Managing the Fiscal Risks Wrought by PPPs : A Simple Framework and Some Lessons from Chile
Public-private partnerships are used to procure public infrastructure. Despite involving private investors and concessionaires, they impact the public budget like traditional provision and create fiscal risks. This paper develops a conceptual frame...
| Main Authors: | , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2022
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/099103105182242099/IDU03141abed08e6804ace0906005e48a1332bfc http://hdl.handle.net/10986/37461 |
| Summary: | Public-private partnerships are used
to procure public infrastructure. Despite involving private
investors and concessionaires, they impact the public budget
like traditional provision and create fiscal risks. This
paper develops a conceptual framework to assess whether and
how public-private partnerships shift risks to
concessionaires and financiers. It uses this framework to
describe and assess the Chilean public-private partnerships
program. The paper identifies renegotiations as the major
source of fiscal risk, which involved additional
investments, increasing the cost by about one-third over the
original project cost estimates. The 2010 law reform on
public-private partnerships introduced changes to the
renegotiations regime and began the routine use of variable
term contracts. Using contractual data, the analysis finds
evidence suggesting that renegotiations fell dramatically.
The paper also calculates the realized internal rates of
return for 50 highway and airport public-private
partnerships, using cash flow data for the entire
public-private partnerships program, which started in 1991.
The average internal rate of return is 6.8 percent, with
averages of 9.1 and 3.1 percent for fixed and variable term
public-private partnerships, respectively. The returns show
a large dispersion, which suggests that infrastructure
projects are intrinsically risky and private participation
entails significant risk shifting from the budget to
concessionaires and financiers. |
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