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Congress passes Public-Private Partnerships Law - International Law Office

International Law Office

Projects & Procurement - Mexico

Congress passes Public-Private Partnerships Law

December 20 2011

Advantages
Problems
Next steps


A new law regulating public-private partnerships (PPPs) was approved on December 14 2011. This law is the result of several amendments to the project originally presented by President Felipe Calderón in November 2009 (for further details please see "On the threshold: Mexican PPP bill to boost investment opportunities").

Advantages

The new legislation creates a clear and specific legal framework for PPPs, which will no longer be subject to the traditional public procurement laws. Many of its provisions will be particularly welcomed by projects and infrastructure stakeholders:

  • Concessions associated to PPP projects will be granted for up to 40 years (except where specific legislation on such concessions provides for a longer term).
  • The private sector can present projects for the government to consider, without having to wait for the government to identify and announce projects.
  • The allocation of risks will be specified on publication of the bidding terms.
  • PPP projects will qualify as public interest projects for expropriation purposes.
  • The rights derived from PPP contracts may be pledged as security. Shares or quotas of the special purpose vehicle may also be pledged or transferred.
  • In the event of a dispute, the parties may resort to arbitration.

Problems

Unfortunately, there are also a few negative aspects of the law:

  • Unsolicited projects (ie, PPP projects presented directly to the government by private sponsors) are subject to public bidding and may not be awarded directly to the promoter.
  • The incentive for the private sector to present unsolicited projects is limited. If the promoter is not awarded the project, it is entitled only to the reimbursement of its expenses.
  • The law does not make provision for dedicated PPP units to supervise PPPs, as recommended by Organisation for Economic Cooperation and Development guidelines to prevent fraud and diversion of public funds.

Next steps

The Office of the President must enact implementing regulations for the law within one year of its publication in the Official Gazette. Publication is expected to take place in the next few weeks.

The approval of the law is a great step forward for infrastructure development in Mexico. It will allow the country to position itself as one of the most developed countries in public infrastructure over the coming years. This law should promote an increase in the building of infrastructure and, as a consequence, an increase of the placement of development capital certificates.

For further information on this topic please contact Luis M Sada-Beltran at Sanchez-DeVanny Eseverri SC by telephone (+52 55 5029 8500), fax (+52 55 5029 8501) or email (lsada@sanchezdevanny.com).


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