Marchas y contramarchas en la concesión de carreteras en Uruguay

Uruguay has allowed private sector participation in road construction, operation and maintenance at the end of the 20th century, specially though the form of concessions. The economic result of these concessions is difficult to be evaluated yet since they are still under execution. However, some difficulties were detected; some of them are related to the incentives generated by the design of the contract of the concession and others to the regulatory design. Concession contracts are incomplete and there must be determined previously the way conflicts are going to be handled. The institutional framework of Uruguay - were judiciary is not effective to resolve economic problems in an efficient manner -, make necessary the regulation of contract execution and to establish the way conflicts are going to be solved. Regulation should generate credibility among investors in a sector were investment is highly specific, and also should protect consumers and tax payers from the capture of the regulator by the concessionaire. In Uruguay concessions were not preceded by fundamental institutional changes, like the separation of the regulatory authority from the office that promotes the activity, making difficult to achieve the objectives of the regulation and making evident the regulatory weakness in the sector. Some key issues for concession contracts design are identified, based in practice and in economic literature. These issues are determinant in the possibility of the achievement of some basic objectives, like choosing the more efficient bidder, getting near economic efficiency, and appropriating the biggest part of the informational rent in auctions. Concessions in Uruguay illustrate the effect of mistakes in contract design. This paper stresses the effects of contract design on the incentive’s scheme, and the effects of these incentives on the strategic behaviour of concessionaires. It also points out that the dimension of the effect of errors in contract design have in the achievement of government objectives is sensitive on the institutional and regulatory design. Indeed, a weak institutional framework increases the negative effects introduced by errors in contracts.Four concessions are working at the present time. They have had some problems but they also have had some positive aspects like the use of variable term instruments despite of the lack of national and international experience in the field. In 2000 the government announced the end of the program of concession and the beginning of the so called Megaconcesión. This is an strategy to finance road maintenance when public budget is constrained due to economic crisis. The Megaconcesión contract introduces a moral hazard problem since the main variable to verify the fulfilment of the contract is unobservable by the regulator and it does not exist incentive to control costs by the concessionaire. This problem could be serious if the Megaconcesión is privatised. Since the regulatory design was not improved and this involves a huge project, the privatisation may introduce great regulatory risks (opportunistic expropriation and capture of the regulator).