Exogenous Determinants for Renegotiating Public Infrastructure Concessions: Evidence from Portugal

Renegotiations are frequently perceived as the Achilles' heel of concessions. After two decades of concessions development, empirical evidence suggests a recurrent need to renegotiate contracts. What drives renegotiation? Why does it occur? What are the results? The literature still lacks data on renegotiation patterns and on its main causes and results, thus not answering these questions. This paper intends to fulfill this gap by identifying some of the key determinants of renegotiations and presenting the main results. Using an econometric analysis on a real database of 87 Portuguese concessions, the research identified some variables that help explaining the high probability of renegotiation, such as the concession duration and investment, or the existence of a regulator when the contract was signed. The research also found empirical evidence of the high costs involved in renegotiations, as well as of poor control and poor management of concessions by the government.