A career in advising governments on structuring public-private partnerships (PPPs) is an opportunity to leverage finance to do good, said Isabel Marques de Sá, chief investment officer for public-private partnerships at the World Bank’s International Finance Corporation.
Marques de Sá spoke to students on March 1 about infrastructure investment in developing countries, in an event hosted by the Energy Club, the Economic Development Club, the Latino Leadership Association, and the Africa Business & Society Club. Senior Associate Dean David Bach moderated the conversation.
A successful PPP means bridging business interests, government objectives, lenders’ requirements, and the interests of the community, Marques de Sá said. Challenges in a PPP project span the need for high-quality technical design and sound project economics underpinned by realistic projections of demand, financial viability and affordability, a strong legal base, and appropriate risk allocation, including consideration and mitigation of potential environmental and social impacts.
Infrastructure projects are increasingly impacted by climate change. Consequently, more and more, Marques de Sá said, resilience is built into the project design—for example, the elevation of roads to resist flooding. A mandate to have 30% of the IFC’s portfolio tagged as “climate change” creates incentives to focus on clean energy, efficiency of utilities, green buildings, and other sustainable projects. Particular attention is also given to social impact of projects when they require resettlement, compensation for land acquisition, and so on.
A major challenge in developing infrastructure is the fact that the terms of public officials are often shorter than the time it takes to prepare an infrastructure project. “There are cases where, after a PPP project is awarded, new elected officials decide to challenge the project for good or bad reasons,” Marques de Sá said.
As often as not, Marques de Sá added, “The success of PPPs is not science; it’s people, and the art of risk allocation in well prepared projects.” Good preparation of projects is key for long-term sustainability, which is largely in the hands of the advisor—“so what you can control, you should do well.”
Marques de Sá noted that a 50% failure rate in bringing an infrastructure project to completion is typical for the industry. “All regions are difficult, and projects are complex,” she said. “There’s not an easy way to do infrastructure given the inherent political nature of the same; everything is interdependent. If you don’t succeed to convince government clients regarding proper risk allocation, the project will not be bankable and will never happen. This is why it takes time.” And, indeed, she said, the preparation of a $20 million project can take as much time as a $2 billion dollar project.
In an era of straitened public budgets, Marques de Sá said, finding private funding is not the biggest obstacle to building infrastructure, provided the projects are financially sound; the challenge is often marshaling the political and institutional will among a varied group of stakeholders. “There’s a lot of private capital waiting to be invested, and a huge need for infrastructure—but a limited number of projects ready to be transactioned,” she said.
About the Event
Isabel Marques de Sá is the Chief Investment Officer for Public-Private Partnerships at the International Finance Corporation - IFC (World Bank Group). Ms. Marques de Sá has over 30 years of experience developing projects for companies, governments and multilateral institutions in the natural resources and infrastructure sectors. She will present her main takeaways from structuring PPP projects in infrastructure in Brazil, Panama, Haiti, Honduras, Mozambique, Madagascar, Ghana, Tanzania, Mauritania, Angola and Liberia, among others. She will focus her talk on energy, water, airports, and Special Economic Zones.
Prior to joining the IFC, Ms. Marques de Sá worked for Paribas Bank in Paris, where she participated in several mergers and acquisitions, privatization and project finance projects in Europe and emerging markets in mining, metals and steel sectors. Before that, she was a consultant in France and served for five years in the National R&D Council (Presidency of Brazil).
Ms. Marques de Sá holds a PhD in Industrial Economics from the Paris School of Mines (1991), Paris, a diploma in Economics from Oporto University, Portugal (1976) and a Master in Agriculture Development from Fundacão Getulio Vargas, Rio de Janeiro, Brazil (1980).
The discussion will be facilitated by David Bach, SOM Professor and Senior Associate Dean for the Executive MBA and Global Programs. Mr. Bach is a leading expert in political economy, focusing his research and teaching on business-government relations, nonmarket strategy, and global market regulation.
Organized by the Energy Club, Economic Development Club (EDC), Latino Leadership Association (LLA), and Africa Business & Society Club (ABSC).