Infrastructure Financing with Unbundled Mechanisms

1 During the last decade the role of the public sector in the financing of infrastructure projects has changed radically, both in developed and in emerging economies. On the one hand, budgetary constraints are now more restrictive. On the other hand, it is also widely accepted that the private management of public projects generates efficiency gains. 1 As a consequence, the role of the public sector is shifting from financier/ owner/manager of projects to regulator and guarantor , and its involvement in the productive economy is shrinking. Simultaneously, private sector initiative is invading areas that were previously considered in the exclusive domain of the public sector. Such a situation has required a new dimension for public-private arrangements to allocate responsibilities, risks and profits. The generalized response to this new environment has taken the form of arrangements in which private initiative is empowered to construct and finance the projects, retaining their ownership temporarily. In some cases, depending on the nature of the project and on the management capabilities of the public sector , the infrastructure is publicly operated on a lease basis, as is the case of some power plant projects. 2 Alternatively, the private sector operates the infrastructure under a concession contract, as is the case with