Presentation on theme: "MINISTÉRIO DO PLANEJAMENTO Public Private Partnerships Fiscal Issues in Brazil MINISTÉRIO DO PLANEJAMENTO Cuernavaca, Mx, 26/11/2008 Seminário de Intercâmbio."— Presentation transcript:
MINISTÉRIO DO PLANEJAMENTO Public Private Partnerships Fiscal Issues in Brazil MINISTÉRIO DO PLANEJAMENTO Cuernavaca, Mx, 26/11/2008 Seminário de Intercâmbio Regional Aspectos Técnicos de los Proyectos para las Asociaciones Público-Privadas
MINISTÉRIO DO PLANEJAMENTO ASSESSORIA ECONÔMICA - ASSEC Institutional Framework Law Projects
MINISTÉRIO DO PLANEJAMENTO ASSESSORIA ECONÔMICA - ASSEC PPPs on Brazilian Legal Framework PPP Law /04 Concessions 8.987/ /95 PPP /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 Independent Revenue Generation Capacity
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
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
MINISTÉRIO DO PLANEJAMENTO ASSESSORIA ECONÔMICA - ASSEC Law Institutional Framework Projects
MINISTÉRIO DO PLANEJAMENTO ASSESSORIA 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 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.
MINISTÉRIO DO PLANEJAMENTO ASSESSORIA 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 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.
MINISTÉRIO DO PLANEJAMENTO ASSESSORIA ECONÔMICA - ASSEC Projects Institutional Framework Law
MINISTÉRIO DO PLANEJAMENTO ASSESSORIA ECONÔMICA - ASSEC Projeto BR 116/324 BR BR 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 VPD (70% light vehicles), BR 116: around VPD (20% light vehicles);
MINISTÉRIO DO PLANEJAMENTO ASSESSORIA ECONÔMICA - ASSEC Projeto BR 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 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);
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 hectares, of which 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 PLANEJAMENTO ASSESSORIA ECONÔMICA - ASSEC Projeto Pontal - Modeling Water availability of 7,8 m 3 /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 jobs created.
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.
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.
Thank You. Fernando Pimentel Ministério do Planejamento, Orçamento e Gestão Tel: /4593 Fax: