CASES - CYCLE of REGIONAL EVENTS and CONCESSIONS APPS Volume II

CASES - CYCLE OF REGIONAL EVENTS AND CONCESSIONS APPS Volume II

Corealization Realization

CASES - CYCLE OF REGIONAL EVENTS AND CONCESSIONS APPS Volume II CREDITS

CASES - CYCLE OF REGIONAL EVENTS AND CONCESSIONS APPS Volume II

Brasília-DF, june 2016

Realization Brazilian Construction Industry Chamber - CBIC José Carlos Martins, Chairman, CBIC Carlos Eduardo Lima Jorge, Chairman, Public Works Committee, CBIC

Technical Coordination Denise Soares, Manager, Infrastructure Projects, CBIC

Collaboration Geórgia Grace, Project Coordinator CBIC Doca de Oliveira, Communication Coordinator CBIC Ana Rita de Holanda, Communication Advisor CBIC Sandra Bezerra, Communication Advisor CBIC CHMENT

Content A

Adnan Demachki, Águeda Muniz, Alex Ribeiro, Alexandre Pereira, André Gomyde, T A Antônio José, Bruno Baldi, Bruno Barral, Eduardo Leite, Elton dos Anjos, Erico Giovannetti, Euler Morais, Fabio Mota, Fernando Marcato, Ferruccio Feitosa, Gustavo Guerrante, Halpher Luiggi, Jorge Arraes, José Atílio Cardoso Filardi, José Eduardo Faria de Azevedo, José João de Jesus Fonseca, Jose de Oliveira Junior, José Renato Ponte, João Lúcio L. S. Filho, Luciano Teixeira Cordeiro, Luis Fernando Santos dos Reis, Marcelo Mariani Andrade, Marcelo Spilki, Maria Paula Martins, Milton Stella, Pedro Felype Oliveira, Pedro Leão, Philippe Enaud, Priscila Romano, Ricardo Miranda Filho, Riley Rodrigues de Oliveira, Roberto Cláudio Rodrigues Bezerra, Roberto Tavares, Rodrigo Garcia, Rodrigo Venske, Rogério Princhak, Sandro Stroiek, Valter Martin Schroeder, Vicente Loureiro, Vinicius de Carvalho, Viviane Bezerra, Zaida de Andrade Lopes Godoy 111 Editorial Coordination Conexa Comunicação www.conexacomunicacao.com.br

Copy Christiane Pires Atta MTB 2452/DF Fabiane Ribas DRT/PR 4006 Waléria Pereira DRT/PR 9080

Translation Eduardo Furtado

Graphic Design Christiane Pires Atta

2 CREDITS

CASES - CYCLE OF REGIONAL EVENTS AND CONCESSIONS APPS Volume II

Brasília-DF, june 2016

Realization Brazilian Construction Industry Chamber - CBIC José Carlos Martins, Chairman, CBIC ACKNOWLEDGMENT Carlos Eduardo Lima Jorge, Chairman, Public Works Committee, CBIC

Technical Coordination This material could only see the light of day due to the Denise Soares, Manager, Infrastructure Projects, CBIC participation of Sinduscons, Sicepots, Apeops, Ademis and other entities related to the Construction Industry’s produc- Collaboration tive chain, who have engaged in the promotion of these Geórgia Grace, Project Coordinator CBIC seminars in each Brazilian region. And the support of FNP Doca de Oliveira, Communication Coordinator CBIC and the collaboration of the speakers, who in addition to Ana Rita de Holanda, Communication Advisor CBIC participate in the seminars also granted permission to post Sandra Bezerra, Communication Advisor CBIC their summaries in this publication.

We thank everyone involved. We are sure that these discus- CHMENT Content A

sions on Concessions and Public-Private Partnerships will T Adnan Demachki, Águeda Muniz, Alex Ribeiro, Alexandre Pereira, André Gomyde, sow seeds in many Brazilian cities, fostering the generation A Antônio José, Bruno Baldi, Bruno Barral, Eduardo Leite, Elton dos Anjos, of new businesses, jobs and income to support the resume Erico Giovannetti, Euler Morais, Fabio Mota, Fernando Marcato, Ferruccio Feitosa, of Brazil’s economic growth and development. Gustavo Guerrante, Halpher Luiggi, Jorge Arraes, José Atílio Cardoso Filardi, José Eduardo Faria de Azevedo, José João de Jesus Fonseca, Jose de Oliveira Junior, José Renato Ponte, João Lúcio L. S. Filho, Luciano Teixeira Cordeiro, Luis Fernando Santos dos Reis, Marcelo Mariani Andrade, Marcelo Spilki, Maria Paula Martins, Milton Stella, Pedro Felype Oliveira, Pedro Leão, Philippe Enaud, Priscila Romano, Ricardo Miranda Filho, Riley Rodrigues de Oliveira, Roberto Cláudio Rodrigues Bezerra, Roberto Tavares, Rodrigo Garcia, Rodrigo Venske, Rogério Princhak, Sandro Stroiek, Valter Martin Schroeder, Vicente Loureiro, Vinicius de Carvalho, Viviane Bezerra, Zaida de Andrade Lopes Godoy 111 Editorial Coordination Conexa Comunicação www.conexacomunicacao.com.br

Copy Christiane Pires Atta MTB 2452/DF Fabiane Ribas DRT/PR 4006 Waléria Pereira DRT/PR 9080

Translation Eduardo Furtado

Graphic Design Christiane Pires Atta

Câmara brasileira de Indústria e da construção - CBIC SQN - Quadra 01 - Bloco E - Edifício Central Park - 13º Andar CEP 70711-903 - Brasília/DF Tel.: (61) 3327-1013 - www.cbic.org.br © Allrightsreserved 2016. Introduction...... 6 Hosts...... 8 Situation of Concessions and PPPs in the South Region...... 12 Elton dos Anjos - PPP Coordinator, State of Paraná Planning Secretariat Marcelo Spilki - Auditor, State of Rio Grande do Sul Economy Secretariat Milton Stella - Coordinator, Rio Grande do Sul PPP Executive Unit Ricardo Miranda Filho - CEO, Águas de Camboriú – AEGEA Group Valter Martin Schroeder, City Secretary, Foz do Iguaçu Planning and Resource Management Secretariat Rodrigo Venske - Partner, Albino Advogados law firm

Experiences in Concessions and PPPs in the Northeast Region...... 26 Alex Ribeiro - Coordinator, Scientific and Technology Development, State of Rio Grande do Norte Economic Development Secretariat Antônio José - Vice-Secretary, State of Ceará Infrastructure Secretariat Pedro Felype Oliveira - Assistant, State of Paraíba Planning Secretariat Jose de Oliveira Junior - Representative of State of Sergipe in the TMIB Investment Commitee Roberto Cláudio Rodrigues Bezerra - Mayor, Fortaleza-CE Viviane Bezerra – Concession Superintendent, State of Piauí Government Secretariat Ferruccio Feitosa - Chairman, ADECE (Ceará Development Office) Philippe Enaud - CEO, Vivante Alexandre Pereira - Chairman, Fortaleza PPP Managing Council Erico Giovannetti - Director, KPMG Roberto Tavares - CEO, COMPESA Pedro Leão - CEO, Odebrecht Ambiental in Pernambuco Marcelo Mariani Andrade – CEO, SPE Couto Maia S.A Fabio Mota – City Secretary, Salvador Urban Mobility Secretariat Rogério Princhak – PPP Executive Secretary, Government of Bahia Eduardo Leite - Director, SEMOP (Salvador City Public Security Secretariat) Bruno Barral - Director General for Services, SEMOP Águeda Muniz – City Secretary, Fortaleza Urbanism and Environment Secretariat Priscila Romano - Coordinator of Special Projects in PPP and Concessions, PPP Executive Secretariat, State of Bahia

4 Sumário

Evolution of Concessions and PPPs in the Southeast Region ...... 86 Luis Fernando Santos dos Reis - Chairman, AEERJ Maria Paula Martins - Sub-Secretary for PPPs, State of Rio de Janeiro Gustavo Guerrante - Sub-Secretary of Special Projects SECPAR - City of Rio de Janeiro Vicente Loureiro - Executive Director, Rio Metropolitan Government Integration Chamber Riley Rodrigues de Oliveira - Senior Expert in Industrial Competitiveness and Investments in FIRJAN System José Renato Ponte - CEO, Concessionária Porto Novo Sandro Stroiek - CEO, Foz Águas 5 Fernando Marcato, Partner, GO Associados Bruno Baldi, Lawyer, AEGEA Rodrigo Garcia - Secretary, State of São Paulo Housing Secretariat José Eduardo Faria de Azevedo - Secretary, State of Espírito Santo Development Secretariat Halpher Luiggi - Director General, DER-ES André Gomyde - Chairman, Vitória Development Corporation Jorge Arraes - Secretary, Special Secretariat for Concessions and PPPs for the city of Rio de Janeiro Luciano Teixeira Cordeiro - PBH Ativos Priscila Romano Pinheiro - Rede PPP Bahia João Lúcio L. S. Filho - Sales Director, Sonel Engenharia S/A; Counselor, Concessionária de Saneamento Serra Ambiental

City and state pipelines of PPPs and Concessions in the Mid-West Region...... 134 Euler Morais – City Secretary for Government and Institutional Integration of the city of Aparecida de Goiânia Zaida de Andrade Lopes Godoy – Coordinator, Central PPP Unit, State of Mato Grosso do Sul Vinicius de Carvalho – CEO, MT Participações e Projetos José João de Jesus Fonseca – Chairman, Águas Guariroba

Cases de Concessões e PPPs na Região NORTH...... 144 Adnan Demachki, Secretary, Economic Development, Mining and Energy Secretariat José Atílio Cardoso Filardi, Project Coordinator, State of Bahia Economy Secretariat

5 Time for Concessions and PPPs After promoting a large international event in Brasilia, in April 2015, to discuss Concessions and Public-Private Partnerships, CBIC, along with members and partners, have decided to organize training for disseminating knowledge and opportunities on this topic in Brazil’s five main regions.

The Public Work, Privatization and Concession Committee (COP/CBIC) hosted two cycles of a seminar titled “Concessions and Public-Private Partner- ships (PPPs) - Expanding Business Opportunities.”

Overall, we had 120 speakers, more than 2,200 attendees, 12 hosting partners and 78 institutional supporters.

We have realized that at every new round, the participation and interest of both companies and the Public Administration would grow, as this is a feasi- José Carlos Martins ble path for resuming growth in Brazil. Chairman, CBIC All topics discussed in these seminars were structured and then divided into two publications that will be benchmarks for those interested in expanding their knowledge on Concessions and PPPs. In this book, we present Cases of companies and public officials that have participated in the Regional Semi- nar Cycle on Concessions and PPPs to talk about their experiences about the topic.

We hope to bring more players from public and private sectors to this business modality, which is strategic to all parties: to the company, as it has expertise and is fast to complete activities; to the Public Administration that can redirect costs on employees to regulation and oversight, and specially for the Brazilian population, who will benefit from more and better services.

6 Introduction

Benefits from Concessions and PPPs to the Brazilian economy At the end of the 11 event cycle that comprised the Regional Seminars on Opportunities in Concessions and PPPs, COP/CBIC has one thing clear: Other events covering this topic will remain in the Committee’s agenda.

This is because we have found a large area for institutional efforts that can and shall be carried out by the industry associations, aiming to better pre- pare public and private sectors, identify market niches in different social infrastructure and logistics areas (such as sanitation, solid waste treatment, parking lots, hospitals, public lightning, housing, prisons) and also to identify the main barriers to financing and guarantees, which must be overcome to make access to a larger number of companies possible to projects. Carlos Eduardo And such efforts have a schedule date: this is the hour. In the first day of his term, president Michel Temer signed the Provisional Measure 727 that cre- Lima Jorge ates the Investment Partnership Program (Programa de Parcerias de Inves- Chairman, COP/CBIC timento, PPI), which is a clear signal to the market that Concessions and PPPs would be used as the main tools for generating jobs and reactivating the economy. Also, his administration created a Secretariat of Infrastructure that, similar to countries like Chile, Peru, and Mexico, will coordinate all efforts in this field, thus accelerating the implementation of Concession and PPP projects.

In line with these measures, CBIC aims to consider how to add more cities to Phase III of events on Opportunities in Concessions and PPPs, to be launched in the second half of 2016, in order to provide these cities with appropriate training to structure partnership projects so that more public and private agents are interested in this business model, which may foster corporate growth, generating job and income, in addition to deliver quality services to the population, thus promoting Brazilian social and economic development.

Enjoy!

7 Hosts

“This topic is extremely important for companies, especially the smaller ones, that need to be fully aware about this topic to realize new business opportunities, as well as for the Public Administration - which has dramatically lost its investment capacity and now relies on the private sector as a partner to conduct urgent works to promote Brazil’s José Eugenio Gizzi development.” Chairman, Sinduscon-PR

“Concessions and PPPs are critical for improving public service, as concessionaires are compensated by performance and user assessment, who are Brazilian citizens, support this process. The ideal isthatthis business model becomes a State Policy and not a government” André Montenegro Chairman, Sinduscon-CE

“I expect that we have launched an important seed for all of us, businessmen, investors and public agents can see Concessions and Public- Private Partnerships under a new light and realizing that such projects are feasible. What we need to do now is to move forward, enhance our knowledge Carlos Alberto de and leverage this range of opportunities Paula Moura Júnior being opened up.” Chairman, Sinduscon-GO 8 “We do not see another path to face Brazil’s infrastructure deficiencies than the Concession and Public-Private Partnership path. For this reason, this CBIC initiative to promote a broad national debate on the topic is quite timely. We believe that this debate is critical for Public Administration representatives and companies in the construction industry have a clearer vision of the challenges and Aristóteles Passos opportunities beneath this topic.” Costa Neto Chairman, Sinduscon-ES

“The State of Rio de Janeiro has become a national benchmark in Public-Private Partnerships, critical to develop the state and the nation’s infrastructure in times of poor economic performance.Here some of the largest and best successful experiences in this model, such as Porto Maravilha, AP-5 (sanitation concession in the West area of the city of Rio de Janeiro), VLT and so many others. We Luiz Fernando need to ensure that this model remains fruitful and Santos Reis extending the participation of companies.” Chairman, AEERJ

9 9 Hosts

“We are absolutely optimistic and convinced that all entities representing the state of Pará and the Amazon societies in relation to the topics orinterested in these topics as potentially agents of change have leveraged this opportunity and contributed a great deal while debating over this topic. We hope that these discussions have awaken interest in public agents and companies in our region Alex Dias Carvalho about this topic and that new business opportunities Chairman, Sinduscon-PA can happen.”

“We are facing a complex political and economic scenario in Brazil, but in such bad times also rise some opportunities. If the State cannot invest in urgent works and services, especially in infrastructure, health, education, and security, make partnership with the private sector is the feasible solution for not leaving the Brazilian population without such basic services. This way, we are not only executors, constructors, but somehow, we are contributing with ideas and projects that will support Brazil’s social and economic development.” Gustavo Miranda Chairman, Sinduscon-PE

“The Concession and especially the PPP topics are a bit weird for us, who basically operate withreal estate - it is a workbusiness. I salute CBIC for embrace and promote across Brazil how a PPP works, and mainly by show to small and mid-sized companies that this is a hiring model for all. So I believe that a new market Ricardo Sessegolo until now unknown to us is being unveiled, Chairman, Sinduscon-RS and we are willing to learn and invest on it.” “We from the private sector have to see this business model as a huge opportunity for our companies. For this reason, it is important to have these events CBIC has been promoted all over Brazil, bringing experts on this topic to each city to guide both government officials and businessmen on how to structure these contracts, what is the builder’s role, the investor’s role, and the State’s role. As small and mid-sized companies can ensure the financial structuring of this business and how to provide legal security to awake investors interest as well? Questions like this Carlos Henrique shall be discussed so that more companies can get ready to work de Oliveira Passos in projects of this nature.” Chairman, Sinduscon-BA

“We believe that PPPs and concessions are really the solution for Brazil in the coming years. In 2015, only 1.8% of GDP were invested in infrastructure, while the minimum required would be between 5% and 7%,just to maintain and keep operational all investments already made. This means that we are virtually destroying all we have built over the years. For this reason, we believe in this agenda of change through PPPs and Concessions, progressing in José Romeu the debate both from the private sector standpoint and the Ferraz Neto Federal, State and City administration standpoint. Chairman, Sinduscon-SP

“Our goal is to show that PPPs and concessions can and should have the most varied types , sizes , and can meet various segments , not just the roads, ports and airports. Certainly , this business mode is a great outlet for our industry and for our State and needs to partner up with the private sector to viable urgent works in many areas ( infrastructure, education , sanitation, health , etc.) as well as quality services for the population.” Ricardo Portella Charmain, Sicepot-RS South Region

12 Situation of Concessions and PPPs in the South Region

13 SOUTH

The Context of PPPs in the State of Paraná

By analyzing the Brazilian scenario, related to asymmetry of information it is notable that there are challeng- are mitigated. But for PPPs, it is es and opportunities in this hiring necessary to reduce the asymmetry model (Concessions and PPPs). and determine objective criteria for selecting studies and projects. From the public official standpoint, there is a budgetary deficit in Bra- There are other issues: Demands zilian states, especially in Paraná, for a lot of studies (some of them where public investments in PPPs unnecessary) that add costs to the and in public works were put to project, as well as many changes halt and austerity measures were and additions to the process’ origi- adopted to restrain spending and nal scope, also affecting costs, blur- adjust state’s accounts. ring project’s original objective and reducing competitiveness, which Some of the main problems caus- impacts on the quality of projects. ing the low PPP numbers in Paraná are the high mortality of projects Challenges still in the PMI phase and the lack of operational capacity of pub- Now, one of the government chal- lic officials, as legislation on pub- lenges is to know how to identi- lic-private partnerships in Paraná fy strategic projects to solve the Elton dos Anjos is quite new. To solve these mat- largest inefficiencies on manag- PPP Coordinator, State of Paraná ters, the government is investing ing public assets, moving away Planning Secretariat and expanding training for human from heavy infrastructure such resources not only for its PPP Unit as highways and short-term proj- but also for other secretariats and ects to focus on long-term plan- state entities. ning, smaller projects and in social infrastructure. From 2012 to 2015, 38 projects were started in the State of Paraná, There is an extremely expensive re- but only 1 was effectively hired and source being spent in the Hospital 2 projects were bid. Such history da Polícia Militar for this asset in raised mistrust in the private sector, comparison with other PPP proj- as companies became fearful of in- ects. In this case, the Public-Private vesting in studies for new PMIs due Partnership will reduce a great deal to the uncertainty that these proj- of State expenses and consequent- ects will see the light of day. Due ly enhance quality and efficiency of to such high project mortality, the public service. Public Administration realized the need for restructure itself on re- Proper care is being given to it be- gards to PPPs. fore making public the interest for a new Concession, PPP or a PMI, There is also an asymmetry of infor- to assess if such project is really in- mation between the Public Admin- to the long- or short-term scope for istration and the private sector as it Paraná and that it has the efficacy is a new process. Such asymmetry and economicity intended. does not happen much in concessions as the state have signed con- Another challenge is to structure a cessions for a long time and risks cost center for the State of Paraná, 14 so that the government is able, from Other projects that explore pub- “One of the government a consistent, single methodology, to lic inefficiency and generate gains organize and analyze projects and of scale for the Public Administra- challenges is to know how to showing to the private partner that tion, such as hospitals for police of- identify strategic projects to the Public Administration is mak- ficers, maintenance and delivery of ing institutional improvements and non-educational services (manage- solve the largest inefficiencies is enhancing project analysis tools. ment of educational facilities), state administrative centers and projects on managing public assets. Opportunities that enhance control and oversight, are expected soon. The current fiscal adjustment that is restraining traditional public in- All these projects have the goal to vestments open a range of oppor- increase State revenues whether by tunities. Three new concessions reducing expenses or by enhancing for highways and parking lots are control and oversight of public bud- about to be signed this year. get in the short term.

15 SOUTH Control and governance from the Economy Secretariat auditor’s standpoint

Public-Private Partnership manage- day is the concurrent control sup- ment and process design need to be ported by information technology highlighted to continue debates on and process selection, that ana- this topic. lyzes items as per their relevance, such as in Concessions and PPPs). The operation of control entities progresses slowly, just like the rest Concurrent control of the Public Administration. The control was initially performed in Cases of the Federal Accounting a classic way, based on accounting Court and the State of Minas Gerais and legal aspects and in constitu- Accounting Court are highlights. tional principles. Overtime, such Both external control entities exert processes were upgraded and audi- control concurrently to follow the tors assessed effort’s performance process and identify failures before through the 4 Es (Economicity, Ef- acts are performed, avoiding prob- ficiency, Efficacy and Effectiveness) lems and gaining on terms and cost and focusing more on the outcomes. savings. The FAC controls PPP according to Regulation # 52/2007. An example is the Government Pro- gram Execution Assessment (Aval- The Regulation 4th article deter- iação da Execução de Programas de mines that oversight of bid and Marcelo Spilki Governo, AEPG), which is today one hiring processes for PPPs will Auditor, State of Rio Grande do Sul of the foremost techniques used by take place concurrently and in five Economy Secretariat internal and external control entities steps, by the analyses of docu- to assess government programs at ments below: federal, state and city levels, even • Technical/economic-financial fea- Concession and PPP programs sibility and EEF parameters. where the focus is on performance. • Bid’s notice and contract min- Control can be classified in several utes (public consultation and ways and control in relation to the debate). time when it is applied was the focus of the auditor’s presentation. • Homologation (legal, fiscal, tech- When the control happens after all nical, and economic-financial). administrative acts has been performed, most relevant milestones • Judgment of bid and cash flow are checked and in case of irreg- consistency. ularities, hardly any cash will be recovered. • Project grant, signed contract and economic-financial proposal in But when control takes place pre- electronic media. viously, all processes are analyzed, creating a sort of “funnel” which Article 8th determines that during slows work down and many times contract execution, oversight will puts the manager to wait on a focus on the fulfillment of all rele- queue of processes irrespective of vant regulations and contract claus- their relevance. es and supplements signed by the SPE, in addition to evaluate be- The most effective system in use to- haviors from the Federal entity that 16 granted the concession or by the re- Highway concessions were a hot were factors that contributed for spective regulating entity. topic during the gubernatorial cam- both projects failure. Add to this the paign and the elected governor had questioning of some contract items What one sees in practice is that declared himself against tolls. The by the State Accounting Court and FAC is applying control during same government that hired the the State Public Attorney. As the the execution of the contract over concessions did not fulfill the con- governor had lost elections, her ad- the regulating entities that man- tracts by not applying agreed administration cancelled the projects age and oversee the contract. The justments to fees. Next, the new and the PPPs were not hired. Minas Gerais Accounting Court has administration exempted the pay- a more recent regulation that was ment of tolls while city mayors cre- Governance in Concessions updated in 2014, and Article 3rd ated bypass roads to help drivers and PPPs determines that planning, bid, con- avoid paying fees, reducing con- The administration that started in tract and its changes and the concessionaire revenues and making January 2015 reactivated the PPP tract execution are the steps where things even worse. unit, in charge of a new governance oversight will focus on. process through which the Public An addition to the contract was Administration is no longer a pro- PPPs and Concessions in the signed in 2001, reducing quali- vider but becomes a regulator and State of Rio Grande do Sul ty and increasing fees. There were the player encouraging competition. several controversies and attempts By observing PPPs in the State from concessionaires to rebalance To improve such process, invest- of Rio Grande do Sul, it is worth contracts on economic and finan- ments are being made in training mentioning that highways grant- cial terms, but governments nev- not only for the PPP unit staff, but ed in 1998, with duration of 15 er admitted the debts. Controlling for all managers of related entities years, and the seven centers with entities found that concessionaires and departments, regulating enti- cross-subsidy, highlighting existing did not invested as expected in or- ty, and internal and external control problems - segments with high Av- der to offset loss of revenue - the entities. erage Daily Volume (ADV) of vehi- so-called self-regulation. Contracts cles were financing segments with were terminated, resulting in legal It is critical to increase competitive- lower ADV, which was heavily criti- disputes where concessionaires de- ness in the bid and provide more cized by public opinion and control mand compensation for losses from transparency to processes, making entities as it ends up in unfair fees. the government. all relevant information available. Also, even in highways with smaller traffic, the Public Administration In 2010, the State Government shall forecast all services related to launched two PPP notices. The first Control entity’s oversight shall be ambulances, tow-vehicles, bath- one was for ERS/010 highway, as performed throughout the process rooms, childcare - which result in a sponsored concession, and the - in studies, bid, contract execu- higher costs. second PPP was for a prison, as tion and when changes and sup- an administrative concession, but plements are made to the contract. As the economy was faltering at the both were cancelled by government Some may think that bringing con- time of concession, interest rates in its last year and having lost the trol entities to the fore may by cause were quite high as well as capital election. problems, but it is just the opposite costs, preventing investments in as control entities can help during duplication. The lack of involvement from con- the process by showing where ad- trolling entities and the regulation justments are required and prevent- Government changed in 1999. entity from the onset of the process ing future issues.

