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Find out what Vinci’s interests are in Latin America

The group has been expanding its presence in the region. Check out the interview with development leader Bernardo Serafim.
3 MIN READ May 22, 2017
INFRASTRUCTURE
Quinta-feira, 08 de dezembro
INFRASTRUCTURE

France's Vinci Concessions, one of the most important global players in the public concessions market, finally set foot on Brazilian territory when it won the Salvador Airport auction in March. In recent years, the group has been expanding its presence in Latin America through important deals, such as the acquisition of Lamsac, which operates Línea Amarilla, in Peru, and the contract to operate the Santiago International Airport in Chile.

Today, Vinci’s base in the region is in Bogotá, where Bernardo Serafim, its development leader for Latin America and managing director for Colombia, is based. He has been at the company since December 2015 and has extensive experience in business development, as well as in transportation infrastructure construction, concession management, and corporate units in the infrastructure, power, and oil & gas areas, covering a broad range of countries – Spain, Tanzania, Georgia, Turkey and Mozambique, just to name a few. In this interview to GRI Magazine, Bernardo unveils Vinci’s interests in Brazil and in Latin America:

Your professional career has always been in this area of ??new business development, where you have worked in very diverse countries, such as Spain, Tanzania, Georgia, Turkey and Mozambique. Is it possible to compare the challenges of working in infrastructure in Latin America with the other places where you have worked?
My professional trajectory was developed not only in the Development of new businesses, but also in several areas, such as construction of transport infrastructure projects, Concession Management and General Business Units (Infrastructure, Energy, O&G). Geographical diversity introduces important variations, due tocultural bias and different idiosyncrasies, and the impact on the management of projects and/or businesses is unequivocal. Latin America is at a stage of development which is different from Europe, Africa or Asia, with economies hugely dependent on commodities and where the extractive industries and primary sectors in general occupy a prominent place. The main challenge nowadays is to catch up on infrastructure development and thereby mitigate the systemic effects on the economy and businesses, such as lack of competitiveness and an unadjusted cost structure. Demand is unquestionable, so there is a huge window of opportunity for private partners who can add value and contribute in a structured way to the successful implementation of investment plans.

Tell us about Vinci concessions. How is it structured in Latin America? What are the differences in how Vinci operates in relation to the rest of the world?
In LatAm, Vinci Concessions currently has projects in Colombia and Peru through Vinci Highways, and in Chile, the Dominican Republic and more recently in Brazil, through Vinci Airports. There is a business development base in Bogotá with a multidisciplinary team that works closely with the headquarters in Paris and then exclusive teams dealing with the management and operation of the assets. In LatAm, Vinci Concession deploys the same market development strategies as those we have been successfully implementing in 17 other countries: a highly selective process in the way we team-up with local partners; an excellent understanding of the country’s dynamics and decision-making processes; a local approach by establishing our staff directly in the country over the long term, in very close contact with the local economic fabric.
 
The presence of Vinci in Latin America is fairly recent. What made Vinci look at this area? And why only in recent years?
Our dynamism in Latin America shows the soundness of the Vinci Group’s construction-concession integrated business model.  Vinci is a long-time partner of Latin America, in the areas of energy and construction. Our relations are now stepping up in the field of public concessions: in 2016, Vinci Concessions bolstered its positions in Latin America with three major projects: the acquisition of Lamsac’s highway concession in Perou, exploitation and extension of the Bogotà-Girardot highway in Colombia and, in this first quarter of 2017, we won the concession for the airport of Salvador de Bahia in Brazil. Latin America is unequivocally a region of the globe with enormous attractiveness as a result of its high growth rates, demographic and economic indicators and an enormous infrastructure shortage. An important part of the region is still characterized by the lack of know-how, expertise and capacity to carry out the Life Cycle Management of infrastructure assets, from their structuring phase up to their exploration and management in the mature stage.

What are the goals for LatAm? Have these goals changed in this period? Do you have any segment that it is not of your interest? Why?
Public concessions are a buoyant sector, both in developed countries where budget pressure is high, but also in emerging countries, who have massive needs in public infrastructure, and especially mobility equipments. In the near future, Vinci Concessions should continue to focus on opening new doors, within dynamic geographic areas or on high potential assets. Our strategy will continue to be based on synergies with the Vinci Group’s Contracting branch, mainly in the most dynamic areas of airports and highways.

In addition to a motorway in Jamaica, Vinci has investments in six airports in the Dominican Republic. Has Central America been attractive? What other assets do you look for in the region?
Prospecting in Central America has been more reactive and case by case, perhaps related to a lower track record in this region for concessions as a model, at least when compared to South America. In any case, this does not mean that in the future the group does not want to assume a more predominant role and a more assertive presence. In Central America, just like in other regions of the world, our development strategy is “opportunistic”. It means that we will continue to analyze concession opportunities on a case-by-case basis in order to enter the competition when we think we can bring enough value and when the concession contract is attractive.

