Unplanning urban transport: Unsolicited urban highways in Lima

Introduction

On 25 June 2009, the Lima city council debated an unsolicited proposal (USP) submitted by Brazilian construction firm OAS for the construction of an urban highway called Yellow Line, which would link the central and eastern part of Lima with the neighboring city of Callao, to the west, where the seaport and the airport are located. The consortium would collect tolls from new booths installed in the highway and existing public ones in another highway it would be in charge of maintaining. Majority member Ricardo Palma Michelsen, responding to criticism from opposition councilors, said:

The project was approved through a direct deal between the proponent and the municipal government. In the following 4 years, two other highway projects were approved using the same mechanism, this time by a new municipal government. The three projects were worth together a total US$1.3bn and would entail the construction of over 30 km of new highways and the transfer of over 110 km of existing highways to private consortia. For the first time in four decades, Lima would see the construction of large-scale urban highway projects. What can this case tell us about the use of public–private partnerships (PPPs) for urban infrastructure in cities of the Global South?

The objective of this paper is to understand how the use of PPPs for urban infrastructure transforms the planning process. It does so by presenting the case of Lima from 2009 to 2014. During those years, the metropolitan municipality signed contracts for three highway projects and wrote a metropolitan plan. The three projects were USPs approved as “self-financed private initiatives.” Both finance (up-front resources) and funding (revenue streams) are private. ² As I will show in this paper, this scheme is used to make investing in infrastructure attractive to private capital. In doing so, it purposely leaves out other issues often assumed to be important for delivering infrastructure, such as alignment with metropolitan plans, fulfilling mobility or other needs, or responding to democratic processes. The scheme, furthermore, sets out an incentive structure that drives the public sector to depend on what the private sector finds profitable. As I will show, when local governments are dependent on private finance to deliver infrastructure, the availability of private finance transforms the whole process from the outset by heavily influencing which projects are chosen during the planning phase. Instead of being the second stage of a two-step process in which implementation follows planning, then, USPs shift priorities from the outset.

The paper is organized as follows. In the next section, I explain the research design and the rationale for selecting Lima as my case. In a further section, I set out the theoretical framework with which the concept of “unplanning” dialogues. I then explain the reforms that allowed local governments to accept USPs. After that, I develop the case of Lima in three steps. First, the use of exceptions to open up spaces for private investment without usual controls. Second, the entrepreneurial role assumed by the local government. Third, I explain how the logic of USPs becomes embedded in formal planning, as plans become lists of projects considered by planners to be potentially profitable. After that, I discuss the implication this mode of infrastructure delivery has for the public interest and specifically for urban transport in Lima.

Research design

The case study method is the ideal option for the issues I am addressing because it allows the researcher to take a holistic approach that includes both the details of the topic and the context within which the process unfolds. This method is particularly useful when the boundaries of the case are not easily defined (Yin, 2009: 18). My case is the process by which the municipality has established partnerships with corporations to deliver infrastructure. The complexity of the case, the need to pay attention to context and detail through an in-depth study, and the fact that my questions seek to understand how the process unfolded justify the use of the case study method (Flyvbjerg, 2006). Following Gerring’s (2004) definition of a case study as “an intensive study of a single unit for the purpose of understanding a larger class of (similar) units,” I propose the process by which the municipality of Lima partnered with corporations to deliver infrastructure as the unit. My analysis will contribute to the understanding of other episodes of city governments in the Global South establishing partnerships with private consortia to deliver urban infrastructure in a context of scarce public resources and rapidly growing automobile use.

