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  1. 'Nuevos Vientos Sobre el Canal San Carlos', El Mercurio, Sunday, July 12, 1998 (Propeidades section), 1, 24.

  2. 'Charting the Rise and Fall of Infrastructure Spending', Governing, January 1992, 61.

  3. 'Atecedentes para la discusión sobre reformulación de la política nacional de desarrollo urbano', Ministerio de Vivienda y Urbanismo, Republica de Chile, 1. This document, received March 27, 1997 from Instituto Libertad y Desarrollo, outlines intended urban public policy for Chile.

  4. Ibid., 2.

  5. Ibid., 4-6
  6. Ibid., 7-8.

  7. An overview of the dozen projects may be found in Prospecto Informativo: Primer Programa de Concesiones Viales Urbanas, Informe Ejecutivo, Ministerio de Obras Públicas, March 1996, 30ff. (Tr. Prospectus on the Urban Road Concessions Program, Ministry of Public Works.)

  8. 'Tras Rechezar Única Propuesta: Desierta Licitacion de Proyecto Costanera Norte', El Mercurio, Tuesday, February 16, 1999 (El País section), C5.

  9. Source: 'Typical Interstate System Cost per Mile', Document Route Symbol HNG-13 (March 21, 1997), U.S. Department of Transportation, Federal Highway Administration, Federal - Aid & Design Division. The document was received by fax on June 2, 1997 from C. Duran of the FHA. The cost per rural mile is $9.84 million and the cost per urban mile is $44.13 million.

  10. Because the project will be built largely over existing infrastructure and the north bank of the Mapocho river, only 109 properties will have to be condemned. Seventy of the condemnations will be made in Recoleta, a lower-middle class sector of Santiago. An additional 36 properties (four of them agricultural) will be taken from lower-middle class Renca, and only three properties will be taken from Lo Barnechea, a sector mixed with upper and lower class neighborhoods. Thus, any problems resulting from the condemnations, although not inconsequential, will likely be relatively less cumbersome than they would be if more properties were being condemned. Of course, affected real property owners will be compensated according to fair market value. Source: 'MOP Abierto a Seprar Kennedy de Costanera', El Diaro, April 8, 1997.

  11. The project will include 39 overpasses, five bridges, over nine kilometers of flood walls along the river bank, and four tunnels/trenches within denser areas. Potential demand by the year 2000 is expected to be between 35,000 and 115,000 vehicles per day on Costanera Norte and between 25,000 and 82,000 vehicles per day on Kennedy. Costanera Norte is a thirty year concession intended to save time and transactions costs, improve highway safety, alleviate congestion (not only by having better traffic flow on the toll road but by decongesting alternate routes used largely by buses), and reduce air and noise pollution. Resumen Ejecutivo Sistema OrienteaePoniente, Ministerio de Obras Publicas, 1997, 3. (Tr. Executive Summary of the East-West [concession] System, Ministry of Public Works.)

  12. Ibid., 4-5.

  13. Public choices are made when one person's decision is also a decision for another person (or vice-versa). Public choice theory has burst the once-dominant romantic vision of politics by suggesting that people are self-interested in all choices, including public choices. Hence, political actors primarily pursue their own self-interest, leading to distortions in the political process and public provision of goods, services, and regulation (Mitchell and Simmons 1994).

  14. It might be that the World Bank is indirectly (and perhaps unintentionally) perpetuating rent seeking activity by providing special funding for more "privatization", through providing "debt capital for road construction and maintenance" (Emmons and Brand 1993, 5, footnote 9).

  15. Likewise, complaints have been raised that construction projects are being choked by conflicting or stringent regulations, in Alabama for instance (Bemis 1997). Truckers complain that consumer prices are higher because of bungling and inefficient regulations and taxes on transportation (Donohue 1992). Many scholars, including Robert Stein, have argued that "non-direct" service modes (i.e., contract, franchise, voucher, subsidy, etc.) can be utilized most effectively by municipalities to mitigate negative externalities (Stein 1996, 20, 14). Therefore, Chilean concessions are on the cutting edge of public policy.

  16. An earlier study by Bruce Ingersoll and Alice Reid put the annual loss at $6 billion (Sauter 1997, 1-2).

  17. On Wednesday morning, June 11, 1997 from 8:45 to 10:00, I experienced a traffic jam caused by an earlier downpour leading to severe inundation at one end of Avenida Kennedy. Adding to the problem, I also noted three cars stopped and blocking the center lane (once) or left lane (twice) with their blinkers on. When I finally managed to get off Kennedy, short of my destination, I saw the sewer spewing out torrents of water through three manhole covers and exemplifying the undercapacity of the Santiago drainage system ae a problem that can also be seen elsewhere during and after a storm (on Avenida Francisco Bilbao oriente for example before being upgraded in 1998 and 1999).

