Discussions on privatization, concession and public-private partnerships (PPPs) periodically resurface, especially when large state companies or public services enter the agenda. Although they seem similar at first glance, these three instruments have different purposes, formats and impacts on the state and citizens.

Understanding the functioning of each model is fundamental to analyze public policies, knowing how public money is applied and understanding how private initiative can assume previously exclusive roles of the public power. Next, know the main characteristics of each privatization mechanism and what differentiates them in practice.

What is concession?

In the concession, the government signs a contract with a private company to manage a public service or public good. There is no transfer of property, the asset remains from the State, but the operation and maintenance are in charge of the concessionaire during the term of the contract.

Concession Example

Highways granted to private initiative, with toll collection in exchange for maintenance and improvements, under the supervision of ANTT or state agencies.

Main characteristics of the concession

• Defined deadline (usually from 15 to 30 years);
• Goods remain public;
• Tariffs charged from users;
• Constant supervision by the granting authority;
• Reversal to the state at the end of the contract.

What is privatization?

Privatization occurs when the state definitively sells an asset or company to private initiative, also transferring the control and risks of the operation.

Privatization Example

Vale do Rio Doce and Telebras, privatized in the 1990s and 2000s with the objective of reducing public deficit and increasing the efficiency of companies.

Main characteristics of privatization

• Full transfer of property and management;
• State is no longer the majority partner of the privatized company;
• Irreversible operation;
• Used to decrease the size of the state in the economy;
• Strategic sectors (such as security and defense) are usually not privatized.

What is Public-Private Partnerships (PPP)?

PPPs have emerged to enable projects at a high cost, especially those that cannot be supported only by charging users to users. In this model, the state shares risks and responsibilities with the private sector.

PPP Types

• Sponsored PPP: pays for the state and the user
• Administrative PPP: pays exclusively by the State

PPP Examples

Sanitation works, public hospitals, subway and bus corridors.

MAIN CHARACTERISTICS OF PPP

• Contract with a minimum period of 5 years;
• Requires high initial investment;
• State financial counterpart;
• Reversal to the state at the end of the contract;
• Risk division between the parties;
• Most common in social areas or urban infrastructure.

Benefits and challenges of each model

Privatization Advantages and Challenges

• Benefits:
  • Reduction of public spending;
  • Greater efficiency and innovation;
  • Increased competitiveness.
• Challenges:
  • Risk of private monopolies;
  • Loss of state control over strategic sectors;
  • Need for effective regulation.

Advantages and challenges of the concession

• Benefits:
  • Potential improvement in the quality of services;
  • Private investments without selling public assets;
  • Risk transfer to the concessionaire company.
• Challenges:
  • Tariffs can become high;
  • Constant supervision is essential;
  • Risk of poorly elaborated contracts.

PPP Advantages and Challenges

• Benefits:
  • Enables large works with cost division;
  • Social return in strategic areas;
  • Integrates public and private sector.
• Challenges:
  • Requires robust legal and technical structure;
  • Cost for the long term state;
  • Complexity in contractual modeling.

Inspection and control, as the State accompanies contracts

In the three models, the state's performance in inspection is essential to ensure compliance with contractual terms, protect the public interest and avoid abuse or mismanagement.

Inspection mechanisms

• Regulatory agencies (such as ANTT, ANEEL, ANATEL) supervise privatized concessions and services.
• In PPP contracts, there is a forecast of internal and external control bodies, as well as independent audits.
• Courts of Auditors, Public Prosecution Service and civil society also play a relevant role in monitoring.

Tools such as performance indicators, periodic reports and contractual review clauses are common control instruments.

Comparative between models

Next, see a table that summarizes the differences between the three mechanisms:

Criterion	Concession	Privatization	Public-Private Partnership (PPP)
Ownership of the good	State	Private initiative	State
Duration	Defined Deadline (Ex: 30 years)	Permanent	Defined deadline
State participation	Control and Inspection	No after-sales control	Share Costs and Risks
Payment	User (tariffs/toll)	May involve granting the state	State and/or User
Examples	Highways, airports	Valley, power companies	Subway, hospitals, prison system
Reversal of good to the state	Yes, at the end of the contract	No	Yes, at the end of the contract
Treasury involvement	Rare	No	Yes (periodic payments to the partner)

Which model is the most appropriate?

The choice between concession, privatization or PPP depends on the type of service, state financial conditions and public policy goals. For sectors with guaranteed financial return, such as roads with tolls or airports, the concession is often sufficient. For projects that require large volume of initial capital, such as sanitation works, PPPs are more viable.

On the other hand, privatization is more controversial by implying the definitive transfer of state assets. It is usually debated in tax crisis contexts or when it seeks to improve the efficiency of deficit public companies. 

Thus, understanding the differences between these mechanisms is essential to assess the economic and social impacts of each policy. Observing the application of such models on roads, health services, water supply and urban infrastructure, the citizen understands better what the state makes partnerships with private companies and how this affects the daily life of the population.