Ecuador lawmakers to debate PPP bill

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Thursday, October 1, 2015

Ecuador's congress is due to debate a bill to implement a public-private partnership (PPP) system for infrastructure projects.

The Andean nation's proposed system is modeled on that of Peru, Chile, Colombia and Uruguay, which together have secured billions of dollars in investment via the mechanism.

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Ecuador, which has lined up US$2.2bn in potential PPP investment projects, could include ports, airports, hospitals, roads and housing projects, the Andean nation's industry minister Eduardo Egas said.

But according to Ecuador's ambassador to Washington, Nathalie Cely, the country's portfolio of PPP projects is as big as US$6.5bn, local paper El Telégrafo reported.

The proposed system, which offers streamlined permitting, tax breaks and the possibility of repatriating profits, would enable both local and international companies to participate, state news agency El Ciudadano said.

"While the state was one of the main growth engines for the economy, spurring consumption and growth in the middle class, today it is unable to make the same effort to sustain the economy," Egas was quoted as saying by local newspaper El Comercio. "We cede to national or foreign investment to fill the partial vacuum that the state is leaving."

PPP infrastructure investment may start flowing as early as next year into projects such as the the Posorja deepwater port and a reengineering initiative at the port of Machala, according to El Ciudadano.

The move to attract private investment comes as local think-tank Cordes cut its 2015 growth forecast for Ecuador to 0.4% from an earlier projection of 0.9% after public spending and private consumption both fell in the second quarter, according to El Comercio. Ecuador depends on oil export revenue to finance over half its annual budget.

"Economic activity has developed a dependence on public spending," Cordes director José Hidalgo told the newspaper. "This creates a vicious circle where when oil prices fall, so does public spending, and the industry that depends on the state becomes less dynamic."

Neighboring Peru has awarded US$18bn in PPP infrastructure projects since 2011, including the southern Peruvian gas pipeline, Lima metro, airports, highways and irrigation projects.