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| Engel, Eduardo M.R.A.; Fischer, Ronald; Galetovic, Alexander. |
| Infrastructure concessions are frequently renegotiated after investments are sunk, resulting in better contractual terms for the franchise holders. This paper offers a political economy explanation for renegotiations that occur with no apparent holdup. We argue that they are used by political incumbents to anticipate infrastructure spending and thereby increase the probability of winning an upcoming election. Contract renegotiations allow administrations to replicate the effects of issuing debt. Yet debt issues are incorporated in the budget, must be approved by Congress and are therefore subject to the opposition's review. By contrast, under current accounting standards the obligations created by renegotiations circumvent the budgetary process in most... |
| Tipo: Working or Discussion Paper |
Palavras-chave: Public Economics. |
| Ano: 2006 |
URL: http://purl.umn.edu/28382 |
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| Engel, Eduardo M.R.A.; Fischer, Ronald; Galetovic, Alexander. |
| Public-private partnerships (PPPs) cannot be justified because they free public funds. When PPPs are desirable because the private sector is more efficient, the contract that optimally trades demand risk, user-fee distortions and the opportunity cost of public funds is characterized by a minimum revenue guarantee and a cap on the firm's revenues. Yet income guarantees and revenue sharing arrangements observed in practice differ fundamentally from those suggested by the optimal contract. The optimal contract can be implemented via a competitive auction with realistic informational requirements; and risk allocation under the optimal contract suggests that PPPs are closer to public provision than to privatization. |
| Tipo: Working or Discussion Paper |
Palavras-chave: Financial Economics. |
| Ano: 2007 |
URL: http://purl.umn.edu/9280 |
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| Engel, Eduardo M.R.A.; Fischer, Ronald; Galetovic, Alexander. |
| This paper reviews the Latin American experience with highway privatization during the last decade. Based on evidence from Argentina, Colombia and Chile, we find that private financing of new highways freed up fewer public resources than expected because public funds were often diverted to bail out franchise holders. Furthermore, many of the standard benefits of privatization did not materialize because of pervasive contract renegotiations. We argue that the disappointing performance of highway privatization in Latin America was due to two fundamental design flaws. First, countries followed a privatize now, regulate later approach. Second, most concessions were awarded as a fixed-term franchise, thereby creating a demand for guarantees and contract... |
| Tipo: Working or Discussion Paper |
Palavras-chave: Build-operate-and-transfer (BOT); Concessions; Cost-of-funds; Flexibility; Franchising; Government subsidies; Present-value-of-revenue (PVR); Regulation; Renegotiation; Public Economics; H21; L51; L91. |
| Ano: 2003 |
URL: http://purl.umn.edu/28456 |
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