- Additional Authors
- Ferreira Reis, Ricardo .
- Found In
- OECD Journal on Budgeting Vol. 12, no. 3, p. 1-14 1681-2336
- Description
- 14 p.
- Summary
- As Portugal is facing strong fiscal pressure, government spending on public-private partnerships (PPPs) in the road sector has become a main budgetary constraint. In this article, we show how the financial crisis has created a unique arbitrage opportunity that provides a solution to this problem. Since the private sector is in urgent need of liquidity, we suggest that the Portuguese government should use some of the bailout funds, borrowed at lower interest rates, to buy back the roads concessions, discounting future payments at the high interest rates currently charged to Portugal. For the roads already in operation, the purchase of the assets would significantly reduce future public payments and would also release money into banks and the economy. For the roads currently under construction, we propose that the government buys only the equity of these companies. That would also reduce future payments, and allow for the postponement or even cancelation of some of these projects, while granting private companies an exit from projects that they are no longer able to finance. This operation would save around half of PPP payments over the next 20 years.
- Subject
- LCCN
- 10.1787/budget-12-5k47tb293czq
- OCLC
- oecd-lib-000770
- Author
Miranda Sarmento, Joaquim.
- Title
Buy back PPPs [electronic resource]: An arbitrage opportunity / Joaquim Miranda Sarmento and Ricardo Ferreira Reis
- Imprint
Paris : OECD Publishing, 2013.
- Connect to:
- Indexed Term
Governance
Finance and Investment
- Added Author
Ferreira Reis, Ricardo .
- Found In:
OECD Journal on Budgeting Vol. 12, no. 3, p. 1-14 12:3<1 1681-2336
- Other Standard Identifier
10.1787/budget-12-5k47tb293czq doi