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Pensioners Paying for Projects: A new meaning for PPP in Latin America?

Daniel Pulido's picture
Follow the author on Twitter: @danpulido
 
Public-Private Partnership (PPP) projects in infrastructure have traditionally been financed by banks. However, interest in new funding sources is increasing as long-term money from banks has become more difficult and expensive to get, while the assets held by pension funds and other institutional investors have continued to soar. In a context of low bond yields, pension funds are looking for attractive long-term investment opportunities to diversify their holdings and meet their long-term payment obligations. Realizing an opportunity to match supply and demand, governments and investors in the developed and developing world have turned their attention to Project Bonds, debt instruments issued by PPP project companies in the capital markets as a way to fund infrastructure investments.

These “Project Bonds” mostly target institutional investors - including pension funds, and have generated a great deal of interest among investment bankers, lawyers and investors. All this hype raises a number of questions: Are these “Project Bonds” really living up to expectations? Can governments really rely on Pensioners Paying for Projects (a newfound meaning for PPPs!)? What do we need to do to turn these instruments into a significant source of financing and close the infrastructure investment gap?

How should a city administration respond to the shared cab phenomenon?

Shomik Mehndiratta's picture
Follow the authors on Twitter: @shomik_raj and @cataochoa
 
Smartphone apps are bringing massive changes to the taxi industry in ways that urban transport has not seen in a long while. From the US to China and Latin America (Bogota, Mexico), taxi alternative services have attained an impressive level of penetration in a short amount of time, often with great controversy. Indeed, many cities across the world are struggling with what to make of these services and how to regulate them.

While we have not been significantly involved with such services thus far, a recently appointed mobility secretary in a big Latin American city has asked us for support on developing an approach to the shared taxi industry, as part of a "Smart Mobility" strategy for the city. In that context, we wanted to start a conversation on optimal strategies for cities to be able to welcome and foster such innovations, while still capitalizing on the opportunity to create value for its citizens.

What Does Piketty’s Capital Mean for Developing Countries?

Gabriel Demombynes's picture

The economics book that has launched a thousand blog posts, Thomas Piketty’s Capital in the Twenty-First Country, tells a grand story of inequality past and present. One would expect that a book on global inequality would have much to say about development. However, the book has limited relevance for the developing world, and the empirical data he marshals for developing countries is weak.

Piketty’s central story is that convergence in the developed world and slower population growth will leave us with a permanently modest economic growth rate (g). Coupled with a constant return to wealth (r), concentration of capital ownership, and high rates of savings among the wealthy, the low g leads to rising wealth inequality over a longish run—something like the second half of the 20th century.

A low-g future for the developed world is a mostly uncontroversial assumption. (He assumes future GDP per capita growth of 1.2 percent for the U.S.) But Piketty draws conclusions for the world as a whole, and we are a long way from global convergence. As Branko Milanovic noted in his review, catch-up growth could fend off Piketty’s inequality dystopia for some time.
 

How to Take Control of your Personal Finances

Rekha Reddy's picture


​Many of our aspirations revolve around improving our personal finances—keeping better track of spending, saving towards a goal or perhaps getting out of debt.  How can we work towards these goals and follow through on these changes? 

Latin America and the Caribbean: Back to Normal?

José Juan Ruiz Gómez's picture


The ritual publication by the leading multilateral organizations, think tanks and investment banks on the macroeconomic outlook for Latin America and the Caribbean which, without being too dramatic, puts an end to the era of growth rates above the region’s potential, has inevitably attracted the interest of policymakers, investors and the public in general.

Replacing the car with a smartphone… Mobility in the shared economy

Shomik Mehndiratta's picture
Follow the author on Twitter: @shomik_raj
 

Photo: Sam Kittner / Capital Bikeshare
The sharing economy has been around for a long time. But recent technological advances like the development of real-time transactions through smartphones and credit cards have taken the potential of the shared economy to a whole new level, and opened the door for substantial changes in the way we think about urban mobility.

Recently, I was invited to join a panel on the sharing economy moderated by Prof. Susan Shaheen at UC Berkeley, focusing more specifically on shared mobility.

