The Argentine government has issued new regulations for public-private partnership (PPP) contracts in the public works sector, which are expected to streamline the process and bring at some US$40bn in infrastructure investments, according to state news agency Telám.
Since Macri assumed power in Argentina, he has lifted currency controls, cut subsidies and brought the country out of a 15-year default by settling with holdout creditors. Now, he needs foreign investment to compensate for the decline in weaker consumer demand and kick start a flagging economy.
In Argentina, the need for infrastructure repair and improvement has never been greater. By itself, the public sector lacks resources to do anything meaningful given the infrastructure deficit. Thus, the new legal framework aims to attract the interests of banks, financial corporations and other private sector players through Public Private Partnerships (PPPs).
The key for PPPs is a legal framework that provides the private sector with confidence that loans will be repaid. It is for this reason that the recent approval of the new legal framework for Public-Private Partnerships is a win for Argentina and international investors as a whole.
The bill constitutes only an alternative way of cooperation, which means that the tradition model may still be applied. The bill is relatively short, it sets out key guiding principles and mandatory terms of the regime. It clarifies that more detailed regulations will have a place in subsequent legal acts, bidding terms and conditions of the contract.
What are the main provisions and benefits of the PPP regime?
Transparent, flexible and competitive procurement process.
The PPP bill requires a transparent, flexible and competitive procurement process and can be launched by means of a tender or private initiative. Moreover, the bill provides a new tool - Competitive Dialogue, which is widely used in the U.S. It applies when a government determines its final goal, but there are a variety of methods to reach that goal. So, the government may discuss all available methods with possible contractors and start a public bidding process with a formulated final request.
Flexibility in financing and guarantee structures.
Depending on the bidding terms and project-specific characteristics, the PPP regime enables the use of any kind of financing tools and instruments of guarantee. For example, for financing purposes, the State may allocate demand-based, shadow or availability payments,...