A lever for Chile’s development

It is more than just strengthening highways, airports and ports; it is also about the fight against climate change and the struggle for access and optimization of water management. These are some of the infrastructure topics in the sweeping vision of Sergio Bitar Chacra. He was the director of the Chilean Ministry of Public Works from 2008 to 2010 in the government led by Michelle Bachelet. He is now a senior fellow at the non-profit organization Inter-American Dialogue, which is responsible for analyzing and investigating issues, policies and strategies relating to the American continent.

Sergio Bitar, born in 1940, has had a long political career, which began in the late Sixties, after earning a degree in civil engineering in Santiago and a master’s degree in economics from the Centre d’Etudes de Programmes Economiques in France. As Minister of Mines in Salvador Allende’s government, he was arrested in 1974 after the coup led by Augusto Pinochet and was confined to Dawson Island, the archipelago of Tierra del Fuego. After living in the U.S. and in Venezuela, Bitar returned to Chile in 1985, where he became one of the leaders of the Concertación, the center-left coalition that gathered together the parties of Social Democratic and Christian Democratic inspiration, leading the country for four consecutive legislatures starting from 1990.

From 2008 to 2010, you worked as Minister of Public Works for the Bachelet Government: what’s your assessment of that experience?

During the twenty years of the Concertación, there were major changes in the infrastructure sector in Chile, following the dictatorship during which no investments had been made in this area, which is so very strategic for productivity. Even before my time as Minister, the regulations for increasing investments and the use of public-private partnership had been issued, starting in 1993. The results obtained from these legislative changes were important and made it possible to expand the connections of the country by land, for example, between the cities of La Serena and Puerto Montt, or between Santiago and Valparaíso. We developed ad hoc programs to connect even the smallest towns, and we started the construction of a second coastal highway, as well as the one that crosses the country in the middle, to strengthen the links along this ridge. With regard to airports, through the bidding, we did some work on the one in Arica (in the far north) and in Punta Arenas (at the opposite end of the country, 4,000 kilometers away): two cases that clearly illustrate the need to have a good network of airports, including minor ones, to shorten travel time. Thus, even for projects currently underway, PPP has been used for procurement for the construction of dams to control the water used both for irrigation and for domestic purposes. Quantifying, we can say that on average, considering the contribution made by individuals and regional administrations, the investments made reach approximately 4-5 billion dollars a year.

The document “Chile 2020: Para el Desarrollo Infraestructura” was drafted by the ministry during your term in collaboration with the private sector: could you explain the objectives and contents of this document?

This act was the result of a great effort made to understand what were the most urgent infrastructure projects. It helped us organize investments in an organic way, a necessity that other ministries also felt. Our ministry primarily dealt with the political and strategic aspects, but we also involved actors such as the Cámara de la Construcción, the national association of contractors, and local governments, to understand what their priorities were.

What are Chile’s major infrastructure priorities in relation to what has been done so far?

There are three major challenges. First, the role that Chile wants to have in the South Pacific as a hub between other South American countries and those in Asia. This is not just a matter of money, but also of organizational and competitive capability. A second important element is water management, not only with regard to the promotion of agriculture, but also with respect to environmental prevention linked to climate change. The third priority is represented by links in the extreme south of our country, an area that is home to about 3% of our population, and which is spread across thousands of islands. To improve the system of maritime transport, including river and lake ports, and related services, we started the Conectividad Austral plan, with the objective of improving accessibility to these territories. This project, however, has been neglected due to the end of our executive term in March 2010.

Returning to the choices regarding how to finance new infrastructures, what tools did you choose to carry out the activities of public-private partnership, and why did you decide to favor some in particular?

I would say that, from the beginning, the tool of concession was chosen according to the priorities in place, such as urban highways and their electronic toll systems in major cities such as Santiago, Valparaíso and Concepción, as well as for the development of the airport in the capital. We have also used the concessions to build two hospitals, and now the bioceanic corridors to Argentina and Brazil are also being made in the same way. This tool allows you to quickly make an investment providing a service (the most effective examples are the concessions for the construction of highways, which pay for themselves through tolls) without taxing the poorer segments of the population and cutting new public resources for smaller, but equally important infrastructures. The same tool is now being applied to other activities, such as the construction of plants for water desalination, energy production, and public buildings.

The procurement department created within the Ministry during your term is considered a model of efficiency and transparency: can tell us how you achieved this?

Initially, the burden of bureaucracy on activities related to PPPs was too heavy and required lengthy negotiations with the private sector involved. So we tried to attract and select a range of professionals with specific skills, such as banking, in the supervision of investments and design engineering. The experiment worked well, but over time, this unit has become progressively more vulnerable, because investments in specialized human resources have a considerable cost. Even now, discussions are still ongoing concerning how the unit could be reorganized: whether it should be left within the Ministry of Public Works or if it should turn into an autonomous body, and thus, be able to deal with the application of PPPs in a number of different fields, such as health care or prisons. Or, even if it should be placed under the joint leadership of various ministries, from agriculture to health, able to control the management of the various concessions over the years.

The Costanera Norte, one of the highways crossing the capital city, Santiago, is considered a model of efficiency. What were the project’s winning elements?

This urban highway is one of the main arteries of the city. It is a sound engineering work and the most sophisticated urban toll road in the country, operating with good results for ten years now. So now the next goal would be to extend these systems of payment and digital control also to the suburban connections.

How has the economic crisis been affecting the development of infrastructures in the country?

In 2008-2009, when I took office, we noticed that for some companies, especially those in Spain, it was very difficult to access capital at low interest rates. In other cases, instead, European companies were able to have sufficient banking availability, also due to the fact that the risk of investing in Chile was very low, subject to the payback of investments in the order of twenty years, given the type of transaction. Therefore, we did not immediately undergo a reduction in the volume of investments. Over time, however, we noticed that some companies have decided to sell their assets, a decision that could affect the delivery of services and customer satisfaction.

(Abstract from Autostrade per l'Italia's Magazine "Agorà")