Lima, being the largest municipality in a country with one of the best PPP frameworks in the region, is a critical case (Flyvbjerg, 2001: 73–81): if something goes wrong in the best-case scenario, then we could assume that it might go similarly wrong in other, less reliable cases. Policy experts and members of the international development community often cite Peru's PPP legal framework as being among the best in Latin America. A periodic report commissioned by the Inter-American Development Bank has consistently ranked Peru among the five countries in Latin America and the Caribbean with the best environment for PPPs (The Economist Intelligence Unit, 2010, 2012, 2014, 2017, 2019). According to the 2010 report, Peru had “strong institutional capacity and sound implementation practices” which situated it only below Chile in terms of institutional maturity for developing PPPs in Latin America and the Caribbean (The Economist Intelligence Unit, 2010: 4). When compared globally, Peru was grouped with Chile, Brazil, Japan, the Republic of Korea among the countries with a “developed” environment, the second-best category out of four, below the “matured” UK and Australia (The Economist Intelligence Unit, 2010: 6). The score considers “regulatory and institutional framework, operational maturity, investment climate, financial facilities, and subnational adjustment.” A 2006 World Bank report highlighted Peru as one of the best examples of private sector participation in infrastructure (World Bank, 2006: xi). Moreover, two of the projects studied in this paper have received international awards from the financial and legal press (International Tax Review, 2013; Latin Finance, 2015).

Furthermore, given the relevance of Lima as a site for PPPs in Latin America, it is remarkable that very little has been published on it from a critical point of view. Among the few studies is Strauch et al. (2014) on the social consequences of a PPP project and Takano (2017) on the same project as an opportunity for rent seeking. There are no studies critically examining the whole process from a political economy view.

I use qualitative methods to reconstruct the decision-making process. I have conducted interviews with 27 people, including actors directly or indirectly involved in the process (public officials, private firm representatives, activists, and residents), and local planning experts. ³ I reached interviewees by contacting them directly or through a personal contact, and then proceeded to find other interviewees through them. In some cases, I had previously identified relevant actors. Interviews were semi-structured. I used a specific questionnaire for each group of interviewees, providing ample space for elaborating on each of the issues. I have also reviewed laws, documents, and news reports that set the background for the process and that were produced by it.

PPPs and neoliberal urban governance

During the last three decades, the use of PPPs to deliver urban infrastructure has increased considerably around the world. Several countries in both the Global North and South have created new institutional arrangements that allow private corporations to take care of the entire process of building and operating infrastructure and services that were previously understood to be under the control of states (Engel et al., 2003; Henisz et al., 2005; Siemiatycki, 2013).

Governments can have a diversity of reasons for carrying out PPPs (Zwalf, 2020). Among them are standard assumptions about the benefits of introducing private actors and market mechanisms, such as managerial efficiency (Andres et al., 2008: 10) and cost cutting (Engel et al., 2014: 13–15). “Value for money” was one of the main arguments for implementing private finance initiatives in the UK, which is one of the countries where PPPs were first used (Ball et al., 2001; Bing et al., 2005; Terry, 1996). Among other reasons are the ability to provide services while transferring the risk to the private sector and keeping “costs off the balance sheet” (Engel et al., 2014: 12; Froud, 2003), and bringing the discipline of the market into infrastructure planning, allegedly preventing “white elephants” (Albalate, 2014; Engel et al., 2014: 9; Gómez-Ibáñez and Meyer, 1993: 4).

PPPs are the product of long-term contracts between the government and a private consortium for the delivery of services or infrastructure. Traditionally, these projects are planned by the state, which then calls for bids in a competitive process. However, an increasing number of governments are using USPs, a mechanism that allows the private sector to propose projects that have not been planned by the state (PPIAF, 2014). In USPs, the private sector identifies and proposes a specific project, and the government decides if it will carry it out. After that, the competitive bidding process gives some sort of priority to the proponent in order to offer firms an incentive to propose projects. At the same time, however, it further imbalances a process that is already skewed toward the original proponent (Ortiz and Buxbaum, 2008), while reducing the discretion of public authorities (Iossa, 2019: 6). It is unsurprising then that USPs are often perceived as being particularly corrupt (Hodges and Dellacha, 2007). A further rather paradoxical issue is that the lack of technical capacity is one of the main motivations for implementing USPs (Osei-Kyei et al., 2018), while a strong technical capacity is considered by experts to be a pre-requisite for overcoming the problems brought by USPs (PPIAF, 2014) and PPPs in general (Bloomfield, 2006; Takano, 2017: 185). And this process is done under the asymmetries of information ingrained in a scheme that gives a major role to the private actor in the planning phase.

