Chile has been a pioneer in Latin America with its much-praised infrastructure concessions system. The public-private partnership (PPP) system has allowed the country to tackle the massive infrastructure deficit it faced in the early 1990s. The public works ministry (MOP) has implemented since 1993 through the Chilean PPP model around US$15 billion in road, airport and public buildings infrastructure projects. The extent of the program is reflected in the number of works and participants involved in its 20 years of existence: 76 projects developed by over 140 companies.

Last July, partly in order to revive a sluggish economy, the government launched an infrastructure plan involving US$28 billion in public investment by 2020 via the concession mechanism. Annual spending on public infrastructure, currently estimated at 2.5% of GDP, could rise to 3.5% of GDP with the planned investments, which would be in line with other countries in the region that in recent years have upped their investments significantly, including Brazil, Mexico, Colombia and Peru.

However, that is still not seen as enough. To overcome the infrastructure deficit, analysts suggest investments totaling US$58.1 billion would be needed during the period 2014-18, the equivalent of 5% of annual GDP.

The challenges associated with such investments are not inconsiderable. The current concession system has run out of steam somewhat, having reached the end of a cycle. The intention now is to build a new long-term institutional framework to provide continuity of plans beyond the term of a single government.

Patagonia, Chile (CREDIT: AFP).


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