Legal framework of the concessions system

National or international public tender processes are used to award the connectivity and infrastructure projects in Chile.

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In the early 1990s, Chile began to experience more sustained economic growth and a considerable increase in state investment in social policies.

However, as the country once again opened its doors to demanding international markets and opportunities grew for all Chileans, that modernizing momentum had to deal with the precarious public infrastructure that existed at the time.

That initial difficulty and the need to focus public resources on new areas of social investment led the state to implement an innovative concessions system based on public-private alliances that would initially allow the development of important road connectivity and airport projects.

Thus it was in 1996 that the Chilean Congress passed the concessions act (Spanish) with the support of all political sectors, which empowers the Public Works Ministry (MOP) to award any public works project as a concession.

In the case of projects that fall under the jurisdiction of another state institution, they can be delegated to the MOP with a mandate agreement empowering it to tender said project for concession.

Public tenders

The concessions act establishes that the adjudication of projects will be undertaken through a national or international public tender process. In addition, the ministry can make a call for prequalification of companies or consortiums when projects involve special characteristics in terms of complexity, magnitude or cost.

Concessions contracts are covered by the rules established in the concessions regulations (MOP Supreme Decree No. 956 of 1997). This legal framework guarantees an adequate balance between the public and private sectors and the rights and obligations of all parties, incorporating conflict resolutions and mediation and arbitration mechanisms, along with tools that facilitate project financing.

This consensus-based vision and the trust important national and foreign consortiums have shown in the model over time has definitively consolidated the concessions system and with it, the chance to put Chile at the forefront of public infrastructure development.

Types of contracts

It is important to highlight that concession contracts can be of the BOT type (Build, Operate and Transfer), or else DBOT (Design, Build, Operate and Transfer). This commits the private sector to the design, construction and operation of the public work project in such a way that at the end of the concession the concessionaire hands it over in optimal conditions so that it can be retendered.

This post is also available in Spanish