Concessions of infrastructure in Latin America: Government‐led renegotiation

J. Luis Guasch · Jean‐Jacques Laffont · Stéphane Straub

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Abstract

Abstract This paper analyzes government‐led renegotiations in infrastructure concession contracts in Latin America, based on the same sample used in Guasch, Laffont and Straub (2003) to examine firm‐led renegotiations. After extending the theoretical framework to a multiple‐period context in which both Pareto‐improving and rent‐shifting renegotiations at the initiative of the government can occur, we develop an original instrumental variable strategy to address the issue of contract endogeneity and derive empirical results. While some of the main insights concerning the importance of having a regulator in place when awarding concessions and the fragility of price cap regulatory schemes are unchanged, significant differences arise with respect to the effect of investment and financing, as well as the corruption variables. We provide evidence that a good regulatory framework is especially important in contexts with weak governance and political opportunism. Copyright © 2007 John Wiley & Sons, Ltd.

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References

2001Econometric Analysis of Cross Section and Panel Data 1995Automobile Prices in Market Equilibrium 1993A Theory of Incentives in Procurement and Regulation 1994A theory of incentives in procurement and regulation 2000Corruption and government: causes, consequences, and reform 1999Corruption and Government 2002The Theory of Incentives 2001The Theory of Incentives: The Principal-Agent Model

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2011Infrastructure and Development: A Critical Appraisal of the Macro-level Literature 2017Not All Sparks Light a Fire: Stakeholder and Shareholder Reactions to Critical Events in Contested Markets 2015Infrastructure Public–Private Partnerships in the Developing World: Lessons from Recent Experience 2006Renegotiation of Concession Contracts: A Theoretical Approach 2015Anatomy of public-private partnerships: their creation, financing and renegotiations 2013Exogenous Determinants for Renegotiating Public Infrastructure Concessions: Evidence from Portugal

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