PPP Contracts: Amendments to the Framework

On September 17, the Argentine Executive submitted a Bill on the General Budget of Expenditures and Calculation of Resources to the Argentine Congress for the 2019 tax year.

Chapter IX of the Bill includes amendments to the Public-Private Partnership Contracts Law No. 27,328 and to the General Budget Law for the Federal Administration for the 2018 tax year No. 27,431, which regulated the Public-Private Partnership (PPP) Trust.

1. Preliminary considerations

Thus far in 2018, the Argentine government has already carried out Stage 1 of the Highways and Safe Routes PPP project, in which six PPP Contracts were awarded in different regions of the country. To date, the government has launched new projects regarding electric power transmission.

The amendments to the PPP framework foreseen in the Bill deal with and try to respond to some of the challenges this kind of projects present, simultaneously aiming to flexibilize and strengthen the legal and contractual structures necessary for their implementation.

2. Amendments to the PPP framework

The main amendments to the PPP framework introduced by the Bill are the following:

• A new template sheet is incorporated for PPP works that may involve public funds for future years, and require the authorization of the Argentine Congress. In addition, the Argentine Executive is allowed to extend up to ten percent (10%) the amount committed per project.
• Regarding the PPP Trust, it states that the trustor or other public entities may not give instructions to the trustee, with the exception of those provided in the contractual documentation.
• The Bill establishes that Provinces, municipalities and the City of Buenos Aires may be trustees in the PPP Trust. Exceptionally, private legal persons or individuals may also be trustees, only if private trustors are involved in the Trust.
• It allows PPP Trusts to borrow loans or any other type of financing.
• Regarding the PPP Trust assets, provinces and municipalities may now make contributions, which until now only the Argentine Government was allowed to do. Likewise, contributions may also be made by any private legal or natural person.
• The Bill states that PPP Trusts may now be secured or guaranteed by multilateral agencies to which the Argentine nation is a party.
•  To conclude, the convening government authority is able to approve the Trust Contracts constituted for each PPP project and their respective amendments.

3. Final comments

In order to evaluate the impact of the amendments proposed for the PPP frameworks, it will be important to assess the aforementioned amendments’ definitive scope and its implementation by the competent authorities.