17 SOUTH State of Rio Grande do Sul administration believes in Concessions and PPPs

The State of Rio Grande do Sul There are also studies to expand faced many issues in the past, BR 287, BR 158, BR 392 and which halted the progress of Con- BR 386 highways. All these high- cession and PPP projects. ways cover almost 92 percent of the State’s GDP, where produc- Current administration has a new tion is intense and better chan- vision as the new governor is open nels of transportation are required. to Public-Private Partnerships from Currently, the State is working on the onset of his campaign. Despite the concession of RS 324 highway, a critical fiscal situation being tack- soon to be launched, which has a led by this government, the goal is high ADV from the city of Passo to work in new projects and priori- Fundo, passing through the cities tize concessions. of Marau, Casca and Nova Prata, with 100 km. It will be a 30-year To start works, the whole unit was concession. restructured to better manage PPP and Concession processes. Some Zoo Park projects are ready or in progress while others are being thought of The State of Rio Grande do Sul or in discussion with the State enti- is also working on the Zoo Park’s PMI, located in the city of Sapu- ties for feasibility, interest and rele- Milton Stella caia do Sul, Porto Alegre’s metro vance for the short-term. Coordinator, Rio Grande do Sul PPP area, as a concession for 30 years. Executive Unit Operation fronts Maintenance will be the responsibility of the company that wins the Currently, the State is focusing on bid, who will also have to build a highways. The previous adminis- Wild Animal Selection Center, cur- tration conducted a study that an- rently located in this area of the alyzed the whole Rio Grande do Zoo Park but will have to be trans- Sul’s transportation and logistics ferred to another area under State’s infrastructure. The main highways administration. to move the State’s production, both domestically through the State The PMI’s notice for this project is of Santa Catarina or international- being reviewed by the Environment Secretariat and then documents are ly by the Port of Rio Grande, were forwarded to the State Public Attor- identified. ney’s office to be published. The idea is to find the segments Public-Private Partnership on Federal highways with potential to be granted, thus expanding In the previous administration a the scope of Federal concessions. PMI was launched for sanitation, Such is the case of BR 290 and BR and some studies were delivered 116 (from Camaquã to Santa Cata- but got stuck in the Public Admin- rina) highways. It makes no sense istration. The topic was resumed to have a duplicated highway until in 2015 when the Public Admin- Santa Catarina and then continue istration hired a consulting firm on a single lane in poor conditions that is studying sanitation projects to move goods to the port. with the goal to launch a bid still 18 this year. It will be a concession of people involved in the project were “To start works, sewage collection and treatment to not quite optimistic but currently serve mid-sized cities. they fight for working in these units the whole unit was due to the quality, equipment and Future projects restructured to better educational management of these There has been a lot of discussions units. manage PPP and in the state about PPP projects There are also studies on construc- Concession processes. as an instrument that uses available budget resources to increase tion of prisons as the state lacks efficiency and quality of services this facility, and feasibility studies delivered. for the concession of waterways as the state has potential for this In this regard, Public Management transportation mode. is already experienced in the area of expanding, building or maintain- The possibility of launching a PPP ing schools or managing education- for highways with low ADV is being al units. An example of efficiency considered, thinking of resources gains achieved by PPP is the city available for maintaining highways, of Belo Horizonte, which has been but moving on to a more efficien- able to build and deliver schools cy model that better addresses the in eight months. In the beginning, state demands.

19 SOUTH New instruments to accelerate the structuring of infrastructure projects

The Procedure to Express Interest nary, Sponsored or Administrative (PMI) is a feasible and required op- Concessions and Permissions with tion for developing infrastructure the state’s direct and indirect Pub- projects in Brazil. lic Administration.

Through this instrument, the Pub- The main benefit from the proce- lic Administration receives from ex- dure is to fill in the shoes of a qual- ternal consultants or companies in- ified technical staff for the Public terested in compete for future con- Administration, especially for small tracts, projects, surveys, research and mid-sized cities, and to ensure or studies to inform the Public Ad- economic attractiveness for the pri- ministration on the structuring of vate sector. works for concession or permission of public services as a public-pri- In this context, the main challenge vate partnership, asset leasing or to elaborate studies like this is to concession of real use rights. know which objective set of criteria Public Administrationwill apply The Public Administration can ben- to assess whether Project A is bet- efit from the knowledge and exper- ter than Project B, as basically ev- tise of the private sector that is able eryone is looking for the same out- to find effective and economically come at the end of the day. In the Ricardo Miranda feasible solutions for the many in- case of sanitation, such outcome is CEO, Águas de Camboriú – AEGEA Group frastructure challenges in Brazil. providing this service to everyone. This is a resource employed by gov- According to him, planning and ernments to enhance dialogue with elaborating studies are hard, com- the private sector and leverage in- plex tasks but nonetheless worth- vestments, especially in this eco- while for the private sector as their nomic downturn and political crisis. deliveries, once accepted and authorized, open several opportunities In the other hand, such instrument, for companies having technical, fi- once effective and structured, nancial capacity and willingness to needs to be seen by companies as submit solutions that meet public a means for new businesses, pre- interest. venting thus the long wait for bid’s notices that not always meet condi- AEGEA Saneamento Success tions and criteria companies want. Case

There is not an option from Heav- That was the case of the AEGEA en. For this reason, a proactive at- Saneamento concession contract, titude is required, as well as re- company chaired by him and cur- specting the law. rently responsible for collecting, treating, storing and supplying wa- In this regard, he mentions the case ter for the city of São Francisco do of State of Santa Catarina, through Sul, in the north of Santa Catarina, the Decree 962/2012 that created which has started upon the sub- the PMI and guided the participa- mission of a MIP to the city. tion of the private sector in Pub- lic-Private Partnerships under Ordi- The company belongs to the AEGEA 20 Saneamento Group, one of the larg- • Estimation in absolute numbers The state of Santa Catarina is pro- est holdings in sanitation in Brazil of investments required; gressing not only in sanitation but with concessions in more than 30 also in issues related to urban cities and serving 3.6 million users • Finally, it is necessary to know if mobility, tourism, logistics and in six Brazilian states. the project depends on investments transportation. from the Public Administration The city lacked projects related to whether for design of the project or This is the best model to develop water supply and sewage treatment for contract execution. a project. There is no alternative even receiving many investments to solve infrastructure problems, It was also based on this invitation and growing fast. mainly for small and mid-sized cit- model, made to other companies, ies, if a closer dialogue does not Located in a port area, São Francis- that the signature of a concession take place between Public Admin- co do Sul was selected for the new contract was made possible, i.e., it istration and the private sector, es- CMO shipyard and is located with- started as legitimate dialogue and pecially in economic downturns. in the influence area of the BMW study that were able to correctly structure the solution of problems Innovations brought by plant located in the nearby city of Decree # 8.428 Araquari. for the city. Decree 8.428 dated April 2 this The city administration wanted to The whole process had active participation from both Public Admin- year that governs procedures to exchange this situation and knew press interest brought innovations istration and the private sector, how, but lacked human resources in relation to the previous legisla- meeting several times to under- and budget to get where it wanted. tion, and it is worth mentioning the stand and discuss required ele- coverage of studies that may be ments to structure the project, in- To ensure legal criteria in this pro- submitted by the private sector to cluding institutional arrangements cess, the city mirrored the State of the Public Administration. Santa Catarina legislation that de- that many times the Public Admin- fines in general terms: istration itself is not aware of, such While the previous legislation reg- as the role of the Federal Account- ulated expression of interest on- • Object description, relevance, so- ing Court that many times can chal- ly for public-private partnerships, cial and economic benefits brought lenge the object execution and con- the new piece extends the use of by the solution; tract’s approval. this procedure for the submission of studies both for PPPs and con- • Estimation of investments, ensur- Business Opportunities cession or permission of public ser- ing rights to reimbursement; vices, leasing of assets and conces- It is believed that the PMI is the sion of real rights of use. • Definition of general character- most suited instrument from the istics of a business model, i.e., institutional, legal, security and This is a model that the company structuring not only the technical feasibility standpoints for devel- should develop for a transparent, but also the economic-financial oping projects with the Public well designed, legal business to and legal ones; Administration. provide the expected returns.

21 SOUTH Concessions and PPPs in Foz do Iguaçu

The city of Foz do Iguaçu has The idea is that the city remains re- 300,000 inhabitants and is locat- sponsible only for basic healthcare. ed in an area where some 1 million people pass by. Tourism is the The city also has a demand to build main economic activity, followed by a Convention Center that might be logistics. turned into a PPP; a City Theater, the revitalization of deactivated quar- Concessions and public-private part- ries, the construction of a Civic Center nerships are new topics to the city. (which has a plot of land and a pre- When the current administration was liminary draft) and the Beira-Foz Proj- inaugurated in 2013, a Supplemen- ect, a road on the banks of Paraná tal Act # 207/2013 (governing bid and Iguaçu rivers. and hiring of Public-Private Partner- ships) was passed to allow for work- Still through PPPs, the city aims to ing with these hiring methods. grant to the winning company the construction and management of Foz do Iguaçu has a success case in Basic Education City Centers (Cen- Concessions: The Iguaçu National tro Municipal de Educação Infantil, Park, the first national park in Bra- CMEIs). zil to be granted under this model. People management is a huge con- This is a success so big that the same cern for Public Administrations. In the Valter Martin Schroeder company also operates in Fernan- City Secretary, Foz do Iguaçu Plan- city administration, for instance, there do de Noronha, Rio de Janeiro, and ning and Resource Management was a department with 58 employees Secretariat Pantanal. but only 19 were working - the oth- The city also made a new concession ers were in maternity leave, medical recently for another touristic area, the leave or absent for other reasons. This former Space of Americas, where the makes the Public Administration very Iguaçu River meets the Paraná River. heavy. When the job is transferred to The company managing the nation- the private sector, service delivery im- al park won this concession and will proves, the community gets faster an- invest some BRL 30 million to build swers and depending on the area, the a touristic complex with restaurants private partner gets a good profit. and theme parks. For sports, the city is in talks to build PPPs a sport/tourism complex at the banks of the Itaipu lake even with foreign Currently, the city priority is to launch groups. The project is designed and PPPs in Healthcare. The previous ad- the financial feasibility study is being ministration built a hospital and now prepared. It will be a racetrack with the Public Administration is consider- a touristic complex including a mari- ing which is the best model to man- na with access to Itaipu lake, which age this healthcare unit. would allow for the development of a broad range of water activities. A Procedure to Express Interest was also opened, with the scope to deliver The future partner or concessionaire Technical Studies for the proposal to might build other sport and hotel restructure the city’s Healthcare man- complexes in addition to the structure agement for A&E. for the racetrack. 22 SOUTH The dialogue between government and companies must be extended In December 2014, Public-Private well structured. Partnerships completed 10 years with more than 80 contracts signed. The invitation for a PPP project is critical to allow companies to bring In the North and Northeast regions, ideas and assess how the project it is possible to find innovation on should be managed and hiring con- projects being executed but in the sulting firms in this area can help a South, progress has been slow and project succeed. there are many opportunities. The integrated parking lot in Paraná However, to promote partnerships is an example. When the Public Ad- between the Public Administration ministration started to think about and the private sector, it is necessary this project, a consulting firm was to expand debates on this topic with hired to analyze legal issues and all players to highlight benefits and then design the project. advantages from this hiring method to everyone, namely the society. It is an interesting, attractive proj- In order to make a project a reali- ect with a large number of poten- ty, it is required to enhance the di- tial candidates, which will reflect alogue between the Public Admin- positively in the quality of services istration and the private sector so delivered. With market competition Rodrigo Venske that at the very moment a project is and a fee that eventually may be Partner, Albino Advogados law conceived by the government, com- reduced, public resources can be firm panies can assess its economic and optimized. Quality levels are critical financial feasibility, which must be for compensating the private sector.

23 Northeast Region

24 Experiences in Concessions and PPPs in the Northeast Region

25 NORTHEAST Rio Grande do Norte PPP Program speeds processes in the state

The State of Rio Grande do Norte ican Development Bank. Foreign in- is ahead on Concessions and PPPs, vestors and companies, from Israel, especially on Healthcare, Trans- Germany, Russia, Spain and Japan, portation, Water Resources, IT and have already developed studies Tourism. In order to develop more through MIPs. projects in these areas, a State Pro- gram was launched in 2005 with How a PPP project is specific rules to support the bid processed in Rio Grande do and hiring of Public-Private Part- Norte nerships in the state. There are two types of PMI that can The State PPP Program’s Regula- be submitted: Solicited PMIs, when tory Framework was instituted in the government sees a demand and December 2004 to regulate bids has to access the market to find in- and hiring of Public-Private Part- terested parties; and the Unsolicit- nerships. The next year a supple- ed PMI, when companies express mental bill added specific rules for interest to assess a project. bidding and hiring this business model for the State of Rio Grande For Solicited PMI, a company ex- do Norte, comprising thus the State presses interest to invest in a given PPP Program. opportunity to the Managing Coun- Alex Ribeiro cil through a formal proposal, as Coordinator, Scientific and The decree regulates how PMIs determined by the State Program’s Technology Development, State shall be submitted, how industry decree. Next, the Council forwards of Rio Grande do Norte Economic groups assess projects and how the proposal to industry groups, Development Secretariat these projects are approved by the which will assess the proposal and Secretariat. government’s real interest based on demands. If approved, the proposal The Program is different from other is returned to the Council. During programs in the speed of process- the analysis and approval processes that are analyzed by a Manag- es, other companies are invited to ing Council that is comprised of the join. Head of Staff’s General Secretary, the general counselor, the general The maximum term for analyzing coordinator, and the Economic De- a project is 15 days and from the velopment, Planning, Infrastruc- date of publication, the company is ture and Tax, and the Economy authorized to proceed with all stud- secretariats. ies required by the process. Then, 60 to 90 days are required, de- The Managing Council is in charge pending on the project complexity, of receiving proposals and to for- for the Council to analyze, approve ward them to the assessment of and bid. technical areas. For this, a multidisciplinary project team was cre- PPPs in the state ated in the Head of Staff office to work primarily with structuring A project that is considered as a partnerships and special projects, model in PPPs for the state is the some of them in partnership with Arena das Dunas stadium, built for the World Bank and the Inter-Amer- FIFA 2014 World Cup. The sched- 26 ule was one of the largest adven- mand and Rio Grande do Norte has “There are two types of tures in the process and has be- cities that are able to do business in come a good point to demonstrate these areas. PMI that can be submitted: that Public-Private Partnerships The government will also support Solicited PMIs, when the can also be fast. The project was large cities to create consortia that approved in 2010 and it was al- government sees a demand will make Public-Private Partner- ready hired by April 2011. This is ships feasible, developing their lo- and has to access the market a 20-year concession that also re- cal economies. quires the stadium management. to find interested parties; and Other projects being analyzed are The State, however, has priority ar- in the areas of energy efficiency, the Unsolicited PMI, when eas that will get investments in the water transportation, prison man- companies express interest to next years, such as mining, trans- agement, highways, tourism, loss portation, logistics and manage- prevention for the water company, assess a project. ment. Also known as development building and managing a hospital hubs, these areas have growing de- and projects in computing.

27 NORTHEAST Creation of an investment program is the hope of Ceará government to attract private capital

The State of Ceará is developing • Economic infrastructure: Those the vision for partnerships between where the service can be hired by government and the private sector. means of a partnership as it is an The current administration is work- economic activity. ing towards the development of Concessions and PPPs. Highways are one of the main focus to reduce costs and increase reve- The first step was to analyze de- nues for the state. The goal is to manding areas and where partner- make Public-Private Partnerships to ships with the private sector could build highways and try to replicate be carried out. It was then that the the United States model, where the idea of creating an Investment Pro- company builds the highway, toll gram came up - a task force com- booths and sites to deliver services prising five secretariats: Planning, and generate ancillary revenue all Infrastructure, Economy, Social over the highway, such as gas sta- and Economic Development, and tions, restaurants, car repair shops Tourism. and so on.

The program focuses on social and Potential partnerships economic infrastructure, aiming to Antônio José Câmara attract private capital. The plan is The pipeline of potential projects Vice-Secretary, State of Ceará Infra- currently being assessed to iden- involves energy generation, region- structure Secretariat tify what is possible to do, which al airports and the area around the projects can be deployed under this Port of Pecém, and even tourism. model and what existing demands One of the State’s project is the Ar- there are. co Metropolitano highway, some This initiative aims to increase 80 km from Fortaleza, connect- availability of public services linked ing the BR 116 highway to the to the granted infrastructure, to im- Port of Pecém. The project’s goal prove the quality of services deliv- is to prevent that heavy vehicles ered, remove financial burden from enter the city’s urban area. Also, the state (and to generate addition- this segment is longer, implying in al revenue when possible) through more time. This highway is a clear a more efficient exploration of as- example of an economic structure. sets and to ensure a fee threshold It generates resources, savings and that is in line with good services de- is quite attractive for a Concession livered to users. or PPP. Areas for investments were Potential projects are being studied divided into two categories: in order to be submitted until the end of the year in a portfolio com- • Social structures: Those that prising all projects the State under- must be hired through Law 8666 stands are the best in terms of part- with public capital, administra- nership opportunities. The State is tive contract and risk taken by the conducting a preliminary study to Public Administration. These are find projects with potential for a works economic focus. successful partnership. 28 The government aims to increase urban mobility, water and sanita- “Highways are one of the the participation of the private sec- tion, tourism and social and eco- tor in investments required by the nomic development. All these proj- main focus to reduce costs State, sharing risks and success, as ects are due to submission by the and increase revenues for well designed, planned and carried end of 2015 to the market as op- out operations reduce and share portunities for partnerships with the state. risks. the private sector.

Potential Public-Private Partnership The State of Ceará is really intent to projects are in logistics, such as promote this partnership model for ports, airports and highways, and a range of opportunities.

29 NORTHEAST Government of Paraíba plans to proceed with Concessions and PPPs

The progress of Concessions and the population. PPPs in the State of Paraíba is slow. There is one project in prog- Another benefit is the sustainable ress and other three that the gov- model that determines the usage ernment is willing to develop to en- of sun energy, reutilization of water sure better conditions of traffic and and the treatment of solid waste. public management for the city. The location is also strategic as it will be built in the south coast sec- The State has a short portfolio for tor, an area that has the potential to Concessions and Public-Private become a hotel hub. Partnerships. Although the State’s legislation leads the way, the gov- This is a 35-year Administrative ernment is unable to make projects Concession and the first phase, al- see the light of day. ready being built, shall be delivered within 30 months and the second The studies for the Administrative phase in 42 months, with BRL 400 Center is the most developed one. million invested. The possibility for The first Administrative Center was obtaining extra resources was al- built in 1975 and has capacity for lowed in this PPP, so the private 9 secretariats and some 4,000 partner can explore shops, shop- employees, out of the existing 22 ping centers and so on. Pedro Filype Pessoa secretariats. Assistant, State of Paraíba Planning Projects that may come true Secretariat Due to growing demand, the parking lot exceed capacity. As it is In 2011, Paraíba ranked 19th out 40 years old, the building is de- of 26 states on quality of Federal teriorating, requiring repairs and and State highways. Last year, the replacement of electric, hydraulic state was ranked 9th. This was an installations, elevators and so. It alert to the State improve and de- is a dire situation and BRL 62 mil- velop this area. These are some of lion are necessary just to keep the the projects that might come to life way it is. in the next years. The new Administrative There is the interest to grant Con- Center cessions and PPPs for the operation and maintenance of highways. There are many expectations with The project about to be triggered is the creation of the new Adminis- Caminhos do Paraíba, which recov- trative Center. One of them is to ered and paved in its first step some expand capacity to 7,500 from 2,300 kilometers of highways. The 4,000 employees, bringing togeth- goal is to deploy 1,300 kilometers er all secretariats in rented offices in the second phase. by the state. As a consequence, public expenditure can be reduced. The project model’s overall goal is Some of the benefits are: Better to define and contextualize elemen- work conditions to employees, in- tal planning, assessment, control crease of productivity, more effi- and basic input mechanisms that ciency of administrative office, and may guide and support the concep- more comfort and better service to tion of a project for the implemen- 30 tation of the State Highway Opera- not pass through João Pessoa, it is “The State has a short portfolio tion and Maintenance System. going to be the solution to alleviate traffic in the capital city. for Concessions and Public- Another Paraíba’s government goal Private Partnerships. Although is to build a bridge to connect the If there are no fruits, the beau- city of Cabedelo to Lucena. This ty of flowers will be worth it. If the State’s legislation leads the project has been talked about for a there are no flowers, the shadow of way, the government is unable while but needs to see the light of leaves will be worth it. If there are the day now. no leaves, the seed’s intention will to make projects see the light The idea is to have a bridge con- be worth it. This seed is the PPP, of day. necting the PB 11 highway to BR it has been sowed and will gener- 101 highway, granting access to ate fruits, flowers and everything Natal and Recife. The main ben- else we are entitled to. It is a great efit is that the traffic of cargo will solution.

31 NORTHEAST It is time of small companies get opportunities in Public-Private Partnerships

One thing is for sure: There are good Managing Council (Conselho Gestor opportunities in PPPs for small and do Programa Estadual de Parcerias mid-sized companies and there is Público-Privadas, PROPPPSE), an a myth that PPP projects must be entity in charge of the governance very large, in the area of millions or of PPP project pipeline and drafting billions of dollars. a PPP Yearly Plan.

