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FINANCE DEPARTMENT Executive Department of PPP’s Program . PUBLIC-PRIVATE PARTNERSHIP PROGRAM OF THE STATE OF BAHIA. José Andrade Costa Executive Secretary for Public-Private Parternship Program. Bahia Trade Association – ACB April 28, 2005. Fiscal Restrictions.

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FINANCE DEPARTMENT

Executive Department of PPP’s Program

PUBLIC-PRIVATE

PARTNERSHIP PROGRAM OF

THE STATE OF BAHIA

José Andrade Costa

Executive Secretary for Public-Private Parternship Program

Bahia Trade Association – ACB

April 28, 2005



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Public-Private PartnershipsBahia’s Project

STATE’S REVENUES ENTAILED (2004)

  • PERSONNEL  60,0%

  • HEALTH AND EDUCATION (EXCEPT PERSONNEL)  13,6%

  • PUBLIC DEBT (EXTRA AND INTERN-LIMITS) 17,7%

  • OTHERS STATE SECTOR (EXCEPT PERSONNEL)  0,7%

  • PASEP, C&T AND POVERTY FUND  2,8%

  • TOTAL  94,8%


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Evolution of Shared and Non-Shared Federal Revenues (1988 – 2004)

Shared

Revenues

Non-Shared

Revenues


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Real Variation (IPCA) of – 2004)

Federal Collection of Taxes - 2004 / 2003

R$ Billions

200420032004 / 2003

  • SHARED TAXES 137,9 132,6 4,00%

  • INCOME TAX 106,4 102,6 3,65%

  • IDUSTRIALIZADE TAX 23,6 21,7 8,73%

  • CIDE (FUEL TAX) 7,9 8,3 (3,92)%

  • NON SHARED TAXES 172,9 148,8 16,21%

  • SOCIAL SECURITY 79,2 65,7 20,60%

  • FINANCIAL MOVEMENT 27,6 25,4 7,45%

  • NET PROFIT 20,3 18,5 9,66%

  • SOCIAL PROGRAM 20.1 19,1 4,89%

  • ( PRICES OF DECEMBER/04 – IPCA)



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PPP/Bahia – Economic Growth – 2004)

GDP BRAZIL X GDP BAHIA


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PPP/Bahia – Fiscal Indicators – 2004)

Fiscal Responsibility Law

Personnel and Duties

Public Debt

* RCL = Net Revenue



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Placing PPP’s Subject – 2004)

Lately existing legislative overview

GENERAL AGREEMENT LAW

(LAW 8.666/93)

  • Works, services and procurement to Public Authority

  • Payment as performed (monthly measured)

  • There is not private financing

  • Budgeting resources

  • Services: contractual terms no more than 5 years

  • The laws did not prevent PPP shaping

  • And neither did they stimulate it

  • Services and public works to the Public in general

  • Compensation due to service provision

  • Tariff system

  • Supplementary tariff absent

GENERAL CONCESSION LAW

(LAW 8.987/95)


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Placing PPP’s Subject – 2004)

Concepts and Characteristics

  • Long-term agreement for service provision, entered into by the public sector and the private entity;

  • Private entity commits itself to provide a certain quantifiable utility: road kilometers, imprisoning positions, hospitals beds,.

  • Compensation according to performance indicators.

  • Financing: Private entity’s attribution

  • Payment: After the enterprise performance and according to its use and results, by means of tariff charges, which can be fully or partially supplemented by the State.

  • Typical modeling: The private entity designs, builds, manages and maintains it.


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Traditional Public Agreement – 2004)

Public-Private Partnership (PPP) Agreement

Payment based on performance (targets)

No payment until the construction is completed

Non-planned costs

Non-planned Costs

Delay

Investment estimated costs

Estimated Costs

5 10 15 years

5 10 15 years

Construction Phase

Operating Phase

Construction Phase

Operating Phase

Placing PPP’s Subject

Traditional modeling and PPP’s

  • FINANCING ACQUISITION


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It is a concession agreement (Law No. 8.987/95), either as sponsored or administrated.

Sponsored concession is the public service or work concession when it involves in addition to tariffs charged to users, a monetary consideration for services provided by the public partner to the private partner.

Administrated concession is the service provision agreement in which the Public Administration is the direct or indirect user, even when involving completing the work or goods supply and placement.

The common concession addressed in the Law No. 8.98795 is not a public-private partnership when no monetary consideration for services provided by the public partner to the private partner is involved.

Definition

How does the Legislative Bill define PPP agreement?


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Context sponsored or administrated.

PPP’s Context

  • It was first used in England, in 1992.

