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Public-Private Joint Ventures in Ecuador

The new government of Ecuador announced the immediate activation of the Public-Private Joint Ventures Law in force since 2016; in order to reactivate the economy; besides announcing and being taking immediate steps for an opening to private national and foreign investments in all fields. The Finance Minister announced that the private enterprise will from now on be the ”motor od the economy” as opposed to the state-centered previous model.

  • Projects must be fiscally sustainable.
  • Adequate risk distribution between public and private entities.
  • Relation quality-price must be optimal and best conditions for users must be attained by the project.
  • Final users must be informed by public entity and project manager of their rights.
  • Property rights guaranteed by the contract, for all the length of the term of the delegation.
  • Social inclusion coverage of social groups who may need the service or work.
  • Should try to utilize national personnel and know-how.
  • Income-yield capacity project should be figured out in an aggregate manner even considering the feasibility of exceptionally establishing subsidies to cover the most vulnerable population.
  • Committee to determine the projects relevant areas, promote them and supervise the execution of projects and the incentives regime.
  • Project may be proposed by the initiative of the private enterprise willing to become project manager chosen by open public contest.
  • Projects may be in any field; among others infrastructure, urban development, real estate projects and those linked to roads – highways, ports and airports. Exceptionally in public services (utilities) not regulation and control.
  • Some types of projects: construction, equipping, operation, maintenance / rehabilitation / repairing of new / existing public works. Construction and marketing of estate projects, social interest housing and urban development works necessary for the public interest. For the development of productive, investigative and developmental activities in general qualified as priority by Committee.
  • Same for existing works used to maintain essential public services if needed.
  • All others that may be qualified by Committee.
  • Juridical certainty and stability pertaining to all regulatory aspects of project, guaranteed by law and contract.
  • Incentives provided for by law will be in force for all the term of contract.
  • Financing of projects and local and foreign investment is welcomed regardless of the place where it comes from as long as they are licit funds.
  • Controversies may be subject to international arbitration in the arbitral entities of Latin America.[1] They can be subject to national arbitration at a well – known Mediation and Arbitration Center of at least ten years of operations with a good prestige (for instance, the Chambers of Commerce Centers; the Ecuadorian – US Chamber of Commerce Center).
  • Administrative procedures for the projects and contracts can be simplified by executive order, so there is great flexibility and easiness of access to them.
  • Projects will preferably be integral so that the private entity takes under control all stages; exceptionally, projects phases can be assigned separately to different enterprises.
  • The delegating public entity bears all responsibility for the content and truthfulness of the information filed to the APP (Public-Private Project) Committee of each entity.
  • Contracts can be modified by mutual consent of parties so as to better the service levels and technical standards agreed to (flexibility).
  • Contractual basis may establish compensation mechanisms for the anticipated termination causes; works partial advancements schemes and investments by project manager valorization.
  • Incentives that can be assigned by the APP Committee to the project have as only limitation that they cannot be higher than the amount invested by the private managing enterprise both as capital and debt for the development of the project.
  • Project manager can be any private equity corporation incorporated according to the Ecuadorian legislation (i.e. branches, subsidiaries, locally incorporated companies) or formed by public entities of foreign countries. The equity amount will be determined in the project basis.
  • Project shares transfer to third parties will be approved by the delegating public entity over 20% or more of the equity, as well as liens on it.
  • For the project financing, chattel mortgages on the contracts assets and funds can be levied. The State may cooperate with the Project Manager for the attainment of financing.

Any information as to the scope of the benefits / incentives should be analyzed on a case by case basis by consultation to the governmental authorities of the Secretary of Industries and Production; for which you can contact us.

By Jiménez-Carbo, Rodríguez & Associates P.A.

Dr. Ramon Jimenez Carbo  

[1] This is of great advantage since contracts can then be subject to the CIAC –IACAC- Inter-American Commission for Commercial Arbitration tribunals, in Bogota, Colombia where it operates for Latin America –with headquarters at the AAA Offices in N.Y.-  which are of the highest qualities, will be fully accepted by the Government of Ecuador, and the Panama Convention for the execution of awards which is the simplest and best for the parties, applies.