With the enactment of the new Regulations to the Public-Private Partnership Law (“PPP Regulations”) and the new Guidelines that set out provisions for determining social returns achieved from a project, as well as whether carrying out a project under a PPP scheme is appropriate (“PPP Guidelines”), published in the Federal Official Gazette (Spanish acronym DOF) on November 5 and 22, 2012, respectively, Mexico has a full legal framework for implementing infrastructure projects on a PPP basis. The framework consists of:
- The Public-Private Partnership Law (PPP Law)1, published in the DOF on January 16, 2012. Its purpose is to regulate the
PPP projects development schemes (the "Projects") that create long-term contractual relationships between the public and private sectors in order to provide services to the public sector or the end user, using infrastructure provided, totally or partially, by the private sector so as to increase social benefits and investment in the country.
The PPP Law constitutes a mechanism that had been looked forward to, not only by Project developers, but also by the financial institutions participating in the funding of such projects, who welcomed the entry into force of legislation that promotes legal certainty, such as:
- Optional alternatives for awarding Projects additional to those provided for in the previous specific legislation for
- various infrastructure sectors.
- Preliminary review, in public bids, of all documentation (technical and legal) other than the financial proposal.
- Submittal of unsolicited Project proposals.
- Reimbursement for non-recoverable expenses if the bidding process is cancelled.
- The obligation to guarantee payment of damages and losses when challenging an award and a suspension of the
- bidding process or works is requested.
- Balanced Risk Allocation in PPP contracts.
- Maximum amounts for the provision of contractual guarantees defined by law.
- Provisions that encourage Project Finance.
- Acquisition of rights-of-way by the developer and commercial appraisals to establish the price for the acquisition.
- Right to have the original economic conditions of the Project restored.
- The right to restitution of venture capital in the event of early termination.
- Settlement of disputes by arbitration and technical issues by a committee of experts.
- PPP Regulations. Their purpose is to regulate public-private partnerships entered into by state and private entities.These Regulations set out the content, features, and scope of the provisions of the PPP Law, such as:
- Rating of Projects according to the type of investment required.
- Preparation and starting of Projects and unsolicited proposals.
- Invitations for public bids, bid conditions, technical and financial proposals, assessment of proposals.
- PPP contracts.
- Right of the government to intervene in Projects, and extensions and sanctions.
- PPP Guidelines. In general, such guidelines address:
- The different types of prior profitability analyses applicable to Projects (cost-benefit and cost-efficiency, among others).
- Ratios (ranges) of eligibility to determine the advantages of carrying out a Project under the PPP scheme.
- Risk analysis: identification, allocation and mitigation of risks.
- Public-private comparison: comparison of cost analysis results of public vs. PPP projects.
- Definition of profitability indicators and formulas for their calculation: Net Present Value–NPV –, Internal Rate of Return –IRR –, Payback Period – PBP –, among others.