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Concession model is crucial to promote public works

Concession model is crucial to promote public works

  • Congresswoman Silvia Hernández, CINDE and IDB led a forum to discuss how to promote innovative funding mechanisms and public infrastructure management, to guarantee long-term high-quality service.
  • Public-Private Partnerships emerge as essential tools to upgrade the country’s infrastructure.

San José, Thursday January 17, 2019. The Congresswoman from the Liberación Nacional Party, Silvia Hernández, the Costa Rican Investment Promotion Agency (CINDE), and the Inter-American Development Bank (IDB), organized the forum “From Lagging to Regional Leadership: Costa Rica’s Concessions Program”. The event was held this morning to analyze the country’s challenges and opportunities to improve the country through innovative funding mechanisms and public infrastructure management.

The First Lady of Costa Rica, Claudia Dobles, participated in the event; as well as CINDE’s Managing Director, Jorge Sequeira, the ex-president of the National Infrastructure Agency of Colombia, Dimitri Zaninovich; Deloitte’s expert on Projects and Infrastructure, Federico Villalobos and Congresswoman, Silvia Hernández. The moderator was Costa Rica’s permanent ex-representative to the United Nations, Eduardo Ulibarri.

The forum gathered more than 130 people from the public and private sector and exchanged opinions on the need for a management model that promotes efficient and viable public works on the medium term.

The plan would include the following conditions: 1. Contribute through the public works (new, expansion or maintenance) to economic reactivation, 2. Improve the competitiveness of the productive sector, 3. Facilitate and promote the use of public transport, 4. Improve the population’s quality of life, especially recurring bottlenecks and delays in its mobility, in order to facilitate a more integrated regional development.

The Congresswoman mentioned a previously presented bill that has the purpose of optimizing public infrastructure assets and strengthening the pre-investment and the development of technical capabilities, aiming to apply transparent and efficient partnership models between the public and private sector. Today, this the only bill in the legislative stream focused on improving the public works management model.

The project looks forward to encourage innovative mechanisms for financing and managing public infrastructure that guarantee a long-term quality service, but also, to benefit citizens by enhancing the assets. It also encourages to develop Costa Rica’s stock market by offering investors attractive and commensurate investment options that go along with their risk profile.

A new vision, an upgrade

The experts addressed the differences between the conventional model and the concession model.

First Lady, Claudia Dobles, explained the government’s goals and its agenda on infrastructure, especially, the Metro Train. “We are working on actions to reactivate the national economy, upgrading infrastructure and transportation. We agree on strengthening the national concessions program, a model that allow us to have a long-term investment vision and increases Costa Rica’s quality of life.”

Congresswoman Hernández described the differences between the traditional hiring model and the concession model, explaining that: “the first model does not transfer risks and doesn’t work based on results. Instead, the State hires private companies throughout different stages of the project without transferring responsibility for financing nor any other risks. The concession model makes the company responsible in each of its stages and the project is created by a financing scheme. The State always owns the project,” she said.

Jorge Sequeira, Managing Director of CINDE, commented that "re-launching the concessions program is another step in the right direction. This is an effective way to improve Costa Rica’s infrastructure competitiveness, making us even more attractive as a potential investment destination and to promote new employment sources inside and outside the Metro area. There are positive experiences in other countries, with tangible results that can be replicated locally to benefit the neediest populations and Costa Rica’s general development, just as the fiscal situation prevents a self-sufficient investment. "

The former president of the Infrastructure Agency of Colombia, Dimitri Zaninovich, said that: "large infrastructure projects offer the possibility to continue promoting the economy. Nowadays, these projects can be built with the private sector, which share its knowledge, efficiency and resources. We want to share the Colombian experience about the largest PPP program in Latin America and support Costa Rica in a new big bet ".

Federico Villalobos said that: "with the objective to diminish the infrastructure gap and increase the low investment levels (-1% of GDP per year, US $ 600 million), Costa Rica promotes a new public works concession program with projects such as expanding the San José-Caldera highway, the San José-Cartago corridor, the San José-Río Frío highway and the metro electric train. We must evaluate Costa Rica’s competitiveness positioning. The key role of the concession figure is to promote strategic projects that have been waiting for years. The country faces many challenges to guarantee success of new concession projects and, at the same time, position itself as an investment destination in infrastructure. "