Revamped Chilean concession system still in line with fiscal responsibility, says official

Chile’s concessions system still operates within the limits of fiscal responsibility, despite a recent uptick in contract tenders, and will not be rushing projects without the necessary studies being conducted, according to the head of the public works ministry’s (MOP) concessions office (DGC), Juan Manuel Sánchez. 

“It's both political will and fiscal responsibility. We have to follow the rules too. For example, a project such as the Iquique-Alto Hospicio cable car [US$151mn], which we will tender in January, is a very profitable project that is also coordinated with other transport systems,” Sánchez told BNamericas after an event to present a new community outreach manual for infrastructure concessionaires.

After no new tenders were launched in 2022, Chile has conducted 11 bidding processes for concessions involving investments of more than US$5bn over the last two years.

However, some projects have been subject to delays, as is the case of a US$313mn light rail system linking the northern cities of Coquimbo and La Serena. At one point the initiative was scheduled to be auctioned in 2023, but it was eventually pushed back to 2024 and later to 2025.

When consulted about that contract, Sánchez said that the government wants to avoid building a “white elephant” in an area without sufficient urban development and therefore not enough demand. 

“These transport systems, which have an enormous price tag, have to be in line with urban development that is currently limited because there’s infrastructure dividing the city [Coquimbo and La Serena are adjacent to each other], which is route 5, and there are issues with provision of public services such as water,” Sánchez said.

He explained that once other concessions, such as the new urban road for La Serena and Coquimbo (part of the Los Vilos-Coquimbo section of route 5) and the planned desalination plant for the region, begin operating and boosting urban development, the light rail system will be more feasible. 

Community outreach

The new community outreach manual, drafted by the country’s construction chamber (CChC) includes a list of suggestions for concessionaires to help them navigate community relations and mitigate potential socio-environmental risks linked to their operations.

Sánchez admitted that Chile’s concessions system has had some negative externalities in its 30 years of existence, and that joint efforts between the public and private sector are needed to rehabilitate its image. 

“Both parties have this responsibility and at different stages,” he told BNamericas.

The full manual can be seen here, in Spanish.