Wednesday, April 03, 2013

If a government can't provide licence plates... Part 2

A little over a year ago, I wrote about the Honduran government’s baffling inability to get licence plates into the hands of drivers.
I saw scads of cars and motorcycles without licence plates, and thought at first that people were just ignoring the law. 
But it turned out the government didn’t actually have the plates, and hadn’t for almost a year. That was a major hassle for drivers, who had to keep going back to the licensing office every month to get temporary permits, a process that took hours. 
And in a country with a big crime problem, some 330,000 vehicles and motorcycles without licence plates was unhelpful. 
The news stories were never clear why the government couldn’t get its act together.
A year later, and the story is back in the papers.
There are still about 200,000 vehicles without plates because the government can’t supply them.
The president mused about having prisoners make licence plates, but then learned the government is too broke to buy the needed equipment. 
It can’t afford to order plates, either, even though drivers’ licence fees should cover the costs (less than $20 to make a pair of plates).
This is new to me. In Canada, governments can borrow what they need. Deficits are debated, but, ultimately, if governments need licence plates or money to pay teachers or buy medical supplies, they just borrow a bit more, at pretty good rates.
Not in Honduras. Teachers plan a one-day strike tomorrow because they say they haven’t been paid. Buses weren’t running in the cities today, because owners say the government hasn’t paid promised subsidies. 
Road repairs have been stalled for a months, because the government can’t pay the contractors’ outstanding bills. It offered the companies a combination of cash and government bonds, but they weren’t keen. 
That’s not surprising. Honduras went to the international bond market this month to raise money. The rating agencies put them deep into junk bond territory. The issue raised $500 million, at 7.5-per-cent interest. (B.C. borrows at less than half that rate per cent.)
The president said the government could have sold more bonds, but he was worried the money would just be wasted. And a commission is to be set up to manage the money, to ensure it isn’t squandared. (Commissions are big here. Anytime a public body fails to perform, the response to seems to be to create a new one to oversee it, instead of just fixing the original governance problem.)
Anyway, back to the licence problem. No money. Prisoners can’t make them. 
So the government is looking at a public-private partnership, hoping to find a company that will take over the whole process in return for the chance to make a profit on licensing cars and drivers.
Those 3P agreements are very big in Honduras right now too. The government has signed a contract to hand over management of the country’s main port for 30 years. 
And I suppose model cities are a way of privatizing government itself.
It’s an appealing concept for Honduras, much more than in North America. Private companies can borrow more cheaply than government for infrastructure, a significant saving on large projects. Government is judged corrupt and incompetent. So the idea of handing responsibility to a third party is appealing.
But there’s an obvious problem.
A government that can’t manage the problem or deliver the service - like licence plates - probably can’t negotiate a good private-public partnership deal either.


scotty on Denman said...

I think 3Ps are bad on principle (profiteering and public service providing, legitimate in their respective realms, provide malfeasant opportunities when combined.) But I shouldn't be so principled as to judge Honduras' resort to 3Ps out-of-hand: the circumstance of poverty often trumps commercial ethics. The acid test seems compelling in Honduran terms: profiteers can borrow at cheaper interest than the government can.

Shouldn't BC employ the same prudential test: only resort to 3Ps when profiteers can borrow at cheaper interest than government...? As it is, BC can borrow at much cheaper rates than private partners, making 3Ps more costly to taxpayers than wholly public infrastructure borrowing.

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