Pérez Bustamante & Ponce partner Juan Manuel Marchán-Maldonado speaks with Rani Mehta about advising on Ecuador’s first road private public partnership (PPP), Río Siete-Huaquillas road PPP, and the growing popularity of the PPP model in the country
How did the firm become involved in the Río SieteHuaquillas road project?
We were involved in this project from the very beginning. We received the request from LatamCo which is the Colombian partner of the project. We started advising them for their corporate establishment in Ecuador and in the drafting and association in the contract with the minister.
Can you tell me more about your firm’s role on the project?
Basically we were involved in the transaction from the first the negotiation of the project and then we worked on the contract for the private public partnership (PPP) with the Minister of Transportation, for building roads in Ecuador. So we had an active role in the initial stage of the execution of the contract and the initial implementation.
Your firm also worked on the first PPP in Ecuador (the Port of Posorja). Did your work on the first PPP affect the way that you approached this one?
It was very beneficial for us and for the client to have the previous experience. We were able to fine tune all the documentation for the benefit of the client. Initially we were thinking of an association agreement but after conducting the first PPP project, we were able to give the client most of the legal structure for the project.
What was the most challenging aspect of this transaction?
This was the first road PPP project in the country. Because Ecuador has been facing an economic crisis, we had to negotiate what would be the contribution of the government to the projectc - that was one of the biggest challenges. We have a lot of projects that demand high amounts of money and another challenge was to draw up a contract that will be bankable for the financing of the project and will make it easy for the clients to receive their financing. The project was designed to be financed by the client or by multilateral financing agencies. The international arbitration clause and the issue of penalties were aspects that also demanded a lot of attention and a lot of active work.
Do you think this will pave the way for more PPPs in the market?
Yes. After this transaction, we have been involved in other infrastructure projects and other projects where PPPs have been proposed to the government.
What made the government decide to introduce a PPP law?
We believe that this was due to the economic crisis. Because of the crisis, the government was not able to invest in important infrastructure projects. This government has made a huge investment in big projects but they have no money to pay contractors. The law was enacted as a response to the crisis. The investors will receive a long term contract with the possibility of recovering their investment and will receive a concession. They’ll be in charge of the development and operation of huge infrastructure projects. This was what caused the government to enact the law.
What sectors do you expect to see projects in?
We’ll see projects in the infrastructure construction sector such as roads, ports, hospitals, facilities, and energy projects.
How has this affected law firm strategy? Do you expect to see law firms try expanding energy and infrastructure practices, either through promotions or lateral hires?
Yes, that’s a reality. In our case we have been already conducting and been involved in the biggest Ecuador projects. This put us in a position to work on new projects that we’re negotiating for future contracts. So it’s a good move for the law firms that will be able to boost practices in this area. This will be good for promotion of associations. Several lawyers of my team have been promoted in the law firm because this gave them a lot of exposure and interaction with the clients and international law firms.
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