Difficulties Recovering Highway Investment

 The holders of highway concessions have found it difficult to recover their investment.

 Few, if any, of the roadways are earning returns commensurate with the capital and operations

 costs. The primary reasons for this are:

 1. Construction cost overruns. For example, the Mexico City-Acapulco
 highway ran 65 percent over its original budget.

 2. High interest rates.

 3. Difficulties in structuring tolls to maximize net revenues.

 4. Limited time to recoup investments.


 The lack of adequate returns on the existing highway projects jeopardizes the prospects for

additional private investments in highways and, indeed, in other transport-related projects. To

address this problem, it seems likely that the government will have to renegotiate the terms of

the concessions, most likely lengthening the lives of the concessions.


Underutilization of Toll Roads

 The second problem is that toll roads frequently are grossly underutilized. While the toll

 roads are clearly the best choice, in terms of speed, ride quality, and safety, rarely are they the

 only alternative. If a roadway is to be used to the mutual advantage of the user and owner, tolls

 should be high enough to cover the marginal costs of use to the highway operator, but lower

 than the marginal value to the user of taking the toll road, rather than using an alternative

 routing. Confronted with the problem of recouping their investments over a limited time,

 highway operators appear to have structured rates which overly restrict usage. For example,

 the one way toll for a passenger car travelling the 265 miles from Mexico City to Acapulco is