The Investor Argentina 2017 I Economy I Analysis
“THE NEW LAW ON PUBLIC-PRIVATE PARTNERSHIP CONTRACTS IS EXPECTED TO STIMULATE PRIVATE INVESTMENT IN KEY SECTORS OF THE ECONOMY.”
Public-private partnerships (PPPs) are growing in importance internationally with governments and the private sector seeing PPPs as an effective way of delivering important public service infrastructure. By combining private sector innovation and financing, and sharing the risks in innovative ways, PPPs can provide much needed savings for the public sector and a fair deal for the private sector.
On 30 November, the Argentine Government passed Law 27,328 on Public-Private Partnership Contracts, which regulates the essential aspects of public-private partnership contracts entered into by the State, as contracting party, and the private sector, as contractor. The aim of the new law is to establish a legal framework to regulate private investment and to stimulate private investment in key sectors of the economy such as infrastructure, housing, services, production, applied research and technological innovation. For 2017, a maximum of 5% of the General State Budget may be used for public-private partnership projects. In subsequent years, draft budgets must indicate precisely the part of the budget allotted to these projects.
The law has been passed at a vital moment of the country’s economic development: in September, Argentina approved a national transportation infrastructure plan valued at USD35 billion, considered to be one of the most ambitious plans in the country’s history. The contracts will be designed with a degree of flexibility necessary to adapt them to each project to be developed and the sources of financing involved. The companies and entities in which the State, the provinces, the city of Buenos Aires or municipalities may also enter into public-private partnership contracts as contractors, on an equal footing with the private sector.
Following the Government’s committment for increased transparency in the public sector, the performance of the contracts executed under the provisions of the law shall be subject to the control and supervision of the contracting State or the body created for that purpose in the corresponding jurisdiction. The contracting State shall have broad powers of inspection and supervision, and may demand information of any kind related to the performance of the contract and progress of the project; it shall guarantee the confidentiality of commercial and industrial information in accordance with legislation in force. External auditors that have sufficient technical knowledge and domestic or international experience and that are suitably independent and impartial may be used to supervise and control the performance of the projects. The head of the Public Private Partnership Secretariat was appointed, which is the body in charge of applying the PPP Regime.
The Government is expecting, as a result of the law that lowered barriers to foreign investment in public works, to include USD5.2 billion in projects that will open to competitive bids in 2018, mostly in the transportation, communications and technology sectors. In total, Argentina hopes to attract USD26.5 billion in infrastructure investments through 2022 in the form of public-public private partnerships. The PPP program has started with bids in November 2017 to begin constructing 7,277 kilometers of roads. This way, the PPP Regime continues to define itself in the current administration as a fundamental instrument for investment and development of necessary infrastructure in the following years.