Fiscal adjustment key to success of Brazil's infra concessions - expert

- Thursday, November 24, 2016

Fiscal adjustment key to success of Brazil's infra concessions - expert

Brazil's infrastructure concessions program still carries risks, despite plans by the federal government to increase confidence by providing greater transparency in its tender processes, infrastructure expert Paulo Resende told BNamericas.

Besides having a low credit rating, the country still has political and institutional shortcomings and most of all, a major challenge in its fiscal balance, according to Resende, who is head of infrastructure and logistics at the Fundação Dom Cabral university.

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"We're still going through a crisis and the success of Brazil's infrastructure public-private partnership [PPP] program Crescer depends heavily on the way the federal government deals with this crisis. The fiscal adjustment issue is paramount," said Resende.

"As an investor, I wouldn't a penny into a country that isn't responsible with its bills. I wouldn't want to be burdened in the future as Brazilian citizens are now," he added.

If the country continues having fiscal problems, some investors will steer clear of PPPs and simply put their money in Brazilian banks to earn interest, and then remove it if the risk gets too high, he said, adding that if the Brazilian public really knew how import the fiscal adjustment is to their future, they would be much more supportive of the changes.

UPCOMING ''CRESCER' CONCESSIONS

Concessions are planned in Brazil for airports, highways, railways, port terminals, oil fields, electric power and basic water and sanitation under the Crescer program.

The first tenders, which are expected to take place next quarter, include four airports, two port terminals and oil and energy projects. By the end of next year, tenders for highways, railways, waterworks and other oil and energy projects are also expected to be held.

Announcement of the Crescer program in September (CREDIT: Agência Brasil).

(Photo: left to right, investment secretary Moreira Franco, chief of staff Eliseu Padilha, and President Michel Temer)