Argentina
Melissa Raciti-Knapp, Pablo Ferraro Mila and Tim Fourteau
Freshfields Bruckhaus Deringer and Gonzalez & Ferraro Mila
- 1.How common is project finance in your jurisdiction? In what sectors is project financing most common?
Currently in Argentina, project financing is less common than in other Latin American countries, such as Brazil or Peru. It is a financing technique most often used in the Argentine mining and energy sectors. In the minerals industry, companies such as Mansfield Minerals Inc, TNR Gold Corp, and Barrick Gold Corp, have recently developed projects on a limited recourse basis. The notable current energy projects in Argentina include the development of oil and gas resources by Pan American Energy and the construction of wind farms by Guascor Group (via a local subsidiary, Eolica-Pico Truncado).
Brazilian mining company Vale has recently begun development of a potassium mining project with a total capital cost of more than US$4.5 billion in the province of Mendoza. This project involves not only the construction of the mine, but also improvements to associated railways and port facilities.
Due to the Argentine government’s recent assumption of control over private pension funds, certain project financings are currently conducted by the National Pension Funds Administration Authority (ANSES). ANSES’ techniques have included structuring project financings as direct loans, or as trusts and securitisations with ANSES funding.
- 2.What kinds of institutions typically act as sponsors and lenders in your jurisdiction? Why?
Typically, the World Bank and regional multilaterals, such as the Andean Development Corporation and the Inter-American Development Bank, act as project lenders in Argentina. These entities tend to be more comfortable and familiar with the market than international commercial banks. Commercial bank lenders active in the project finance space in Argentina include BNP Paribas, Banco Itaú BBA and Calyon.
Project finance sponsors are typically government entities and local or foreign developers. Lately, we have not witnessed a material flow of investment from international private equity funds into the Argentine project finance market.
Argentina has received more investment locally than from abroad. Investments from outside of the country have been limited. During 2011, several local banks have returned to the syndicated loan business with a focus on projects in the mining, electricity and roads sectors. The majority of those projects involve debt restructurings and benefit from participation of public banks such as the Banco Nación or Banco de la Provincia de Buenos Aires.
Project investment from China, through the Export-Import Bank of China and CITIC Group, has generally been limited to infrastructure, such as railway and subway projects.
- 3.What structures are most common?
Project finance structures in Argentina depend mainly on the size and type of project. BOO (build-own-operate) and BOT (build-own-transfer) finance structures are frequently used in the mining and oil and gas industries. During the past three years, trust structures with public and private parties were used to finance certain projects sponsored by the Argentine government, many of which were in the energy sector. public-private partnerships (commonly known as PPP’s) are also frequently used for local project finance structures, and the most common sponsor for such projects has been the ANSES.
- 4.Does local law require that the project company be organised under the laws of your jurisdiction? What is the typical legal form of a project company and why? Does local law require that any of the project company’s equity be held by local investors?
Under Argentine Companies Law No. 19,550 as amended (the ACL), foreign companies may engage in “isolated transactions” in Argentina. The ACL does not define the term “isolated transactions.” Judicial interpretations of the term, however, suggest that a typical project would not be considered an “isolated transaction.” Thus, it is advisable that project companies be organised locally. Also, foreign entities generally active in Argentina must have permanent local representation (eg, a branch) or establish a local subsidiary and register its non-resident shareholders with the Public Registry of Commerce (Office of Corporations) (pursuant to sections 118 and 123 of the ACL). Registration and information requirements, as imposed by local regulations of the Office of Corporations, apply to the registration of a branch of a foreign entity or a non-resident shareholder. It should be noted that if a branch is established in Argentina, the parent company may be held liable for its local activities.
A project company is typically formed as a sociedad anónima, which is similar to a corporation. A sociedad anónima provides investors and sponsors with predictability and certainty as to the project’s internal governance and the limitation of liability of equity holders, as well as favourable tax-treatment. In addition, a sociedad anónima can issue notes or any kind of securities.
