Private Capital Flows and the Environment: Lessons from Latin America

While the need for public and private actors to work together is great in a privatization, it is even more critical in the growing area of 'public-private partnerships'. As shown in Table 7.1, a wide range of relationships can exist between public and private actors. Many of them fall into the broad definition of public-private partnerships, from coordinated sharing of resources to achieve individual goals (as in the tourism example below), through jointly owned and operated businesses (such as those used to supply water services in some municipalities), to infrastructure concessions with substantial public and private involvement (such as the Juárez waste water treatment case also described below). Such partnerships are being sought where the public and the private sectors share goals which neither can achieve alone. Sometimes this is because the public sector lacks the resources or expertise necessary to address a social need. Sometimes it is because a socially desirable investment is too risky or not profitable enough for private parties without some form of government support. ¹

Two major examples of environmentally driven public-private partnerships are considered in this chapter. ² One is a sector analysis -- the Costa Rican tourist sector; the second is a case study of a public-private partnership gone wrong, but which may still be recovered -- the water treatment system in Juárez, Mexico. In addition, some information is offered on the opportunities created by a specific regulatory program -- 'joint implementation' in the Costa Rican energy sector.

While public-private partnerships will never capture the amounts of private capital flows going into more traditional types of investments, they are an important vehicle for bringing the energies of the public and private sectors to bear on addressing certain types of priority environmental issues. ³

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