Road privatization in Ecuador
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Road Privatization in Ecuador
By
Daniela Mogollon
Loyola University New Orleans
6363 St. Charles Avenue
New Orleans LA 70118
and
Walter E. Block, Ph.D.
Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics
Loyola University New Orleans
6363 St. Charles Avenue, Box 15, Miller Hall 318
New Orleans LA 70118
wblock@loyno.edu
https://walterblock.substack.com
Road Privatization in Ecuador
Abstract:
One of the greatest enemies of long and healthy life-spans is government roads. All too many people are killed on national highways and many more seriously injured.
The present paper makes the case that that full privatization is the proper solution. If road owners compete with each not only in terms of safety, but, also, convenience, reducing congestion, etc., human flourishing will markedly increase.
Even semi-demi-quasi privatization will improve matters we demonstrate. This refers to the public private partnership (PPP) system that has been used to good effect in several South American countries.
Key words:
Transportation; Ecuador; roads; privatization; PPP
JEL category:
L62, L92, N76, O18
Road Privatization in Ecuador
I. Introduction:
For years, local and national governments have been responsible for millions of deaths in car accidents on roads all around the globe. As a result of lack of maintenance, speed controls, clear signalization, and poor road design, traffic accidents are a worldwide leading cause of death. According to the World Health Organization (2023), around 1.19 million people lose their lives, and 50 million people get injured in road accidents, yearly. Car accidents also mean significant monetary expenses for those involved with no clear entity held liable for the consequences. Governments should be accountable for the accidents related to road quality because they own and manage these facilities and are not ensuring the safety for which citizens pay. In many cases, political incentives may conflict with the public good.
Road privatization will render these facilities safer and significantly reduce road accident rates. This will be achieved through increased and improved road maintenance, better rules of the road and a structured road design. If and when private companies come to own the roads, they can be held accountable[1] for mistakes that could have prevented fatal accidents and saved people’s lives. As matters stand at present, however, no one in a position to improve matters in any way, shape or form, loses a single centavo when traffic fatality all too often takes place. Under private enterprise, in sharp contrast Indeed, this is one of the basic foundations of laissez faire capitalism: when you do not satisfy customers, you lose profits. If you do not end the error or your ways, you risk bankruptcy.
Besides making roads and highways safer, financial benefits are associated with road privatization which improve a country’s economic growth. This process will relieve a financial burden on the government by reducing public debt and increasing tourism. Less travel time means less fuel is used to distribute products or materials to businesses, which will reduce consumer prices. People will spend less on car and accident insurance with safer roads, stimulating internal consumer spending in other sectors. In addition, private companies operate more efficiently, maintaining higher quality standards compared to the public sector.
Over 90% of road traffic deaths occur in low- and middle-income countries, where limited resources and poor road infrastructure contribute significantly to the problem (World Health Organization, 2023). In Latin America and the Caribbean, these challenges are particularly acute, with high accident rates linked to inadequate maintenance, deficient road design, and insufficient safety measures (Nazif‑Muñoz & Pérez‑Salas, 2009). In this case study, we focus on the benefits of road privatization in Avenida Simon Bolivar, a major Ecuadorian highway connecting the north and south areas of the capital city, Quito. This highway is commonly known for its high accident and mortality rates and as Ecuador’s most dangerous but essential road. A broader look at Avenida Simón Bolívar demonstrates the effects of inadequate public road management, highlighting the urgent need for reform.
Case Study: Avenida Simon Bolivar
According to the World Health Organization (2023) and The Global Economy, Ecuador ranked fifth among South American countries for road traffic deaths per 100,000 people in 2019. (The Global Economy, 2025). In 2021, Ecuador’s road traffic mortality rate stood at 23.4 deaths per 100,000 population, significantly higher than the global average of 15 deaths per 100,000. (World Health Organization, 2024) Quito, the capital city, has a total population of 2,872,351. (Alcaldía de Quito, 2023) Avenida Simon Bolivar is a 34 miles long highway around 75, 000 vehicles utilize this road daily. (Primicias, 2025) A study conducted by two civil engineers (Bermeo & Picuasi, 2019) at the Central University of Ecuador showed that 60% of drivers use this road to work or return home, making it essential for daily use. Jonathan Machado wrote for Primicias, a local newspaper in 2024, that between January and October 287 accidents occurred on this highway. (Machado, 2024). Fabian Diaz and Josue Ortega analyzed the causes of traffic accidents on a 15.4‑km stretch of (2019–2023) Simon Bolivar Avenue (2019–2023) and found out that 84% of accidents occur because of human factor including speeding caused by lack of speed limit signage and 3% occur because of road factors including poor road design. (Díaz & Ortega, 2024)
This means that the government should be accountable for at least that portion of the traffic accidents their poor roads caused. There is a lack of adequate signage and lighting in many stretches; this is particularly hazardous at night or in foggy conditions.
