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

Day 1 - FOURTH SESSION
Years From
Creation
Source of
subsidies
Average
subsidy
per project
Total
Investment
in Subsidy
projects
(US$ Billion)
Brazil 7 Budget 25% 12.4
Colombia 17 Budget 54% 16.8
Mexico 3 Fund 39% 3.4
India 6 Fund 20% 3.5
The selected cases present a range of options and experiences
Source: Castalia Strategic Advisors.
Table N.6
Guzmán specified that creating a subsidy fund has worked
better than budget appropriations for every project.
The reasons are that: (i) it generates pressure for more
transparency and clear rules, (ii) allows private sector agents
to see the government’s commitment, (iii) creates incentives
for PPP, and (iv) simplifies the approval process.
He noted that a greater advantage may come from the subsidy
if payments are made once results are tangible. For instance,
in Brazil payment occurs during the operation, according to
performance levels. In the case of Colombia, payments are
made during the construction of the infrastruture, and are
pursuant to the attainment of performance. In India, payments
are made during the construction of the asset, and are
pursuant to attainment performance indicators. Additionally,
there are payments during the first years of operation. Finally,
in Mexico payments are made on specific dates established by
the contract, when the Monitoring Unit approves the payment
(Refer to Table N.7).
Likewise, it is important for the Government to take into
account the fiscal impact and economic justification of all
financial support mechanisms. For example, in the event of
subsidies, it should assess the value of the subsidy; regarding
guarantees, it should analyze the liabilities’ contingent value
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