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The impact of “incomplete contracts” on long-term infrastructure concessions

September 2020|Bulletins » FAL Bulletin
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Author: Sánchez, Ricardo 18 p. Editorial: ECLAC September 2020

Description

Provision of infrastructure services is one of the development bottlenecks for Latin American and Caribbean countries. As the Infrastructure Services Unit team has found in its analysis and has warned for many years, policies in the region have been characterized by underinvestment, fragmentation, and a lack of resilience-related sustainability, to name but a few qualities.

This issue of the bulletin addresses potential problems with long-term infrastructure concession agreements, drawing on theoretical developments regarding incomplete contracts. It offers a preliminary examination of specific problems that could be remedied by applying economic theory, highlighting potential risks in public-private partnerships (PPPs) based on experience in the region and economic theory, with a view to preventing concession agreements from being distorted owing to their incomplete nature.