An Overview of Current Capital Investments in Latin American Port Infrastructure

Abstract

Port infrastructure development is an important requirement for sustainable economic growth as it allows for the increment of trade, which benefits the countries involved. As occurs with most infrastructure projects, however, this investment requires significant amounts of capital with long term returns under conditions or risk and uncertainty, which frequently cannot be afforded by the host government. To address these challenges, Public Private Partnerships (PPPs) agreements have been widely used to meet the port infrastructure needs in many countries. In this article, we analyze the case of port infrastructure development in Latin America and show that the incorporation of managerial flexibility may help increase the value and reduce the risk in this class of projects. We discuss several port projects in the region and discuss in detail the case of the Terminal Portuario Multipropósito de Salaverry to show how uncertainty can be mitigated by incorporating managerial flexibility into the bid documents and contracts.