More active entrepreneurial State wouldn't hurt Chile’s infra concessions – Corfo VP

Chile’s concessions system would be able to operate unaltered even while the "entrepreneurial State" pursues a more active role in the economy, according to the executive VP of state development agency Corfo, José Miguel Benavente.

“In an entrepreneurial state you assume risks alongside the private sector,” Benavente said during an investment seminar hosted by public studies center CEP, adding that under this arrangement public-private cooperation would be commonplace. 

He underscored that in the case of the infrastructure concessions system, the State has adopted the stance of an entrepreneur by participating in issues such as early financing and drafting business models, and now is seeking to replicate this experience in developing sectors such as information technologies. 

However, Benavente emphasized that this is not the same as the “State as a business owner,” because the State would own the means of production in that case.

When consulted by BNamericas after the event, Benavente said that the “entrepreneurial State” would not force changes to the concessions system.

“What we're aiming at has to do with innovation and development of entrepreneurship,” he said. 

However, he admitted that the current concession framework needs to be improved to avoid what is called the “winner’s curse,” where winning bidders make offers that end up being too low to enable them to feasibly carry out their contracts and eventually have to renegotiate.

Benavente pointed to a 2008 study that estimated that, at the time, the public works ministry (MOP) had to spend an additional US$2.81 billion on top of the US$8.46bn in the original budgets for 50 concession contracts due to renegotiations.  

Back in May, the executive branch submitted a bill to create a new development agency called Afide (Agencia de Financiamiento e Inversión para el Desarrollo), which would provide loans for innovation projects as well as supporting small and medium-sized firms who seek to develop new technologies or business models. 

“Chile doesn’t have debt mechanisms for innovation projects in medium-sized companies,” Benavente told BNamericas, adding that the new agency is modeled on similar institutions such as Germany’s KfW and France’s Bpifrance. 

The bill is currently being reviewed by the lower chamber's finance committee. The full text can be seen here, in Spanish.