Additionally, parts of the road suffer from poor maintenance, including potholes, damaged guardrails, and worn-out lane markings. An article written by Mariela Cevallos for Primicias stated that speeding, lack of signage, and poor road maintenance are the leading causes of traffic accidents on Simón Bolívar Avenue, where 35% of all accidents in Quito occur. According to the same article the most extensive maintenance intervention recorded on Avenida Simón Bolívar in Quito was the comprehensive rehabilitation of almost the entire roadway carried out in 2021. (Cevallos, 2024)
Despite being in service for decades, there is little to no public documentation detailing when Avenida Simón Bolívar last received comprehensive maintenance before 2021. This lack of transparency raises concerns about the management and upkeep of such a critical roadway.
Besides the lack of proper maintenance, Dr. Fabricio Yépez, a Civil Engineering professor at Universidad San Francisco de Quito (a highly ranked university in Latin America), stated for El Comercio that there are structural flaws on Simón Bolívar Avenue that must be considered; therefore, precautions should be taken due to poorly designed road banking. (El Comercio, 2015).
The road runs along the slopes of the Andes, with steep gradients and curves. Some of these curves have poorly designed banking angles, making them dangerous, especially at high speeds.
The highway has two to three lanes per direction, and merging areas are abrupt or poorly marked, in most sections. With the Ecuadorian government collecting revenue equivalent to 34.78% of the nation’s GDP (International Monetary Fund, 2025a) and carrying a public debt burden equal to 53.84% of GDP (IMF, 2025b), how is it possible that citizens are left with dangerously designed and poorly maintained roads that put their very lives at risk?
These ongoing difficulties show why handing over road management to the private sector might well be efficient and lifesaving. It is difficult to see how such a transfer would make things worse.
Benefits of Road Privatization
The urgency of road privatization cannot be overstated. It is a solution that will not only address these pressing issues but also benefit the city’s overall economy. Allowing a private firm to design and manage major highways, especially in poor countries that have limited resources and cannot ensure high-quality road safety, will be a priority to avoid being held liable for people’s lives.
Road privatization can significantly enhance road safety and urban economic development, particularly in cities like Quito. By transferring management and maintenance responsibilities to private firms, roads such as Avenida Simón Bolívar would receive regular upkeep, improved signage, better lighting, and properly engineered structures, directly reducing the risk of accidents. Privatization assigns clear property rights, creating direct responsibility and incentives for the owner to maintain safe conditions, unlike government roads, where accountability is diffuse and ineffective.[2] Private entities have strong incentives to ensure safety and efficiency, avoid legal liability, attract users, and maintain a positive reputation. Beyond safety, a well-maintained private road network facilitates smoother traffic flow, reduces vehicle damage and fuel consumption, and saves time, improving overall productivity.[3] Moreover, better infrastructure encourages foreign and domestic investment by generating employment opportunities through large-scale infrastructure projects. It will increase tourism because this highway is essential to connect rural to urban areas, including the city’s downtown area, where most tourist attractions are located.
Safer roads serve as an incentive to attract tourists, especially in Latin America, where road quality can be a determinant factor when deciding on a place to live or visit. As the government redirects its resources to other essential areas like healthcare and education, privatization is a strategic partnership that fosters accountability and stimulates economic activity, prioritizing the common good and development. Even though there are numerous advantages to road privatization, it is important to consider the concerns of those opposed to such policies.
