Update of challenges and changes to the PPP Framework in Chile

José Miguel Torres

Ministry of Public Works March 2015

• Concessions in Chile started in the early ‘90s, due to a huge deficit on productive infrastructure: around US$11.000 millions dollars.

• Based on international experience the PPP framework was created, called “Coordination Unit for Concessions” - CCOP - within the Ministry of Public Works.

• This unit was dedicated mainly to transport infrastructure, as Chile had already privatised the Electricity and Telecom sectors, and it did the same with Ports and the Sanitary System.

A bit of context: the first 20 years

• Faced with these challenges, in 10 years:

• Public Works Ministry - MOP hereinafter – almost quadrupled its budget.

• By means of concessions it reached an accumulated of more than 60 projects by US$14 billiions.

• This big impulse implied a significant advance for the country and its productivity, improving the logistics and also the quality of its exports (e.g., “bruised and dusty apples”).

• Currently, the ever first concession contract of

public roads in Chile - the “El Melón tunnel” - is coming to its end this year.

The first 20 years…

• But since the mid 2000, growth in infrastructure investment has stagnated.

• Therefore, last year President Bachelet launched a new

‘Agenda for Infrastructure, Development and Inclusion – Chile 30.30’

• It poses our sight in the 2030 and thinking today which infrastructure we need to reach that year with USD30,000 income per capita.

The next 20 years: a new leap

• Of the Regulation of Private Initiatives

• A new institution for Concessions

Private Initiatives, as its name tells, are those projects filed by

private partners to the CCOP. They are assessed by the government

and after a long time, it decides whether these projects are ‘of public

interest’ or not.

But the private sector complains this regulation does not give them

any certainty, that the projects ‘sleep in our desks’, and that the

proponent does not bear any advantage for proposing the initiative.

Working together with the private sector, we introduced three major

improvements, basically:

Two regulatory changes

• A more accurate deadline for the Government to decide whether

the project IS of public interest or not. It used to be 45 days which

was never met. Now it is 180 days.

• Also, projects can be divided in stages, so the Gov ought to

respond in each stage which is the next step and how much could

be reimbursed from the studies carried out by the private

proponent.

• So the proponent know beforehand whether the government is

advancing on the project or not, and therefore, whether is worth to

invest in further studies. In case the studies are required by the

government, they shall be reimbursed.

• Prize (bonus) are increased and different categories updated.

The points in the economic offer are increased by a percentage

for the proponent, plus an additional bonus for: innovation and/or

prioritized areas, so to foster IPs in the areas of interest of the

government. E.g., by now, any project that help to improve our

draught crisis, or located in extreme zones, etc.

Private Initiatives

The CCOP has no formal institutional form. It depends of the General

Director for Public Works, so it is in the fourth level in the hierarchy of MOP:

The next 20 years: a new leap

Minister

UnderSecretary

DGOP/GDPW

DV/Roads DA/ Architecture DAP/Airports DOH/ Hydraulic

Works DOP/Ports Dirplan/Planning CCOP now

DGA/GDWater

Plus support units: DAF, Legal, IT, etc.

• The Concessions Unit has no formal institutionality. It is a “coordination”

This is rather an historical debt that ought to be settled.

• 84% of its staff is under fees annual contracts, not legally public

servants

• Nowadays, the CCOP is in charge of 1/3 of the total investmen on Public

Works “planned” for the next 6 years.

• Additionally, the portfolio is highly concentrated in roads and airports,

and the expertise is not used to promote or structure other kind of

projects where PPPs could be of benefit.

• Finally, the relation with other ministries is not always smooth – partly

because is left to the willingness of the in-turn officers – and it should be

institutionalised so both the MOP and the private sector can better plan

for the future of infrastructure.

The next 20 years: some facts

The new proposed General Directorate for Concessions of Public

Works:

The next 20 years: a new leap

Minister

Under Secretary

DGOP/GDPW

DV/Roads DA/ Architecture DAP/Airports DOH/ Hydraulic

Works DOP/Ports Dirplan/Planning

DGA/GD Water New! GDCPW

Plus support units: DAF, Legal, IT, etc.

CCOP now

• Provide formal and higher status to the CCOP by creating a General

Directorate of Concessions of Public Works (DGCOP) within the Ministry of

Public Works;

• Incorporating within the DGCOP some key areas such as:

A unit of project finance, so to ensure projects are “bankable”

A unit to monitor and assess the compliance with the objectives set in

the programmes of infrastructure;

A unit of citizenry participation to look out for early involvement of the

final users in the planning of the projects

• Strengthen the corporate governance of PPPs to validate and give political

support to the decisions made for the medium term.

Main objectives of the Law:

• To reinforce the role of the new DG in promoting the mechanism to

other State bodies that have no expertise, mainly in other non-

explored areas, and also at the sub-national levels.

• By the same token, to promote PPP projects abroad, especially in

those projects where there is not enough technology or expertise in

the domestic market, such as tunnels, cable cars, desalination, etc.

Main objectives of the Law:

It is rather an organisational change, to boost a new generation of PPP

projects, looking for a better understanding within the government, with a

long-term vision, and attempting to promote PPPs wherever the State

considers and decide that they might be useful.

merci

• Private Initiatives: • Cable car Bicentenario, • Cable car Alto Hospicio-Iquique, • Route 5 Chiloé, Chacao-Chonchi, • Route 5 Caldera-Antofagasta, • Parking lots in Concepción.

• Some recently awarded projects: • Customs Complex Centre Los Libertadores USD 214 Mn • Concepción Industrial Bridge USD 84 Mn • AMB – SCL Airport USD 633 Mn

• Some recently added new projects:

• Doble vía Antofagasta – Iquique USD 466 Mn • Transversal Route O’Higgins USD 300 Mn • New route between Santiago and Viña del Mar USD 1,222 Mn

Current projects undergoing:

PROYECTO US$ MM REGION

1. La Punilla Dam 387 Maule

2. Route Nogales – Puchuncaví 192 Valparaíso

3. Improvement Nahuelbuta Route 237 Biobío

4. The Fruits Road 420 O’Higgins

5. El Melón Tunnel 120 Valparaíso

6. New bid Iquique Airport 49 Tarapacá

7. New bid Concepción Airport

45

Biobío

8. Route G-21 to Ski Resorts 107 RM

9. Cable Car Bicentenario (Santiago) 76 RM

10. Road conection Routes 68 - 78 108 RM

Total 1,741

Projects for bidding in 2015: USD 1,500 Mn (app.)