Bill 5431, which will now be known as the “Priority Road Infrastructure Law,” has already received a favorable opinion from the members of the Economic Commission of the Congress of the Republic, with a different article than that previously included in the “General Road Infrastructure Law” that was presented in 2018 and was approved favorably with modifications in November of that year, without making any further progress.
Last Wednesday, deputies who are part of that working commission, together with the president of Congress, Nery Ramos, announced that the “priority road infrastructure law” had received a favorable opinion, so that in the following days it can be discussed in the Plenary.
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The new regulations propose to change the current model of contracting, bidding and awarding of highway sections carried out by the Ministry of Communications, Infrastructure and Housing (Micivi) for the construction, rehabilitation, operation and maintenance of the same and first-hand allocates a cash balance of Q6 billion destined to cover the first payment coverages.
It was reiterated that under this new modality, there will be no tolls or toll booths for users.
The legislative announcement coincides with a visit to Guatemala this week by Eric Jacobstein, Deputy Assistant Secretary of State for Central America in the Office of Western Hemisphere Affairs, to discuss progress on the “Central America Forward” initiative that seeks to promote investment in sectors such as road infrastructure, ports and airports.
What does it consist of?
Regarding the scope and limitations of the new initiative, Deputy Jorge Ayala, president of the aforementioned commission, explained that the Plenary ordered that the previous initiative – the general law on road infrastructure – be transferred to the commission again, so work was done on a new draft opinion.
On the main differences with the previous legislative project, he listed the following:
- On the implementation side, the original initiative involved the entire road system in the country, but now it is focused on Central American (CA) highways.
- Includes both Metropolitan and Regional rings.
- The CAs that connect ports and borders with borders.
- The branch line that connects from the village of El Rancho, El Progreso, to the Verapaces.
The parliamentarian clarified that the institutionality of Micivi is maintained, while the Social Solidarity Fund, the Road Conservation Unit (Covial) and the General Directorate of Roads (DGC) maintain their functions, but with more limited scope of application.
“The figure of payment for availability is created, which are the construction, rehabilitation, operation and maintenance contracts, which will allow a contractor participating in an international public tender to build the assigned road section and then receive their deferred payment”
Jorge Ayala, deputy of the Economic Commission
In addition, the Directorate of Priority Projects is created to handle the entire process of contracting works on the aforementioned road sections, while Micivi will continue to handle secondary and third-party national roads.
This Directorate would have a decentralized figure, but under the command of Micivi with a Board of Directors:
- Two ministers of state or their deputy ministers.
- The president of the College of Engineers.
- A representative of international transport users.
- A representative of the Guatemalan Chamber of Construction.
Ayala said there would also be two representatives from the private sector, academia and the public sector.
Operation and maintenance managers
The initiative creates a fund and allocates annual resources. The concept of payment for availability is created, which are construction, rehabilitation, operation and maintenance contracts, which will allow a contractor participating in an international public tender to build the assigned stretch of road and then receive deferred payment for periods ranging from 20 to 25 years, but the same construction company is responsible for operating and maintaining the assigned stretch.
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According to the deputy, the construction of roads of optimal quality and with international standards is guaranteed, so in order to be eligible for the payment of its annuity, certain indicators must be met and thus the problem of the contractor being disengaged at the time of delivery of the project is avoided.
Now the winning company will have to be responsible for its maintenance and comply with the parameters established in the contract. “No CA highway will be privatized or charged a toll,” he said.
Sources of financing
Ayala pointed out that the fund being created will be financed by the tax on the distribution of petroleum (IDP) and its derivatives, since in the imagination of people and users, there is a belief that it is allocated for road maintenance, as well as the tax on the distribution of vehicles (ISCV).
It was explained that from the IDP, of the Q4.70 that is now paid for each gallon of super gasoline, Q1 goes to Covial, Q0.30 to the municipalities and the difference, which is Q3.40, goes to the common fund – which is administered by the Ministry of Finance.
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But with the new proposal, these resources will go entirely to the fund to settle the annual payments for companies. In this way, each year the fund will be fed – via taxes – by the IDP and ISCV, as well as 30% of the cash balance of the funds not executed in each fiscal year.
The funds would be allocated exclusively to road infrastructure and it was clarified that no new taxes would be revised or created for that purpose. The new Board would be responsible for managing the funds collected, through the Directorate of Priority Road Projects.
Intervention
The CA routes that will be worked on represent 10% of the country’s total road infrastructure, which is 17,500 kilometers, so in this model, work would be done on 1,500 to 2,000 kilometers, through which 70% of commercial traffic and 60% of the displacement of the country’s total population passes.
“The focus is very clear”
Juan Carlos Zapata, executive director of the Foundation for the Development of Guatemala (Fundesa), said that this initiative has a very clear focus on the country’s most urgent needs.
He stressed that the changes to the opinion give it a more accelerated political viability, since it addresses the expansion, rehabilitation, operation and maintenance, as well as the use, exploitation and conservation of the Central American routes, as well as the perimeter routes that are part of a study by the Korean International Cooperation Agency (Koica), with which it has been supporting the Municipality of Guatemala, which includes the Metropolitan Ring, the Regional Ring and some bypasses that are needed in the department of Guatemala.
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“Institutionality would be maintained by creating the Directorate of Priority Road Projects within Micivi, instead of a Road Superintendence, which would be a decentralized body.”
Regarding the capitalization of Q6 billion of the cash balance, it is recognized that there will be no intervention in the current institutionality of Micivi, as Covial and the DGC will remain in place “so the opinion is quite good and what comes next is the political part, with the achievement of the necessary consensus for its approval.”
Improve in indicator
Guillermo Díaz, coordinator of the Institute for Research in Socio-Humanistic Sciences at Rafael Landívar University (URL), reiterated that infrastructure is an important asset for the country and is a pillar for measuring competitiveness, apart from having its respective index, which is why Guatemala is poorly rated.
Given the current situation, the index will not improve, which in turn affects the low foreign direct investment and the national image. “Despite having a better country risk rating and macroeconomic stability, international investors pay attention to infrastructure.”
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Regarding the participation of international companies, he said that it would be positive for this type of market that “is co-opted by some local companies, since the works are directed towards convenient political and economic interests.”
He recalled that, in the last 20 years, not a single new major highway has been built and on average about 200 kilometers are opened per year on rural roads, “so it is a good alternative and hopefully the deputies can do their job for the benefit of the country, because a law is needed to expedite the construction and rehabilitation of road infrastructure.”
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