The elected president of Argentina, the far-right Javier Milei, has begun to give the first signs of where he will direct the policies of his future Government. And some of his ideas look at Chile with interest. The winner of the elections on Sunday, November 19, will seek to emulate some of the public-private initiatives implemented by his neighboring country, in particular the concessions model.
“We are going to go to a Chilean-style private initiative system,” Javier Milei reaffirmed on Wednesday of this week in a interview with an Argentine radio after his victory at the polls. It is an idea that he had already raised during his campaign and that now he made explicit: “We do not have money, so these works can be handed over to the private sector and completed by the private sector.”
Started in Chile in 1993 with the construction of the El Melón tunnel, the first concessioned work in Chile, which connects the provinces of Quillota and Petorca in the Valparaíso Region, the concession system became the main tool for building public infrastructure in the South American country. 30 years after its implementation, it is a model that adds up to a total investment of 28 billion dollars, equivalent to around 12 years of the entire budget of the Ministry of Public Works allocated to new works.
It consists of bidding among private companies, both national and international, for the construction of large public infrastructure works intended for public service or use, through concession contracts between the Ministry of Public Works and the concessionaire firms. Once built, these companies take charge of the activities necessary for the proper provision or operation of the work or service, under the supervision of the authorities. In exchange, they obtain remuneration that may vary depending on the work in rights, rates, rates, valuations, or the participation granted in the exploitation of the asset. In other words, the private sector builds and receives the right to exploit that investment. This occurs, for example, in the case of highways that can charge tolls from their users for 20 or up to 35 years, depending on the contract. Once this period has expired, the State can take charge of the service or initiate a new tender for its operation and maintenance.
In the last 30 years, Chile has built highways, bridges, hospitals, prisons, airports, among others, under this modality, which today constitute a large part of the country’s public infrastructure.
For Carlos Cruz, executive director of the Infrastructure Policy Council and former Minister of Public Works in the Government of former socialist President Ricardo Lagos (2000-2006), the Chilean system consists of “the State assuming responsibility for providing the community with infrastructure.” necessary for the development of the country and what it seeks is different ways to finance that infrastructure to meet this objective. This is thought to be privatization, but they are different approaches to finding solutions to infrastructure deficiencies.”
And he adds that it is a system that has been successful. “Today, Chile’s road network is recognized as one of the best in Latin America, and 20 concession hospitals and 10 prisons have been built, and that is something that must be considered part of the success, but at the same time it has allowed the public resources that could have been allocated for these purposes have been allocated to improving complementary infrastructure. Chile has 80 thousand kilometers of paved roads, of which 3,000 are concessioned. But the resources that these concessioned roads have freed up for the State have allowed the improvement of around 10 to 12 thousand kilometers of the alternative network,” explains the former Secretary of State.
A system with legitimacy problems
Despite its obvious contribution to the development of public infrastructure in Chile, today the system is experiencing challenges and legitimacy problems among citizens. These are views that, in Cruz’s opinion, are related to the problems generated by high congestion on urban highways, when the rates are also higher. “The infrastructure of urban highways is not coping and every year the rate is adjusted for inflation and, in addition, the number of cars increases and greater congestion is generated. This is generating inconveniences that must be recognized and seen how they are resolved,” says the engineer.
The same conflict is identified by the economist of the Department of Economics of the University of Santiago, Víctor Salas. “Those roads, especially in the urban part, are saturated and people pay a high amount to travel on them, but they do not solve the problem of time because you move slowly anyway. It is part, perhaps, of a deficiency in the structuring of the new roads,” he says.
But Salas also raises other disadvantages: “The State has to commit to ensuring that the companies they built have an acceptable profit for that business. And it compromises the contracts to make that happen. And that depends on the traffic on those highways. In the Chilean case, the first roads were built in spaces where there was great demand, there the system worked, but when there is less demand, problems are generated.”
Another problem that, in his opinion, must be resolved is that the concessionaires do not provide care or protection services against safety problems at the exits of these highways. “These are new things that have been incorporated as deficiencies that any new concession system must review,” he maintains.
PUBLIC WORK
Public works are paid for with taxes, so they displace work from where the market assigned it to where the politician ordered it.
More taxes mean less income for individuals, where the damage caused by theft is added to the fact that they will not buy the goods they want…— Javier Milei (@JMilei) June 30, 2023
Regarding Milei’s plans to implement a “Chilean model”, Carlos Cruz states that “it is a statement that speaks of an appreciation on the part of Argentines of what has been done in Chile and we must feel proud, because they are There are few things that Argentines admire us for.” But, he warns, we must be careful: “What we have achieved in Chile, more than a model, is a practical spirit to satisfy the demands for infrastructure for development and does not obey an ideological perspective, but rather a concrete thing to move forward.” efficiently in terms of providing us with the necessary infrastructure for development.”
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