Time for LatAm govts to start focusing on improvements to PPPs – IDB study

Latin America and the Caribbean have made great strides in efficient and sustainable PPP frameworks and are now working on necessary improvements and to address gaps in areas like performance evaluation and environmental sustainability.

"Public-private partnerships offer a major opportunity to expand markets, create jobs, and contribute to the region’s economic recovery and growth, since they foster sustainability, efficiency and innovation," IDB president Mauricio Claver-Carone said at the launch of the 2021-22 Infrascope study.

“Now that the bedrock has been strengthened it is time for governments to start focusing on the other pillars such as project preparation, finance and risk management,” Vaibhav Sahga, principal for the Americas at Economist Impact, added during the event.

In general terms, the report shows that the region has performed strongly in terms of regulations and institutions, although it notes that institutions involved in preparing, promoting and awarding PPP contracts still suffer from deficiencies in terms of staffing, transparency and capacities.

Other gaps can also be seen in project preparation and sustainability, as evaluation and selection standards, and environmental and sustainability goals have somewhat uneven performances across the region, with countries such as Colombia, Costa Rica and Uruguay showing negative scores in these areas.

The report also points to failings regarding risk management, with the IDB stating that broad principles are being adopted in this area, but that application still remains patchy in Latin America. 

With respect to financing, the study indicates that the performance across the region was better than expected despite the economic turmoil of the last two years, and that many countries are now poised to take advantage of multilateral and development financing institutions.

However, the largest shortcomings were seen in performance and impact assessments, with all but two countries (Brazil and Chile) recording negative scores on these measures.

The IDB underlined that this last factor is the best predictor of the performance of a country’s PPP system, as it measures how authorities learn and adapt from their experiences with operational PPPs.

COLOMBIA, CHILE, PARAGUAY AND PERU

During the presentation event, authorities from four countries outlined which specific challenges they believe they will have to tackle to improve the structure of their PPP systems.

Alejandra Botero, head of Colombia’s national planning department (DNP), said that the main challenge will be to strengthen sub-national institutions and develop new financing schemes. 

In the case of Chile, the main problem facing the PPP system is poor public image, according to the head of the government concessions office, Luis Elton, and authorities will therefore have to work closely with communities in the early stages of these initiatives.

Paraguay’s deputy minister of economy, Carmen Marín, said that her country was looking to develop new financing tools, as well as to simplify procedures and requirements to participate in PPP contracts.

Lastly Rafael Ugaz, head of Peru’s investment promotion agency ProInversión, emphasized that his country’s goal with regard to PPPs was to tender mature projects without losing out in terms of structural quality or assignment of risk.