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The governments of Argentina and Uruguay have proposed the implementation of the Buenos AiresColonia bridge project min the form of a build-operate-transfer (BOT) concession. Located at the southern end of Latin America, the project is to build a fixed vehicular crossing that links both shores of the Rio de la Plata, a wide river separating the two countries (see Exhibit 1). Once completed, the forty-two kilometer bridge will have four lanes and, by 2003, will carry over 4,000 vehicles daily - 53% of cross-river traffic.
The previous opposition party recently was elected to head the new Argentine government. This new government has yet to announce its intentions regarding the future of the project. If the government decides to continue the project, it certainly can be let, as most political obstacles have been removed.
Highway projects like this one have acquired a poor reputation, as many have failed - some spectacularly. Yet projects keep coming and the industry keeps growing. Governments facing tax revolts and pushed into monetary orthodoxy by the global marketplace see such projects as the way to improve their highway networks. Contractors rely on such projects to maintain their backlogs. Bankers, lawyers, and consultants, who continue to seek ways to improve their value and interest investors, are attracted to the size and fees of these projects.
This article reviews the measures taken by both governments to maximize the project's likelihood of success. Many of these measures were designed from lessons learned on previous projects and address the broad categories of causes for project failure:
Legal documentation
Cost and schedule overruns
Revenue shortfalls
Public opposition
To develop a comprehensive framework for the project, all of these were reviewed in a coherent body of studies - described schematically in Exhibit 2.
LEGAL DOCUMENTATION
Enabling legislation is one of the drivers of project economics and must be tailored to each project. A clear and comprehensive legal framework decreases project risks and lowers costs, particularly if it is in place prior to the submittal of bids.
A key aspect of this project is its binational nature, which the governments have used to its favor. To enable the project, a treaty was signed between presidents Menem and Sanguinetti in 1997 and currently is being reviewed by both...