Monday, February 13, 2012




The Central America region is a mixed bag - whilst opportunities are on offer, the risks in some countries are prohibitive. Escalating violence and exposure to international instability makes the region a risky bet, especially considering the small scale of industries. However we do expect some sectors to provide attractive opportunities. The Panama Canal is creating a dynamic industry within Panama, with the country set to outperform in industry growth expectations over the medium term. It is also precipitating investment into transport infrastructue across the region. The power sector is the other major area for growth, with untapped renewable potential catching the attention of international developers.

Key Regional Themes:

Power: New electricity generating capacity is seeing sizable investment in Central America. Hydropower is the dominant source of electricity and will remain so given the number of projects in development across the region. Key hydropower projects include: the US$300mn Patuca III in Honduras, the US$700mn Tumarin project in Nicaragua, the Tres Ninas project in Guatemala, the 138MW Paz hydropower project in El Salvador and the 223MW Changuinola in Panama. In addition, the Central American Electrical Interconnection System (SIEPAC) is due to be completed in March 2012.

Renewables: Both wind and geothermal potential in the region are attracting investor interest given the untapped potential for both and the hope of reducing reliance on imported fuels. The completion of Gamesa and Iberdrola's 100MW Cerro de Hula Wind Farm in Honduras is one of the first of many projects planned in the region. El Salvador is hoping to start its first commercial wind farm in 2016/17 and Acciona is building a 49MW project in Costa Rica. Geothermal potential is also being explored, Panama has called for companies to register interest in geothermal concessions, and Ram Power has recently completed the first phase of expansion of its San Jacinto-Tizate geothermal plant, with Phase II expected soon.

Airports: Opportunities are anticipated in the region's airport sector. Honduras has announced a US$300mn plan to invest in five airports, and El Salvador, Nicaragua and Panama all have projects underway or in the pipeline.

Ports: Port infrastructure appears to be a priority area of investment across the region. The most important project is undoubtedly the expansion of the Panama Canal. The US$5.2bn project, to be completed in 2014, will significantly alter the regional trade and shipping dynamics. Other notable projects include the US$1bn Moin Container Terminal in Costa Rica, to be built and operated by APM Terminals, and the US$500mn plan for a port at Monkey Point in Nicaragua, for which Andrade Gutierrez was contracted for a feasibility study in August 2011.

Despite a number of opportunities across a variety of sectors, there are pertinent risks to investment which could be prohibitive in some countries.

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