- 5.Please describe the foreign investment regime in your jurisdiction.
Foreign investors wishing to invest in Argentina are regulated and protected both by a number of international treaties, as well as by certain domestic laws and regulations, as noted below. As a general principle, foreign investors in Argentina do not require prior governmental approval, except for certain specific regulated areas (ie, energy, broadcasting and the acquisition of real estate in frontier and other security areas) or for general applicable regimes such as antitrust regulations (ie, mandatory merger notification system).
Foreign investments are governed by the Argentine Foreign Investments Law No. 21,382, as amended (hereinafter the AFIL). The AFIL sets forth, as a general statement, the principle of Equal Treatment; that is, foreign individuals or entities with a legal domicile outside of Argentina investing in economic activities in Argentina, enjoy the same status and have the same rights that the Argentine Constitution and local laws grant to Argentine investors. Further, the AFIL establishes that foreign investors may invest in Argentina in any economic or productive activity (defined as any industrial, mining, agricultural, commercial, financial, services provision activities or any activity related to the production or exchange of goods and services).
The AFIL deems an investment of foreign capital as: all capital contributions from foreign investors applicable to local economic activities; and the acquisition of local companies by foreign investors.
Also pursuant to AFIL regulations, a foreign investor is classified as: any individual or entity owner of any investment of foreign capital and with a legal domicile outside Argentina; and local companies of foreign capital (defined as local companies duly incorporated in any Argentine jurisdiction) where foreign individuals or legal entities own over 49 per cent of the local company stock, or voting rights thereof.
Further, pursuant to the AFIL and its regulatory decree, foreign investors may repatriate their investment and transfer the profits thereof abroad at any time. However, such right may be limited by certain regulations enacted by the Argentine Central Bank, related to foreign exchange restrictions and amounts of foreign currency which may be acquired in Argentina.
In terms of available corporate structures for purposes of foreign investments in Argentina, see question 4.
Foreign investors generally have the same tax obligations as resident investors. These obligations include federal taxes (e.g. income tax, personal asset tax, value added tax, etc), state taxes (stamp tax, turnover tax, real estate tax, etc), and municipal charges.
Noteworthy differences in the fiscal treatment of foreign investments include:
- the avoidance of double taxation if the countries of foreign investors have entered into a treaty for the prevention of double taxation with Argentina (to date: Australia, Austria, Belgium, Bolivia, Brazil, Canada, Chile, Denmark, Finland, France, Germany, Italy, Mexico, Norway, Russia, Spain, Sweden, Switzerland, The Netherlands and the UK);
- the taxation of non-resident foreign investors on income from an Argentine sources and the subject of non-resident foreign investors to withholding tax at the source (the general withholding rate on gains is 35 per cent);
- dividend payments to foreign beneficiaries are generally not subject to tax;
- withholding rates apply to loan interest payments and vary by the location of the lending entity (eg, a tax haven, bank, or a legal entity in a jurisdiction that has entered into a double taxation avoidance treaty with Argentina); and
- the gains from the sale of shares in a corporation (sociedad anónima) by a non-resident foreign investor are not subject to income tax.
- 6.Are there any restrictions on payments abroad or repatriation of capital by foreign investors?
There are no restrictions on the repatriation of capital by non-residents. Pursuant to Central Bank Communication A 4662 dated 11 May 2007, prior approval from the Central Bank is not required for a foreign investor’s repatriation of capital in connection with the sale of an investment, the liquidation of an investment or the repayment of capital contributions by a local entity. It should be noted that pursuant to Decree 616/2005, loan payment funds must remain in Argentina for at least one year.
- 7.Is it permissible for a project company to maintain offshore foreign currency accounts?
Argentine project companies may maintain offshore foreign currency accounts to pay dividends, so long as such dividend payments are made in accordance with an approved and audited financial statements. (Central Bank Communication A 3859 dated 7 January 2003). Also see question 31.
