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MINISTÉRIO DO PLANEJAMENTO. Seminário de Intercâmbio Regional Aspectos Técnicos de los Proyectos para las Asociaciones Público-Privadas. Public Private Partnerships Fiscal Issues in Brazil. Cuernavaca, Mx, 26/11/2008. MINISTÉRIO DO PLANEJAMENTO. ASSESSORIA ECONÔMICA - ASSEC.

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slide1

MINISTÉRIO DO PLANEJAMENTO

Seminário de Intercâmbio Regional

Aspectos Técnicos de los Proyectos para las Asociaciones Público-Privadas

Public Private Partnerships

Fiscal Issues in Brazil

Cuernavaca, Mx, 26/11/2008

slide2

MINISTÉRIO DO PLANEJAMENTO

ASSESSORIA ECONÔMICA - ASSEC

Institutional Framework

Law 11.079

Projects

slide3

MINISTÉRIO DO PLANEJAMENTO

ASSESSORIA ECONÔMICA - ASSEC

PPPs on Brazilian Legal Framework

Concessions

8.987/95

9.074/95

PPP

11.079/04

e

Law of Public Licitations

8.666/93

PPP

Law 11.079/04

Sustainable projects

Independent Revenue Generation Capacity

Partially sustainable projects by means of public resources

Traditional projects of public investments and public procurement

slide4

MINISTÉRIO DO PLANEJAMENTO

ASSESSORIA ECONÔMICA - ASSEC

PPP definition in Brazil

  • Concessão patrocinada (Sponsored Concession)
    • Common concession of public services
    • Origin of revenue: tariff + public payments
  • Concessão administrativa (Administrative Concession)
    • Direct or indirect services to the Public Administration
      • Public services
      • Economic activities not listed as public services
    • Origin of revenue: public payments
slide5

MINISTÉRIO DO PLANEJAMENTO

ASSESSORIA ECONÔMICA - ASSEC

Who Is Involved in the Decision (Federal level)

  • CGP – PPP Council, composed of:
    • Ministry of Finance
    • Ministry of Planning, Budget and Management;
    • Ministry of Presidency
  • Fiscal controls
    • National Treasury
    • Tribunal de Contas da União (Federal Auditing Office)
  • Modelling
    • Ministry that sponsors the project (budget)
    • PPP task force of the Ministry of Planning, Budget and Finance
slide6

MINISTÉRIO DO PLANEJAMENTO

ASSESSORIA ECONÔMICA - ASSEC

Institutional Framework

Law 11.079

Projects

slide7

MINISTÉRIO DO PLANEJAMENTO

ASSESSORIA ECONÔMICA - ASSEC

PPP’s Law Main Caracteristics

  • Project development, construction, financing, operation by the private sector and transfer of assets, at the end of the contract, to the public sector;
  • Law is valid for the Public Administration, public foundations, special public funds, state owned enterprises and other entities controled directly or indirectly by federal, state or municipal governments;
  • Minimum amount: R$ 20 million (around US$ 9,1 million);
  • Contract duration: between 5 and 35 years;
  • The object of the contract can´t be solely hiring people, equipament acquisition or construction of facilities;
  • Public payments conditioned on the availability of the service;
  • Although the law subsidises itself in many points in the Concession Law, they don´t co-habitate in the bidding process.
slide8

MINISTÉRIO DO PLANEJAMENTO

ASSESSORIA ECONÔMICA - ASSEC

PPP’s Law Main Caracteristics (cont.)

  • Resources from public payments come from the budget of the ministry directly involved, or from the budget of the independent state owned enterprise (it´s not “added”);
  • Public payments cannot be delayed (is immune to the National Treasury´s “scissor”);
  • Main fiscal control at the federal level:
    • Limit of 1% of previous annual “current liquid revenue*” with public payments of PPPs, for the federal government (more or less R$ 4,0 billion in 2008 – US$ 1,82 billion);
  • Sponsored concessions where more than 70% of revenues comes from public payments depends on authorization from the Congress.
  • Step-in Rights

* Revenue from taxes, government financial assets and dividends from state owned companies less compulsory transfers and pensions.

slide9

MINISTÉRIO DO PLANEJAMENTO

ASSESSORIA ECONÔMICA - ASSEC

PPP’s Law Main Caracteristics (cont.)

  • Public payments garanteed by the PPPs Fund of Garantees (FGP);
  • FGP – Fundo Garantidor de PPPs
    • Begins in feb/2006 with assets of R$ 3,15 billion (= US$ 1,43 billion) in stocks (Petrobrás, Vale, Banco do Brasil, etc);
    • Rules don´t allow leveraging of obligations (the ration between abligations and assets must be equal or less than 1);
    • Allows garantees to be constituted under various juridical instruments;
    • Fund is operated by Banco do Brasil, not the government;
  • As garantees can also be used bank garantees, insurance, public revenue segregation, garantees from multilateral institutions, etc.
slide10

Compliance with Fiscal Responsability Law

  • Estimation of future obligations for the next 10 years;
  • The estimations must be accomodated in the government budgetary law (looking ahead 4 years);
  • The rules regarding the consolidation of PPP’s financial compromises as public debt were stated by the National Treasury;
  • The rule states that if a contract of PPP incur in risk of demand or construction or availability, it must be treated as debt;
  • That’s not a problem for the Federal Government, but some states and municipalities don’t have margin for new debt assumptions;
  • SOE are part of the 1% limit, even if they have an independent budget.
slide11

