Come fly with me: as trade and travel pick up, regional airports in Latin America pick up the pace.

Latin American governments across the region, driven by trade demand and clearly aging airports, are turning to the private sector to develop billions of dollars in new airport infrastructure. Aside from obtaining shiny new passenger terminals, airport development is an increasingly important regional development tool that is unlocking economic growth by improving market access.

In Brazil, airport development helps regional integration since vast distances make land travel tougher. Brazil saw air travel grow 18.1% in 2005 to 98.1 million passengers--of them, 83.5 million were domestic travelers. "Regional airports guarantee the integration of Brazil. An operator must make the airport an integrated force for the regional development," says Valseni Braga, supervisor of operations at Brazilian state company Infraero, which manages 66 airports.

Accordingly, Infraero has spent US$777 million in the last three years, much of which on regional airports to build runways, passenger and cargo terminals, and equipment. Regional airstrips provide a vital economic link for remote cities such as Manaus, deep in the Amazon rainforest. Cargo shipments at the Eduardo Gomes Airport there have grown 25% in the last three years following a $9.5 million investment on a new cargo terminal. "Manaus has an industry based on equipment assembly and electronic products, with great export volumes that depend directly on the airport," Braga says. The airport now handles 1.5 million passengers a year and more than 30,000 flights.

Boost. With people now accustomed to flying rather than heading down dusty roads, tourism development has received a boost, particularly in Belo Horizonte in Minas Gerais state following improvements at Tancredo Neves International Airport. "The airport has benefited tourism as tourists arrive to visit the historical cities of Minas Gerais, Ouro Preto and Diamantina," Braga says.

Like Brazil, Mexico is using airport development as a decentralization tool by creating regional spoke-and-hub networks: a large central airport plus a ring of smaller peripheral airports. Toluca, Puebla and Cuernavacas, for instance, support Mexico City's international airport. "This strengthens the local product so that the population does not have to go to Mexico City to fly," says Roberto Castafieda, director of operations at state-run airport company ASA.

ASA has been so successful turning around 23 of Mexico's 73 airports that it aims to double passengers to 120 million within a decade, says Castaneda. Improved facilities are providing the catalyst, too, for the development of low-cost startups, such as Internet and Volaris. "We improve the infrastructure and then the airlines and state government, together with the federal government, promote and develop the air industry," he says. Stellar growth at Toluca airport, where Interjet flies, means the airfield now needs a terminal to handle 2.5 million passengers annually; it used to handle a quarter million a year. "That is tenfold growth in one year," Castaneda says.

Such growth is providing passenger feed for the big global airlines. A $100 million investment at Cuidad del Carmen airport in Campeche state has allowed U.S. airline Continental to expand from a couple of flights a week to two a day to feed business passengers into its international network. "Houston has become a hub for Mexicans to fly to the world," Castaneda says.

Throughout Mexico, airport investment has topped $900 million in recent years and improved services are drawing international firms, with the new Queretaro airport chosen as a base for French aviation company Bombardier. ASA is not alone in reaping the benefits. Passenger traffic at Grupo Aeroportuario Centro Norte's 13 airports grew 9.2% to 11.6 million people in 2005, with the strongest increases at Zacatecas, Tampico and San Luis Potosi.

Peru is hoping to unlock the economic benefits of regional airport development with a concession process underway for a packet of 10 northern airports as part of a wider government policy. "Airport development is part of an interlinked government strategy to decentralize the economy in conjunction with the development of the transoceanic highways so that not all products have to go to Lima," says Aldo Bresciani, head of airports at state investment promotion agency ProInversion. The winner of the 25-year northern concession have to invest between $100 million and $120 million on the airports, which is hoped will boost tourism by making it easier for tourists to move throughout the country.

Private operators are seen as the solution to improve logistics and develop hubs to service regional agriculture and make Peru more competitive by removing the need and cost of sending products through Lima. "The biggest impact this project will have is to move goods quicker, address the lack of storage and freezer capacity, and provide logistics support for fresh products," Bresciani says. "It will make importers and exports more competitive by giving them the opportunity to go direct to the regions."

Aeropuertos Argentina 2000 won a 30-year concession package of 32 airports in 1998. Aeropuertos President and CEO Ernesto Gutierrez says that airports are true centers of economic generation; he sees a direct correlation between passenger and cargo growth and economic output. "By providing infrastructure appropriate to the needs of the region, locality or country [you] maintain ideal conditions for the growth," he says. "If airport infrastructure is not good enough, it is going to interfere with economic growth." Argentina's economy grew 9% in 2005, while passenger air traffic increased 27%.

The company generated sales of $550 million in 2005 and has invested over $800 million over six years in Argentina. Aeropuertos plans to spend $400 million more in the next five years. The improvements it has made have benefited Argentina's agricultural regions, but Gutierrez says exports need to be balanced with imports to optimize air services. "Mendoza and La Rioja are intensive agricultural areas but in those zones we do not have reciprocal imports and so export costs go up because of the empty planes. There needs to be growth of imports to share cargo capacity and tariffs," he says.

Stability. In Chile, international airport groups look for airports with a lot of economic development potential but also take into account political stability, relationships at the airport with the current operator and the Chilean air force, as well as unemployment, traffic forecasts and the ability to make change, says Kevin Johnson, senior project director of Canadian group YvRS, which operates Arturo Merino Benitez International Airport in Santiago.

"Without a doubt Chile is the most progressive, stable and transparent economy in Latin America," Johnson says, but all businesses have risks and airport concessions are no exception. A previous forecast for double-digit passenger growth became meaningless in September 2001 when people stopped traveling for fear of politically motivated hijackings, for instance. That, combined with other economic difficulties in the region made the concession unprofitable and threatened the company's ability to make debt payments, he says. "It took us two years to negotiate a 78-month extension to the concession," Johnson says.

Chile's international traffic nevertheless grew 10.7% in 2005 to 4 million passengers while domestic passengers increased 7.1% to 3.2 million, according to Chile's civil aviation authority. With the bad days behind it, YvRS is looking to grow passenger numbers to 10 million a year and increase cargo volumes though a new export terminal with expanded refrigerated warehousing for shipping fresh fruit and vegetables to Europe and the United States. Economic development goes hand-in-hand with improving access to a country through airport development, says Johnson: "The most important strategy a country can follow to develop its economy is to develop its airports."