- 8.What recent measures has your government implemented to make projects in your jurisdiction more attractive to foreign investors? Has this involved making government or other local sources of co-financing more available for projects?
As noted above, over the past few years the Argentine government has developed certain trust structures with public and private parties to encourage the development of projects (and particularly projects in the energy sector). Also, certain provinces are currently planning on refurbishing the railways and road networks through joint ventures with Asian and European investors respectively.
Beginning in 2011, and with the intention of stabilising the trade imbalance (ie, reversing the trade deficit), the Argentine government has enacted certain regulations regarding import and export of electronic products. Essentially, in order to obtain an import licence, companies need to demonstrate that they have exported assets with at least the same value of the goods they plan to import.
- 9.Will any of the financing or project agreements need to be registered or filed with any government authority or otherwise need to comply with local formalities to be valid or enforceable? Even if not necessary for enforceability, is there any special advantage in complying with local formalities?
There is no requirement that financing agreements be registered with any government agency to be valid and enforceable. However, the Central Bank may request government enforcement of foreign exchange regulations.
In respect of project documents, the documentation creating the security interest may need to be registered with the appropriate government authority or registry to be enforceable. For more information relating to the subject of “collateral security,” please see the responses to questions 12 to 22 below. Generally, notary public certification is required if registration is required. Whenever a non-Spanish document is filed with any government authority, an official Spanish translation, duly legalised, must be attached.
In certain cases, to benefit from a special tax regime (including from any treaty to avoid double-taxation), registration of the project finance documents with certain governmental authorities is required. This requirement applies, for example, to mining projects.
- 10.Are there any advantages in having the project company issue promissory notes that are governed by local law in addition to the credit agreement governed by New York?
Yes, if the project company issues promissory notes governed by Argentine law, the project lenders will be entitled to an expedited proceeding enabling them to attach assets of, and collect from, the issuer, as regulated by section 520 of the National Civil and Commercial Procedural Code.
- 11.Must any agreements be governed by local law?
In project financing, there is no requirement that any agreement be governed by local law other than real property mortgages and pledges of assets that are located within Argentina. Contractual parties have the right to elect a foreign law to govern their contract, and such election will be respected, so long as there is a reasonable connection between such jurisdiction and the contract. The foreign identity of one of the contractual parties is deemed to be a sufficient connection to justify the election of such foreign jurisdiction’s law as the governing law of the contract. Typically, financing documents are governed by New York or English law, and project documents are governed by Argentine law.
- 12.May a collateral agent act as the sole secured party for the benefit of a group of lenders whose composition may change from time to time?
An entity serving in the capacity of trustee may act as the sole secured party for the benefit of a group of lenders, whose composition may change from time to time.
- 13.May a security interest be granted with respect to all of a project company’s assets? Are any types of property considered personal in nature or ‘of public interest’ such that granting a security interest therein would not be permissible?
In Argentina, a security interest may be granted with respect to immovable and moveable property, such as cash, receivables, shares and securities. Pledges, security assignments, trusts, mortgages and warrants are the principal means of obtaining security interests.
A pledge provides a security interest in moveable property. There are two kind of pledges: ordinary pledges (ie, pledges of chattels) or registered pledges. In an ordinary pledge, possession of the collateral property is transferred from the debtor to the creditor. In a registered pledge, possession of the collateral property remains with the debtor and the pledge is registered in the appropriate registry, which can be a private registry (eg, a share registry book for shares pursuant to article 215 of the ACL) or a public registry for moveable assets, such as vehicles. Registration of such pledges renders them effective before third parties. Registered pledges may be ‘fixed’ or ‘floating.’ In a ‘fixed’ registered pledge, the pledge covers only the registered asset. In a ‘floating’ registered pledge, the pledge covers the registered collateral and any asset derived from such collateral.
