Private Infrastructure Concessions: The 1989-1994 National Highway Program in Mexico

22 Pages Posted: 3 Dec 1998

See all articles by Ramiro Tovar Landa

Ramiro Tovar Landa

Instituto Tecnológico Autónomo de México (ITAM)

Jacques Rogozinski

Inter-American Development Bank (IDB)

Multiple version iconThere are 2 versions of this paper

Date Written: September 1998

Abstract

In the late 1980s Mexico, like other emerging economies, embarked upon an accelerated expansion of its toll highway system by offering concessions to the private sector for construction and operation. The government awarded Build-Operate-Transfer (BOT) contracts where a private entity builds the infrastructure and operates it for a specific period. Then, in theory, once the private entity has recovered its investment and obtained a certain return, the infrastructure reverts to the public sector. This model has gained wide acceptance not only to roads but in water supply and power. However, agency cost in imperfectly competitive markets, like network industries, often led to opportunistic behavior by concessionaires. Income guarantees should be used as incentive devices before demand and political risk to reward efficiency throughout project life span instead of serving as a means of indiscriminate compensation. An alternative to such contracts is proposed when the full transfer of ownership rights to the infrastructure assets is not feasible.

JEL Classification: H54, H57, L91

Suggested Citation

Tovar Landa, Ramiro and Rogozinski, Jacques, Private Infrastructure Concessions: The 1989-1994 National Highway Program in Mexico (September 1998). Available at SSRN: https://ssrn.com/abstract=138273 or http://dx.doi.org/10.2139/ssrn.138273

Ramiro Tovar Landa (Contact Author)

Instituto Tecnológico Autónomo de México (ITAM) ( email )

Rio Hondo No.1 Col. Tizapan-San Angel
01000 Mexico, D.F, Federal District 01080
Mexico
525 6284168 (Phone)
525 6526284 (Fax)

Jacques Rogozinski

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States
202-623-1730 (Phone)

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