Public procurement and PPP

Legislation

Is the legislation governing procurement and PPP general or specific?

The legislation is general.

Proposal consideration

May the government or relevant port authority consider proposals for port privatisation/PPP other than as part of a formal tender?

The selection of private participants takes place through transparent and competitive procedures, respecting the principles of nondiscrimination, equality and wide publicity, so as to promote the participation of the largest number of operators, in order to select the private participant who can provide the most efficient and effective service.

The projects executed under Law No. 5,102/13 (the PPP Law) are normally subject to formal tender procedures. The PPP Law provides that the selection of participants will be made by formal tender procedures, but also leaves room to establish, through regulation, other sorts of competitive procedures, provided that they are not contrary to the general principles of economy and efficiency, transparency and equality.

The development of PPP projects might start as a result of a public initiative, within the relevant contracting authority, or might be presented to the contracting authority by the private sector. Private initiative projects can be substantiated and evaluated whenever there is not a previous submission made by another private proponent in study, and when the contracting authority is not conducting a similar project for promotion as a public initiative project.

In both scenarios the contracting authority, under the coordination of the PPP Project Unit of the Ministry of Planning, will be responsible for the structure, selection, adjudication and conclusion of the PPP contract. Likewise, the contracting authority has the power to control the proper execution of the contract and the fulfilment of the obligations assumed by private participants.

Joint venture and concession criteria

What criteria are considered when awarding port concessions and port joint venture agreements?

All PPP projects must have a technical, economic and legal analysis presented and approved by the contracting authority. In addition, the projects should have a favourable opinion issued by the Ministry of Planning, and the approval of the Ministry of Finance.

The regulation of the PPP Law (Decree No. 1,350/14) establishes the scope, form and content of the previous assessments required that may be applicable in each case, such as:

  • engineering;
  • operational;
  • commercial;
  • economic;
  • financial;
  • legal;
  • environmental; and
  • economic.

 

The award of the PPP project to a certain private participant is decided in accordance with the evaluation system, which consists of a predetermined scoring system established in the specifications of the tender.

The evaluation system must meet one or more of the following factors:

  • fees paid by users;
  • remuneration for services rendered to the state;
  • the term of the contract;
  • government contributions to the bidder to supplement revenues coming from users;
  • payments offered by the bidder to the contracting authority;
  • income guaranteed by the government;
  • the total or partial score obtained in the technical qualification;
  • qualification of additional useful and necessary services;
  • total contract revenues, calculated in accordance with the provisions of the tender; and
  • other objective factors defined in the regulations.
Model agreement

Is there a model PPP agreement that is used for port projects? To what extent can the public body deviate from its terms?

There is no model PPP agreement. The legal terms of the project are included in contracts negotiated between the private participant and the contracting authority.

Approval

What government approvals are required for the implementation of a port PPP agreement in your jurisdiction? Must any specific law be passed in your jurisdiction for this?

A decree issued by the executive branch is required to start a PPP project. Below is a brief description of the process.

The project, whether generated by public or a private initiative, needs to be submitted to the PPP Project Unit of the Ministry of Planning, the technical body of the executive branch in charge of developing PPP projects. The evaluation process starts there, where the projects are submitted at a pre-feasibility level.

The PPP Law and its regulatory decree establish that before the execution of PPP projects, different sorts of studies are submitted, such as technical, economic and legal. The assessments and favourable opinion of three different governmental bodies (the Ministry of Planning, the Ministry of Finance and the contracting authority) are compulsory.

The evaluation process involves analysis in stages. The first evaluation is given to the proposal submitted at a pre-feasibility level. Then the process advances to the feasibility level, and if there are favourable assessments the project is raised to the executive power. With the approval of the executive power, the project proceeds to the stage of preparation of the terms and conditions of the tender and the basis for a competitive procedure. All the initiatives, whether public or private, must pass through the described evaluation process.

Upon completion of the assessment process and once the terms and conditions for bidding are approved, the process goes through the stage of submitting the bids from the private sector, which lasts at least 60 days. After this period, the bids are evaluated and then the contracts are awarded and signed.

Projects

On what basis are port projects in your jurisdiction typically implemented?

The vast majority of ports in Paraguay are based on fully privatised port models.

Term length

Is there a minimum or maximum term for port PPPs in your jurisdiction? What is the average term?

There is no minimum term. The maximum term for a PPP project, including its extensions, is 30 years.

On what basis can the term be extended?

The term can be extended up to 10 years, under exceptional circumstances only, for unforeseeable and extraordinary acts after the signing of the PPP contract, provided that those acts provoke serious economic damage to the private participant and substantially alter the financial balance of the PPP contract. Article 34 of the PPP Law provides the casuistic details.

Fee structure

What fee structures are used in your jurisdiction? Are they subject to indexation?

The position of the private participant will be determined in each contract according to the type and characteristics of the proposed PPP agreement. Different forms of remuneration may be provided, such as granting the right to charge fees to users, public contributions or other sources of income.

A public contribution may include, among others:

  • proceeds from public revenue;
  • project financing guarantees;
  • guarantees of minimum income collection;
  • tax exemptions provided for in the laws;
  • contributions to the capitalisation of special purpose corporations; and
  • loans.
Exclusivity

Does the government provide guarantees in relation to port PPPs or grant the port operator exclusivity?

The government is empowered to grant exclusivity to the private operators.

Regarding guarantees, the PPP Law establishes the creation of a trust fund in order to effectively and efficiently meet the firm and contingent commitments assumed by the state under a PPP contract.

The trust is financially administered by the Financial Development Agency in a separate estate, pursuant to the provisions under Law No. 921/96 and its regulations. The state, acting as trustee, acts through the Ministry of Finance. Resources transferred to the fund are not returned to the Treasury, and remain within the affected fund until its conclusion.

The effectiveness and efficiency of the payment of state commitments is assured in that way.

Other incentives

Does the government or the port authority provide any other incentives to investors in ports?

Investors in Paraguay can benefit from the incentives provided under Law No. 5,542/15 and Law No. 60/90. These establish an incentive scheme for taxes and provide guarantees to promote investment of national and foreign capital.

The purpose of the regulation is the protection of capital investment in the creation of industries or other productive activities settled in Paraguay, when they contribute to the generation of employment and economic and social development.

These are general and non-specific regulations related to ports, and are not related to greenfield or brownfield investments. There is no specific investment threshold required to qualify. The projects are studied and approved by an investment council within the structure of the Ministry of Industry and Commerce.