A trust structure is another common way to establish a security interest over an asset. In a trust, the trustee is granted certain rights over the secured asset (after transfer by the settlor), which may be exercised for the benefit of the beneficiary of the trust upon the occurrence of certain triggering events. The advantage of a trust structure is that it results in the asset in trust to be beyond the reach of the debtor’s other creditors. Moveable and immovable assets may be placed in a trust.
Mortgages provide security interests over real estate. Mortgages are created by notarial deed and become effective before third parties only after registration with the real estate registry of the jurisdiction where the property is located.
- 14.What costs are associated with registering collateral security interests in your jurisdiction? Are such costs determined with respect to the obligations secured or the approximate value of the property?
There are fees for registration with the various registries (eg, the real estate registry, the registry of pledges, the vehicle registry, etc). Such registration fees are calculated based on the obligations secured. When the value of the asset encumbered is much less than the value of the loan, it may be advisable to stipulate a secured amount that approximates the value of the asset (plus a cushion if the asset is of a type that is likely to appreciate in value) instead of a secured amount equal to the value of the loan.
It should also be noted that there are notary public fees in connection with the granting of a public deed (eg, mortgages).
- 15.Does your jurisdiction require lenders to stipulate the value of their collateral security in the relevant security documents? If so, what happens if at the time of foreclosure the property is worth more? Must such amount be stated in local currency even if the financing is in a foreign currency? If so, what protections may be implemented against devaluation of the local currency?
With respect to mortgages, it is mandatory to stipulate the value of the collateral security in the mortgage deed and failure to do so may result in a judicial invalidation of the mortgage (section 3109 of Argentina’s Civil Code). It is permissible to estimate the value of the collateral security if determining such value is not possible at the time of the mortgage’s execution.
With respect to registered pledges, it is also required to stipulate the value of the collateral, the applicable interest rate and the repayment mechanism in the relevant pledge document. The failure to do so may result in the non-registration or rejection of the pledge document by the corresponding registry.
In the case of both pledges and mortgages, if the principal payment obligation is stipulated in a foreign currency, the collateral security value may also be stated in such foreign currency provided that the applicable exchange rate is stipulated for local tax calculation purposes. If the principal payment obligation is stipulated in a foreign currency, the debtor must pay in such foreign currency. It is also possible to include clauses stating that the debtor’s payment obligation may be satisfied in local currency determined at the applicable exchange rate on the payment date. If such a clause is included, the debtor may satisfy its payment obligation by paying in either foreign currency or local currency at the applicable exchange rate.
Local regulations prohibit supplemental mortgages. However, mortgages subsequent to the original one may be entered into with respect to the same real estate. Subsequent mortgages are prioritised according to the time of registration.
Finally, pursuant to Law No. 25,561, automatic indexation clauses are forbidden in any agreement entered into under Argentine law.
- 16.Does each item of collateral need to be individually identified in the security document to grant a valid security interest in that item? Or would a general description of the types of collateral covered be sufficient?
It depends on the kind of asset or security involved. If the security is granted by a registered pledge, then each item of collateral must be individually identified in the pledge agreement, by describing either its physical or legal characteristics. For example, the pledge agreement may need to include the serial numbers, weight, height or other details. Note that the type of detail required depends on the type of asset involved.
If the security is granted by an ordinary pledge (ie, a pledge of chattels), transfer of the asset to the creditor is sufficient.
If the collateral is granted over real estate property (ie, by means of a mortgage), the pledge’s public deed must clearly identify the property and describe the property’s location.
- 17.How do lenders satisfy themselves with respect to the absence of other liens on their collateral? Are liens centrally recorded or searchable? May contractors file mechanic liens? If so, are lien waivers enforceable?
Mortgages and registered pledges are centrally recorded by both the real estate registry and the registry of pledges of the jurisdiction where the assets are located. Such governmental offices offer different filing alternatives that allow creditors to check whether a certain individual or company has assets under a specific lien or if a particular asset is under a lien or other form of attachment in favour of a third party.
