Alliances that Mobilise: PPPs and the Guatemalan Metro  

Rodolfo Salazar,  May 13, 2024

BLP LEGAL - President Bernardo Arévalo recently announced an ambitious project to build a metro in Guatemala City, with an expected inauguration date of mid-2027.

This metro, which will initially run in its first phase 11.2 km from the Central Railway Station in the centre of Guatemala City to the Central de Mayoreo Centra Sur in the municipality of Villa Nueva, will be developed on the basis of the Metro Riel project that the National Agency for Infrastructure Development (ANADIE) initially began structuring.

However, this initial phase of the Metro for Guatemala City is still undergoing adjustments and changes in order to accelerate its execution to meet the goals of the current government. 

This first phase is expected to be complemented by a second phase that is still under development, comprising the East-West section from the end of Calzada Roosevelt to the end of Boulevard Los Proceres, which is yet to be determined whether it will be underground or above ground.  

The Metro for Guatemala City promises to transform urban mobility in one of the most congested areas of the country.

The importance of this project lies not only in improving daily traffic, but also in fostering a more orderly and sustainable urban development, contributing to the quality of life of citizens.

This project is expected to be implemented through a combination of public works contracting and public-private partnerships, which is still being determined, indicating a collaborative effort between different government entities, municipalities and the private sector to finance and manage this important infrastructure.

Public-private partnerships (PPPs) are a model of collaboration between government and the private sector to develop, finance and operate infrastructure projects. These partnerships are typically formed for large, complex projects that require substantial investments and advanced technical expertise that the public sector may not possess. For example, in the case of infrastructure projects such as a metro, PPPs allow the financial capacity and innovation of the private sector to be combined with the strategic and regulatory objectives of the public sector.

One of the main reasons why PPPs are chosen for projects such as the metro is cost efficiency. By involving the private sector, competition is encouraged which can result in reduced costs and more efficient execution compared to traditional public procurement methods. In addition, the private sector usually provides more agile management and planning, which can reduce lead times and improve the quality of the final project.

PPPs also allow direct access to private sector innovation and technical expertise. This is especially valuable in technologically complex projects such as the construction of a metro, where advanced engineering and project management solutions are necessary for success.

Finally, PPPs can offer significant benefits in terms of long-term maintenance and operation of the infrastructure. In the PPP model, the private sector regularly has responsibility not only for the construction but also for the maintenance and operation of the infrastructure over an extended period. This ensures that the construction is of high quality to minimise future costs and guarantee a focus on the long-term sustainability of the project.

The use of a PPP for the metro in Guatemala not only facilitates the financing and construction of the project, but also ensures its long-term sustainability and efficiency by including quality and performance standards that the private sector must meet. In addition, this scheme allows the Guatemalan government to mitigate financial risks by sharing responsibilities and benefits with private partners, which is indispensable in large-scale, high social impact projects such as the metro.

However, it should be noted that PPPs are not always the solution for all government infrastructure projects, which is why contracting public works in projects as complex as the Metro may be an option for certain infrastructures where public investment is required, and where PPPs are not viable due to the complexity of their structuring.

Legal and Administrative Implications of PPPs in Guatemala

PPPs in Guatemala seek to facilitate and regulate public-private partnerships in infrastructure projects. Legally, these partnerships must comply with specialised national legislation on the matter, such as the National Infrastructure Development Agency Law in the case of Guatemala, which develops the responsibilities and obligations of the private and public parties with respect to each project. This legal framework aims to ensure transparency, efficiency and equity in the execution of PPP projects.

One of the main legal and administrative challenges is contracting. PPPs involve complex tendering processes designed to ensure that the selected private partner meets the necessary technical and financial requirements for the project. This includes preparing detailed proposals, assessing risks and negotiating contract terms that protect public interests while incentivising private investment. Contracting should also consider accountability and dispute resolution mechanisms to manage potential conflicts during the life of the project.

In addition, the implementation of PPP projects in Guatemala faces challenges related to inter-institutional coordination and the alignment of projects with public policies and development priorities. PPPs require effective collaboration between numerous government entities and the private partner, which can be complicated by differences in objectives, expectations and implementation timelines.

To address these challenges, Guatemala needs to continue to develop and improve its legal and administrative framework around PPPs, strengthen the capacities of the institutions involved, learn from lessons learned, and promote a business environment that is both competitive and fair. Improving this framework can facilitate more effective implementation of significant projects such as the metro in Guatemala City, ensuring that these efforts contribute positively to the country’s development and the well-being of its citizens.

From a future perspective, the success of the metro could be the beginning of a broader expansion of the public transport system in the city, fostering greater connectivity and accessibility. The effectiveness of the metro in improving urban mobility will depend on its integration with other modes of transport and the system’s ability to adapt to the needs of the population. The long-term vision for the metro is for it to become a central component of a broader transport network that benefits the entire metropolitan region of Guatemala.

Potential Impact and Benefits of the Metro

The anticipated construction of the metro in Guatemala City could represent a transformation of urban mobility in one of the densest and most congested areas in the region. This infrastructure is projected not only to mitigate long commute times, but also to reduce traffic volume and vehicular pollution. This project aims not only to improve the daily flow of transport but also to contribute significantly to the environmental sustainability of the city.

The extended benefits of the metro’s implementation are manifold. It is expected to decrease reliance on private cars, promoting the use of faster and more efficient public transport. This could result in an improvement in the quality of life of the inhabitants by reducing daily stress, costs and increasing the time available for personal and family activities. In addition, a boost in the local economy is anticipated due to the increased ease of getting around, which could attract more business and tourism to the city.

On the other hand, the implementation of a modern metro system can be the start of a more orderly and planned urban development. Metro stations could become development hubs that attract investment and improve the planning of urban spaces around them. This reorganisation of urban space around the metro can lead to a more integrated and accessible city, fostering closer-knit communities and equitable growth.

Finally, the metro project promises to be a model of sustainable development and an important legacy for future generations in Guatemala, setting a precedent for other infrastructure projects in the region. These transformations would not only be seen in the physical infrastructure, but in the very way of living and moving around the city, leading to a cycle of continuous improvement in the quality of urban life.

blplegal.com