The recent enactment of Law No. 7452/2025 on Public-Private Partnerships (PPP) (“Law 7452”) marks a turning point in the regulatory framework for infrastructure investment in Paraguay. Law 7452 repeals the previous “PPP Law,” Law No. 5102/2013 (“Law 5102”), with the purpose of improving efficiency and transparency in the management of public-private partnership projects.

Key Developments introduced by Law 7452

1. Central Role of the Ministry of Economy and Finance (MEF)

Law 7452 centralizes functions previously distributed among several institutions (such as the Technical Planning Secretariat) within the MEF, seeking more agile management of evaluation processes for PPP awards, as well as uniformity and alignment with the country's fiscal policy.

2. Extension of Contractual Terms

The maximum term for PPP contracts is extended from 30 to 40 years, extensions included. This extended timeframe allows for investment recovery in large-scale projects.

3. Increased State Participation

State participation in PPP projects increases to up to 25% (previously limited to 10%), with the possibility of exceptional expansion if approved by the National Economic Team (NET) and the MEF. Allowing the percentage to exceed 25% would enable the State to assume additional commitments for repayment of projects without financial return, such as schools and other social infrastructure.

4. Increase of Limits on Firm and Contingent Payments

The limit for future quantified net firm and contingent payments increases from 2% to 4% of GDP, and the annual amount assumed rises from 0.4% to 0.8% of GDP. This facilitates investment in PPPs but also increases the risk of fiscal overcommitment, requiring rigorous oversight by the MEF and the NET to ensure financial sustainability.

5. Updates on Procurement and Energy Projects

The right of first refusal is introduced in tenders, allowing proponents to improve their offers within a margin of 3% to 10%. Additionally, the list of eligible sectors for PPPs is expanded to include non-hydraulic renewable energy generation.

6. Minimum Investment Thresholds

A minimum threshold of 12,500 minimum monthly salaries (approximately USD 4.5 million, at the February 2025 exchange rate) is established for projects to qualify under the PPP regime, although the MEF may reduce this in exceptional cases.

7. Streamlined Procedures

The minimum call period is extended from 60 to 120 days before the receipt of offers, providing participants with more time to prepare their proposals.

8. Award Criteria and Economic Regime

Section 26 establishes payment modalities and requires the inclusion of penalties and deductions for service level breaches, without affecting other compensation mechanisms (such as user collection rights or committed State contributions during construction or operation).

9. Contract Modifications and Compensation

If unilateral modification of the contract occurs, the contracting administration must rebalance the economic-financial equation, including associated financial costs. Compensation for unforeseen events (e.g., force majeure) is strengthened, stating that it will only apply if it materially alters the balance of the contract. Such compensation may extend for a maximum of 10 years, provided the original contract does not exceed 40 years.

10. Termination and Contract Control

A new cause for contract termination is introduced when contract suspension exceeds 60 days or, with an extension, 120 days. Creditors of the private participant are also granted the ability to take control in the event of a serious breach (step-in rights).

11. New Incompatibilities

Conviction for contractual breach with the State within the last five years is included as a cause for disqualification.

For further information, please contact: Rodolfo G. Vougargvouga@vouga.com.py); Manuel Acevedo (macevedo@vouga.com.py); Silvia Benítez (sbenitez@vouga.com.py); Lucas Rolón (lrolon@vouga.com.py); Yvo Salum (ysalum@vouga.com.py).