Foreign Infrastructure Investment in Chile: The Success of Public–Private Partnerships through Concessions Contracts

Hill, Andrew | January 1, 2011

Developing countries often have infrastructure needs that far outpace their ability to finance and undertake such projects. The private sector can foster development and help governments meet their infrastructure demands through Public–Private Partnerships (PPPs). PPPs allow governments to shift risk to the private sector and tap into the expertise of profit-maximizing firms. However, governments still face substantial exposure when deals fail. Over the past fifteen years, Chile has had great success with PPPs—most notably through toll road concessions. This paper examines the characteristics of Chile’s PPP regime in order to pinpoint the factors that lead to successful private participation in infrastructure development. First, the bidding process is clear, transparent, and fair. Second, the robust regulatory framework for PPPs has remained stable and predictable. Third, concession contracts encourage compliance with clearly defined expectations and service levels. And finally, Chile’s foreign investment laws protect investors and provide financial assurances for private sector capital.