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Chile’s PPP Project Pipeline to Help Economy Recover

6 MIN READSeptember 02, 2020
Infrastructure development has proven time after time that it helps reactivate economic activity after a crisis, and this one is no different. The Chilean government and the MInistry of Public Works have decided to continue with a strong pipeline of concessions through its PPP program to continue attracting investment into the sector and the country. During the last eMeeting with the GRI Club Infra Chile, Alfredo Moreno, Minister of Public Works (MOP) discussed Chile’s long-term PPP agenda and the impact COVID-19 has had on the existing projects. 

Chile’s Response to the Crisis 

The sanitary crisis has deeply impacted Chile’s economic activity and employment. In the 2Q20, the GDP fell 14.1% and the Chilean Central Bank estimates a 2020 drop of between 5.5% and 7.5%. Unemployment has reached 12.2% at a national level, nevertheless, the total number of occupied workers decreased by 20% and the number of inactive workers increased to 32%. The number of occupied workers dropped due to halt of activities in the hospitality, food services, construction and commerce sectors. 
 
As of August, 53 comunas or municipalities were still in quarantine, 29 were in transition, 208 in preparation and 55 in initial opening. The Chilean government implemented its Paso a Paso Plan to slowly reopen cities and municipalities depending on COVID indicators. To support the reactivation of the national economy, the government issued a US$12 billion COVID Fund, divided into two different purposes: the Economic Recovery Fund and the Income Protection of Families and Workers fund. Each designated to support citizens who lost their employment, employment policies, SME support and a public and private investment plan. The Chilean government expects public investment to increase 30% by 2021, which will be financed in part by the COVID Fund from 2020-2022. This public investment also seeks to increase private investment equating to more than US$1.2 billion. 

Chile’s 2020-2024 PPP Project Pipeline

Chile’s Public Private Partnership (PPP) structure has been a success in attracting investment since 1993. Since then, 98 contracts have been awarded with a value of more than US$25.05 billion. Today, Chile has 74 ongoing projects and 24 that have already been finalized. The MOP presented a hefty PPP pipeline for 2020-2024 as it plans to tender US$3 billion in contracts on average per year. Among these tenders are 23 freeway projects, 14 hospitals, 5 trams and cable cars, 2 reservoirs and 6 airports. 
 
In 2020 alone, the MOP has a concessions pipeline of 10 projects worth US$2.8 billion. Two of these projects has already been tendered, and in the 3Q and 4Q20, the main projects include:
  • Two highways: Santiago-San Antonio Ruta 78 and the Longitudinal Chile Ruta 5, 
  • Four hospitals (Coquimbo, Red Valvia, La Serena and the National Cancer Institute) 
  • Two airports (Araucania and Acceso Vial AMB). 
 
There are currently six projects already being tendered which have been reviewed to mitigate the risks from the pandemic and have improved the business models of both airports and highways. Some of the changes in the these models include: 
  • Changes  from fixed to variable terms 
  • Adapted investments according to the demand evolution 
  • Delayed calls to give bidders time to consider changes 
 
In 2021, the concessions pipeline includes 13 projects worth US$3.8 billion. These include: 
Highways
  • Orbital sur de Santiago
  • Ruta 5: Caldera-Antofagasta
  • Ruta 5: Chillán-Collipulli
  • Ruta 5: Temuco - Río Bueno y Acceso Valdivia
  • Ruta 68: Santiago - Valparaíso - Viña del Mar
  • Ruta Pie de Monte
 
Hospitals
  • Hospitales Red O’Higgins
  • Hospital Metropolitano Norte
  • Instituto Neurocirugia
 
Others
  • Sistema Alerta Temprana Tsunamis
  • Teleférico Alto Hospicio-Iquique
  • Aeropuerto El Loa
  • Aeropuerto Atacama
 

Chile’s Call to Unsolicited Proposals 

During the GRI eMeeting, the Minister placed emphasis on encouraging the private sector to develop their own private initiatives (IP) or unsolicited proposals to develop alternative infrastructure projects. To this date, 23 private proposals have been tendered worth over US$3.5 billion since 1992 such as the Teleferico Bicentenario, Rutas Antofagasta and the Americo Vespucio Sur. In 2019, 13 new initiatives were submitted. 
 
This year, the government hopes to modify the IP regulatory framework to further encourage these initiatives by simplifying the process and providing more certainty to the companies that submit them. The Santiago-Valparaiso and Mejillones trains, the hydraulic desalination roads and the tram to the Arturo Merino Benitez airport are some of the highlighted IP projects that are currently being evaluated.
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