Abstract
Recently, the Chilean government created the Chilean Infrastructure Fund (CIF) that will allow taking advantage of the value of existing infrastructure assets. The fund will enable the government to finance new infrastructure projects with the resources obtained from new concessionaires’ payments to the government for the value of retendering existing public-private partnership (PPP) projects. The purpose of this paper is to evaluate the contribution that this new public institution will bring to the financial sustainability of infrastructure in Chile, the opportunities and challenges for its implementation, and its economic value. The research has a qualitative and quantitative approach. Based on the understanding of the new concept of asset recycling, the application of economic foundations, and financial methodologies such as discounted cash flows and real options, the research assessed the institutional and economic value of the new Chilean Infrastructure Fund. The main findings are that the new Chilean Infrastructure Fund will create public value and public wealth since it will foster good governance, streamline the concession system, accelerate the implementation of sustainable PPP projects, and improve planning schemes among others. Other countries could follow this experience, promoting infrastructure funds to improve governance and accelerate the implementation of sustainable PPP projects.
Highlights
The concession system for infrastructure projects in Chile will soon turn 25 years old
The qualitative approach used in this paper employed the following information sources: (i) literature review papers; (ii) government provisions such as the regulations of the Chilean concession system, the law creating the Chilean Infrastructure Fund (CIF), the bidding terms of private partnership (PPP) projects, awarding decrees, and bid results of MOP; (iii) news from the media; and (iv) interviews with PPP experts in Chile using the technique of unstructured interviews (Zhang and Wildemuth, 2017) [28]
Considering the literature review, the information about the Chilean concession system and the CIF, the experience of the authors, and the interviews with PPP experts in Chile, the strengths and weaknesses have been ordered by importance
Summary
The concession system for infrastructure projects in Chile will soon turn 25 years old. According to official data from the Chilean Ministry of Public Works (MOP for its Spanish acronym), Chile has 94 concession projects (47 highways, 23 airports, 8 hospitals and prisons, and 16 cross-sector projects) and an investment amount of around US$22,151 million [2]. The success that Chile has had in the implementation of the concession system is confirmed by Infrascope/The Economist Intelligence Unit (2019), which is an index about the capacity of countries to do PPPs. Chile is again classified as the leader in Latin America in the use of public-private partnerships (PPP), considering regulations, institutions, maturity, investment climate, and financing [3]. Chile is again classified as the leader in Latin America in the use of public-private partnerships (PPP), considering regulations, institutions, maturity, investment climate, and financing [3] In this regard, PPP projects in Chile have had an adequately competitive level. According to the MOP, 68% of the projects have received three or more offers and 24% of the projects have received between two and three offers [4]
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