Mechanic liens are specifically regulated in Argentina’s Civil Code. Sections 3939 and sub-sections therein set forth the right to withhold a particular asset in case of lack of payment by its owner. However, certain requirements must be met for this right to apply:
- the asset must be in possession of the creditor;
- the debt claimed by the creditor must be unpaid at the withholding time; and
- there should be a connection between the asset involved and the claimed debt. The lien over the asset survives a debt reorganisation proceeding or bankruptcy of the debtor. If the creditor gives the asset back to the debtor, the lien is terminated. Lien waivers are enforceable in all cases, including anticipated waivers thereof.
Finally, “title insurance” is unavailable in Argentina. In Argentina, title insurance is understood as protection against loss from claims and problems with a real estate title based on causes prior to the transfer or mortgaging of the real estate. However, as part of any real estate transfer or mortgage closing process, the retained notary public conducts a public records search to check if the property has a “clear title.” If the search identifies a problem, the notary public helps resolve the problem before closing (eg, if there are any pending taxes over the real estate at closing, the notary public withholds owed amounts from the transfer price).
- 18.What steps must a lender take to foreclose on a collateral security interest in your jurisdiction? How does a beneficiary of a guarantee provided by a local entity or granted under local law enforce such guarantee? Are any self-help remedies available? Is a public or private sale permissible or required? Is a judicial sale necessary? May lenders participate as buyers in any such sale, including by bidding the debt owed by the project company to them in lieu of cash? May any such sale be for foreign currency? Is foreclosure on a pledge of the ownership interests of the project company more efficient and less time-consuming than a foreclosure on individual assets of the project company?
A lender has the right to foreclose on a mortgage (security interest in real estate) and on a pledge (security interest in moveable property) and sell the collateral in a public auction. Regulations mandate a minimum amount of publicity for the public auction. A lender is entitled to bid in the public auction. If the lender wins the auction, it may generally offset its purchase obligation against the value of its claim against the debtor. However, note that a creditor may not keep the collateral as payment in kind for its secured obligation prior to the auction. In this respect, self-help remedies are forbidden in connection with pledges and mortgages.
To foreclose on a mortgage, a lender may either file a court of justice foreclosure summary proceeding, which contains simplified procedural rules, or commence an out-of-court foreclosure proceeding. With respect to the out-of-court foreclosure proceeding, a lender may request court intervention to compel certain actions. To foreclose on an ordinary unregistered pledge, a creditor must follow a streamlined out-of-court process governed by the Code of Commerce. The foreclosure process for a registered pledge will depend on the identity of the secured party. If the secured party qualifies as a “financial entity” under Financial Entities Law 21,626 according to the Central Bank, court intervention in the foreclosure process is limited to seizing the pledged asset (Decree 15,348, section 39). As in the out-of-court foreclosure proceeding for a mortgage, a lender may seek court intervention to compel certain actions. If the secured party is not a “financial entity,” a lender must file a foreclosure summary proceeding similar to the one for mortgages. In out-of-court proceedings and in court-controlled proceedings, such sales may be in foreign currency if the relevant court so allows. The foreclosure process of the ownership interests of the project company (ie, foreclosure of a pledge over the project company shares) will most likely be more efficient than the foreclosure of individual assets of the project company (such as a registered pledge or a mortgage over the company’s assets).
- 19.What creditors would enjoy a higher statutory priority with respect to the collateral security than the lenders?
In a bankruptcy or debt reorganisation proceeding of the project company, creditors with claims arising from: salaries and severances owed to employees for six months; or principal amounts owed for taxes whether at the national, provincial or municipal level, would have general priority over other creditors. Creditors with liens over certain assets have special priority over any amount resulting from such secured asset’s sale.
Also, if more than one mortgage or pledge is granted over the same asset, priority will be determined according to the chronological order in which each mortgage or pledge was recorded in the pertinent registry.
