- 1.How common is project finance in your jurisdiction? In what sectors is project financing most common?
Since the early 1990s with the capitalisation process of the hydrocarbons industry as well as other industries such as electricity and telecommunications, project financing has become very common in Bolivia, even with the new changes in the economic policy under the current government. Project financing has been the mechanism used in Bolivia due to the need to attract new capital to finance the different projects, but it also fulfilled the need to attract new technology and experts into the development of different infrastructures in the country. Furthermore, as one of the poorest nations in the continent, its infrastructure has benefited from major investments from different international organisations such as the Corporación Andina de Fomento (CAF) and Inter-American Development Bank (IADB). Until 2005, most project financing was based on concessions issued by the government to private companies in the different sectors, since 2005 most of the new project financing is based on public-private partnerships (PPPs) given that the current government has nationalised many companies in most industries and has further incorporated state-owned companies that are active players in the different industries.
Companies that resulted from the nationalisation process are as follows:
- in the hydrocarbon industry: Chaco, Andina, Transredes and the Compañía Logística de Hidrocarburos de Bolivia (CLHB);
- in telecommunications: Empresa Nacional de Telecomunicaciones (Entel);
- in mining: Empresa Minera Huanuni (EMH) and Empresa Metalúrgica Vinto (EMV).
Companies newly created include: YPFB Corporación, Emapa (Empresa de Apoyo a la Producción de Alimentos), Papelbol (Papeles de Bolivia), Cartonbol (Cartones de Bolivia), Lácteosbol (Lácteos de Bolivia), Azucarbol (Azúcar de Bolivia) y Ecebol (Empresa Pública Nacional Estratégica de Cemento), Boliviana de Aviación (BoA), Empresa Siderúrgica del Mutún (ESM) and the Depósitos Aduaneros Bolivianos (DAB). Furthermore, under the new Bolivian Constitution that was enacted in 2009, article 351 provides that with regard to natural resources, the state is only allowed to execute association agreements.
- 2.What kinds of institutions typically act as sponsors and lenders in your jurisdiction? Why?
Lenders in project financing in Bolivia are typically multilateral institutions such as the CAF and IADB, as such organisations are most knowledgeable about the country’s policies, risks and market. There are very few commercial banks that are currently involved in project financing, especially after the nationalisation process that Bolivia has undergone since 2005. Export-Import Bank of the United States, Overseas Private Investment Corporation has been involved predominantly in the mining industry in the past few years.
Project finance sponsors are usually large oil companies, mining companies and state-owned companies.
Most of the investment, especially in the hydrocarbons and mining industry is still largely coming from US and European investors, notwithstanding this we have seen an increase in new players from other countries such as Russia, Venezuela, India, China, Korea, Brazil and Argentina.
With regard to investment coming from China, no major project has materialised in 2011 with said investment, nevertheless they are actively seeking for projects in which to invest.
- 3.What structures are most common?
Up until 2005, most of the project financing structures that were common in Bolivia were, BOT, BOO, BLT, DBFO, DBMF and hybrid financings, given that most of the industries where said project financing was being conducted were based on concessions, and such concessions where, for 40 years or more, such as in the oil and gas and mining industries, the concessions were perpetual.
Under the current more state-controlled economy, we are seeing a transition to PPP’s and hybrid financings.
- 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?
The Commerce Code provides that any company doing business “regularly” in Bolivia should incorporate a local company, be it in the structure of a subsidiary of the foreign company or a local entity. Given that project finance projects are generally long-term, the incorporation of a local company would be advisable. There are three options in regards to the legal form of a project company, the first would be a Sociedad Anónima, most similar to a corporation, a Sociedad de Responsabilidad Limitada, most similar to a limited liability partnership, and as a subsidiary of a foreign company. The main differences between the types of companies are:
- the structure of the company - the SA has a more complex structure than an SRL given that it is required to have a board of directors and a comptroller;
- the shareholders in an SRL have the right of first refusal and any transfer requires at least two-thirds of the votes in favour of a new partner; and
- a foreign subsidiary will have the form as regulated by the laws of the country where the parent company was incorporated but will be regulated by the structure in Bolivia that is the most similar, additionally it has to have an assigned capital for its operations in Bolivia that has to be fully paid when it is being registered before the Commerce Registry. All accounting would be separate from the Parent company’s capital and it determines the limit of the responsibility in Bolivia.
