J. Luis Guasch

During the 1990s, infrastructure concessions were hailed as the solution to Latin America's endemic infrastructure deficit, by combining private sector efficiency with rent dissipation brought about by competition. This publication examines the design and implementation of over 1,000 examples of concession contracts, in order to identify the problems that have occurred in the process. It goes on to highlight lessons to be learned for the future, in order to realise the potential benefits of infrastructure reform and to contribute to economic growth and poverty reduction.

Doing it Right

Granting and Renegotiating Infrastructure Concessions

Jean-Jacques Laffont

Stephane Straub

The authors construct a regulation model in which renegotiation occurs due to the imperfect enforcement of concession contracts. This enables the authors to provide theoretical predictions for the impact on the probability of renegotiation of a concession, regulatory institutions, institutional features, economic shocks, and the characteristics of the concession contracts. Then they use a data set of nearly 1,000 concessions awarded in Latin America and the Caribbean countries from 1989 to 2000 covering the sectors of telecommunications, energy, transport, and water to test these predictions. Finally, the authors derive some policy implications of their theoretical and empirical work.

J. Luis Guasch

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