Presentation done in the "Development in Brazil: Still the Country of the Future?", University of Toronto, Canada, Jan 20, 20011. The event was advertised at: http://las.utoronto.ca/component/illbethere/public/development

1. Image
in
public
domain
The
Promises
and
Perils
of
Infrastructure
Projects
in
Brazil
Mauricio
Portugal
Ribeiro
Development
in
Brazil:
S;ll
the
Country
of
the
Future?
University
of
Toronto
01/20/2012

2. Contents
1. Recent
history
of
infrastructure
investments
in
Brazil
and
the
main
challenges
2. How
to
meet
the
challenges?
3. Difficul;es
to
involve
private
par;cipa;on
in
infrastructure
in
Brazil
4. Agenda
Annexes
A:
state
of
Brazil
infrastructure
(quality
and
access)
and
infrastructure
investments
B:
private
par;cipa;on
in
infrastructure
C:
main
features
of
the
legal
framework
for
the
priva;za;ons
and
PPP
program
in
Brazil

3. 1.
Recent
history
on
infrastructure
investments
in
Brazil
• Brazil
investments
in
infrastructure/GDP
have
decreased
since
the
80’s
70’s
-­‐
5.42%;
80’s
–
3.62%;
90’s
–
2.69%;
00’s
–
2.22%
• In
the
90’s,
due
to
priva;za;ons,
in
some
sectors
investments
have
picked
up
(v.g.
telecom,
power
transmission)
– Telecom
-­‐
70’s
–
0.8%;
80’s
–
0.43%;
90’s
–
0.73%;
00’s
–
0.73%
• However
in
many
other
sectors
private
par;cipa;on
fell
short
on
replacing
public
investment,
due
to:
– regulatory
uncertainty
(water,
sanita;on,
solid
waste,
and
energy
genera;on)
– bureaucra;c
obstacles
to
structure
new
projects
for
private
par;cipa;on
(roads)
– badly
structured
priva;za;ons
that
did
not
include
adequate
mechanisms
to
foster
network
expansion
(railroads)
– ideological
prejudice
against
private
par;cipa;on
(airports)

4. 1.
Recent
history
on
infrastructure
investments
in
Brazil
(cont.)
• PAC
I
and
II
–
the
na;onal
programs
to
accelerate
investments
in
infrastructure,
in
place
since
2005,
have
been
slow
on
the
execu;on
of
investments,
although
it
is
improving
year
by
year
– The
success
of
PAC
is
mainly
in
the
sectors
of
Oil
and
Gas,
transmission
and
genera;on
of
power
due
to
Petrobras
and
Eletrobras
capacity
of
invest
• About
94%
of
foreseen
investment
for
these
companies
were
done
for
2010
budget
period
– The
other
sectors
are
always
legging
behind,
although
year
by
year
it
is
improving
– Although
there
is
no
empirical
data
on
quality
of
PAC
investments,
there
is
anecdotal
evidence
that
the
quality/cost
rela;on
is
not
good
– PAC
does
not
include
a
long
term
policy
of
maintenance
of
infrastructure

5. 1.
Recent
history
on
infrastructure
investments
in
Brazil
(cont.)
– During
the
90’s,
when
the
country
tried
to
move
investments
in
infrastructure
to
the
private
sector,
public
sector
lost
its
capacity
of
doing
investments,
which
it
has
not
yet
recuperated
– New
fiscal
issues
have
arisen
in
the
post
crisis,
which
reduced
significantly
the
resources
available
for
public
investments
• Currently,
Brazil
infrastructure:
– quality
is
lower
than
peer
countries
• 84th
in
infrastructure,
WEF
2010)
• 104th
in
infrastructure,
WEF
2011
– level
of
investments
too
– level
of
access
to
u;li;es
and
telecom
is
• Very
good
for
power
(99%
of
the
popula;on
have
access)
• Good
for
telephone
(84.3%
including
cell
services)
• Not
bad
for
water
(84.4%
has
access)
• Very
bad
for
wastewater
collec;on
and
treatment
(52.5%
has
access)
Source:
PNAD,
2009
• As
investments
every
year
are
lower
than
what
is
needed,
the
country
will
keep
lagging
behind
if
it
keeps
the
current
levels
of
investment

