Jan 29, 2016

The Brazilian Development Bank (BNDES) and the International Finance Corporation (IFC) have just launched a study “Structuring PPP and Concession Projects in Brazil: Diagnosis of the Brazilian model and proposals for improvement”. The study comprises a map of development models for private participation projects in Brazil and worldwide.

A pioneer in Brazil, the study coordinated by the IFC and supported by the BNDES presents a detailed diagnosis of Brazil’s project development model, as well as proposals to improve laws, current administrative practices and legal instruments applied when preparing concession and PPP projects.

The paper also maps out and assesses international experiences, such as the cases in Colombia, Peru and Chile, and analyzes regulations adopted in these countries. The IFC is part of the World Bank Group and is the world’s largest developed institution focused on the private sector in emerging markets. 

The document shows the correlation between investment in infrastructure, economic growth and poverty reduction. Hence, freeing up planning, preparation and financing processes for infrastructure projects has become a priority in Brazil and worldwide.

The study indicates three main strategies that the government may use in concession and PPP project feasibility studies: structures fully implemented by the public sector; technical support from external consultants to structure all work fronts required to structure a project, usually by means of service agreements in accordance with the Procurement Act (Lei de Licitações); conducting studies by means of an authorization instrument, as provided for by the Concessions Act (Nº. 8,987/95), which enables the State to authorize the private sector to conduct feasibility studies, whose costs will be subsequently reimbursed by the winner in the PPP/Concession project procurement process.

The study also presents a series of recommendations aimed at improving the effectiveness of the concession and PPP model in Brazil. The proposals also include drafts prepared by legal consultants: one for the concession authorization model, and another for the decree-law that proposes the creation of a specific regulation when procuring technical feasibility studies for complex infrastructure projects. These proposals aim to mitigate possible conflicts of interest; minimize costs, thus avoiding waste of public funds; promoting greater agility, quality and legal certainty when procuring consultants.  

 “Structuring PPP and Concession Projects in Brazil: Diagnosis of Brazil’s model and proposals for improvement” was financed by the Development Program for Private Participation, a partnership between the IFC, the BNDESPAR and the IBD, which was established in 2007, to improve the implementation of infrastructure projects in Brazil. This is a program that aims to facilitate the performance of institutions as partners of the government at the local, state and federal levels by helping structure concession and PPP projects in different infrastructure sectors. To read the full text, visit here.