USPs, then, are likely to exacerbate problems that are commonly associated with PPPs. For instance, it has been argued that PPPs are more likely to fulfill private than public interests (Sclar, 2015). This is often aggravated by the asymmetry of information between government and private sector negotiators, an issue that tends to be worse when local governments are involved due to their even more limited capacity (Ashton et al., 2016; Beard et al., 2008; Dannin, 2011). It is also heightened when the reason for turning to private finance is the inability of the public sector to finance projects by itself, as is common in some geographies including Spain and Latin America (Acerete et al., 2009; Andres et al., 2008: 10). In its latest “Public–Private Partnership Reference Guide,” the World Bank alerts about this issue (World Bank, 2017: 25), and particularly about using USPs to overcome financing shortfalls. Furthermore, by subjecting the provision of infrastructure to the needs of the market (Torrance, 2008), PPPs have the potential to deepen processes of uneven development, as the areas or activities that get more investment will often be those that can provide acceptable financial returns (Siemiatycki, 2011). Despite the obvious problems with USPs, an increasing number of countries are allowing the private sector to submit USPs.

To understand why, we should look beyond the obvious problems for the public good, and into what the mechanism offers to interested parties. USPs can be seen as the formalization of a broader move toward “unsolicited urbanism,” a mode of planning as deal making that allows private investors, consultants, and public officials to make arrangements that bypass standard planning regulations (Rogers and Gibson, 2020). Furthermore, these deals are done behind closed doors, as confidentiality clauses are common because the information produced by the private party in the planning process remains private (Siemiatycki, 2007). Hiding details from the public can work in favor of public officials that are interested in avoiding accountability (Bowman et al., 2015). USPs are also commonly used when governments do not have the capacity to finance large projects. Allowing bids for project ideas lets them project the image of major public work delivery while keeping costs off the balance sheet (Engel et al., 2014: 12; Froud, 2003). But USPs, despite the name, are not always unsolicited. While the government's role in the process is to wait for proposals, it can also take a proactive role, making suggestions to private parties about which projects they could submit as a USP. This allows the government and the private party to evade some controls, especially when the USP is a “self-financed” project, that is, one that nominally does not require public funds. We should see USPs, then, not as a flawed type of PPPs, but as a particular mode of urban governance that allows local governments to open new spaces for private investment without usual controls.

Rather than being simply a tool for implementation, then, PPPs in general are better understood as part of a regime of neoliberal urban governance (Brenner and Theodore, 2002; Harvey, 1989; Keil, 2002; Mattos, 2011; Swyngedouw, 2005). If governance is understood as the displacement of government from the state and into a variety of actors, PPPs fulfill part of this endeavor by allowing corporations to take care of delivering services and administering areas of the city. PPPs correspond to the roll-out stage of neoliberalism (Peck and Tickell, 2002), as they depend on the reconfiguration of governance along with new institutions. Keil (2002: 585) has argued that “[n]eoliberal urbanism is grounded upon a restructuring of the political economy as well as on a changing set of technologies of power.” Furthermore, Brenner and Theodore (2002) argue that, rather than seeing neoliberalism as a single coherent project, we should look at “actually existing neoliberalism,” which allows us to uncover how cities play a role in reshaping local institutions in processes of neoliberalization.

I call the specific mechanism by which private finance influences planning through the use of USPs “unplanning.” Here, the state is not simply retreating to let the private sector determine priorities. In other words, it is not abandoning planning, or simply not planning. Rather, it is being transformed in order to follow a proactive role in attracting investment. By unplanning, I mean a specific mode of urban governance that includes three characteristics. First, the local government transforms existing planning regulations in order to create exceptions (cf. Rolnik, 2015: 348; Vainer, 2011) for profit-seeking investments. Second, it takes an entrepreneurial role (cf. Harvey 1989) in convincing investors to bring their capital to the city. To achieve this, the government might take on risks and/or transfer existing revenue streams in order to make projects financially attractive. These negotiations are often done behind closed doors, similar to what Rogers and Gibson call planning as deal making (Rogers and Gibson, 2020). And third, formal planning follows this logic. Planners propose projects and include them in metropolitan plans according to what they see as attractive for investors.

