RECIPE FOR SUCCESS

Ecuador 2019 | TRANSPORT & INFRASTRUCTURE | INTERVIEW

Ecuador's Ministry of Transport & Public Works is taking full advantage of the government's investor-friendly legislation and has a busy calendar for years to come.

Jorge Aurelio Hidalgo
BIOGRAPHY
Jorge Aurelio Hidalgo was appointed Minister of Transport & Public Works in September 2018. Prior to this, he was Deputy Minister of Infrastructure and Assistant Secretary General at the same ministry, bringing years of experience into the position. He has conducted studies on infrastructure construction, road equipment performance, flood control, and technology for toll roads. Hidalgo is a civil engineer and graduated from the Pontifica Universidad Católica del Ecuador. He holds a postgraduate degree in industrial engineering from Escuela Politécnica Nacional and studied engineering management at Universidad San Francisco de Quito.

What do you expect to be the impact of the new investment legislation for the industries of your responsibility, and how have you translated this into policy?

There is a legal framework in place that provides security to private investment with the purpose of encouraging national and international private investment to inject fresh capital into the national economy and reduce the pressure on the fiscal budget. Thus, it promotes projects that operate under a framework of a healthy and constructive partnership between the public sector and private enterprises. The new investment law establishes the application of incentives for investment, such as exemption of Income Tax (IR) for 10-12 years, for companies from different economic sectors that invest and produce within Ecuador's territorial boundaries. Companies in primary industries will be exempted from IR for five to 15 years or more if investors operate in border states. Moreover, IR will be eliminated for companies that are dedicated to agriculture, technology (creation of software), construction materials, and other industries that are outside of Quito and Guayaquil. The objective of the law is to reactivate production by giving tax incentives, extending the benefit to 20 years for border areas, and 15 years for Manabí and Esmeraldas to encourage new investments in the areas of community tourism, ecotourism, EPS, and SMEs. This regulatory framework positively affects the infrastructure and transport management sector, attracts private investments, both domestic and foreign, and contributes to the economic development of the country. Private sector participation is extremely important because we take advantage of the private sector's experience and financing capacity to provide services that have traditionally been provided by the public sector. It also introduces technology and innovation to improve the provision of public services through operational efficiency. Moreover, involving the private sector allows for diversification of the Ecuadorian economy, making it more competitive, while it also guarantees that the investment flow is more strategic. Finally, the private sector assumes the investment and operational risks of the projects and contributes to new capital that reduces the pressure on the fiscal budget.

The coordination of PPPs in the transport and infrastructure sectors are among the key tasks of your ministry. What are the main opportunities for the private sector to get involved in public works?

Ecuador has an attractive regulatory framework for private investment, both for PPP project initiatives and for concession. For the development of the State Road Network, we work with the private sector under the modality of concession; there is a transparent mechanism with public tenders. The South Viaduct of Guayaquil is currently in the inter-nation public tender stage and all information is available on our website. Another example of a large-scale work to be executed in PPP format is Tren Playero, whose construction process will begin in 2H2019.

Ecuador is well connected to travel by sea and the opportunity is there to improve its position as a regional center with its port. How should this position be strengthened?

The Ecuadorian port system has ongoing development and complementarity projects through delegation and direct administration in the ports of Guayaquil, Puerto Bolívar, Manta, and Esmeraldas, with investments of approximately USD2.1 billion. That includes dredging and deepening of access channels, modernization of existing infrastructure, repowering of machinery, and specialization of services. Another project is the construction of a deepwater terminal in Posorja-Guayaquil, set to begin in 2H2019 with a private investment of USD1.2 billion. Additionally, we are in the process of receiving offers for the Viaducto Sur de Guayaquil, a four-lane road project that will allow connectivity from the port area of Guayaquil to the province of Oro 44.2km away, with an investment of USD1.2 billion. Another big project in the works is Tren Playero; with an investment of USD1 billion, its purpose will be to move passengers and cargo from the province of Guayas, passing through Guayaquil, arriving at the Port of Posorja, and to every beach on the coast. With these investments, our international maritime transport logistics will improve, as well as our connectivity with other latitudes, attracting all the major shipping companies.