Brazil’s Rousseff moots PPP approach for failed concessions

Brazil’s Rousseff moots PPP approach for failed concessions

Brazil Funds

Brazilian infrastructure concessions that fail to attract bids at auction could be offered as public-private partnerships instead, Dilma Rousseff, the country’s president, told investors in New York Wednesday.

Rousseff made particular reference to a road concession project that was auctioned earlier this month without a single bid.

“Initially, the investors believed it was viable, but they later began to worry about the amount of the toll — for the region, and the amount of the toll,” Rousseff said. “We’re reviewing if this needs to become a PPP, or whether it will be a public project.”

A concession for Brazilian highway BR-262, which runs between Espirito Santo and Minas Gerais provinces, received no bids when it was auctioned earlier this month.

Brazil has struggled to encourage infrastructure investment, despite its announcement last year of a 133 billion real ($66 billion) investment program.

Rousseff attempted to reignite enthusiasm in the speech to investors on Wednesday.

Addressing a packed auditorium in New York – which included private equity, pension funds, real money accounts, multinational firms and dedicated infrastructure funds – she highlighted the country’s advances in recent years.

Brazil had increased credit, kept spending under control, and was committed respecting institutions and contracts, she said.

The comments came after Luciano Coutinho, president of Brazil’s state development bank BNDES, told the same audience that the country needed the private sector to step in to “share the burden, because the BNDES is already overburdened”.

The country’s banks, asset managers, pensions would also be needed, as well as foreign sources, he said.

Coutinho highlighted the potential of infrastructure bonds, and the need for a deepening of the domestic capital markets. To this end, he said BNDES is trading more bonds in the secondary market, and wants to create a temporary fund to trade bonds with the aim of stimulating liquidity.

“We will need the market to help us finance infrastructure,” Coutinho said, while noting “the BNDES will retain an important role” in supplying funds, particularly at longer tenors.

Rousseff and Coutinho spoke at the Brazil Infrastructure Opportunity seminar in New York Wednesday. LF

See also: "The problem with Brazil", and "Brazil infrastructure: The way ahead" in LatinFinance September/October 2013