Counterarguments
Avenida Simón Bolívar connects various neighborhoods with diverse socioeconomic profiles, and privatized roads can often be seen as inaccessible and unethical. Most private roads come with tolls, which can disproportionately affect low-income people who rely on these roads for daily commuting. However, the key areas connected by this avenue are, on average, middle-class neighborhoods. Low-income residents still pay taxes; the only difference is that by paying tolls, they will receive what they paid for on a daily-use road. For this reason, people would rather pay a $1 toll for a high-quality highway that ensures safety standards. As owned by a private company, they could offer accessibility discounts or memberships for public transport, students, elders, and frequent users. If there is less traffic on the road, drivers would save time, and hourly-rate workers, who are primarily low-income people, could earn in one extra working hour what they paid for the toll. Increasing productivity increases overall GDP per capita. Another frequent worry is the potential lack of accountability in privatized systems, especially when profit motives come into play.
What is the counterargument to the claim that the poor will pay a disproportionate amount of their income on road tolls? One response is that they do so for a myriad of goods and services: food, cars, clothing, entertainment. Indeed, it is difficult, in the extreme, to think of any item for which this is not the case. Suppose this were not the case. Posit, that is, that all prices, of everything, were proportional to income[4] Then, we would have reached the socialist nirvana of absolute equality. Would this be a blessing. No, and on two grounds. First deontological: there does not seem to mean any justice in equating the well-being of those who contribution widely different amounts to overall wealth. Second, we would all be vastly poorer, as one of the incentives to be productive would be erased.[5] Yet, insisting that the poor not pay a disproportional amount for a highway toll is a movement in this horrific direction.
Accountability and transparency can also concern the public. The idea that private companies aim to maximize profits above anything else and that privatization deals may involve corruption or favor certain people are common thoughts.
However, the past Ecuadorian government that was in power for 10 years still faces legal charges for corruption and resource mismanagement. “The new Anti-Corruption Secretary of Ecuador, Dora Ordóñez, states that corruption during the decade of Rafael Correa’s government (2007–2017) amounts to figures that local and international organizations estimate at between 30 and 70 billion dollars in losses for the State”.(Infobae,2019)
Overpriced public works with inflated costs in significant infrastructure projects like hydroelectric plants and highways are part of this corruption scandal. The Attorney General’s Office in Ecuador has been auditing contracts and public spending for years to recover misused funds, with partial successes. It is often more likely to recover money from a corrupt private company than from a corrupt government. For this reason, in countries with unstable economies and corrupt governments, privatization is the only rational solution for prosperous economic and human development.
No one can deny that theft and fraud occur, too, in the private sector. However, when they are caught doing so, these companies pay the ultimate commercial penalty: they cease to exist. The same does not occur in counterpart governmental operations.
Inflexible contracts and limited government revenue are other counterarguments used against road privatization. Agreements that are difficult to adjust when situations change, such as long-term concession contracts that last around 20+ years, often have fixed terms for toll rates and maintenance responsibilities. Once signed, these are legally binding and hard to modify, even if traffic patterns change, economic shocks occur, or public priorities shift. This inflexibility can cause governments to renegotiate high-cost terms, increasing public debt.
A simple solution to address this concern would be to design more flexible contracts. Well-drafted contracts can include adaptive pricing mechanisms (for tolls or user fees) linked to demand or inflation. These contracts must also include renewal periods (every 5 years) and renegotiation for exceptional circumstances such as pandemics or natural disasters.
Further, these arrangements are not pure private enterprise, as advocated in the present paper. Rather, they constitute public-private partnerships.[6] Yes, this form of contracting out is replete with difficulties. But none of them touch upon complete road privatization. In that case, the private firms that tie themselves into inflexible contracts will pay a penalty.
Regarding limited government revenue, the concern is that when a road is privatized, the private company collects tolls and user fees directly. Therefore, the government loses the steady cash flow it could have earned from tolls, especially because Avenida Simon Bolivar is a high-traffic road. These lost revenues could have helped address other public matters. If the government collects tolls from highways and taxes from residents, the least Ecuadorians should get is safe roads. However, if the government does not have strict obligations like a private company would after signing a contract to invest in high-quality roads, these will never be prioritized, and lives will continue to get lost due to poor maintenance and inefficiency. In addition, private companies build and maintain roads using their own capital or bank loans; this frees up public funds from the government for social spending or debt reduction. The government will benefit from road privatization because it can transfer long-term revenue risk to a private company in exchange for immediate infrastructure delivery, especially during fiscal crises.
Then, there is claim that the less money the government has at its disposal, and the more in the hands of the private sector, the better is the commonweal. Consumers have much more control over corporations that do voters have over governments even in such non-corrupt entities. For example, the dollar vote occurs every day, even every minutes. The political ballot box is typically open every two or four years.
