Trains and privatizations

A functional modern two-track train is what they need in the long term, but somehow they can’t seem to get it moving. Are they perhaps biting off more than they can chew? In countries with a lack of resources and high uncertainty, every single dollar requirement that you add on to a project will make it exponentially so much more difficult to complete, since when the investor expects high rates to make up for high risks, the lengthening of the duration of the concession offered is of little use as anything in a distant future is not really valued.

This is what I call the death-embrace of discounted cash flows. Normally a country gets into problems because of shortsightedness but, when it then is in a problem, the rates of return that investors demand shoot up, and so now it is forced to be even more shortsighted, as anything beyond the first couple of years is considered almost of no value. 

So, forget the fringe on the top, go for a reasonable one single-lane restoration and, in the process, prepare yourself for more action a couple of years down the line. A clause that gives the government the right to repurchase a privatized project, in cash at a decent price a couple of years hence, does provide much flexibility without taking away too much from the general attractiveness of the project.