The expectation generated by the imminent presentation of projects by PPP, make project financing mechanisms grounds for discussion, since it can generate a kind of alliance between banks or channeling funds through stock market.

To say that the banking sector is expectant to finance PPP projects sounds logical, obvious and elementary, but how to reach this joint venture?

The Ministry of Finance, through the National Public Investment System (SNIP, in Spanish), and the representative of the Department of Treasury of the United States, Steven H. Hochman, met with representatives of public and private banks to try to agree mechanisms and procedures, taking advantage of foreign experience and excellent time of Paraguay.

The representative of the Department of Treasury said that to make this investment model works, the standards of service must be aligned with the profitability of the private partners, since its effectiveness depended on the appropriate transfer of risks between the private partner and the government.

Hochman emphasized the advantages and disadvantages of these partnerships as well as the financing scheme and the assessment of the risks involved.

In accordance with Law 5102/2013, the Ministry of Finance is responsible for the analysis of the technical feasibility of investment projects, the identification and assessment of the associated tax risks.

These tasks will belong to SNIP, created by Law 4394/2011 that aims to ensure that public investment resources generate impact on growth, employment and poverty reduction.

PPP projects can introduce greater certainty into derivative financial investment flows.

While a new road can generate a stable flow of toll revenues, it is easier to allocate credit risk to a long-term investment. Synergy can contribute to greater predictability in managing infrastructure projects.

Stock exchange, the banks allied

However, right now, not many banks can support large loans because there is insufficient capitalization.

PPP´s project amounts would result in syndicated loans between banks, in order to reduce risk as the Paraguayan banks funding levels do not handle that level.

There are other funding possibilities, including the one that could bring more: the stock market, which is the most effective tool for channeling funds, however, interestingly, the Government still does not see its potential, although the Securities Market entered into force since 1998 and the National Securities Comission (CNV, in Spanish) reportedly in June 2014, that the amounts traded so far in 2014, in bonds, both in primary and secondary markets were up to USD 47 million and in equity securities, the amount traded so far 2014, has been USD 3 million.