Reason Foundation

Reason Foundation

Annual Privatization Report

Puerto Rico Building Robust Infrastructure Privatization Program

Puerto Rico advanced public-private partnerships in schools, highways and aviation in 2011

Leonard Gilroy
May 15, 2012

In two short years, the administration of Governor Luis Fortuño has turned Puerto Rico into a privatization leader among its state peers. To address the territory's chronic deficits and unsustainable debt, the administration has advanced a range of reforms that include major spending reductions, optimization of government operations and the enactment of a new law in 2009 inviting private investors to modernize or develop new infrastructure across a variety of sectors.

That law, Act No. 29, is now bearing fruit. It authorized government agencies to enter into public- private partnerships (PPPs) with private firms for the design, construction, financing, maintenance or operation of public facilities, with a set of priority projects that include toll roads, transit, energy, water/wastewater facilities, solid waste management and ports. The law also established a new Public Private Partnership Authority (PPPA), a new center of excellence within the Puerto Rico Government Development Bank responsible for identifying, evaluating and selecting PPP projects and for monitoring and enforcing the terms of PPP contracts.

Despite its short life, the PPPA has built a world-class PPP program utilizing global best practices, and it has already seen some major successes advancing projects through the procurement pipeline:

In a June 2011 press release announcing the winning bidder on the toll road lease, Gov. Fortuño noted that PPPs are just getting started in Puerto Rico: “We have come a long way in just 24 months since the enactment of our P3 legislation. We will continue to move forward with important projects and our commitment to P3s is stronger than ever.” At press time the PPPA had not announced the next round of potential PPPs in its project pipeline, but in August 2010 the authority's board of directors directed staff to begin an evaluation process and develop feasibility studies for several potential projects, including a new minimum custody correctional facility, a ferry between the municipality of Fajardo and the municipalities of Vieques and Culebra, a technology project for traffic control automation and traffic violation control, and redevelopment initiative targeting areas surrounding Tren Urbano (San Juan's regional rapid transit system) stations.

Leonard Gilroy is director of government reform at Reason Foundation. An earlier version of this article originally appeared in Reason Foundation's Annual Privatization Report 2011, released in April 2012.

Leonard Gilroy is Senior Managing Director, Pension Integrity Project &
Director of Government Reform

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