The group acquired, through Vinci Highways last year, Yellow Line, in Lima (Peru), which was owned by Lamsac (Invepar). The acquisition, whose operation began effectively this year, was considered by Vinci itself as an important milestone in the Group's development strategy in Latin America. What are the objectives of this project?
The Yellow Line is an asset of enormous importance, not only for its size but also for its strategic importance of the project to the city of Lima. It was the first acquisition in Latin America by Vinci Highways, which marks an important entry in the Peruvian market and leaves an important footprint in the region.

You also have an operation in Colombia within the real sector. Tell us about it.
In August 2016, Vinci Highways was awarded by ANI the third Lane of the Bogotá-Girardot contract, with a value of approximately €1.3 billion and an investment in Capex of approximately €650 million. This award was the result of the hard work by Vinci Concessions in Colombia over the past three years, together with the local partner Conconcreto (with which it has a strategic partnership and where Vinci participates in the capital). The project is one of the most important in Colombia, as it has one of the largest traffic [volumes] in Colombia and is part of the corridor that connects Bogota to Buenaventura, which is the largest port on the Pacific coast.
 
Are there other similar road (or rail) projects that you will start (or have already started) looking for in Latin America? What would they be?
We are currently monitoring several projects in Colombia, Chile and Peru. In Colombia, since the public initiative concessions are somehow running out, we are evaluating the secondary market for projects in the main logistic hubs of the country and, in parallel, PPPs of private initiative, which have economic reasoning and aggregated value for the group. In Chile, we are following the AVO2 project and also some private initiatives. In Peru, line 3 of the Lima subway, APP Javier Prado and some private initiatives as well. In other markets, prospecting is more reactive.

To date the largest share of the group in the region is concentrated in the segment of airports. Will airports be your primary focus in the region? What are the other areas where Vinci envisages entering Latin America?
Vinci Airports and Vinci Highways have been quite active in LatAm with some major deals in recent years. Vinci Highways is currently evaluating projects in the primary market (greenfield) and secondary market (yellow field or brownfield) in countries that have been prioritized. As for airports, we will naturally continue to evaluate concession opportunities on a case-by-case basis, as more and more countries in the region see the concession model as the solution to developing their airports.

Salvador is the largest airport among the four auctioned on the Fifth Feria, with higher grant amounts (minimum value of R $ 310 million) and investment (offered R $ 660,943 million). What is Vinci's expectation of this new operation? Do you see this as a kind of "tasting of the Brazilian market?
I was not part of the bidding team for Salvador so I cannot get into specific details of this offer but I can tell you that just like for all the opportunities we evaluate, our decision to bid or not and the level of our of offer are based on a thorough analysis to determine the overall balance of the concession. This means that we wouldn’t have bid on Salvador’s airport if we didn’t believe in its development potential. 

How do you see the current momentum of infrastructure in Latin America? How much have you invested in the region? How much do they have to invest? What are the big challenges? Which countries in the region are more interesting? Why?
Vinci Concessions currently has airport assets in Chile, Dominican Republic and Brazil, and Roads assets in Peru and Colombia. There seems to be some scarcity of greenfield projects, due to the economic situation in Latin America, related with the recent reduction of PIB growth rates (when compared to previous periods) and consequent investment shrinkage. In parallel, the side effects of recent problems with some construction companies and the way it has spread throughout  Latin America has severely affected investment plans in the vast majority of markets affecting the portfolio of projects. However, we hope that this effect will be mitigated by the introduction of stimulus from central governments and greater transparency in the structuring and launching of new projects.
 
How do you see the current economic situation in Brazil? Given this scenario, in what position does Brazil compare with other markets in the region? What is your assessment of the recent Brazilian movement with the Programa de Parcerias de Investimentos (PPI) and the revision of the concession criteria? Would it be a breakthrough? What is missing?
Brazil is and always will be a reference in Latin America due to its size and importance. As a foreign investor it is possible to verify the effort that has been made with the introduction of programs that stimulate private investment and promote attraction of foreign capital. As for the current economic situation, several indicators suggest a rebound after 2017.

What other areas are you looking at in Brazil? How can the experience in other markets help here?
Vinci Concessions today has projects in 17 countries and this number will continue to grow in 2017, because international plans open up the opportunities we need to fuel our growth. As a global player, with 90 % of its staff operating outside France, Vinci Concessions has developed a unique an efficient pattern to sustain its global expansion, which will be of use in Brazil. Our priorities will be to develop a common language with our new partners and staff, through the sharing of common values, best practices and technical expertise. Vinci Concessions currently generates assets in several parts of the world in a sustainable manner and in accordance with best market practices. This experience, knowledge and capacity can be used and transferred in a very natural way. It is just a question of timing and adequacy of the projects.

What should be the weight of the first revenues obtained in Latin America, especially with the resources generated by the airports of Dominican Republic and the Yellow Line on Vinci balance? What is the expectation of a growth in the share of Latin assets in the Vinci group?
Latin America is an important part of the strategy of sectoral and geographical diversification of the group's revenues, betting on countries with potential for growth, stability in the long run and a legal framework that transmits security to investors. I am sure that Vinci will occupy a prominent place in the next years in the region.
 

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