Effects of Corruption on Public–Private Partnership Contracts: Consequences of a Zero-tolerance Approach

Recent experience shows the negative consequences that corruption cases can have on the development of infrastructure, specifically on the market of public–private partnerships (PPP). Unlike traditional literature on the matter, which focuses on the analysis of mechanisms to prevent corruption in these types of projects, this paper analyzes the main legal consequences of an event of corruption on the management of PPP contracts. The paper argues that the economic and legal particularities of the inherent structured financing of these contracts mean that their annulment, as a legal response in most countries of Latin America and the Caribbean (LAC), leads to significant economic costs for society and economic development. In light of this, some countries in the region have promoted legal reforms of their regulatory frameworks. Based on these experiences, this paper presents its main features and the challenges faced, together with other reform alternatives and the principles that could guide them. In particular, this paper highlights the need to develop tools that sanction corruption, ensuring at the same time the continuity of the project, the business opportunities of stakeholders uninvolved in the illegal act, and the public interest of society as a whole.