- 20.Would the lenders incur any liabilities upon foreclosure relating to project assets?
Lenders do not incur liabilities upon foreclosure of the project assets.
- 21.What legal restrictions exist with respect to the operation of the project post-foreclosure by the lenders or their designee?
There are no specific legal restrictions with respect to the operation of the project post-foreclosure by lenders or their designee. If lenders or their designees are foreign companies, as noted above, they may need to register with the local Office of Corporations (such registration may be requested in order to act as a local company shareholder or as a branch of a foreign company in Argentina). If a public service rendering company is involved in the project finance, post-foreclosure operation by lenders or their designee must be duly authorised by the corresponding governmental authority.
- 22.Would the agreement by a project company’s equity holders to make capital contributions to the project company be enforceable by the lenders in bankruptcy proceedings of the project company?
Equity holders’ agreements are enforceable only by equity holders. Creditors of the project company are not entitled to enforce an obligation to make capital contributions. However, there are exceptions to this general rule. For example, an exception is made if the project company, and therefore its creditors, is a party to the capital contribution agreement. In a bankruptcy proceeding, a syndic’s rights could also be subrogated.
- 23.Can a project company organised under local laws validly submit to the jurisdiction of a foreign court?
Yes. Local project companies may submit to the jurisdiction of a foreign court for contractual disputes as long as there is a reasonable connection to the jurisdiction, and the dispute is pecuniary. It is worth noting that if a debtor is domiciled in Argentina, Argentine courts will exercise exclusive jurisdiction over insolvency proceedings.
- 24.Is service of process by mail recognised in your jurisdiction or would the project company need to appoint a process agent?
Service of process by mail is prohibited in Argentina. To serve process, a party must go through and abide by the rules of Argentina’s Ministry of Foreign Affairs, International Trade and Worship.
- 25.Are foreign judgments and arbitral awards enforceable in your jurisdiction? If so, does any process of ratification or additional review need to be carried out in the local court system as a condition to such enforcement? Do sovereign or quasi-sovereign entities have the capacity to arbitrate as a matter of local law?
Foreign judgments and arbitral awards are enforceable in Argentina. The National Code of Civil and Commercial Procedure (CPCCN) addresses the enforceability of foreign judgments in federal court (provincial rules apply to the enforceability of foreign judgments in state court). CPCCN article 517 sets forth the following legal requirements for enforcement of foreign judgments:
- the judgment must have been issued by a competent court (the rendering court), as determined under Argentine conflict of laws principles on jurisdiction (subject matter and personal);
- the rendering court’s judgment must be final;
- the defendant must have had due process of law (ie, he or she was duly served with summons and given opportunity to defend himself or herself);
- the judgment is valid in the rendering court’s jurisdiction;
- the judgment does not violate Argentine public policy; and
- the judgment does not conflict with prior proceedings involving the same parties and subject matter or a contemporaneous judgment of an Argentine court.
Note that reciprocity is not required. The following procedural requirements must also be satisfied:
- a notarised copy of the judgment must be filed with the Argentine court (in the form of a letter rogatory to the local court);
- the petitioner must file a statement evidencing that the above legal requirements are satisfied;
- all documents (either originals or notarised copies) must be authenticated by the Argentine consulate in the jurisdiction where the documents were issued;
- all non-Spanish documents must be translated into Spanish by a translator registered in Argentina; and
- a 3 per cent court tax must be paid up front if in any federal or Buenos Aires court (note that this can be recovered from the losing party).
The requirements for enforcing foreign judgments may vary according to bilateral and multilateral treaties. For instance, an apostille may be used to authenticate the document if the other country has ratified the 1961 Hague Convention on abolishing the legalisation of documents.
Recognition and enforcement of arbitral awards are subject to the following conditions:
- the defendant must have been properly summoned;
- there must be evidence of the arbitral award and arbitration agreement (originals or certified copies, where signatures have been authenticated);
- all non-Spanish documents must be translated into Spanish by a translator registered in Argentina; and
- a 3 per cent court tax must be paid up front.
