Sep 23, 2020

 The Brazilian Development Bank (BNDES) and the Government of the state of Rio Grande do Sul, on Tuesday, 22, signed a contract to create a public-private partnership (PPP) for the construction, equipping, operation and maintenance of a new penal complex in Erechim. The prison complex will have the capacity for up to 1,125 male prisoners. The project has the potential to be replicated elsewhere in the country, becoming the reference implementation of new standard focused on modernizing the management and rehabilitation of prisoners through the development of professional activities. 

This new complex will replace a unit already in operation in the center of Erechim, which is outdated and located in a densely populated area. In addition to promoting the reinsertion of prisoners in the labor market and contributing to the acceleration of their reintegration into society, the initiative also seeks alternatives to optimize public expenses in the prison system. 

“This partnership will serve for the implantation of an entirely new prison unit, with better conditions both for the re-socialization of inmates and of work for the prison officers – which is essential for the improvement of public security”, declares Eduardo Leite, the state governor. “BNDES support is fundamental to guarantee credibility in the process and put into practice our objective of promoting more public-private partnerships here in Rio Grande do Sul”, he emphasizes.

The BNDES work will consist of modeling the privatization project and preparing the bidding process to be carried out by the state, which will culminate in the concession of the prison unit. “Currently, the state of Rio Grande do Sul is the largest client of BNDES’s privatization services, with projects in the areas of sanitation, highways, energy, natural gas and real estate. Now another project will be included in its portfolio, strengthening an already successful partnership”, points out Pedro Bruno, superintendent of BNDES’s Government and Institutional Relations Division. 

The project is the first result of the policy to promote State Prison Systems, approved in the Investment Partnerships Program (PPI) by Decree 10,106/2019. Thus, “BNDES, in conducting the structuring of the project, enables the establishment of a federal public policy, to be followed by all states, with the development of a partnership model with the private initiative to be replicated in the country, which excels in providing the public service with more efficiency and security”, explains Martha Seillier, PPI’s special secretary.

According to the National Penitentiary Department of the Ministry of Justice and Public Security (DEPEN/MJSP), between 2009 and June 2019 the prison population in Brazil increased by 63% and the investments made in the period to increase the number of vacancies only followed the growth in number of prisoners, with high rates of prison overcrowding remaining constant. For this reason, partnerships with the private sector can be an interesting alternative to face the problem of overcrowding and contribute to the recovery of detainees.

Agreement with the IADB – The Erechim project will also count on the support of the Inter-American Development Bank (IADB) to carry out technical studies prior to the structuring of projects by the BNDES. Support will be formalized through a technical cooperation agreement to be signed between BNDES and the IADB for the structuring of PPPs in order to increase infrastructure availability and enable better management of prison units in the states of Rio Grande do Sul (RS) and Santa Catarina (SC). 

The importance of the agreement with the IADB for the elaboration of these alternatives is due to the institution’s high credibility and its experience in the public security sector as well as in the structuring of PPPs in Brazil. The agreement also brings the opportunity to add the knowledge of experts and international experiences, allowing to evaluate and select the best practices around the world. “In addition to the relevance of the project itself, it is a concrete example within an even broader perspective of strengthening the successful partnership between BNDES and the IADB in structuring projects”, explains Fábio Abrahão, Director of Infrastructure, Concessions and PPPs at BNDES.

The IADB representative in Brazil, Morgan Doyle, celebrates the partnership with BNDES in yet another initiative and stresses the importance of PPPs for the economic recovery of Brazil and other countries in the region. “PPPs are an important mechanism for leveraging investments, but we see relatively few projects being effectively executed. We seek to help our partners in structuring projects with a view to their sustainability and efficiency, thus offering better services to citizens. Developing this project with BNDES and supporting the state of Rio Grande do Sul encourages us to continue moving forward on this agenda”, concludes Doyle.

The agreement will be formed in the context of the Memorandum of Understanding signed on October 10, 2019 between BNDES, IADB and the Federal Union, through the Ministry of Justice and Public Security (MJSP), which aims to promote programs and projects that contribute to boost effective and innovative investments aimed at improving public security in Brazil.

About BNDES – Founded in 1952 and currently linked to the Ministry of Economy, BNDES is the main instrument of the Federal Government to promote long-term investments in Brazilian economy. Its actions are focused on socioenvironmental and economic impact in Brazil. BNDES offers special conditions for micro-, small- and medium-sized enterprises, as well as social investment lines, directed at education and health, family agriculture, sanitation and urban transport. In situations of crisis, BNDES acts in an anticyclical manner and assists in the formulation of solutions for the resumption of economic growth. 

About PPI - PPI serves to expand and strengthen the interaction between the government and the private sector through the signing of partnership contracts for the execution of public infrastructure projects and other privatization measures. Since 2019, the program has worked on projects with states and municipalities, using technical, financial and institutional assistance to produce feasibility studies, proposals for regulatory improvements and attracting investors. The structuring of state and municipal concession projects is paid for by BNDES, with subsequent reimbursement by future concessionaires. 

About IADB – The Inter-American Development Bank is dedicated to improving lives. Established in 1959, IADB is an important source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. IADB also conducts cutting-edge research and provides policy advice, technical assistance and training for clients in the region’s public and private sectors. It is also historically the main international creditor of BNDES, having so far signed 22 contracts, totaling around US$ 8.75 billion. BNDES has a series of ongoing initiatives in different areas with the institutiion, most notably in the preparation of projects in the sectors of public security, solid waste, health, sanitation, and in support to MPMEs and social infrastructure actions.