6. 2.
How
to
meet
the
challenge?
• There
are
evidences
that
private
par;cipa;on
in
infrastructure
in
Brazil
is
a
quicker,
more
reliable,
and
beher
cost/quality
way
of
enhancing
infrastructure
quality/quan;ty
– Overall,
private
par;cipa;on
in
infrastructure
has
enhanced
quality
and
access
to
infrastructure
– Main
complaints
where
private
par;cipa;on
was
introduced
are
related
to
the
cost
of
tariffs
• Shijing
focus
from
public
sector
investment
to
private
sector
investment
in
infrastructure
can
be
the
best
way
to
tackle
the
current
issues

7. 2.
How
to
meet
the
challenge?
(cont.)
• There
are
currently
very
favorable
condi;ons
in
Brazil
to
private
sector
investment
in
infrastructure:
– High
demand
for
infrastructure
– Macroeconomic
stability
(stable
currency,
controlled
infla;on,
tendency
of
reduc;on
of
interest
rates,
and
investment
grade
status)
– Experience
with
the
involvement
of
and
regula;on
of
private
sector
par;cipa;on
in
infrastructure
– Ins;tu;onal
and
poli;cal
maturity
and
widespread
respect
in
any
place
of
the
poli;cal
spectrum
to
the
content
of
contracts
signed
by
the
Government
– High
quality
of
the
legal
framework
for
private
par;cipa;on
in
infrastructure
• Fiscal
responsibility
protec;ons
• Possibility
of
selng
backstop
facility
to
Gov
payments
in
cases
of
low
credit
ra;ng
of
the
en;ty

8. 3.
Difficul;es
to
involve
private
par;cipa;on
in
infrastructure
in
Brazil
• Difficul;es
related
to:
– Ideological
prejudice,
labor
unions
opposi;on
and
poli;cal
sensi;veness
of
the
topic
priva;za;ons
– Incompa;bili;es
between
poli;cal
;me
frame
and
technical
;me
frame
to
structure
projects
– Public
sector
technical
capacity
to
structure
PPPs
– Coordina;on
between
public
agencies
(Fed
Gov,
State
and
Municipality)
and
also
among
agencies
of
the
same
level
of
Gov
– The
lack
of
a
permanent
and
organized
ac;vity
of
developing
projects
with
clear
and
stable
pipeline
– The
existence
of
hidden
tax
incen;ves
and
subsidies
for
the
states
and
municipali;es
to
do
public
investments
instead
of
private
investments
– Main
source
of
long
term
finance
for
the
private
sector
is
s;ll
BNDES

9. 4.
Agenda
• Expanding
the
capacity
of
EBP
and
of
the
partnership
IFC/BNDES/IDB
to
assist
Governments
to
structure
PPPs
• Keeping
structuring
projects
in
12-­‐18
months
in
order
to
create
a
new
track
record
on
the
;me
required
to
structure
and
bid
out
projects
for
private
par;cipa;on
• Structuring
and
manage
a
pipeline
with
credible
;meframe
to
implement
projects
• Develop
alterna;ve
means
of
long
term
financing
to
BNDES
– Foster
the
development
of
capital
market
tools
to
finance
infrastructure
projects
debt
• Crowding
out
by
the
treasury
bonds
market
• Recent
correc;on
of
tax
disincen;ves
to
the
development
of
secondary
market
of
long
term
bonds
• Create
tools
to
provide
transparency
of
the
secondary
market
deals
in
order
to
create
public
price
references
for
the
bonds

10. 4.
Agenda(cont.)
• Enhance
the
mechanisms
to
protect
the
independency
of
the
regulatory
agencies
– The
main
regulatory
agencies
(the
Federal
Gov
ones)
do
not
have
financial
autonomy
– The
way
appointments
of
commissioners
were
managed
in
the
last
years,
have
in
my
opinion,
reduced
the
capacity
of
the
agencies
to
take
decisions
and
resis;ng
to
poli;cal
pressures
• If
the
Gov
decide
to
pursue
this
course
of
ac;on,
it
will
make
sense
to
change
the
hidden
disincen;ves
and
face
the
poli;cal
opposi;ons
and
resistances
to
private
par;cipa;on
in
infrastructure
• Control
current
spending
to
save
money
for
public
investment
in
sectors
like
health,
educa;on
and
safety,
and
give
room
for
the
private
sector
to
invest
in
infrastructure