Xochi: A Path of Flowers to Alleviate Traffic Woes in Guatemala

Picture: A digitally rendered image of the finished project.

Guatemala's traffic is a daily struggle for millions, with congested, poor-quality roads hampering mobility, access to essential services, and economic growth.

The Central American Highway 2 West ("CA-2 Occidente") road, a vital artery that connects Guatemala with Mexico and El Salvador, is a case in point.

The road's condition is particularly poor in the Suchitépequez department, where it narrows to two lanes and crosses major population centers, with average speeds dropping to a frustrating 14 to 19 kilometers per hour.

Without sufficient public sector resources to fix this bottleneck, the private sector has stepped in with an innovative solution.

Alternative Route

Enter "Xochi, Corredor de las Flores" project, a 31-kilometer road designed to alleviate traffic woes and boost connectivity, consolidating one of the country's principal logistics highway corridors.

WATCH: Carlos Colom and Irene Asturias of IDC Network speak about Xochi, corredor de las flores.

(Content in Spanish: Activate the CC option to choose subtitles in your preferred language)

It aims to provide an alternative route for those traveling beyond Suchitépequez department, bypassing urban centers while offering intermediate exits to improve local mobility.

The road is built to international safety standards, with four lanes, and a design speed of 80 kilometers per hour, reducing travel time from more than three hours to just 25 minutes for the over 22,000 daily travelers expected to use the road once complete.

Innovation and Opportunities

However, it is not just what the project delivers to the country but also how the project team has addressed challenges and innovated along the way that makes Xochi unique.

Rights of way. Xochi is an entirely private project, with no government concession and no eminent domain. Therefore, acquiring the necessary land was a significant hurdle. The project provided different options to landowners along the road to benefit financially, including offering them the opportunity to become shareholders by giving up their land in exchange for equity, and compensation for their crops' lost profits.

Social investment and community partnerships The project team also leveraged Xochi as a source of additional economic opportunity and benefit sharing for the local community through:

• Xamba: A digital database program that allowed residents to register their skills and experience and apply for jobs with local contractors and companies serving the project. Public workshops promoted this initiative, registering more than 2,500 people in the database and integrating 55% of local labor in construction work. By September 2024 over 1400 people had been employed in the project.
• Emprendex: An initiative to encourage local entrepreneurship, including supporting women in the creation and management of nurseries to grow native species that will supply trees to plant along the road, contributing to a literal "path of flowers."
• Inviertex: A program offering small investors the option to become shareholders in the project, which together with financial training, aims to build local investment capacity and ownership.
• Women and indigenous peoples. Xamba also incorporates voluntary and protected data on women and self-identified indigenous peoples, allowing the project to set targets for hiring female and indigenous workers into road construction and operation. The project complements that ambition with programs on gender-based violence, training subcontractors on prevention and management and launching an online platform highlighting good practices.

Climate resilience, adaptation, and sustainability. It is the first infrastructure project in the region to consider a forward-looking climate exposure and vulnerability analysis in its planning, design, and capital investment plan. It could also be one of the first infrastructure projects in Latin America to achieve the Envision certification for sustainable and resilient infrastructure.

Fundraising. To attract local investors and ensure funding, the project structured an innovative convertible bond issued on the Guatemalan stock exchange. It also kept the minimum investment low to allow smaller Guatemalan retail investors an opportunity to participate.

Financing and Technical Assistance

IDB Invest provided a financing and technical assistance solution that allowed the sponsors to increase their impact ambition, with long-tenor, fixed-rate loans unavailable in the market for a project of this nature.

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It also included concessional blended finance resources from the Canadian Climate Fund for the Private Sector in the Americas to support the additional investments in adaptation and to offer performance-based incentives to the developer contingent on meeting certain climate, and gender and diversity targets.

In addition, IDB Invest's technical assistance package supported the climate exposure and vulnerability assessment, and a cost-benefit analysis of nature-based engineering measures that fed into the capital investment plan, as well as the gender and diversity initiatives for employment and gender-based violence.

Lessons Learned

Xochi, Corredor de las Flores, could be a model for benefit sharing and democratizing capital for infrastructure projects. While transportation infrastructure projects with no government concession are allowed in Guatemala, they are uncommon in the region.

For infrastructure developers, these unique circumstances underscore the importance of developing strong shared value models with communities that pay social dividends over the project's lifetime.

Xochi has developed a suite of solutions that offer local communities meaningful ways to benefit economically from the project and continues to provide opportunities for Guatemalans to own a piece of the project.

Nominated for the IDB's 2024 Superheroes of Development Contest, Xochi's experience provides a blueprint for other infrastructure developers in Guatemala and the region to develop sustainable, inclusive, impactful, and commercially viable infrastructure projects.

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