Concessionaires want the state to cover TAG debt risk

- Tuesday, February 23, 2010

Concessionaires want the state to cover TAG debt risk

Chilean inter-urban highway concessionaires want the state to cover the financial risk of implementing electronic toll collection devices, known locally as TAGs, an official from the public works ministry's (MOP) concessions division told BNamericas.

MOP has been negotiating the implementation of TAGs with the concessionaires for over two years in an effort to reduce traffic congestion. If an agreement is not reached soon, the discussion will be inherited by president-elect Sebastián Piñera, who takes office on March 11.

"This is not necessarily good news for users," the official said. "If the new government agrees to meet the concessionaires' demands, the whole country will end up paying for something that should be covered by the companies." The Chilean government already guarantees highway concessionaires minimum income.

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Highways that have yet to implement TAGs - including Ruta 68, connecting capital Santiago to coastal cities Valparaíso and Viña del Mar - currently use toll booths which increase travel time for users. Congestion caused by lines of vehicles waiting to pay at the booths increases notoriously during peak seasons, such as summer and Easter, and people sometimes get stuck for hours in traffic jams.

While concessionaires acknowledge the benefit of TAGs for users, they are concerned revenue might fall if some users fail to pay their bills, the official said. They are therefore asking to negotiate individually with MOP and modify concession contracts to ensure they continue to receive the same income, even if some users do not pay bills.

The highway operators also argue that the risk is higher now that the new concessions law lowered the penalty for users that fail to pay these bills.

These concerns have been strongly criticized by MOP experts who say highway concessions have a good business model and that users are entitled to improved services. As far as MOP is concerned, the concessionaires should cover the risk of TAG debts as it is part of the business.

Regarding the changes to the law, MOP says the amount concessionaires were previously allowed to charge for unpaid bills was abusive, which is why it was modified.

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