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01 December 2002

Smaller Latin American economies will find that PPP structures in the power sector may be the best route to infrastructure upgrades. By Adriana de Aguinaga and Roberto Vellutini, the Inter-American Development Bank.

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This article examines three cases in the power sector of Latin America in which a certain quanitity of public resources (monetary or equivalent) has been used to make private delivery of public services (electricity generation and distribution) feasible in smaller economies. The cases reviewed have received financing from the Inter-American Development Bank through its Private Sector Department, as described in Table 1.

Table 1: IDB financing (US$ million)

Total B-Loan and

Project project costs A-Loan cofinancing

Privatization of electricity 94 25 25

distribution in Guatemala

Capitalization of electricity 285 75 113

distribution in the

Dominican Republic

Construction and operation 66 16.5 33

of a geothermal power plant

in Costa Rica

Total 445 116.5 171

For certain projects (e.g. electrification in poor rural areas, power generation based on fuels with costly exploration) the level of investment and/or risk assumed by the private investor is not commensurate with either: (a)...

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