But there are companies with year- The Government Plan for 2015- ly revenues of BRL 20 million that 2018, was released in 2015 by have participated in complex PPP governor Jackson Barreto, consist- projects with significant investing of a set of commitments that in- ments. It must be considered that it clude efforts that may be executed requires a long-term vision of twen- as a PPP. In addition to the 3-year ty, thirty years as the average term plan, the State Secretariat for Bud- of a concession. get, Planning and Management (Secretaria de Estado do Orçamento, The challenge is to create condi- Planejamento e Gestão, SEPLAG) tions for simpler operations more also has a yearly plan for public-pri- aligned with the realities of small vate partnerships and concessions. and mid-sized companies may be executed, mainly in smaller states There is capacity to invest up to José de Oliveira Junior like Sergipe. BRL 300 million per year, respect- Representative of State of Sergipe in ing thresholds determined by the the TMIB Investment Commitee Much has been talked in this sem- Fiscal Responsibility Act and con- inar, even in other regions, about sidering PPP project counter pay- the lack of qualification from the ments. We understand that this is a Public Administration to enter into satisfactory investment level for our partnerships, as the lack of exper- needs and we don’t see large works tise of public officials to manage inas priority, just a pipeline with mid- novative projects. Concessions and sized projects. PPPs can help to close this gap in the State, so that the Public Admin- PPPs in Sergipe - Studies in istration can obtain from the pri- execution vate sectormanagement technol- The first project was called DESO ogies and the entrepreneur mind- Sustentável. The Sanitation Com- set, as the Public Administration is pany currently operates with thin withered and plunged in slow and margins and its main issue is the time-consuming processes. loss of water in distribution and billing. This PPP would minimize For this reason, partnerships with water losses and deliver addition- the private sector are important. al services to manage billing and Change of direction energy savings. Privatization of any critical sanitation service and The State of Sergipe passed legis- of the process control is out of lation in PPPs in 2004 but it was bounds and if the PPP is execut- completely overhauled in 2007, ed it would be placed under the with the creation of the Public-Pri- responsibility of the state-owned vate Partnership State Program company. 32 Sergipe is also considering Supply Another source of opportunities is “The challenge is to create Centers and three projects are in the creation of an Industrial Park discussion (the Committee is draft- near the Inácio Barbosa Sea Termi- conditions for simpler ing a PPP Plan, so these referenc- nal. The Terminal, currently used for operations more aligned with es are of materials being elaborated cargo in general but predominantly and does not imply that these will for solid bulk is operated by a con- the realities of small and be approved or even completed): sortium formed between Petrobras mid-sized companies may be and Valor Logística Integrada, VLI, • Implementation of a Supply Cen- a Vale subsidiary. There is a signif- executed, mainly in smaller ter for the capital city, Aracaju, in icant amount of state-owned land a new access to the city, and the around the terminal, where an in- states like Sergipe. private sector would be in charge of dustrial park can be built and oper- building and managing this facility. ated by the private sector. • The second Supply Center would be installed in the city of Itabaiana, In the so-called industrial-port which is focused on growing pro- complex, Sergipe has a large duce and trade in general. The city amount of projects as the area is a traditional producer of essen- has a wealth of mineral resources tial products and a provider of land and logistics facilities. transportation services. It is quite One of the priorities would be the feasible that a trading facility could oil and gas industry, among other achieve excellent outcomes with sectors, as the recent discoveries of private management, and in this excellent oil and gas in ultra-deep case a PPP would be quite similar waters in the geological basin of to a traditional concession. Sergipe-Alagoas is quite near the • Finally, a third Supply Center area. could help to recover the current There is also the production of fer- Aracaju’s CEASA, a facility still in tilizers, with the only potassium use despite its poor conditions. chloride mining in activity in Brazil There is still the possibility of op- along a Petrobras hydrogen-based timizing the facility’s management fertilizer plant producing urea and by renovating and upgrading trad- ammonium chloride, critical for the ing lines developed there. sugar cane plantations in the North- Three projects are in study: east. There is also an abundance of limestone in the region and in- Management of prison also has po- vestments are expected for cement tential for public-private partner- plants, as well as for a mega proj- ships all over Brazil. It is not dif- ect for energy generation from natu- ferent in Sergipe, and one of the ral gas using a Floating Storage and possibilities is the transformation Regasification Unit that is able to of the Santa Maria Prison Complex generate near 2.5 MW of electric and the Areia Branca State Prison. energy if installed in full. The government is willing to consider proposals for granting prisons It would the best fit for the fertilizer to the private sector and upgrading industry as the area is close to the and expanding capacity. only potassium reserve in Brazil. 33 It is time of small companies get opportunities in Public-Private Partnerships

The government is willing All these projects showcase the Polícia Militar is also being exam- area’s potential and a PPP would ined, which would a PPP in Health- to consider proposals make easier all public investment care. It is operational but does not for granting prisons to required. serve the population nor the SUS and could be converted into a uni- There are business opportunities in the private sector and versal hospital such as other Brazil- Sergipe for mixers and construction ian hospitals under a PPP. upgrading and expanding industries due to the large reserves of limestone in this area. Also, Ser- capacity. ” The pipeline of projects in Sergipe gipe is the only Brazilian state with shows the existence of many op- reserves for the three main ingre- portunities that may be leveraged dients for fertilizers, the so-called by small or mid-sized companies, LPK, and also produces autono- once they have the excellence in mously two of the most expensive their core activities and are able to and difficult to produce: potassi- join consortia with structuring com- um chloride and ammonium, both panies that add the required sup- manufactured by Petrobras. plemental expertise for operating Sergipe is also the largest cement under a public-private partnership. producer in the Northeast, so the The PPP seminar held in Fortale- production of limestone and cement za was timely to demonstrate the opens significant opportunities in existence of new opportunities for this region and a thermal-electric the private sector and to show plant is also being built in the area, which must be one of the Brazil’s companies that the public-private largest plants for the generation of partnerships shall be elucidated to electricity from natural gas. become another option for a safe, transparent hiring by the Public The recovery of the Hospital da Administration.

34 NORTHEAST The scenario of Concessions and PPPs in Fortaleza

The Mayor of Fortaleza, Roberto feasibility studies. There are also Cláudio Rodrigues Bezerra, had an studies for a concession of park- active role in the seminar on Con- ing lots in the city, as the “Zona cessions and PPPs and highlighted Azul” service in Fortaleza is not that since the inauguration of his working properly due to the lack of term, in 2013, he was led by busi- oversight. nessmen and political allies to give proper attention to this topic as it Some changes were deployed to is strategic to the development of Fortaleza’s public transportation cities. system, that lacked until then time- based integration - having only in- To start works, a PPP Managing tegration achieved by terminals. A Council was founded to identify the card that allows citizens to take as most urgent and strategic areas for many buses it is necessary within this hiring model, and what type of two hours was introduced for the projects could be performed under cost of a single journey fee. such type of partnership. The first step was to explore urban opera- The user is free to take or leave a tions in consortium, that are urban bus at any bus stop, without having planning tools for the implementa- to go to a bus terminal. This will tion of urban development policies. shorter bus trips as integration can be achieved in any of some 5,000 Roberto Cláudio Just like a PPP, such operations bus stops in the city. also demand a well-defined legal Rodrigues Bezerra Mayor, Fortaleza-CE structure and attention to calcu- However, terminal management is late public and private investment absolutely poor. Parts of the roof feasibility. that fall down is slowly rebuilt, the sink breaks, there is no appropriate A good example is the Operação security or cleaning, because there Consorciada Sítio Tunga, launched is no public expertise to manage a in October 2015 to create an ur- bus terminal. This is not a public ban public park in parallel with the business and has never been. For grant of part of the area belonging to Sítio Tunga with a plot of land in this reason, the city is considering a Passaré, where social housing will partnership with the private sector be built. to improve efficiency and quality of services delivered to the population A pilot project in Healthcare - the without adding costs to the public Hospital Management PPP - is in budget.

35 NORTHEAST Piauí: A wealth of opportunities for the private sector

Piauí is backed by the legislation nerships aim to improve infra- and projects are thoroughly as- structure, increase efficiency, plan sessed to determine a city priority. projects, optimize and allocate re- This seminar is an opportunity for sources properly, reinforce public the government to show their ef- management, cut costs and control forts on this topic. outcomes.

On what concerns to legislation, Pi- In order to be approved, a PPP auí is constantly pursuing improve- needs to go through a thorough as- ment. The State regulatory environ- sessment process. The superinten- ment is well-defined with a 2005 dence receives requests for studies state law that pushed for changes from the private sector but all re- in the Managing Council, chaired quests, even from the government by the Piauí governor. itself, are assessed and must pass submission criteria. These are: Ba- Another important step was a sic legal and institutional environ- 2012 state law that created all cri- ment, technical, economic and fi- teria and guarantee mechanisms; nancial aspects, comparative gov- a 2015 state decree instituting the ernance mechanism assessment, PMI; and a Resolution specifying how projects will be selected as governance costs. Viviane Bezzera priority. The variables considered as gains of Concession Superintendent, State of Piauí Government Secretariat The Superintendence of Partner- efficiency, stable technologic sup- ships and Concessions was creat- port offered, fiscal commitments - ed this year, directly reporting to considering the state’s budget and the Government’s Head of Staff and the public interest. Then the proj- working along with the Managing ect goes to the Managing Council. Council, the governor, and has as This means that not a single project members’ secretaries of Adminis- gets to the Council without being tration, Planning, Economy and the assessed by the superintendence. State Public Attorney office. PPPs progress Every project approved by the Man- Piauí’s project pipeline is quite di- aging Council arise from a request versified with 10 possibilities rang- whether by the private sector or by ing from supply, transportation the government. and logistics, highways, tourism, Each project studied by the super- among others. intendence has a committee from There is a study that is in advanced several sectors that is in charge levels for the creation of Citizenship of the project’s development. And there is the Development Office Space, a request from the private that takes care of guarantee mech- sector. The Supply Center is close anisms and the guarantee fund. to completion. Another study is to implement a new Administrative How PPPs are processed in Center, also a request from the pri- Piauí vate sector.

Such as in other states, Piauí part- Highways are also a priority there. 36 The Trancerrados project is a rele- by the Managing Council, such as “Such as in other states, vant highway for the state economy Teresina strategic location in an inas it passes through an important fluence area for several states, it is Piauí partnerships aim to production area. The concession a macro region with an expressive improve infrastructure, aims to implement, renovate, oper- population potential. This is a proj- ate and maintain the Transcerrados ect that the Federal Government is increase efficiency, plan highway with 331.80 kilometers. interested to add to the Logistics The goal is to move produce and Investment Program (Programa de projects, optimize and improve access and vehicle traf- Investimento em Logística, PIL). allocate resources properly, fic. Investments are estimated at Investments could total some BRL BRL 1 billion and estimated count- 1.4 billion. reinforce public management, er payment of BRL 3 million. De- cut costs and control livery will be in three installments, Teresina is also pursuing the struc- the first of them to be completed in ture of a Touristic Complex, consist- outcomes. December 2015. ing of renovation, expansion and upgrading of facilities, building an The Multimode Logistics Platform Aquatic Park and an auditorium. aims to build a Platform Mainte- It is a 20,000 square meter area nance Hub that is comprised of to be renovated and located near many equipment. The idea is to the state coast, a very well locat- meet demands related to logistics, ed area. This space was used on- the distribution of goods and as- ly by public officials and now is in sets both locally and international- very poor conditions. A preliminary ly. The platform would benefit from study conducted by the superinten- Teresina’s strategic location. Some dence suggests investments near assumptions taken into consider- BRL 100 million and a 30-year ation for this project to be approved grant.

37 NORTHEAST How State of Ceará’s first PPP was made

State of Ceará’s first Public-Pri- ed by the consortium that won vate Partnership was the renova- the bid and the concessionaire’s tion, expansion, suitability, main- shareholders. tenance and preservation of Arena Castelão stadium. For this project, Summary of the concession an Administrative Concession with contract shared revenues was signed. A Concession term: 96 months PPP Managing Council was created, comprising of the Planning and Contract Total Value: (BRL) Management Secretariat, as well 518,606,000.00 as Economy, Head of Staff and In- frastructure secretariats, the State Estimated Yearly Total Counter Public Attorney and the technical Payment: (BRL) 4,884,000.00 teams of these secretariats. Monthly Total Counter Payment: A Value for Money study was con- (BRL) 407,000.00 ducted to assess the project’s feasibility and it guided Public Admin- Investment - CAPEX: (BRL) istration’s decision-making. Next, 486,940,599.15 the public bid model was selected, Operation - OPEX: (BRL) Ferruccio Feitosa based on state and federal laws, 31,665,400.85 Chairman, ADECE (Ceará considering technique and cost as Development Office) criteria for selecting the best tech- Compensation Mechanism nical proposal and smaller counter payment value due to the private The Administrative Concession sector. contract opted for dividing the Con- cessionaire’s compensation into The bid was launched in October two models: Fixed compensation 2010, generation fierce compe- (exclusively tied to the develop- tition between four consortia - to- ment of works) and Monthly Count- taling 11 companies involved. Es- er Payment (related to the service timated amount for this project was delivered). of BRL 617 million and the amount hired totaled BRL 518 million, The fixed compensation was further which means that almost BRL 100 divided into four steps, which were million were saved for the State on- paid upon the conclusion of works, ly at the bid. in the figures below: The contract was signed on No- Step 1 - BRL 102,000,000.00 vember 26, 2010 and the works Step 2 - BRL 140,000,000.00 started in December of the same year. Execution last 24 months Step 3 - BRL 90,000,000.00 and the Castelão was the first stadium ready for FIFA 2014 World Step 4 - BRL 154,940,599.15 Cup in Brazil. Costs related to infrastructure The parties involved in the PPP maintenance and operation were were the Ceará State government, borne through the monthly count- the Specific Purpose Entity found- er payment. The initial amount was 38 defined as per the bidder’s finan- The Arena Castelão project under “The Arena Castelão project cial proposal at BRL 407,000.00 a PPP brought successful results a month. both in terms of savings for the under a PPP brought State as in terms of time. The work successful results both in Such amount can be reduced in was completed in 24 months with case of Concessionaire’s poor per- milestones defined with the private terms of savings for the State formance, as per criteria and mech- partner, who provided technology anisms determined in the Adminis- to execute the work in the smaller as in terms of time. trative Concession contract. This amount of time as possible to be amount can also be reduced due as paid as soon as possible. revenues are shared with the pri- The Arena Castelão project was the vate sector, by a pro-rated discount first public work in Brazil to obtain of net revenues obtained. the international environmental Savings for the State: certification LEED (Leadership in Energy and Environmental Design) Fiscal Year 2013 - BRL 1,577,755.14 The Ceará’s stadium was the only one that was completed within Fiscal Year 2014 - BRL budget. We started the project with 1,616,475.00 an expected budget of BRL 486 million and it was completed at TOTAL: BRL 3,194,230.14 that same amount.

39 NORTHEAST Vivante presents 1st hospital built under a PPP in Brazil

The Hospital do Subúrbio da Bahia has a transparent management. is the first public hospital in Bra- There is a website (www.prodal- zil built under a Public-Private Part- saude.com.br) where qualitative nership (PPP) and started opera- and quantitative production indi- tions in September 2010. cators posted by the company that won the bid can be tracked. If the The unit is evidence that it is possi- goals for these indicators are not ble to improve public healthcare in met, as established in contract, the Brazil without spending a fortune. company is fined. These goals en- It is a public hospital providing free courage the bid winner to pursue A&E with the quality of a nice pri- excellence in the delivery of service. vate hospital. As the population was being served The excellence of services delivered by the hospital, the unit achieved has been recognized locally and in- 120% of occupation in less than ternationally. In this year, after win- 10 days and the occupation rate ning UN’s Public Service award in has been kept at that level, due to the “Improvement in public service the demand. delivery” category, the hospital was awarded with the Prêmio Luiz Plí- The hospital managed to increase nio Moraes de Toledo - Innovating tenfold the number of surgery in- Philippe Enaud terventions without increasing the CEO, Vivante Practices 2015 during the 7th In- ternational Quality in Healthcare number of facilities, indicating man- Forum IQG, by the Instituto Qualisa agement efficiency in the healthcare de Gestão(IQG) accredited by the unit. Accreditation National Organization Project’s strengths (Organização Nacional de Acredi- tação, ONA) and a local reference • Integration of medical to in certification and implementation non-medical services. of quality management programs in healthcare. • Synergy between Promedica (medical service provider) and The hospital Vivante (non-medical service provider). Built by the State of Bahia government, the Hospital do Subúr- • Operational excellence evidenced bio is administered, operated and by the several awards received. equipped by the private sector, as Vivante is one of the sharehold- • Operational transparency: Indi- ers from its inauguration in Sep- cators publicly available in Inter- tember 2010. net, HS application. It offers 373 beds and 6 surgery fa- • Ordinary payments without cilities where some 1,300 health- delays. care professionals from several • Guarantee of payment. fields work. • Independent verifier. One of the main benefits from this model is that the public hospital • Committees are operational. 40 Weaknesses • Consolidation of the hospital’s ects to a halt. current profile: closed doors hospi- • Facility built by the State and tal vs. open doors hospital (a cam- • Guarantees frequently without re- PPP was launched after the work paign explaining that the unit fo- al liquidity. was completed, resulting in techni- cuses on A&E was conducted along • Difficulty to structure financing. cal-structural issues. the population). • The number of potential partici- • Huge difference between design • Maturing of administrations. pants is getting smaller. and what was a built (modification of demand is a risk for the State). • Interest of several administra- Delay is the main threat. A new tions led to the integration between model for the hospital’s structure • Permanent adjustment and construction + medical service + has been in negotiations for three time-consuming resolution - the non-medical service. years. Why does it take so long? best would have an automatic Because these changes depend on mechanism for adjusting according • Political need to complete some negotiations between the SPE, the to demand. projects (election years). unit’s management and the political power, who also changes staff • Political and administrative • Financial players or investment (such as in elections) so time pass- deadlines - changes in political funds are attracted to this market. es and make works progress very power slows administrative pro- Main threats slowly. cesses down. • Delays on remodeling the hospi- Guarantees and payments made • A new model is in negotiations tal may cause its collapse. in time in these contracts are ex- for three years. • Pressure to cut costs may frus- tremely important. There are many • Non-medical services lack trate the population. investors currently interested in this project model, but liquid guaran- indicators. • Development time for this type of tees are required to make them feel • Utilities (water, gas, energy) cost project is long. safe in this type of business. Public is not part of the contract’s scope. partner must meet its obligations in • Economic crisis and increase of order to the private partner do so as Opportunities profitability rates may bring proj- well. Credibility is critical.

41 NORTHEAST City’s Managing Council presents PMIs for Fortaleza

The seminar’s second panel facil- ats and entities, with capacity for itator, Alexandre Pereira, also the 6,000 public officials, and facility chairman of the Fortaleza PPP management. The goal is to reduce Managing Council, followed the city time to serve citizens, share com- mayor by presenting what the city mon services, improve quality of in- has been doing in Concessions and formation flow and trim operational PPPs in detail. costs.

Projects conducted in partnership Zona Azul Parking Lots - The goal with a company or consortium are is to integrate city’s transportation complex, requiring a broad dialogue modes, to regularize and deploy among the parties, as projects must parking lots in priority areas and be attractive to all parties. A lot of deploy a new management system transparency is required for the for Zona Azul parking areas. For- Public Administration to do busi- taleza fleet of vehicles increased ness with the private sector: Com- by 104.43% from 2003 to 2013, panies must protect their activity; causing a huge demand for parking the government must explain to the in public and private areas. population that the public budget is not being spent on the partner- Technologic Park - Creation of a Alexandre Pereira ship; and clients, that are citizens Data Center in Fortaleza due to the Chairman, Fortaleza PPP themselves, must be absolutely city’s strategic location, connect- Managing Council happy with the results or services ing Brazil to Europe, Africa and delivered. the United States through subma- History of PMIs in Fortaleza rine fiber optics. To support these projects, Law 9.585/2009, was New Administrative Center - A passed to grant tax and material BRL 300 million project to build a benefits for creative and technolog- facility to house 31 city secretari- ic parks.

Novo Centro Administrativo

42 Requalificação do Centro de Fortaleza

Área do Centro Expandido: 500 Ha Número estimado de Transeuntes: 1.000.000/dia Número Estimado de Habitantes: 27.000

Downtown renovation - Joint urban A successful case is Belo Horizon- operation to renovate the center of te, where 20 schools are managed the city. The operation focuses on under a PPP. The cost of a stu- downtown streets, where intense dent in the public school system is popular activity takes place and the same of a student in a private have architectural benchmarks and school, but levels are higher. So public areas of relevance for histo- why not provide the student in the ry and tourism. Currently, the urban city school system the same level design in this region is full of mobil- of education of a private school? ity issues, poor use of the existing That is what the city of Belo Hor- infrastructure and lack of physical izonte did. and visual connectivity. By means of a PPP, the private sec- Arena Paulo Sarasate - This is tor builds the school, runs securi- Ceará’s largest sheltered gymnasi- ty and cleaning, provides school um, staging several sport events, meals and all other operational shows and religious events but it is tasks whereas the Public Admin- a loss-making structure, according istration deals with the education- to the PPP coordinator. The city is al aspects through teachers. The negotiating with investors to share Public Administration makes a mis- the space’s management with the take by placing the best teacher as private sector. the school’s dean. A good teacher 43 City’s Managing Council presents PMIs for Fortaleza

By means of a PPP, the private sector Áreas de Interesse em Novos builds the school, Projetos de PPP runs security and Novo Hospital Municipal cleaning, provides school meals and all other operational tasks whereas the Public Administration deals with the educational aspects through teachers. ” does not translate into an efficient partner. The problem: For investing administrator. in a private company, interest rates skyrocket to 4% p.a. They can’t un- New City Hospital – The mayor of derstand how Brazilians pay more Fortaleza visited London recently for financing due to our legislation. to talk with an investment fund focused on hospitals in more than 50 The advantage these investors countries. bring to the table is the expertise They want to finance the city at an in healthcare management. They interest rate of 0.75% p.a. and a have a shared database with all 2-year grace period. The city ad- diseases, which support a more ministration has credit and can hire efficient management. This is the new debts, but cannot take these “gray coat” and “white coat” con- resources for legislative issues and cept, where they are responsible for the investment for building the hos- the hospital management and the pital must come from a private city takes care of healthcare.

44 NORTHEAST Case Study - COMPESA Independent Verifier

KPMG member firms are some of the 2. Monthly Report with the calcu- main service providers in Audit, Tax, lation of the performance level and and Advisory, relying on 162,000 counter payment amount; employees in 155 countries. There are some 4,000 employees working 3. Monthly Report of activities per- in 31 states and the Federal District, formed by the independent verifier; totaling 22 cities. 4. Monthly Report on the collection The company won contract to verify system and performance indicators Compesa’s performance. feed;

There is a specific group within KP- 5. Monthly analysis over perfor- MG that accepts Government proj- mance reports and concessionaire’s ects in infrastructure, of which I am decisions; a member, and we act as an independent verifier to provide advisory 6. Mid-year analyses of QID perfor- and audit services for large works. mance indicators.

We rely on the knowledge of a mul- The role of the Independent tidisciplinary team comprised by Verifier Governance’s life engineers in audit and advisory and cycle of an investment other professionals in several ar- project goes from: eas with a deep knowledge of the • Project’s concept and feasibility Erico Giovannetti business. Director, KPMG • Preliminary draft There is a growing demand for independent verifiers when the Con- • Environmental permits ceding Power transfer the obligation of performing public services on its • Investment structure behalf to a concessionaire. • Hiring providers and setting up In this relationship, the indepen- the worksite dent verifier has the mission to be limited to the contract’s terms. So • Elaboration of executive project the verifier’s main task is to keep and deployment of project’s com- compliance with contract irrespec- mercial operation. Including envi- tive of interests of any party. ronmental permits, contracts, mea- surements, schedules, reports, pay- To fulfill this mission, it must face ments, demands from lenders and controversies by creating opportu- agreements. nities to solve divergences and the need to mature topics, such as per- The process might have formance indicators, according to three initial steps: the contract. • Analysis on deliverables of the Some of the reports project that are specific to each produced by the Independent phase in the life cycle. Verifier are: • Implementation of best practices, 1. Weekly status to validate items compliance tests with legislation, found in the field; technical standards and assess- 45 The independent verifier Modelo de apurção de desenpenho does not follow-up work’s

Relatórios produzidos pelo Verificador execution but work’s delivery Independente FINANCEIROS CONSTRUÇÃO OPERAÇÃO 1. Status semanal para validação dos terms and compliance with aspectos apurados em campo; 2. Relatório Mensal de apuração da nota de desempenho e calculo da the contract. Independent contraprestação; AMBIENTAIS SOCIAIS 3. Relatório Mensal das atividades Verifier’s.” realizadas pelo VI; 4. Relatório Mensal sobre o sistema de coleta e alimentação dos indicadores de desempenho; 5. Análise mensal sobre os relat órios de desempenho e ações da concessionária; 6. Análise semestral dos indicadores de QID desempenho.

ment of risks for implementing the • Mediate conflicts between con- project. cessionaire and Conceding Power based on evidences and keeping an • Regular monitoring reporting. unbiased, independent approach. Independent Verifier role Critical success factors

There are some instances where Do not replace Conceding Power ob- the independent verifier becomes ligations at the contract’s oversight. a certifier - a new nomenclature that appeared in subway works or • Conceding Power and the con- in some other infrastructure works, cessionaire shall support the Inde- especially in PPP contracts as en- pendent Verifier strategically and gineering and operation issues ap- operationally. pear in this project type. • Divergences between the par- So there is a large operation in ties shall have a specific method progress and there is also a signifi- for resolution and shall be treated immediately, quickly and action cant work component and the role plans shall be deployed as soon as of the verifier is to determine mul- possible; tidisciplinary topics related according to performance indicators. • Terms longer than 1 year;

The independent verifier does not • Independent Verifier’s multidisci- follow-up work’s execution but plinary knowledge. work’s delivery terms and compliance with the contract. Some indicators are systemic, i.e., the independent verifier has a Independent Verifier’s knowledge and brings in technolo- Objective: gy in data analysis recorded in systems such as Compesa’s, that in- Gauge performance indicators of a terfaces with users. public service concessionaire (PPP, concessions and others). So it is important to get to know and understand the calculation ba- • Zeal and promote improvements sis to make sure it is available to to the quality of services delivered all parties - the independent verifi- by the private sector in comparison er, the concessionaire and the con- with the Public Administration. ceding power. 46 Case Study - COMPESA Independent Verifier

This is one of our concerns and ed monthly and requires approvals success for the independent verifier from oversight, independent verifier means to be sure that this calcula- and the agreement from teams to tion basis is uniform. correctly measure performance.