Argentina is a member of the New York Convention, subject to reservations made about reciprocity and certain commercial relationships.
- 26.Is subordination of debt recognised under the law of your jurisdiction?
Pursuant to section 239 and subsections of the Argentine Bankruptcy Law, subordination of debt is recognised, and any payment to be made to subordinated lenders must be made after payment to senior creditors.
- 27.Are there laws in your jurisdiction that regulate how tariffs payable to a service provider must be calculated? If so, please describe briefly.
Certain tariffs payable to service providers (commonly, public service providers) are regulated by the corresponding governmental regulatory authority. In the case of pipeline companies, the transport tariffs are regulated by the Argentine Gas Authority. In the case of tariffs payable to electricity providers, tariffs (including transport tariffs) are determined by the Argentina Electricity Authority. There are no specific formulae for calculating tariffs. The tariffs are regulated and determined by the corresponding governmental regulatory authority by means of a special procedure which may involve public hearings as well as the intervention of industry professionals. Once the government issues a resolution determining the tariff, the tariff is published in the official gazette.
- 28.Do environmental, tax or other liabilities relating to the project extend beyond the project company to the direct or indirect owners of the project company or to the lenders?
Tax and environmental liabilities may apply to the project company, their directors, syndics and managers or any other individual who professionally advises the company in tax or environmental matters. Lenders or indirect owners are not liable for tax or environmental consequences. In addition, pursuant to Law No. 26,675 it is mandatory for the project company to hire and maintain environmental insurance covering any environmental damage caused by the project.
- 29.Are there any limitations with respect to importation of equipment or materials to be used in the project?
There are no specific restrictions on the importation of equipment or materials for a project. In certain sectors, such as the mining industry, import duties apply with respect to the importation of equipment to be used for project purposes. Used production lines, however, may be imported to Argentina using the temporary importation regime and may consequently defer the import duties to be paid.
- 30.What land issues might there be in connection with a project financing in your jurisdiction? Are there any restrictions on foreigners’ ownership of land or natural resources? How difficult is it to obtain rights of way?
For foreign individuals to own land located close to the borders of Argentina, a filing for authorisation of the acquisition must be submitted to the National Border Zones Commission before the execution of the public deed. Final approval could take approximately 12 to 18 months. This filing requirement also applies to local project companies controlled by foreign residents. Finally, foreign companies that intend to own land in a border zone must also submit the filing and request registration with the corresponding office of corporations before execution of the public deed.
The process to obtain a right of way may depend on the ownership of the land that the project will affect. If the land is owned by the government, a right of way is generally granted upon request of the project company. If the land is owned by a private company or an individual, an agreement between the land owner and the project company suffices. In both cases, the granting of a right of way must be included in a public deed and registered before the corresponding real estate registry.
- 31.Please describe any other relevant legal considerations relating to project finance in your jurisdiction.
Since the Argentine financial and economic crisis of 2001 and 2002, the Ministry of Economy and Argentina’s Central Bank issued regulations regarding foreign exchange restrictions. The ability to acquire foreign currency and the possibility of transferring those funds abroad were significantly affected.
Decree 616/2005 was issued to provide control regulations for the foreign exchange rate and to regulate the foreign exchange market. The decree established several restrictions for the inflow and outflow of funds, which may affect the interests of foreign investors and creditors in project finance. The most important features set forth in this decree are listed below:
- Certain transactions must be registered and carried out through the Argentina Central Bank, such as loans granted by foreign creditors to local borrowers.
- As a general obligation, currency inflow must stay in the country for a minimum term of 365 days. Exceptions to this obligation may apply depending on the purpose of the currency transfer.
- Any person who requires access to the local foreign exchange market must set up a non-interest-bearing deposit in US dollars, equal to 30 per cent of the inflow amount, with a local financial institution. There are certain exceptions to this obligation, and local bank entities may require appropriate documentation in order to authorise the exception.
