Climbing the Ladder

15 June 2017 Healthcare projects are the focus for a number of Latin American countries as they look to boost their international standing. Marina Formoso takes a look at the plans

Data collected by the World Bank and the Organization for Economic Cooperation and Development (OECD) has shown that Mexico, Colombia and Peru are all mid-ranking countries when it comes to the number of hospital beds per million inhabitants.

Such a measure may not be the only way to assess a country’s healthcare provision – as care improves the need for beds recedes, which has been demonstrated through the OECD’s rankings in a number of more mature economies in recent decades, such as the UK and Canada.

However, the three Latin American countries above are clearly keen to boost their positions in the ranking and have revealed hospital infrastructure plans to build new facilities and upgrade existing ones. Currently, Mexico registers 1.6 beds per million inhabitants, Colombia 1.59 and Peru 1.57. They all expect to deliver over 2,000 new beds to their respective health systems in the near future.

“In Bogotá, we estimate that we need to invest around $550m to be able to close the hospital infrastructure gap,” says Alfredo Rueda Prada, P3 project manager at the Bogota City health department. “We aspire to reach the hospital infrastructure quality of the UK, Spain and Chile.”

The request for proposals process will start early next year, with the projects expected to be awarded in summer 2018 and in operation by 2021. For the technical, legal and financial structuring processes, Bogotá will work with the National Development Bank of Colombia (FDN) as strategic partner. FDN will also take part in the procurement process.

Plans include the construction of six new hospitals in the city over the next four years.

This will involve the construction of the Bosa, La Felicidad and Usme hospitals. The remaining three projects involve demolition of the current facilities and their replacement at Simón Bolivar and Santa Clara hospitals, plus the Materno Infantil Institute.

“The old facilities will need to be completely refurbished and modernized,” says Rueda. “We need to adapt the buildings to new needs such as a future population increase and to bring the infrastructure up to [modern] earthquake regulations.”

As well as the need to expand provision, this need to upgrade existing health facilities is another driver in the sector’s growth in Latin America.

“Hospitals, by their nature, must remain in service during and after the occurrence of extraordinary events, such as earthquakes,” says Alfonso Méndez-Lossada, lead advisor at Arup. “We are worried that in the case of P3s these kinds of risks are not considered in the contracts and will be awarded at the lowest cost,” he warns.

However, the P3 model is being pursued because of its long-term benefits. A report from the Inter-American Development Bank revealed that over 90% of hospitals in Lima, Peru, were built 30 or more years ago. Many of these have had only minimal investment in that time, leading to serious maintenance backlogs that the P3 model would avoid.

Bogotá is determined not to fall into this trap. “The P3 model works for us because it has been shown to have less variability in prices, to have quicker construction process and the most important part is that it solves the common problem of deterioration due to lack of maintenance,” explains Rueda.

Peru is also on track. The Association for the Promotion of National Infrastructure (AFIN) has calculated that $18.94bn of investment is needed to close the hospital infrastructure gap by 2025.

And the country is looking to make sure what comes next is state-of-the-art. “The projects that we are planning will be designed to be eco-efficient, with re-use of solar light and heat, implementation of solar panels and efficient air conditioning with natural ventilation, amongst other specifications,” says Maria Elena Fernandez, manager of healthcare projects at P3 authority ProInversion.

The agency has an important role to play in coordinating healthcare investments in Peru, because plans can come from two funding streams: the Ministry of Health (MINSA), which covers the needs of vulnerable families through the Comprehensive Health Insurance (SIS) program; and EsSalud, a national insurance coverage for the working population. Each institution works with its own separate network, facilities and funds, and while both are able to procure their projects individually, so far ProInversion has been in charge of the procurement process.

ProInversion is to tender three new hospitals in the cities of Piura, Chimbote and Lima. The new plan will bring over 800 new beds and is expected to cost $424m. Other projects on the agenda involve the construction of three hospitals in Cajamarca, Talara and Altiplano, adding 500 new beds at a cost of $264m.

“Peru has encouraged the participation of the private sector through investment and the provision of care services, through the P3 contractual modality,” says Méndez-Lossada. “An important aspect of this challenge is that the hospitals that are being developed by P3 are called ‘white coat’, which means that the operator not only has to provide the infrastructure [and] equipment, but also the care and administrative services for the autonomous operation of the hospital unit.”

MINSA is also preparing the expansion of the ‘2 de Mayo’ hospital in Lima, expected to cost $186m, and the construction of the Hipolito Unanue hospital worth $213m. Like Peru, Mexico also has two separate entities that are able to procure projects independently: IMSS, which provides coverage for the general public; and ISSSTE which covers public workers.

The fact that two different authorities are able to procure the same type of project can cause frustrations for investors. “In Mexico where we have recently participated in some competitions, we believe that sometimes there is an excess of bureaucracy,” says a spokesperson from Spanish contractor Sacyr.

“There are two authorities that tender hospitals that request very similar specifications and it is necessary to prepare a huge volume of documentation for each bid.”

However, not everyone agrees that this is a problem, with some preferring to focus on the positives that two procuring authorities have greater capacity than one, and can therefore potentially tender more projects at any one time.

“Some investors could perceive an excess of bureaucracy, but the reality is that Mexico presents one of the most competitive business environments at the international level,” argues Sergio Forte Gómez, general manager of investor relations and banking investment projects at the National Exterior Commerce Bank (Bancomext).

“In recent years the Mexican government has been working to make the country a competitive destination for investment, business development and productivity.”

There is certainly no lack of interest from construction companies in Mexico. Firms such as Marhnos, Assignia, Sacyr and Acciona have all submitted several unsolicited proposals for the construction of hospitals in the cities of Tapachula, Garcia, Bahia de Banderas and Tepotzotlan. All projects are already tendered except for the Tepotzotlan project, although it is understood that too is not far away.

Plans coming from ISSSTE involve 11 hospitals, located in Mexico City, Villahermosa, Tepic, Oaxaca, Torreón, Durango, Tampico, Acapulco and San Luis de Potosí.

While these might not be the largest schemes available to international investors – who can, for example, target the huge and complex health campus pipeline coming out of Turkey – they do offer a stable investment opportunity for those already active in the market.

“Possibly, these P3 programs will not be especially interesting for construction companies that are not positioned in Latin America because these are small projects by international standards,” says the Sacyr spokesperson. “However for Sacyr, these projects fit perfectly into our strategic plan.”

And that is just the way these Latin American countries would like to keep things for the time being. Nothing too ambitious, but incremental investments that will in time push them higher up the international healthcare rankings.

This page was last updated on:
22 September 2017.


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