Caribbean countries with little to no fiscal space are being encouraged to look more towards public-private partnerships (PPPs) and private financing for the building out of their infrastructure projects.
This sentiment was shared during a virtual panel discussion on the topic Taking Stock: Caribbean Infrastructure Opportunities, Priority Sectors and the Project Pipeline, on Tuesday.
Associate Partner and Head of Infrastructure at KPMG Cayman Islands Sam Story acknowledged that Caribbean countries had different infrastructural needs, faced different financial constraints and were affected differently by the COVID-19 pandemic.
However, he suggested that countries that did not emerge from the pandemic with the fiscal space for infrastructure projects should look to PPPs and private financing options.
“In terms of financing, we [the Cayman Islands] are in that fortunate position. Obviously, other jurisdictions aren’t and that is where private finance and PPPs will play much more of an active role,” said Story.
Stating that he was seeing more of this taking place in the region, he said the projects being done should be long-term and able to bring social and economic benefits.
Adam Carter CIBC FirstCaribbean International Bank.
“I think increasingly, countries are beginning to think about their social infrastructure and looking more towards healthcare infrastructure and education infrastructure. And where countries have the flexibility and financial security to be able to focus on those areas as well as renewable energy, we are seeing jurisdictions starting to look more at those areas as opposed to the traditional infrastructure,” he said.
Adam Carter, Managing Director and Head of Investment Banking with CIBC FirstCaribbean International Bank, said financial institutions in the region were “very well capitalised” in local currencies and willing to lend.
In fact, indicating that “right now all cards are on the table and that liquidity needs to find a home”, he said this made for an attractive borrowing environment at the moment.
“Most [governments] have got real fiscal constraints or credit ratings criteria to manage, or IMF programmes to manage under. So they are not looking to incur direct financing themselves. So the PPP models and private financing models are very attractive,” he said.
Director of International Business Development with Aecon Concessions Luc Allary.
Indicating that the risks were moderate and returns on such projects tended to be lower than some other investments, Carter added: “I think that is kind of what the Caribbean needs. It needs that sort of stable and secure type of investment and confidence in the market that it can attract those types of projects and those types of investors.”
Meanwhile, Director of International Business Development with Aecon Concessions Luc Allary said the Caribbean was attracting a lot of concessional funding for infrastructure projects, creating a lot of competition and opportunities.
“There is much more competitive funding in the region that is arriving from different sources, whether traditional sources which are multilaterals or ECAs [Export Credit Agencies], now you have sovereign wealth funds. You have countries that are coming in with their own funding at very concessional rates that are highly competitive in terms of offering for those governments. Those are difficult for us to tap into and to compete against, as a company,” he said.
“That space seems to be growing more and more. More and more actors are coming in, so I think it is going to be interesting to see how all of that plays out. That means the region is attracting a lot of interest which is good. There are a lot of opportunities.”
Aecon Concessions is a subsidiary of the Canada-based Aecon Group, and has been involved in construction and infrastructure development projects in the region for close to a decade.
Despite the stiff competition, Allary said his firm was committed to undertaking projects in the region.
Tuesday’s virtual discussion was a precursor to the highly anticipated Caribbean Infrastructure Forum (CIF) 2023 which is scheduled for September 18-19, 2023 at the Ritz-Carlton Coconut Grove in Miami, Florida. (MM)
