Argentina: 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 intergenerational solidary in its financing.

PPPs constitute an alternative to the classic public works contracting systems in which the State usually designs, finances, operates and pays for the works, while the private party only builds. The legal framework drafted by the PEN also implies a shift in the traditional paradigm of public contracts, as it excludes or limits the public law prerogatives of the administration (among others, the power to unilaterally modify the contract; to terminate it for reasons of public interest; to force the private contractor to continue with the performance of the contract despite the State's lack of compliance of its own obligations; the limitation of State liability). Experience shows that these powers have been exercised when the private contractor is at its weakest position (i.e., once the main investments have been made and the infrastructure is already built).

The key for PPPs to become an efficient tool for infrastructure projects to be financed by the private sector is that the relevant agreements be suitable for private financing. For this, it is essential for contracts to include the legal and economic elements which provide the necessary assurances for the payment of the relevant loans.

In Argentina, two regulations were enacted in the past to govern PPPs, neither of which was ultimately used: Decree No.1299/2000 and Decree No. 967/2005. The first was an excellent framework but was put in place in a very adverse context as regards both the international economy and Argentine politics. The second resulted in a deficient regulation despite having been issued in an excellent international context with abundance of capital available for emerging markets and very favorable terms of trade for Argentina.

2.  The bill on PPPs submitted by Executive Branch – Main provisions

The bill submitted by the PEN represents a substantial improvement considering the current PPPs framework, set forth by Decree No. 967/2005.

The proposed framework includes many elements and institutions created by Decree No. 1299/00, such the possibility of assigning the contracts which allow structuring the project financing.

The bill is relatively short and that fact allows for the principles and parameters established therein to be completed through its subsequent regulations as well as by the specific bidding terms and the relevant contracts.

The bill also provides a broad definition of PPP, which is not circumscribed to infrastructure projects or to a certain type of contract (e.g. construction, supply, maintenance, management and/or operation of projects are included).

The main provisions of the bill are as follows:

Alternative regime. PPPs constitute an alternative regime for public works and public works concessions and therefore, do not preclude the use of traditional systems. The public sector will consider which is the most suitable contracting method in order to satisfy public needs in each project. Therefore, PPP will be chosen only if it is deemed the most efficient method for the specific project.

Regulatory framework. The legal framework will be completed through the implementing regulations, the bidding terms and the provisions of the contracts. Neither the Public Works Law No. 13,064 nor the Concession of Public Works Law No. 17,520 nor the Public Procurement Decree No. 1023/01 will be applicable to projects governed by the PPP regime. The parties' contractual obligations will be those expressly provided in the PPP law, in the relevant bidding terms and in the contract.

Flexibility in legal structure. The vehicle involved in the contract may be an existing company or a SPV. The government may have a stake in the SPV. The SPVs created under the PPP framework can be publicly traded under the Capital Markets Law No. 26,831, a potentially important tool in seeking a wider financing net.

Flexibility in guarantee structures. The bill allows for the assignment of receivables and contractual rights, as well as step-in rights. Also, of contracting insurance or any other guarantee from local or foreign entities. Moreover, it allows for the creation of trusts as a security measure and/or for payment of consideration by the contracting entity, which must provide for the existence of a minimum liquidity during the performance of the contract. The trust's assets, which shall be in charge of a trustee (a financial entity), shall consist of the resources provided by law, including taxes, and will allow for the issuance of securities and thus, the securitization of flows arising from the regular fee payments. One issue that Congress should address when discussing this bill is the elimination of the requirement that the assignment of credits be notified to the payer, in order to be enforced against third parties (as required by the Argentine Civil and Commercial Code) if the consideration is wholly or partially backed by fees or rates to be paid by users. In the past decades, this has been a difficulty for the financing of projects such as toll roads or construction of gas distribution networks where such notification was —and still is— unworkable. We suggest replacing such mechanism with a publication of the assignment in the Official Gazette and, if necessary, in a newspaper in the jurisdiction where the project is taking place.

