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

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Best practices in Public-Private Partnerships financing in Latin America conservative fund. The feasibility to combine different funds will be studied in the future. Pension funds in Colombia have invested mainly in the energy sector and less so in housing or transport infrastructure. The meager demand for infrastructure investment by Pension Fund Managers (PFMs) is due to significant issuance within the institutional, legal and regulatory frameworks of the transport sector in Colombia. The diagnosis falls along four main axes: A) Balance in the Road Sector Concessions • Institutional weakness of the transport sector restricts its participation in the definition of road networks. • Symbiosis between public expenditure and concessionaires interested in additional works. • The legal framework consolidates the symbiosis and therefore fails to defend the public interest. • Low quality of designs and performance of roads. B) Network planning and projects’ assessment • Lack of sector framework to assess the projects’ opportunity • Road network defined without standardization • Impossibility to halt the construction of “white elephants”. • Unmanageable risks by certain serious concessionaires. • Heterogeneous size projects. C) Projects’ Awards • Erratic project award processes won by expert renegotiation companies (profit hunters). • Free access to concessions without suitable qualification. • Project awarded to small consortiums. • Bolds or plunderer bids are not excluded. • Endemic renegotiations. - 40 -
Day 1 - THIRD SESSION D) Financial Structuring and Security Arrangements • No equity contribution. • Bank debt against balance. • Work financing based on tolls and sluggish construction. • The government finances profitable concessions and displaces the capital market. • An automatic contract extension without bidding produces significant profits. Given this scenario, Arango proposes the following: • PPP Law that will allow for the strengthening of government functions regarding planning, contract procedures and supervision. Likewise, such law can allow for differentiation of concessions from activities usually associated with the acquisitions of assets and services. • Institutional strengthening that allows for the reinforcement of Sectorial Supervision and Economic Regulation activities. • Creation of the National Infrastructure Agency to be in charge of structuring, promoting and defining the finance mechanisms. In the same way, it will manage the Concession Contracts. Peru Lorena Masias pointed out that the international financial conditions of 2008 caused volatility in pension funds. However, in the long run, a positive evolution in the funds was observed, as they increased in 2010 by about 25%. In March 2011, the managed portfolio achieved US $ 30 billion. Pension systems require investing in long-term investment instruments. Concerning this subject, the Bank and Insurance Companies Superintendence (SBS) has issued certain standards - 41 -
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