MINISTÉRIO DO PLANEJAMENTO
Public Private Partnerships
Fiscal Issues in Brazil
MINISTÉRIO DO PLANEJAMENTO
Cuernavaca, Mx, 26/11/2008
Seminário de Intercâmbio RegionalAspectos Técnicos de los Proyectos para las
Asociaciones Público-Privadas
MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA ECONÔMICA - ASSEC
Institutional Framework
Law 11.079
Projects
MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA ECONÔMICA - ASSEC
PPPs on Brazilian Legal Framework
PPP
Law 11.079/0
4
Concessions
8.987/959.074/95
PPP
11.079/04
e
Law of Public Licitations
8.666/93
Sustainable projects
Traditional projects of public investments and public
procurement
Partially sustainable projects by means of
public resources
Inde
pend
ent R
even
ue
Gener
ation
Cap
acity
MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA 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
MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA ECONÔMICA - ASSEC
Who Is Involved in the Decision (Federal level)
CGP – PPP Council, composed of:Ministry of FinanceMinistry of Planning, Budget and Management;Ministry of Presidency
Fiscal controlsNational TreasuryTribunal de Contas da União (Federal Auditing Office)
ModellingMinistry that sponsors the project (budget)PPP task force of the Ministry of Planning, Budget and Finance
MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA ECONÔMICA - ASSEC
Law 11.079
Institutional Framework
Projects
MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA ECONÔMICA - ASSEC
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.
PPP’s Law Main Caracteristics
MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA 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.
MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA ECONÔMICA - ASSEC
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.
PPP’s Law Main Caracteristics (cont.)
MINISTÉRIO DO PLANEJAMENTO
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.
Compliance with Fiscal Responsability Law
MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA 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.
MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA ECONÔMICA - ASSEC
Projects
Institutional Framework
Law 11.079
MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA ECONÔMICA - ASSEC
Projeto BR 116/324
BR - 324
BR - 116
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);
MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA 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
MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA 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);
MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA 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.
MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA 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.
MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA 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.
MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA 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.
Thank You.
Fernando Pimentel
Ministério do Planejamento, Orçamento e Gestão
Tel: +55 61 3249-4070/4593
Fax: + 55 61 3321-8084
E-mail: [email protected]