There is another set of indicators, There is also a report of all activities such as quality of service, where performed by the independent veri- work in the field is required, so our fier in all units and another monthly independent verifier team works report covering the collection sys- with a sample to visit points of tem, that is the calculation of all touch where repair works are effec- information so we analyze the set tively delivered. of systemic information to suggest improvements and Compesa works It is from this base that reports are to ensure that the data are always produced by the independent verifi- updated. er on a weekly basis. There is also a monthly analysis on For Compesa, there are 21 perfor- the concessionaire’s performance mance indicators on a monthly ba- reports and efforts. The concession- sis, and five more will be added. aire issues for each region a report It is necessary to meet weekly with of all activities completed. EPIPs involved in the process. So Communitarian, environmental and the independent verifier does the social efforts are also included on fieldwork to check what was ac- monthly reports issued by the con- complished and submits a report to cessionaire and checked by the in- Compesa and the conceding pow- dependent verifier. er and to the concessionaire, so we need to identify and agree on And, finally, there is an analysis of per- everything that is being verified on formance indicators every six months. a weekly basis - what is being de- This is a large summary with two pro- nied, what is being argued about grams for each fiscal year. and what is being accepted. Transparency Another big delivery is the performance grade monthly report, which There are more independent veri- is exactly the concept here, all indica- fication tasks, arising concerns on tors calculated every week shall con- transparency, data publication and verge to a final performance grade. performance indicators.

And if the performance grade is There is a trend for new project below the level determined by the models to be transformed into a contract then a penalty is applied large database available to access. at the counter payment for the concession service. Therefore, these indicators are re- flected in regular reports bringing This is the outcome, it has a quite recommendations, action plans demanding presentation and for- and especially risks arising from the matting dynamics as it is calculat- failure to meet these indicators.

47 NORTHEAST

The Cidade Saneada Case

The Cidade Saneada Program is a sa’s own loans. We are on the third public-private partnership between round of issuing bonds - the two Compensa and Odebrecht Ambien- previous rounds were conducted tal to extend sanitation services to by BNDES, virtually an operation the whole Recife Metropolitan Re- with the government, but this third gion (15 cities plus the city of Goi- round is a market operation con- ana), expanding sewage coverage ducted by Santander, worth BRL to 90% and treating 100%, impact- 100 million. We also issued FDIC, ing 4 million people. purchased by Banco do Brasil. It is operational for 2.5 years and Award for Management has invested BRL 330 million in works and services out of BRL 4.5 Despite the degrading of Brazilian billion to be invested (Private part- investment grade by Standard & ner: BRL 3.5 billion / Public Admin- Poor’s, we hold an A rating. This istration: BRL 3.5 billion.) shows that a strong management with financial results recognized by This is the former governor Eduar- the market and awarded by maga- do Campos dream for water sup- zines such as Isto É Negócios, that ply and sanitation that became ranked us as the best company in Roberto Tavares true in agreements, contracts and economic and financial terms for CEO, COMPESA investments. the sanitation industry, with a pipeline of investments around BRL 11 The PPP model has a 35-year con- billion - BRL 4 billion for water and tract that started in July 2013, with BRL 6.7 billion for sanitation be- 41 sewage systems and the private tween 2015 and 2022. partner responsible for recovering existing systems; SES operation The recognition for this work con- and maintenance; elaboration of all trasts with the failure of Brazil’s projects and expansion and imple- sanitation policy of the last 50 mentation of systems. years, as only three Brazilian states have sanitation in more than 70% Investments of their territories. Most states have Recently, Compesa ranked fourth in sewage coverage under 40%. investments in Brazil, despite being And even after Federal Law the ninth largest company in the 11.445/2007, that determined industry. guidelines for delivering urban In 2015, the goal was to invest cleaning services and solid waste BRL 800 million but investments handling (planning, oversight, de- reached BRL 489 million due to livery of services under standards, the economic downturn. For 2016, the demand for contracts preceded expectations to invest BRL 800 mil- by technical and financial feasibil- lion may also be frustrated due to ity studies, definition of regulation expense contingency. by law, definition of regulating entity and ensured social control, in- However, we benefit from having cluding the delivery of services to multiple financing sources, such every citizen and interaction with as World Bank, IADB and Compe- other areas, such as water resourc- 48 “We need legal security. We Evolução dos Investimentos still don’t know today who owns the concession and 2016 800 2015 489 2014 751 how to share duties between 2013 842 2012 20 dias 471 20 dias 2011 467 state and citye specially for 2010 759 2009 623 2008 390 integrated systems that go 2007 212 2006 144 2005 79 Os valores de 2002 a 2014 beyond boundaries. 2004 124 foram corrigidos para valores 2003 76 de 2015 através do INCC. 2002 185

Obs.: A partir de 2015, o valor do investimento considera o Programa Cidade Saneada

Contextualização Panorama nacional do esgotamento sanitário

< 10,0% (4 estados) 10,0% a 20,0% (4 estados) 20,1% a 40,0% (9 estados) 40,1% a 70,0% (6 estados) > 70% (3 estados)

Índice médio de atendimento urbano por rede coletora de esgotos dos municípios cujos prestadores de serviços são participantes do SNIS em 2014

es, healthcare, environment and ur- control entities, especially the State ban development) as an industry’s Attorney that needs to develop a benchmark, we are still lagging be- clear understanding of the law and hind in relation to telecommunica- respect the article stating that the tions or power generation. environmental entity has to establish progressive goals to leave the We need legal security. We still current reality and move on to the don’t know today who owns the reality wanted. concession and how to share duties between state and city especially We know of some systems that are for integrated systems that go be- not compliant with the environmen- yond boundaries. tal legislation, but these goals must be progressive and accepted to pro- Another issue is the legal insecu- vide legal security, irrespective of rity for environmental matters that the operator and the investor. affect institutional and corporate contexts and the manager as an Our current coverage in the Re- individual. cife Metropolitan Region is 30% and our goal is to reach 90% in For this reason, we need that stan- 12 years. Recife was founded 479 dards are urgently incorporated by years ago and when it is considered 49 We have created a basin- works for the last 100 years since The special occupation Saturnino de Brito, in 1918, cover- problem based investment sharing age is only 30% in the metropolitan Our operation is based on Ministry system to avoid investing area and our challenge is to build 60% and recover the existing 30%. of Cities’ Integrated Sanitation Pro- all our revenues and the gram, so areas with special occu- This is a very daring goal that may pation are incorporated whenever state save resources for be compromised with the economic possible to our project so that we can meet their future sanitation 41 sanitation systems.” crisis, as complexity levels rise due to an existing system and a new one needs after urbanization. that must be developed - differently Modelling Structure from a highway, where new lanes are build, toll booths are deployed In addition to Caixa’s participation and it starts generating revenues. in Compesa’s ownership structure, the bank also finances the PPP, Investment sharing which ensures a higher leverage power - Caixa is currently the larg- For this reason, we have created est lender for sanitation in Brazil. a basin-based investment sharing system to avoid investing all our Risk Matrix revenues and the state save resources for 41 sanitation systems. Responsibilities are shared and the The public administration shall in- risk of default is borne by the Public Administration. vest in 16 basins and the private partner in 25. The system’s existing risks are taken over by Compesa, but risks from But all basins are operated by the new systems are borne by the pri- private partner. So it is not like vate partner. There is the obligation as I am investing additionally, the of investing in the public Capex. And growth investment, that he will not there is also the private partner’s be operating it. So the private part- Capex, as works are under their re- ner’s obligation is to recover, oper- sponsibility. Opex operation and ate and maintain all systems, elab- maintenance risks are fully borne by orate preliminary drafts for systems the private partner and environmen- to be built and expand and imple- tal risks are shared, according how ment them. these risks were originated.

Programa Cidade Saneada Estrutura de Modelagem

Acionistas Acionistas Odebrecht Ambiental Governo do e Lidermac Estado de PE (1) Constituída SPE

Contratada Financiador Odebrecht Ambiental – (3) Contratos Financeiros (2) Contrato de PPP COMPESA Região Metropolitana do CAIXA Trustee Recife/Goiana SPE S.A. (8) Amortização

(7) Remuneração (6) Participação no COMPESA CAIXA Faturamento de Esgoto (4) Contrato de Construção Consumidores (5) Pagamento Construtoras RMR + Goiana de boletos Construtoras

50 The Cidade Saneada Case

How is the private partner per-profit clause). Losses below paid? 90% are split in a half.

The consumption relationship still PPP Benchmarks takes place between the user and the sanitation provider, which will • Starting from 2013, there were oversee the goals forthe partner two years to recover existing sys- consortium. tems and five years to adjust all systems to the current legislation. A ramp up was created for compensation, as Compesa already had • The 12-year term is complet- revenue from sanitation on 30% of ed in 2025, when all services will the coverage area and losing the have 90% coverage and 100% revenue would hurt our cash flow. treatment. (see chart) • The contract expires in 2047, So Odebrecht Ambiental creat- when all assets are returned to ed a ramp up of 50% for the first Compesa, who may decide for a year, 70% for the second year and new partnership or take control. 86.5% for the third year. • Some commitments with the cli- Our ceiling in the bid is to pay up to ent, as the social fee, remain un- 90% of our revenues from sanita- changed as they are ensured by tion, we measure several indicators cross subsidies and sanitation is determined by the bid on a monthly free for low income users. Up to basis and then a performance level 8% of clients in this bracket does is generated by control entities. not impacts the PPP economic-fi- The chart shows that the risk of nancial model. demand is shared. We have a • Fee policy unchanged. billing curve (see chart) for 35 years based on expected revenue. • The client contacts Compesa di- If the curve moves 10 points up rectly by phone, mobile and physi- or down, nothing changes. If the cal points of touch. movement is more than 10% we share the gains with Compesa • Independent verifier (KPMG Au- and Odebrecht Ambiental (the su- ditores Independentes).

Programa Cidade Saneada Risco de demanda - compartilhamento

Compartilhamento dos ganhos entre Parceiro Privado e Compesa, na proporção de 50% para cada parte

Comportamento da contraprestação

Contraprestação não é impactada Faturamento Jul/13 Jul/14 Jul/15 Jan/16 Compartilhamento das perdas entre Realizado X X Realizado Modelagem Parceiro Privado e Compesa, na proporção de 50% para cada parte Responsabilidade exclusiva da Compesa, que arcará com as perdas

51 NORTHEAST

The sanitation challenge in Brazil

To present the CidadeSaneada proj- vironmental solutions in Brazil and ect in progress is an opportunity to rank among the world’s 10 largest launch a wide debate on one of the companies in this industry until largest challenges Brazil currently 2020, using sustainable technolo- faces: To eliminate or reduce the gies to improve the human condition large gap in sanitation. and to preserve the environment.

First, there is the issue of cultural We operate in three large areas: shift. We are talking about something completely different, not on- WATER AND SANITATION - PUB- ly a work. The work is a detail on LIC CONCESSIONS (Client: Con- the business of delivering sanitation ceding Power and Service Users) services to the citizen. UTILITIES - UTILITY CENTRAL There is one extremely import- OUTSOURCING (Client: Oil, Pet- ant thing that we take into con- rochemicals, Steelmaking and sideration while investing in san- Pulp and Paper industries) itation, that is the efficacy of the investment. RESIDUES - RESIDUE FINAL DISPOSAL AND REMEDIATION It is not enough to see the balance OF CONTAMINATED AREAS (Cli- Pedro Leão of Growth Acceleration Program 2 ent: Oil and Petrochemical indus- CEO, Odebrecht Ambiental in that shows the volume of resources tries) 26 assets in different con- Pernambuco paid or hired from the Federal Bud- tract models get or companies investing billions if we do not have the certainty that OdebrechtAmbiental owns 26 as- all houses in a given area are con- sets under different contract mod- nected to a network, making sure els in operation - 24 in Brazil and that the investment had an effec- 2 abroad. tive and efficient use. These are sub delegation, spon- Another issue is to ensure attrac- sored and administrative conces- tiveness of these PPP models, en- sion and PPP models with cities, abling companies to invest with states - we have a broad range guarantees of return of investments of experience covering the whole in large terms of up to 35 years. country.

In a country where we don’t have For Pernambuco, we created a Spe- the culture of investing in infra- cific Purpose Entity (SPE) with Li- structure for the long run, we don’t dermac, a local construction com- have structure of financing to do pany focused on earthwork and so - we lack investors used to take paving, which is an extremely im- long-term risk. portant expertise in a PPP for sanitation. In my view, this is a challenge that Pernambuco is close to solve and Some of the lenders are CaixaE- that can be an example to Brazil. conômica, transferring resources from the FGTS, FDNE and Com- For this reason, OdebrechtAmbien- pesa, in addition to the State of tal aims to become a leader in en- Pernambuco. 52 “Investments were focused Odebrecht Ambiental on recovering 1,200 Presença Geográfica 26 Ativos em diferentes modelos contratuais kilometers of piping in 2 years (from a simple jam to the.

MÉXICO

ANGOLA

Água e Esgoto Água Esgoto

Tempo de Atendimento Ordem de Serviços

100,00%

90,00%

80,00%

70,00%

60,00%

50,00%

40,00%

30,00%

20,00%

10,00%

0,00%

até 12h 12h-24h 24h-36h 36h-48h após às 48h

Ciclo 1 - 23.07 a 22.08.2013 | Ciclo 31 - 23.01 a 22.02.2016

OdebrechtAmbiental took loans at properties to check fat collection a total of BRL 651 million. boxes.A strong campaign in hotels and restaurants for awareness and Caixa is the manager for resourc- cleaning. More than 600 establish- es from FGTS and FDNE through ments were notified. Sudene. CidadeSaneada Program More than 1,400 people working in Benchmarks the program. 950 of them are Ode- brechtAmbiental employees. Investments were focused on recovering 1,200 kilometers of piping in More than 130,000 hours of train- 2 years (from a simple jam to the ing since July 2013. full replacement of piping to allow for residues to leave houses and 100% of service orders are fulfilled reach a sewage treatment plant). in up to 48 hours. This is a gain that the citizen, i.e., the user, is al- Verifications in 1,240 commercial ready realizing (see chart). 53 Along with this, when we Melhoria na prestação de serviço talk about changing the sanitation culture, we highlight the work done with operators, society and users in general to really appreciate the value of the sewage collection service.”

In terms of sewage treatment, the multiplication of information on example of Dancing Days is a re- water-borne disease prevention. gional and national benchmark on efficacy, with a jump to 1,299 liters Plummer workshop - Aims to from 541 liters per second of sew- share information, encourag- age collection. ing reflections on the sanitation culture and providing - the Social and Cultural Efforts oretical guidance on construct- ing and maintenance sewage Along with this, when we talk about connections. changing the sanitation culture, we highlight the work done with oper- Interacting with the Community - ators, society and users in general Aims to lead the discussion on en- to really appreciate the value of the vironmental and social responsibili- sewage collection service. ty topics, encouraging proper practices of SES use and preservation. The work is directly done on a regular basis with 20,000 people, Open Doors - Aims to raise aware- spreading information, meetings ness on several sectors of society and visits under several projects on the SES importance and the us- in private and public schools, nur- er’s responsibility by visits to the turing environmental awareness in ETE and EEE. partnership with healthcare professionals, including campaigns Environmental Citizen - This activ- against Dengue mosquito and Zika ity aims to raise awareness for en- virus, highlighting: vironmental topics and sanitation culture, as well as the importance MissãoAmbiental Program - Aims of their role as a professional and to develop informative activities citizen. with students and teachers with playful activities and environmen- Social work does not bring immedi- tal topics. ate results but ten years from now, a child of 7 or 8 years old will place AgenteCidadão- Aims to support greater value on sanitation services Healthcare Professionals on train- than our generation has put across ing support for communities with this decade. 54 The sanitation challenge in Brazil

Innovation used to feed trucks that clean sewage networks. New Network Register with cutting edge technology Biological treatment

A technical database of existing - Biological treatment method of sewage collection networks in the residual waters, characterized by: coverage area of this project was completed and is under ongoing - Increased energy savings (up to updating, so that service operators 30%); can identify by the use of a smart- - No emission of odors; phone which piping and network specification there is in the 15 cit- - Higher efficiency degree and cut ies of the Metropolitan Area and re- of operational costs gions outside. This map and register will be quite useful in the future, - Demand for areas 4 times with a margin of error of 8 centime- smaller than a conventional ETE. ters. Recycling Truck Laboratory

Another important point is the - ETE quality control - More than equipment that is able to unlock 430 tests/day show compliance to sewage networks through the reuse legislation; of effluents without the need for displacement. Some 80,000 liters - Cutting edge equipment; of water are saved daily, speeding - Qualified technical team; up procedures dramatically. Reused Water - Mobile Lab | efforts to raise awareness in communities; Treated effluents that would be released in a body of water is now - Partnership with Bioagri.

55 NORTHEAST Case Study 01: Hospital Couto Maia (State)

Expert in full management of mid- The role of PPP in the and high-complexity hospitals in management of hospitals clinical and non-clinical areas, the Grupo Sm is responsible for a case There is a high repressed demand in the State of Bahia, the Hospital in healthcare and the Public Admin- Couto Maia, a unit that treats pa- istration has a credit limit near to tients with infectious and conta- be exceeded. Yearly research show gious diseases. With 20 years of and repeat that public healthcare is experience and five contracts in op- the population’s main concern. eration, the group was recognized PPPs allow to speed up implemen- as the first operation to obtain ISO tation of this structure as their goal 9000 in all processes. is to put the project from the full The Brazilian healthcare market is operation of a unit or a network of relevant to the GDP as elsewhere in healthcare units. Thus, the Pub- the world. In 2014, BRL 195 bil- lic Administration has a faster in- lion were invested in healthcare and strument to develop and expand this amount grows above inflation, healthcare infrastructure. which is true all over the world. This There is a model based on the sup- way, healthcare always gets invest- port from the private sector, without ment or increase investments above the realization of profits but lacking inflation. Investments in healthcare Marcelo Mariani Andrade operational capacity to meet the are shared between the Public Ad- Presidente da SPE Couto Maia S.A existing repressed demand. Anoth- ministration and the private sector. er possibility is that the private sec- From the total invested, 46% comes tor provide expert teams with the from cities, states and the Federal culture of quality and control takes governments, while the rest is di- over. So, one can see how the mar- vided into private investments from ket is wide for developing PPPs in companies and from cooperatives this area. and healthcare insurers. Reasons to Implement PPPs Brazil invests basically the same in Healthcare: amount that other developing countries do. Brazil invests USD 971 per capita, roughly the same amount in- • High repressed demand for new vested by Argentina, Chile and Mex- services. ico. However, developed countries invest more and better. Portugal, for • Public Administration’s credit instance, invests twice more than limits are compromised. Brazil and the United States, the benchmark country, invests ten times • Huge popular appeal: Research more. This means that the Brazilian shows that public healthcare is the healthcare infrastructure has a lot main concern among Brazilians of room to grow and do. There is a (Source: Ibope/2014). huge, billionaire market to be made • PPPs can deploy new services in terms of infrastructure, especial- faster. ly in the North and Northeast of the country. Here enter PPPs. • A non-profitable business model 56 is not enough to meet all repressed cation of Dom Rodrigues Menezes. “PPPs allow to speed up demand, especially for complex projects. New Couto Maia’s X-Ray implementation of this

• The private sector can bring • Pre-operational (licenses + proj- structure as their goal is quality and low unit costs. ects + works + commissioning): 16 months to put the project from the The Couto Maia Institute • Operation: 20 years. full operation of a unit or There are two healthcare units a network of healthcare in Bahia that deal with infectious • Initial Investment: BRL 95 million. and contagious diseases: Dom Ro- units. Thus, the Public drigues Menezes and Couto Maia • Maximum Yearly Counter Pay- Administration has a faster (1853). Dom Rodrigues Menezes ment: BRL 42 million/year. is specifically focused on leprosy instrument to develop whereas Couto Maia deals with all • Unit profile: Hospital focused in infectious and contagious diseases infectious and contagious diseases and expand healthcare in the state with mid to high com- with 155 beds for hospitalization. infrastructure. plexity. As it is a century old unit, Law requires that the project is con- Couto Maia has outdated equip- ducted by a Specific Purpose Enti- ment and can’t be expanded. How- ty (SPE). In this case, such SPE is ever, both units have excellent clin- the Couto Maia S/A and sharehold- ical and medical teams that even ers are SM and Metro Engenharia, develop research and education. which was founded in a different The impossibility of upgrading and method. It was possible to sign a expansion forced the Health Secre- DPC contract and an operation con- tariat to conceive the Couto Maia tract. The SPE will build, operate Project, an administrative conces- and each shareholder will transfer sion to build, provide equipment, technology. operate non-clinical services and Building location maintenance services. The pre-operational term is 16 months that The technical sheet indicates a include licenses and demolitions as plot of land with 111,000 square there is the construction of the Cou- meters in Cajazeiras, near Águas to Maia Institute, in the previous lo- Claras, an area full of trees. The

Unidades de Serviços Clínicos

Unidade de Atendimento Unidade de Apoio ao Diagnóstico e Ambulatorial Terapia Ambulatório Patologia Clínica (NB2) CRIE (Centro de Referência de Imagenologia (Ressonância Magnética, Imunobiológicos Especiais) Tomografia, Raio X, Ultrassom, Farmácia Ambulatorial Endoscopia) Urg ênci a de Ba ixa e Média Comp lexid ad e Métodos Gráficos Unidade de Internação (155 leitos) Agência Transfusional Adultos (()85) Reabilitação Pediatria (35) Centro Cirúrgico Semi-Intensiva Adultos (10) Intensiva Adultos (10) Intensiva Pediatria (10) Hospital Dia (5)

16 57 There is also an outpatient Unidades de Serviços Não Clínicos unit with individual access for Unidade de Apoio Técnico Unidade de Apoio Logístico each service, A&E is separated SND (Servi ço de Nut ri çã o e Dietéti ca) Almoxarif a do Farmácia Manutenção (Eng. clínica) with independent entries, as Central de Material Esterilizado Conforto e Higiene shown in the floor plan.” Maqueiros Limpeza e Zeladoria Necrotério Segurança e Vigilância UiddUnidade de Ensi no e Pesqui sa IfInfra-Estrutura Pred ial Treinamento de Pessoal Administração da Concessionária Unidade de Apoio Administrativo Transporte Serviços Administrativos, Clínicos, de Telefonia Enfermagem e Técnico Mensageria Documen taçã o e Inf ormaçã o (TI) Bombeiro Civil Recepção Jardinagem Unidade de Appgoio Logístico Processamento de Roupa 17

company planned and the State • 14,000 square meters of roads Government accepted the creation of a green belt around the hospital. • Outpatient It will have an operational site with • Biologic center buildings, parking lots, heliport, always respecting the green belt and • Pharmacy the profile of patients that will remain an average time in the units • 155 beds for adults and chil- due to the treatment type. This dren, 30 out of which for inten- brings more attention to the human sive care and semi-intensive care aspect of a hospital. and 5 beds for day care. Structure’s Checklist Earthwork was optimized for parking lots. The West wing was spe- • 23,000 square meters of useful cialized for hospitalization. Biolog- area ic risks were mitigated through the • Parking lots conception of operational flows.