MINISTÉRIO DO PLANEJAMENTO

ASSESSORIA ECONÔMICA - ASSEC

State and Municipal Level

  • States and municipalities have their own law, which must follow the general guidelines of the federal law;
  • They have also their own fiscal autonomy, according to the Constitution;
  • Federal government has constitutional compulsory transfers to states and municipalities;
  • But, there are the non-compulsory transfers...
  • States and municipalities that surpass the 1% limit of their own “current liquid revenue” are blocked from receiving non-compulsory transfers;
  • Actually, the states of São Paulo, Minas Gerais and Bahia are the ones that have the most advanced PPP programs.
slide12

MINISTÉRIO DO PLANEJAMENTO

ASSESSORIA ECONÔMICA - ASSEC

Institutional Framework

Law 11.079

Projects

slide13

MINISTÉRIO DO PLANEJAMENTO

ASSESSORIA ECONÔMICA - ASSEC

Projeto BR 116/324

  • Concession to rehabilitate, operate, maintain and make capacity improvements in 680km of a logistical corridor in the Northeast of Brazil;
  • Cross subsidy between the two roads;
  • BR-324: around 20.000 VPD (70% light vehicles), BR 116: around 5.000 VPD (20% light vehicles);

BR - 324

BR - 116

slide14

MINISTÉRIO DO PLANEJAMENTO

ASSESSORIA ECONÔMICA - ASSEC

Projeto BR 116 - Modeling

  • Estimated investment around R$ 1,1 billion (around US$ 500 million), throughout the concession period of 15 years;
  • Fixed base toll fare of R$ 0,035/km (or US$ 0,016/km);
  • Dualization of 84km of lanes dependent on service levels;
  • Road upgrading works:
    • Initial emergency recovery (first 6 months);rehabilitation and third lanes (first 5 yeras);
    • Routine periodic maintenance;
    • Dualization;
  • Operation services:
    • Toll collection;
    • Traffic monitoring and control;
    • Mechanical and medical assistance to road user
slide15

MINISTÉRIO DO PLANEJAMENTO

ASSESSORIA ECONÔMICA - ASSEC

Project BR 116/324 – What Happened?

  • Project turned into a pure concession;
  • Many innovations colliding with the 2nd auction of public federal roads. Ex:
    • Participation of foreign investors;
    • Allowance of non engineering participants and subprocurement;
    • New toll scheme (end of heavy truck subsidy);
    • The “service” approach;
    • Dualization based on service levels;
  • Project near sustainability combined with low toll fares (R$ 0,035/km or US$ 0,016/km);
slide16

MINISTÉRIO DO PLANEJAMENTO

ASSESSORIA ECONÔMICA - ASSEC

Pontal Project

  • Irrigation project located in Petrolina, PE, in the Valley of the São Francisco River;
  • Total area of 33.000 hectares, of which 7.717 irrigated;
  • 40% of the infra-structure already built by the public sector;
  • Region already exports, annually, US$ 100 million in fruits;
  • Logistical chain prepared for exports;
  • Project is part of the PAC.
slide17

MINISTÉRIO DO PLANEJAMENTO

ASSESSORIA ECONÔMICA - ASSEC

Projeto Pontal - Modeling

  • Water availability of 7,8 m3/sec;
  • Individual contracts for the operation of infra-structure and agribusiness, but they are awarded to the same consortium or individual winner that must be an agribusiness operator;
  • Bid evaluation focus on integration of small farmers that are chosen by the agricultural operator;
  • Tariff to end user based on amount of irrigated land and water delivered;
  • Term of 25 years and public payments set for the auction at a maximum of R$ 208 million (R$ 113 million on PV or US$ 50 million) during that period on a scale given by the government;
  • Expectation of 20.000 jobs created.
slide18

MINISTÉRIO DO PLANEJAMENTO

ASSESSORIA ECONÔMICA - ASSEC

Pontal Project – Public Payments

  • Public payments conditioned on:
    • 10% on availability;
    • 40% on land occupation;
    • 50% on performance, after the land is fully occupied.
slide19

MINISTÉRIO DO PLANEJAMENTO

ASSESSORIA ECONÔMICA - ASSEC

Financing in Brazil and the Credit Crunch

  • BNDES is the main source of financing for infrastructure projects in Brazil (US$ 30 billion disbursed in 2007);
  • Normally, concessions have pre-approved lines of credit of 70% of the value of the investment;
  • In less developed regions, this amount may be up to 80%;
  • Addionally, pension funds in adition to SOEs may have up to 80% (90% in less developed regions) of the value of the investment in PPP projects, either through equity or debt;
  • The FI-FGTS is another option, a fund of US$ 7,7 billion that can provide up to 85% of participation, either through equity or debt in infrastructure projects in selected areas (Transport – except for airports –, sanitation and electricity).
  • Finally, there are Constitutional Development Funds for the North, Northeast and Center-East Regions.
slide20

Thank You.

Fernando Pimentel

Ministério do Planejamento, Orçamento e Gestão

Tel: +55 61 3249-4070/4593

Fax: + 55 61 3321-8084

E-mail: fernando.pimentel@planejamento.gov.br