Notwithstanding the above, all other registries and obligations are the same for both types of companies. In general out of the three structures, the least advisable is the foreign subsidiary, given that all documents, including the parent company’s incorporation documents, designation of legal representative, issuance of power of attorney, and in general all acts that requires the intervention of a shareholders’ meeting and resolution, have to be issued by the parent company in the country of origin and all pertinent documents have to undergo the pertinent legalisation process, such process can take on average a month and a half, specially since Bolivia is not a signatory of the Apostille Convention.
There are no obligations that the project’s equity be held by a local investor, although the legal representative and the comptroller do have to be permanent residents in Bolivia.
- 5.Please describe the foreign investment regime in your jurisdiction.
There is no specific law that regulates foreign investment in Bolivia. Bolivia has signed 24 bilateral investment treaties (BITs) with various countries, which includes most favoured nation clauses and national treatment of foreign investments as well as the definition for foreign investment. It is important to mention that although the majority of BITs provide the ICSID court of arbitration as the forum for resolving conflicts, Bolivia has left the ICSID effective from 2 November 2007.
The Bolivian Constitution provides in its article 320 that domestic investment will be prioritised before foreign investment. Furthermore, it is provided that all foreign investment is subject to Bolivian jurisdiction, laws and authorities. It is further provided that it is prohibited to give foreign states or companies more beneficial conditions than those established for Bolivians. Additionally the Investment Law of 1990 guarantees the following:
- The same treatment - same rights, obligations and guarantees to the national and foreign investor. For private investment there is no previous authorisation or registration required.
- The right to property without any limitation, except those established in the Constitution and the laws. The Constitution provides that no foreigner as an individual or as a company may own property within 50km of the borders except if there is a national necessity that is declared by law. One of those laws is the Ley Corazon, which declares as national necessity:
- the construction and operation of pipelines for the transportation of hydrocarbons;
- the construction and operation of all types of generation, interconnection, transmission, distribution and commercialisation of electricity installations; and
- the construction and operation of all types of installations for the transmission of data, signal, images, sound and general information by any means or system of telecommunications.
- There are no restrictions to the entry or exit of capital or expatriation of dividends, interests and royalties.
- The free exchange of currencies and the ability to perform all types of operations in national or foreign currency.
- The freedom to contract investment insurance in the country or abroad.
- The freedom to import and export goods and services. In the last few years the government has issued temporary quotas for the export of certain goods.
- The freedom in the determination of prices, production and commercialisation of goods and services. This would be limited by the industry, hydrocarbons, electricity, telecommunications and water are some of the industries that are regulated by the state.
- The freedom to submit contractual differences to arbitration courts. Notwithstanding, article 366 of the new Constitution provides that companies performing activities in the hydrocarbon productive chain in the name and representation of the state are subject to the national sovereignty and therefore no foreign court or international arbitration will be acknowledged.
DECISION 291: Comisión del Acuerdo de Cartagena, Régimen Común de Tratamiento a los Capitales Extranjeros y Tratamiento de Marcas, Patentes, Licencias y Regalías
It defines “direct foreign investment”, “national investor”, “subregional investor”, “foreign investor”, “national company”, “mixed company”, “foreign company”, “neutral capital” and “reinvestment”. It also provides the rights and obligations of foreign investors as well as regulates the contracts for trademarks or patents and other IP rights.
DECISION 292: Comisión del Acuerdo de Cartagena, Régimen Uniforme para las Empresas Multinacionales Andinas
It defines an Andean multinational company, and provides for the requirements, incorporation, functioning and treatment of said company. It also provides that said companies have to be incorporated as a Sociedad Anónima or corporation pursuant to the law of the Andean country where it’s incorporated in and add “Empresa Multinacional Andina” or EMA. These companies and their subsidiaries will have the same treatment with regard to priorities for the acquisition of goods and services in the public sector as of a national company. The subsidiaries of these companies will also have the right to transfer to their parent company the totality of its net profits as a result of their direct investment, previous applicable taxes. With regard to taxes, the member state of the main residence will not tax the profits and repatriation of dividends distributed by the company that corresponds to their subsidiary profits.