Infrastructure gaps

In the midst of the 2008 economic crisis, the national government of Peru rolled out policies to promote economic recovery. One of the reforms was an overhaul of the infrastructure concession system. The legal framework was weak, as it did not regulate the whole project cycle, while the guidance it provided for project selection and risk allocation was deemed insufficient (Benavente and Segura Vasi, 2017: 31). For local governments, the framework was even weaker, with each project being led by an ad-hoc committee rather than a centralized agency. The 2008 law of PPPs established new rules that would guide the whole life cycle of projects, allowed for USPs (Velásquez, 2012) provided that they were “self-financed,” that is, financed entirely through user fees, and created specific provisions for local governments to carry out PPPs.

Besides promoting economic growth by attracting private investment, the reform sought to close the infrastructure gap. Lawmakers cited a report commissioned by the Association of Private Firms for Public Services (now AFIN) ⁴ and written by the Peruvian Economy Institute (Instituto Peruano de Economía), a think tank that had been instrumental in the neoliberal reforms of the 1990s. Infrastructure gap reports are published periodically, often commissioned by industry guilds, and written by think tanks or universities.

To estimate the road infrastructure gap, the report cited by lawmakers in the 2008 reform combined three factors and consolidated them into a monetary value. The first factor was the road concessions that either had been approved or were about to be approved. The second was the Ministry of Transport plans for building roads through public procurement. And the third, an own estimation of the level of investment required for existing roads to be in good condition (Instituto Peruano de Economía, 2005). The recommendation expressed in reports, especially for the first component, followed a circular logic. The projects that had either been earmarked or judged by the writers to be in the process of being adjudicated constitute part of the gap. The report then recommended speeding their implementation or their adjudication as a way of closing such gap. Under the same logic, planning a new project would increase the gap rather than reduce it. That should not be a surprise: the reports published by the infrastructure industry can be easily measured in dollars because they reflect what private firms—precisely those that commission the report—are planning to invest. If they have a new project on the way, the gap increases.

The fact that these reports are commissioned by the construction industry should not be understated. According to former Finance minister (2014–2016) Alonso Segura, reports tend to be biased, ⁵ either with regard to the magnitude of the gap or the types of projects that are identified as part of it, in ways that fit the interests of the firms paying for the report. Other technocrats at the Ministry of Finance have been less bothered by the fact that the reports were done by interested parties. In a public forum on PPPs in April 2017, Adolfo Pulgar, a legal advisor on PPPs to the Ministry of Finance, highlighted their usefulness for closing the infrastructure gap. ⁶ He cited a report done by AFIN which put the gap at US$160bn. When during the Q&A I asked how such gap was estimated, he replied that he could not answer that question and that I should query AFIN instead.

After these reports are published, it is common to see headlines informing the public about the urgency of closing the infrastructure gap (El Comercio, 2012; La República, 2019b). These headlines tend to highlight the billions of dollars in private investment that would be needed to close the gap. Failing to do so, we are told, would confine Peru to unbearable logistic costs and setbacks in competitiveness. When looking at the reports in detail, however, it is clear that their effect as a source of impact headlines is far more important than its usefulness as a guide for where and what to invest in. According to the 2005 report, it would have cost US$58m to close Lima's road infrastructure gap (Instituto Peruano de Economía, 2005). In the 5 years that followed the reform that cited it, Lima attracted enough private investment to close that gap 24 times.

Genealogies of planning in Lima

From the 1950s on, a large portion of Lima has urbanized outside formal land markets. At the time, dominant planning ideas pushed for the eradication of informal settlements and the provision of public housing. By the 1960s, however, it became apparent that those ideas were not enough to deal with the phenomenon of rapid urban growth driven by mass internal migration. At the same time, informal settlements once deemed backward places to be evicted became legitimized as a space for opportunity. By the late 1960s, planning was changing in Lima to adapt to this reality. Previous zoning codes that were born out of modernist planning were changed with the addition of a new category: special regulatory zone (SRZ). The 1969 zoning code designated SRZs as “a zone that, because it has particular urban characteristics, must have regulatory dispositions that allow it to be treated through specific programs of urban renewal or rehabilitation” (Perú, 1969). The objective was to facilitate improvements in irregular settlements. Rather than eliminating them and rehousing their residents, the new norm was to provide services on site.

