Risk Allocation For Public-Private Partnerships In Infrastructure Projects In Costa Rica

Costa Rica's lag in infrastructure is compromising its competitiveness among other countries of the region and the rest of the world.The Global Competitiveness Report 2014-2015 ranked Costa Rica in the 119 th place among 144 countries.Currently the investment the country is doing in infrastructure is 1.1% of the GDP,whereas the required investment is 3.7%.To overcome this gap,the Government has used the concession model to develop important infrastructure projects.Nevertheless,the approach remains shy as only five projects,in almost twenty years,have been developed through this model.Furthermore,the projects given in concession have gone through a strong public opposition which concluded in the resignation of the project Corredor San José – San Ramón in 2013.The research shows that there is a relation between the risk allocation,the success of the projects and the value for money outcome.Therefore,this research aims to determine which are the actual practices related to risk allocation in Costa Rica and to know if they are in tune with the trends in the international practice.Through a comprehensive literature review,the risk allocation and the practices in locations like Australia,Mainland China,India,Hong Kong,Indonesia,Greece,South Africa,the United Kingdom and Singapore were identified.Then,the actual risk allocation agreed in the contracts of the five infrastructure projects given in concession in Costa Rica was found and analyzed using unstructured interviews: Terminal de Contenedores en Moín(TCM),Terminal Granelera en Puerto Caldera(TGPC),Aeropuerto Daniel Oduber Quirós(ADOQ),Ruta 27 San José – Caldera,and Corredor San José – San Ramón(despite of its resignation).This study provides to domestic and international managers,politicians,investors and researchers a better understanding on risk allocation in PPP infrastructure projects.The number of risks identified according to the international practice is 89,from which 51 were identified in Costa Rica.The findings suggest that the practices in risk allocation in Costa Rica are in tune with the international practices and the percentage of risk transferred to the Private sector has been achieved.Nevertheless,there is also evidence of misallocation in political,social and relationship risks;which is actually a matter of risk identification as the risks are not explicitly addressed in the contracts.Hence,important improvements need to be done in the risk identification and management practices.Finally,flaws were also identified in the communication strategies,management practices and leadership of Government?s officials in charge of managing these projects.It is recommended to: develop a guide that assists the implementation and management of PPP infrastructure projects,improve the practices in risk management,improve the auditing of the projects currently operating or under construction,to improve the communication strategies of the Government,to look forward to improve the conditions that allow local investors and contractors to participate,and to encourage the academic institutions to do further research in the PPP area.