Why Uruguay ditched road PPPs

Long delays and significant cost overruns drove Uruguay to ditch road PPPs in favor of construction, rehabilitation and maintenance (CREMA) contracts, according to the country’s planning and budget director, Isaac Alfie.

“The total costs ended up being assumed by the public sector, including overruns,” Alfie said during the 2020-21 Latin American Infrastructure Forum, held by IDB and Chilean infrastructure think tank CPI.

He said that since Uruguay is a small and scarcely populated country, road PPPs had trouble obtaining financing as demand was too low to cover costs without subsidies.

Uruguay also suffers from a long-standing issue of delayed tenders, which in the case of PPPs became even longer due to structuring costs and the financing issues, which prevented authorities from awarding contracts quickly.

Such was the case of road circuit N°7 (US$72mn, pictured), which for nearly two years was stuck in the “provisionally awarded” stage as consortium San José, comprising local firms Interagrovial, Ebital Construcciones Viales y Civiles and Serviam, had to spend over a year working on financial closure.

Uruguay will use the CREMA model, also employed in Paraguay, to carry out new road projects, which Alfie said will result in “substantially lower” costs.

However, he warned that Uruguay still has fiscal problems, which the country tends to tackle by “cutting back investments instead of seeking to reduce current spending or at least not increasing it.”