Two decades later, planning was also changing, now in the context of neoliberalization. The 1992 Metropolitan Plan presented signs of this shift. According to the plan,

The plan proposed “to promote zoning as a tool to promote and negotiate the occupation, use and rent of land in a way that incentivizes private investment, both from corporate and non-corporate agents, in the real estate market” (Municipalidad de Lima Metropolitana, 1992: 62). The use of SRZs from then on is also a sign of the shift.

In the 1990s, SRZs were longer restricted to the improvement of irregular settlements. The 1992 Metropolitan Plan proposed to use special regulatory zoning for specific projects including the shoreline, called Costa Verde. The plan sought to “consolidate recreational, touristic and cultural activities” in this area (Municipalidad de Lima Metropolitana, 1992: 95). Consequently, the Costa Verde was categorized as an SRZ. In most parts of it, a cliff divides the urban area from the coast. But the rezoning included parts of the upper side of the cliff: parks along it were also zoned SRZ as if they were part of the shore. This paved the way for the privatization of a public park in the wealthy district of Miraflores. In what once was Parque Salazar, a luxury mall was built. It surely complied with the plan's purpose of turning the area into a touristic center, as Larcomar, as the mall is called, is one of Lima's tourist hubs. It is just not on the shore, but 100 m above it. Larcomar became an example of how zoning could be used now for creating exceptions for promoting private investment.

Changes in urban governance also paved the way for the Yellow Line, the first privately financed urban highway in Lima. In 2004, a group of low-income neighborhoods west of downtown had been zoned as SRZ-urban renewal for physical safety. But that was not enough for the Yellow Line, as areas that were deemed safe would have needed to be evicted. The council, however, was ready to intervene in that area as well. In April 2007, while talks between OAS and the municipality were already underway, the city council extended the area that required urban renewal. ⁷ This paved the way for OAS to formally propose a highway that would go right through that area, demolishing homes in the process.

Then, while in wealthy Miraflores, SRZ was used to build a mall on public land, the Yellow Line went through neighborhoods that came closer to the areas originally identified as SRZs. The objectives of those that used the tool, however, had changed dramatically.

Projects that “fall from heaven”

The prayers mentioned by a council member in the quote at the beginning of this paper should be translated as what the government actually did: they looked for investors and convinced them that investing in PPPs in Lima was a good idea. In fact, the Yellow Line project was not considered in existing plans, but it did not just “fall from the sky” either. It was only presented formally after 2 years of talks between power brokers at the municipal government and OAS.

The quote also reveals that the usefulness of the project was secondary. Pushing for its approval was the main priority, even at the cost of having potentially serious flaws. In the context of uncertainty brought by the economic downturn, the role of the government was interpreted as sowing hope for investors in the way of easing profitable investments in infrastructure. This would be done by accepting the project without questioning too much as a way to convince investors that investing in Lima was a good idea. This was especially important because the Yellow Line was the first large project carried out in Lima under the recently reorganized scheme. The entrepreneurial ethos of the local government needed the fast approval of the first major private initiative project as an example for further investors.

In practice, this meant that once a project was agreed, after some months or even a few years of informal talks between municipal power brokers and private firms, the municipal machinery began working to make the project go through. ⁸ Some discussion is allowed, but not if it goes so far as to question the project itself. This is a central trait of the way PPPs work in Lima. Once power brokers at the municipality agree that the project will go through, the municipal bureaucracy starts working for it to be approved. Rather than a debate, what we get is the tweaking of the project for it to be acceptable to different municipal agencies. Such a process distorts the alignment between the projects that are approved and the projects that would be suitable for the city by putting the profit motive before any other consideration.

The process by which the municipality formally evaluated the project is a case in point of the municipal government's rationale and capacity. Instead of doing the project evaluation in-house, it outsourced it to consultants working on success fees: a large portion of their compensation would depend on the project going through (Takano, 2017: 188). In other words, the contracting process included a moral hazard by design (cf. Sclar 2001: 114).

