The cost of Portugal’s Public-Private Partnerships (PPPs) increased by almost 60% in 2014 compared to 2013, reaching €1.544 billion, according to an estimate from the government department that analyses the state budget which warns also that these agreements "constitute a considerable source of financial risk".
In a note on the implementation of these PPPs, the Unidade Técnica de Apoio Orçamental (UTAO) has revealed that the total net charges, including ongoing charges and financial balance replenishment, rose between 2013 and 2014 to 0.9% of gross domestic product.
The independent technical support team which reports to parliament said that in 2014 there was a "significant increase" of over €576 million compared to 2013 in the ongoing charges for PPPs, mainly due to "contribution of the road sector, whose net charges rose €555 million over the previous year, namely due to the "payment of the sub-concession holders of Estradas de Portugal."
The toll income on SCUT roads such as the Algarve’s Via do Infante, is below forrecasts as the forecasts were based on pre-toll traffic volumes. Hence the concession holder gets paid whether anyone uses the roads or not as the company receives a taxpayer subsidy payment.
The overall PPP budget for 2014 was €1.458 billion which was overspent by €85 million and the amount that is budgeted for over the lifetime of these contracts represented an astounding 11.1% of the country’s gross domestic product, hence, "due to the size of future state responsibilities, PPPs constitute a considerable source of financial risk."
The government has been attempting to renegotiate many of these contracts but "the materialisation of any estimated savings resulting from the ongoing renegotiation process is dependent on approval by the companies and by the Court of Auditors."
The negotiations are viewed by many as a farce if the PPP holder has fully to agree to any contractual amendments.
The Government estimates an accumulated savings of €7.2 billion over the life of Portugal’s roads PPP contract alone, which run until 2041.
The unit warns that in accordance with the current contracts, major road repairs in future will be paid from the public purse and, causing no surprise at all, stated that "revenue from tolls are likely to be below the level budgeted."
This PPP system is an expensive mess, entered into by politicians and a willing commercial sector as the figures remain off balance sheet in the government accounts.
When this sort of analysis is publicised it reveals the enormous sums involved used to fund large projects with the enduring suspicion that some of the cash gets waylaid.
The current government has tried to unravel some of the most disadvantageous contracts but, it seems, at the cost of leaving the taxpayer liable for, in the case of roads, their full repair.
On joining the European Economic Community in the '80s, Portugal received adequate money for a complete infrastructure overhaul for the country with a proportion of the incoming funds wasted or misappropriated.
The last socialist government under José Sócrates built roads to nowhere and the suspicion remains that politicians on the take were the driving force, rather than any sensibly planned and executed infrastructure programme.
