Brazil mulls liberalisation of transport concessions

Signaling a shift in economic policy, the government of Brazil is working on a plan to encourage foreign participation in its Logistics Investment Programme (PIL), a BRL$198.4 billion (€51.5 billion; $57.0 billion) transportation concessions programme aimed at drumming up transportation and logistics infrastructure development. 

While in recent months the Brazilian senate has systematically struck down many of the economic initiatives of President Dilma Rousseff's administration, common goals began to surface in talks between senate chief Renan Calheiros and Finance Minister Joaquim Levy last week, according to a source close to the discussions. 

The source told Infrastructure Investor that last week's talks may be a “breakthrough”, noting that Calheiros has been “very open and engaging” in the discussions, which have surrounded environmental licensing, reducing regulatory uncertainty, and implementing a fast-track approach for priority projects. 

Earlier this year, the Ministry of Finance in Brazil initiated the second phase of PIL, but only received lukewarm reception from the market since concession rules currently require all bidding teams to have local participation and many of the domestic players best-suited to carry out PIL projects set for tender are either already contracted out for other work, financially strapped, or tied up in the Petrobras investigations.

Now, however, with business sectors across the Brazilian economy reporting contractions and the economic impact of the Petrobras corruption scandal continuing to spread, it appears that Brazilian leadership is ready to liberalise the concessions under the PIL programme to encourage global participation in hopes that increased infrastructure development can help spur growth.

According to a report from O Globo, Brazil's largest newspaper, the federal government is considering withdrawing notices required that competing groups in PIL project tenders be led by domestic partners, a stipulation that has been key in turning international investors away from the market. Also under consideration is removal of the local advantage that automatically awards projects to local bidders in the event of a tie.

In a speech on Friday morning, Levy acknowledged that the government's current push for austerity is very unpopular, but said that a new fiscal path is necessary in order to bring Brazil back from the edge of recession. 

A draft of the economic action plan being hashed out by Calheiros and Levy is expected to be introduced sometime this week, according to our source.