- 6.Are there any restrictions on payments abroad or repatriation of capital by foreign investors?
There are no restrictions on payments abroad or repatriation of capital by foreign investors, although there are certain registration requirements before the Bolivian Central Bank regarding the amount of investment that is expected to enter the country and the amount that will be expatriated. This requirement is only for statistical and information purposes.
- 7.Is it permissible for a project company to maintain offshore foreign currency accounts?
Yes, project companies may maintain offshore foreign currency accounts. Bolivia uses the US dollar and the boliviano interchangeably, therefore it is possible to have accounts in Bolivia in US dollars and in certain banks in euros.
- 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?
Since 2005, Bolivia has been undergoing a transition period from a capitalist economy to a more state-owned and controlled economy. This has meant that, in the years after the nationalisation process started, many of the government’s measures have deterred many new large foreign investment from entering the country. The foreign investors that were already in the country have maintained the status quo and have not increased their investments, although in recent years it has picked up. As a result of the above, the government has been searching for new investors that have not traditionally done business in Bolivia, and it has stopped, for the time being, the nationalisation of other privately owned companies. Additionally, the state has become the most important player in investments of projects in the country.
- 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?
Depending who the parties are to the agreement, the requirements differ. If one of the parties is a state-owned company or the state, depending on the size and nature of the project, it might require previous approval from the Plurinational Assembly (Congress), the board of directors (YPFB Corporación) or other such body, and furthermore, some of the agreements would have to be executed before the government notary for it to be valid and enforceable. Agreements that are entered by private entities only require the intervention of a public notary. Please be aware the companies that have joint operation, production or association agreements with the state are required to inform and be approved by the YPFB Corporación, as such agreements are considered when determining operational costs that are accounted for when determining the remuneration of the private company by YPFB. Additionally, depending on the collaterals provided in the financing and project agreements, these would be required to be registered before the appropriate registries (please refer to the “collateral section” below). Agreements entered into in Bolivia that are required to be notarised have to be in the Spanish language.
- 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?
The use of promissory notes that are governed by local law would not be advisable in general, as there are other more efficient mechanisms to secure a credit agreement, unless there might be a possibility to transfer said promissory notes to a third party. In general, as the foreign parent company co-sign credit agreements, the promissory notes are usually issued by said foreign company abroad.
- 11.Must any agreements be governed by local law?
In general, Bolivia has a very nationalistic approach to governing law. Although what is agreed among the parties is law among said parties, and therefore they would be able to choose any law to govern their agreements, the Commerce Code provides that all contracts that are being performed in Bolivia are ruled by Bolivian law. Furthermore, most if not all agreements that are linked to one of the regulated industries in Bolivia or that are executed with the Bolivian state would necessarily be governed by local 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?
- 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?
It is not possible to grant security interest with regards to all of a project company’s assets given that each security type requires certain formalities in order to become valid and enforceable. In this regard, the assets have to be divided into real estate, moveable assets subject to registration and moveable assets not subject to registration. Real estate properties and moveable assets subject to registration (cars, boats, aircraft, heavy machinery among others) can be secured with mortgage agreements and moveable assets not subject to registration (any moveable asset, credits and any other that are considered as a moveable asset) would be subject to pledges. There are two types of pledges, one where the pledged asset is transferred to the possession of the creditor and the second pledge is that where the assets remain in the possession of the debtor.
Certain activities require the approval of the state or authorities with regard to permits or licences, as well as direct intervention in case of contracts signed with the state-owned companies, therefore these are considered “personal” and could not be freely be assigned, disposed or transferred, Furthermore, there are certain activities that are considered of “national interest and utility” and the interruption of those activities and services is against the law, therefore even if certain assets that are used for the provision of those services were encumbered to secure a credit, the lender would not be able to step in or to remove said assets. In these cases, the creditor would necessarily have to wait until such service is transferred to a new operator and discuss with such new operator the payment of the credit. Nonetheless, pledges on pipelines, generators, and so on are still being obtained simply to prevent third party creditors from obtaining priority rights.
