A regulation on public-private alliances is already in place, which will enable several road projects and port and health infrastructure. The Secretary for Public-Private Investments, Roberto Salas, explains what changes are being introduced and why they were implemented by regulation and not by decree.

Why was this regulation on PPP necessary?

Having the regulation and all its technical instructions is a step forward in improving the country’s competitiveness and increasing investment attractiveness. As a country, we have fallen behind in the demands of both investors and long-term financiers, in order for projects to be sustainable. But now the regulation is an immediate contribution to make viable at least eleven public-private partnership projects that are on the dynamic network and that already have previous feasibility studies and feasibility studies, others that are in the phase of contract restructuring. All this within the framework of four areas: transparency, efficiency, access to financing and improvement of initiatives. With this, we hope to improve the confidence indices of investors and financiers for the structuring of projects.

Which projects will benefit from this regulation?

There are seven roads: Pifo-Y de Baeza, which connects the Sierra with the Amazon; Ambato-Guaranda-Babahoyo, which represents the biggest investment; Manta-Quevedo, who is also an important intermediary, especially for the production release. Bahía-Pedernales-Cojimíes, Loja-Catamayo, Ambato-Baños-Puyo and Montecristi-La Cadena. There are other important road projects that are underway, such as the Fifth Bridge, but it is not a PPP and that is why it is not on this list that I am mentioning. The port of Esmeraldas is on the list of eleven projects, which is a long-term project that will be reinforced by the theme of the northern mining corridors. We also have the first PPP application in a public health project, which is the construction of 20 renal health centers and rehabilitation of 20 more of the same type. Two hydroelectric plants will also benefit: Cardenillo and Santiago.

That translates into private investment, how much would that amount to?

This would generate an investment of USD 7.3 billion with the potential for 146,000 direct and indirect jobs. About 4,320 million dollars would go into hydropower plants alone. On roads, $2.8 billion; $160 million from the Kidney Health Centers and $109 (million) from the Port of Esmeraldas. It is important that the good use of the improvements provided by the regulations can gain good experiences of witnessing how to use the modality for more projects.

But what is new in the regulation that enables better implementation of PPP?

I will give a couple of examples: in the case of transparency, the most important thing is to establish a unique record of the PPP project, which already exists, but will now be implemented from the project profile. Then the information will be publicly available to all information from the earlier stage. There is another important issue in the regulations that reduces the discretion of officials, especially in the matter of bidding. In terms of efficiency, there is a reduction of four steps compared to the previous regulation which will allow the development cycle to be reduced between four and six months. It usually lasts between 12 and 36 months, but with this regulation, the process will last, depending on the complexity, from 12 to a maximum of 30 months. Furthermore, better access to financing is sought, since the regulation establishes high standards in the creation of projects aligned with the requirements of banks. This has to do with the social, environmental and social issues of the Paris Agreements, which also coincide with the Equator Principles. The idea is to give the investor more confidence by linking projects to the Sustainable Development Goals (SDGs). This improves the quality of project proposals and makes financing more accessible. In addition, the regulation provides greater clarity on how the state assumes long-term fiscal obligations in contracts, so there is greater certainty that the obligations will be paid. In addition, the right of intervention for investors is established so that the project does not fail. This already exists in other countries.

Have you decided on this way of organizing, leaving aside the possibility of submitting a bill to the Constitutional Court, because it has already been seen that it can be a cumbersome process?

We saw that these eleven projects, which are already active, require modern regulatory support, and we preferred not to lose a single day, and with the support of President Lasso, we took the first step. The vision is not lost that in the future, when circumstances exist, a much stronger law can be established. The law can do broader things that cannot be done by regulations.

Like which one?

For example, changing the role of this secretariat from a moderator to a project structure. The idea is that the stages of designing, structuring, tendering and awarding of contracts will pass into the hands of the Secretariat, thus relieving the ministries. On the other hand, ministries would be in charge of managing contracts. Government departments do not have enough resources to do this properly.

Regarding the road PPP issue, how does the issue of repayment to investors work?

Citizens should know that the government had initiatives to implement several road projects, expansions, new works, new layouts, and there are two alternatives: to do it in the traditional way with state funds, and many of them do not charge tolls because there are no payment options. But there are others who are identified with technical and financial, ecological, economic analysis, who are candidates for private participation in which the rate regulated by the state is paid. The advantage of the second modality is that the initial investment is not provided by the state. PPPs are focused on the second alternative.

The contract for Villonaco 3 was signed this week, what is the significance of that?

Villonaco is good news. This concluded the signing of the concession contract for the start of work on this 110 MW project, in which approximately 180 million dollars was invested. The executing consortium is the Spanish group Cobra, which has persisted in this lengthy process. Although it was allocated in the previous government, we took it and made it sustainable. This is because the development bank has determined that it is not sustainable.

Why did this happen?

The project did not provide financial guarantees, there was not enough clarity that the flows would be sufficient to pay the debt. The necessary fiscal obligation has been established. The theme had to be reworked without changing the focus, but the instruments that make it viable did so. On a positive note, this serves to enable sustainability for others who have been in the same situation, such as the 500MW unconventional renewable energy block.

So how are the public-private alliance processes and how is it guaranteed that subsequent governments will continue with this issue?

The most important thing is to leave this legacy of President Lasso and this secretariat, which is a network of active projects. There are a total of 26 projects, 11 of which are public-private partnerships. 26 projects have an investment potential of 21,000 million dollars. PPP contracts may be signed in 2024 and 2025, and other delegated management projects in 2026. This is a new institution that has $30 million to complete feasibility projects and has trained 300 officers, including staff from the Comptroller.

But what if the representatives in the new government do not believe in these numbers?

Processes that have already been signed are government contracts that must be respected and projects can be evaluated. Our aspiration is for this assessment to be positive, for these resources to be used. More than ideologies, we need to create public services and infrastructure for people that create jobs. If the ghosts that PPP is privatization are eliminated, and it is understood that the option is not to privatize, but that the initial investment is not the state, then it will be possible to continue successfully.

How do you assess what has been achieved in this time of government that is about to collapse?

I would like to emphasize that the vision that President Lasso had from the beginning was to generate infrastructure through this new modality and in everything that is delegated management. The 21,000 million dollars that I mentioned can be added to other projects related to industrial mining and it would reach about 25,000 million dollars, a figure that is not inconsistent with what was said at the beginning of the Government to generate some 30,000 million dollars from investment.