Infrastructure, News

Public-Private Partnership: Latin American experiences

A recent report from The Economist Intelligence Unit, commissioned by the BID (The 2017 Infrascope: Evaluating the environment for public-private partnerships in Latin America and the Caribbean) evaluates the capacity of 19 Latin America countries to channel private investments through the public-private partnership (“PPP”) model.

The ranking that takes into account indicators such as legal framework, institutions, maturity, climate for investments and financing, is led by Chile, Colombia & Brazil.

Chile

With more than 25 years of specific regulation and experience in this type of contracts, Chile has approved more than 70 PPP projects in the last 5 years and 197 since 1990 until today. Airports, generation of electric power projects, road licenses, railroads, water and sanitation and hospitals are some examples.

Today, the Chilean PPP system faces new challenges such as the high cost of developing more ambitious projects and the growing demand for more transparency in all phases of contract development.

Colombia

A renewed legal framework (the new PPP law was approved in 2012) and the wide experience if the public sector in the development and maintenance of PPPs makes Colombia one of the most attractive countries in Latin America for  private investment.

Over the last 5 years, Colombia has developed 37 projects. Currently, under the same model, the country is finalizing the settlement of the fourth generation (4G) of road licenses, the most ambitious road infrastructure project in its history.

Brazil

Almost half of the PPP projects in Latin America are developed in Brazil, where the type of goods and services provided are also starting to diversify under these contracts to include penitentiary, health and education establishments and also public lighting.

The report highlights as one of the issues to resolve, the way in which banks and capital markets will participate financing these projects after the repositioning of the BNDES (Economic & Social Development National Bank).

Argentina: An emerging scenario

After years of disinvestment, the report highlights important progress in the reestablishment of trust of private investors in our country.

The new public-private participation system in Argentina is modern and solid but still very recent. The new PPP law was sanctioned at the end of November 2016 and is yet to be tested by the implementation of specific projects.

On that subject, the government has announced a series of initiatives for upcoming years. One of them is the Belgrano Plan that involves a road, railway and commercial air project to include the north provinces of the country, in addition to the construction of houses and early childhood centers.

Regional challenges

The Economist Intelligence Unit emphasizes the effort of the whole region to improve the legal framework of PPPs, particularly related to the granting of appropriate guaranties to investors. Some governments (Brazil, Colombia and recently, Argentina) have also created specific units devoted to the following of these projects. Although, in terms of effective implementation of this tool, in many countries there is still a distance between legal texts and what actually happens in practice.

On the other hand, they try to prevent corruption scandals, in which recognized construction corporations have been involved, from sullying the PPP system. In some cases, governments have been forced to take drastic measures in the framework of executing contracts.

However, these facts could work as catalyzers in the search for more transparency in the future. From the public sector, through the implementation of a preventive legislation (in Argentina, for example, the Congress is in the process of analyzing a law about criminal business responsibilities) and from the private sector, with the strengthening of compliance policies.

María Lorena Schiariti

Partner

C.V.

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