Moreover, the terms of reference required the consultant only to assess the technical and financial aspects of the proposal, that is, if it was financially and technically feasible according to the criteria proposed by OAS. Social risks were included as part of the financial assessment, but only insofar as they impacted the financial viability of the project. ⁹ The bidding terms for the consultancy did not ask for any type of transportation-related assessment. Thus, the public goods aspects of the project were not considered. The focus was on the project's financial feasibility: any other aspects become relevant only as long as they could affect it.

With no other bids received, the council adjudicated the project directly to the original proponent. The contract between the municipality and OAS’ special purpose vehicle (SPV) Línea Amarilla SAC (Lamsac) was signed in November 2009.

From project shortlists to unplanning institutionalized

In January 2011, Susana Villarán became mayor leading a center-left coalition. Her party, Fuerza Social, was on the moderate side of it. Both Villarán and some of her would be upper-level officials had been critical of the Yellow Line project. As a candidate, Villarán visited the neighborhoods that were threatened by it and offered to take care of the issue. Once in power (2011–2014), she approached Lamsac to renegotiate the contract. In early June 2011, after several rounds of negotiations, an agreement was reached. The main section of the project, a 9 km highway including a 2 km tunnel, would be rerouted to reduce damage, while other aspects would be changed. The new deal included improved compensation packages for local residents (Strauch et al., 2014).

Initially, promoting large infrastructure projects using PPPs “was not in the radar” of the incoming municipal government. ¹⁰ During her second year in office, however, the administration approved two other PPP highway projects: New Roads of Lima, worth US$590m, and the Southern Expressway, worth US$230m. What happened? Both the political context and budgetary constraints are key to understand this shift.

According to Álvaro Espinoza, one of Villarán's government high-level public officials and one of her closest advisors, they realized that the municipal budget was insufficient for delivering major public works and started looking at PPPs as a solution. Municipal manager Miguel Prialé sought to give some order to the process of selecting and approving PPPs by suggesting USPs. By the end of 2011, along with the Agency for the Promotion of Private Investment (Gerencia de Promoción de la Inversión Privada, from now on GPIP), Prialé produced a project shortlist titled “The Lima of the Future.” It contained 12 projects, including an urban highway and a Bus Rapid Transit (BRT) line, as well as some non-transportation-related ones. In March 2013, another shortlist also had a diversity of projects. The third one, published in December 2013, was simply a list of urban highways. This is a fragment of the interview I conducted with Prialé in which I asked him how projects were selected:

The projects, then, are not part of a plan but are derived from old and new ideas about particular projects and solutions. Plans, at best, are treated as a repository of specific projects to be selected.

The later months of 2011 were a political disaster for Susana Villarán's administration. By October 2011, she had a net approval rating of −57%. ¹² She had engaged in a dispute against previous mayor Castañeda, who was very popular despite serious accusations of corruption. Castañeda and his allies responded by beginning a recall campaign.

The press did their part too. As is usual with left-of-center politicians in Latin America, the mainstream media, owned by large business corporations (cf. Ramonet 1998; Sosa Plata 2016), spun any mistake made by the municipal government into one of the main news stories of the week. It was later revealed that Odebrecht, a Brazilian corporation involved in infrastructure in Peru, had in its payroll a large number of journalists from several of the major news organizations based in the city (La República, 2019a). Odebrecht also contributed US$3m to Villarán for her campaign against the recall referendum (El Comercio, 2019). ¹³ This was part of Odebrecht's systematic efforts to influence the political process in order to win contracts (Durand, 2018: 75–99). ¹⁴ The unpopularity of the mayor weakened her government, both vis-a-vis the public and, more importantly for this story, vis-a-vis private capital.

In April 2012, the recall campaigners announced they had already collected the signatures required. The following month, the council declared Odebrecht's project of interest. Through its SPV Rutas de Lima, Odebrecht would improve and maintain 96 km of existing highways, and build a new, 19 km-long stretch of highway. During the council debate, recently appointed municipal manager José Miguel Castro said that one of the bases of their approach to private investment was the transparency that the process had shown. He added that they

Three months later, the project was adjudicated to the original proponent after no other bids were received.

