Mexico announces the launching of 14 investment projects under the figure Public Private Partnership (PPP). An investment of up to MXN$58bn during its two phases is being contemplated.

 The Public Private Partnership Law aims to promote the collaboration between the private and public sectors in activities that help the economic development of Mexico. Its focus is on construction projects and public infrastructure maintenance, applied research projects and technologic development projects.

For the implementation of an alliance between the public and private sectors under the PPP figure, it is necessary to consider, among other things, (i) the cost-benefit ratio of the project; (ii) social profitability; (iii) financial and economic profitability, and (iv) its legal feasibility.

Usually, the initiatives for the development of a PPP project, come from government agencies or entities, however, the applicable law provides that anyone interested in carrying out a PPP project may submit to the relevant agency or entity their proposed PPP project (Not Requested Proposal). In order to approve a Not Requested Proposal, there is a need to evaluate, among other things, its adequacy with the agency's guidelines, budgetary sufficiency, feasibility studies and its adequacy to the National Development Plan.

The service contract must contain, among other things, clear performance indicators that ensure the adequate service provision and that the infrastructure is maintained in optimum operating conditions.

The legislation contemplates mechanisms that give certainty for the financing of this type of projects. Among other things, it allows developers, with prior authorization of the public entity, to guarantee the rights of collection derived from the contract and from the permits that would have been granted to provide the services related to the project. In addition, the temporary transfer of the control of the developer may be agreed with the creditors, in the event of non-compliance, with prior authorization from the contracting entity or entity. The shares representing the developer's share capital may also be guaranteed or transmitted, subject to prior authorization from the contracting entity or entity.

The figure was originated in England and has proven to be a major driver for the development of high quality public infrastructure worldwide.

* * *

Alejandro Sobarzo Hadad: Corporate-financial lawyer with more than 20 years of experience. He has participated in several PPS, PPS and public concessions projects. He was in charge of designing the legal structure of the unsolicited proposal for the construction and start of operations of a hospital in the IMSS area under the PPP figure. Partner at Kuri Breña, Sánchez Ugarte y Aznar, S.C.

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.