Primeiro Andar

58 Case Study 01: Hospital Couto Maia (State)

There is also an outpatient unit with in charge of upgrading equipment, a confusion from entities between individual access for each service, which requires ongoing invest- concession and privatization. A&E is separated with independent ments to keep the hospital’s oper- entries, as shown in the floor plan. ation and status. The technologic Concession is not upgrade risk, however, is borne by privatization Bid process and public the State. All other risks are borne guarantee Concession has nothing to do with by the private sector, such as en- privatization. The equipment and The bid process was lower price vironmental risks, engineering, op- the service are public, and the with offer and bid by voice in the eration, price variation, exchange Public Administration can get the stock market. The public guarantee rate, inflation and labor legal pro- equipment back by bearing costs. was separating resources from the ceedings, for instance. Controver- This way, there is a political risk in State Participation Fund, as usually sies are solved by arbitrage panel. the long-term contract. happens with other State contracts. The company appoints a member, Transfers are made by Banco do the State appoints another member In Brazil, few lenders can structure Brasil, which is also the manag- and a third member is appointed by long-term projects and companies er. The bank pays the concession- both. have no options. There are also few aire and the rest is returned to the teams specialized in structure pub- Difficulties to implement PPP lic health projects and healthcare State. An independent verifier as- contracts sesses performance on a quarterly has higher operational costs when basis. There is no fee for the count- Despite the popular appeal, there compared against other projects. er payment and it is fully paid by are some barriers to implement The conceding power has a limita- the Conceding Power, but 30% is PPP in healthcare. The first one tion of 5% to use its revenues. tied to performance. Payments are is guarantees, especially at the Public healthcare is a service with on a monthly basis. investment phase. The contract high social impact and the PPP is a works well in the compensation legal instrument that may support PPP Risks regime. However, during the in- its universalization. Qualitative and vestment phase, the private sec- A core principle for PPP is the quantitative research indicate that tor lacks a public guarantee for maintenance of the economic and efforts in healthcare have a huge re- obtaining resources. Negotiations financial balance of the contract, turn, generate high social and eco- with lenders are necessary to de- providing security for the private nomic impacts. sector to invest. The contract deter- velop guarantees during this phase. mines the risk that each party will Thus, PPPs came to stay, de- bear through a risk matrix. Here, The other barrier happens when spite difficulties. See the exam- the responsibility of the parties is the contract is unbalanced. In these ples of Portugal and Spain, that defined. The Public Administration cases, there is a period between have healthcare systems similar is in charge of demand variations, the request and the concession, to the Brazilian system, based on i.e., any excess from the contract, when it is possible to request an religious hospitals and universal such as an outbreak, will be require adjustment while the private sec- healthcare. It is different from the adjustment to the contract by the tor finances the loss caused by the English model, where clinical ser- State. Any changes in tax legisla- unbalance. The company is com- vices are under the State respon- tion also trigger contract adjust- pensated after an administrative sibility but it is the country with ment by the State. process. Thus, the company must the largest number of concessions. be prepared to finance this unbal- PPP is a very important tool and The concessionaire, by its turn, is ance for long periods. There is also there is no coming back.

59 NORTHEAST

Case Study 02 Lapa Station (Salvador)

Urban mobility is a key concern of Leveraging the technology, the Cit- the city of Salvador, as it is suffer- tamobi application was deployed ing from the increase on the flow of and has now more than 600,000 people and also by local degrada- users. The app brings benefits for tion. Salvador’s Lapa Station case users and managers alike. It allows is about a place with a very high the user to know beforehand the flow of people and required an ex- time of buses and the city to fully treme makeover. control bus stops, mechanical issues, speed and other elements. Using PPPs for mobility was started by the city’s previous administra- Mobility bottlenecks tion. At that time, it was thought of a public transportation concession. The capital of Bahia had several Then the Lapa Station concession mobility bottlenecks in the three entered the debate. main vectors of public transportation. In Cajazeiras, for instance, a The Station was built according to connection between Cajazeira 5 to an innovative project from the ar- Cajazeira 10 was made allowing chitect João Filgueira Lima, the fa- that people move from buses to the mous Lelé, and opened in 1982. Lapa Station and saving 30 min- Considered as a touristic spot for utes, enhancing quality of living for Fabio Mota many years, the station was in poor people to commute. City Secretary, Salvador Urban conditions and featuring structural Mobility Secretariat issues. Retorted iron was at plain Another bottleneck is the Subur- sight. The main issue is that all bana Avenue, the second most im- these problems were plaguing the portant vector to Lapa Station. For main station in the city of Salvador, this segment, a qualification work where approximately 450,000 peo- was considered specially in the Lu- ple pass every day. so region, ensuring arrivals to the station in only 45 minutes. The station was planned to be rebuilt by the Public Transportation The new Lapa Station Secretariat of Salvador. After restructuring vectors feeding The project established a bus con- Lapa Station, it was time to im- cession charging an encumbrance prove the station to match the sta- of BRL 180 million and demand- tus of the city, the third largest cap- ing that the bid winner would have ital in Brazil. The main goal was to an average fleet of 3.5 years. Due aggregate the upgrade of the new to the concession, 200 new buses public transportation system and starting driving around under a col- improve mobility. or code to distinguish the areas of the city. Another demand was the The Lapa Station concession had an installation of satellite navigation encumbrance of BRL 13,623,000 in all vehicles, allowing for a better and 10% of the amount of the actu- control of the fleet and establishing al value of use. The contract would an example for other cities as this is have 35 years and would total BRL the only fleet in Brazil with 24-hour 139 million. The bid winner should monitoring in every bus of the city. renovate and take Station’s main- 60 tenance on cleaning, lightning and basis. Today it is a bus and subway “Another bottleneck is the security - services poorly provided station, although the subway line by the State and heavily criticized has only 10 km currently. Suburbana Avenue, the by users. The selection of the hiring mod- second most important vector The concessionaire spent approx- el, public service concession, is to Lapa Station. For this imately BRL 21 million to rebuild a modern, transparent and effi- Lapa station. The important thing cient tool for the public manage- segment, a qualification work in this model is not only rebuilding ment as it makes possible a tem- was considered specially in Lapa station, as the city could do porary transfer of public services the same work but would not have for a company or consortium, that the Luso region, ensuring conditions to maintain it. demonstrates capacity to win the object. This is an instrument with- arrivals to the station in only The Lapa consortium started op- out paperwork. If the Lapa Station 45 minutes. erations in January 13, 2015 and was bid in traditional mode, bid, maintenance also started at that hiring and oversight would take at date. Works would last for 12 least one year. months but delivered before that - on March 29, 2016. The private sector is way faster than the Public Administration to Station’s Mall make a work. Thus, the Lapa sta- The second part of the project is tion is not a public work but a con- a mall. Lapa is near the convent, cession made within this model. an area comprising 34,000 square Project challenges and meters. This is the object, a con- opportunities: cession of public services for management, operation and adminis- • The need for a specific Law to tration of the station, concession of authorize the concession. These use of existing facilities for renova- are the basic requirements to make tion, maintenance, restoration and a concession: To elaborate a feasi- the concession of land next to the ble, attractive concession involving station for deploying the mall. costs - BRL 140 million approximately in this case. The work was performed in the Cleriston Andrade building, with • Possibility of exploring commer- floor and basement, in front of the cial areas within concession limits. platforms and its construction will Lapa has today 64 stores and the last 24 months for a mall with future mall will have 240 stores. So more than 200 stores. the concessionaire will have 304 stores. The concessionaire, in addition to renovation work and maintenance, • Possibility of charging a fee for is also responsible for adminis- parking lots. tration, operation, maintenance, cleaning, security and zoning. Zon- • Possibility of exploring ancillary ing for the informal trading areas revenues from advertising and oth- around the station. The circulation er activities within the station and of people totals 450,000 on a daily the future mall. 61 The private sector is way • Work Group structured with sev- ly monitored and there are security eral technicians from the city office agents all over the place. faster than the Public to analyze the elemental principles QUESTIONS Administration to make a involved. Such Work Group structure was already formed, actually is Carlos Henrique de Oliveira Pas- a 35-year Assessment Committee, work. Thus, the Lapa station sos – SINDUSCON-BA: Marcelo, always rotating members. is not a public work but a I realized from your presentation The expectation for future conces- that your SPE is in charge of the concession made within this sions under the SPE model pro- non-clinical service, so I suppose the State will provide clinical ser- model.” vides a great deal of comfort and transparency to the Public Admin- vices. Do you see any risk or issue istration and to citizens. A SPE fits from this management combina- into the stock corporation legislation, or what impact does a poor tion, which requires the publication public service delivery have to your of balance sheets so there is anoth- performance in the non-clinical er element for oversight both of the service? Public Administration, enhancing Marcelo Andrade – SPE Cou- its control as every quarter a new to Maia: We have discussed this balance sheet is published and with the Conceding Power and I even to support an eventual adjust- have discussing this with the inde- ment request, and of the conces- pendent verifier at the time of as- sionaire itself, that can assess the sessment of indicators, as some business on a daily basis. of them are opinion research. So Lapa Station differentials if you have a patient that believes was poorly served by the medical Access is one of the project’s high- team, this can impact his/her opin- lights. An assessment made before ion about other services. This risk the new project showed that it was exists and must be controlled. First, the least accessible station in Bra- the way you make the questions zil. So 11 escalators were replaced must be considered. Second, it is - one of them the largest in Latin about control groups, having as- America. Two kilometers of path- sumptions tested, making the same way for the visually impaired were questions about clinical services for deployed, improving accessibility. those who liked it and those did not like it to see if the opinion on Adding to accessibility efforts, two the service is relevant or different elevators were added, one exclu- from those who did not liked clini- sively for mobility impaired peo- cal services and if affects judgment ple and another for goods. Anoth- about my non-clinical services. So er benefits to the public in general we are going to cover this statically were the installation of a fire detec- tion system, firefighting system, cli- by creating a focus group, the con- mate control in bathrooms with ex- trol group and this was a topic in hausting system and granite floor. the discussions with the independent verifier, we need to have a sta- Focusing on the security for the tistic treatment to mitigate this. But whole population, a CCTV system this has been our concern from the with 90 cameras was deployed. In onset, we made questions even be- other words, the Lapa Station is ful- fore the bid. 62 Case Study 02 Lapa Station (Salvador)

Carlos Henrique de Oliveira Pas- Marcelo Andrade – SPE Couto “Focusing on the security sos – SINDUSCON-BA: What are Maia: Thanks God, it has never the performance indicators for Lapa been triggered. for the whole population, Station and will new investments a CCTV system with 90 be required due to the increase of Letícia Queiróz – Queiróz Maluf passengers caused by improve- Advogados: Is there any friendly cameras was deployed. ments in the bus system or by the resolution mechanism? They work growth of the waterway system? Is very well in these contracts, don’t In other words, the Lapa they? this something you expect? Station is fully monitored Marcelo Andrade – SPE Couto Fábio Mota – City of Salvador: and there are security There are two concessions, two Maia: Yes. There is an Adminis- different models and for the pub- trative Committee formed by three agents all over the place. lic transportation system, it is clear technicians - one appointed by that the most important indexes the concessionaire, another by the and parameters are those related to Conceding Power and the third is the improvement of Salvador public appointed by both, and if this com- transportation system. In the con- mittee fails to find a solution then tract itself we created the oversight the matter goes to arbitration. Ab- and compensation mechanisms solutely, any controversy is solved and the fee is related to the satis- at arbitration and the Brazil-Cana- faction levels of all these vectors. da Chamber of Commerce. As I mentioned, technology, which Letícia Queiróz – Queiróz Maluf is our main allied in Salvador today, Advogados: And the Chamber fol- sends us 108 reports every day as lows the whole contract or is it only we have satellite navigation in each triggered in case of controversy? bus geo-referencing each bus stop in the city. When the bus passes by Marcelo Andrade – SPE Couto such geo-referencing stop, all in- Maia: Only in case of controver- formation related to it is extracted sy. Now, the contract is overseen and sent to our Operational Con- by the Conceding Power through trol Center, such as trips scheduled ad-hoc and permanent commit- for Fazenda Grande - Pituba were tees and the independent verifier. made, if the intervals are within the Ad-hoc committees exist because scheduled range, if the itinerary de- some milestones arise only for a fined by the city is being met and single phase. The assessment of so on. So the parameter is connect- projects has an ad-hoc committee ed to this satisfaction levels from only for the project, the assessment the Public Administration and also of real estate encumbrance list has from the quarterly surveys conduct- an ad-hoc committee only for this ed in selected spots. list and when this is accomplished, the committee is dissolved. And Letícia Queiróz – Queiróz Maluf there are a permanent committee Advogados: I have two questions, by the Conceding Power and an in- one for each speaker. Marcelo, the dependent verifier that last for the first one is for you, about the arbi- whole contract. trage clause - has it been utilized? Is there a separation of matters Letícia Queiróz – Queiróz Maluf where some go the court and oth- Advogados: Now a question to the ers to an arbitrage panel? secretary. I would like to know, es- 63 Case Study 02 Lapa Station (Salvador)

pecially for the Lapa station proj- in buses are split 50/50 between ect, how ancillary revenues were the concessionaire and the city. covered by the contract, as they The same model is applied to La- seem relevant to me and if they are pa station, where ancillary revenue shared or not, and how they were is obtained from advertising. This is projected in relation to the revenues a model unique for the city, which from fees. has created an office to oversight Fábio Mota – City of Salvador: the contract. In addition to inde- There are two models. Let me get pendent verifiers and committees, back a little. For public transporta- we also have a city office that over- tion concessions, 50% of ancillary sees and defines on any incorrect revenues goes to the city and 50% when they happen or fix imperfec- stays with the concessionaire. For tions in the contract. There is an in- example, revenues from advertising ternal management.

64 NORTHEAST

PPPs: Opportunities for investors

The PPP model is advantageous in the world’s history; for the Public Administration as it opens a wide range of opportunities • In 1299, the English royalty ob- for the private sector on what con- tained a loan from Frescobaldi, then cerns to investments. one of the largest Italian banks, to develop silver mines in Davon For this reason, it is with a financial structure based important to highlight three in assets. Another example of as- points: set-based financing took place cen- turies later when Iberian countries • Of course, the first one is the quality and structure of projects, so in financed their great discoveries this regard the State of Bahia Guar- • Due to a lack of resources in glob- antee Structure will be explained as al markets at the second half of the well as some of the projects already 20th century, new finance engi- in progress in the state and others neering arises with the goal to cre- in development or study. ate new financing alternatives spe- • Second, and quite important, is cially for infrastructure; the State of Bahia Guarantee Struc- • Dissemination of project finance ture, bankability and financiability in the US started with the passing of projects, once any Concession and PPP project must have eq- of the Public Utility Regulatory Pol- Rogério Princhak uity inputs or financing from pri- icy Act6 (Purpa). This piece of leg- PPP Executive Secretary, Government of Bahia vate partners, that get loans from islation was a critical step towards banks such as BNDES, Banco do the structuring of asset-based fi- Nordeste and others. This is the so- nancing by establishing contract called Project Finance. long-term obligations and became quite used in the USD and Britain. • And finally, third but not least important, is the long-term hiring and Project Finance characteristics how to mitigate political instability It takes place as a separated eco- risks, requiring a guarantee structured for the private partner for the nomic investment, preferably as public counter payment even un- a Specific Purpose Entity (SPE); der government changes and differ- High investments demanding high ent institutional and governmental leverage from shareholders if fi- scenarios. nancing was achieved by corporate financing; Project Finance Reasonable forecast level upon • This is defined as a financing cash flow and return rate, as in a model which assessment process, natural monopoly, thus reducing structuring and loan is based pri- market related risks for the service marily in the project’s financial ca- of product. pacity; loans are granted to a separated stock corporation, the SPE; • Segregation and risk allocation between multiple participants with • Project cash flow based financing reduction of joint liability between starts with large ventures recorded partners. 65 This is defined as a Possibility of creditors/interested Resistance parties to take effective measures financing model which to take over contract’s execution. But this model faces resistance from BNDES and Banco do Nor- assessment process, Situation in Brazil deste, both demanding additional guarantees from the private partner structuring and loan is based This is brand new mechanism in during the project’s implementation Brazil as the assets of companies primarily in the project’s and execution phases. in the business to be hired are financial capacity; loans are segregated as guarantee through Hence the first conflict arises, when a SPE. So the asset itself is the granted to a separated stock the model is designed and the pri- guarantee, which is the business vate sector will require such addi- corporation, the SPE.” itself, that will be responsible for tional guarantees, raising financial payment. This is a critical matter costs. However, control entities, that requires attention and qual- such as Federal and State Account- ity to the model for the process. ing Courts, argue against this mod- And this is crucial. Project finance el specially about the famous bridge started in Brazil around 1990, loans that make feasible launching when the privatization process is the business. launched. So this is an important concept for companies requiring fi- This is the first problem that also nancing: Leverage equity, i.e., part can be understood as a cultural is- of its own capital having the proj- sue, in the sense to raise awareness ect itself as guarantee. and show to banks that the project is feasible. And a good project This discussion starts in Brazil and is expensive. So a good mid-sized needs to mature among banks and to large model does not cost less long-term borrowers so existing al- than BRL 3 million or BRL 4 mil- ternatives for long-term financing lion as these are long-term projects can be deployed as fast as possi- with 15, 20 or 30 years. ble, along with other loan options, such as infrastructure bonds and Due to this business aspect, we other creative loan methods from have in Brazil an evolution on hiring the private sector. methods and nature, that is deeply

Estrutura do Project Finance

Poder Acionistas Concedente

Construtoras Instituições de Crédito e SPE Fornecedores Financiadores (locais e Operadoras externos) Seguradoras

Receita/Serviços e Produto Final Pacotes de Trustee: Garantias: recebíveis Cauções de Ações, + Direitos conta reserva Usuários Emergentes, Penhor de recebíveis, Conta Reserva, etc.

66 PPPs: Opportunities for investors

connected to how revenues will be rization to provide subsidies be- “In Brazil around 1990, achieved. Public works governed by fore the bid. This is the big differ- Law 8666 receive resources as the ence: The possibility of reimbursing when the privatization service is being executed. investments. process is launched. So this Revenue Generation Legal Aspects is an important concept Capacity: Concession vs. PPPs Limitations of Law 8666/97: It for- for companies requiring bids the inclusion to the object of For this reason, there is the Con- an administrative contract for ser- financing. cession Act, as it determines that vice of a forecast to obtain finan- subsidies can be granted during the cial resources to finance install- construction phase once there is a ments and restricts the combina- specific authorization, and then the tion of two objects (service delivery evolution to a sponsored PPP con- + works, for instance) tract to an administrative contract Law 8.987/95: It allows the pri- PPP, where initially the payment to vate partner to provide infrastruc- the private partner would only start ture and to be reimbursed with the from the onset of operations but rights to explore it economically. there is a change allowing that part of resources are invested during the Payment mechanisms for construction phase. PPP contracts

This provide fiscal benefits as Tax There is also a cultural issue plac- Income is not applicable as there ing barriers on control entities, is no revenue and PIS and COFINS Caixa Econômica Federal, and the are deferred and diluted to the next Federal Government on how re- moment, which is limited by the sources will be released. maximum depreciation term, amor- tization, to contract term. The Law guiding PPPs have operational milestones that usually bring So this is actually the mechanism some issues. For instance, a sub- that governs and sets the PPP con- way contract with a provision of tract apart from the Concession State inputs, forecast that resourc- contract unless when there are es will be transferred from the fed- subsidies, since there is an autho- eral budget and interest rates from Relação Marco Legal / Capacidade de Geração de Receita dos Projetos

Concessões 8.987/95 5 9.074/95 PPP PPP 11.079/04 Projetos auto- Lei e sustentáveis 11.079/04 Lei das Licitações e Contratos Administrativos Projetos parcialmente 8.666/93 sustentados com contraprestação pública

Projetos tradicionais de investimento público

67 Law 8.987/95: It allows loans made by the State from Caixa this is about long-term contracts, to finance and reduce project costs requiring proper guarantees to pro- the private partner to during its implementation period. vide comfort to the private sector provide infrastructure and to the lender, as the PPP Bill For instance, when we did the BA- determines step-in rights. and to be reimbursed 092 highway, an overhead walkway was defined as an operation- This is the right for the lender to with the rights to explore al milestone, but when the curve take over the business in case of it economically. radius was projected it was found default, including part of counter that there was a transmission line payments. ” and the risk of these interferences would be borne by the state. Object: The segregation of 12% of the amount received by State of Ba- After that, an underground walkway hia from the State Participation Fund. was built. Caixa Econômica Feder- al did not release the resources for Goal: To have a simple mechanism the walkway, which was not even that ensures public counter pay- 1% of the total, simply because it ment flows irrespective of public was an underground walkway and budget, resistant to political inter- not an overhead walkway. ference and compromising only the required resources. We have this expertise, we cannot be so generic and not that specific Guarantee: 18% of FPE is transferred either. We had to change the con- as per State Law 11.477/2009 to tract to forecast this operational Desenbahia and automatically to benchmark by going to the Ministry the concessionaire, for the fulfill- of Cities and Caixa Econômica Fed- ment of State of Bahia obligations eral, which were informed about with PPP contracts. the incident. These barriers persist Method: Umbrella Contract de- in Brazilian legislation. termines the opening of a current State of Bahia Guarantee account separated from other ac- Structure Model counts held by Desenbahia and payments performed by the Pay- The government shall offer to the ment Agent from a power of attor- private sector robust guarantees as ney granted by Desenbahia. Mecanismo de Pagamento nos contratos de PPP

Período de Período de Operação Construção

Aporte Pagamento ocorre com a entrega

Contraprestação Pública Contraprestação Ressarcimento dos serviços e é baseado nos níveis de de performance do parceiro privado Investimento

3 10 15 Anos

68 PPPs: Opportunities for investors

Surplus: Returned to a single is regulated by contract attached account to PPP contracts, allowing for the opening of a specific account. Revenue obtained by the State of Bahia Article 3: It determines that balance in excess from FPE resources are re- Under the PPP payment mechanism turned to the State of Bahia Trea- with resources from the State Partic- sury when all counter payments are ipation Fund (law 11.477/2009), done. there is a legal controversy to clarify if resources from the SPF is tax State of Bahia has a tested or not. guarantee structure

This is because the Constitution To make large infrastructure works prohibits tax linkage. However, feasible, Bahia created a partner- it was determined that resources ship guarantee fund that allows for from the SPF are not tax as they capital pay-in of up to BRL 750 are originated from taxes charged million. For the moment, the fund by the Federal Administration, such has BRL 250 million to guarantee as IPI and Tax Income. the partnership for the subway, a contract signed in 2013. Financing Main devices on the State was granted by BNDES. law The resources are maintained for Article 1: It is expressly autho- 24 months. Then the guarantee is rized: The financial agent to trans- reduced to BRL 200 million, main- fer to Desenbahia 18% of FPE to tained in the fund for another 24 pay obligations from State of Ba- months. At the end of 48 months, hia for PPP contracts; ii. Desenba- BRL 67 million (or the equivalent hia to authorize the financial agent to 6 counter payments as deter- to transfer resources directly to the mined by the contract) will remain concessionaire. in the fund.

