PPPs are modalities of private capital linkage, in which experiences, knowledge, equipment, technologies, technical and financial capacities are incorporated to create, develop, operate, and maintain infrastructure for the supply of public services in the country. The link is materialized in a long-term contract signed between the State, through one of the public entities, and one or more private investors, in which risks and resources are distributed.

This type of contracting emerged in the United Kingdom in the early 1990s as a tool to renew public assets after a long period of low investment in infrastructure and to promote best practices by using the management capacity of the private sector in the process. Since then, Latin American countries such as Argentina, Brazil, Chile, Colombia, Mexico, Peru, among others, adopted this modality as an alternative to solve the lack of infrastructure because of the lack of growth and the debt crisis in the 80s.

Through the PPP Regime, the Government of the Republic of Panama may promote the development of infrastructure projects and services in strategic areas for the country (energy, transportation and logistics, telecommunications, social development, urban development, among others), for the benefit of the State and its inhabitants, and under conditions that allow satisfying the basic expectations of the different key actors in these processes, namely: the State and its inhabitants, the private developers, the financiers, and the users or beneficiaries of such infrastructure and services.

PPP contracts will provide the country with quality and efficiency in public services, boost the economy and generate employment, and it is expected that the country will improve its competitiveness and achieve a significant injection of private capital into our economy.

Click here to learn more about the benefits and advantages of PPP contracting.

Projects with potential to be executed under the PPP modality originate from public initiative, which are submitted by the competent Contracting Public Entities (CPE) under Law No. 93, 2019. To be executed under the PPP modality, the projects must be included in the Five-Year Investment Plan or in the list prepared by the Cabinet Council, as projects to be considered for execution through the PPP modality.

It will be necessary that preliminary studies be conducted based on the eligibility criteria that every PPP project contemplated in Article 27 of Law No. 93 of September 19, 2019, must comply with, thus creating a level of prior studies with a view to ensuring that the project has the desired quality, covers a real need, is technically and financially viable, and maintains an adequate balance between the interests of the State and the private sector.

The value of each public initiative must be higher than B./ 15 million, to consider its possible implementation under PPP modality.

PPP projects differ in certain aspects from traditional public procurement, regulated in Panama by Law No. 22, 2006, mandated by Law No. 153, 2020.

Click here to learn about some of the characteristics and differences of each contracting modality.

The Governing Body oversees approving or dismissing public initiatives proposed by the Contracting Public Entities (CPE) or those that the Cabinet Council considers that could be implemented as projects under PPP modality, among other functions established in Article 11 of Law No. 93, 2019.

It is composed of six members, five of whom have voting rights:

Minister of the Presidency (presiding)

• Alternate: Viceminister

Minister of Economy and Finance

• Alternate: Viceminister

Minister of Public Works

• Alternate: Viceminister

Minister of Commerce and Industry

• Alternate: Viceminister

Minister of Foreign Relations

• Alternate: Viceminister

Comptroller of the Republic of Panama (with the right to speak)

• Alternate: Deputy Comptroller

The National Secretariat of Public-Private Partnerships (SNAPP) is, among other provisions, a technical unit attached to the Ministry of the Presidency, created by Law No. 93 of September 19, 2019, which provides technical and operational support to the Governing Body. It also provides technical support to the Contracting Public Entities (CPEs), which are responsible for public initiatives and PPP projects, and acts as a link between them and the Governing Body, which approves or rejects such projects, based on technical reports and recommendations made by the SNAPP.

To learn more about the actors of the PPP Regime, click here.

It is the technical and operational support unit of the Governing Body. Some of its main functions, established in Article 12 of Law No. 93, 2019, are: to carry out prior inter-institutional coordination actions that are necessary to facilitate decision-making by the Governing Body, as well as to carry out prior verification of the technical sufficiency of the different requests for approval submitted to the Governing Body by the Contracting Public Entities (CPEs).

In addition, the SNPPP provides technical support to the CPEs in the phases of identification, planning, formulation, structuring, bidding, and execution of PPP projects; and accompaniment to promote and advertise PPP projects, in order to promote the maximum possible competition in the bidding processes of PPP projects, in charge of the CPEs.

The SNPPP plays an articulating and transversal role in the promotion of the institutional framework for PPPs, established by Law No. 93 and its Regulations.

Click here to learn more about SNAPP and its functions.

SNAPP is not responsible for identifying or structuring projects with the potential to be implemented under the PPP modality.

SNAPP is a technical unit that provides technical and operational support to the Governing Body and technical support to the Contracting Public Entities (CPEs) in the phases of identification, planning, formulation, structuring, bidding and execution of PPP projects, among other functions that are framed in Law No. 93 of September 19, 2019.

