VZCZCXYZ0001
RR RUEHWEB

DE RUEHSJ #0686/01 2251236
ZNR UUUUU ZZH
R 131236Z AUG 09
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC 1115
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHSG/AMEMBASSY SANTIAGO 0465
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SAN JOSE 000686 
 
SIPDIS 
 
DEPT FOR WHA/CEN, WHA/EPSC:MROONEY AND AWONG, EEB/IFD/ODF 
TREASURY FOR LMCDONALD, DVKOCH, AND SSENICH 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV PGOV PREL CS CI
SUBJECT:  U.S.-CHILEAN JOINT INFRASTRUCTURE ASSISTANCE IDENTIFIES 
COSTA RICAN PROJECT 
 
REF: SAN JOSE 497, SAN JOSE 364 
 
¶1.  SUMMARY. From July 13-16, a Treasury Department team from the 
Office of Technical Assistance (OTA) and a representative of Chile's 
Ministerio de Obras Publicas (GOC MOP) met with GOCR leaders and 
private sector officials to consider how to deliver infrastructure 
technical assistance (TA).  Both USG and GOC advisors represented 
the Infrastructure Finance Expert Corps (IFEC), a joint assistance 
program which selected Costa Rican as a pilot project (reftel A). 
After successful previous trips by an OTA team and GOC 
representatives in late May and early June, this second engagement 
focused on identifying candidate projects.  By the last day of the 
meetings, the GOCR identified the Liberia airport concession as the 
candidate for TA.  All parties agreed that the size and scope of the 
project -- a USD 35 million renovation / expansion with a term of 
approximately 8-12 months -- worked well with the GOCR's needs, 
OTA's assistance horizon, and the GOC MOP expertise.  Next steps 
include drafting, finalizing, and signing a TOR agreement between 
the OTA and the GOCR and for the GOC to provide funding (direct or 
through a multi-lateral bank) to support its participation.  End 
Summary. 
 
-------------------- 
ACT TWO: THE PLAYERS 
-------------------- 
 
¶2.  OTA Advisors Harry Tether and Barry Gray traveled to Costa Rica 
for four days of meetings commencing on July 13.  The GOC MOP sent 
John Diaz as its representative.  On this second Costa Rican trip, 
the OTA team again met with a variety of players in Costa Rican 
infrastructure, including: 
 
-- Karla Gonzalez, Minister, Guillermo Matamoros, Vice Minister of 
Concessions, and Eduardo Navarro, Director of Concessions, and 
Hernan Vasquez Director of Planning, Ministry of Public Works and 
Transportation (MOPT); 
 
-- Jose Luis Araya and Jenny Phillips, Vice Ministers of Finance 
(Hacienda) and Melvin Quiros, Deputy Director, Public Credit, 
Hacienda; 
 
-- Marco Vargas, Minister, Inter-Ministerial Coordination; 
 
-- Carla Morales Rojas, Vice Minister, Ministry of Planning; 
 
-- Javier Cascante, Director, Superindentency of Pensions (SUPEN); 
 
-- Lourdes Fernandez, Interim Director of Investment Banking for 
Banco Nacional de Costa Rica; 
 
-- William Hayden and Ronald Vargas, Hayden-Vargas-Fernandez 
Financial Consulting; 
 
-- Carlos Andres Arguedas Vargas, Contract Division Manager, 
Contraloria General (Comptroller) of the GOCR; 
 
-- Jose Antonio Munoz, Partner, Arias and Munoz; 
 
-- Carlos Arrea, Partner, LEX Counsel (attorney for the Liberia and 
Port of Caldera concessions); 
 
-- Mariela Diaz, Director, and Cecilia Montero, Manager, ProChile; 
and 
 
-- Bill Abraham, Partner, Osa Pacific Partners (holds a minority 
stake in the Liberia concession). 
 
-------------------------------------------- 
ACT TWO HIGHLIGHTS I:  DO WE HAVE A PROJECT? 
-------------------------------------------- 
 
¶3.  During the initial days of meetings, the OTA team and Post 
became slightly puzzled by the GOCR's lack of providing specific 
examples or even a list of candidate projects.  The most direct 
suggestion came from MOPT Minister Gonzalez who proposed Costa 
Rica's Limon-Moin port complex (on the Caribbean, reftel B) as a 
candidate.  However, the OTA team and Post agreed that the scale 
(USD 700+ million), complexity, and political/labor implications of 
this project were completely mismatched to IFEC's more immediate 
goals.  Other than the Minister's specific suggestion, GOCR contacts 
offered few specifics. 
 