Shares or equity in a company can be pledged, furthermore it is common to see that the parent company is prohibited to sell, assign or transfer their shares on a project company without the previous approval of the creditor.
For after-acquired properties, a new lien agreement would have to be entered into depending on the nature of the asset.
- 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?
- mortgages and pledges without transfer of possesion: registration costs 0.04 per cent plus Bs. 56;
- pledge over shares: registered in the share book, no cost; and
- registration of the agreement before the Commerce Registry: sole-owned company: Bs. 78, limited liability: Bs. 136.50 and corporations: Bs. 175.
- 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?
It is not required to stipulate a value of the collateral security in the relevant documents. The amount can be stated in both local or foreign currency, but when payment of the obligation is being made in a different currency than that contracted, they must use the exchange rate of the day of payment. Most agreements provide that they have to be paid in the same currency as provided in the agreement.
- 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?
Yes, the collateral needs to be individualised and identified. Only in case of assets that are fungible goods, which are secured by a floating pledge by which only the type, volume and other pertinent description have to be inserted.
- 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?
The Real Estate Registrar will have the record of all mortgages on any real estate and any person can request such information. There are also such registrars for all the mortgages that might exist on moveable assets subject to registration. With regard to mechanic liens, the Civil Code provides the right of a creditor to retain assets so that in the event the debtor does not pay its debt, any waiver would have to be in writing by the parties.
- 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?
In case of default by the debtor, a judicial process has to be initiated in order to foreclose on a collateral security interest. It is not permissible for a lender to take the collateral in satisfaction of the debt, unless a transactional agreement is entered by and between the creditor and debtor transferring the property of the collateral as payment for the existing debt. In that sense, the creditor would have to demand payment before a judge; if such payment is not made within the allotted time then a judicial sale would follow by means of a public bid. If the asset is not sold after two biddings, the creditor may request that such asset be assigned to its property as total or partial payment of the debt, depending on the court’s valuation of the asset. The sale of the asset can be made both in bolivianos or US dollars.
Foreclosing on the pledge of the ownership interests, if these should exist, would be more efficient and less time-consuming than a foreclosure on individual assets of the project company given that each individual collateral agreement would be subject to its own judicial sale process. Notwithstanding the above, please be aware that it might be necessary to obtain previous authorisation from the state if the project company has an agreement with the state or state-owned company, since usually there is a clause in those agreements that requires that any change in the ownership of its shares, especially if it is a controlling shareholder, needs the prior approval of the state company. Usually for such transfer to be allowed, the new shareholder would have to have enough technical and financial capabilities to be accepted. If such approval is not obtained, it is a cause of default.
- 19.What creditors would enjoy a higher statutory priority with respect to the collateral security than the lenders?
This would depend whether all of the project company’s assets are involved, as in the case of a bankruptcy.
The general priorities:
- judicial and court expenses in order to liquidate or preserve the debtor’s assets;
- salaries and other social benefits;
- authorship rights; and
- taxes.
Priorities regarding registered mortgages and pledges would be determined chronologically.
- 20.Would the lenders incur any liabilities upon foreclosure relating to project assets?
Lenders would not incur any liabilities upon foreclosure of project assets.
- 21.What legal restrictions exist with respect to the operation of the project post-foreclosure by the lenders or their designee?
As mentioned above, there are certain legal restrictions regarding the ability of a creditor to “step in” in order to operate a project post-foreclosure. Depending on the project, usually in order for a new player to enter into projects that are regarded of national interest or utility, they would have to obtain prior government authorisation. In general, they would only be allowed to take over a project if they have a proven technical and financial capacity, especially if they have controlling interest in the project company. Notwithstanding, each of the regulated industries have their own requirements and would have to be analysed on a case-by-case basis. Any compensation that might be applicable if the creditor is not able to take over the project would usually be negotiated with the company that takes over the project.
- 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?
