Portugal backpedals on PPPs

Critics of the Portuguese government’s use of public-private partnerships (PPPs) won a victory over the weekend when the government agreed to set up an independent work group to re-evaluate Portugal’s PPP programme – including contracts that have already been signed.
 

Lisbon's Vasco da Gama bridge: Portugal's first PPP

The government’s decision was part of a deal struck with the main opposition party – PSD – to get its budget approved. As part of the agreement, the new work group will “re-evaluate all PPPs, without exceptions, which haven’t been signed or are still in the construction phase” with no new contracts to be signed until the workgroup’s final report is published.
 
The agreement also states that “old contracts will be re-evaluated legally, economically and financially according to the new conditions in the financial markets”, opening the door for the government to renegotiate its annual contributions to these projects.
 
While the deal does not address the fate of particular projects, leaked negotiation documents show that the government is prepared to avoid procuring Lisbon’s new €5 billion airport as a PPP; to drop procurement of its healthcare programme (with the exception of the two hospitals already underway); and to limit the Lisbon-Madrid high-speed rail line to its rail component (the project originally envisaged a third bridge over the Tagus river with both road and rail).
 
The deal reflects a growing wave of opposition to the use of PPPs in Portugal. In a recently published book by a former judge of Portugal’s Court of Auditors, the country’s highest body regulating public spending, the author estimates that Portugal will have to pay some €48 billion in PPP liabilities between now and 2049, equivalent to 30 percent of its current gross domestic product (GDP). That number is almost twice the €28 billion in liabilities recorded by the government.
 
In an interview with national newspaper Público, the author, Carlos Moreno, also urged the government to renegotiate many of the PPP contracts already signed, including the €5 billion of roads closed during 2008 and 2009 as part of the current government’s PPP programme. Moreno argues these contracts “show a clear imbalance in favour of concessionaires regarding the financial and commercial risks shouldered by the state in relation to the returns earned by concessionaires”.
 
He added: “To renegotiate, it’s necessary to strike a deal with the private sector. But I believe that banks and concessionaires should also help to prop up the public budget.”