IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v13y2020i1p219-d469578.html
   My bibliography  Save this article

Is Ex-Post Fiscal Support to PPPs Sustainable? Analysis of Government Loans Granted to Shadow-Toll Roads in Spain: A Case Study

Author

Listed:
  • Laura Garrido

    (Centro de Investigación del Transporte (TRANSyT), Universidad Politécnica de Madrid, Calle Profesor Aranguren 3, 28040 Madrid, Spain)

  • José Manuel Vassallo

    (Centro de Investigación del Transporte (TRANSyT), Universidad Politécnica de Madrid, Calle Profesor Aranguren 3, 28040 Madrid, Spain)

Abstract

Budgetary constraints are prompting many governments to encourage private financing of transport infrastructure through public–private partnerships (PPPs). Fiscal support measures are often used to improve the financial feasibility of PPPs and to rebalance the economics of contracts to compensate for government-imposed changes. In the latter case, information asymmetry, political haste, and lack of competition may lead to poor government decisions in establishing support measures. Furthermore, lack of government support may lead to early termination of contracts and non-implementation of projects with high potential social benefits. This paper analyzes the awarding of subordinated public participation loans (SPPLs) to 10 brownfield shadow-toll highway PPPs in Spain after the government imposed additional works. It is hypothesized that, given the political importance of the projects and the viability problems they soon experienced, the government may not have set out the terms of SPPLs efficiently. This paper evaluates the financial and social impacts of awarding these loans to three of these projects to assess whether the government’s decision to support them was justified from a sustainable perspective. The results show that, while the government’s decision was reasonable, the design of the SPPL and its awarding conditions should be improved to ensure the public interest.

