Benito Juárez, Mexico City’s current airport, which has faced issues with congestion for several years. The new airport, which aims to obtain a LEED Platinum certification and a carbon neutral footprint, will be an interesting benchmark in sustainability if it achieves its goals.

Since 2013 Mexico’s hydrocarbon sector has been open to private investment, and the country is determined to find ways to further prompt investment in energy, power and infrastructure projects. In October 2015, the government implemented the FIBRA-E, based on the FIBRA (a real estate investment trust introduced in Mexico in 2011). The FIBRA E is a vehicle which incentivises energy project investments. Furthermore, the Energy Transition Act passed at the end of 2015, aims to develop Mexico’s renewable energy sector and help the country meet its targets for renewable consumption.

Natural gas has been an active area, particularly the construction of pipelines. For example, the Los Ramones pipeline, a 741 km natural gas pipeline which will transport natural gas from the US to Mexico is in its second phase. Since opening up its hydrocarbon sector, Mexico has held several oil auctions which have grown increasingly more successful. In July 2015, Mexico auctioned 14 blocks and only sold two of them. In October 2015, three of five shallow water contracts were sold. And in December 2015, in the third round, 25 out of 25 blocks received bids.

The telecommunications sector, due to laws passed in 2013 and 2014 designed to increase competition, was also active in 2015. With nine telecommunications M&A transactions collectively worth $8.4 billion according to Dealogic data, telecommunications was the most active target industry for M&A in 2015.

Rani Mehta – Journalist Latin America



Hydroelectricity dominates Paraguay’s energy matrix. The largest hydroelectric producer in the world, the Itaipu Dam, is on the border of Brazil and Paraguay and the country exports much of the electricity produced to neighbouring countries. Though the country is not a significant oil producer, in October 2014 President Energy found oil in the Chaco basin.

Like most countries, the strength of Paraguay’s infrastructure varies by region. Some are relatively developed, others are not. Much of Paraguay has inadequate infrastructure and dirt roads are common, particularly in non-urban areas. In December 2015, the Inter-American Development Bank loan loaned Paraguay $62 million to improve and maintain these routes.

Paraguay has already and is taking further steps to improve its infrastructure. Paraguay’s PPP (public-private partnership) structure became law in October 2013, and significant infrastructure projects are underway in transport, for example, the Route 2 and 5 highways are being expanded.

In March 2016, Millicom announced plans to invest $2.5 billion in telecommunications infrastructure in the country.

Rani Mehta – Journalist - Latin America



Like other natural resource rich countries, Peru has been hit by low commodity prices, but the mining sector remains important to the country, and has proven somewhat resilient. The government expects copper production to expand by 66% in 2016, which would make the country the second largest copper producer in the world (replacing China). Illegal mining is a problem that continues to plague Peru. Although the government has spent approximately $20 million on dealing with the issue, there has been little success in eliminating it.

Petroperú controls the oil sector in Peru and, in October 2015, Peru’s Congress passed a law which allowed Petroperú to control oil block 192, the largest in the country. In January 2016, an oil spill equating to 3000 barrels worth spilled from the North Peruvian Pipeline, which Petroperú operates, in an area around the Chiriaco River. This spill resulted in allegations that the company had failed to properly look after its infrastructure.

In the energy sector hydroelectricity remains an important source of power in the country, and Peru is building several dams on or near the Marañon River. In February 2016, Enel Green Power announced the investment of $400 million in a 20MW Ayanunga hydro plant, 126MW of wind power and 180MW of solar.

Peru has also been working to develop its infrastructure sector. Although the country still has an infrastructure gap, the government passed Legislative Decree No. 1224 in September 2015, as it sought to spark investment. Under the law, PPPs (public-private partnerships) are either self-financed, meaning they receive very little to no help from the government, or co-financed with the government, and both presidential candidates, Keiko Fujimori and Pedro Pablo Kuczynski, who will face each other in a runoff on June 5, have expressed plans to develop infrastructure. One significant project underway in the country is Line 2 of Lima’s Metro, which will connect Ate with Callao port and should be operational by 2019.

Rani Mehta – Journalist Latin America


Uruguay has gained international attention for being a leader in the renewable energy sector. As the country lacks oil and gas reserves, renewable energy has become an important investment for the country and according to data 95% of the country’s electricity came from renewable sources in 2015. Although hydroelectricity still makes up a significant part of Uruguay’s energy use, there is a focus on moving towards, and relying more on, wind and solar.

Some developments have occurred within oil and gas. For example, a consortium of Total and ExxonMobil started drilling in 2015 for oil off the coast of Uruguay.

Rani Mehta – Journalist Latin America



Venezuela is said to possess the largest oil reserves in the world so it comes as no surprise that the country’s economy - largely dependent on the black stuff - has been declining with the oil price. Wider economic turmoil has made investors nervous, with one example being Schlumberger’s announcement in April 2016 that it would be limiting its exposure to Venezuela.

Reportedly, around 70% of Venezuela’s electricity comes from the Guri Dam and its hydroelectricity plant. In light of the recent drought the country has suffered, it is facing a significant electricity shortage and numerous measures to conserve electricity are being taken. For example, in April 2016, President Nicolás Maduro asked women to limit their use of hairdryers, while the government is also regulating the use of electricity in Venezuela’s shopping malls.

Maduro also made Fridays a holiday for public employees for the two months between April and June 2016 to conserve electricity, subsequently announcing that for two weeks public employees would work two-day weeks except when essential. The government has also implemented power cuts for four hours a day for 40 days. Furthermore, President Maduro is pushing clocks forward a 30 minutes, cancelling a 2007 time change, which put Venezuela four and half hours behind UTC.

There are issues in other sectors as well, with several corporations in oil and mining filing or considering filing claims against the country. In mining, the country was ordered to pay $1.4 billion to Crystallex International for seizing the Las Cristinas gold project. Venezuela’s state-owned oil company Petróleos de Venezuela has also faced allegations of corruption and in March 2016, three former workers at the company pled guilty to money laundering charges brought by the US.

Hyperinflation is another problem. According to Venezuela’s Central Bank, the country’s inflation was 180.9% in 2015 and is only expected to increase. IMF reports from January 2016 say that Venezuela’s inflation might reach 720% in 2016.

Furthermore, President Maduro’s opposition, many of who blame him for the economic and electricity crisis Venezuela is facing, has launched a bid to remove him from office. At the time of publication, it is unclear how successful this will be.

Rani Mehta – Journalist Latin America