Broad Roads in a Thin Country : Infrastructure Concessions in Chile
To increase investment in infrastructure, in the early 1990s Chiles government introduced private capital into the transport infrastructure sector, covering roads and highways, bridges, tunnels, and airports. The chosen mechanism: a concession sche...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2015
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2000/01/438412/broad-roads-thin-country-infrastructure-concessions-chile http://hdl.handle.net/10986/22265 |
| Summary: | To increase investment in
infrastructure, in the early 1990s Chiles government
introduced private capital into the transport infrastructure
sector, covering roads and highways, bridges, tunnels, and
airports. The chosen mechanism: a concession scheme through
which private firms would finance and build a given project
and then operate the infrastructure for a set of number of
years, recovering their investment by collecting tolls from
users. Among the lessons learned from the experience: 1) As
much as possible, avoid concessioning roads for which there
are convenient alternative freeways nearby. 2) Choose the
right variable for awarding a concession. Avoid mechanisms
that (by promoting large payments to the state or short-term
concession periods) encourage high tolls, and if you choose
to award a concession to the firm charging the lowest tolls,
place a floor and ceiling on possible bids. The floor is to
guarantee the concessions financial viability; the ceiling
is to prevent inefficient traffic diversions. Ties at either
end should be resolved by a second variable, such as the
level of transfers between the state and the firm. 3) Allow
downward toll flexibility so that the concessionaire can
react to unexpectedly low traffic flows, especially for
certain types of vehicles. 4) Pay special attention to the
tendering mechanism and to the general incentive structure.
There are limits to the pure least-present-value-of-revenue
(LPVR) auction, but income guarantees do enhance liquidity.
In fact, a minimum-income guarantee through an LPVR auction
is an instrument for credit enhancement, not income support.
Alternatively, some form of financial innovation should be
encouraged to make debt service commitments more flexible.
5) If concessions are tendered by traditional methods and
income guarantees will be given, cover only a fraction of
the concessionaires expected income stream, to reduce the
states financial exposure and to improve the incentives to
the concessionaire. 6) Make the contracts as complete as
possible but allow for later modifications or
renegotiations, and include a well-designed dispute
resolution mechanism. |
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