Volume 5, Number 10, Page 3

Privatization of Ports and Airports

by Marco Antonio Nájera Martínez

Latin American countries are promoting the privatization of their seaports and airports in an effort to improve their transportation infrastructure and to become competitive in a worldwide marketplace.

During 1998, airport and seaport privatizations are expected to take place in Mexico, Chile, Honduras, Paraguay, Peru, Ecuador, Guatemala and El Salvador. Currently, the Peruvian government provides incentives for the private sectors’ participation in the concession operations of Lima’s José Chavez International Airport. Brazil will privatize three of its main seaports during 1998, and is expected to begin privatization of its airports in 1999.

Last November, the Chilean Congress approved a bill transforming the state owned and operated seaport company, Empresa Portuaria de Chile (Emporochi), into ten autonomous state companies. Each entity will be operating as a separate company within a year. Emoporochi will later be dissolved. Once the separate entities are operating, they will begin preparing for the concession process. A bidding process is expected to begin by the end of the first part of the year. Valparaiso, San Antonio and San Vicente de Talcahuano will be the first port companies in which private investors will be able to partake.

The Mexican airport privatization structure is unique. Last February, the Mexican Ministry of Communications and Transports published general guidelines for the bidding process of thirty-five of the fifty-eight airports currently managed by the state owned and operated Aeropuertos y Servicios Auxiliares (ASA). Thirty-five airports will be divided into four groups organized by geographic location.

The Federal Government will create 35 companies, granting each a concession to operate an airport. Subsequently, four holding companies will be created and charged with controlling airport groups. With the support of specialized consultants, four airport groups will carry out an operative, administrative and labor transition. Each holding company will execute an Operation/Participation contract with a recognized airport business development group (The Airport Operator). This contract will have a term of seven to ten years. The selection of each Airport Operator will be made under a competitive bidding process.

Thereafter, the four holding companies will be required to offer stock to the public on the national and international stock markets. Each Airport Operator will acquire up to 10% of the holding company’s shares, with an option to later acquire an additional 5%. Under this scheme, and pursuant to the Mexican Foreign Investment Law, foreign investors will be able to participate directly through ownership of up to 49% of the holding companies’ capital stock. Greater participation of foreign ownership will require approval from The Foreign Investment National Commission. As currently proposed, there are incentives for the Airport Operator to maximize the long term stock value, as well as to merge its interests with stock market investors.

The government will regulate the airport services through the establishment of maximum prices for each airport category, determined on an efficiency basis. The maximum prices will be based on the expected return on capital invested in airport assets.

Marco Antonio Nájera Martínez is with the law firm of Gardere & Wynne. The firm has offices in Dallas, Houston, Tulsa and Mexico City.