How Brazil plans to unleash a new urban mobility era

Brazil’s government recently unveiled a round of investments under its PAC program, with plans to invest 41.2bn reais (US$7.16bn) in cities, including urban mobility, drainage, water supply and sewage projects.

Of the total, 9.9bn reais will be allocated to urban mobility projects in medium and large cities, benefiting 58 municipalities in 24 states. This amount was lower than expected due to a lack of projects from local governments and the aim for 2025 is to have a greater number of projects when a new PAC investment round is announced, according to Denis Andia, urban mobility secretary at the cities ministry.

Andia, who is a former mayor of Santa Bárbara d'Oeste in São Paulo state, spoke with BNamericas about the government's plans to increase investments and the number of projects in the urban mobility sector.

BNamericas: How important is the bill creating a new legal framework for public transportation?

Andia: The legal framework will open up a completely new field in relation to modeling urban public transport operations.

It currently works on the basis of a model where the cost of the operation is calculated and divided into the fare that passengers pay. 

This is a model that needs to be revised and opened up to other possibilities, so we will have new ways of setting fares to finance the operations.

Furthermore, the framework brings legal security for new investments, especially in PPPs where legal security is necessary to bring in large-scale investments. 

The framework will also generate new financing possibilities in the sector, where we want to use the full amount of the fees obtained from the contracts for reinvestments in the public transport sector.

In general, this framework will provide more legal security to investors, more options to modernize the sector, and better service quality for the user.

BNamericas: How much progress has the bill made in congress?

Andia: It has been under evaluation in the senate since May. Once the senate approves the framework, it will go to the lower house for final approval.

Our expectation is that the framework will be approved in the second half of this year.

BNamericas: Why did the federal government detect a lack of projects in the urban public transport area?

Andia: We realized that we have to invest in planning and we’re already doing this through the ministry of cities in conjunction with [development bank] BNDES.

As part of these efforts, BNDES will assess 21 metropolitan regions with more than 1mn inhabitants, coming up with the best public transport model for each of them, understanding the best paths that each of these regions should follow.

The idea is to invest resources efficiently and avoid conflicting interests.

BNamericas: What kind of conflicting interests?

Andia: Often a state government has an idea about a mobility project and the city mayor has another idea, which is why neither of the projects is implemented.

Given this, the idea is to have a master plan in which we outline a clear direction for the best option in certain locations and that everyone is on the same page, from the federal government to the state governments, and the mayors of the cities where the project will be carried out. 

The idea is to integrate proposals to optimize public resources.

BNamericas: Does the federal government prefer PPPs or concessions in the area of urban mobility?

Andia: PPP contracts for passenger transport projects are very welcome because these contracts begin with a mutual interest among the public and private sectors, so that the project advances and becomes operational as quickly as possible and with quality.

Experience in other segments shows that projects carried out in the PPP format work faster and that is why the PAC resources that the federal government has made available to the sector have a focus on PPP contracts.

BNamericas: You mentioned BNDES's work in the sector. Is there interest in attracting other banks to future projects?

Andia: We want to attract multilateral banks to help states and municipalities advance with their projects, complementing the existing efforts by BNDES and [state-run bank] Caixa Econômica Federal.

That is why we have sought support from the World Bank, the Inter-American Development Bank, CAF, KfW, Asian banks, to raise fresh funds for projects and other initiatives in the sector.

BNamericas: Some local firms complain about unfair competition from machinery and equipment manufacturers that don’t produce in Brazil, mainly those from China. What are the rules in terms of the issue of purchasing materials for the projects?

Andia: We have minimum local content requirements. In existing plans for renewing bus and subway fleets, local content is essential and that is why we have a 60% minimum requirement in terms of materials of national origin.