Economic Advisory PPP Unit PPP Contracts in Brazil

Economic Advisory – PPP Unit PPP Contracts in Brazil Isaac Averbuch Madrid, October, 2009 1

Economic Advisory – PPP Unit The Brazilian Legislation There’s a legal framework which emphasizes the transparency along the process (before and along the contract lifetime); The legislation provides also some definitions about fiscal balance, including States and Municipalities; It was created a Federal Guarantee Fund to offer more liability to the entrepreneurs (Federal level only). 2

Economic Advisory – PPP Unit The Brazilian Legislation The legislation addresses all these points: • Selection of projects; • The steps until the bidding; • Rules for the contracts (amount, term, clauses. . . ); • Follow up after the formal contract; • Guarantees • Division of risks • Resolution of contracts • Calling for proposals 3

Economic Advisory – PPP Unit The Brazilian Legislation The legislation addresses all these points: • Fiscal restrictions; • Possibility of arbitrage in disputes; • Step in rights for financing institutions; • Rebalancing of contracts; • Updating of revenues • Good degree of freedom for the entrepreneurs • Rules for payment by the Government (output based) • Reversion of investments by the end of contract 4

Economic Advisory – PPP Unit Results by now Even with very few contracts, the PPP legislation and studies brought some good results for the Brazilian Government and society: • The case of “Seven Lots of Highways” • The modernization of irrigation projects 5

Economic Advisory – PPP Unit Challenges for the future To change the wrong perception of some important policy makers about the “excessive complexity” of PPPs, which “take so long time” to a project become real. To implement, in concrete, the legal determinations about selection of projects – consolidate the institutions; To improve the coordination among the Government agents involved in the PPP projects – it means goals and procedures 6

Economic Advisory – PPP Unit Challenges for the future To improve the general knowledge about the PPPs as a good public management tool; To remove political resistances (legitimate or not) – including the fear of the word “private”; To improve evaluation procedures and the relationship with the control institutions. 7

Economic Advisory – PPP Unit ¡Gracias! isaac. averbuch@planejamento. gov. br +55 -61 -2020 -4683 8