Article 2: It allows that payment At this point, the subway will be procedures (resource flow and operational and this amount will movement) by the Payment Agent be retained to ensure resources if

Fluxo Financeiro dos Recursos PPP no Estado Fluxo de Pagamento

Repasse FPE UNIÃO BANCO DO 1º BRASIL

2º Travamento de 18% do FPE Contrato (Lei Estadual)

ESTADO SPE 4º 3º Conta Excedente Corrente Contraprestação Específica

DESENBAHIA Operada pelo Banco do Brasil

 Mecanismo que mitiga risco de inadimplência do Estado da Bahia

69 Underwater sewage pipeline fees can’t be raised, which would Legitimacy: Desenbahia and the increase the value of counter pay- State of Bahia will grant an irrevo- - One of the first PPP in ments from the State. cable and unchangeable mandate sanitation in Brazil at a cost to the Payment Agent to perform The biggest challenge for large in- custody, movement and manage- of BRL 259 million. The frastructure works, such as subway, ment operations in order to pay demanding high investments and State of Bahia contract obligations land portion of the work was long terms, is a guarantee system to Concessionaires that have signed that is able to reduce risk and the excavated using pipe jacking PPP Contracts. cost of business. technology.” Main obligations: Without any guarantees in this type of project, the State needs to • To place in custody, movement raise counter payments or the fee and manage resources destined to is above population’s capacity to Accounts; pay. This renders the project as not feasible. • Directly transfer to the private partner the resources for the public To meet the need for counter pay- counter payment; ments, Bahia also puts aside 18% of resources from the FPE (State • To control the flow of resources in Participation Fund, State Law the Account. 11.477/2009). Desenbahia: (i) To keep in effect At the first moment, this resource powers granted to the Payment does not even arrive at the State Agent to operate the Revenue Ac- Treasury as it is segregated and count; (ii) Report on the existence then used to pay counter payments. of administrative or legal proceed- Only the remaining balance is re- ings that may affect the Accounts; turned to the State coffers. State of Bahia: (i) To set FPE re- Payment agent sources apart for guarantees (beyond contract); (ii) Report month- Banco do Brasil S.A., bank appoint- ly to Desenbahia the amount for ed by Law to operate and move public counter payment, and then FPE resources. Desenbahia will report to the Pay- ment Agent; • Responsibility: It answers only for the default on meeting contract • Desenbahia will receive a fee obligations under limits determined for operationalizing the guarantee by the contract. as negotiated with the Economy Secretariat. • Compensation: Fees to be negotiated and included in the contract. Private Partner Obligations and Rights • Waiver/Termination: The Payment Agent may waive by a previous no- • To receive amounts owed by tice or be terminated if it does not State of Bahia directly from the fulfill its contract obligations. transfer of resources from a Specif- ic Account. • Terms/Custody: In the case of waiver or termination, a term of 90 • Provide any of its emerging rights days is granted to replace the Pay- from the contract as a guarantee for ment Agent; Custody obligations re- financing. main in force. • The private partner is not allowed Desenbahia and State Obligations to make direct use of resources de- and Rights posited to the Specific Account; 70 PPPs: Opportunities for investors

such use is solely made by the Pay- So think about it, I have a fee- “The payment to the private ment Agent as per Contract’s terms based revenue with a growth curve and conditions. as forecast in the contract that is partner would only start from 70% of inflation plus 30% of en- • Unconditional, full adherence to the onset of operations but ergy variation change, as indicated the contract. by the Getúlio Vargas Foundation, there is a change allowing Adherence of New and the public fee, which is a po- that part of resources Concessionaires litical fee. are invested during the • The Guarantee Mechanism for So, at any given time in this curve the payment flow as created by the public fee may not cover the construction phase. State Law and the contract is used compensation fee in full and the in- in PPP projects of the State of Ba- tegration transfer fee that the sys- hia through unconditional, full ad- tem is paid for from buses. herence of concessionaires to the contract’s terms and conditions. A guarantee fund can close this gap. With this, potentially from a legal • The addition of a new conces- standpoint, there is plenty of room sionaire will be formalized by the for hiring new operations, which signing of a Contract Addition Term. greatest amounts will surface from 2018 to 2020 when I am going to • As a new concessionaire is added, compromise 2%, that is when the FPE resources will be transferred to subway starts operation and Cou- its current account according to an order of preference by time for con- to Maia also will be operational. So tracts entered into by the State. we still have a margin of 3% to hire new PPP projects. Guarantee - Payment Flow Need for Changing Imagine the PPP revenue struc- Legislation ture for a subway, constituted by a capital input during the investment Law 12.610 dated December 27, phase, counter payment and com- 2012 - Authorizes the Executive pensation fee, which is the fee paid Branch to create the Bahia Partner- by the user and the State captures ship Guarantee Fund (Fundo Garan- the public fee which is the user fee. tidor Baiano de Parcerias, FGBP);

Informações Financeiras

2015 2016

RCL 27,2 bilhões 28,1 bilhões

Limite de 5% 1,3 bilhões 1,4 bilhões

Contratos Ente 328 milhões 450 milhões Federado Contrato Estatal não 64 milhões 71 milhões dependente Total contratado 393 milhões 521 milhões

Limite 1,2% 1,6% comprometido

71 The addition of a Initial input of B RL 250 sion to rebuild and operate the million Fonte Nova Stadium. new concessionaire • Adjustments to be made: – Fund’s • Concession Term: 35 years; 3 will be formalized feedback; – Receivables from FUN- years for executing the works DESE; – Royalties. by the signing of a • Monthly Counter Payment: BRL Contract Addition As for constitutionality of 12,231,949.98 for a 15-year revenue linkage term. Term. ” - This is not a tax-originated in- • Investment: BRL 591 million. come for the State so it is not subjected to article 167, item IV • Guarantee: Payment flow from and paragraph 4 of the Federal resources segregated from the Constitution; FPE.

• It is not an actual guarantee (it Hospital do Subúrbio can be subjected to pledge) • Object: Administrative conces- - Budgetary guarantee that is ties sion for hospital management and a revenue stream to public counter operation. payments for PPP contracts; • Concession Term: 10 years.

- Thus it ensures the payable-re- • Concessionaire’s investment: ceivable flow; BRL 36 million in equipment.

- It allows pledging credit rights for • Monthly Counter Payment: BRL the SPE in the next phase. 15,809,397.61.

PPP projects implemented in • The unit is well regarded by Bahia users in general terms, fulfilling Underwater sewage pipeline - One quantitative and qualitative perfor- of the first PPP in sanitation in mance levels. Brazil at a cost of BRL 259 mil- • Guarantee: Payment flow from lion. The land portion of the work resources segregated from the was excavated using pipe jacking FPE. technology. Instituto Couto Maia - Innovative • Object: Administrative Conces- project with international awards sion for building and operating in the Health area, with invest- Jaguaribe Ocean Disposal System. ments in equipment and medical • Investment: BRL 179 million. service delivery, with compensation systems and mechanisms for • Concession Term: 18 years; 2 quality control, transparency that years for executing the works. Start are extremely interesting. of works: June 2008 and Start of Operations: May 2011. • Object: Administrative concession for building and delivering • Monthly Counter Payment: R$ non-medical services. • Conces- 5,907,955.07 for 183 months. sion Term: 21.4 years; 1.4 year for executing investments. • Guarantee: Embasa receivables, a non-dependent state-owned • Investment: BRL 96 million company. • Monthly Counter Payment: BRL Arena Fonte Nova Stadium 3,515,027.17

• Object: Administrative conces- • Situation: Earthwork. 72 PPPs: Opportunities for investors

• Current situation: In transition.

• Initial Investment: BRL 80 million.

• Guarantee: Payment flow from resources segregated from the FPE. Projects being assessed/ studied

VLT – Comércio/São Luiz

• Object: VLT Salvador implementation, operation and maintenance to replace the current train system.

• Sponsored PPP.

• Investment: BRL 1.1 billion.

• Segment: 20 Km • Guarantee: Payment flow from resources segregated from the FPE • Stations – 23.

Salvador and Lauro de • Operation: Phased and complet- Freitas Subway ed in 36 months.

• Object: Sponsored concession for • Yearly counter payment: Calculat- Salvador and Lauro de Freitas sub- ed at BRL 112 million. way (34 km). BA-052 Highway System • Concession Term: 30 years • In- • It is the renovation and mainte- vestment: BRL 3.6 billion • Month- nance of a highway system com- ly Counter Payment: Full operation: prised of BA052, BA148, BA432 BRL 14,742,848.28 • Current sit- and BA160 highways totaling al- uation: Partial operation. • Public most 685 km, and the construc- guarantees: Payment flow through tion of a bridge between the cities resources segregated from the Ba- of Xique-Xique and Barra. hia State Guarantee Fund (FPE Fundo Garantidor Baiano de PPP) • Where it stands now: model be- with BRL 250 million. ing defined in partnership with BNDES/IFC. Image-based Diagnosis Service Network • Schedule.

• Object: Administrative concession for management and operation of services to support diagnosis through medical imaging in an Imaging Center and 12 hospitals.

• Concession Term: 11,5 years, with 1,5 years for works and transition activities.

• Monthly Counter Payment: Full operation: BRL 8,208,819.86. 73 PPPs: Opportunities for investors

• Public consultation: July 2016. • Services hired: Probing, Sea Hi- drology, Preliminary Draft, Envi- • Bid: October 2016. ronmental Impact Studies, Cultural • Hiring: February 2017. Impact, Intangible Assets, Review of Urban Planning of the cities of West Road System Itaparica and Vera Cruz.

• Object: Building and operating a • Amount: to be defined, but it will highway between the cities of Sal- be comprised of: charge of fees at vador and Itaparica (12 km), a road the highway/bridge, resources from between the bridge and the BA001 Bahia and Federal Administration, highway until BR 242 highway trying to minimize the need for (150 km) to develop the Baixo Sul counter payments to a maximum. region. • Estimated value of investment • Modeling: Mckinsey & Company, according to PMI is of BRL 7.3 hired by Seplan. billion.

74 NORTHEAST PMI for Public Parking Lots in Salvador

The Procedure to Express Interest in Context public parking lots in Salvador is similar to a reality we live here in Brazil. A survey on the current situation of parking lots in Salvador found The PMI aims to drive participa- that the private sector would pro- tion of interested parties to elab- vide this service much better than orate technical studies covering the city itself, and then a pre- technology, engineering, architec- liminary draft for feasibility was ture, technical, environmental, conducted. economic-financial, legal feasibility, in addition to traffic and supply What do these studies look for? and demand studies as detailed as Subsidies to elaborate the future to subsidize the future hiring of a concession for public parking lots concession to explore a parking lot, in Salvador. horizontal and vertical signal services, existing parking lots and so Opportunities on, comprising works, implementation, maintenance, operation and Both for exploring the service itself management of service according as for the construction of facilities to the Benchmark Term. as expected in the Salvador PMI structure, new opportunities for In general, parking lot business are plenty. Eduardo Leite services: Director, SEMOP (Salvador City Models that upgraded Brazilian Public Security Secretariat) • Are poorly delivered; cities on managing their parking lots are supporting the conclusion • Provide low security and con- of the procedure, especially Rio venience to users and service de Janeiro’s, but technologies are vendors; being adopted in several Brazilian • Use old technology (printed cities, such as: cards) that makes hard to follow-up payment and properuse of Recife/PE; Rio de Janeiro/RJ; Por- parking slots; to Alegre/RS; Florianópolis/SC; Rio Branco/ AC; Fortaleza/CE; Gua- • Benefit informal service rulhos/SP; Caraguatatuba/SP, ABC providers. Paulista/SP; Lavras/MG; São José dos Campos/SP; Araucária/PR; Pelo- New opportunities tas/RS; Caruaru/PE; Petrolina/PE. The future concession of parking The PMI’s notice was published in services will bring new opportuni- May 20, 2015, giving 20 days for ties based on the Procedure to Ex- the private sector to manifest inter- press Interest, some of them are: est whether by individuals or com- • Exploration of parking lots in panies, alone or in consortia. Salvador. Two companies approached the • Construction of buildings for city: Shopping Boulevard 161 and parking lots or underground park- Hora Park Sistema de Estaciona- ing lots. mentos Rotativos Ltda. 75 Both for exploring the The Evaluation Committee voided • Increase rotation on parking Shopping Boulevard 161 propos- slots usage, allowing for more service itself as for the al as it would manage parking lots people to use them construction of facilities near their own mall. The company Hora Park met PMI requirements • Increase traffic speed by reduc- as expected in the and then was granted authoriza- ing time spent on the search for tion to perform the studies. parking slots Salvador PMI structure, Market • Encourage the use of public new opportunities for transportation Authorization granted to Hora Park business are plenty.” does not prevent that any other in- • Ease to pay. Example: cash, terested part joins the bid for con- bank cards, smart cards, electron- cession to be defined by the Ad- ic tickets, internet or mobile. ministration. It also grants no ad- • Increase of security to users and vantages in a future bid. service providers Costs to perform the authorized • Improve working conditions for studies are not reimbursed by the current service providers City but by the future bid winner, only if these studies are fully used. • Discourage clandestine work. In other words, the risk of investing Mobility in performing studies is fully borne by the company, as article 21 of It is worth mentioning that incen- Federal Law 8.987/95 (Conces- tives to parking lots are connected sions Law). In Salvador, it is reg- to the Urban Mobility Policy as the ulated by City Decree 23.396/13. topic is related to the Parking Lot Policy, governed by Law 2587, the For this specific PMI, studies Urban Mobility Law, guiding the would be reimbursed up to BRL elaboration of the procedure to ex- 2 million. It is worth remember- press interest. ing that the city is not paying for that - the future concessionaire Also we were concerned about will. So the studies will be reim- speeding traffic as parking lots can bursed after the bid, by the win- be deployed or removed according ning consortium. to the situation and in line with the planning of an integrated transpor- If the concession is no granted, tation network. which may happen according to the PMI’s notice, the company is Planning considers future subway not reimbursed. So all parties are lines and the Bus Rapid Transporta- aware that this a high-risk negotiation that will be operated by the city. tion. Well, it is regulated by Decree 23.393 in Salvador. So there is the concern of integrating not only the public transporta- Benefits that must be tion but the system in itself with included in a PMI the urban mobility at the center, as it is one of the current concerns. • Expansion of parking slots to 15,000 from 7,400 Furthermore, there are convenient payment methods for the user, • Charge fair value for the period such as apps, electronic cards or used physical mechanisms as the me- • Construction of buildings for ter, providing security and conve- parking lots operated by robots or nience to the user. underground parking lots Also it is important to highlight 76 PMI for Public Parking Lots in Salvador

the situation of Sindiguarda union- hiring of a concession to explore a ized workers that sell parking lot parking lot, horizontal and vertical cards under Transalvador oversight signal services, existing parking - Transalvador issues and sells the lots and so on, comprising works, cards to Sindiguarda which trans- implementation, maintenance, op- fer the cards to the workers; they eration and management of ser- get the money and transfer it to vice according to the Benchmark Transalvador. Term. This is not an effective operation Study Submission based on a consistent legal and formal relationship. Report 1, comprising basic studies, and report 2, that would be The procedure shall find options economic-financial feasibility stud- to end with the large scale clan- ies, define the PMI. destine work, non-unionized street workers but still perform their work The first report was submitted and without any legal support. forecast the division of meters; one meter for each 20 vehicles; pay- Even the card selling system by ment means (as electronic card, a Transalvador is faulty and will mobile app, the meter itself, there be replaced by a more efficient is the possibility of reload, issues system. related to service channels, an om- PMI budsman related to service delivery and so on). PMI’s technical studies shall comprise technology, engineering, ar- Economic and financial feasibili- chitecture, technical, environmen- ty studies will arrive by the end of tal, economic-financial, legal fea- April 2016, as well as legal analy- sibility, in addition to traffic and sis and the presentation itself that supply and demand studies as will be used as the future model detailed as to subsidize the future for the reference term.

77 NORTHEAST

PPP for Public Lightning

The Public Lightning Office of the In Salvador, the Public Administra- Public Order City Secretariat is re- tion decided in 2015 to study this as sponsible for the public lightning sys- it received an invitation from a com- tem in Salvador and provide several pany to do so. A public invitation was services such as pole maintenance made, then an assessment commit- and lamp replacement, expansion of tee was created to work on proposals the lightning network and lightning from eight consortia to perform stud- for events. ies to improve or increase efficiency of the city’s lightning network. The city’s public lightning is managed by a fund called FUNCIP, with The Public Administration’s reference resources from payment of bills from terms requested three simple stud- houses and companies. The city has ies for BRL 1 million each, a finan- a surplus as it is able to collect ex- cial-economic study, legal framework actly what has been spending with and the operational-technical model. public lightning. These studies will enable a bid’s no- It all started at September 9, 2010, tice for the future concession. The when the National Energy Office first invitation was attended by sev- (Agência Nacional de Energia Elétri- en companies, but only three of them Bruno Barral ca, Aneel) issued Regulation #414, met all requirements. Then they had Director General for Services, SEMOP determining new general conditions 60 days to submit a diagnosis. for power supply. In other words, the city is responsible for public light- This is where we stand. One of the ning, i.e., they must deliver opera- studies, for instance, intends to re- tion (a toll-free line for the popula- place 100% of the network in 36 tion) and the replacement of lamps, months under a 30-year concession. lighting fixtures and all equipment re- This is not feasible, the Public Ad- quired for the proper service delivery. ministration wants the private partner to work on something smaller, The question is that some cities, like 70% of the network in 4 years. namely smaller ones, are fighting The bid will be created upon the this resolution in court. They claim analyses of all proposals. that there are no financial resources to bear the costs brought by the new Salvador paid some BRL 3.5 mil- resolution. lion for the lightning service, which caused a savings program to reduce As many cities lack know how to the lightning bill to BRL 3 million. If manage these services, there was the Public Administration managed a stampede to launch PPPs for this to obtain such savings, I wonder sector using the FUNCIP. what the private sector can do once they have better technology as pow- For small cities with less than 8,000 erful lamps that use less energy in all lightning points, for instance, it was poles in the city beaches? thought to form a consortium of cities. For this, the challenge is to The city of Salvador will get these overcome difficulties and political studies ready this year so the PPP is differences. launched in 2017. 78 Fortaleza opens its doors for Concessions and PPPs

The city of Fortaleza has poten- pending approval from City Coun- tial for new investments in Con- selors and shall be developed cessions and PPPs. The city has soon. This is a means to improve expressed interest and is open to the city’s infrastructure. The Pub- partners in small, mid-sized and lic Administration can’t meet all large projects on several types and demands alone; the private sector methods through which a PPP can must be brought in to help. be structured: According to Law The private sector is able to im- 11.079 and also Public-Private prove Public Administration proce- Partnership Law. dures by reducing paperwork, one The city is mostly interested in of Brazil’s main bottlenecks. urbanism and environment. The A Public-Private Partnership to be Urbanism Secretariat is current- launched in urbanism and envi- ly working on five projects: Three ronment is a joint operation in For- are completed, one is in prog- taleza downtown similar to a Pub- ress and the last one is about to lic-Private Partnership, which is a be launched, while other two are huge opportunity for companies. Águeda Muniz City Secretary, Fortaleza Urbanism and Environment Secretariat

79 NORTHEAST State of Bahia creates RedePPP to share information

RedePPP was created one year ago will be primarily invested on the de- by the State to promote required velopment of systems and training. actions to elaborate policies and determine guidelines and align pro- RedePPP also signed a cooperation cedures and standards, as well as agreement with the LSE (London to encourage mutual collaboration School of Economics), FESP-SP among PPP Units in Brazil. (São Paulo School of Sociology and Politics Foundation) and the Brit- This is the most important and in- ish Embassy in Brazil to develop a novative articulation, knowledge MBA in Concessions and PPPs next management and training in Con- year, which currently have 200 in- cessions and PPP initiative in Bra- terested students. zil. Although many states and cities have progressed far in this subject, The scenario for Concessions the majority of Brazilian cities do not and PPPs in Bahia even have legislation on this area. The State of Bahia has modelled The idea is to share knowledge seven PPPs, out of which six are al- and help in a collaborative envi- ready hired and five are operation- ronment, to exchange experienc- al. One of the main aspects in this es, leverage successful experiences business model is to have experi- Priscila Romano and projects and increase sharing. ence not only in structuring PPPs Coordinator of Special Projects in Currently the organization has more but also in contract management, PPP and Concessions, PPP Execu- which is where errors are usually tive Secretariat, State of Bahia than 30 members between states, cities, state-owned companies, de- found. velopment banks and state-owned In Hospital do Subúrbio (second banks. PPP created in Bahia), for instance, What can be expected from a mistake was the lack of a demand Rede PPP? restriction mechanism as the unit is always opened to full absorption RedePPP signed in September capacity. It is necessary to make 2015 an agreement with the Unit- clear in these contracts the mech- ed Nations Office for Project Ser- anisms to shut the door in critical vices (UNOPS), the UN’s operation- situations. al arm that supports humanitarian and development projects all over The lack of efficient mechanisms the world. The goal is to promote in appropriating exceeding costs al- Public-Private Partnerships in Bra- ways force an adjustment process, zil through the Rede, as it has 30 where costs are calculating and de- members between states, cities, manding time, energy and it is really federal entities and development tiresome. The stability of the State’s entities. institutional environment is a positive factor as there are consistent The partnership with UNOPS will laws, decrees and rules to regulate allow the execution of priority proj- operation in this business front. ects, such as database to support federal, state and city governments Furthermore, the State of Bahia has to develop new PPPs. Resources been strictly respecting contracts, 80 and there has not been delays on 4 main projects structured in “One of the main aspects counter payments until now, im- Bahia proving the Public Administration’s in this business model is to reputation. - Construction and operation of the Sistema Viário do Oeste, al- have experi¬ence not only in How does the State so known as Salvador-Itaparica structuring PPPs but also in encourage Concessions and bridge. The bridge has 12 km and PPPs? there is a road with 150 km con- contract management, which necting the bridge and the BA001 - The government has adopted re- highway to the BR242 highway, to is where errors are usually sources from the State Participation development the Low South area. found. Fund for meeting counter payments, Mckinsey & Company is the part- and allowing for revenue binding with ner in this model to deliver studies bank account blocking. This is an ef- in Probing, Sea Hidrology, Prelim- ficient mechanism that prevents de- inary Draft, Environmental Impact lays of even one day to pay partners. Studies, Cultural Impact, Intangible - The Bahia Partnership Guar- Assets, Review of Urban Planning of antee Fund was created simi- the cities of Itaparica and Vera Cruz. lar to the federal guarantee fund. Estimated value of investment ac- - We expect to pass in 2015 the new cording to PMI is of BRL 7.3 billion. - Renovation and maintenance of PMI Decree to allow for the execution BA-052 highway, also compris- of a MIP (Private Interest Statement) ing BA-148, BA-432 and BA-160 so that companies can submit their highways, totaling 685 km and the projects straight to the government. construction of a bridge between - The State government is working Xique-Xique and Barra. This proj- on a bill to create a new state-owned ect has BNDES/IFC as partners company to encourage investments and shall be bid in October 2016. in infrastructure. The goal is to - The government is also working in raise assets, structure operations another two projects - the construc- to get resources from capital mar- tion and operation of a new Conven- kets and consequently to encour- tion Center in the State of Bahia and age investments in infrastructure. the other being a PMI (already in ex- - The State is also developing a sup- ecution) for urban solid waste com- porting line to liquidity similar to prising filter, transportation, solid BNDES lines, with the goal to guar- waste treatment and final disposal, antee infrastructure bonds issued by covering some 62% of residue gen- the private partner. eration in the state.

81 Southeast Region

82 Evolution of Concessions and PPPs in the Southeast Region

83 SOUTHEAST AEERJ highlights the role of Rio de Janeiro in PPPs and Concessions

Luiz Fernando Santos Reis, AEERJ ed and in other programs being chairman, highlighted the impor- planned with the participation of tance of the State of Rio de Ja- companies from all sizes. neiro for PPPs and Concessions as the state is becoming a nation- PPPs are not just for big corpora- al benchmark due to success cas- tions. It is a shoe that fits all feet. es as the Porto Maravilha Urban For this reason, Governments must Operation, covering a 5 million be wise to set up programs that fit square meter area and AP-5 and several sizes of companies, espe- other projects in progress. cially in the state of Rio de Janeiro, which lacks large contractors with It is necessary to ensure that this DNA. The state is only at the early model remains strong, expanding stages of forming a core of compa- the participation of companies, nies that can tackle that. namely small and mid-sized ones. In the other hand, irrespective of In addition to the expansion of PPP the company’s size, this business and Concession projects in the model creates a huge amount of Southeast, the rest of the country jobs, works and hiring, even if also offers positive perspectives for not directly involving companies more long-term contracts between from a given region as the main Luis Fernando the Public Administration and the employee. private sector in the next months. Santos dos Reis Rio’s companies have a huge op- Chairman, AEERJ This is the time for the private sec- eration. When observing some tor to leverage real opportunities works, it is possible to see many in infrastructure projects, reinforc- AEERJ members working for con- ing AEERJ’s position on the cur- cessionaires, reinforcing the im- rent economic scenario. The sector portance of working together for is much worse shape than many developing this model and gener- people think it is. And it is impos- ating new opportunities all over sible to believe that the Public Ad- Brazil. ministration will recover by 2017. The sector was heavily affected by Social Responsibility the financial crisis and the worst The possibility that the private sec- symptom is the lack of trust in the tor supports the development of marketplace. studies for new concessions and The private sector is afraid to trust PPPs through procedures for ex- in the government, so for this rea- press of interest is undoubtedly a son it is hard to discuss PPPs now valuable tool at this point, espe- and not raising doubts. Howev- cially when the chances of losing er, it is necessary to understand jobs are enormous in this industry. that this is the only solution to It is estimated that 150,000 to minimize deficiencies in Brazilian 170,000 employees in the state infrastructure. are laid off by the end of the Olym- The State of Rio de Janeiro is far pic Games, many of them only in ahead on works being execut- the city of Rio. 84 For this reason, companies must “The State of Rio de Janeiro fulfill their social responsibilities, trying to run projects with the is far ahead on works being strong participation of entities that executed and in other can support this efforts, such as FIRJAN or the AEERJ itself, as it programs being planned with is not a house for engineers but for Engineering, willing to find the the participation of companies best solutions for developing Brazil from all sizes. economically and socially.

