Brazil announces fund to stimulate PPPs at municipal and state level

The Brazilian government announced details of a 1bn-real (US$176mn) fund to be used by local administrations to structure concessions and PPPs.

The fund aims to address one of the main issues currently hindering progress in infrastructure projects in Brazil.

"Today, our main challenge is attracting more local governments to engage in concessions and PPP contracts. Structuring such projects is an expensive process, and smaller municipalities, in particular, do not have the budget resources available to invest in this," Maurício Carvalho, special secretary of federal investment program PAC, told BNamericas.

The fund will be supported by state-run banks Caixa Econômica Federal and BNDES, the regional development ministry said in a statement. 

The priority sectors are sanitation, solid waste management, drainage and management of urban stormwaters; urban infrastructure, including mobility, housing and public lighting; transportation; social infrastructure, including education and health; irrigation; and concessions for parks and forests.

Although available for all regions of the country, the fund's resources will prioritize projects in the north, northeast and center-west where there are more municipalities with limited resources.

PPPs are considered crucial to attract the interest from private sector investors, especially for segments such as health and education.

"The greatest risk remains the assurance that the government will honor its obligations, since in these models it's not possible to charge fees," Paulo Dantas, an infrastructure and project finance specialist at law firm Castro Barros Advogados, told BNamericas.