New Public-Private Partnership Contracts Law

By Martín Carlevaro, Larissa Recalde and Juan Manuel Ros, BKM | Berkemeyer

Law 7452/25, "Modernization of the Investment Promotion Regime in Public Infrastructure and Expansion and Improvement of Goods and Services under State Responsibility," introduces a new framework for Public-Private Partnership (PPP) contracts, superseding Law 5102/13.

This legislation, originating from the Executive Power, incorporates Senate modifications concerning extensions for unforeseen events impacting private partners and the inclusion of renewable energy projects (including non-hydraulic unconventional renewable energy) within PPP structures.

Following Senate approval, the Chamber of Deputies confirmed the amended bill, leading to its promulgation. This law is intended to bolster investment in infrastructure and public service development.

Key improvements include:

1. Fiscal Commitments Derived from Public-Private Partnership Contracts: The fiscal space has been expanded from 2% to 4% of GDP, with the National Economic Team (EEN) empowered to authorize increases, subject to Ministry of Economy and Finance (MEF) approval based on the medium-term fiscal framework. The permissible annual amount for quantifiable fixed and contingent payments is now 0.8% of the previous year's GDP (previously 0.4%).

2. Competence to Process Private Initiatives: The state's participation in private initiative projects is now capped at 25% of the present value of the total project cost. State contributions can be applied during the construction or operation and maintenance phases. The "blocking" period for similar project submissions after non-admission has been reduced from three to two years.

3. Stages of the Private Initiative Procedure: Timeframes for pre-feasibility and feasibility evaluations have been shortened. Reimbursement of study costs is now guaranteed upon feasibility approval by the Contracting Administration and the DGIP.

4. Rights of the Proponent (Private Initiative Projects): A right of first refusal is granted, allowing the proponent to match the best offer, provided their initial offer is not materially more expensive. The materiality threshold, to be defined in the bidding documents, must be between 3% and 10%.

5. Incompatibility to Be an Offeror or Private Participant: The incompatibility criterion (Article 19, paragraph (c) of the previous law) has been revised. Instead of ongoing breach of contract lawsuits, ineligibility now applies to entities convicted of breach of contract with the state within the past five years.

6. Early Termination of the PPP Contract: The law now permits contract termination due to suspensions exceeding established timeframes. The Administration is also authorized to terminate contracts for severe breaches by the private participant and replace them through a new bidding process, ensuring project continuity. In such cases of severe breach, creditors have the right to assume control of the special purpose vehicle (SPV) to remedy the breach, under terms defined in the bidding documents.

7. Principles: PPP contracts are now subject to a maximum 40-year duration, inclusive of permissible extensions (Principle of Temporality). The definition of the Principle of Environmental Sustainability now explicitly includes risks related to climate change.