Innovative Infrastructure Fund to Ensure the Financial Sustainability of PPP Projects: The Case of Chile

Abstract

Recently, the Chilean government created the Chilean Infrastructure Fund (CIF) that will allow taking advantage of the value of existing infrastructure assets. The fund will enable the government to finance new infrastructure projects with the resources obtained from new concessionaires’ payments to the government for the value of retendering existing public-private partnership (PPP) projects. The purpose of this paper is to evaluate the contribution that this new public institution will bring to the financial sustainability of infrastructure in Chile, the opportunities and challenges for its implementation, and its economic value. The research has a qualitative and quantitative approach. Based on the understanding of the new concept of asset recycling, the application of economic foundations, and financial methodologies such as discounted cash flows and real options, the research assessed the institutional and economic value of the new Chilean Infrastructure Fund. The main findings are that the new Chilean Infrastructure Fund will create public value and public wealth since it will foster good governance, streamline the concession system, accelerate the implementation of sustainable PPP projects, and improve planning schemes among others. Other countries could follow this experience, promoting infrastructure funds to improve governance and accelerate the implementation of sustainable PPP projects.