85 SOUTHEAST Rio de Janeiro launches the largest PPP in sanitation in Brazil

One of the projects that shall be- to which the project is related to, come success cases for Brazil was such as transportation, health and presented by Maria Paula Martins, so on. PPP Sub-Secretary for Rio de Ja- neiro: The PPP in sanitation, the The council meets to list priorities largest in the country, serving 5 and then, during the PPP’s devel- million people in a single PPP. opment, assesses and decides upon what has been achieved. How does the state of Rio de Ja- neiro see PPP and why has it de- Hiring of PPPs cided to make this investment? The PPPs can be hired by two ways: state, in other hand, lacks conditions to meet all demands and here - Independent studies is where the private sector steps in, investing and obtaining a proper re- - Studies conducted by parties turn to perform public services. interested in PPPs, the so-called MIPs. One of the alternatives that may speed up Concessions and PPPs In the case of independent studies, in the future is about the differ- it is expected that the project de- entiated regime for public hiring, signs a PPP in line with interests Maria Paula Martins which was primarily created for of the State government. A symme- Sub-Secretary for PPPs, State of FIFA 2014 World Cup and Olym- Rio de Janeiro try of information is then achieved, pic Games works but it is consid- resulting in higher success rate in ered for expansion by the Federal bids. Government. The State of Rio de Janeiro has A PPP project requires four adopted as a basic assumption to critical pillars: have independent studies to model - Definition of a business model all PPPs. The state is open to MIPs but for large PPPs, it is preferable - Good model that the studies are independent so the State has larger control to - Governance define how things are going to be - Performance Indicators. made. Project Management Solutions in guarantees

PPPs are managed in Rio de Janei- Guarantees, the cornerstone for ro by a Public-Private Partnership PPPs, are not an issue for Rio de Program Managing Council, com- Janeiro. There is a list of possibil- prised by several secretaries: State ities that originate guarantees and Attorney, Works, Economy, Plan- are decided according to the case: ning, Environment and Develop- - Receivables ment. Also, in topics involving the metropolitan area, the Metropolitan - Real Estate Chamber has a say. Finally, there is the participation of the secretariat - CIDE 86 - Federal Bonds collection in 10 years. This means nitions shall emerge during 2016. 80% of all sewage collection and - Shares and dividends from state- treatment in 10 years. There is al- The PPP for digital technology is owned companies so plans to build a containment one for which the governor has a system to prevent that water from preference and the idea is to take - Constitutional funds (Constitu- the rain combines with sewage and digital technology to all cities in the tional Deposits) flow to the Guanabara Bay. state and connect all public entities: police stations, schools, hos- - FPE In addition to be the biggest, it is pitals and so on. This is in design - Export taxes. also the most advanced one in the phase. area. EBP was the winner between Projects in development three companies that submitted In healthcare, the PPP for im- proposals to execute the project. age-based diagnosis is one of the The state of Rio de Janeiro is The company’s proposal was best priorities and will be deployed in working in 11 projects: 8 are tra- suited to the reference terms and Niterói and to all state public hospi- ditional PPPs (2 sanitation proj- was authorized by the State’s Pub- tals so that all units have the same ects, 1 for subway, 1 for prison, 1 lic-Private Partnership Program’s equipment and have a single hub for information technology, 1 for Managing Council to conduct the for image-based diagnosis. DEGASE - resocialization of mi- study - which lasted almost six nors, 1 for education and 1 for im- months. The state also considers the age-based diagnosis) and 3 struc- following PPPs: Despite being a large project, small- tured operations (Police upgrading, - Prison: replacement of exist- extension of Subway’s Line 2 in er companies can join this project. The size of it does not shy Rio’s ing prisons and improvement of downtown and a water transposi- conditions; tion tunnel connecting Lages hy- small companies away as they can dropower plant in Piraí to Guandu be hired to perform services. Now, - Resocialization units: Replace- water reservoir). even local large companies have ment of existing units and delivery credit issues. But an international of effective resocialization for chil- road show will be made to attract Sanitation dren and teenagers in conflict with foreign companies to partner with the law; The PPP sanitation is the largest Brazilian companies of all sizes. PPP in this sector being deployed - Education: Construction of new Other projects in Brazil. The impact is that 5 mil- schools (the goal is 80); lion people will be served in a sin- The subway project aims to im- gle Partnership. - Subway: Expansion of existing prove mobility with the creation of lines and construction of new a system to connect Araribóia, Ni- The governor has prioritized sanita- ones; tion of the Baixada Fluminense ar- terói, to São Gonçalo, Alcântara. It ea, that comprises the metropolitan is a 22-kilometer-long line 3, with - Water transposition tunnel: Improve- area and the West area. 13 stations. The governor is nego- ment on Rio’s water supply system; tiating resources and a Guarantee The goal is to have water supply Fund with the Federal Administra- - Upgrade of Military Police to everyone in 5 years and sewage tion. This is under study and defi- barracks.

87 SOUTHEAST Rio de Janeiro’s Public-Private Partnerships

In lieu of Jorge Arraes, Special Sec- · Partnership with World Bank, for retary of Concessions and Pub- enhancement lic-Private Partnerships for Rio · Creation of CDURP and Port de Janeiro, Gustavo Guerrante, Legislation sub-secretary of project structures for SECPAR, made a brief explana- · Hiring of qualified team to study tion of how the legal framework for possible concession and PPP encouraging Public-Private Partner- projects. ships in the city of Rio de Janeiro was built since 2009. SUBPPP expanded its scope in 2013, with the creation of the A Sub-Secretariat was created Special Secretariat for Concessions within the Head of Staff office that and PPP (SECPAR), being struc- was later promoted to a Secretariat tured as: as the pipeline of projects increased and the need for a qualified staff · Asset Superintendence emerged not only for structuring · Existing concessions projects, but also regulating projects already being bid - this is the · New projects structure: Gustavo Guerrante · Concentration of several entities Sub-Secretary of Special · City law for PPPs and to establish new partnerships Projects SECPAR - City of Concessions Rio de Janeiro Through incentives to private in- · Assembly of the team vestment, it has been possible to deliver faster to society by means · Creation of a Managing Council of an ordinary concession, PPP for PPPs and Concessions in the and Sponsored or Administrative Sub-Secretariat Concession, or hiring public works

Parque Ol mpico í

Valor do Contrato R$ 1,6 bilh o • ã • Construção de equipamentos olímpicos e manutenção das

áreas verdes, vias e redes de infraestrutura Cronograma: • Pós Olimpíadas: áreas utilizadas pelos equipamentos • Obras de Jul/12 a Jan/16 Olímpicos provisórios serão destinados para construção de

empreendimentos residenciais e comerciais • Garantia: o próprio terreno

88 to structure projects divided into: This is a smart way to structure a “In an area of 1.18 million PPP: Give the land as payment and · Private with government as square meters, 16 Olympic guarantee for the private partner, so interested party 55% of the area will be destined disciplines will take place. It is · Self-sustainable financially for private investment later and 45% remain a public area, includ- a legacy for the city as provisory · Do not financial input from tax ing training centers for high-yield facilities will be transformed in revenues athletes. It is worth mentioning that this part of infrastructure was also schools and areas for leisure · Traditional, public included in the PPP, as well as sew- City of Rio de Janeiro age collection, draining, water sup- and physical activities for the Olympic Campus ply, paving - everything. And the fa- citizens. cility is a private venture. With 90% of works completed, the Public-Private Partnership for There is a bid for parking lots that Rio Olympic Campus is an adminis ready and also filed with the City istrative concession to deliver ser- Accounting Court, structured by vices and execute works required PMI. for the city’s Olympic Campus for Shared Electric Cars - A conces- the 2016 Olympic and Paralympic sion ranging from 5 to 10 years and Games. investment calculated in BRL 250 The contract determines the con- million. struction and maintenance of Olym- pic equipment (basketball courts Aspects of the project: with 16,000 seats, judo courts · Sharing electric cars similarly to with 10,000 seats and fight courts the model adopted by Bike Rio with 10,000 seats), implementation of infrastructure for the area, · Reduction of vehicles the future Autódromo area and the Olympic and Paralympic housing · Reduction of emissions areas, as well as maintenance and · Addition of transportation modes operation services for the area. In- vestments totaled BRL 1.45 billion. · One vehicle is shared by up to 7 users Served by two rapid bus lines, Tran- solímpica and Transcarioca, the · Guarantee of a parking slot at the Olympic Campus will house the ma- destination jority of facilities for 2016 Olympic Games. An audience of 120,000 · Driving in lanes reserved by people is expected every day in the buses campus during the games. · Cheaper than a cab In an area of 1.18 million square meters, 16 Olympic disciplines will · In consultation take place. It is a legacy for the city · Use of 100 shared electric cars as provisory facilities will be trans- (same model as Paris) formed in schools and areas for leisure and physical activities for Environmental alternative that pre- the citizens. The Arena do Futuro vents citizens to buy a second car stadium, for instance, will house or use it for a specific purpose. four city schools. Rio will have an Olympic Training Facility with ten- Concession for the Zoo - Study in nis courts, running tracks and the progress to upgrade the zoo and Maria Lenk Water Park, focusing on bring new attractions, with invest- high-yield athletes. ments estimated in BRL 60 million. 89 The cinema and video Aspects of the project: area of Rio de Janeiro

center is a city asset · Rio’s Zoo has 75 years - Operation similar to the Porto Maravilha’s owned by RIOURBE and · More than 20 years without large infrastructure investments - Investment areas in analysis: Ur- consists of a property to ban, Infrastructure, Mobility and develop Rio de Janeiro’s · Old concept of small cages Environmental creative industry.” · Bid scheduled for February 25, As opposed to Porto Maravilha, 2016. where revenue is generated at once, as it is the case of CEPACs Olympic Arena Legacy Plan - An (Potential Addition to Construc- Administrative PPP with invest- tion Certificate), now it is a private ments calculated in BRL 60 million plot of land whose revenue will be Aspects of the project generated over time from different sources, with a joint urban opera- - Build the infrastructure while pre- tion to be completed in 2016. serving the Olympic legacy Cinema and Video Center - A con- - Maintain and operate the Tennis cession for the use of the space Olympic Center, all 3 main arenas, with investments estimated at BRL Running Track, Maria Lenk Water 60 million and works scheduled Part, Public Parks at the Olympic from February 2016 to December Road and Live Site 2018

- Maintain training center for high- Aspects of the project yield athletes; - To renovate, expand, operate and Light Rail Botafogo – Gávea - A maintain the Cinema and Video PPP with estimated investments of Center at Barra da Tijuca BRL 1 billion and works scheduled - Double the number of studios cur- from October 2016 to December rently available 2018. Aspects of the project - Operate and maintain for 30 years - Encourage the creative industry in - Light rail connecting the districts Rio de Janeiro of Botafogo to Gávea The cinema and video center is a - Area not served by subway. A city asset owned by RIOURBE and line with approximated 23 km consists of a property to develop - More than 200,000 passengers Rio de Janeiro’s creative industry. a day estimated for the initial years It has a wide expansion capaci- of operation. ty and its useful capacity would Vargens Joint Urban Operation - be more than doubled through a Investments estimated at BRL 15 concession. billion. The goal is to launch a bid for up- Project Description grading the existing facility to leverage the creative industry concentra- - Large area located at the West tion in Rio de Janeiro.

90 Rio innovates by creating a Metropolitan SOUTHEAST Government Integration Chamber

Vicente Loureiro, Chairman, Met- ing in housing, soil usage, sanita- ropolitan Government Integration tion. The work is more articulated Chamber Câmara Metropolitana do and integrated, providing govern- Rio de Janeiro) presented the en- ment with more efficiency at its tity, formed by mayors in the state efforts. and presided by the Governor of Rio de Janeiro, aiming to create a state Avoid wasting resources is also a of art in planning and governance priority for the entity, such as sub- for the city’s metropolitan area. way’s Line 2, which received suc- cessive investments and the result The Chamber creates a new legal was a decrease in the amount of and institutional framework; pro- passengers transported despite poses a governance model and fa- growth in the Pavuna district and in cilitates the cooperation among the region around the Shopping No- several layers of government, as va América. These resources could conceived by the 2015 Metropolis have been better applied some- Charter, an important ruling by the where in the region. Federal Supreme Court, that has now the challenge to further inte- So money is invested to install grate metropolitan areas and their conditioned air, trains are im- respective capital cities. proved, all of which happens over time and administrations, and at Vicente Loureiro Rio de Janeiro is Brazil’s second the end of the day the outcome Executive Director, Rio Metropolitan largest metropolis with 12 million is scant in relation to the money Government Integration Chamber inhabitants, featuring several envi- invested. Why? Because,at the ronmental and urban liabilities but same time, it is a region that has also offering a set of opportunities degraded from the social stand- that require better leveraging. It is point, with drugs, crime, and oth- precisely at economic downturns, er issues that weren’t followed when resources are scant and per- through as the housing policy spectives darker, when we need wasn’t applied. to innovate and find options to go ahead. For this reason, an integrated vision is the great strategy for the The creation of the Metropolitan most developed metropolises in the Chamber was a political act from world that are already working with governor Pezão, who took the job future performance in mind. and indicated to the state mayors - and to society as a whole - that he Metropolitan Management would change how the metropolitan Executive Group area was being treated. From such Rio Metropolitan Cham has an ex- perception, he issued a Decree cre- ecutive group tasked to: ating the Metropolitan Chamber. - Operate Chamber’s decision For the first time in history, a Metro- politan Urban Plan provides a set of - Coordinate metropolitan issues integrated strategies for infrastruc- management ture. We know that transportation cannot be conceived without think- - Develop metropolitan plans, pro- 91 For this reason, an grams and projects Metropolitan Region, which will jointly have managed by State and integrated vision is - Facilitate integration among cities cities in the region. comprising the metropolitan area the great strategy for The work is expected to be deliv- At this moment, there is a Bill Draft the most developed ered by the end of 2016 so that in the State Congress to support new mayors elected in October can metropolises in the world this process, creating a real gover- benefit from this metropolitan vi- nance method to meet all require- sion, conceived and developed in a that are already working ments from the Metropolis Charter, planning process as open and col- sanctioned by president Dilma in laborative as possible. with future performance January 2015 and by the Federal in mind.” Supreme Court. With resources from the World Bank, the Government of Rio de Based on this Bill Draft, every and Janeiro run an international bid for all public service of common inter- the realization of a Strategic Plan est in the metropolitan area must for Metropolitan Area’s Integrated be shared. This is an innovation as Urban Development that will define decisions now must be taken to- items as mobility and sanitation to gether, it means that the State and support 21 cities in the region, in- cities in the area have to decide cluding the capital. whether they will make a concession, an expansion of concession, a There is a proposal that AEERJ new system for any public service hosts a meeting with companies to considered as of common interest discuss demands, ideas to be sug- in the area. gested to mature this planning process and hear the voices of those at Strategic Plan for the front with the real-world experi- Metropolitan Area’s Integrated ence to identify challenges and the Urban Development complexity to solve some of these issues. Governor Luiz Fernando Pezão announced this Tuesday (September Another challenge for this project 8) the winner of the international is to map the region as some cities bid for the preparation of the Strate- has not been mapped for 30 years, gic Plan for Metropolitan Area’s In- so we went to the former IPLAN- tegrated Urban Development (Pla- RIO - City IT and Planning Corpora- no Estratégico de Desenvolvimento tion, currently IPP - Pereira Passos Urbano Integrado da Região Metro- Urbanism City Institute, to hire the politana), that will define items as service of Digital Mapping in Urban mobility and sanitation to support Areas and to deliver maps of urban 21 cities in the region, including areas at the 1:2000 scale for these the capital. cities. Whoever is an Engineer here knowing how much this mapping The winner is the consortium head- facilitates works and to help con- ed by the office of architect and ur- ducting a small engineering study, banist Jaime Lerner, and also com- mainly a feasibility study. So this is prising Quanta Consultoria and the a fundamental tool. Barcelona Regional Urban Develop- ment Agency, which was responsi- Finally, an information system to ble for renovating Barcelona’s met- allow for the improvement of the ropolitan area after the 1992 Olym- metropolitan area management pic Games in the Catalan city. At not only from the geo-referencing the same occasion, the governor standpoint but also for other sys- sanctioned a law that creates an tems. All these efforts are already administration office to decide on hired and in progress, due to be de- issues of common interest in the livered within 1 to 2 years. 92 Rio innovates by creating a Metropolitan Government Integration Chamber

Scenario for 2030 • Attraction of private investments “With resources from the World with changes of indicators and The planning effort is to find solu- characteristics of soil and subsoil Bank, the Government of Rio tions for development, also as- demarcation, use and occupation, de Janeiro run an international sessing macroeconomic scenarios, as well as changes to building cod- how the country will be positioned ing, considering the environmental bid for the realization of a against its development process as impact caused by such changes or all variables will define positive or the regularization of buildings, ren- Strategic Plan for Metropolitan negative perspectives. ovations or expansions executed in Area’s Integrated Urban violation of the current legislation; Challenges also include important Development that will define liabilities, such as informal land oc- • Additional construction rights cupation at the outskirts of the met- items as mobility and sanitation ropolitan area, lack of sanitation, ICMS tax law mobility and low density areas. to support 21 cities in the The ICMS tax law is another re- There was an expectation about source that can help specially the region, including the capital. COMPERJ which was not fulfilled, outskirts to establish interesting lo- but FIRJAN study unveiled other gistics activities, as there is no mo- possibilities such as logistics, which bility system that can properly work has been intense specially at the when 75% of the jobs are concen- outskirts of the metropolitan area. trated in the city of Rio de Janeiro.

There are areas available for metro- This is a model that has been un- politan expansion with industrial or changed for so long as it was con- logistics vocation, albeit these ar- sidered as irreversible, unchange- eas are scant for a fast expansion or able and now is the time to discuss these areas are dispersed or there are this possibility and better distribute conflicts to be prevented. This met- these development opportunities ropolitan plan will find opportunities within these regions, as there is and proper strategies for preservation no transportation system that can or incentives for these areas, which meet such concentration. are not many, to deliver their most relevant economic and social func- Rio de Janeiro is the Brazilian city tions to develop the region. where people spend more time in commuting, while São Paulo is Urban and housing activity in these ranked second. areas are quite relevant as 85% in average of the land for expansion is It is necessary to think and rethink focused in housing. So it is a prob- this issue to reorganize this pro- lem in terms of occupation, in this cess of distributing job opportuni- model we have that is based in low ties to create an equal metropolis density, informal, with horizontal and reduce the pressure over sani- housing. tation and mainly mobility services. There are excessive number of trips Opportunities and through the Supervia system, the Investments metropolitan bus system, due to Thus, investing opportunities that poor planning or poor distribution are opened and are important to of equipment. ensure at least an optimistic per- For instance, a mother in Japeri spective for development are: that needs to take her child to a • Cepac - Potential Additional Con- hospital has to take the train to go struction Certificates; to Ricardo de Albuquerque, in the city of Rio, which is the first family • Demarcation of area for applica- hospital she will arrive to. If this is tion of joint urban operations; not changed, the situation will be 93 Rio innovates by creating a Metropolitan Government Integration Chamber

The ICMS tax law is intolerable not only for the family through changing of transmission hospital, in order to maintain the towers another resource that can health system, as well as to maintain the mobility system. - Old train lines - Study potential help specially the outskirts uses to establish interesting Exame magazine conducted a cou- ple of surveys about the real estate - Tod - Renovation of train stations logistics activities, as sector in Brazil, one in the begin- and surroundings ning of 2015 and the other in the - Port and Access road to COM- there is no mobility system middle of that year, and found that PERJ - Structuring projects that can properly work there are 20 cities in Brazil that are not capitals and have up to 1 mil- - Marambaia Park - Recreation when 75% of the jobs are lion inhabitants, and in terms of park for the Baixada Fluminense real estate valuation, 3 out of 20 concentrated in the city of region are located near Rio de Janeiro: Ni- Rio de Janeiro.” terói, ranked third in Brazil, Nova - Federal and State plots of land Iguaçu and Caxias. that are unused.

There is potential. And there are no There is an interesting perspective doubts that a joint urban operation to resume governance with the is a concept that is here to stay, construction of a planning envi- but we need to innovate in order to ronment covering not only one city build an environment to allow for or another, but a huge metropolis, joint investments between public with a future vision that may gen- and private. erate and leverage business and There are other assets that may be development opportunities in infra- better develop, such as: structure to better serve the population in the next years. - Line 3 - Spatial structuring of the influence region Despite the crisis, there is a quite optimistic perspective to resume - Via Light - Expansion of use this development process.

94 Potential concessions and PPPs SOUTHEAST for Rio de Janeiro

Riley Rodrigues de Oliveira, advi- has to have the vision of what the sor for the FIRJAN System’s Infra- State wants in terms of quality of structure Corporative Council, pre- services to be delivered to the pop- sented a context of Concessions ulation by that contract, and not and PPPs in Brazil, focusing on forgetting that the citizen is the the state of Rio de Janeiro. In his end user and not the government, opinion, challenges must be solved mainly because contracts survive in order to massively expand PPPs the government that launches the in Brazil. The main challenge is to process. structure PPP programs as policies Planning is key for concession of State as opposed to policies of projects. Consortium members government. need to see a pipeline several Concessions and PPPs are long- years long, obtain full information term processes: Implementation, on projects and its complexities, maturing and return are not taking with time suited for performing de- place in a single term. It is neces- tailed studies. sary to think in the State’s inter- But what is the use of a perfect ests, focusing on serving the pop- planning if the project is poor? ulation and then Brazil will start to This is the question that many in- develop programs aimed not only volved in concessions and PPP ask Riley Rodrigues de to meet ad-hoc demands or needs, themselves, and it was one of the Oliveira but to promote local, regional and topics discussed in almost all re- national development. Senior Expert in Industrial Competi- gional seminars that took place tiveness and Investments in FIRJAN System One of the relevant issues is to before reaching Rio de Janeiro. organize these programs in stra- One of the problems is that proj- tegic terms, thinking in competi- ects lack known, repeatable meth- tiveness gains, increase of capital odologies. One example is the lack returns and making new invest- of standardized instruments to an- ments. One example is the subway alyze risks by capital markets, as expansion, where stations shall be each project, even those in the same sector, has a different meth- used as mechanisms for local de- odology, many times not compati- velopment, integrating mass trans- ble with the project’s own nature. portation system to regional planning with focus to development Many times, there is no consider- the surroundings, even by chang- ation that two typical cases exist: ing building parameters to allow One, when full knowledge is ob- for the consolidation of new stores, tained about the behavior of the services and housing. concession’s object, where the project is known in terms of poten- Risks of investing, that are the tial and behavior, i.e., the whole main concerns on a Public-Private process is known, such as renewal Partnership, has to be weighed to of concessions of existing ports or avoid excessive contract renegoti- highways. ation. It is necessary to adjust return to the activities required by The second case is when the proj- the Public Administration, i.e., one ect is new, such as the concession 95 Planning is key for of a new highway and investments There is plenty of room for expan- are new, and nothing is known sion going beyond projects in prog- concession projects. about the future behavior of the ress or expected to be kicked off. Consortium members concession’s object. These two different characteristics require spe- There are 260 studies and proj- need to see a pipeline cific methodologies and instru- ects ready to be offered to the ments. Construction, demand, and private sector. Estimated value of several years long, environmental risks need to be tak- investment according is of BRL 404 billion. Some of the possibil- obtain full information en into account, as they are large, as well as process model and bid’s ities are projects ranging from in- on projects and its notice content, many times allow- frastructure (urban mobility, rail- ing different interpretations and roads, highways, airports, sani- complexities, with time generate insecurity to investors. tation, public lightning and data transmission systems by fiber op- suited for performing Problems with regulations in tics) to service management, such detailed studies.” Brazil as public healthcare and education. Considering projects in ear- Brazil currently has 58 regulation ly stages of analysis, identified entities: 10 in the Federal Ad- potential for PPPs in Brazil sums ministration, 26 in the State Ad- BRL 700 billion. ministrations and 22 in city administrations. Despite the large There are 85 PPP contracts in op- number, these entities are weak, eration in Brazil since 2006, with operate under incomplete, unsta- investments totaling BRL 133 bil- ble models and there is a lack of lion. Historical performance of commitment from governments to PPPs in Brazil points to highways structure solutions and transpar- and sanitation as those more ma- ent strategies to develop them. For ture to progress faster in relation to this reason, projects are mostly fi- new projects. nanced at a high cost due to its increased regulatory risk, consid- Looking to Rio de Janeiro, the state erably impacting performance in accounts for 9.4% of current con- the bid phase for concessions and tracts and 10% of contract value PPPs, as well as for the outcomes in Brazil. A highlight is the Porto of projects upon implementation. Maravilha PPP, a project that will change Rio’s downtown by giving The situation is worse on environ- back the social and economic rel- mental licensing: Many times, no evance of the Port zone in addition one knows which is the applicable to the port itself, where more taxes legislation. Still, due to impreci- and jobs are generated per square sions and lack of clear, direct cri- meter in the state. teria, such regulation depends on the person in the other side of the Rio de Janeiro’s potential counter with a “warped” interpretation of the law, which implies In addition to projects in prog- in a random interpretation, many ress, Rio de Janeiro has potential times wrong as for the focus and for areas like public lightning, sol- cost efficacy of projects. id waste - including waste treatment plants - subway and trains, Brazil has potential and healthcare management, educa- demands for new projects. tion, public security and services to the citizen. The lack of infrastructure, sanitation, healthcare and so on is one of The state needs to increase invest- the points that make concessions ments dramatically, but this is only and PPPs one of the main solu- going to happen with a clear pol- tions for Brazil in the coming years. icy that encourages more partici- 96 Potential concessions and PPPs for Rio de Janeiro

pation from the private sector. It is achieved through PPP; and Rio “Despite the large number, necessary to admit that the private has few investments in compari- these entities are weak, operate sector has larger capacity to deliv- son to Brazil. er public services with quality and It is necessary to increase the under incomplete, unstable demanding huge investments. It space for small and mid-sized models and there is a lack of is required to serve more sectors companies in projects in order to and to increase volume of PPPs. provide stimulus to the economy commitment from governments In comparison with the rest of the and reduce risks involving large world, Brazil has few investments concession portions. to structure solutions and transparent strategies to develop them.

