New concessions plan will bring more transparency to attract foreign capital

Published 25/08/2016

The Executive Secretary of Brazil´s Investment Partnership Programme (PPI), Wellington Moreira Franco, said the government is reviewing the public concession model used in recent years. According to him, the goal is to provide more transparency to the process, encouraging the participation of medium sized companies – until then not included in the process – and working to attract foreign capital to fund and run infrastructure projects in the country.

“Our declared goal is to provide guarantees so that the private initiative starts to invest again and generates jobs in Brazil. We want to have a competitive environment that encourages the participation of Brazilian and foreign partners,” he said.

This Saturday (13), Moreira Franco presented, at the Rio Media Center in Cidade Nova (Rio de Janeiro), the Federal Government’s plans to steer the Brazilian economy back into a growing trend by attracting private investments. According to the Secretary, with transparency and safety, new partnerships will come up, resulting in an increase in jobs.

“Brazil is experiencing one of its most serious crises. While the government makes fiscal adjustments to balance the books, we are seeking conditions to generate employment. We have 11 million unemployed, with the prospect of reaching 14 million this year. We need to create an environment to increase the investment rate, make the country grow again, and, through this effort, solve this serious social issue,” Moreira Franco said.

New model for public concessions

The priority sectors still have to be defined by the PPI Board, made up by ministers of the economic and infrastructure areas, the BNDES, and the Executive Secretary himself, under the command of the President. All concessions and privatisations will be centralised under the PPI, which will receive proposals from the ministers of the corresponding areas.

According to Moreira Franco, the first meeting of the PPI Board will take place at the end of the month, when it will discuss projects for railways, highways and oil & gas, as well as other initiatives under consideration by the BNDES. Regulatory and governance changes will also be on the agenda. Some have already been defined, such as the publication of calls for tender both in English and Portuguese, and the extension of deadlines between the publication and the actual auctions, which will be of at least 100 days. For oil & gas, due to the complexity of projects, this period will be of one year.

The programme plans for other financial agents to take part in infrastructure projects, in addition to the BNDES. The bank will play an important role, but will not be the only one involved. Private entrepreneurs will no longer be required to have state-owned companies as partners. “We’re looking for a more appropriate model, different from the one being used, but we’re not going to reinvent the wheel”, said Moreira Franco.

According to him, the Federal Government has studied the problems in the public concession model applied in recent years and listened to the agents involved. “Before, some indicators were changed to reach lower rates artificially, for example. We intend to correct these distortions”, explained the Secretary.

How would you describe the new model for infrastructure concessions the federal government intends to adopt?

Secretary Wellington Moreira Franco – It is different from what was being done, but we will not reinvent the wheel. We have studied all problems we have had in recent years – and there were many – and are talking and listening to a lot of people in search of corrections. It is essential to afford more transparency to the process, to encourage participation of medium-sized enterprises (who had been pushed out of the competition) and to attract foreign capital, both for financing and developing projects. Our goal is to provide security for the private sector so that it can feel confident to re-invest and generate jobs in Brazil.

What are the priority projects to be offered to the private sector?

Moreira Franco – The priority will be established by the Board of Directors of the Investment Partnerships Program (PPI), which is chaired by the President of the Republic and includes representatives from the government’s finance and infrastructure bodies, the BNDES (Brazil’s Development Bank) and the Executive Secretary of the PPI. But the priority project is to grow, to create jobs.

What are the main differences between the new Investment Partnership Program (PPI) and the current model for concessions and public-private partnerships?

Moreira Franco – The fundamental difference is that, based on what we have heard from the agents involved, some indicators were modified to obtain artificially lower rates in bids. Furthermore, private entrepreneurs were required to have state companies as partners. Finally, all responsibility for funding fell on the BNDES. We are seeking the most appropriate model.