Brazil seeks to build largest vaccine complex in Latin America with a US$1.2bn PPP contract

Brazil is preparing an unprecedented public-private partnership (PPP) contract, with capex estimated at around 6 billion (bn) reais (US$1.2bn), which is expected to boost the social infrastructure segment, mainly in the healthcare area.

The federal government, through the Program of Investment Partnerships (PPI) secretariat, is structuring a PPP contract for the construction and operation of a complex for vaccine production in the state of Rio de Janeiro, which is expected to become the largest final processing center for vaccines and biopharmaceuticals in Latin America.

The PPP contract aims at implementing the Health Biotechnology Industrial Complex, linked to the vaccine producer Bio-Manguinhos/Fiocruz, of the Ministry of Health. The complex will have a campus of 580 thousand m², with 343 thousand m² of built area and 28 buildings intended for production, quality control, research, and administrative support.

According to the PPI, the technical structuring of the contract is receiving support from the International Finance Corporation (IFC), of the World Bank Group, in partnership with the National Bank for Economic and Social Development (BNDES).

"We plan to launch the public consultation process for this PPP contract between June and July and to conclude it still in the first quarter of the year, so that afterwards the details can be sent for approval by the Federal Court of Accounts (TCU). We then have to wait for the TCU’s authorization, but it is likely that we will have everything ready to at least publish the tender notice for this contract later this year", said to BNamericas Manoel Renato Machado, deputy secretary for Social and Urban Infrastructure of the PPI.

Current capex estimates are 6bn reais, but such projections may change as the public consultation processes and drafting of the tender notice advance.

The PPP contract seeks to increase Brazil’s capacity to produce vaccines. Once implemented, the new unit will have a production capacity of 120 million vials of vaccines and biopharmaceuticals per year, quadrupling the current potential of Bio-Manguinhos/Fiocruz.

“The main goal of the Ministry of Health is to gain autonomy in vaccine production at critical moments. But this requires a resizing of public policy. It is necessary to guarantee a minimum demand for this factory’s production. Without that, it is not justified to build a unit of the projected dimensions,” Machado emphasized.

Brazil, like all of Latin America, suffered from the lack of local vaccine production capacity during the COVID-19 epidemic in 2020 and 2021, exposing the region’s dependence on vaccine production in other parts of the world. In addition, the region also suffers from a gap in the production of vaccines against tropical diseases, especially during peak periods of diseases characteristic of certain times of the year, such as dengue.

According to Machado, the PPP contract must also include its own characteristics, ensuring that the Brazilian government has sovereignty in decision-making for vaccine production.

In 2020, during the peak of the pandemic, the Brazilian government sought to raise funds from the private sector for the construction of the vaccine production complex in Rio de Janeiro, through a financing model known as built to suit (BTS), in which the construction is tailor-made. However, at the time, the initiative did not move forward.

“The BTS contractual model is still not very mature in Brazil. We have many problems in securing financing because there is no specific regulatory framework for this. So it became very difficult to make the project feasible, getting stuck precisely on the financing side,” said Machado, emphasizing that the PPP model adopted now is better known by market players and therefore has a greater chance of moving forward.

Another front

At the same time, the PPI is also working on structuring a PPP contract for the construction and renovation of 148 thousand m² of the National Cancer Institute, also in Rio de Janeiro.

With projected investments of 1.5bn reais, the PPP contract provides for the acquisition of equipment and the operation of non-care services by the private sector.

“The expectation is that we will hold the public consultation on this contract in the third quarter and submit it for analysis by the TCU still this year. But the auction should only take place next year”, said Machado.

Both the federal government and state governments have resorted to PPP contracts in recent years in an attempt to unlock investments in hospital infrastructure, given a scenario in which the public sector faces severe fiscal constraints.

(The original version of this content was written in Portuguese)