07.08.2020 | ABIFER | Notícias do Mercado
The Brazilian government is putting the final details on a plan to trigger investments in infrastructure and boost the economic recovery.
The program called Pró-Brasil, which comprises a mix of private and public sector investments, is expected to be detailed later this month, according to an official at the infrastructure ministry.
The program involves 230bn reais (US$43.4bn) in private sector investments, while the federal government will likely chip in at least 40bn reais, according to the official, who declined to be named. The public sector investments alone will create 2mn jobs, the government estimates.
“Investments in infrastructure will be key to keep the level of jobs after the pandemic as the segment demands intense labor,” the president of national rail equipment manufacturers’ association Abifer, Vicente Abate, told BNamericas. “At least, in the short term the government needs to act as a catalyst for investments until the private sector regains confidence levels.”
The areas set to receive the most investment from the federal government are highways, railways, ports and airports, which are likely to see a series of auctions for concessions.
“The most important factor is that the government keep its agenda of concessions for infrastructure projects on track,” Gustavo Fava, head of project finance at local investment bank BTG Pactual, told BNamericas. “The pandemic caused delays to certain auctions, but once things on the health side improve, the agenda will be back strong, and there is major appetite from investors for projects in infrastructure.”
Most of the amount is expected to be invested through the end of 2022, when President Jair Bolsonaro’s term ends.
The right-wing leader has admitted his interest in being reelected and in recent days, after recovering from COVID-19, Bolsonaro visited public works in Brazil’s northeast, traditionally a stronghold for leftist parties.
NEW MECHANISMS
As part of efforts to fuel investments in infrastructure, the government is using new mechanisms.
In July, the audit court (TCU) approved the early renewal of concessions for two railways operated by mining firm Vale, namely the Carajas (EFC) and Vitória-Minas (EVM) networks.
The company has been operating the railways since 1997 and the contracts expire in 2027. With the early renewal, the iron ore giant is looking to
extend the concessions by 30 years.
Under the new contracts, Vale plans to invest more than 14bn reais in the networks. For the early renewal of the EVM contract, Vale will pay the government 1.52bn reais, and for EFC the payment is projected to be 231mn reais.
“This mechanism of renewing concessions early is interesting, since it guarantees investments remain in infrastructure,” said Abate. “The Company that gets the early renewal of the concession approved makes the investment in the same segment, avoiding that the money that the government raises goes to the national treasury and ends up being spent in areas other than infrastructure.”
The amount to be invested by the federal government in Pró-Brasil, however, is the subject of disagreement within the Bolsonaro administration, with economy minister Paulo Guedes defending fiscal discipline and other ministers backing more government money for projects.
REGULATION
However, experts say the most important government contribution would be an improvement in regulations.
“One of the most important bills to be considered by congressmen is the one that consolidates existing laws and modernizes them, creating a general concessions law,” said Venilton Tadini, president of infrastructure association Abdib. “Another very important bill is the one which gives greater scope to the use of debentures to finance infrastructure investments, to include [tax benefits for] institutional and international investors.”
With those measures encouraging more private sector investments, Tadini projects that investment in infrastructure can increase from the current 1.9% of GDP to up to 4.5%.
Congress, meanwhile, approved new regulations for the sanitation sector, paving the way for the participation of more private sector players. With the new bill, government officials project investments of up to 750bn reais in sanitation in the next 15 years.
FISCAL RESTRICTIONS
Efforts to contain COVID-19 have had a major impact on the coffers of governments across Latin America, as emergency measures were adopted to save lives and stimulate plunging economies.
Looking ahead, space for additional government spending is diminishing, forcing governments to be more efficient regarding investments.
“For too long we’ve focused on bricks, pipes and other hard assets,” said Agustín Aguerre, manager of the infrastructure department at the Inter-American Development Bank, in a recent report.
“Digital technology allows us to better understand how people use our roads, consume electricity and water. Our future infrastructure will be cheaper, more sustainable and better serve our citizens,” he added.
Fonte: BNamericas
Data: 04/08/2020
