7 Keys to Develop PPPs in Latin American Cities

Public-private partnerships (PPPs) have been promoted worldwide as a solution for governments to meet their needs for infrastructure and public services with the participation of the private sector. The expansion of this model in different Latin American countries has resulted in a need to generate knowledge based on the experience of other countries in the region, in order to leverage lessons learned for national and local governments interested in implementing PPPs.

To this end, CAF—development bank of Latin America—presented today in Lima the publication Public-private partnerships in Latin America. Facing the challenge of connecting and improving cities, with case studies on the application of the PPP model in cities. “Given the importance of improving quality of life in urban areas for the development of Latin America, and the growing need for investment that it entails, we put forward various reflections and recommendations on the application of PPPs in cities, which is a novel experience due to the lack of literature on the subject and the importance of investment in urban settings for Latin America in years to come,” said Lucía Meza, Director of Projects for the North Region of the Vice-Presidency of Infrastructure at CAF.

The book introduces seven key factors for a successful implementation of PPPs in Latin American cities based on the knowledge and experience gained over the years in other settings: a) institutional governance and legislation, b) planning and decision-making, c) tariff policy coordination, d) the possibility of securing additional resources to finance projects, e) allocation of risk, f) mechanisms to attract private investors, and g) public interest defense.

The publication contains four case studies which also address key challenges in PPPs in the region, such as new infrastructures adopting this model in the field of telecommunications and water; and the need to transform institutional governance. One case in Peru is the project developed by the National Fiber Optics Network (RDNFO), which aims to provide proper telecommunication data access to remote areas in the country.

This case showed how RDNFO helped democratize and balance opportunities of access to communication services between urban and rural areas, effectively reducing the digital divide. In addition, the anticipated increase in the number of internet users is expected to contribute positively to the development of Peru’s society and economy.

“Peru has become the first non-OECD country to adhere to international quality standards for PPP project evaluation. The legislative progress made by the nation is a step forward in the development and establishment of the national PPP system, and will attract more international investment,” said Manuel Malaret, CAF Director-Representative in Peru, during the opening ceremony of the presentation of the book.

After the presentation made by José Manuel Vassallo, professor of transportation at the Technical University of Madrid and author of the book, a symposium was held, which featured Patricia Pella, Director of the Ex-ante Control Department at the Office of the Comptroller General; José Aguilar, director general of Policy and Regulation in Communications at the MTC; Lucía Meza; and Mónica López, road specialist from the Directorate of Analysis and Technical Assessment at CAF.

This new book is the third in a series of publications issued by CAF with the purpose of generating knowledge on PPPs in the region. Its inception is part of an effort initiated by CAF back in 2010 with the presentation of the book “Public infrastructure and private participation: Concepts and experiences in the Americas and Spain”, and continued in 2015 under the title “Public-private partnership in Latin America: Learning from experience”.