On November 12, the Guatemalan Congress approved Decree 29-2024, the Priority Road Infrastructure Law, which will become effective 30 days after its publication in the Official Gazette, something that has not occurred to date.
The approval of the Priority Road Infrastructure Law was received with high hopes by different sectors, because the country currently has great challenges in this industry.
The Law seeks to regulate the contracting modality of priority road projects, and among its principles is to improve legal certainty and security for all investors. To this end, it establishes mechanisms to ensure the execution of projects and to improve the process and the timely collection of payment by companies.
The Law includes several references to the need to encourage competition and participation of international companies. For example, it incorporates the use of English in the bidding conditions and informative meetings, the elaboration of a specific process to pre-qualify international bidders or the amendment of any condition that prevents or hinders international participation.
If a foreign bidder wins a bid and is not registered in the country, it must be legally registered with the Trade Registry, the Superintendency of Tax Administration (SAT) and the Guatemalan Social Security Institute (IGSS) within the term established in the bidding conditions.
Great Investment Opportunities
Due to the number and magnitude of the projects, there will be a wide range of investment opportunities for local and international companies. The option of contracts that include construction, repair and maintenance is established, which will attract long-term investment (with a maximum of 30 years for a contract).
This is the list of priority road projects included in Article 87, which includes twelve highways and three peripheral rings:
- Central American Route CA-1 East
- Central American Route CA-1 West
- Central American Route CA-2 West
- Central American Route CA-2 East
- Central American Route CA-8
- Central American Route CA-9 North
- Central American Route CA-9 South
- Central American Route CA-10
- Central American Route CA-11
- Central American Route CA-12
- Central American Route CA-13 (from CA-9 North to the Corinto Customs Border)
- Central American Route CA-14
- Metropolitan Ring
- Regional Ring C-50
- Regional ring that adds other departments.
- Project to take advantage of road infrastructure such as the deliverance to Guatemala City through the interconnection with three highways.
Some Important Aspects of the Law:
- It prohibits the collection of tolls from users of priority road projects developing under the present law (Article 5).
- It creates the Direction of Priority Road Projects (Dipp): it will be in charge of enforcing the Law and creating a regulation no later than 10 months after the entry into force of the Law. It will have its own resources and will be independent (Article 7).
- The Fund for Priority Road Projects (Fovip) has been created: it will have an operational (administrative) fund and an infrastructure (construction) fund (Article 28).
- The Law includes mechanisms that Fovip may implement to comply with the Infrastructure Fund, and specifies that others may be added, including:
- Trust or specific guarantee fund
- Escrow payment accounts
- Bank guarantee of payment
- Payment contingency fund
- Penalty clause for late payment
- Review and update mechanisms
- Long-term vision: a Priority Road Infrastructure Plan (Pivip) will be developed, and it will have a 30-year projection and must be updated every 5 years.
- Priority road project contracts with more guarantees. Among other things they must include:
- Bid support guarantees and insurance, contract performance, conservation bond, civil liability insurance and all-risk construction insurance.
- Performance indicators.
- Contracts and payment mechanisms: source of financing to make payments, terms and conditions. Also guarantee payments on time, in the form of a trust or specific guarantee fund.
- Remuneration. Still to be developed in the regulations, but the law already includes some issues:
- The advance payment will be for a maximum of 20% of the total amount of the work and in these cases, the developer must present the guarantees or insurance established in the law.
- Delay in payment by the Dipp. If there is a delay of 40 days or more in a payment, the developer may request payment in writing to the Ministry of Finance.
- Dispute Resolution:
- A Technical Dispute Resolution Panel will be established for technical or economic issues arising during project execution.
- Disputes or claims arising from the interpretation or application of the Road Infrastructure Contract, or those arising from the execution, may be taken to arbitration. Technical or economic aspects of a dispute may be submitted to arbitration only when they have been previously submitted to the Technical Dispute Resolution Panel.
- The arbitration procedure may be agreed upon within the priority road project contract itself and may be entrusted to a legally recognized institution. It may also be carried out before the local arbitration institution or center.
- Foreign investors will have the right to resort to the International Center for Settlement of Investment Disputes (ICSID), if so, established in the Investment Treaty applicable to the investor. Foreign awards will be subject to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 or the New York Convention.
- The Law includes mechanisms that Fovip may implement to comply with the Infrastructure Fund, and specifies that others may be added, including:
If you have any questions, please do not hesitate to contact us.
Update (12/3): The Decree was published in the Official Gazette on December 3, 2024.
