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September 16, 2016

Newsletter: Brazilian Government announces Investment Partnership Program - PPI


On last 13th September, 2016, the board of the Investment Partnership Program - PPI held its first meeting, in which the Brazilian government announced 34 infrastructure projects (concessions and privatizations).

The government has also announced the 10 main guidelines of the Program, included in Federal Law No. 13.334/2016 (PPI Law), enacted this week:

i) Use Technical standards;
ii) Focus on services quality;
iii) Clearly define services quality indexes;
iv) Strengthen the authority of regulatory agencies;
v) Submit projects to public consultation and approval by the Federal Court of Audits – TCU before tender;
vi) Publish tender documents both in English and Portuguese;
vii) Allow 100 days between tender publication and proposal submission;
viii) Require preliminary environmental license (or guidelines for obtainment of such license issued by environmental agency) before tender;
ix) Require long term financing to be contracted at the very beginning of the concession; and
x) Submit possible alternative solutions to existing concessions to public consultation.

In an attempt to reduce private investors’ risks, one of the main announcements relates to eliminating the bridge loans, as well as including other financial institutions into the model, such as: Banco do Brasil, Fundo de Garantia do Tempo de Serviço - FI-FGTS, Caixa Econômica Federal – CEF, Banco Nacional de Desenvolvimento Econômico e Social – BNDES and private banks.

All projects are expected to have at least 20% equity and BNDES is able to subscribe up to 50% of the infrastructure debentures to be issued for each project, jointly with FI-FGTS and CEF.

BNDES informed that, for the airport projects, it will finance up to 40% based on the Long Term Interest Rate – TJLP, while for the highway projects, it will finance up to 50% based on TJLP for the 1st cycle and up to 40% for the 2nd cycle.

PPI’s fundamental goal is to rearrange the economy and, as a consequence, generate new jobs. By valuing credibility, predictability and transparency in he projects, PPI also aims at the strengthening legal certainty, regulatory stability and governance.

According to the government’s pipeline, the tender documents of the airport port projects are expected to be launched in the end of this year.
As next steps, normative rules are expected to be issued approving the implementation of each of the projects. Click here for the list of projects.

This content is authored by Antonio Felix de Araujo CintraClaudia Elena Bonelli and Ana Cândida de Mello Carvalho, partners of our Government Contracts and Projects - Administrative Law practice group.

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