The returns of new private investments in contexts of uncertainty: a proposal for changing the road concession mechanism in Brazil

• Autor(a) principal: Pires, José Cláudio Linhares
• Data de Publicação: 2000
• Outros Autores: Giambiagi, Fábio
• Tipo de documento: Artigo
• Idioma: por
• Título da fonte: Revista de Administração Pública
• Texto Completo: https://periodicos.fgv.br/rap/article/view/6290
• topic: privatização; concessão; transporte rodoviário.

The need to restore and expand the Brazilian highway network has given impulse, during the last five years, to the privatization of roads by means of the concession mechanism. In general, concessions have been granted on a fixed term basis, with the conceding authority establishing the maximum tariff. Notwithstanding the need for private investments, the impacts caused by tariffs on the circulation of goods and on the well being of the people have generated a search for alternative road concession methods. This paper suggests the adoption of the proposal to endogenize the term of the concession contracts, so that the winning bidder is the one that presents the toll with the lowest present value. According to this model, the concession will expire when the actual revenue equals the one expected by the concessionaire. Thus, the conceding authority can make a new bid for the concession, with lower tariffs, anticipating the benefits of tariff reduction, as compared to the current model. This proposal has the merit of being especially important to new projects, whose level of uncertainty about the behavior of the variables that are important for revenue estimation can generate extraordinary profits for the concessionaires if the expected demand is underestimated.