Do Public-Private Partnerships in El Salvador Work?

The way that the government handles the arbitration failure at the International Chamber of Commerce on the La Geo case could dictate the success or failure of state-business partnerships.

Thursday, July 7, 2011

The private-public scheme has been promoted recently by the Salvadoran government for the implementation of large public infrastructure projects because they can free the state from the significant investments that such works require.

In the case of La Geo, The Italian firm ENEL was finally favored in international arbitration against the State Commission of the Lempa River Hydroelectric Executive (CEP). The dispute was based on the fact that CEL blocked a $100 million investment by ENEL, which would have left the Italian firm with the majority of the company’s shares, reducing the state’s participation who did not want to lose control of such a strategic asset.

Sources close to both companies were cited by the newspaper, expressing the expectation that CEL will comply fully with the ruling ordered by the international arbitration court.
It is believed that not abiding by it voluntary would generate lack of confidence by investors in this type of association, adding that the ruling "will become like a pilot project to demonstrate the government's real willingness to enter into such partnerships."

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More on this topic

LaGeo Litigation Continues

January 2013

After the last judgment which was unfavorable to El Salvador, officials have announced the continuation of the legal battle against Enel.

Representatives from the Executive Hydroelectric Commission of the Lempa River (CEL) reported that they will abide by the decision of the Parisian Court of Appeals which means that the Italian company ENEL can capitalize the geothermal company LaGeo and become the majority shareholder in the company.

El Salvador: LaGeo Case Affecting Country's Image

August 2011

The dispute between the Italian company Enel and the CEL and INE commissions has sent a negative message to foreign investors.

In the opinion of experts, the fact that by the Ente Nazionale per l'Energia elettrica (Enel) and the Lempa River Hydroelectric Executive (CEL) are going through an arbitration process in order to decide who gets majority control of the geothermal plant, could be affecting the country’s attractiveness in terms of foreign investment.

El Salvador To Appeal LaGeo Ruling

July 2011

CEL has filed a motion to quash the ruling that would allow Enel to have a majority stake in LaGeo geothermal plant.

Tóchez Irving, president of the Commission of the Lempa River Hydroelectric Executive, said: "It is inappropriate to put a country’s strategic resource, such as a geothermal plant, into private hands," when presenting the proceedings before the court of appeals in Paris, France.

El Salvador's LaGeo Ruling will be Known in January

September 2009

The International Chamber of Commerce will communicate its ruling on the arbitration trial filed by Enel for $120 million.

The complaint filed by Italian company Enel in October 2008 is based on noncompliance by the Salvadoran government with its commitment of handing over shares of company LaGeo.