Best Practices in PPP Financing Latin America - e-Institute - World ...

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Best practices in Public-Private Partnerships financing in Latin America termination, contains mechanisms for restoring financial and economic equilibrium and clauses that define tax stability. Also, inflation-indexed earnings are important in order to consider financial closure. Finally, rising investment funds for infrastructure financing in Latin America and the Caribbean reflects the lack of investment in infrastructure, which varies by country. Nevertheless, the main challenge that lies ahead is to have proper PPP regulations, stability and long-term political commitment, simplified procedures for obtaining environmental licenses and expropriation procedures, project preparation studies, as well as appropriate allocation of risks. - 10 -
INTRODUCTION The need to close the gap in the provision of public services and infrastructure is still a great challenge for the governments of Latin America and the Caribbean (LAC). In this context, financing projects through Public-Private Parternship (PPP) 1 schemes, has been one of the more effective ways to achieve this purpose. Nevertheless, the global financial crisis showed the weaknesses of institutions related to PPPs. One of these was the negative impact of access to financing for PPP projects in most countries, including LAC countries. In the same way, during the last years, restrictions for PPP financing increased risk aversion of financial agencies, which translated in a significant increase in the role that LAC governments played in support of PPP programs through several mechanisms. In the case of PPP financing, governments have created or promoted – for example – investment funds (private, hybrid and pension funds), guarantee funds, subsidy funds, as well as innovative financial products. Likewise, some governments introduced changes to legislation, and to PPP contracts, in order to improve the bankability of projects. On the other hand, against expectations of some countries in the region, PPPs have become an effective instrument to mitigate the effects of the financial crisis, through aggressive investment programs. In this scenario, it is evident that the promotion of PPP mechanisms, its effectiveness and sustainability in the long run, includes not only sharing the knowledge about financial instruments, such as investment or guarantee funds among others, but also the institutional aspects associated with the correct performance of PPPs, the corresponding incorporation 1. In Spanish Asociaciones Públicas y Privadas (APPs). - 11 -
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FINAL WORDS Clive Harris, PPP Pract
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