Guatemala’s Toll Road Fiasco, or How to Give Money to Your Friends in the Private Sector

The toll road in Guatemala that runs from Palín to Escuintla (on the way to the Port) is the nicest road I’ve seen in Central America. It makes sense. You have to pay 15 quetzales (about $2). Prensa Libre has a report on the finances of the concession today. And surprise, surprise, Guatemala got a terrible deal. If you read Spanish, check out the article. I’m just summarizing it below.

As the article explains, in most concessions of this sort, a private company builds the road in exchange for the right to the future earnings from tolls. In Guatemala, however, the state built the road and then gave it to the company for 25 years. The Guatemalan state gets 1% of the tolls. In exchange, the company (Marhnos) built a separate road and loaned the Guatemalan government $50 million. The numbers are pretty bad.

The road cost the government over $40 million. In the 14 years of existence, more than $115 million has been raised. The government receives 1%, meaning about $11.5 million. The company says they spent $23 million on the separate road. A politician says the company actually spent less than $13 million. Anyway, taking the most generous numbers, the state loses from $14-30 million on the concession.

The Government says that it was their first concession and it was done in ¨a different era.¨ I’m not sure if that means that the government used to be able to get away with massive giveaways of taxpayer money to private companies, but it seems like it. File this under how to give money to your friends in the private sector.

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