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A driving force in road construction

Spain's infrastructure giants prepare Madrid for the Olympics, and eye Obama's stimulus money.

Spanish companies represented more than half of the world’s top 12 transportation developers in 2008, according to trade magazine Public Works Financing. SEOPAN, which is the Spanish construction sector’s export group, reported that Spanish companies’ combined annual revenues from abroad leaped from 3 billion euros in 2004 to 8 billion euros in 2007. U.S. earnings — from projects such as roads, bus stop shelters and recycling centers — represented 9 percent of the Spanish sector’s 2007 revenues from abroad.

The Chicago Skyway Bridge — gateway to another city on the shortlist of 2016 Olympic host hopefuls — was the first existing U.S. toll road to be privatized in 2005. Ferrovial group’s Concesiones de Infraestructuras de Transporte Ferrovial (CINTRA), which is one of Spain's leading infrastructure companies, formed a Spanish-Australian partnership called the Skyway Concession Company that paid the city of Chicago $1.83 billion in exchange for the rights to manage the project according to a 99-year lease. As part of the deal, it gets all toll and concession revenues. Spaniards are also managing highway concessions in North Carolina and Texas.

Another Spanish infrastructure giant, Actividades de Construccion y Servicios (ACS) President Florentino Perez told stockholders last May that he expects big things in the U.S. As Real Madrid soccer president, Perez is famous for pumping the big bucks into players like David Beckham and Cristiano Ronaldo in the hopes of proportionate turn around. Like many of his colleagues, he believes big up-front investments in infrastructure are similarly likely to turn around proportionate rewards. In highway projects, for which the upfront costs can be in the billions, rewards take the form of toll revenues.

In October 2008, ACS paid about $1.4 billion for a 35-year contract that put its American subsidiary to work upgrading Florida’s I-595. ACS put up some of the capital and arranged for the rest to be financed by federal funds and a number of banks including Spain's Banco Santander and Banco Bilbao Vizcaya Argentaria. Though ACS considers profit projections confidential, Guillen said he thinks it’s reasonable for investors to expect a 10- to 15-percent return.

Spaniards learned to navigate the construction business from the ground up when they sought financing abroad to rebuild their dilapidated roadways in the 1960s. By the 1990s, about 40 percent of all European construction and new infrastructure projects were carried out in Spain, according to the Lauder Institute’s Guillen. Thanks to decades of experience, Spain has become a pioneer in public-private partnerships — which are particularly attractive in the U.S., where public funds often come up short.

“The innovation on our side has been to develop a way of proving to the market that it’s a very good business,” Nicolas Rubio, CINTRA business development director, is quoted as saying in a publication issued by Spain’s Foreign Trade Office.

U.S. state politicians faced with the prospect of raising gas taxes to finance infrastructure projects may find the immediate windfall of highway concessions a soft sell on voters despite the appearance of tolls and the occasional charge that Spaniards are out to re-conquer the North American territory they first mapped five centuries ago.