IIRSA South Interoceanic Highway of Peru: A Megaproject with Express Pre-investment

Jun 2018
Pre-investment is the foundational stage of the project, and concludes with the contractual structuring and start of implementation. A pre-investment with complete technical-economic studies leads to better execution, reducing the probability of cost overruns and excessive delays, since it enables better designed contracts with less information asymmetry between the parties. Megaprojects, by virtue of their size and complexity, require very long periods of time to carry out desirable pre-investment studies, often being longer than government periods. The promoters normally face the dilemma of pre-investment: carry out complete studies, which improve the probability of adequate execution, assuming the risk of political blockage by subsequent administrations, or develop very short pre-investment processes, which result in a rapid contracting, accepting the risk of greater conflicts and renegotiations during execution, and the high probability of delays and large cost overruns.