Infrastructure Concessions in Latin America: Government-Led Renegotiations

45 Pages Posted: 17 Oct 2005

See all articles by J. Luis Guasch

J. Luis Guasch

World Bank - Finance, Private Sector and Infrastructure Sector (LCSFP)

Jean-Jacques Laffont

University of Southern California - Department of Economics (Deceased)

Stéphane Straub

University of Toulouse 1 - Toulouse School of Economics (TSE)

Date Written: October 2005

Abstract

This paper complements the existing knowledge in the renegotiation literature on infrastructure concessions by analyzing government-led renegotiations. We first propose a multiple-period theoretical framework in which both Pareto improving and rent shifting renegotiations at the initiative of the government can occur. We then perform an empirical analysis based on a sample of 307 water and transport projects in five Latin American countries between 1989 and 2000. While some of the main insights from the previous literature are unchanged, for example concerning the importance of having a regulator in place when awarding concessions and the fragility of price cap regulatory schemes, there are also significant differences as predicted by the model, in particular with respect to the effect of investment and financing, as well as the corruption variables. We provide additional evidence showing that a good regulatory framework is especially important in contexts with weak governance and political opportunism.

Suggested Citation

Guasch, José Luis and Laffont, Jean-Jacques and Straub, Stephane, Infrastructure Concessions in Latin America: Government-Led Renegotiations (October 2005). World Bank Policy Research Working Paper No. 3749. Available at SSRN: https://ssrn.com/abstract=825967

José Luis Guasch (Contact Author)

World Bank - Finance, Private Sector and Infrastructure Sector (LCSFP) ( email )

1818 H Street, NW
Washington, DC 20433
United States
202 473 8606 (Phone)
202 522 2106 (Fax)

Jean-Jacques Laffont

University of Southern California - Department of Economics (Deceased)

No Address Available

Stephane Straub

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

21 Allée de Brienne
F-31042 Toulouse Cedex, 31000
France
05 61 12 85 37 (Phone)
05 61 12 85 38 (Fax)

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