Law 5.074/13 for financing infrastructure

The Law 5074 (“La Ley 5.074/13 sobre el financiamiento de Infraestructura”) aims to regulate the public procurement procedure by Paraguay. Bidders to the calls for tenders may design, build, equip and finance the public works. Only infrastructure projects listed in the law (i.e., roads, bridges, ports, railways, sanitary sewer, transmitting sources, generating electrical power, among others) can be carried out under this scheme. This law finances different type of projects including sustainable transport, housing, energy, governance, green spaces, promoting biodiversity and regeneration and climate change adaptation with a focus on NBS. 25% of the project services or workforce should be performed by Paraguayans. This alternative financing modality is expected to contribute to a dynamic economy in line with the National Development Plan 2030 for Paraguay. One of the biggest projects developed under the modality of Law No. 5.074/13, better known as “Turnkey”, is the construction of the Costanera Sur, which will link Asunción with Lambaré. It was launched three times, before works began in 2016 for the first time. It includes the urbanization of 66 hectares which will be upgraded on a non-floodable level, which is 64 m above sea level in order to ensure that the neighbourhood will not be flooded again. Additionally, the project includes a linear park of 1000 metres. Example 2: Another project, where the financing shall be guaranteed under law No. 5.074, is the construction of a waste water treatment plant and a sanitary sewage system in the streams of Yukyry before entering the lake Ypacaraí. A total of 21 municipalities discharge into the lake and the water of the streams show very high levels of coliforms and nitrates. However, the exact project execution and source of funding are to be determined.

Overview

Type of instrument:

Legislative, regulatory and strategic instruments›Dedicated strategy, plan, or law

Challenges addressed

Ecologic connectivity
Soil quality
Water management (e.g. reuse)
Green space management (e.g. accessibility)
Flood risk: pluvial and fluvial / soil permeability
Social equity
Human health, comfort and well-being

Consideration of nature-based solutions:

The law aims to allocate public investment to construction projects which address infrastructure needs and include natural systems. For example, the project in the coastal strip of Asunción promotes a holistic approach and focuses on establishing environmental resilience of public spaces and green areas to floods and other climate change impacts through planting trees and protection of native flora and concentrating on nature-based solutions. Concrete examples are the revitalization of the historic center and restoration as well as expansion of the Parque Caballero and Parque Reserva Natural Banco San Miguel.

Targeted (peri-)urban areas:

Parks and (semi)natural urban green areas

Green areas for water management

Urban green space connected to grey infrastructure

Good practice characteristics:

Sustainable in the long-term

Locally appropriate

Potential to be replicated / upscaled

Inclusivity

Governance

Government body/bodies

Initiating body:

Ministry of Public Works and Education; Ministry of Finance

Instrument design:

Details about how the instrument was designed:

While the law lays out the general provisions and lists possible projects, central provisions governing the project are set out in the tender documents. For example, the project is a result of an inter-institutaional work carried out by the Ministry of Public Works and Communications, the Municipality of Asunción, Ministry of Urban Development and Housing, the "Asamblea Permanente Unidos por la Franja/Centro de Ayuda Mutua Salud para Todos" and the "Pastoral Social". The contract was signed between the Ministry of Public Works and Communications and the Municipality of Asunción. A private company, "Consorcio del Sur (CDS)", is in charge of the execution of the project (expected period: 36 months). Another example is the alliances around the water management project, that entails a collaboration of all 21 municipalities that discharge in the streams entering the Ypacaraí lake. After completion of the executive design and finalizing financing modalities, it needs to be approved by the Ministry of Public Works and Communications, the Empresa de Servicios Sanitarios del Paraguay S.A. (ESSAP) and the Secretary of the Environment.

Involvement of non-governmental actors:

Private sector, corporate, business

Citizens or community groups / NGOs

Coalition

Type of actor involvement:

Co-planning or co-design of instrument (e.g. boards, advisory role)

Civil society consultation through e.g. workshops, surveys

Instrument implementation:

Type of involvement:

In the Costanera Sur intervention, the Asamblea Permanente Unidos por la Franja was established in 2016 as a representative body of the Bañado Tacumbú neighborhood. Its aim is to promote information and encourage participation of the whole neighbourhood in the project. So far, 33 social organisations from Bañado Tacumbú are part of it.

Type of non-governmental actors involved:

Citizen councils or consultation for co-planning (e.g. workshops, surveys)

Targeted actors:

Public sector institution (e.g. school or hospital)

Private: household, real estate developer, business , financial

Citizens or community groups (CBOs), NGOs

Financing

Sources of funding:

Corporate investment

Inversión empresarial

Budget:

Above 10 000 000€

Details about instrument financing:

Example 1: The budget for the Costanera Sur is around USD 129.960.310. For construction of housing around USD 100 million which is a loan from the Inter-American International Bank. Example 2: The budget is estimated at 60 millions.

Monitoring, evaluation and impacts

Achieved outcomes and impacts:

With regard to public infrastructure, Paraguay is ranked as one of the most underdeveloped countries in the world. Paraguay heavily relies on third parties to undertake the execution of major infrastructure works. Many projects are in the pipeline and the right allocation of public investment forms still part of a heated debate. Therefore, modern public contracting regimes such as the turnkey law are essential to Paraguay. One of the best examples is the Costanera Sur intervnetion, where works for the construction started in 2016 and are advanced at 65%, all three bridges are built.

Success factors and lessons learned:

As the law demands high financial security from its bidders, once contracts are signed and the works are carried out, commenced projects have a high chance of being finished. The process has shown challenges to include the communities and local authorities in the definition of the priority interventions. Therefore, more work could be done at this regard.

Sources and further information

References

List of references:

Corte Surpema de Justiciá. Decreto 1434 Reglamenta Ley 5074. (2014). Available at: https://www.csj.gov.py/legislacion (Accessed: 31.01.2023). Corte Surpema de Justiciá. Ley 5074 (2013). Available at: https://www.csj.gov.py/legislacion (Accessed: 31.01.2023). Corte Surpema de Justiciá. Ley 2051 de Contrataciones Públicas (2003). Available at: https://www.csj.gov.py/legislacion (Accessed: 31.01.2023). Banco Mundial (2022). Proyecto de resiliencia urbana en la franja costera de asuncion. News. Available at: https://www.bancomundial.org/es/news/feature/2022/11/15/proyecto-de-resiliencia-urbana-en-la-franja-costera-de-asuncion (Accessed: 31.01.2023).