International Case Studies
Real-world examples show how several countries have successfully implemented road privatization, at least the public-private partnership (PPP) version thereof, to address both infrastructure challenges and economic development. It is essential to explore how other countries, specifically in Latin America, have implemented road privatization as a solution to support private investment, receive high-quality highways, and prevent government resource mismanagement. Chile, Mexico, Peru, and Brazil, all from South America, which means they have similar demographics and geographic and economic inequalities, have implemented PPP models to alleviate budget constraints and transfer responsibilities and risk to private investors.
The Chilean government started to rely on public companies, establishing a PPP model that included a minimum guaranteed revenue for the concessionaire to improve their road network in 1933. By 2020, over 3,600km of roads were concessioned through PPPs, representing at least 17% of total paved roads according to the Ministry of Public Works. (Ministerio de Obras Públicas Chile, 2016)
Mexico employs two key models for public-private partnerships in its road infrastructure. One model transfers traffic risk to private operators through concession agreements, while the other is known as Service Projects (PPS). This is organized to compensate operators through predetermined payments tied to road availability and maintenance without involving toll revenue. Out of the country’s 50,000+ kilometers of federal highways, toll roads account for roughly 20%, with operational responsibilities split nearly evenly between public and private entities. (Gobierno de México, n.d.)
The Brazilian government’s privatization framework for federal highways began in the mid-1990s, officially launching the Federal Highway Concession Program in 1995 with the first concession of the Rio–Niterói Bridge (Ministério dos Transportes, 2020) Although Brazil maintains over 1.8 million kilometers of federal and state highways, only 18% are paved, contributing to unsafe and costly transportation in many sectors of the country. (Cabello, Tavares, & Maia, 2020) This quasi privatization approach involved long-term concession contracts in which private companies were responsible for financing, operating, maintaining, and upgrading road infrastructure, with toll collection as a primary revenue source. Brazil’s road privatization example is one of the most successful in Latin America. “The private sector’s role is vital as it ensures investment in profitable areas, allowing the public sector to focus more resources on less profitable regions,” said Transporter Minister Renan Filho on Datamar News. (Datamar News, 2024) “From 2025 to 2029, private sector investments could reach R$372bn, according to the Brazilian Association of Infrastructure and Basic Industries. Highways lead the forecast with R$288.6 billion in potential works” (Hirata, 2024). One example is the Piracicaba-Panorama (PIPA) highway concession in São Paulo, which is expected to create more than 7,000 new direct and indirect jobs within its first two years and incorporate innovations such as modern road design and zero-carbon initiatives (Cabello, Tavares, & Maia, 2020; International Finance Corporation, 2020). Road privatization in Brazil has already lowered traffic accident rates.
Studies of Brazil’s federal highway concession program (2007–2017) show concessioned roads experience modest but significant safety gains around 16 fewer deaths per 1,000 crashes compared with publicly managed highways (Romano, 2021).
In the early 1990s, fewer than 15% of Peru’s roads were paved, contributing to excessive transportation delays and numerous accidents (Organisation for Economic Co-operation and Development, 2015). To address this problem, since the 2000s, Peru has implemented PPPs to address infrastructure deficits. By 2022, the government had awarded 16 road concessions, resulting in approximately $4.8 billion in private investment. These partnerships have led to the construction of 2,163 kilometers of highways and the maintenance of an additional 4,057 kilometers, effectively doubling the percentage of paved national roads to nearly 84%. (Peru – infrastructure development, 2023).
Even though these are not examples of fully privatized road models, they are initiatives governments of the region are taking to support private investment, improve road infrastructure, and stimulate economic growth.
The United Kingdom, however, is a historic example of the success of privatizing one of its main highways. The M6 Toll Road opened in 2003 and is a major privately owned and operated toll road in the UK. The private sector fully funded this privatization model, covering all operation, maintenance, and upgrade costs without the need for direct public investment or taxpayer money. A Trafficmaster survey estimates that this private highway has reduced some journey times by up to 45 minutes. (PPIAF, n.d., p. 4). Early UK parliamentary analysis found average weekday time savings of approximately 12 minutes northbound and 7 minutes southbound on the M6 Toll compared with the pre-opening M6 (House of Commons Transport Committee, 2005). The operator has more recently claimed larger savings up to 41% faster versus local A-roads, especially during peak periods (Midland Expressway Ltd., n.d.). Reduced travel time translates to increased productivity for employees and employers from different industries and lower fuel consumption, which contributes indirectly to economic efficiency. A shift in consumers’ minds that is saving time and resources results in increased consumption or market investment. Increasing employee productivity also makes the supply curve more efficient since they will produce more output for the same cost.
Regarding safety concerns, IFM Investors can be held liable for negligence for accidents caused by road factors; for this reason, they prioritized road design and effective signage to reduce the likelihood of accidents. Additionally, the private company has implemented its dedicated incident response team, which can quickly handle accidents, breakdowns, or debris removal. “Including 24/7 maintenance crews and monitoring systems, enabling them to respond faster than public agencies and assuring proper care and concern for toll payers’ lives.” (Omega Centre, 2011; IFM Investors, 2017).
The M6 Toll Road is the perfect example to demonstrate the benefits of road privatization, assessing economic and social factors by prioritizing productivity and user safety and reducing the government’s ability to promote road improvements as part of political campaigns that do not benefit drivers. These cases serve as evidence to demonstrate that road privatization, when implemented responsibly, not only reduces financial burdens from the government but also protects lives, something public road systems have repeatedly failed to do.
Conclusion
In conclusion, the current system in developing countries like Ecuador puts millions of lives at risk while also limiting economic growth potential. With the clear objective of reducing road accident rates and helping stimulate the economy of a developing country, privatizing Avenida Simon Bolivar is a mutually beneficial solution from all perspectives. It benefits road users, the government, the private sector, and, in general terms, the local economy. Private companies are incentivized to maintain high-quality standards or face legal penalties that ensure proper road design, maintenance, and management to protect drivers. Avenida Simon Bolivar lacks these essential road characteristics. It prtects citizens from corrupt governments that use infrastructure projects as a shield to hide illicit activities and resource mismanagement. On the other hand, it reduces a significant financial burden and social compromise from a currently unstable economy, allocating those resources to other projects in the country. It is also beneficial to incentivize private investment and tourism, which will reduce unemployment.
The most dangerous highway in Ecuador should not have taken thousands of lives over the years due to improper governmental actions, and citizens do not deserve low-quality roads that put their lives at risk just so the government does not lose some control. Privatization is a powerful tool from which countries such as Ecuador should benefit. It is time for governments to stop treating road infrastructure as an afterthought and start prioritizing the lives of their citizens. Implementing successful road privatization models is not just an economic strategy but a critical social necessity.
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[1] According to Sowell:: “It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.”
[2] It is an elementary aphorism in economics that government interventionism stems from large concentrated benefits to the few, and small losses to the many. We are all much more highly concentrated as producers than as consumers. In the latter case we purchase tens of thousands if items in a year. However, typically, we are employed in only one occupation. This makes it easier for producers to exploit consumers rather than the other way around. See on this Stigler,m 1971; Peltzman, 1993
[3] For the general case in favor of highway, street, and road privatization see Anderson, 2007; Beito, 1988, 1989, 1993; Beito and Beito, 1998; Benson, 2005, 2007; Block, 1983, 1996, 1998, 2003, 2009A, 2009B, 2020, 2015, 2017, 2023; Block and Block, 1996; Butler, 1982; Caplan, 1996; Carnis, 2001, 2003; Cadin and Block, 1997; Cobin, 1999; De Palma and Lindsey, 2000, 2001; Foldvary, 1994; Friday, 2019; Hibbs and Roth, 1992; Klein, 1990; Klein and Fielding, 1992, 1993A, 1993B; Klein, Majewski, and Baer, 1993A, 1993B; Knipping and Wellings, 2012; Lemennicier, 1996; O’Toole, 2009; Roth, 1966, 1967, 1987, 2006; Roth and Butler, 1982; Semmens, 1981, 1983, 1985, 1987A, 1987B, 1987C, 1988A, 1988B, 1991A, 1991B, 1992A, 1992B, 1993, 1994A, 1994B, 1995A, 1995B, 1996A, 1996B; Staley and Moore, 2009; Tullock, 1996.
[4] Or, better yet, wealth
[5] Two of the most powerful rejections of compulsory egalitarianism are Rand, 1957 and Rothbard, 1974
[6] This is known in the vernacular as economic fascism.
