Renegotiation of Concession Contracts in Latin America

J.Luis Guasch
World Bank
Jean-Jacques Laffont
University of Toulouse (IDEI, ARQADE, GREMAQ-CNRS)
St¶ephane Straub
University of Toulouse (IDEI, GREMAQ-CNRS)
October 2002

Abstract
We construct a regulation model in which renegotiation occurs due to the imperfect enforcement of concession contracts. This enables us to provide theoretical predictions for the impact, on the probability of renegotiation of a concession, of regulatory institutions, institutional features, economic shocks and of the characteristics of the concession contracts themselves.
Then we use a data set of nearly 1000 concessions awarded in Latin America and the Caribbean countries from 1989 to 2000, covering the sectors of telecommu-
nications, energy, transport and water, to test these predictions.
Finally, we derive some policy implications of our theoretical and empirical work.
JEL Codes: D7, L5, O54
Keywords: Renegotiation, Concession contracts, Regulation, LDCs.