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
Nicola Mining Inc. Corporate Presentation May 2024
Promises and Perils of Infrastructure Projects in Brazil
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