The hurdles PPPs need to overcome in Honduras

With the US wanting to promote private sector participation in Central America to curtail migration, the three countries of the northern triangle – Guatemala, Honduras and El Salvador – are pushing to expand the use of public-private partnerships. BNamericas spoke with specialist lawyer Marco Flores, who discussed the obstacles PPPs face as an investment mechanism in Honduras.

BNamericas: What is the state of public-private partnerships in Honduras?

Flores: There are currently some contracts that have been awarded and some that are in the review process, which have been the subject of questioning and accusations since transparency and objectivity were not observed during the award process. The institution that was created to administer them was Coalianza in 2010 but it was abolished in 2019 because, according to official documents, it did not have the technical strength for this type of contract. So we’re in a growth process to promote PPPs in a solid and robust way.

BNamericas: How widely used is the scheme?

Flores: I don't think it has developed sufficiently. It’s still in the process of growth and there are many opportunities for improvement to consolidate an alternative to develop and attract investment under the principles of efficiency and transparency.

BNamericas: What is missing for this to happen?

Flores: The use of PPPs has not spread due to technical weakness, due to the fact that they are contracts that require and demand a lot of effort. There has been some progress, but I believe that the regulatory framework has not been as robust and the players need to develop it in a better way with standards and in harmony with the best international practices.

BNamericas: What are the concrete obstacles?

Flores: Honduras has had a law since 2010 that did not compare favorably with the advances worldwide, so the first obstacle is in that regulatory framework. For me it is fundamental that the actors are strengthened – it will be necessary to give greater importance to the institutions that know or by law have those responsibilities. The second obstacle is the questioning of PPPs by citizens, since they perceive them as not very transparent. I believe that local people should also feel the benefits of these types of contracts. 

BNamericas: What would be the way to make PPPs more attractive?

Flores: The most appropriate way is to carry out studies and project profiles that show profitability for both the private and public sectors, that is, that it’s attractive to both parties. It must be shown that it’s a good business for the private sector, as well as a viable option for citizens and government bodies. This is achieved through attractive projects that identify the needs of the people.

BNamericas: What would be the way to make the PPPs transparent to generate acceptance among citizens?

Flores: Today we’re talking about going beyond transparency, we’re talking about open purchases, open contracting, we’re saying that it’s not enough for citizens to be able to see a document in PDF but rather that they have access to open data, and we need to work with them so they can evaluate and identify service standards themselves with that data. These must allow them to reach constant and continuous conclusions that the service is generating benefits for them. This will ensure that the public can enforce compliance and see if the project meets their needs. This way there will be security for everyone: for the private part it will guarantee that it generates value and for the public part it can be vigilant. Otherwise, we would have a questionable process, a process that does not satisfy the public interest and that’s opaque.

BNamericas: How should the regulatory framework be modified?

Flores: The regulation falls very short. The regulatory framework has approximately 38 articles and leaves many gaps and contradictions. There have been reforms but from my point of view, it has many opportunities for improvement. I believe that the best option is to create a new regulatory framework that is based on best practices, on the prevention of corruption, that implements compliance mechanisms, spaces for participation, that strengthens competition, balance and security. In particular, I would suggest as a starting point the model that the United Nations Commission on International Trade Law has already worked on, which has a model law for PPPs and would be a good starting point – that it is able to regulate unsolicited proposals, that it also has a regulation regarding private initiatives and ensure that they are consistent with the needs of the country.

BNamericas: What else should be added to this regulation?

Flores: Although it is true that there are many documents, literature, and many good practices, it’s important that the law contemplates its own logical framework of the process. In other words, it can detail the cycle of the PPP process from its planning to the issue of contractual settlement – despite the fact that they are long-term contracts. It should also include the modification of the contract within this cycle, with some minimum requirements, as well as the issue of early termination and grounds for termination, so that it offers security to all parties.