Regulations regarding loans, direct investments and public project finance were also issued in order to set forth the above requirements.
Law No. 26,683, enacted on 21 June 2011, was enacted in order to prevent money laundering operations. This new regulation requires foreign companies or individuals who wire funds to Argentina to demonstrate the source of such funds, and banks, accountants and external auditors operating in Argentina to comply with certain reporting obligations.
- 32.Has specific PPP-enabling legislation been passed in your jurisdiction? If so, and if applicable, has it been passed at the federal, state or municipal level and is it sector-specific?
A particular PPP regime (known as Regimen Nacional de Asociación Público-Privada) was created by Decree No. 967/2005, issued by the national government on August 2005. Public projects that qualify for inclusion in this regime are those related to the performance, operation, maintenance, financing and construction of public works and services (including expansion projects). Once completed, the public works developed as a PPP project belong to the state.
PPPs may be organised as corporations, trusts or any other legal organisation (including cooperatives, civil associations and branches of foreign companies). Essentially the chosen organisation should be entitled to obtain financing from the Public Offer Regime set forth by Law No 17,811.
The Public Administration contribution to the PPP may be made in different ways, Such contribution could consist of, among others, cash, fiscal benefits, such as tax deferrals, concessions, permits or any kind of authorisations with respect to relevant assets.
There are some requirements to be met in order to obtain the above mentioned benefits. Fulfillment of such requirements is controlled by the Evaluation and Development of Public-Private Partnerships Commission (Comisión de Evaluación y Desarrollo de Asociaciones Publico Privadas (the Commission)). The filing before the Commission shall be made by the sponsoring public entity involved in the project. Such filing must include: project identification; bases for the financial, economic and technical feasibility; estimated amount of investment; legal structure that the PPP will adopt; identification of the contribution to be made by the public administration; and a detailed report issued by the sponsoring public entity. Once filed, the Commission has sixty days to evaluate whether the project is of public interest or not and to produce the corresponding report. On the basis of such a report, the Executive Branch shall determine whether the project is in the public interest or not. If the proposal is determined to be in the public interest, the Ministry of Federal Planning and Public Investment and Services shall determine the appropriate manner of contracting for such project, ie, deciding between a public tender or a bid for integral projects.
In addition, the provincial governments have initiated certain programmes known as private initiative schemes that allow the solicitation and receipt of private proposals for infrastructure projects. Under such programmes, to ensure fair competition, a government must follow a public procurement process before committing to a specific proposal. The initiating bidder has a right of first refusal to match the winning proposal in the competitive auction process.
During 2011 certain PPP projects involving roads and sanitation facilities in northern Argentina have been conducted through the United Nations Development Program. Such international organ conducted the public international bidding processes as well as the contracting processes for these projects.
- 33.What legal limitations, if any, are there on PPP transactions? Are there any limitations on the contracting power of the state, the state’s ability to incur long-term fiscal obligations, or the extent to which certain government functions may be performed by the private sector?
There are no constitutional restrictions to the contracting power of the federal state regarding PPP transactions. However, Public Projects Law No. 13,064 sets forth the mandatory public bidding process for public projects financed by the federal government. Almost all the provinces have similar regulations. Such regulations generally set forth the obligation to use the public bidding process for public works financed by governmental authorities; they also set forth assignment rules and control policies.
The courts have held that treatment of the state’s long-term fiscal obligations, such as tax exemptions or tax deferrals, may be governed by laws enacted by the federal congress.
- 34.What are the most significant PPP transactions that have been completed to date?
- 35.What do you see as the primary impediments and drivers, both legal and commercial, to the development of PPP in your jurisdiction?
However, since the federal government assumed control of pension funds previously administered by private companies, a few PPPs have been financed with those funds. In addition, a portion of the pension funds were also used to provide credit to mid-cap companies.
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