Study evaluates chances of partnerships to prosper in 26 countries

07/14/2022

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Study compares countries based on 106 indicators, grouped into five categories — Foto: Fernando Martinho/Valor

Brazil tops an Inter-American Development Bank (IDB) survey on the environment for public-private partnerships (PPP) in Latin America. Conducted with the Economist Intelligence Unit (EIU), the study “Infrascope LAC” evaluated, for the first time, the chances of such initiatives prospering in each of the 26 countries in the region.

This is the seventh edition of the ranking. However, because it is the first conducted with updated methodology and with all Latin American countries, it is not comparable with previous editions. In 2019, in the last edition, Brazil was ranked 16th out of a total of 21 nations surveyed.

“Public-private partnerships represent a great opportunity to expand markets, generate jobs, contribute to economic recovery and growth in Latin America and the Caribbean, as they foster sustainability, efficiency, and innovation,” said IDB President Mauricio Claver-Carone.

In all, the study compares the countries based on 106 indicators, grouped into five categories: regulation and institutions; project preparation and sustainability; financing; risk management and contract monitoring; and performance and impact evaluation. From a 0 to 100 score, Brazil reaches 76.3 points, slightly above Chile, in second place, with 75.3 – the region’s average was 47.3 points.

Of these five categories, Brazil only does not lead the ranking in two: risk management and contract monitoring, where it loses the lead to Chile, and regulation and institutions, where it is twelfth.

“Brazil is one of the most active markets for PPPs in Latin America and the Caribbean, accounting for more than 40% of infrastructure investments of this type between 2011 and 2020,” the IDB points out.

The study lists four challenges for PPPs in Brazil: ensuring an appropriate division of risk between the private and public sectors, improving coordination between the different agencies involved, strengthening the legality of contracts, and implementing social and environmental evaluation mechanisms. The authors point out that the new biddings law, signed into law last year, is a step in the right direction, but “progress depends on its full implementation, which has been left until 2023.”

They also criticize the lack of clarity on compensation mechanisms for early termination or default of contracts, or on the characterization of force majeure, which represent a source of uncertainty for the private sector. “The case of the Linha Amarela concession in Rio de Janeiro, in which the government expropriated the concessionaire’s assets without a prior process, represents a warning point, although this type of occurrence is not common,” they point out.

The authors emphasize, finally, that the environmental and social issues are taken into account in the structuring of the projects, but are left out of the later stages of monitoring and evaluation of results.

*By Marcelo Osakabe — São Paulo

Source: Valor International

https://valorinternational.globo.com/