  • Maastricht Treaty in 1991 and European Union

  • Fiscal Accountability Law - Brazil.

  • Fiscal constraint macro-economic environment.

  • Relative depletion of the investing capacity

  • The State is unable to fulfill the demands.

  • The construction of new concepts and practices for Public Authority performance is required.


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Context sponsored or administrated.

PPP’s operating areas

  • Prisons and courts

  • Hospitals

  • Military facilities

  • IT Systems

  • Public lighting

  • Schools

  • Sports facilities

  • Roads and bridges

  • Light railways systems

  • Wastage management

  • Low-income houses

  • Universities

  • Government buildings


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PPP projects already implemented: sponsored or administrated.

‣ All United Kingdom countries ‣ Spain

‣ France ‣ Portugal

‣ Germany ‣ Greece

‣ Holland ‣ Italy

‣ Australia ‣ Sweden

‣ Norway ‣ Japan

‣ South Africa ‣ Hungary

‣ Mexico ‣ Poland

‣ Chile

On going or in study PPP’s:

‣ Brazil ‣ Canada

‣ Singapore ‣ Malaysia

‣ Romania

Context

PPP, internationally


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PPP-Bahia sponsored or administrated.

Essential Concerns

Creation of a benchmark to attract private investments, aiming at strengthening the State infrastructure.

To prevent the use of such benchmark to defraud the fiscal strictness and imbalance the State finance.

To explore supplementary services to provide the project with better financial sustainability and to reduce the tariff impact.


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Fiscal Accountability sponsored or administrated.

Limits for annual expenditure

Expenses must not exceed 5% of the Current Net Income.

In the Federal Law, 1% of the CNI ended by prevailing.

the State is prevented to enter into new agreements if the established limit is exceeded.


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PPP-Bahia sponsored or administrated.

Concepts, principles and transparency

  • Minimum amount: The monetary expression of an amount higher than R$ 20 million prevailed.

  • Total access to data and reports, including for any reviews.

  • Inclusion in the Quadrimester Report on Fiscal Management and submitted in Public Hearing;


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Essential Clauses to PPP’s Agreements sponsored or administrated.

Essential clauses

Sharing with the public administration of economic profits, resulting from the risk reduction of partnership financing, and of ascertained productive gains when performing the agreement;

Pledged installment withholding, in the last years of the agreement, to ensure the wholeness of the enterprise, which will be released after the agreement termination.


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PPP/Bahia - Guarantees sponsored or administrated.

Creditor’s Protection

Pledged and personal guarantee or insurance;

Issuance of performance certificates directly and in favor of the project financing institution;

Financing entity allowed to receive payments trough the obligor fund.


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PPP/Bahia - Guarantees sponsored or administrated.

Creditor’s Protection

Obligor Fund.

Association with State Resources, including the Royalties’ and CIDE’s, other than taxes.

The contractor may collect receivables of the contracting party from third parties, other than taxes.


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PPP/Bahia - Guarantees sponsored or administrated.

Obligor Fund

  • Creation of the Obligor Fund for the PPP of the State of Bahia – FAGE Bahia.

  • Guarantee with a contribution up to 30% of the annual obligations paid by treasury resources;

  • Sources:

    ‣ 20% from the Royalties, while the 30% is not reached and up to 20% after exceeding the ceiling or if equal to it;

    ‣20% from CIDE (idem Royalties);

    ‣ other budgeting resources and additional credits;

    ‣The Fund’s financial applications;

    ‣ Internal and external credit operations;

    ‣ donations, allowances, contributions and legacies.


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PPP/Bahia - Control and Management sponsored or administrated.

Management Council - Composition

  • Management Council of the PPP Program:

    I - the Finance Secretary (Chairman);

    II - the Planning Secretary (Deputy Chairman);

    III - the Administration Secretary;

    IV - the Government Secretary;

    V - the State Attorney General;

    VI - up 2 members, at the Governor free discretion.

  • State Secretary Head Officers, with direct interest on a certain partnership;


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PPP/Bahia - Control and Management sponsored or administrated.

Executive Department and Regulatory Agencies

Executive Secretary for the Management Council, associated with the Finance Secretariat.

Regulatory Agency Roles (AGERBA).


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PPP-Bahia sponsored or administrated.

Priority Areas

Education, health and social welfare;

Public transports (roadways, railways, ports and airports);

Sanitation;

Safety, defense, justice and imprisonment system;

Science, research and technology, including information technology;

Agribusiness (irrigated agriculture and agricultural-industrialization);

Other public areas of social or economic interest.


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PPP-Bahia sponsored or administrated.

Major Projects to be Performed

Ocean Outfall

Roadways and Railways

Prisons

Child Custody Institution


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  • A second Ocean sponsored or administrated.

