Brazil: New Infra Investment stance

Author: | Published: 11 Jul 2016
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Souza Cescon Barrieu & Flesch

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Luis Souza Rafael Baleroni

Since becoming the acting President of Brazil, the Vice-President has set out two main goals as the pillars of his government. These are: reducing public expenses and improving the dialogue with, and increasing the confidence of, the private sector. The aim is that the private sector should play a more important role in developing Brazil's infrastructure.

As a result, on May 12 2016, the acting President issued Provisional Measure 727, which created the Investment Partnerships Programme (Programa de Parcerias de Investimento). The programme aims to strengthen interactions between the state and the private sector. It will do this by means of partnership agreements to implement public infrastructure projects and other privatisation measures. Under the broad concept of partnership agreements, the programme encompasses all types of relationships between the public and the private sector, including: concessions, public-private partnerships, authorisations, and leases. It also encompasses privatisation measures.

Three key principles must be observed when implementing the programme:

(i) ensuring the stability of public policies in infrastructure sectors;

(ii) ensuring the legality, quality, efficiency and transparency of government actions; and,

(iii) providing legal certainty to all stakeholders.

The programme intends to: expand investments and employment opportunities; improve the public infrastructure at appropriate prices; increase competition for contracts with the government; minimise government intervention in investments; and, strengthen the state's regulatory role and the autonomy of regulatory agencies.

The programme will be regulated by Presidential Decrees, which will detail matters such as schedules, long-term public policies and privatisation initiatives. It will be guided by a council chaired by the President and including key infrastructure ministers, the environment minister and the president of the Brazilian development bank (BNDES). An executive secretariat will be responsible for managing and implementing the programme.

BNDES will create a fund to structure the projects; unsolicited projects may also be submitted by private parties for consideration of the authorities. Projects will be subject to public hearings before being subject to partnership agreements.

Once a project is included in the programme, all public agencies must consider it a national priority. These agencies must act to guarantee that all measures and licenses necessary for the completion of the projects are obtained in a timely manner. Any public body involved (whether federal, state or local) may be summoned to participate in structuring and discussing the project, to facilitate the licensing process.

Congress has 60 days to approve Provisional Measure 727 into law; otherwise, it will lose its validity.

This programme is the first step taken by the acting President to stimulate long-term investments from the private sector in infrastructure sectors. It evidences a more liberal approach by the new government.

Luis Souza and Rafael Baleroni