Restrained by fiscal rules, Paraguay’s Peña looks to infra concessions
Paraguay will lean more on infrastructure concessions as the new government faces pressure to lower the fiscal deficit in line with legislation, President Santiago Peña said.
“Unfortunately, that need to develop infrastructure clashes with the limits we place on ourselves, and I’m convinced that the limits on public spending are correct. We must acknowledge that, though they may seem very cruel sometimes, they are necessary and allow for long-term predictability,” Peña said in response to a question from BNamericas during a seminar held by Chilean manufacturers’ association Sofofa in Santiago.
Paraguay’s fiscal responsibility law, which was temporarily lifted during the COVID-19 pandemic, sets a limit on the fiscal deficit of 1.5% of GDP and Peña aims to reach that goal by 2026.
As a result, the public works ministry (MOPC) is in line for a 28% cut in its funding in the 2024 budget bill, which has yet to be approved by congress.
“We clearly believe in the model of public works managed by a private operator. We currently have an ongoing [PPP tender] process for a very important route [PY01],” Peña added, highlighting that since passing a PPP bill in 2015 Paraguay has used the model to develop road and prison infrastructure, and that hospital PPPs were being studied.
Public works minister Claudia Centurión said a PPP for Asunción’s international airport is also being studied.
“That still hasn’t been 100% decided, but the operation would certainly be a PPP,” she told BNamericas.
In 2017, when Peña was finance minister and Centurión was head of the MOPC's strategic projects office DIPE, a PPP tender for the airport fell through after it was blocked by the comptroller over alleged irregularities.
The minister added that PPPs are also planned for routes PY03, PY06 and PY09.
PENSIONS AND INFRA
Peña said that Chile’s success with concessions was partly due to long-term investments by private pension funds (AFPs) that financed infrastructure projects but that Paraguay did not have a regulatory framework that incentivized long-term savings.
When Peña was finance minister during Horacio Cartes’ presidency in 2015, he tried to push through a bill to create a pensions regulator but it failed due to lack of support from legislators.
Peña was the winner of April’s presidential election while his Colorado party won majorities in both chambers of congress. He took office in August and the government is close to resubmitting the bill.
“If you, as a fund manager, have a 30-year liability, you cannot deposit that money for a three-year period because there would be a term mismatch, and if an AFP or a fund manager is obliged to invest for a 20 to 30-year period, it means that the person who assumes that liability will have to invest it in a 20 to 30-year asset. Which are those assets? Infrastructure, housing, loans for the industrial sector. Those are the sectors we want to develop,” the president said.
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