With Spanish and Portuguese banks heavily engaged in their domestic and culturally linked project finance markets, foreign banks based in Madrid and Lisbon claim it will be their role to help local sponsors to succeed in new markets.

According to Javier Guzman, vice-president in corporate finance at Citibank in Madrid: ?Advising on projects involving higher degrees of risk will be in our interest especially taking local sponsors to markets they would be traditionally hesitant to get involved. We know of conditions in India and the Far East where Spanish companies could play a profitable role.?

Despite some signs of a move away from traditional markets, a truly global spread by Spanish and Portuguese sponsors looks to be a long way off. The focus on historically and culturally linked markets has paid dividends. As Miguel Abeniacar Trolez, deputy head of international finance at Dragados in Madrid, says: ?In Latin American countries Spanish sponsors have a natural advantage over other international competitors. Cultural and historical legacies are very important when negotiating projects out there.?

Spanish sponsors have stayed in Latin markets despite the crisis that hit Latin America for the best part of 1998. The Spanish export credit agency Cesce has had an important role in supporting local sponsors doing projects abroad. In 1998 Cesce established its own project finance division now headed by Carmen Vara Martin. She says: "Most of our activities focus on the primary markets for Spanish sponsors: mainly Latin America but also China and Turkey.?

Spain's biggest construction company Dragados is focusing on business opportunities across Latin America, North Africa and Eastern Europe and is developing a strong niche in the Latin airports business.

Major airport projects in the pipeline for Dragados include bidding for the $261 million 50-year concession for 12 airports across Mexico's Pacific coast. Dragados is in a consortium with Grupo Angeles and Aeropuertos Espanola y Navigacion Aerea (AENA). The winner will be announced by the end of the year.

Last year Dragados also won a 15-year concession to run Santiago's international airport in Chile. Dragados has structured the deal around the concept of operating the airport's runaways and generating revenues through landing fees. Abeniacar Trolez is now looking into the possibility of applying the same concept to the airports in the Colombian capital Bogota and Lima in Peru.

Despite the focus on those markets where Spain has historical and cultural ties, some Spanish sponsors are active beyond South America.

At the of November this year Dragados won the bid for a concession to build and operate a $350 million road between the South African capital Pretoria and neighbouring Botswana. Societe Generale is the financial adviser to Dragados.

And following its involvement in the $200 million Carmel tunnel project, the first done on a limited-recourse basis in Israel, Dragados also bid but lost the tender for the development of the Cross-Israel Highway project (see Project Finance, November 1999).

Like the majority of Spanish sponsors, the Portuguese are heavily focused on historically linked markets and are keeping tabs on Brazil, Mozambique and Angola.

Joao Vasconcelos Guimaraes, president of Somague in Lisbon says: "The company is focusing on opportunities in Portuguese-speaking countries where our knowledge of the local business environment is superior to everyone else's."

Over the last two years Somague has sponsored a $400 million rail project between South Africa and Mozambique. Portugal's Caixa Geral de Depositos and Caixa Investimento were the lead arrangers for the financing of the transaction. In Brazil, Somagues is also carrying out a traffic study for a 474km-long road concession around the southern city of Sao Paolo.

Former state-owned Electricidade de Portugal (EDP) is similarly looking at opportunities abroad ? most recently the $1 billion Lajeado hydro-power plant in Brazil. Together with a local consortium led by Empresa de Electricidade Vale Paranapenema, EDP won a 35-year concession to build and operate a 900MW plant that will be operational by 2002. EDP holds a 27.6% stake in the venture.

EDP is also active in taking over ownership interests in newly privatized power, electric and water utilities across Latin America. In 1998 EDP - in a consortium with Teco Power and Spain's Iberdrola Ð won an 80% stake worth an estimated $520 million in Guatemala's Empresa Electrica de Guatemala. At the end of November this year EDP and UK's Thames Valley won the bid for a 45% $112 million stake in Chile's Empresa de Servicios Sanitarios de El Liberador in charge of a local water treatment plant.

While Spanish and Portuguese sponsors compete for deals across Latin America and Southern Africa, there are interesting exceptions to the rule - particularly in North African countries such as Morocco and Algeria, the latter being the main supplier of gas to the Iberian peninsula.

Spain and Portugal are coming together for the development of the $1 billion Medi Telecom project in Morocco. In July this year Spain's Telefonica Internacional and Portugal Telecom won the bid against six other bidders for a 15-year concession to develop and operate Morocco's second GSM network.

Teaming up with local Afriquia and Banque Marocaine du Commerce Exteriour, the international consortium awarded Sweden's Ericsson a $109 million engineering procurement and construction contract. Financing came in August this year in the form of a $350 million 1-year bridge loan lead arranged by Spain's Argentaria, ABN Amro and Barclays.