Capital contributions obligations can only be enforced by the equity holders of the project company. It would only be possible for lenders to enforce such agreement if the capital contributions have been made to the company by the equity holders. If such contributions have not been made, than the lender would have to sue the equity holders, unless the project company itself was part of such agreement. In that case, in a bankruptcy proceeding, said credit would become part of the debts that must be paid once the company is liquidated. The other option would be for the judge to determine that the company is still viable and should continue its activities, in which case he might judge that the equity holders must make the capital contributions as agreed.
- 23.Can a project company organised under local laws validly submit to the jurisdiction of a foreign court?
Yes, project companies organised under local laws can submit to the jurisdiction of a foreign court, unless article 366 of the Constitution is applicable.
- 24.Is service of process by mail recognised in your jurisdiction or would the project company need to appoint a process agent?
No, any service of process would have to follow the pertinent procedure provided for in the Civil Procedural Code.
- 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?
With regard to foreign judgments, these must follow the exequatur procedure, which is carried out by the Bolivian Supreme Court. In regards to Bolivia the following would be applicable:
- Tratado de Derecho Procesal Internacional de Montevideo, 1889, all judgments and arbitral awards regarding civil and commercial issues in one of the signatory states, shall have the same the same effect in the other territories if they comply with the following requirements: (i) the sentence or award is issued by a competent court; (b) the judgment must be final; (c) the counter party has been duly notified, represented or declared “rebel”; and (d) it is not contrary to the public order of the country where it will be enforced.
- Código de Bustamante, 1928, which provides additionally to what is established in the above treaty, that (a) it is duly translated by a state official and (b) that the documents meet the requirements necessary to be considered as original, usually legalisation procedure.
- Civil Procedural Code, 1976 provides that all sentences and other judicial resolutions will have the effect in Bolivia as provided by in the respective treaties. In regards to reciprocity, if there are reciprocity treaties, they are given the same effect as if they had been issued in Bolivia. If the country where the sentence was issued does not enforce sentences issued by Bolivian courts, then they will not have any effect in Bolivia. If the three options above are not applicable then such foreign judgments can be enforced in Bolivia if: (a) the judgment is as a result of a personal or real action over an asset that was transferred to Bolivia during or after the proceeding; (b) the losing party with domicile in Bolivia has been legally served; (c) the obligation object of the procedure is legal in Bolivia; (d) the judgment does not violate the public order; (e) the judgment is final; (f) it is considered as a resolution in the country where it has been issued with the authenticity conditions required by law; and (g) it is not incompatible with another judgment issued before or simultaneously by a Bolivian court.
In regards to arbitral awards, Bolivia recognises the following as sources of law: The New York Convention of 10 June 1958 and the Inter-American Convention of Montevideo, 8 May 1979. Additionally Law 1770 provides that a foreign arbitral award would not be recognised or enforced if: article 63 is applicable; is not mandatory due to a lack of annulment or suspension of the award; or due to the existence of causes of annulment or rejection pursuant to the international treaties. Additionally the Supreme Court could refuse enforcement if the award is contrary to Bolivian public order.
Miscellaneous
- 26.Is subordination of debt recognised under the law of your jurisdiction?
There is no legislation that regulates subordination of debt recognition and therefore it would be a contractual matter. In case of bankruptcy, the creditors would be paid pursuant to the privileges and priorities provided by law, especially in regards to secured collateral. If there is a senior and subordinated lender with the same rank, there are two possibilities, that the judge orders for all creditors to enter into a creditors’ agreement distributing the assets, whereby it would be up to the creditors to negotiate how they are paid, or that the judge pays all the lenders on a pari passu basis.
- 27.Are there laws in your jurisdiction that regulate how tariffs payable to a service provider must be calculated? If so, please describe briefly.
Most regulated industries and activities in Bolivia have special legislation that determines how tariffs are to be calculated; such is the case for the hydrocarbon industry, electricity, water, and other public services.
- 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?
In general, environmental, tax and other liabilities relating to the project do not extend beyond the project company to direct or indirect owners of the project company, unless there is wilful misconduct from said direct or indirect owners. Depending on the consequences and nature of the liabilities, administrators or directors might also be personally liable for some of said consequences - particularly if a criminal process results from the above. With regard to environmental issues, most projects are required to have insurance to cover any damages that might result from their operations. Lenders are not liable for environmental, tax or other liabilities.
