Peru, which is one notch below investment grade according to Standard & Poor’s, is avoiding to borrow directly for infrastructure projects on concern this will upset the country’s debt-to-GDP ratio, says Luiz Jordo, director of structured finance at Brazilian contractor Andrade Gutierrez.


One way around this – not only in Peru but also in most Latin American countries – is to look for municipalities, provinces, state-owned companies and other sub-sovereign risks capable of submitting royalties, taxes or revenues as guarantee for projects, adds Daniel Melo, structured finance manager at Andrade Gutierrez.


Moody’s, Fitch and other rating agencies pay close attention to a country’s foreign debt relative to its gross domestic product, which for Peru is expected to fall to about 27% this year from a high of 49% in 2002.


Andrade Gutierrez, together with contractors Camargo Corra and Queiroz Galvo, closed on April 26 a US$270mn true sale financing due in 18.5 years to build a road in Peru. BNP acted as sole arranger, Goldman Sachs bought the US$270mn bonds that were issued to fund the transaction and the Peruvian ministry of transportation guaranteed the operation.


Andrade Gutierrez has a US$770mn backlog amounting to the construction of airports, power plants, refineries and other infrastructure across Latin America.