accounted for in the fiscal accounts or the budget. Arguing that the PPP was entitled to a compensation that restored its “economic equilibrium”, every time a government decision affected it adversely, became much harder under the new law.

The second change was the elimination of the “exceptionality” of PVR contracts. Indeed, PVR contracts began to be routinely used in the late 2000s, before the change of the law by the Ministry of Public Works and since then have become the main means of procuring transport PPPs (see Figure 1). The Minister at the time, Eduardo Bitrán, believed that PVR contracts should become the standard rather than an exceptional method of awarding PPPs, given its success in the Santiago-Valparaíso highway. Moreover, it had become clear that the opposition to PVR was selfinterested when, after the 1999 crisis, several major PPPs ran into financial trouble and were converted to a variable term contract.

The third relevant change was that any additional works must be procured in a competitive auction under the supervision of the Public Works Ministry. The value of the additions would be estimated (for social project evaluation purposes and for use as an upper limit to bids) using unit prices included in the original contract. After the opening of the bids, the SPV can make a lower offer for the additional works. This bid in turn can be contested by a lower offer from the lowest bidder in the auction. The procedure implies that there are scant rents from renegotiations, and the PPPs became less interested in pressuring for additional works through renegotiations.<sup>53</sup> Finally, the new law modified the governance of PPP renegotiations by creating an independent and specialized Experts Panel. The Panel is the first step in the resolution of any conflict between the parties and issues a recommendation after a public hearing. The parties can accept the recommendation or appeal to the Arbitration Commission of the PPP. Moreover, the Arbitration Commissions are no longer allowed to judge in equity but must issue a verdict based on the Law and the contract. The Experts Panel also reviews renegotiations that exceed 25% of the original value of the contract.

# _3.3.2 The effect of the new law_

The new law applied only to PPPs tendered after 2010.<sup>54</sup> Thus we compare PPPs tendered under the old law with those tendered under the new law. Of course, our comparison is only suggestive, because PPPs were not randomly assigned to the old and new laws.

Table 6 summarizes renegotiations under the new and the old law overall, distinguishing also between fixed and variable term PPPs. We have data from 98 PPPs, of which 57 were projects awarded before the 2010 Reform. Of all projects, 55 were fixed-term PPPs and 36 were variableterm concessions.<sup>55</sup> As column 1 shows, as of 2021, 55 of the 98 PPPs had been renegotiated 189 times. On average 20 percent of the total investment was a result of renegotiations. The average hides important differences, however.

> 53 The concessionaire does receive a contract management fee of 8% of the bid value for the additional works.

> 54 More precisely, the older PPPs could decide whether to abide by the reformed Law. None chose that option. 55 Recall that seven PPPs were tendered as fixed term, but then their term was made flexible post the 1999 Asian crisis. Thus, we excluded them from the comparison between fixed and variable term PPPs.

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