Abstract

The collapse of the inter-bank lending market has reduced the global liquidity availible, most banks, expecially those with limited deposit bases, have raised funds even on short maturities. Project finance and PPP lending are competing for scarce regulatory capital allocations with more attractive corporate opportunities. This is placing under pressure the viability of the current PPP model. However, the PPP market has not collapsed, there is only a high degree of selectivity on the side of banks and a general lack of consistency in the terms and conditions required by funders.

In this analysis we assume that a PPP is an agreement betwen a governement and one or more private partners, in which the private delivers a quantity and quality of services, in return of whom it receives a form of payment, from the governement or from the direct recipient of the service. Usually the private is responsible for the construction and for the operational phase of the project.

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