  18. The critique of central planning by Friedrich A. von Hayek and Ludwig von Mises, the Austrian knowledge problem, says that planners will fail to provide public goods and services efficiently, and perhaps not even effectively, since social knowledge is dispersed and fragmented. By extension, this critique applies to all forms of regulation also. Even the most erudite and well intentioned planners can not expect to garner enough knowledge to make optimal decisions in the public interest, and certainly not decisions that take into account the subjective preferences of all those in society. Leonard Reid, followed by Milton Friedman, further argued that no one has the requisite knowledge to make something as simple as a pencil on account of all the knowledge that goes into its production. Note that the knowledge problem is not simply imperfect information. The knowledge problem suggests that it is impossible for government planners to allocate resources or production correctly since they cannot know the pertinent information that is implicit in prices and the market. Firms, as groups of individuals specializing in certain production, can make accurate and profitable local decisions based on cost-benefit expectations. Even though their forecasts will be in error at times, it is at least possible for them to be correct (unlike planners) and, in fact, solvent firms will be correct most of the time.

  19. It is also hoped that highway concessions will bring positive benefits to various real property holders, 'Camino a la Plusvalia', Qué Pasa, March 29, 1997 8-17 [tr. "Road of the Unearned Increment", noting that the word Plusvalia is commonly used in Marxian rhetoric]. Also see a memorandum numbered 403 and dated April 29, 1997, from Pablo Trivelli O. at the Ministerio de Vivienda y Urbanismo, Gabinete del Ministro, in which he outlines similar basic objectives of the ministry for urban policy.

  20. 'Private California Toll Road Needs Drivers', USA Today, December 28, 1995.

  21. The Coase Theorem basically says that where the costs of contracting are low and there is free bargaining, the assignment of property rights by a judiciary will not affect the level of negative externality. Hence, markets will tend to provide optimal externality solutions without the use of costly judicial services in such cases.

  22. Gordon Tullock defines rent seeking as "the manipulation of democratic [or other types of] governments to obtain special privileges under circumstances where the people injured by the privileges are hurt more than the beneficiary gains" (Tullock 1993, 24, cf. 51). James Buchanan notes, "The term rent seeking is designed to describe behavior in institutional settings where individual efforts to maximize value generate social waste rather than social surplus" (Buchanan 1980, 47).

  23. Information on the interviews are as follows. Interview with Alcalde (Mayor) Cristián Labbé at his office in the municipal building of Providencia on Av. Pedro de Valdivia, June 30, 1997 5:00pm to 6:30pm. Interview with Alcalde (Mayor) Joaquín Lavín Infante at his office in the municipal building of Las Condes on Av. Apoquindo, June 13, 1997 in the morning. Interview with Maximiliano Ruiz and Fernando Vergara of Infraestructura 2000 at their office in downtown Santiago on the evening of June 18, 1997. Interview with Vincente Dominguez Vial, leader of Concessiones Chilena Limitada, along with his son, at their office in Canadá 185-A, Providencia, Santiago on July 25, 1997. Interview with Carl Weber in his office in Amunategui 277, suite 1003, on Thursday, July 17, 1997 (downtown Santiago). Interview with Claudio Garín Carrasco, Manager of Urban Concessions, Ministry of public Works, in his office in Merced 753, 9th floor, on July 28, 1997 (downtown Santiago). Interview with Ives Montélimard, chief executive of Consorcio Internacional Autopistas Chilenas (Transroute), along with his son Philippe Montélimard, on the afternoon of July 14, 1997 at their office at Cruz del Sur 133, Suite 302, Las Condes, Santiago. A follow-up phone conversation with Ives was made on Januray 6, 1999 at 1pm after the near failure of the Costanera Norte project 2461232.

  24. Decreto Ley Numero 2,186 (June 1978), Ley Organica de Procedimiento de Expropriaciones, Apendice del Codigo de Procedimiento Civil, 325-352, especially 325 and 340ff.

  25. Like Chile, Mexico has implemented build and transfer concession policy for highways (Emmons and Brand 1993, 6). However, under the Mexican system, an alternate non-tolled route, often being of lover quality, is required (p. 4). Such rivalry augments the risk to the concessionaire, and will thus be reflected in cost estimates and project feasibility studies.

  26. Anonymous (1997), 'Postergan Concesiones en Santiago', El Mercurio, May 15, A1, A11, and Anonymous (1997), 'Positivo Informe de Impacto Ambiental', La Tercera, May 8, 3.

  27. The three firms are Endesa, Tribasa, and Delta. Anonymous (1997), 'Tendencia a la Concentración en Concesiones Viales', Estrategia, March 31, 1, 51.