¶4.  Having just met Bill Abraham, a minority partner in the Liberia 
airport concession, the OTA team raised this as a possibility with 
CNC's Vice Minister Matamoros toward the end of the week.  The 
airport concessionaire -- led by Coriport, an airport management / 
development consortium -- proposes to invest approximately USD 25 
 
million for a renovation / expansion of the Liberia airport.  This 
includes the construction of an 180,000 square foot 
arrival-departure-immigration facility, estimated to take 
approximately 8-12 months to build.  Vice Minister Matamoros 
responded positively to this suggestion and directed the OTA team to 
focus on the Liberia concession. 
 
¶5.  After meeting with Vice Minister Matamoros, the OTA team 
presented this result to Finance Vice Ministers Phillips and Araya 
who both concurred with the selection.  In addition, the Vice 
Ministers also tapped the Office of Public Credit as Hacienda's 
analytical team to assist with evaluating financing options for the 
Liberia concession. 
 
---------------------------------- 
ACT TWO HIGHLIGHTS II:  CHALLENGES 
---------------------------------- 
 
¶6.  A key challenge to the process emerged on the very first day 
when the GOC MOP John Diaz explained that the GOC did not have funds 
to support IFEC assistance.  Though, Diaz recognized a role for 
Chilean participation (and certainly a strong interest), he could 
not make any promise about the GOC's ability to support IFEC.  By 
the time of Diaz's departure from San Jose, we understood that the 
GOC would explore the possibility of securing IFEC assistance 
through a multi-lateral bank such as the IDB. 
 
------------------------------------- 
ACT TWO HIGHLIGHTS III:  A PPP PRIMER 
------------------------------------- 
 
¶7.  John Diaz shared with the OTA team and us the Chilean model of 
managing concessions and / or public private partnerships.  Within 
the GOC's concessions agency, three distinct functions move a 
concession from beginning to end.  The first is Tendering.  This 
function manages the "offering" and award of a concession.  Diaz 
noted that concession competition (three to four bidders) is vital 
to the process.  The second function, Construction, manages the 
design / build process and handles contractor disputes and change 
orders.  The third function, Operations, monitors the actual revenue 
results versus projected revenue results and the distribution of 
revenue to stakeholders (including the GOC) in accordance with the 
terms crafted during the Tendering phase. 
 
¶8.  All three functions draw upon professional experts (e.g. legal, 
appraisers, etc.) that are part of the GOC's concession agency.  One 
other function that plays a key role in the process is a Project 
Manager.  The concession agency charges this person with total 
responsibility for shepherding a concession project through the 
tendering, construction, and operations phases of the project's 
life.  The project manager also has a key liaison role with the 
"requesting" or "sponsoring" ministry.  For example, if the 
concession is a hospital, then the Project Manager interacts with 
the representatives at the Ministry of Health on the key technical 
issues related to delivering a major health care facility. 
 
------- 
COMMENT 
------- 
 
¶9.  After the first OTA and GOC visits in May and June respectively, 
three near-term issues emerged for upcoming visits.  We recount 
those issues below along with comment updating the status of each: 
 
 
-- Collaborating with the GOCR to select specific IFEC project(s) 
and defining specific areas of focus for the IEFC team:  the IFEC 
team met most of this goal on its second visit to Costa Rica with 
the selection of the Liberia airport concession.  As the picture of 
GOC assistance becomes clearer, the latter part of this goal will be 
met. 
 
-- Increasing the effectiveness of the Council of Concessions:  this 
remains a long term objective of the IFEC team and will require work 
akin to "management consulting" in order to achieve results. 
 
-- Publicizing concession and public-private partnership successes: 
the recent opening of a segment of the San Jose-Caldera concession 
tollway illustrates how much work remains in this area; a 
combination of misshaped expectations, an approximate eight-fold 
increase in tolls, and the lack of an awareness campaign by the 
concessionaire, Autopista de Sol, highlights the critical important 
of public awareness and information. 
 
What may be a fourth issue is the GOC assistance.  Though the lack 
of GOC IFEC funding poses as a near term challenge, Chile clearly 
wants to actively participate in IFEC as we gathered from the travel 
 
of John Diaz and his enthusiastic engagement in our meetings.  We 
choose to remain optimistic that the GOC will find a way to insure 
continued participation with IFEC's pilot project for Costa Rica. 
 
BRENNAN