Public-Private Partnerships in Ecuador

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DATE: 11-12-19

CORRALROSALES IN THE NEWS: 

-Jimmy Rodríguez

Ecuador is committed to accelerate the construction of infrastructure and the provision of public services through Public-Private Partnerships (“PPP”). For this purpose, it is essential to plan and prioritize strategic projects by sector; a transparent and predictable legal framework; and, above all, an inter-institutional structure with defined competencies and with the capacity to coordinate, monitor, and control.

The State and the private sector can be complementary agents in the provision of goods, jobs, and services to citizens. One of the fundamental responsibilities of the central and regional governments is to provide high-quality infrastructure and public services in a timely manner. By associating with the State, the private sector contributes with capital, as well as experience and specific knowledge. This figure is known as Public-Private Partnerships.

Chile, Colombia and Peru have had PPP regulations and experiences for at least a decade. In Ecuador, the Law of Incentives for Public Private Partnerships and Foreign Investments was enacted on December 18, 2015. So far, several APP contracts have been signed between the Central Government and private[1] partners. As part of the National Development Plan, The Ministry of Transport has 5 road projects in public tender and 9 other projects on the agenda[2]. On the other hand, although there are some initiatives promoted by the private sector, it is still a pending task of the regional governments to crystallize projects through this instrument.

The PPP scheme ensures the legal stability of the contract and grants access to tax benefits for the private partner, such as income tax 10 year´s exemption, tax outflow (ISD) exemption on imports, financing and payment of dividends, and the reduction of tariffs and VAT applicable to imports related to the project. The applicable law provides the possibility to submit any dispute that may arise between public entities and private partners to a national or international arbitration process.

The timely execution of the projects and the absence of conflicts derives from the capacity of the State to coordinate and monitor the execution of the projects, and cooperation between institutions. For this purpose, the State should have adequate material and human resources to ensure the success of the projects.

Given that the State has limited and scarce economic resources, it is decisive that Ecuador maintains the incentives contained in the Law of Incentives for Public-Private Associations and Foreign Investments, and that it applies a modern and transparent system of PPP which will contribute positively to the development of the country.

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[1] The relevant infrastructure projects are: Posorja Port, Bolívar Port ; Río 7 – Huaquillas Highway; Guayaquil viaduct; and, Chongón – Santa Elena road system.

[2] Ver: https://www.obraspublicas.gob.ec/asociacion-publico-privada-2013-2017_esp/ (2019-11-22)