Changes to PPP Contracts’ Framework

On December 4, 2018, the General Budget of Expenditures and Calculation of Resources to the Argentine Congress for the 2019 tax year No. 27,467 (the “2019 Budget Bill”) was published in the Official Gazette.

Chapter IX of the 2019 Budget Bill includes amendments to the Public-Private Partnership Contracts Law No. 27,328 (the “PPP Law”) and to the General Budget Law for the Federal Administration for the 2018 tax year No. 27,431, which regulated the Public-Private Partnership Trust (the “PPP Trust Law”).

Moreover, on November 2, 2018, Decree N°987/2018, which introduces amendments to Decree N° 118/2017 of the PPP Law (the “Regulation”), was published in the Official Gazette.

1. Preliminary considerations

So 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. Over the last few weeks, the government has launched new projects regarding electric power transmission. Furthermore, there are other projects in which the Government is already planning to employ the PPP framework, mainly in the infrastructure and service sectors.

The amendments to the PPP framework included in the 2019 Budget Bill deal with and try to address some of the challenges this kind of project present, simultaneously aiming to flexibilize and strengthen the legal and contractual structures necessary for their implementation.

2. Main amendments to the PPP Framework

(a) Amendments in the 2019 Budget Bill

The main amendments to the PPP framework introduced by the 2019 Budget Bill are the following:

• The Argentine Executive is allowed to extend up to ten percent (10%) the amount of public funds committed per project.
• Regarding the PPP Trust, it is clarified that the trustor or other public entities may not give instructions to the trustee, with the exception of those provided in the contractual documentation.
• 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.
• PPP Trusts are allowed 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 Federal Government was allowed to do. Likewise, contributions may also be made by any private legal or natural person.
• PPP Trusts may now be secured or guaranteed by multilateral agencies to which the Argentine Government is a party.
• The convening Government Authority is empowered to approve the Trust Contracts constituted for each PPP project and their respective amendments.
• PPP Trusts created by the jurisdictions that adhere to the PPP Law will be exempt from all taxes, fees and national contributions -existing and to be created in the future-, including the value-added tax and the tax on debits and credits in the bank accounts and other transactions.

(b) Amendments in the Regulation of the PPP Law

The main amendments to the PPP framework introduced by Decree N° 987/2018 are the following:

• In the area of the National Administration, the Chief of Cabinet, the General Secretary of the Presidency and the Minister to whose jurisdiction the project is for may act as “Convening Authority” of a PPP Project, along with the Secretary to whom one of the Ministers delegates such function. For the other entities of the Argentine Public Sector, the superior authority of the entity must act as “Convening Authority” which will be, at the same time, the Contracting Entity.
• PPP Trusts must operate within the jurisdiction of the Convening Authority, the Ministry or the Secretariat in whose jurisdiction the Contracting Entity operates. 

 3. Final comments

The amendments introduced in the PPP Regime seek to clarify the scope of certain aspects necessary for its efficient implementation and thus address some of the challenges presented by this type of projects.

It will be important to monitor the evolution of the PPP regime closely to assess the impact of these changes and their implementation by the competent authorities.