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Today is Tuesday - October/17/2017
Private sector partnerships will improve the Brazilian economy and services

Private sector partnerships will improve the Brazilian economy and services

Concessions and privatisations translate into economic progress, job creation and better services to citizens

Improving the quality of services, creating jobs and helping the economy grow more sustainably are the core goals of the government's efforts to award part of the operation and management of some of the country's infrastructure to the private sector. And the efforts are already paying off: investors have shown great interest in the 57 projects included in the Investment Partnerships Programme (PPI).
A practical example of the attractiveness of these assets and how the PPI can leverage the Brazilian economy (especially after two years of recession) are the recent infrastructure auctions. The ones held for the electricity and oil & gas sectors alone have raised almost R$ 16 billion in signing bonuses.
These funds, which go directly to the National Treasury, will help the Brazilian government rebalance public accounts and eliminate the need to take more stringent measures, such as raising taxes.
In the assessment of José Carlos Medaglia, CEO of the State Planning and Logistics Company (EPL) - the public agency that produces the studies that guide the concession projects - partnerships with the private sector are an important tool to foster development at a time when the government cannot afford the costs of high investments in infrastructure.
“Bridging Brazil’s infrastructure gap requires measures that give us effective and faster responses. In this context - and also taking into account some budgetary difficulties of the government - I think it is almost a consensus that concessions through public-private partnerships are a path to be followed," he said.
For some experts, Brazil's infrastructure assets have roused the interest of investors due to a less interventionist, more transparent model for their concession. Commenting on the successful auction of four hydroelectric dams (which raised R$ 12.13 billion), Thais Brandini, an executive at Tyhmos Energia, highlighted the competition between bidders and the change in the business model for the concessions.
“It has been a success compared to what we had. When the government shapes the auction in a way to attract investors, they will come. This model is more interesting, and more players were interested", she pointed out. The EPL CEO has a similar view. For him, the projects are attractive, and the new concession model, which does not try to impose a rate of return on investors and gives them more time to prepare, has generated positive effects.
“This is a sign that the model, the offer, was done right. This ensures that we have a good level of service," he said, before mentioning the example of the auction held earlier this year that awarded four airports under concession to the private sector (Salvador, Fortaleza, Porto Alegre and Florianopolis).
At the same time that they help the economy grow in the wake of new infrastructure investments, concessions can also mean a substantial improvement in the quality of services provided to the population.
“Highway infrastructure concessions offer greater safety and mobility on Brazilian roads. When roads have better signage and adequate pavement, truckers spend less on tyres, vehicle maintenance and similar expenses", said the president of the Brazilian Truckers Association (Abcam), José da Fonseca Lopes.
For Lopes, Brazilian highways are famous for their poor state of conservation. In the entity's view, the concessions are changing that, something that ultimately improves the Brazilian economy. "The highway transportation modality is fundamental to leverage the country's economic development," he concluded.
Economic impact
Partnerships with the private sector generate revenue for the Brazilian government and create jobs - especially in construction, leading to higher income and wealth for Brazilians. For Medaglia, the impacts are undoubtedly positive.
"The construction sector is the fastest to respond to job creation and one of the largest employers, so investment in highways, airports etc. can lead to a very favourable equation in terms of job creation, economic dynamics and tax revenues," he said.
For Brandini, the upcoming energy deals are a symbol of that. "It's a positive impact, one that makes the economy grow and create jobs," she said. Given the recent auctions in the area, she expects a promising future for the other projects the Brazilian government has presented to private investors.