The panel acknowledged that shared mobility is already transforming the mobility landscape globally, but could go a lot further in increasing the sustainability of urban mobility systems. The panel identified a number of key research gaps that we need to pay close attention to if we want to create a policy environment that is conducive to mobility innovations. Three that I want to highlight are:
 
  • Supporting open data and open-source ecosystems is critical considering the tremendous potential of open-source software and data-sharing for improving transport planning, facilitating management and providing a better experience for transport users (for more detail, please see my previous blog on how the transport sector in Mexico is being transformed by open data)
  • Looking into shared-economy solutions for those at the bottom of the pyramid – solutions that don’t require credit cards and smartphones as prerequisites (see this blog on the bike-share system in Buenos Aires for a good example)
  • The world of driverless cars is coming – which, depending on how policy responds to it, could spell really good or really bad news for the environment: if such technology is used primarily in shared mobility scenarios, it could greatly reduce the environmental cost of motorized transport; on the other hand, the possibility of “empty trips” with zero-occupancy cars could exacerbate the worst elements of automobility (see Robin Chase’s blog in The Atlantic Cities for a great discussion on this). That is why it is critical to create a policy environment that appropriately prices the ‘bads’ of congestion, accidents and emissions while steering the world of driverless cars towards sharing and resource conservation.

A new path away from violence: the story of Raul

Jessica Gallegos's picture

Raul is short, skinny and has an enormous smile. Looking at him, it was hard to believe that this fifteen-year-old had long been feared in his community as a gang leader and had been the author of horrible crimes in Colonia Santa Marta in El Salvador.

“Will you take me for a 1,000 pesos?”— Making sure public transport subsidies really target the poor

Camila Rodriguez's picture
Also available in: Español

Follow the authors on Twitter: @TweetingCamila and @shomik_raj
 

A commuter in Bogotá, Colombia
(World Bank)
When analyzing the modernization of Bogota’s extensive bus system, we read a lot of technical analyses on public transport business models, risks, incentives, etc. But in a city where 11,6% of the population lives below the poverty line, social reality trumps all theoretical studies. In a new report entitled The promise and challenges of integrating public transportation in Bogotá, experts from Embarq estimate that as many as 23% of bus users sometimes plea for discounted rides, asking the bus driver: “Will you take me for 1,000 pesos?”

This situation points to one of the toughest challenges faced by public transport systems: how to reconcile financial sustainability and social inclusion? On the one hand, if fares do not cover operational costs, systems need subsidies to survive, which can pose serious financial and political risks. In some cases, transport systems operating with inadequate financial resources may experience system deterioration, safety problems and service curtailment. On the other hand, if fares are set to reflect the real price of transport services so that operators can recoup their costs without subsidies, then the poor are often priced out. This is exactly the problem that Bogotá is currently struggling with, despite its well-deserved reputation for innovation and excellence in public transport: fares of its state-of-the-art Transmilenio Bus Rapid Transit (BRT) system are pegged at cost-recovery levels that may price out many of the city’s poorest. Recent studies show that the lowest income households in Bogotá (socioeconomic strata 1, 2, 3 according to the local classification) are already devoting 20-30% of their total income to transportation, spending more than US$2 daily.  The situation may be even worse when Bogota’s city-wide public transit reform (the Integrated Public Transport System or SITP) is fully implemented, as bus drivers, with the adoption of smart cards, may no longer be able to offer unofficial discounts to passengers at their discretion, a common practice in the traditional system.

Building Metros in Latin America: Not all projects are created equal, but they all need strong institutions

Daniel Pulido's picture
Follow the author on Twitter: @danpulido
 

Construction of the Quito Metro
Representatives from international and local commercial and development banks convened in Bogota, Colombia at the end of March for the Second International Workshop to discuss the First Line of the Bogota Metro. Bogota is currently undertaking the engineering studies required to develop the metro project but the key question remains:  how to develop it in a manner that reduces costs, mitigates risks and maximizes benefits for users? Together with other Bank colleagues, I was invited to the workshop to discuss the procurement and financing models adopted in other urban rail projects in Latin America (see workshop presentations here). My main take away from the discussions is that although there is no such thing as a single recipe for success, there is one widely recognized essential ingredient: strong government institutions with the sufficient managerial and technical capacity to prepare, manage and supervise these complex projects.

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