  28. It might be of some interest to note that most of the bidding firms are not Chilean. As of April 1997. Ten of the potential concessionaires prequalified for the estimated $313 million project were foreign while only three were Chilean. See 'En Junio Adjudican Costanera Norte', Estrategia, April 4, 1997, 32.

  29. Anonymous, 'Acuerdo Preliminar en Costanera Norte', El Mercurio, Tuesday, August 25, 1998 (El País section lead story).

  30. Anonymous (1998), 'Fracasó Licitación de la Costanera Norte', El Mercurio, Thursday, December 31 (cuerpo Portada lead story) and Anonymous (1999), 'Continúa en Análisis Proceso de Licitación', El Mercurio, Wednesday, January 6 (section El País), 7.

  31. 'Tras Rechezar Única Propuesta: Desierta Licitación de Proyecto Costanera Norte', El Mercurio, Tuesday, February 16, 1999 (El País section), C5.

  32. 'MOP dispone "revisión completa" de su plan de concesiones viales en Santiago', El Diaro, January 6, 1999, 5.

  33. Anonymous (1999), 'Gbno. Reactiva Concesiones Viales en Stgo.', El Mercurio, Tuesday, May 4 (front page), A1ff.

  34. Anonymous (1999), 'Nuevo Eje Urbano para Santiago: US$53 Millones Valdrá La Avda. Costanera Sur', El Mercurio, Thursday, April 22 (section El País), C1, C2.

  35. Some scholars argue that the "status quo" system of property rights, especially upon given public choice and Pigouvian or command and control type perspectives, makes human existence bellicose (Dragun and O'Connor 1993). Others use path dependence theory to argue that pollution and other things commonly classified as negative externalities are really the consequences of poor technological choices, rather than poorly defined property rights (Goodstein 1995). A policy change towards plenary privatization and absolute real property rights might facilitate a means of achieving better technology and well defined property rights, as well as the elimination of rent seeking.

  36. Garín says that bidding for Chilean concessions is straightforward and transparent, with no political favoritism being shown to any firm (domestic or foreign). Each firm must prepare two proposals: one economic and the other technical. The technical proposal must demonstrate that the company will meet all the mandated specifications, and, if it does, the only selection criteria left to consideration is the cost, with the lowest bid winning. (The selection committee must give unanimous approval to the technical specifications.) A maximum time limit for project completion will be imposed on the winning firm. Firms have no advantage in preparing a bid that will permit completion of the project in less time, since the bid price, rather than speedy delivery of the goods, is the only economic variable considered in the bid selection. Nevertheless, people will always wonder if there is favoritism in bidding. Even under competitive bidding, an incentive might exist to favor one group over another by biasing the technical specification or auction process criteria in its favor.

  37. Garín claimed that exhaustive studies have been done, including studies which estimate demand, suggesting that a 13% rate of return is feasible. (The demand study was not available for review, although it was requested and promised by Garín during his interview.) He swept away pragmatic objections to the plan by the mayors and potential concessionaires, noting that fines of forty times the amount of the toll have been legislated and would serve as an effective deterrent against toll violation, even if only three percent of violators are apprehended. Since the Ministry of Public Works built most of the Kennedy project, he thought Mayor Lavín should be content to receive compensation for what Las Condes invested and not expect more. Las Condes would be reimbursed for the portion of the Padre Hurtado and Geronimo overpasses that were built with municipal funds. He further noted that it is impossible to please all interests and to have an optimal environmental solution (i.e., where highways are produced without any negative environmental consequences). Garín emphasizes that only a minority of people are complaining about the project, and that business interests (historically) always complain about technical plans. He did expect the cost estimate for the project to rise, but nothing close to the sixty percent increase feared by Dominguez.

  38. Ives Montélimard said that the French-Spanish conglomerate he represents (Transroute) is not easily dissuaded by technicalities and governmental uncertainties. He indicated that there might be some politicizing about the project, noting that it would help Minster Lagos more than hurt him. Localities would be compensated for the costs they incurred building Kennedy, which he thought would be improved (in terms of congestion and noise) if tolls were added to it. (Of course, if no toll were added to Kennedy the entire project would collapse since people would prefer to use it instead of the Costanera portion running parallel.) He also indicated little concern about people evading the tolls, especially since the Chilean authorities have such tight informational controls over motorists which is linked to other aspects of their lives (including credit). Thus, incentive and institutional frameworks are in place to make the project work.

  39. Things such as subdividing or leasing, or selling off portions of absolute real property holdings, and owning real property jointly as corporations or trusts would not be precluded by allodial policy. Moreover, the absolute nature of ownership, use, and possession of real property, does not imply a justification for committing crimes with it against the negative rights of others.

  40. El Mercurio, Sunday, April 6, 1997, economía y negocios enfoques section.


  42. El Mercurio, Sunday, July 12, 1998 (Propeidades section), p. 24.

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