In July, the council declared another project of interest: a 4.5 km-long extension of an urban freeway that goes south from downtown. The proponent was Graña y Montero (GyM), a Peruvian corporation. The project was also awarded with no competition, in what is no exception in Peru, where the vast majority of projects awarded via USPs has been adjudicated to the original proponent (Takano, 2017: 190)

In the council session where the approval of the Southern Expressway was discussed, the administration made gestures toward the conservative Popular Christian Party (Partido Popular Cristiano, PPC), the main opposition force in the city council. Its founder, former mayor of Lima Luis Bedoya Reyes (1964–1969) was invited, and Villarán and Deputy Mayor Eduardo Zegarra delivered speeches highlighting his contributions which included the original plans for the Southern Expressway in the 1960s. During the referendum campaign, PPC endorsed the “no recall” position.

In 2014, the municipality completed a new plan for Lima. In the mobility vision section, the plan reproduced the usual sustainable mobility lines about prioritizing walking, cycling, and transit (PLAM 2035, 2014: MO 865). ¹⁶ The logic of project shortlists described above, however, was also present in the form of 14 urban highway projects for private investors to submit as USPs. In an interview I held with the writer of the mobility section of the plan, I asked him about this apparent contradiction. Architect Carlos Chacón was in fact critical of the use of PPPs and their outcomes in recent years. For him, rather than being born out of planning rationality, these private initiatives “have always come from outside… If they are framed within the urban development plan for Lima it has been almost by chance.” ¹⁷ What he envisioned was limited by what could be actually invested in. The logic of accommodating space for profit-seeking investments in the name of the provision of public services, which could be initially identified on a case-by-case basis beginning in the case of the Yellow Line, now became embedded within formal metropolitan plans.

Unplanning urban transport: “From searching for what it aspired to towards searching for what was possible”

According to Daniel Ramírez Corzo, the municipal government moved “from searching for what it aspired to towards searching for what was possible.” ¹⁸ The possible were PPPs. In the absence of a qualified bureaucracy capable of delivering other attractive projects in a short period of time, PPPs became a way of bringing outside know-how in producing public works. According to Ramírez Corzo, this turn came along with the increasing importance of the municipal manager's office. The mayor still led projects specifically oriented toward social development, such as infrastructure investments done with public funds in low-income neighborhoods. But most of the municipal machinery became geared toward two objectives: large infrastructure projects done with private finance, and the regulatory reform of the public transit system, which required little public investment.

According to some on the more progressive side of the governing coalition, including Mayor Villarán, doing large projects with private finance was a way of freeing funds for social interest projects. ¹⁹ Indeed, Mayor Villarán led some efforts to improve low-income neighborhoods with a program called Barrio Mío (Dosh and Coyoli, 2019: 217). But highway projects were possible because the municipality gave the consortia building them either existing revenue streams or financial guarantees. Thus, in the long term, rather than freeing up funds, PPPs were pulling them out. The municipality was set to renounce vast amounts of resources in the future.

Miguel Prialé confirms that the private sector's capacity to raise funds and to spend them was key for implementing PPPs rather than doing traditional public procurement. For him, the projects approved during this period would have been impossible to deliver with public finance. ²⁰ In fact, while the municipality had put in place a relatively successful municipal bond program in the mid-2000s, it was far from being capable of raising enough resources to fund projects of that scale. ²¹ As a result, the decision-making process on the side of the municipality resembled the “garbage can model” (cf. Cohen et al., 1972). Rather than having well-defined problems and planning specific solutions for each of them, the availability of private finance becomes “a collection of choices looking for problems […] solutions looking for issues to which they might be the answer” (Cohen et al., 1972: 2). The solutions the municipality have in its disposal are USPs, including those that have not been submitted yet but municipal officials think might be attractive for investors. After GPIP receives a USP, its officials think about what problem it might solve, rather than the other way around. And given that its mandate is to promote private investment, it is unsurprising that, if needed to support projects, they distort evidence in the process, as in the case of the Yellow Line: an internal memo from GPIP said that the Yellow Line project followed the latest urban and road plans even though nothing resembling it was projected in them. ²² Furthermore, the project made it more difficult to connect urban areas across the Rímac River, as the ground-level highway built along the river bank would require even longer bridges to cross it. Experts had for a long time deemed those connections key to solve connectivity and congestion issues in that area of the city. ²³

