Investment opportunities to meet growing airport demand in Latin America by 2040

Investments needed to increase the sector's capacity are estimated at USD 53.15 billion, according to a study conducted by CAF in order to help define a long-term strategic regional agenda to boost productivity. This is one of the topics for the CAF Conference: Infrastructure for the Integration of Latin America, to be held in Madrid on July 16.

The airport sector in Latin America and the Caribbean showed an average annual growth of 8% in passenger traffic during 2006-2015, doubling the traffic volume from 162 million passengers per year (Mpax-year) in 2006, to 322 Mpax in 2015, with no double-counting. The sector benefited from economic growth in the region, internationalization of economies, and the growing tourist demand from North America and Europe.

Aviation in Latin America and the Caribbean has a direct economic impact of more than USD 37.5 billion a year and a total impact of over USD 152 billion, accounting for a 5% share of the global aviation industry. In addition, the sector provides more than 4.9 million jobs.

In order to identify airport investment needs in the region and help devise a long-term strategic agenda to boost productivity in Latin America and the Caribbean, CAF -development bank of Latin America-presented the study Analysis of airport investments in Latin America -A 2040 outlook. The base scenario for projections in the region assumes a 5.2% average annual growth in passenger air traffic, from the current 322 million passengers to 1.1 billion passengers by 2040, i.e. tripling its volume in 25 years.

"Latin America and the Caribbean is a market with great growth potential and a smaller relative size compared to more advanced regions such as North America (27.5%) and Europe (30.2%)." Current airport capacity stands at 741 million passengers (counting departures and arrivals, with no double counting), but a capacity of 1,727 Mpax-year will be required by 2040. The largest portion of the investment should be made in the Andean region (341 Mpax, 34.6%), Brazil (260 Mpax; 26.3%) and Mexico (229 Mpax; 23.2%)," said Rafael Farromeque, senior specialist of the Vice-Presidency of Infrastructure of CAF and author of the report.

Investment opportunities

Investments estimated in the report to close the demand-capacity gap in 2016-2040 amount to USD 53.15 billion at 2016 prices. Current investments are on USD 13 billion. Nearly 50% of the total investment (USD 25.54 billion) is required in the coming decade (2017-2026), due to the large capacity demand of the sector. It is noteworthy that more than 80% of the investment will focus on privately-run airports.

Almost 70% of the total investment will be concentrated in Mexico, Brazil and Colombia due to significant traffic growth projections and a lagging capacity in their major airports. Investments will fund over 220 projects as part of a preliminary portfolio that includes some 'greenfield' projects, new terminals, new runways, as well as capacity enhancements in different airport sub-systems (airfield, platform, passenger terminals and cargo terminals), etc.

The report notes that the investment in passenger terminals accounts for 69% (USD 36.93 billion), while the construction of new runways will require an investment of USD 8.98 billion (17%). Investments in logistics facilities to handle air cargo are estimated at USD 3.12 billion, accounting for 6% of the total investments in the airport sector of Latin America and the Caribbean until 2040.

"Investments will help meet the estimated capacity demand; however, the Latin America and Caribbean region requires an Airport Strategic Agenda 2040, to be developed and deployed around five action axes: governance and legal framework, airport infrastructure, air navigation, air connectivity, and airports in harmony with their environment," added Farromeque.

These and other investment opportunities will be addressed at the CAF Conference: Infrastructure for the integration of Latin America, to be held on July 16 at Casa de América in Madrid, Spain, with the participation of Mariana Prado, Bolivian Minister of Development Planning; Esteves Pedro Colnago, Chairman of the Board of CAF and Brazilian Minister of Planning, Development and Management; Mauricio Cárdenas, Colombian Minister of Treasury; Pilar Más, Macroeconomic Analysis and International Economy Director of the Spanish Ministry of Economy and Business; Dulcidio de la Guardia, Panamanian Minister of Economy and Finance; Lea Giménez, Paraguayan Minister of Finance; Danilo Astori, Uruguayan Minister of Economy and Finance; Salvador Marín, President of COFIDES; Joan Rosell, President of the Confederation of Employers and Industries of Spain (CEOE), and Juan Béjar, President of Globalvía, among others.