Suggested Citation

  • Laura Garrido & José Manuel Vassallo, 2020. "Is Ex-Post Fiscal Support to PPPs Sustainable? Analysis of Government Loans Granted to Shadow-Toll Roads in Spain: A Case Study," Sustainability, MDPI, vol. 13(1), pages 1-23, December.
    • Handle: RePEc:gam:jsusta:v:13:y:2020:i:1:p:219-:d:469578
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/13/1/219/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/13/1/219/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Faruk Buyukyoran & Selin Gundes, 2018. "Optimized real options-based approach for government guarantees in PPP toll road projects," Construction Management and Economics, Taylor & Francis Journals, vol. 36(4), pages 203-216, April.
    2. Balázs Égert, 2015. "Public debt, economic growth and nonlinear effects: Myth or reality?," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 226-238.
    3. Eduardo Engel & Ronald Fischer & Alexander Galetovic & Ginés de Rus, 2015. "Colaboración Público-Privada en infraestructuras: Reforma del sistema concesional español de autopistas de peaje," Policy Papers 2015-11, FEDEA.
    4. Lihe Tu & Emanuele Padovani, 2018. "A Research on the Debt Sustainability of China’s Major City Governments in Post-Land Finance Era," Sustainability, MDPI, vol. 10(5), pages 1-21, May.
    5. J. Luis Guasch, 2004. "Granting and Renegotiating Infrastructure Concessions : Doing it Right," World Bank Publications - Books, The World Bank Group, number 15024, December.
    6. Cheng Chen & Dan Li & Caixia Man, 2018. "Toward Sustainable Development? A Bibliometric Analysis of PPP-Related Policies in China between 1980 and 2017," Sustainability, MDPI, vol. 11(1), pages 1-25, December.
    7. Sarmento, Joaquim Miranda & Renneboog, Luc, 2021. "Renegotiating public-private partnerships," Journal of Multinational Financial Management, Elsevier, vol. 59(C).
    8. Timothy Irwin, 2003. "Public Money for Private Infrastructure : Deciding When to Offer Guarantees, Output-based Subsidies, and Other Fiscal Support," World Bank Publications - Books, The World Bank Group, number 15117, December.
    9. Timothy C. Irwin, 2007. "Government Guarantees : Allocating and Valuing Risk in Privately Financed Infrastructure Projects," World Bank Publications - Books, The World Bank Group, number 6638, December.
    10. Luiz Eduardo Brandao & Eduardo Saraiva, 2008. "The option value of government guarantees in infrastructure projects," Construction Management and Economics, Taylor & Francis Journals, vol. 26(11), pages 1171-1180.
    11. Olexandr Yemelyanov & Anastasiya Symak & Tetyana Petrushka & Roman Lesyk & Lilia Lesyk, 2018. "Assessment of the Technological Changes Impact on the Sustainability of State Security System of Ukraine," Sustainability, MDPI, vol. 10(4), pages 1-24, April.
    12. World Commission on Environment and Development,, 1987. "Our Common Future," OUP Catalogue, Oxford University Press, number 9780192820808.
    13. Barbosa, Diogo & Carvalho, Vitor M. & Pereira, Paulo J., 2016. "Public stimulus for private investment: An extended real options model," Economic Modelling, Elsevier, vol. 52(PB), pages 742-748.
    14. P.C. Bueno & J.M. Vassallo & K. Cheung, 2015. "Sustainability Assessment of Transport Infrastructure Projects: A Review of Existing Tools and Methods," Transport Reviews, Taylor & Francis Journals, vol. 35(5), pages 622-649, September.
    15. Andreea Stoian & Laura Obreja Brașoveanu & Iulian Viorel Brașoveanu & Bogdan Dumitrescu, 2018. "A Framework to Assess Fiscal Vulnerability: Empirical Evidence for European Union Countries," Sustainability, MDPI, vol. 10(7), pages 1-20, July.
    16. Bel, Germà & Bel-Piñana, Paula & Rosell, Jordi, 2017. "Myopic PPPs: Risk allocation and hidden liabilities for taxpayers and users," Utilities Policy, Elsevier, vol. 48(C), pages 147-156.
    17. Dailami, Mansoor & Leipziger, Danny, 1998. "Infrastructure Project Finance and Capital Flows: A New Perspective," World Development, Elsevier, vol. 26(7), pages 1283-1298, July.
    18. José M. Vassallo, 2006. "Traffic Risk Mitigation in Highway Concession Projects: The Experience of Chile," Journal of Transport Economics and Policy, University of Bath, vol. 40(3), pages 359-381, September.
    19. Basilio ACERETE & Mar GASCA & Anne STAFFORD, 2019. "Two Decades Of Dbfo Roads In The Uk And Spain: An Evaluation Of The Financial Performance," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 90(2), pages 269-289, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Buso, Marco & Moretto, Michele & Zormpas, Dimitrios, 2021. "Excess returns in Public-Private Partnerships: Do governments pay too much?," Economic Modelling, Elsevier, vol. 102(C).
    2. Feng, Zhuo & Zhang, Shui-Bo & Gao, Ying, 2015. "Modeling the impact of government guarantees on toll charge, road quality and capacity for Build-Operate-Transfer (BOT) road projects," Transportation Research Part A: Policy and Practice, Elsevier, vol. 78(C), pages 54-67.
    3. Shi, Shasha & An, Qingxian & Chen, Ke, 2020. "Optimal choice of capacity, toll, and subsidy for build-operate-transfer roads with a paid minimum traffic guarantee," Transportation Research Part A: Policy and Practice, Elsevier, vol. 139(C), pages 228-254.
    4. Jamie S. Davidson, 2010. "Driving growth: Regulatory reform and expressways in Indonesia," Regulation & Governance, John Wiley & Sons, vol. 4(4), pages 465-484, December.
    5. Patricio Mansilla & José Manuel Vassallo, 2020. "Innovative Infrastructure Fund to Ensure the Financial Sustainability of PPP Projects: The Case of Chile," Sustainability, MDPI, vol. 12(23), pages 1-21, November.
    6. Jin, Hongyu & Liu, Shijing & Sun, Jide & Liu, Chunlu, 2021. "Determining concession periods and minimum revenue guarantees in public-private-partnership agreements," European Journal of Operational Research, Elsevier, vol. 291(2), pages 512-524.
    7. Ibrahim Ari & Muammer Koc, 2018. "Sustainable Financing for Sustainable Development: Understanding the Interrelations between Public Investment and Sovereign Debt," Sustainability, MDPI, vol. 10(11), pages 1-25, October.
    8. Kenneth A. Small, 2009. "Private Provision of Highways: Economic Issues," Transport Reviews, Taylor & Francis Journals, vol. 30(1), pages 11-31, July.
    9. Athias, Laure & Saussier, Stéphane, 2018. "Are public private partnerships that rigid? And why? Evidence from price provisions in French toll road concession contracts," Transportation Research Part A: Policy and Practice, Elsevier, vol. 111(C), pages 174-186.
    10. Ales S. Berk & Dejan Podhraski, 2018. "Superiority of Monte Carlo simulation in valuing real options within public–private partnerships," Risk Management, Palgrave Macmillan, vol. 20(1), pages 1-28, February.
    11. Ganuza, Juan-José & Llobet, Gerard, 2020. "The simple economics of white elephants," Mathematical Social Sciences, Elsevier, vol. 106(C), pages 91-100.
    12. Dimas de Castro e Silva Neto & Carlos Oliveira Cruz & Joaquim Miranda Sarmento, 2017. "Understanding the patterns of PPP renegotiations for infrastructure projects in Latin America," Competition and Regulation in Network Industries, , vol. 18(3-4), pages 271-296, September.
    13. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2013. "The Basic Public Finance Of Public–Private Partnerships," Journal of the European Economic Association, European Economic Association, vol. 11(1), pages 83-111, February.
    14. Marco Percoco, 2012. "Infrastructure Investment and Growth in Developing Countries: Does the Type of Contract Matter?," Journal of Infrastructure Development, India Development Foundation, vol. 4(2), pages 139-152, December.
    15. Zhe Cheng & Huanming Wang & Wei Xiong & Dajian Zhu & Le Cheng, 2021. "Public–private partnership as a driver of sustainable development: toward a conceptual framework of sustainability-oriented PPP," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(1), pages 1043-1063, January.
    16. Eduardo Engel & Ronald D. Fischer & Alexander Galetovic, 2020. "When and How to Use Public-Private Partnerships in Infrastructure: Lessons from the International Experience," NBER Chapters, in: Economic Analysis and Infrastructure Investment, pages 333-364, National Bureau of Economic Research, Inc.
    17. David Martimort & Flavio Menezes & Myrna Wooders & DANIEL DANAU & ANNALISA VINELLA, 2015. "Public-Private Contracting under Limited Commitment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(1), pages 78-110, February.
    18. Rubo Zhao & Yixiang Tian & Ao Lei & Francis Boadu & Ze Ren, 2019. "The Effect of Local Government Debt on Regional Economic Growth in China: A Nonlinear Relationship Approach," Sustainability, MDPI, vol. 11(11), pages 1-22, May.
    19. Antonio Estache & Ellis Juan & Lourdes Trujillo, 2011. "Public–Private Partnerships in Transport," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 30, Edward Elgar Publishing.
    20. Engel, Eduardo M.R:A. & Fischer, Ronald & Galetovic, Alexander, 2019. "Soft budgets and endogenous renegotiations in transport PPPs: An equilibrium analysis," Economics of Transportation, Elsevier, vol. 17(C), pages 40-50.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:13:y:2020:i:1:p:219-:d:469578. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.