Chile, Brazil and Peru are the countries in Latin America and the Caribbean with the most capacity to carry out sustainable public-private partnerships (PPPs) to develop infrastructure and increase access to basic services, according to the new edition of the Infrascope. The Infrascope was developed by the Economist Intelligence Unit in collaboration with the Multilateral Investment Fund (the “MIF”), a member of the IDB Group.
The Infrascope is an interactive learning tool and benchmarking index, accompanied by a summary report, that provides a valuable starting point for private-public dialogue about improving project conditions and strategies. It can be downloaded for free and allows users to self-score indicators and change weights to reflect dynamic country circumstances. The tool is also very effective for companies engaged in PPPs to compare frameworks and evaluate risks across countries.
In the Infrascope, nineteen countries in Latin America and the Caribbean are evaluated, based on an independent assessment by the EIU, according to their relative capacity to develop and implement PPPs in water and sanitation, transportation and energy (specifically, electricity generation). The study analyzes the laws, regulations, institutions and practices that affect the environment for PPPs and evaluates these conditions alongside the rate and quality of PPP project development in the region.
Good infrastructure contributes to increased productivity and economic growth. Yet, the ability of many governments to develop infrastructure to meet the needs of their populations is inhibited by constrained public-sector budgets. Under public-private partnerships, private entities contract with the public-sector, assume project and other risks and provide investment in return for gains from operating or managing infrastructure and/or providing services. Private-sector management techniques can contribute to increased efficiency, lower costs and an increase in the quantity and quality of infrastructure and basic services.
However, for the above mentioned gains to be realized through PPPs, it is important that governments have adequate technical capabilities and an appropriate legal, regulatory and institutional framework in place.
Chile topped the index again in 2010 owing to strong regulatory, institutional and investment conditions and legal reforms this year that improved the PPP process. The second and third-ranked countries, Brazil and Peru, displayed similar characteristics, along with strong political will to initiate projects, strong institutional capacity and sound implementation practices.
Main Findings of the Infrascope
Legal and regulatory framework: Out of the 19 countries in this study, four have reformed their regulatory framework for PPPs since 2009 when the first edition of the Infrascope was released. Reforms in three countries—Chile, Mexico and Panama—modified and improved pre-existing laws. The fourth country, Guatemala, approved a new law altogether by passing a comprehensive PPP law in April 2010 for concession projects in the transport and energy sector.
Institutional framework: The top three countries—Brazil, Chile and Peru—receive the best scores for institutional frameworks. All three countries have reasonable checks and balances in place for the project planning and oversight stages but have room to improve.
Operational maturity: Six of the countries in this study have had at least 20 concession projects in the past ten years (1999–2008). Countries in the region, however, still lack full capacity to plan and oversee PPPs and to effectively regulate the sectors in the Infrascope on a consistent basis.
Investment climate: Most countries in the region experience some degree of political interference in institutions, policy implementation and business. However, the study found that three countries in the region—Chile, Colombia and Peru—have a high level of political will for PPPs across sectors. These countries not only enjoy political consensus around PPPs, they also have active PPP programs. Another six countries in the region benefit from favorable political attitudes and strategies for PPPs, though project implementation is generally slower.
Financial facilities: Although the risk of non-compliance with PPP contracts has not changed for most countries since last year, three countries—Uruguay, Argentina and the Dominican Republic—have seen improvements in their evaluations on this indicator.
Subnational adjustment factor: Of the 19 countries in this study, six facilitate and implement PPP projects at a sub-national level. Although it fell short of a perfect score, Brazil tops the list for this indicator.
The first edition of the Infrascope was released in June 2009. This year the EIU and the MIF have worked to enhance the tool through improvements in methodology and by including information on PPPs at the subnational level and for an additional sector (electricity). To access and learn more about the Infrascope, the country rankings, and the environment for public-private partnerships in Latin America and the Caribbean please refer to the Infrascope tool and accompanying report.