In Latin America (LatAm), line ministries are usually responsible for sectoral policy development and in charge of infrastructure planning (long-term plans), programming (medium to short-term programs) and individual project appraisal. Furthermore, in most of LatAm countries, there are inter-sectoral development plans and programs, compiled by planning secretaries or ministries of economy and finance, which include the previous sectoral efforts. These national development plans intend to promote a broad view of the countries’ requirements and propose a holistic set of solutions. Government institutions that are in charge of controlling the quality of infrastructure appraisal are usually called National Public Investment Systems (SNIPs). Their objective is to ensure efficiency in the allocation of resources, verifying the timeliness and rationality in making investment decisions. There is a set of norms, instruments and procedures from which public investment projects should always be prepared, evaluated, prioritized and financed.
On both matters, previous research has shown that this formal set of rules, and consequent organizational strategy, has severe problems in delivering the needed results. Firstly, long-term plans are usually not followed. On a sectoral level, they are modified when political periods change. Moreover, there is no integrality and interdependence between the different sectors. Basically, the aforementioned inter-sectoral plans are a complex collection of disconnected line projects. In this context, infrastructure megaprojects are not always included in the sectoral and inter-sectoral plans. They are short-term impulses with important long-term consequences.
Likewise, formal infrastructure appraisal control, developed by the SNIPs, is not viewed as a value-adding process. Instead, government officials normally believe that SNIPs impose irrelevant requirements, as they only focus on analyzing economic efficiency, leaving other important criteria out. This is especially relevant for megaprojects. The SNIPs are seen as a bureaucratic prerequisite to obtain the needed funding and financing. Therefore, rules are typically in place to constrain the pre-investment period and bypass SNIPs (Alberti, 2015). In the opinion of the author of this note, decision-makers have good reasons to follow this strategy. They are basically acting rationally.
Megaprojects in LatAm - A Wild Nature
Recent research on the development of megaprojects in LatAm illustrates the wild nature of these endeavors. Infrastructure megaprojects are a particular type of infrastructure projects. To simplify, they are usually classified as "mega" if their cost is USD 1 billion or more (Alberti, 2019a; Bruzelius, Flyvbjerg, & Rothengatter, 2002; Flyvbjerg, 2014). However, remarkably for this region, they are a lot more.
Firstly, megaprojects are global projects (Alberti & Pereyra, 2020b). A global project is defined as a temporary endeavor where multiple actors seek to optimize outcomes by combining resources from multiple sites, organizations, cultures, and geographies (Orr, Scott, Levitt, Artto, & Kujala, 2011, p. 11). The environment, additionally, is characterized by involving various stakeholders interconnected in a complex way with conflicting evolving interests (Alberti & Pereyra, 2020e; Erkul, Yitmen, & Çelik, 2016; Mok, Shen, & Yang, 2015). There are multiple structural elements interacting and changing in the progress of the project’s different phases (Alberti & Pereyra, 2018b; Whitty & Maylor, 2009).
Therefore, megaprojects are characterized by being organic phenomena that co-evolve with their context (Alberti & Pereyra, 2018b; Dimitriou et al., 2014; Lehtonen, 2014). They are open systems that undergo a continuous transformation in terms of objectives on different levels: outputs (regarding the construction project – cost, time and scope), outcomes and impact (in terms of public policy – efficiency, equity, among others) (Alberti, 2019a).
In this context, the project life cycle approach institutionalized by LatAm countries, fixing the project in early stages, as usually requested by the SNIPs, is not suited to affront the challenges posed by megaprojects. Given megaprojects’ nature, this phased stage-gate approach is not reasonable, and decision-makers usually bypass the rules in place (Alberti, 2015, 2019a).
Besides, megaprojects are also political projects whose preeminent function concerns the building of political consensus (Alberti & Pereyra, 2020f; Beria, Grimaldi, Albalate, & Bel, 2018). This consensus is usually achieved if other criteria, other than economic efficiency, are followed: equity, equality, fairness, and justice (whatever they mean for the different stakeholders). Moreover, they are iconic projects, capable of revitalizing an economy through changes in the image of a city or country, a value that cannot be captured by typical ex-ante economic analysis (del Cerro Santamaria, 2017). Consequently, decision-makers do not always use the results of economic analyses to support their decisions (Alberti & Pereyra, 2018a, 2020d).
In this scenario, the economic efficiency of the policy intervention behind the megaproject is not even the principal criterion followed in practice, and the methodology used to control megaproject appraisal, by the SNIPs, is basically constructed on the assumption that it should. That is another reason why SNIPs are normally bypassed, when a megaproject is being planned and appraised (Alberti, 2015).
To keep pace with regional needs, LatAm countries are showing a growing demand for the development of megaprojects. However, the institutional environment of infrastructure planning and appraisal in LatAm is not suited for the challenges involved in the development of these endeavors (Alberti, 2019b). Particularly, there are regulatory changes that would promote an adjustment to international best practices. On that subject, all kinds of projects, not only megaprojects, would benefit from the following changes in the rules of the game.
The Way to Go
LatAm countries would benefit from the development of institutional solutions for upstream and downstream megaproject planning. Regarding upstream planning, a dedicated central infrastructure center of expertise needs to be implemented in the countries of the region. This solution is used by some countries outside LatAm, in order to produce independently-assessed lists of infrastructures, based on some kind of audit of infrastructure needs or infrastructure assessments. Though most I-bodies are at an early stage, they are thought to enjoy broad public support because they also have institutionalized an open-systems approach to planning, by including multiple stakeholders in the process. Megaprojects should be shaped by these organizations (Alberti & Pereyra, 2020d).
Secondly, regarding downstream planning, it is desirable to use formal tools in order to link megaprojects to upstream planning. The minimum requirements at the project level normally include a strategic case for the project and a full business case. Notwithstanding this usual approach, it is preferable to have a specific, again independent, organization that can provide technical support and guidance for line departments regarding pre-feasibility studies, feasibility studies, negotiation and procurement. This can be developed through an infrastructure investment institution, or an infrastructure unit inside the I-body. Monitoring and approval of this independent institution/body should be mandatory to ask for funds from the central government in the case of megaprojects (Alberti & Pereyra, 2020d). Furthermore, in addition to the typical economic efficiency analysis, specific methodologies should be put in place for the planning and appraisal stages of complex projects, such as (among others): problem structuring methods for strategy development (SODA, SSM, SCA, robustness analysis, etc.); social network analysis for stakeholder characterization; regulative, normative and cultural-cognitive evaluation to address the institutional challenges; and dynamic capabilities frameworks to promote flexible management (Alberti & Pereyra, 2020a, 2020b, 2020c, 2020e)
Institutional changes in the previous directions are fundamental in order to encourage greater transparency in the initial decision-making process, to promote greater democratization of the process, while limiting the opportunistic behavior of agents with power that can curb the democratic solution to pursue their own interests. That, in the opinion of the author of this note, is the main challenge in order to enhance megaproject planning and appraisal in LatAm.
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Alberti, J., & Pereyra, A. (2020b). Ampliación del Canal de Panamá - El Desafío Institucional de un Proyecto Global. Manuscript Submitted for Publication.
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Alberti, J., & Pereyra, A. (2020d). Mi Teleférico de La Paz: un Megaproyecto Icónico. Manuscript Submitted for Publication.
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Alberti, J., & Pereyra, A. (2020f). Transmilenio y SITP: Un Nudo Político. Manuscript Submitted for Publication.
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