Some of the main functions of the Contracting Public Entities (CPEs) –ministries, decentralized institutions, public companies or municipalities– framed in Article 14 of Law No. 93, 2019, are:

• Identifying projects in its portfolios with the potential to be implemented under the PPP modality. To this end, it will prepare the corresponding technical reports and submit them to the Governing Body, through the SNAPP, for evaluation and potential approval.
• Preparing and submit to the SNAPP the model bidding documents and the PPP contract.
• Prequalifying the private bidding companies (when applicable) and carry out the bidding and awarding process of the PPP project, with the assistance of SNAPP.
• Supervising, overseeing and monitoring the execution of PPP contracts, ensuring compliance with the guidelines defined by the Governing Body and the SNAPP.
• Structuring, selecting, awarding, and executing the PPP contract, as well as supervising and controlling its correct execution and compliance with the obligations assumed in the PPP contract.

In all these processes, the CPE must follow the policies and guidelines given by the Governing Body and the SNAPP, who will be in charge of advising and coordinating PPP projects with said entities.

Public initiative: These are projects originated by the competent public entities under the scope of application of Law 93, 2019, which have the potential to be implemented under the PPP modality. Prior to initiating the PPP Process of evaluation and approval for their possible implementation under the PPP modality, public initiatives must comply with the following conditions.

• Be part of the Five-Year Investment Plan or be included in the list prepared by the Cabinet Council.
• Investment over USD 15 million.
• Comply with the seven eligibility criteria, in accordance with Article 27 of Law No. 93, 2019.

PPP Project: These are public initiatives that were approved in phases 1 and 2 (Prefeasibility and Feasibility) of the PPP Process. The Contracting Public Entities (CPEs), as owners and responsible for the PPP projects implemented in the country, are in charge of carrying out the bidding process (phase 3) and the execution, supervision and oversight of the PPP contract (phase 4).

• Under the PPP modality, it refers to the formulation, financing, construction, development, use, enjoyment, exploitation, maintenance, operation, modernization, expansion and/or improvement of public infrastructure, associated equipment and other structures dedicated to the provision of public services.

The assets belong to the State; the PPP Contractor manages them for a specified time, subject to Law No. 93, 2019, and its Regulations.

The control of compliance with the indicators or service levels will be the responsibility of the Contracting Public Contracting Entity (CPE), as provided in Law No. 93 of September 19, 2019, and its Regulations.

The PPP contract will establish the information to be prepared by the PPP contractor to demonstrate compliance with the indicators or service levels defined for each PPP project, and will establish the methodologies, protocols, or systems for controlling and monitoring compliance with such indicators or levels, to generate predictability during the term of the PPP contract.

Co-financed: Projects that require resources from the State through transfers and/or guarantees, which imply the assumption of firm or contingent commitments by the Contracting Public Entity (CPE), either due to the absence of payments from the end user or because the payments are not sufficient to cover the costs of the project.

Self-financed: Projects in which costs are recovered with the revenues received by the PPP Contractor (investor) through the collection of tariffs, prices, tolls, fees, or charges in general charged directly to the end user during the term of the PPP contract, which allow the PPP Contractor to obtain a financial return adequate to the risk assumed.

The State may assume firm commitments or contingent commitments.

Firm commitments are the payment obligations assumed by the State as consideration to the PPP contractor for the investments and provision of services, for example, the payment of periodic installments that are intended to reimburse the investment incurred by the contractor or to reimburse the operating and/or maintenance costs incurred by the private party for the provision of the service.

Contingent commitments are the potential payment obligations of the State, in favor of the PPP Contractor, when specific risk events occur, as established in the PPP contract.

Not all public entities may submit projects for possible implementation as PPPs. The following are excluded from Law No. 93, 2019:

• Panama Canal Authority
• Agricultural Development Bank
• National Mortgage Bank
• National Bank of Panama
• Savings Bank
• Social Security Fund
• Institute of National Aqueducts and Sewage Systems (Instituto de Acueductos y Alcantarillados Nacionales, IDAAN)
• Agricultural Insurance Institute
• Superintendence of Banks of Panama
• Superintendence of Securities Market.

The Advisory Committee is a chartered body of an advisory and consultative nature, representing the private, academic, teaching and labor sectors. It is composed of eight members, for a term of five years each:

• 4 members from the most representative sectors of the private sector.
• 2 members from the academic and teaching sector.
• 2 members from organized groups of workers linked to the nature of PPP contracts.

The members of the Advisory Committee, whose function is to propose ideas for analyzing the potential implementation of possible PPP projects by the Contracting Public Entities, will be chosen by the Governing Body from shortlists of suitable professional candidates, related to the nature of the PPP contracts, presented by the private, academic, and teaching and working sectors.

To learn more about the phases of the PPP Process, please click here.

Panama’s PPP Regime excludes from its application public security services, medical health services, official education services and metallic mineral extraction concessions.

These exclusions do not prevent them from being infrastructure services.

Natural or legal persons that are disqualified from contracting with the State, pursuant to the provisions of Law No. 22, 2006, ordered by Law No. 153, 2020, may not participate in bids for PPP projects for as long as such disqualification lasts.

Neither may companies holding a PPP contract, their shareholders or direct or indirect beneficiaries who have been disqualified under the terms of Law No. 22 or persons who are included in any of the situations indicated in Article 69 of Law No. 93 of September 19, 2019, participate in PPP project bids.

Click here to see the list of individuals and legal entities disqualified from contracting with the State.