The infra topics Brazil's next congress will deal with

Starting their four-year terms in February, Brazilian lawmakers elected in the October election will, among others, work on a tax reform, expanding eligibility for infrastructure debenture-related tax benefits, new environmental licensing rules, and potential changes to infrastructure regulations.

"Regarding the tax reform talks, we have to establish a model that guarantees competitiveness for the sector, that does not generate cumulative taxes for investments in infrastructure. In addition, we need to discuss measures to make room in the government budget, to arrange more public investment in the infrastructure sector," Venilton Tadini (pictured), head of infrastructure association Abdib, told a press conference in response to a question by BNamericas.

Finance minister Fernando Haddad recently said the government will try to get a tax reform through congress during the first half and expects no increase in the tax burden but a simplification of the existing system.

“If we want to get closer to good international practices, it makes perfect sense to foster VAT and no sense to increase the charge from VAT,” Haddad told Valor Econômico newspaper.

Meanwhile, congress is set to prioritize accelerated environmental permitting and a bill to extend tax benefits linked to infrastructure debentures to global investments and pension funds. "The volume of proceeds from pension funds interested in investing in infrastructure is much higher than the volume of individual investors," said Tadini.

Abdib also advocates a strict but swift environmental licensing process.

REGULATIONS

In the first days of the new administration taking office on January 1, uncertainty arose regarding sanitation regulations or potential changes to the rail authorization regime, which were implemented during the preceding Jair Bolsonaro administration to increase private investments.

"We will closely monitor all negotiations on regulatory changes and, of course, we will always be evaluating improvements, but I advance that there is no room in congress for the reversal of these regulations," lawmaker Arnaldo Jardim, of centrist Cidadania party and a key infrastructure legislator, told BNamericas.

Jardim said congress might evaluate changes to concession auction models that are currently giving contracts to the bidder offering the highest fees.

"The approval of the regulation in sanitation brought a lot of investment to the sector, but sometimes I see that there is a very high volume of fees paid in auctions and perhaps this could affect the investment capacity of some companies during the duration of the contracts. We need to better evaluate other mechanisms for the auctions," said Jardim, but he did not provide details of the measures under evaluation.

On the authorization regime for rail infrastructure, Jardim said, “this model is good, but we will have to discuss some improvements in congress. One would be to obligate companies to set an exact deadline to start projects and another would be to define rules in cases where more than one company is interested in a section.”

Implemented in late 2021, this regime allows private firms to build and operate short-line rail networks using government-owned rights-of-way, avoiding lengthy tender processes.