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.

Similar Articles
Relevancy Powered by MondaqAI
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”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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