Best Practices in PPP Financing Latin America - e-Institute - World ...

Day 1 - FOURTH SESSION
• Many of the projects intended to be under this scheme are
“stigmatized” as “bad for the country” when considering
the PPPs as a privatization of public services.
• Alternative guarantees are offered by the Brazilian States,
which limits the market penetration of the guarantee
fund. The States have promulgated legal standards in PPP
in order to attract private investments.
Issac Averbuch pointed out that in the last few years, there
have not been difficulties in the availability of resources for
PPP financing at the Federal and State level in Brazil. Public
Banks such as BNDES (Brazilian National Development Bank)
had enough resources. Likewise, there was a certain fiscal
affluence, and the 2008 crisis did not alter this panorama.
The Government, however, established a fiscal austerity
program. At the federal level, fiscal restrictions of 1% of
net revenue (RCL) have not yet been effective because the
execution of investment projects will take a long time.
Nevertheless, some States have started to feel the pressure of
exhausting the payment limit, as established under the Law
(3% RCL).
According to Averbuch, this austerity program may cause
Public Bank loans to become insufficient for not having
enough resources. The Treasury capitalizes Public Banks, and
their interest is quite attractive for the reference market in
order to model and finance the projects. Private Banks cannot
compete with public banks, which limits their participation,
mainly when interest rates increase.
Most of the banks, especially private ones, are opposed to
risk and therefore, do not have many incentives to invest in
new projects such as PPPs. For this reason, they demand very
stable and liquid guarantees. Nevertheless, large banks are still
interested in investing in PPP projects.
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