Por Belén Villegas
Non-resident investors, foreign banks, and global financial investors have steadily increased their penetration into developing countries since the 1990s. Likewise, in the last decades, many Latin American countries have launched public-private partnerships. At the outset, these models were based on public work concessions for highway construction; they were then extended to other infrastructures and public services, such as railroads, ports, hospitals, prisons, and public buildings, amongst others.
The number of PPPs has grown in recent years, sustained politically by two major discursive drivers.
On the one hand, the decrease in public income due to the financial restrictions of recent years caused by changes in the global economy. Many of the conditions that produced a sharp boom in developing countries between 2002 and 2012 have changed. There was a considerable fall in China’s demand and the monetary and trade policies of the USA contributed to downward price pressure on commodities (Erten and Ocampo, 2013). Additionally, most developing countries are experiencing rising debt servicing costs since 2012 (UNCTAD, 2020).
On the other hand, the fear of corruption and misuse of public money has paved the way for the growth of these alliances. Corruption by many Latin American left governments during the pink tide in the first two decades of the twenty-first century has driven arguments about the need to move towards greater “efficiency” and “transparency” which can allegedly be provided by the private sector.
Finally, the Covid-19 pandemic is now accentuating the trend towards PPPs even more, as a lack of revenues together with weak financial infrastructure (UNCTAD, 2020) makes responding to social and economic needs arising from the pandemic very challenging indeed.
Expenditure cuts triggered by constraints in fiscal revenues have a disproportionate effect on women and children (ECLAC, 2019; ECLAC, 2017). Since private investors seek a good financial return on their investment, they often tend to reduce the quality of services or increase tariffs. At the same time, PPPs payback costs often mean that governments have less money to spend on public services and infrastructure needed to support women’s rights.
Governments who struggle to afford basic infrastructure and services often look to PPPs as possible options. These options can only be compatible with social and gender justice when they are supported by mechanisms, such as regulatory and accountability capacities.
We are now at a crossroads. The Covid-19 pandemic is boosting the use of PPPs in developing countries. It is time to strengthen our understanding and introduce regulation if we want development solutions that make lives better, not worse.
Belén Villegas is a PhD student at the Department of Politics of the University of York and alumni of the ELADES's Program of Advanced Studies in Latin American Economies.