Status of 3Ps through the lens of infrastructure projects in Latin America

Abstract

By 2040 the world’s population is expected to increase from 7.4 billion today to 9 billion people, with an economy growing at an average rate of 3.4% per year. This will require huge amounts of investment in order to satisfy the energy demand to accommodate the needs and satisfy the living standards of the population. According to the IEA, expectations are that by 2040 electricity will represent half of the total energy supply investment. An expansion in trade and investment will be required to face the challenges of meeting this energy demand. Despite sizeable efforts to invest in transportation, power, water, and telecoms to satisfy the needs of a growing population, these efforts alone will not be sufficient. The world currently invests $2.5 trillion in these areas although the average investment required is $3.3 trillion a year. Public Private Partnerships present are alternative route to satisfy these needs, however, 3Ps currently account for only 5 - 10% of total investment. At the same time, there are doubts as to their efficiency and their cost of development. This paper looks at the rational to develop 3Ps, its meaning, performance, issues and success factors, and the progress made in this sector in Latin America. Governments have limited resources to invest, allocation is complex, and there are too many needs to be satisfied. Governments, therefore, need to allocate resources in the most efficient way possible. They need a very strong decision-making process to select the best project development alternative and thus more robust frameworks are needed. 3Ps are one of a variety of modes of strategic alliances and as they can be interpreted differently it is important that all stakeholders share the same understanding of both the expectations and the performance of the alliance. The performance assessment of 3Ps is difficult to measure as it has the same issues as any strategic alliance. Some effort has been made to increase analyses that can shed light on the advantages of 3Ps. Among emerging regions, 3Ps in Latin America are above average; they perform well in the development of regulations, institutions, and financing. However, there is more work to be done to enhance investment and the business climate in general and as more 3P experience is accumulated, a generalized perception of expectations will emerge, Unsolicited proposals could drive more innovative and efficient projects, however, there are some areas which could improve, such as transparency and encouraging competition in order to increase reliability. As in any strategic alliance, the relationship among parties in 3Ps is complex. The only way to contribute in filling the investment gap and bringing better conditions to the population is by aligning visions and interests and creating win-win collaborative environments. This will develop efficient projects that can provide benefits to all stakeholders, as no one can do everything alone, collaboration is needed.