Politics

Public-private partnerships, a tool to assist economic recovery

Washington, Dec 9 (EFE).- Public-private partnerships are generating renewed interest in Latin America by allowing the use of private capital in infrastructure at a time of fiscal difficulties after the crisis caused by the pandemic, the Inter-American Development Bank (IDB) has said.

This model is to be discussed at the sector’s main forum, PPP Americas 2021, to be held in Sao Paulo (Brazil) on Dec.  9 and 10 with the focus on the need to strengthen collaboration to reduce the wide infrastructure gap in Latin America.

“There is great anticipation that the economic recovery from the pandemic will be leveraged heavily on the use of private capital because all the effort that could be made by the public sector has already been made,” said Gaston Astesiano, head of the IDB’s Public-Private Partnerships unit, in an interview with Efe.

The expert explained that infrastructure investments have “a multiplier effect” since each dollar invested generates two dollars of additional GDP growth.

These public-private partnerships “take into account the life cycle of the asset,” such as a road, an airport or a transmission line, which last between 20 and 30 years.

Astesiano said that “unlike traditional public works contracts” in which the private sector hands over the asset to the authorities once construction is complete, in public-private partnerships “the private sector is also in charge of its operation and maintenance.”

“It is a paradigm change: it does not imply the privatization of the service, since it continues to be public, but the state takes on the role of supervision and compliance with a contract,” he said.

Latin America has different levels of development in this type of contracts, with countries such as Brazil, Chile, Peru and Colombia with solid and defined frameworks, which is why the IDB’s role as advisor in the proper structuring of these projects is important, Astesiano said.

The region’s economy is expected to grow by 6.3 percent this year, after contracting 7 percent in 2020 due to the economic impact of the coronavirus pandemic. EFE

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