Nelson Barbosa presents investment opportunities during talk in New York
Minister talks to international investors about how to participate in infrastructure concessions in Brazil
Nelson Barbosa, Brazil’s Minister for Planning, Budget and Management, gave a talk this Monday (29th) to businessmen in New York about how international investors can participate in the second stage of the Program of Investment in Logistics (PIL).
In the opening of the Brazilian Infrastructure Seminar, he explained in detail the concession program. He also explained how the investor can participate both in the auctions and in project financing. “You can do the studies, participate as a shareholder in the project and also bid in the auction”, the Minister said.
He added that the government adopted a new model for financing concessions to foster private funding by leveraging state sources of finance. “We will tie public funding with subsidized interest to the amount of private resources the borrower raises from capital markets”, he explained.
Barbosa emphasized that that the entire concession process for roads, railroads, ports and airports is being done in a transparent way. All elements of the project have been made public, from the original request for proposals for studies all the way to the auction.
The Minister told investors that Brazil is undergoing a transition due to changes in the domestic and the global economy. Though some adjustment measures are required, this background is also conducive to the implementation of a new growth phase in the country, based on higher investment and productivity. “There are opportunities within grasp. We are implementing viable and profitable programs that will benefit the population without generating undue inflationary pressures”.
He emphasized that, though Brazil is living a short-term inflationary surge, the country’s economic staff has been able to control expectations. “The market expects inflation in Brazil, measured by IPCA, to be in 4,5% by 2017.”, he added. The Minister also said that, though the country’s macroeconomic policy is going in the right direction, there are still important reforms to be made, especially tax reform.
According to the Minister, the effort to rebalance government expenditures resulted in changes in the relative prices for energy, fuel and urban transportation. It also reduced subsidies for infrastructure, by means of BNDES, and agricultural subsidies.
Barbosa stressed that the Brazilian Congress favors the adoption of fiscal measures. “The measures are working and Congress is adapting without changes of course”, he concluded.
While presenting an overview for PIL’s second stage, the Minister emphasized opportunities for investment in existing concessions. “We have more and more cars, trucks and trains using our transportation infrastructure. We have spotted opportunities for new investments in existing concessions in the order of US$ 10 billion”. According to Barbosa, projects are undergoing analysis by the Minister for Transportation. These investment projects are expected to start in the second semester of this year.
The Minister also presented a quick summary of PIL’s first stage, emphasizing progress in the country’s transportation infrastructure. “For roads alone, we have auctioned concessions for more than 5,350 kilometers in President Dilma Roussef’s first term. That is more than in the previous 16 years. More than a thousand kilometers in railroad concessions were auctioned. That is more than in the previous eight years.”
Investment in ports under the 2013 Port Law add up to R$ 11.5 billion. Around R$ 8.5 billion of these should be related to newly authorized Private Use Terminals (TUPs) and R$ 2.5 billion in expanding existing TUPs. The remaining investment are related to early renewals of lease contracts and to already built TUPs.
Over R$ 26 billion in investment were devoted to the airport concessions of São Gonçalo do Amarante (RN), Guarulhos (SP), Viracopos (SP), Brasília (DF), Confins (MG) and Galeão (RJ).
The Minister reminded investors that, last week, new rules were announced for the Fund for Investment in Education (FIES). “We will continue to fund education, but with a more sustainable structure and looking out for those that need it the most.”
He emphasized the importance of investment in human capital. “The number of Brazilians with more schooling has doubled in the last few years”, he pointed out. According to IBGE/PNAD, between 2002 and 2013, the share of the population with 15 or more years of schooling went from 5% to 9%.