ministÉrio do planejamento public private partnerships fiscal issues in brazil ministÉrio do...
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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
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MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA ECONÔMICA - ASSEC
Institutional Framework
Law 11.079
Projects
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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
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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
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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
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MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA ECONÔMICA - ASSEC
Law 11.079
Institutional Framework
Projects
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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
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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.
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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.)
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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
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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.
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MINISTÉRIO DO PLANEJAMENTOMINISTÉRIO DO PLANEJAMENTOASSESSORIA ECONÔMICA - ASSEC
Projects
Institutional Framework
Law 11.079
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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);
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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
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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);
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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.
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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.
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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.
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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.
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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]