  • Outfall

  • Customer’s assistance

  • - Salvador

  • - Lauro de Freitas

  • - Existing Basin

  • Densifications

Implementation of New Outfall and Supplementary Works

TITLE

BASIN LIMITS

SYSTEMS’ LIMITS

LIMITS BETWEEN OUTPOURINGS

MUNICIPAL DISTRICT LIMITS

RISING STATION

PREVIOUS CONDITIONING STATION

INTERCEPTOR

PRESSURE PIPES

OCEAN OUTFALL

Implemented basins that contribute to the Rio Vermelho Outfall

Implemented basins currently contributing (provisional) to the Rio Vermelho Outfall and final contribution to the Jaguaribe Outfall

Basins planned to be implemented in the second phase which will contribute to the Jaguaribe Outfall


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Implementation of New Outfall and Supplementary Works sponsored or administrated.

(CONTINUED)

  • Work Characteristics

  • Land outfall:

  • 1,509 m of extension and

  • 1600 mm of diameter

  • Previous Conditioning Station (ECP) to a flow of 3.m3/s

  • Ocean Outfall:

  • 3,648 m of extension

  • 5,9 m3/s capacity.

  • Investment: R$ 260 million

TITLE

BASIN LIMITS

SYSTEMS’ LIMITS

LIMITS BETWEEN OUTPOURINGS

MUNICIPAL DISTRICT LIMITS

RISING STATION

PREVIOUS CONDITIONING STATION

INTERCEPTOR

PRESSURE PIPES

OCEAN OUTFALL

Implemented basins that contribute to the Rio Vermelho Outfall

Implemented basins currently contributing (provisional) to the Rio Vermelho Outfall and final contribution to the Jaguaribe Outfall

Basins planned to be implemented in the second phase which will contribute to the Jaguaribe Outfall


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Enterprise’s Benefits sponsored or administrated.

  • It will serve a population of approximately 1,900,000 inhabitants.

  • Implementation of the Jaguaribe system will provide sanitation services to an area of approximately 20,000 hectares.

  • Improvement of the users’ life quality and reduction of expenditure on the public health sector.

  • Possibility to fulfill all basin sanitation depletion with significant densification, in Salvador and its metropolitan region, without damages to tourism - major economic activity and attraction of such cities, as well as preventing the spreading diseases transmitted by water.


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Other Depletion Systems sponsored or administrated.


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Roadways and Railways sponsored or administrated.


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PELTBAHIA sponsored or administrated.

Paths Towards Development

Main Cargo Generating Sites

GRAINS

FRUIT-GROWING

TOURISM

INDUSTRIAL

INFORMATION TECHNOLOGY

PAPER/PULP


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BA-093 Duplication sponsored or administrated. - 23.3 km and Repair Services of de 81.7 km

Entre Rios

BR-101

Feira deSantana

BA-093

Alagoinhas

Araçás

Catu

BR-324

BR-116

Pojuca

Candeias

Camaçari

Simões Filho

SALVADOR

Location:

Road Junction with BR 324 (RMS)

BR 101 road junction (Entre Rios).

Extension:

105 km

Works:

  • Duplication: Road Junction of the BR 324 -Dias D'Ávila – 23.3 km;

  • Repair Services: from Dias D'Ávila - BR 101 Road Junction BR 101 – 81.7 km.

    Investment:

    R$ 144 million.


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BR - 415 Duplication sponsored or administrated.

Location:

Ilhéus – Itabuna.

Extension:

27 km.

Works:

  • Duplication between Ilhéus – Itabuna.

    Investment:

    R$ 70 million (estimate).


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HIGHWAY AISLE IBOTIRAMA - ITABUNA sponsored or administrated.

Location:

Ibotirama – Bom Jesus da Lapa – Brumado – Vitória de Conquista – Itabuna

Extension:

738 km.

Works:

Recovery and Suitability

Estimate Investment: R$ 317 million


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EAST-WEST RAILWAY sponsored or administrated.

Location:

Luís Eduardo Magalhães Municipality to road junction with FCA line at Malhada de Pedras near Brumado.

Work:

New railway segment implementation with 575 km extension.

Investment:

R$ 1.07 billion


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Penitentiary System sponsored or administrated.

Place Requirements in the Imprisonment System


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Penitentiary System sponsored or administrated.

1 prison unit in the capital

6 inland units (1)

(1) Municipalities:Itaberaba, Vitória da Conquista, Seabra, Irecê, Santo Antônio de Jesus and Eunápolis.


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www.sefaz.ba.gov.br sponsored or administrated.

BANNER


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