In 1972, the first concession for a tolled motorway was granted with the creation of the private company Brisa. Following the 1974 Carnation Revolution, however, the government took majority ownership of Brisa, effectively making it a state-owned enterprise. Until the 1990s, Brisa was the sole motorway concessionaire in Portugal. During this decade, the Portuguese government decided to privatize Brisa and increase the number of private compa- nies participating in highway infrastructure concessions to promote competition and industry development.(a)
Since then, the Portuguese government has used PPPs extensively to develop and manage its National Motorway System. A key driver of the decision to implement PPP arrangements in earnest was compliance with European Union (EU) convergence criteria, which places limits on public debt and budget deficits.1 This pressure makes the use of PPPs, in which the private partner assumes real risk, quite attractive because its associated debt is moved off the public sector's balance sheet. Other drivers cited include the following:
♦ Make public funds available for investment in other areas.
♦ Facilitate execution of the National Road Plan.
♦ Improve public safety.
♦ Increase private sector capacity and competition.
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1 Convergence criteria are the criteria for European Union member states to enter the third stage of European Economic and Monetary Union (EMU) and adopt the euro. The four main criteria are based on Article 121(1) of the European Community Treaty. Member coun- tries that adopt the euro need to meet four criteria: (1) Inflation rate: The inflation rate must be no more than 1.5 percentage points higher than the three lowest inflation member states of the EU. (2) Government finance: The ratio of the annual government deficit to gross domestic product (GDP) must not exceed 3 percent at the end of the preceding fiscal year. If not, it is at least required to reach a level close to 3 percent. Only exceptional and temporary excesses are permitted. The ratio of gross government debt to GDP must not exceed 60 percent at the end of the preceding fiscal year. Even if the target cannot be achieved because of specific conditions, the ratio must have sufficiently diminished and must be approaching the reference value at a satisfactory pace. (3) Exchange rate: Applicant countries should have joined the exchange-rate mechanism (ERM II) under the European Monetary System (EMS) for 2 consecutive years and should not have devalued their currency during the period. (4) Long-term interest rates: The nominal long-term interest rate must not be more than 2 percentage points higher than in the three lowest inflation member states.