With car ownership in Lima growing at rates of around 10%, ²⁴ it should be no surprise that, as the government learned what the private sector wanted, shortlists that began as a diverse list of projects shifted toward simply a list of highways. However, market demand is not the same as public need. Most of the trips in Lima are still done by public transit. In 2012, just 9% of trips to work or study were done by car, compared to 69% by transit (Lima Cómo Vamos, 2013). Transit trips, in turn, take on average almost twice as much time as trips done by car (Daude et al., 2017: 140). In 2007, Lima had the third-highest average travel time (60 min) by transit among a list of 15 major cities in Latin America (CAF, 2010: 55). It is questionable, then, that investment should prioritize highways from a public interest point of view, especially if we consider reducing inequalities around mobility as a goal of transportation planning. In contrast, from a profit-seeking point of view, in a city that expects a large increase in traffic, the logic of investing in toll roads is flawless. Villarán's government, in fact, was well aware of the urgent need to improve the public transit network. During the campaign, she promised a major overhaul of the system. This urgency, however, was not reflected in budgetary choices.

Conclusions

In Peru, the state's capacity to plan is often limited by, among other issues, the low priority given to the institution of planning (Fernández-Maldonado, 2019). In that context, PPPs have come to fill the void left by state action in not only delivering urban services and infrastructure but also planning them. The increasing use of USPs is a further demonstration of this. One of the stated objectives of the PPP law that allowed USPs is to let private actors identify social problems that governments supposedly have not realized existed (Morón Urbina, 2005). PPPs in Peru, then, have been conceived as a way of overcoming the limitations of a state regarding planning and finance.

The result in Lima has been a wave of urban highway construction. The main explanation for this process is the sudden availability of financing sources allowed by the 2008 reform of the national legal framework for private investment in infrastructure. The municipality of Lima, which had a relatively limited capital budget, became able to bring decades of future revenue streams into the present—provided it did so using PPPs. The wide disparity between what could be done with public finance and what could be done with private finance gave the private sector considerable power in setting priorities. As a result, the profit motive became central in defining what could be done with the new financial capabilities, even though large projects still required either the transfer of public revenue streams or financial guarantees to investors: Lima transferred around two-thirds of its toll revenue streams for the Yellow Line project, and the remaining one-third for New Roads of Lima. For the Southern Expressway, in turn, which has not been built yet, it provided minimum revenue guarantees.

It is remarkable that the logic of accommodating infrastructure provision to the needs of private capital seeking long-term returns did not stop in exceptional cases. Instead, project shortlists produced by the municipal government, and later a metropolitan plan followed this logic. Five years after the first USP was approved, the practice of producing long lists of potential USPs became an important part of formal planning in Lima. From initially influencing a decision to approve a particular project, the interests of private capital, or what the municipal government believed those were, became inscribed in planning documents. I call the regime of governance produced in the process unplanning, which consists of readjusting the state in order to promote the participation of the private sector in planning and delivering urban infrastructure, dismantling existing planning decisions if needed, and incorporating this rationale in further plans. The local government actively seeks investors willing to invest in infrastructure projects. This entrepreneurial approach transforms planning itself when the logic of doing what can be done for profit enters the process of writing plans: projects are included insofar as they can be packaged and sold to investors.

In a country that is regarded in expert circles as an example for its use of PPPs, their implementation in its largest city has largely shifted the responsibility for planning infrastructure from the public to the private sector and from public to private goals. This case sheds light on the actual effects of implementing PPPs and, particularly, USPs, in cities where the capacities of the local governments to plan and finance public works are limited. When PPPs are used to overcome those limitations, they can sharply transform the planning process by further limiting what can be done to the needs of private capital. In the specific case of Lima, given the rapid increase in car ownership during the last few decades, financing urban highways became a safe way for private investors to secure long-term returns. As a consequence, introducing private finance in infrastructure pushed the local government to prioritize investments that deepened inequalities around transportation access.