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Traffic Risk Mitigation in Highway Concession Projects: The Experience of Chile


  • José M. Vassallo


Traffic risk mitigation remains a challenging aspect of highway concessions. This paper evaluates three mechanisms applied in Chile to mitigate traffic risk: the 'Minimum Income Guarantee' (MIG); the 'Least Present Value of the Revenues' (LPVR); and the 'Revenue Distribution Mechanism' (RDM). Specifically, the paper focuses on the performance of LPVR and MIG during the economic recession that took place between 1998 and 2002. In the context of this recession, the paper explains the reasons that led the government to implement the RDM mechanism. The paper gives some guidelines about the applicability of these mechanisms in other countries, highlights the beneficial features of LPVR in reducing traffic risk and avoiding concession contract renegotiations, and finally provides some recommendations as to how to make LPVR more attractive to private promoters. © 2006 LSE and the University of Bath

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  • 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.
  • Handle: RePEc:tpe:jtecpo:v:40:y:2006:i:3:p:359-381

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    Cited by:

    1. Vassallo, José Manuel, 2010. "The role of the discount rate in tendering highway concessions under the LPVR approach," Transportation Research Part A: Policy and Practice, Elsevier, vol. 44(10), pages 806-814, December.
    2. Alexander Moore & Stéphane Straub & Jean-Jacques Dethier, 2014. "Regulation, renegotiation and capital structure: theory and evidence from Latin American transport concessions," Journal of Regulatory Economics, Springer, vol. 45(2), pages 209-232, April.
    3. Diego Aycinena & Rimvydas Baltaduonis & Lucas Rentschler, 2014. "Valuation structure in first-price and least-revenue auctions: an experimental investigation," Experimental Economics, Springer;Economic Science Association, vol. 17(1), pages 100-128, March.
    4. Albalate, Daniel & Bel, Germà, 2009. "Regulating concessions of toll motorways: An empirical study on fixed vs. variable term contracts," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(2), pages 219-229, February.
    5. Viegas, José M., 2010. "Questioning the need for full amortization in PPP contracts for transport Infrastructure," Research in Transportation Economics, Elsevier, vol. 30(1), pages 139-144.
    6. Babatunde, Solomon Olusola & Perera, Srinath, 2017. "Analysis of traffic revenue risk factors in BOT road projects in developing countries," Transport Policy, Elsevier, vol. 56(C), pages 41-49.
    7. Iseki, Hiroyuki & Houtman, Rebecca, 2012. "Evaluation of progress in contractual terms: Two case studies of recent DBFO PPP projects in North America," Research in Transportation Economics, Elsevier, vol. 36(1), pages 73-84.
    8. Tan, Zhijia & Yang, Hai, 2012. "Flexible build-operate-transfer contracts for road franchising under demand uncertainty," Transportation Research Part B: Methodological, Elsevier, vol. 46(10), pages 1419-1439.
    9. Beria, Paolo & Ramella, Francesco & Laurino, Antonio, 2015. "Motorways economic regulation: A worldwide survey," Transport Policy, Elsevier, vol. 41(C), pages 23-32.
    10. repec:eee:transb:v:102:y:2017:i:c:p:105-123 is not listed on IDEAS

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