Essays in Political Economy
Edited by Susan Rose-Ackerman and Paul Lagunes
Chapter 6: The story of Paraguayan dams: the long-term consequences of wrongdoing in procurement
Public procurement, because it involves the transfer of large amounts of public resources from the public sector to private firms, is an area where wrongdoings and abuses are common. These take many forms, such as collusion and bid rigging, the distortion of specifications, revolving doors, and the use of exception, among many others. They are found both in the purchase of standard goods such as office supplies and milk for school children, and in the procurement of complex projects such as infrastructure. Finally, despite large variations in the quality of institutional frameworks around the world, they hit developing and developed countries alike. While a large body of contributions, both theoretical and empirical, has addressed these issues, a more neglected aspect has to do with the consequences of systematic wrongdoings in the procurement arena on the long term development trajectory of countries. This chapter aims at illustrating this through the enlightening story of the Paraguayan dams, Itaipú and Yacyretá. These two massive infrastructure projects, started in the 1970s and 1980s, embody most of the ingredients found in the literature, namely widespread corruption and abuses of public money, facilitated by weak or inexistent legal and political institutions, and the long-term adverse effects on the development trajectory of Paraguayan society.
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