- 29.Are there any limitations with respect to importation of equipment or materials to be used in the project?
The only limitations in respect to imports of equipment or materials would be if such were considered as hazardous material. Furthermore, certain materials that are in the list of controlled substances require prior authorisation by the competent governmental authority. Most capital equipment has a Gravamen Arancelario of 0 per cent. It is also not uncommon that when it is an important project where the state is involved, that such imports be exempt from some import taxes, such as the value-added tax.
- 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?
As mentioned before, no foreign person or company may own property within 50km of the borders, unless there is a special law that decrees the activity as of national interest and therefore an exception is made. Furthermore, no foreign person or entity may obtain land that is owned by the state through the respective allowed titling procedure. All natural resources are constitutionally owned by the state and therefore all exploitation of the same would only be possible by means of a contract with the state.
In regards to rights of way, under the new Constitution, as further regulated in laws such as the Hydrocarbons Law, if a project affects any indigenous community, their approval must be obtained before the project can start. If it is not possible to obtain such right of way from the community, the state, through its pertinent authority, might expropriate the right of way for the project. In regards to right of way with private people, these are regulated by the Civil Code and can be obtained by negotiating a contract.
- 31.Please describe any other relevant legal considerations relating to project finance in your jurisdiction.
Bolivia has had a new Constitution since 2009. As a result of the change of economic, political and structural changes contained in the Constitution, Bolivia is currently in a transitional period, legally speaking, as many of the changes require that many of the laws be changed. The changes to the laws will probably take some time, and as a result there might be gaps in the law or a lack of regulation. Furthermore, as with any Constitution, the interpretation, much of which is regulated in the Constitution, will be further interpreted by the new laws and regulations that have to be issued. In that sense, it is hard to gauge the possible changes that might result in many of the industries where most project financing has been concentrated.
Additionally, the current government has nationalised many companies and from time to time indicates that it will further nationalise other private companies. Notwithstanding the above, the nationalisation process in Bolivia has been limited to those companies that were once of the Bolivian state and later privitised or capitalised. Furthermore, the current government is moving to a more state-controlled economy, setting up different state-owned companies, together with the fact that they currently control the legislative branch and possibly the judicial branch, there is on the one hand the possibility of issuance of laws that create a monopoly for the state-owned companies and since the judicial system might also be controlled by the government, it will be harder to a fair process if the opposing party is the state.
Notwithstanding all of the above, in the most recent years we have seen that the government has become less aggressive and has recognised the need for foreign investment. As such, many of the contracts that are being executed, especially in the hydrocarbons industry, are fairly standard.
Furthermore, it is important to note that since Bolivia has left the ICSID, it has not renegotiated the BIT with the different countries to establish an alternative arbitration court. Notwithstanding the above, most BITs already have alternative arbitration options, may they be before the United Nations or an ad hoc court.
- 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?
As the economy becomes more state-controlled, most of the current projects are PPPs. These are regulated depending on the industry where the project is being developed.
- 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?
Pursuant to article 12, the Plurinational Assembly must approve any contracts of public interest that refers to natural resources and strategic areas. Besides the above, the state is able to incur long-term fiscal obligations only if approved by the Plurinational Assembly, unless such projects are part of the approved budget by the Plurinational Assembly. For most PPPs, it is necessary that either a national or international bidding process takes place.
- 34.What are the most significant PPP transactions that have been completed to date?
There are many projects that have been developed by YPFB in the hydrocarbons sector, such as in compression plants and liquid-gas separation plants. Furthermore, Comibol, the state-owned mining company has invested in a copper cathode plant in Coro Coro with Korex, a Korean Company. ENDE the electrical company is currently negotiating with the IDB for the Cochabamba - La Paz transmission line.
- 35.What do you see as the primary impediments and drivers, both legal and commercial, to the development of PPP in your jurisdiction?
The main driver for PPP is definitely the current state-controlled/owned economy, where many strategic industries are being performed directly by the state. Since the state lacks sufficient technical and financial capacities, it is actively looking for private partnerships in order to further develop PPP projects. The main impediment for PPPs might possibly be the legal uncertainty and political risk in Bolivia.
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