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Abstract

We now have over a decade of experience with regard to alternative approaches to private participation in transport operations and infrastructure in Latin America. At the beginning of the 1990s, virtually all of the region's railways were under public ownership and control. Ten years later, there were only a few, small publicly operated railways. Seaports generally have been concessioned under alternative models. Most airlines have been privatized and airport concessions of varying types have been put in place throughout the region. Toll roads have been developed or extended with varying degrees of success. Policy initiatives to mobilize private financing and participation of the private sector have been achieved with considerable success. Between1990-1999, cumulative long-term international private capital flows to developing countries (excluding foreign direct investment) amounted to over USD 150 billion. Latin America attracted the largest share of any region, about USD60 billion. In addition, Latin America and the Caribbean undertook about USD220 billion of private infrastructure projects/concessions/investments, of which about USD130 billion - USD140 billion involved divestitures of former public infrastructure. The record of the past decade has shown that is possible, even during recurrent emerging market crises, to mobilize private finance. But the larger question remains as to whether this mobilization was accomplished “on whatever terms necessary”, resulting in an uneven distribution of benefits and ambiguous results with respect to social welfare.2 Moreover, the project financing instruments used also have the incentive to promote integrated, monopolistic market structures either to maximize proceeds to the government or to increase the rate of return to the concessionaire. This paper reviews the region’s transport experience, emphasizing lessons learned and their implications for the next generation of transport projects. Section I describes the background and motivations that helped produce reform efforts. Section II describes principal results for each mode. Section III describes different organizational forms used to structure private participation, emphasizing the development of concessions. Section IV discusses concessions and regulatory risk. Section V analyzes the determinants of transport concession performance. Section VI describes concession renegotiations. Section VII draws lessons from this experience for the next generation of transport projects in Latin America.

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