How Brazil will move forward with PPPs and concessions

Brazil’s government is planning to offer more PPPs and concessions as well as attracting multiple players to help structure projects.

Along with streetlighting and sanitation, ports and railways are likely target areas for new PPPs. 

Marcus Cavalcanti, head of federal investment partnerships program PPI, talks to BNamericas about the government’s plans for PPPs and concessions.

BNamericas: What does PPI’s pipeline of auctions look like for the next few months?

Cavalcanti: At the end of this month we will have a big auction for the power transmission segment  that will generate a lot of investment, and at the same time we’re giving support to local governments for their respective PPPs in some areas.

In the coming weeks and months there will be a series of auctions that have already been scheduled. In addition to the transmission lines I mentioned, we will have many auctions for streetlighting PPP contracts, among others.

We also issued a public notice calling on city halls to structure contracts to be offered in the area of solid waste and we’re approving several sanitation projects that will be offered at auctions as well.

PPI is acting on two fronts, one that supports the progress of the federal government's own projects and another supporting local governments.

BNamericas: Is this pipeline of auctions that PPI is helping to organize going to increase?

Cavalcanti: Yes, it will increase. What we’re doing this year are faster projects, to speed up investments. But the list of auctions will be expanded to attract investment in infrastructure.

We’re going to support local governments with the structuring of projects in the sanitation area.

We also want to encourage projects in the ports area with terminals and drawing up concessions for dredging services in the ports. We have a study in progress for a dredging concession in the port of Paranaguá, in Paraná state, and we’re also going to evaluate a concession for dredging services in the port of Santos, in São Paulo.

BNamericas: Any other initiatives on your radar?

Cavalcanti: We’re negotiating an early renewal of the railway concession operated by VLI, and as part of this negotiation some stretches will be returned.

For the stretch from Salvador [Bahia state] to Petrolina [Pernambuco], our idea is to set up a railroad PPP using the funds that VLI will pay the government for returning the stretch.

The details of this PPP will be unveiled next year.

BNamericas: How are you helping to structure new projects?

Cavalcanti: We’re encouraging more projects to be structured by [development bank] BNDES, by FEP, as well as multilateral organizations such as the IFC and IDB.

With this joint effort, we also want to accelerate the structuring of local projects as well. The objective is to have public investment in parallel with private investment.

[Editor’s note: FEP is the support fund for the structuring of concessions and PPPs, and it is managed by federal bank Caixa Econômica Federal].

BNamericas: Is the current administration more in favor of PPPs than concessions?

Cavalcanti: It’s not the case that the government favors PPPs. What I see, for example, that has happened in the area of highways, is that there’s not much room left for lots of new concessions.

The scenario then becomes either you do nothing or try to move forward with PPPs. So we opted for PPPs.

Through a PPP I can leverage my investments. Many states already do this well, such as Bahia, São Paulo, Piauí, among others, but the federal government does not engage in PPPs and we want to do that.

The federal government does not have a problem with funds, the problem is unblocking some budget constraints.

Finance minister Fernando Haddad is also enthusiastic about this idea.

We have created a model with the national treasury to help stimulate local PPPs with federal government guarantees, and the idea now is to also support more PPPs in the federal government.

It's not a matter of preferring one over the other. A PPP is, after all, a concession, which uses public funds as part of a project.