Flexibility in the contractor's remuneration. With a currency exposed to inflation, financing long-term projects in Argentine pesos is impossible unless the regime allows for efficient price redetermination mechanisms. For this reason, the bill expressly excludes the prohibition of indexation set forth by Convertibility Law 23,928. Moreover, the parties may agree that the consideration be payable in foreign currency. Regarding the consideration structure, it provides the possibility of assigning funds resulting from credit operations or taxes; the creation of surface rights and/or use or any other contributions made by the State. Finally, contractor has the right to maintain the original economic-financial balance of the contract

Step-in rights. Loan agreements entered by the contractor may include step-in rights, that is that in case of default by the borrower, the PPP contract is assigned to the creditor or to eligible third parties, subject to the procedures to be established in the contract.

Possibility of appointing independent technical auditors. The parties to the contract may appoint independent technical auditors who will control and monitor the execution of projects. The contract may specify that if the administration does not agree with the auditor's determination, this will not preclude the payment of the consideration, which will remain in the trust until the dispute is solved.

Competitive dialogue. This is a novel institute introduced by the bill. This competitive dialogue is one of the options the administration has to carry out a procurement of supplies and services, and is used when the kind of goods or services required is unknown but the Administration does know the goal or benefit sought. For example, if the administration wants to save energy in its buildings and facilities, the goal is clear: saving in energy and therefore funds, but how to achieve it may not be so evident, as there are several possible solutions to achieve the same goal. That is the purpose of this procedure in which pre-qualified companies are invited to file their proposals and a process of competitive dialogue is begun with all of them. Thus, it is through interaction with private parties that the most convenient solution for both the administration and companies participating in the bidding process is outlined.

Quantification of damages in case of breach by the parties. It is established that the parties' liability is governed by the provisions of the bidding terms and the resulting contract, as well as by the provisions of the Civil and Commercial Code (in subsidy). The calculation of damages may include the possibility of claiming lost profits under the terms provided by the contract.

Compensation for early termination. The contract will set the scope of compensation in cases of termination for reasons of public interest, as well as its determination and payment method. The 100% of the compensation will have to be paid prior to the takeover of assets. Rules limiting the liability of the State shall not be applicable.

Dispute resolution. Arbitration. Technical or any other kind of disputes arising from PPP contracts may be submitted to technical panels or arbitral tribunals. The text expressly excludes the review of the merits of the arbitral award by the local courts. The bill does not exclude the possibility that the arbitration takes place abroad.

3.  Final Comments

In our view, the keys for the success of the new PPP regime, once approved by Congress, are, inter alia, the following:

  • Contract management, until the work is completed and operative, in a coordinated manner between the relevant administrative agencies.
  • The adoption in the medium term of an objective method to measure the economic efficiency of the PPP system.
  • Macroeconomic, legal and fiscal stability and a tax system which promotes long term investment.
  • Provinces adhering to this framework and providing for stamp tax exemption. The PPP projects require an intensive use of contracts.
  • Coordinated and synchronized execution of the PPP projects with the use of traditional budgetary tools.
  • Efficient allocation of risks between the parties intervening in each project.
  • Mechanisms which allow and encourage public officials to compare differing offers.
  • Lack of interpretative risks and ambiguities when it comes to determining breach, as well as in the authorization of the use of the financer's step-in right.
  • Use of stability clauses as regards the applicable legal framework.
  • Consistent case law endorsing the new framework.

Ultimately, it is the responsibility of the entire legal community to provide what is necessary for the PPP framework to become a suitable tool to channel private investment in public infrastructure. This new regime seeks, essentially, to allow a balanced and predictable collaboration between the public and private sectors, allocating the project's risks in a reasonable and efficient way between the parties. This objective is incompatible with a system of law which, as has sometimes been the case in Argentina, acquiesces to the State's omnipotence in contractual relations, even against the text of the contract.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions