The economics literature predicts that using PPPs with user payments can help prevent the building of ‘white elephants’; that is, public investment projects with negative social returns. The case of Spain is a paradox in this regard. PPPs have been frequently used in Spain, yet the country has the highest stock of excess infrastructure supply in Europe.

This research explores the reasons for this paradox by drawing on evidence from three case studies of PPP projects in the motorways, railways and energy sectors. These cases identify guarantees provided for in the Spanish legal framework and specific PPP contracts as important reasons for this paradox. The State’s Financial Liability (Responsabilidad Patrimonial de la Administracion) is especially relevant as it provides for public compensation in case of the early failure of the concessions owing to the bankruptcy of the concessionaire.