Collaborations between the public and private sectors have always been a viable option for governments in Latin America to address the needs of their citizens without jeopardizing the financial stability of the government.
However, the requirements for awarding such contracts or concessions are becoming more stringent in the region, as there is now a general demand for the inclusion of marginalized groups and minorities as well as transparency in the process to prevent corruption or tax avoidance. Experts from the infrastructure sector, who have gathered this week in Panama, have reached a consensus on this matter during the PPP Americas 2023 forum, organized by the Inter-American Development Bank (IDB).
In order for Latin America to meet its infrastructure needs, an average annual investment of $200 billion would be necessary, allowing governments to collaborate with the private sector in financing critical projects.
Through public-private partnerships, a government can engage a company to undertake a project or provide a service, benefiting from their expertise and labor. This generates revenue for the private sector without compromising the financial stability of the government.
During his opening statement at the PPP (Public-Private Partnership) Americas forum, Jordan Schwartz, the executive vice president of the IDB, emphasized that for every dollar invested in resilient and sustainable infrastructure, there are four dollars of economic benefits generated.
“This does not imply that public-private partnerships are the sole solution to address all investment needs, but they are a significant piece of the puzzle,” Schwartz said in front of approximately 250 attendees in Panama City.
“In Costa Rica, there is still reluctance to grant these concessions,” Dahianna Marn, from the National Concessions Council of the Central American country, said during a panel discussion.
Experts who participated in various panels also agreed that public authorities must involve marginalized communities and vulnerable populations from the beginning of projects. Juanita Merchán, a social worker at a private hospital in Bosa, Colombia, suggested a project design that addresses the needs of the communities, ensuring their inclusion from the outset.
Last year, IDB Invest withdrew funding from two hydroelectric plants in Guatemala, following pressure from Mayan groups that claimed they had not been consulted by the authorities. After the Indigenous communities demanded an end to the hydroelectric projects, the bank settled its debt with the construction company.
This year, the IDB identified six categories under which infrastructure projects should be developed, with the potential for financing through public-private partnerships: climate or sustainable investment, digital transformation, improvement of logistics, job creation, promotion of inclusivity, and measurement of social impact. Unlike purely private investments, collaborations between governments and companies must assess their performance to be accountable to the public. They must generate data and establish best practices.
“In the case of Chile, there is an additional evaluation dimension,” Juan Eduardo Chakiel, head of financial analysis at the Directorate of Concessions in the South American country said.
Although Chile’s Ministry of Public Works is responsible for preparing and structuring infrastructure projects, Chekel acknowledges that the Ministry of Finance is involved in approving bids based on an evaluation of fiscal impacts.
