Public-Private Partnership As A New Tool For Infrastructure Development In Argentina

The Federal Executive Branch submitted a bill seeking the approval of a new legal framework for Public-Private Partnerships to Congress. This new regime seeks, essentially, to allow a balanced and predictable collaboration between the public and private sectors.

The Federal Executive Branch ("PEN", according to its Spanish acronym) has recently submitted a bill seeking the approval of a new legal framework for Public-Private Partnerships ("PPP") to Congress. This regime is seen as another tool to help address the country's existing infrastructure deficit and generate greater involvement of banks and multilateral lending agencies in financing public works.

It is expected that Congress will discuss this initiative in the coming weeks and, if approved, the new legal framework for PPPs may be applied to a number of infrastructure projects in different parts of the country.

1. PPPs and their strategic importance in Argentina's current scenario

   The lack of investment in infrastructure in Argentina is very deep. Indeed, so massive is the need for capital, technology, management and resources to overcome this deficit, that neither the public nor the private sector can alone provide a solution. It is necessary to find new ways for the two sectors to work together to take advantage of the best each of them can offer and, thus, materialize the infrastructure investments that will improve quality of life for the Argentine people.

   PPPs were first used in the United Kingdom during the early '70s, and then spread to the rest of Europe, North America and Latin America, with Brazil, Chile, Colombia, Peru, Uruguay and Mexico, among their main exponents. They represent new means of association between the private and public sectors. Under this model, part of the projects or services traditionally run by the public sector are performed by the private sector through a contract in which the shared purposes for the provision of the relevant services or the performance of certain works are clearly set out as well as the obligations undertaken and the risks assumed by each party.

   In the classic conception of PPP, the private sector provides a service directly to the public sector through a contract for the design, construction, operation and maintenance of, for example, water treatment plants, hospitals or freight hubs. The possibility of unifying and aligning the interests of those who design, build and operate the project results in quantifiable efficiencies which have already been shown in those jurisdictions where PPPs are frequently used. The greatest advantage for the public sector is that the works are financed by the private sector. The works are paid over time by the State in instalments in consideration for the service provided. This not only allows for deferment of the budgetary impact of the price of the project but also promotion of...