97 SOUTHEAST A new Rio de Janeiro through the Porto Maravilha Concession

The Porto Maravilha project in the velopment Corporation, that inter- coast of Rio de Janeiro is already faces with Porto Novo concession- considered a success after five aire for this project. Work started in years of progress. The project was mid-June 2011. discussed in the Seminar on Con- cessions and PPPs in the South- This way, a potential addition for east Region by the CEO of Conces- construction was created and the sionária Porto Novo, company that resources earned from the sale of won the bid, José Renato. that potential, from the sale of CE- PAC city bonds that are regulated The project for the renovation of by CVM such as any other bond, Rio de Janeiro port zone was in dis- will be invested in the region. cussion for a long time, as it was required due to the degradation of In this case, as it is a Joint Urban Rio’s downtown. The project ma- Operation, it is a service and work tured slowly by changing its charac- concession. All utilities are deliv- teristics until it was implemented. ered for 15 years and the works considered valuation of CEPACS so It was developed based on the Cit- that a virtuous circle could be built, ies Charter, where city laws are where valued CEPACS can support housed, to allow for the legal ba- the whole operation success. José Renato Ponte sis and financial conditions for Concessionária Porto Novo deployment. There are other social demands in the region, such as the Mor- There are five million square mero da Previdência slum and ad- ters, equal to the area of Copaca- jacent areas. These are areas re- bana, currently with 30,000 dwell- quiring conservation of their urban ers and a very low human develop- characteristics. ment index for the area. Some of the project’s objectives was to ex- Funding for the Port was provided pand, articulate and renovate pub- basically by FI-FGTS, where BRL 6 lic spaces in the area; to improve million in CEPACS were bought in local quality of living; to achieve en- a single auction for BRL 3.5 billion vironmental and social-economical and CEPACS are now being traded sustainability for the area. at BRL 2,000 or BRL 2,5000 at face value. A real estate investment Several concepts applied to the fund was created with the partic- project set Porto Maravilha apart. ipation of the city, that makes a One of them is the usage of CEPACS commitment to buy all public land (Potential Additional Construction or make them available for buyers Certificates), that are municipal re- (CEPACS) that from the moment al estate bonds used as payment the land becomes available, make of a counter payment for perform- a commitment to fund the whole ing a Joint Urban Operation. It was project during the 15 years of con- something unseen in PPPs. cession. (Approximately 75% of the For Porto Maravilha, CEPAC was area where the potential additional obtained from an auction after the construction was defined is owned creation of the Port Area Urban De- by the Federal Administration.) 98 It is a 15-year contract at the Rodrigues Alves Avenue’s role; and “There are other social amount of BRL 7.6 billion with all the construction of an expressway public services included, such as to be delivered in May 2016 to re- demands in the region, urban cleaning and garbage collec- place Perimetral with added capac- such as the Morro da tion, traffic control, maintenance of ity, a 3 km-long tunnel and two gal- all roads, security and signaling, leries built in the center of the city Previdência slum and green areas and their preservation of Rio de Janeiro. (both for existing ones and new adjacent areas. These - Infrastructure works: rebuilding ones), maintenance of public light- are areas requiring ning and the execution of all infra- all streets in the region. Infrastruc- structure works required for deliver- ture in the region is old, built by conservation of their urban ing these services. former mayor Pereira Passos in the beginning of the 20th century. The characteristics. The project also will build 650,000 whole infrastructure needs to be re- meters of sidewalks, plant 15,000 built underground, as only lightning trees and deploy 12o km of water poles with LED lamps will be at supply piping. the surface and controlled from the Progress of the project concessionaire control room. The company has a high technol- The project schedule goes to 2023 but 85% of the works shall be com- ogy control room with integrating pleted by June 2016, considering systems, through which planning the Olympic period. The conces- and execution of all public services sionaire divided the works into two the concessionaire was hired for categories: road works and infra- will take place. The control room structure works. will also support the visualization of all services at delivery, which will - Road works: construction of Bi- provide a broad view of how the enário do Porto Avenue to take over work is progressing.

99 SOUTHEAST AP5 Sanitation project brings quality of living to Rio Metropolitan Area

With almost 30 years of experi- Upon receipt of the service order, ence in sanitation, Sandro Stroiek, the first initiative from the compa- CEO, Foz Águas 5, presented the ny that was awarded the contract project for sewage called AP5 was to perform a system concept that was developed for the city study. The West Area sanitation of Rio de Janeiro. Foz Águas 5 is system was conceived through 10 a concessionaire formed in part- large systems for a population of nership with Odebrecht Ambien- 2.3 million, requiring an increase tal and Saneamento Ambiental of 4.8 cubic meters per second for Águas do Brasil (SAAB). the sewage treatment capacity - an investment of BRL 2.6 billion. AP5 is about the expansion of delivery of sanitation and sewage ser- Progress of the project vices and the commercial manage- One of the elements that sets this ment of water and sanitation ser- project apart are 5-year goals devices. The contract covers almost termined by the contract, defined half of Rio’s area, from Deodoro through Service Delivery Plans district to Santa Cruz district. It (SDP) that allow for structuring fi- was signed in January 2012 and nance and the execution of the the service order was issued in May work. Sandro Stroiek 2012. AP5 has been exploring the CEO, Foz Águas 5 30-year concession for 3 years. The first batch of investments is for 500,000 people, almost the whole AP5 Profile city of Niterói, expanding treatment The Concession serves almost 50% capacity in 1,000 liters per second of the city of Rio de Janeiro, which and resulting in 31.57% of service in sewage treatment by the 5th translates into 21 districts of the year of concession. city or 1.7 million people. The first 5-year goals were Although the demand is higher divided into three steps: than the contract’s, the impact is significant. At the start of the Con- - First goal, already achieved: cession, the bid’s notice stated that serve Deodoro Olympic Cluster 55% of sewage was collected but equipment. Sandro says that this only 5% was treated - a great deal was relevant as most of these of collection was performed by unit Olympic equipment were planned to systems, that are piping for water have individual compact treatment from rain. plants in anticipation to the works for deploying a collection network The company created three opera- in the region and expanding a small tional hubs in the districts of Santa plant - the goal was achieved in Cruz, Campo Grande and Deodoro. June 2015 and there was no need Then service units were created to install these compact treatment under a fully computerized system plants. that distributes all demands related to sewage service to each oper- - The second goal is to deliver 200 ational hub. kilometers of sewage collection 100 piping until May 2016. Currently, puí, Santa Cruz, Campo Grande - “One of the elements that 150 kilometers are already which will be a large focus for the deployed. Another detail is that concessionaire, the Guaratiba area sets this project apart are 25,000 new sewage nodes and the and an additional area in Afonsos, 5-year goals determined by opening of the new treatment plant that missed the first step. processing 1,000 liters of sewage the contract, defined through per second. The Olympic Games will also gain a lot with this project, even as it is not Service Delivery Plans (SDP) - The third goal is due December completed. A positive point is the that allow for structuring 2016, five months earlier than significant help to clean Guanabara planned, to deliver more 100 ki- Bay, with the opening of Deodoro finance and the execution of lometers of collection piping and sewage treatment plant that is able 15,000 new nodes. At the day of to process 1,000 liters of sewage the work. Seminar, the Consultation Letter for per second. Also, 300 kilometers SDP2 was delivered, representing will be added to the network, pre- investments of BRL 1.2 billion to venting the release of 65 million li- meet goals at the tenth year of the ters of sewage a day to Guanabara concession. There are more than Bay. Finally, the whole region will 615,000 people served through gain as the sewage from 500,000 the deployment of 572 kilometers people will not be released in Gua- of sewage collection piping, more nabara Bay. 57 kilometers of trunk piping and new 73,000 house connections. Project challenges and barriers New goals Some critical aspects place barri- The Gericinó Prison Complex is a ers to the project’s progress. The demand also in the concession- area served by the concession is aire’s radar. Today, the Complex has plagued with drug dealers and 26,000 inmates and only two compact sewage treatment plants, so armed militia, which many times sewage spills to the brooks in the damage technical and commercial region. A cooperation agreement is interventions. being elaborated to allow some in- Another challenge is the consolidation vestments in the collection of the of the concession amid uncertainties sewage from the prison to the De- and questioning, as if the AP5 works odoro sewage treatment plant that the model can be used in other will start operations in May. cities as an alternative to dissemi- This investment will have a different nate sanitation services. character as it will be distributed Finally, the surety that water will be all over AP5 in five fronts, as the supplied along with sewage collec- first SDP was targeted at the basins tion services delivers an important draining at the Guanabara Bay. impact that is critical to for us to ef- The next phase of operations will fectively charge for the sewage ser- take place in the regions of Sara- vice delivered to the community.

101 SOUTHEAST

Asset Leasing in sanitation

Asset leasing is a very specific mod- • A specific finance line is created el for the sanitation sector but has for works executed by the private been gradually being adopted by partner. other sectors as it is an important partnership to unlock investments, • Large state-owned companies did with successful cases of sanitation not have the intention to delegate companies in the implementation of service operation. these projects and to have the ap- • PPP requires more paperwork for proval of control entities in this part- approvals. nership model. What is the structure of asset In the State of São Paulo, Sabesp de- leasing? ployed some 8 asset leasing projects and a series of control entities, Pub- I usually say that it looks like an Ad- lic Attorneys, are giving green light ministrative PPP, but without the op- to the model as it is different from eration in this case. other concession types, such as ordinary, sponsored, and administra- The structure is based on a state or tive concessions, SPEs, and private municipal sanitation company and participation in the capital or PPPs. the private sector that is in charge Fernando Marcato of building and deliver the construc- Partner, GO Associados Asset leasing is a different model, tion to the operation by the public requiring a different legal and eco- partner. nomic-financial model that is not the same as the other models. It The private partner does not operate emerged as an option to regulatory the asset, as opposed to an Admin- restrictions placed against CEF: istrative Concession such as Sabe- sp’s Alto Tietê. • Limit to CEF finance large state- owned companies. The private partner has also to get

102 loans to complete the work, usual- on that plot of land terminated at “The state-owned company is ly from Caixa Econômica Federal, as the end of the contract and the as- it will be only compensated when set becomes property of the state- in touch with users, oversees the work is ready for operation, and owned company. the work and pays for it when the public partner pays a monthly amount for leasing the asset. Of course, the state-owned compa- it is done. ny is in touch with users, oversees And why is it asset leasing? the work and pays for it when it is done. In this case, it is possible to Because in practice the asset is built determine a pre-operational period in plot of land owned by the state, so the state-owned company can be that offers a concession or rights to supported by the private partner in use (surface rights) for that land ac- the operation of the asset. cording to legal regulations to allow the private entity to build an asset Sabesp is designing a sludge dryer in that location and such asset is facility as an asset leasing. This is owned by the private sector. a new technology that will require While the contract is in force, usually a pre-operational phase for trans- a period of 15, 20 years, a monthly ferring technology, so the public fee is paid - the leasing monthly fee. company will start compensating Hence the denomination of leasing. for the next 15 or 20 years - fixed payments, not tied to performance, Why is it similar to a which is different from the PPP leasing? where usually payments are variable to performance. Because by the end of the contract, this asset is automatically incorpo- Asset leasing rationale rated by the state-owned company. So that asset, let’s say it is a treat- Where does this idea come ment plant, has its right to build up- from?

Lógica da locação de ativos...

Obras e pré-operação

-Privado realiza as Locação e pagamento obras no sistema -Após o fim das obras Transferência -Público cede a o parceiro privado -Após o fim do período utilização do terreno aluga o sistema para o de locação os bens para realização da obra parceiro público revertem ao público -Privado faz pré- operação

103 So a specific financing Estrutura de financiamento da CEF para locação de line was created for ativos... these works executed by FGTS the private sector as an Agente financeiro alternative to PPP, as state- Consumidores (CEF) Conta owned companies resist to garantia- Rating Serviços Vinculação delegate to some service de receitas Cash Empréstimo operation to the private Público Locação SPE sector.” Licitação Obra

Licitante Vencedor Garantia

https://www.senado.gov.br/comissoes/CAE/AP/AP20100601_CEF_Audiencia_Publica_BSB.pdf

In the past, state-owned sanitation private sector as an alternative to companies had a large volume of in- PPP, as state-owned companies re- vestments as they were the largest sist to delegate to some service op- borrowers from Caixa Econômica eration to the private sector. Federal. When one looks at Sabesp’s PPP The problem is that in accordance (São Lourenço and Alto Tietê), the to the Basel Agreement, the Nation- service level is very low. CAB Ambi- al Monetary Council and the Caixa ental, for instance, does not operate Econômica have a limit to loan to Alto Tietê water treatment plant - it certain corporation and the public only delivers ancillary services. sector. Delegating the commercial opera- So there is a specific financing line tion to the private sector is almost for the public sector that cannot ex- a taboo within state-owned compa- ceed a limit of risk (it is now allowed nies, namely Sabesp, one of the best to concentrate so much risk in a sin- structured companies. So the PPP gle borrower). model did not fit, and it was seen as Due to this, large companies like Sa- a bureaucratic model. besp, Copasa, and Sanepar get the Asset Leasing was seen as provid- lion’s share of investments whereas ing most benefits for both the private smaller companies cannot borrow and the public partners: due to technical issues. So how did Caixa figure this To the Public Administration out? • Ensures that the state-owned It has decided to incorporate Built company’s investment capacity is to Suit, which is a model from the strengthened. private sector where one builds fa- • Possible reduction on work deliv- cilities for a given client and rents ery deadlines. such facility to that client for a determined period, say 30 years, and • May allow for technology ex- when the contract expires the facility change and knowledge before the is incorporated to the client’s assets. operation.

So a specific financing line was cre- • Strong incentives to complete the ated for these works executed by the work within deadlines - the private 104 Asset Leasing in sanitation

sector only gets paid when the work • No need to pay for measurement. “There are currently Caixa is delivered and operational. Asset location vs. PPPs financing lines for asset • A public guarantee model and VML unrelated to the demand risk. The PPP Law determines a limit leasing, such as Saneamento of BRL 20 million, but transaction To the private sector costs are usually high depending on paraTodos (Sanitation for the state-owned entity. There is no- All), without limitation • Business risks are not connected such problem in asset leasing, so from an operation and are basically competition is higher as more com- on leverage. In some ties to construction and financing. panies are eligible to join, which is not the case in a PPP. partnerships with Sabesp, • High leverage. There are currently Caixa financing the private partner was • A broader set of companies has lines for asset leasing, such as San- capacity to compete. able to leverage 100%, eamento para Todos (Sanitation for • There are financing from Caixa All), without limitation on leverage. significantly improving the In some partnerships with Sabesp, Econômica Federal that are able to project outcome. attract the private sector. the private partner was able to leverage 100%, significantly improving What does it take to bid an the project outcome. asset leasing? Caixa currently offers • Preliminary draft. “Saneamento para Todos” finance line • Benchmark economic-financial model - IRR suited to the market • Borrower: Specific Purpose Entity conditions. (SPE).

• Based on the preliminary draft, • Resources: FGTS. estimate CAPEX and the result of the project’s cash flow is the proper • Term: Up to 20 years with period return. of grace of 4 years.

• Economic-financial study of a dis- Including: counted cash flow. Financial cost - 6% p.a. (except for • Plot of land defined by the Hiring the Integrated Sanitation model, that Party. has a nominal rate of 5.0% p.a.)

• Structure of public guarantees. Is CAIXA basic compensation -2% over there guarantee enough? They can the debt balance. guarantee other projects. Credit risk rate - Defined in line with How they can be presented: borrower track record and limited to 1% p.a. • Within a PMI. Brief comparison of asset • It can be an expression of interest leasing projects. for a PPP project, where asset leasing reaches the same goals targeted Asset Leasing cases by the Public Administration, with The first asset leasing made in Bra- advantages. zil was Sanasa’s for the construction Main legal aspects of asset of ETE Capivari, with investments of leasing BRL 60 million and a 264-month term, serving 60,000 people. Ode- • A different contract. brecht won that bid.

• Needs to conduct a bid for hiring. There are 7 asset leasing projects. 105 Resumo comparativo de empreendimentos em locação In a PPP, there is room de ativos...

to propose a basic Resumo comparativo dos VMLs por projeto

Campo Franca São José Campos do Franca project based on a Limpo (Etapa Socorro dos Praia Grande Jordão (Etapa 2) Várzea 1) Campos preliminary draft for VML - Edital 1.227.000 1.040.000 1.214.757 544.671 215.126 833.474 486.583 the bid, button Asset (R$ mil)

Leas¬ing there is VML Vencedor 1.030.000 1.111.987 (R$ mil) 1.128.840 - - - - no way to avoid this

Investimento 120.574.963 87.808.832 111.969.728 66.449.488 24.086.103 94.064.418 54.085.598 obli¬gation of having (R$ mil) a previously defined project.”

The first case was Campo Limpo • Sewage treatment levels will go and next was Várzea in 2009. Caixa to 92% from current 88%. worked with Sabesp’s technical staff to design this model that became • Population Benefited: approx. the reference for other Sabesp’s 130,000. models after it was approved by São • Contract term: 276 months (6 Paulo Attorney General from a legal months for the efficacy period, 30 standpoint. months for works and 240 months Sanitation in the city of for leasing assets). Socorro • Drain: 640l/s. • Value of works: BRL Sabesp asset leasing in the 24,086,103.00 (twenty-four mil- city of Franca lion, eighty-six thousand, one-hun- dred-three Brazilian real). • Value of works: Phase 1 = BRL 93.8 million and Phase 2 = BRL • Term: leasing – 240 months. 63.4 million.

• (MLV): Maximum Leasing Value: • Object: Construction of a new wa- BRL 215,126.12 ter system. • Assisted operation: 12 months. Sabesp asset leasing in • MLV payment period: Oct 2012 the cities of Campo Limpo to Oct 2032. Paulista and Várzea Paulista Sabesp asset leasing in the • Value of works: BRL 120.6 city of São José dos Campos million.

• Amount: BRL 94,064,418.69 - • Term: 228 months (works + MLV: BRL 833,474.11 leasing).

• Object: Financing, construction • Object: Sanitation Preliminary and pre-operation of Pararangaba draft sanitation system. In a PPP, there is room to propose a • It will increase sewage collection basic project based on a preliminary levels to 93% from 91% draft for the bid, but on Asset Leas- ing there is no way to avoid this obli- 106 Asset Leasing in sanitation

gation of having a previously defined As for asset location for the city of “For a public entity that is project. As for Asset Leasing, similar Franca, the São Paulo State Attor- to PPPs, it is necessary to open a ney General agreed with the opera- not able to borrow due to Specific Purpose Entity to be respon- tion due to the contract’s legal base. fiscal restrictions and run a sible for that project. •Re: Decision GPG.Cons # work under the payment Other states have 60/2008. implemented asset leasing by measurement model, models, such as Alagoas. •Date: September 30, 2008 asset leasing can be Is it possible to propose a Casal implemented a similar model project? an alternative and an to Sabesp’s in 2013 in Alagoas, with a 32-year term and a high contract Most or all projects were proposed opportunity for the private value. The company had already by the Government, but there is a performed a series of PPPs and Con- situation where a PPP is being dis- sector. cessions in 2013 and 2014, having cussed through a PMI and the gov- asset leasing and PPP models with- ernment suggests by saying, “PPP in the same city. here is not application, what about an asset leasing?” But I guess that the message here is that this is a consolidated model in So it is possible to move from Con- São Paulo by an important city oper- cessions and PPPs to Asset Leas- ator, to transfer management to the ing (I don’t see them as rivals) as private sector but at the same time in some situations the government ensuring expressive financing for will retain operation due to political the state-owned company (Sabesp, or technical questions, and this is a under the asset leasing model, has proposal to be made. BRL 600 million), which is an alter- I see no competition as this is an in- native to Brazil especially in times of dustry with a huge appetite for infra- fiscal adjustment. structure, so there is room for every- How have control entities one. And I think that it is important behaved? Does Law 8666 to think that this model is not exclu- apply to this contract? sive for sanitation, it can be applied to other areas. Yes, it does. But not all clauses. The 8666 Law contract model is based Why can’t I build a public on works, which is not compati- building through asset ble with Asset Leasing. So by any leasing? chance I must run a price-based bid, It is technically possible to negotiate there is no discussion about it, but with Caixa, which obviously would in principle there would be any re- have to create a specific financing striction to be a bid based also in line or get resources from BNDES technique. But as there is no need and other lenders. for payment by measurement, and some Law 8666 clauses cover sole- Other infrastructure segments can ly the payment by measurement also benefit from this model. So, mechanism, allowing for a different for a public entity that is not able to interpretation that happily has been borrow due to fiscal restrictions and accepted by control entities. run a work under the payment by measurement model, asset leasing State Attorney General can be an alternative and an oppor- Statement tunity for the private sector.

107 SOUTHEAST

Aegea Saneamento

Aegea Saneamento manages san- formance by applying synergies and itation assets through concession- separating activities per operation aires in several states in Brazil. The model, ensuring highest returns to company manages public conces- the shareholder. With the entry of sions in cities of all sizes, operating the company in the service delivery in water services across the board - business, the company was able to supply, sewage collection and treat- join a market covering 93% of Bra- ment in 44 cities from 8 Brazil- zilian cities served by state-owned ian states divided into five regions, sanitation companies with low lev- serving almost 3 million people or els of invested capital. 18% of the whole private market. Recognition for executed works To leverage this wide market, the was achieved from 2013 to 2015, company is highly efficient in re- when Aegea was selected as the ducing physical and commercial best and one of the largest sani- loses and has a solid commer- tation companies. CEO Hamilton cial and distribution management Amadeo as named “Valuable Offi- through another company in the cer in the Water, Sanitation and En- group, GSS - Gestão de Sistemas vironmental Engineering Industry” de Saneamento. granted by Valor Econômico news- paper for two years in a row (2014 Bruno Baldi Also, its administration is in charge and 2015). Lawyer, AEGEA of defining strategy and coordination of operation of each conces- PUBLIC-PRIVATE sionaire, as well as the coordination PARTNERSHIP IN of Aegea Engenharia operation, us- PIRACICABA ing this vehicle as a mechanism to enhance returns. The history of sanitation in Pirac- icaba gained another important Aegea has a high operational per- chapter in 20 years with the uni-

ESTRUTURA ACIONÁRIA

4 108 versalization of sewage treatment ed solely for managing the sewage “Piracicaba gained another that was reached due to invest- system, not the water collection or ments performed by Piracicaba Re- treatment processes. In addition to important chapter in 20 years de Program - a PPP between Águas sewage collection and treatment with the universalization of do Mirante concessionaire and the during the 30-year concession, the city sanitation company. maintenance, expansion and re- sewage treatment that was placement of collecting pipeline; The current structure of Piracica- upgrading of existing Sewage Treat- reached due to investments ba sewage system started in the ment Plants and Sewage Lifting performed by Piracicaba 1990s with the construction of the Plants; new sewage connections, Piracicamirim Sewage Treatment construction of new plants and the Rede Program - a PPP Plant, designed and executed by upgrading of meters are also un- the city’s sanitation company and der the company responsibilities. between Águas do Mirante the city of Piracicaba. It was a pio- Investments are expected to reach concessionaire and the city neering project in the city as it was BRL 333 million across the conces- the first large STP in the city with sion period. sanitation company. capacity to treat 36% of sewage and serve 90,000 people. From the contract’s signature the holding started the operation and By 2012, sewage treatment levels management goals plan focusing on raised to 72% with the completion reaching regulatory benchmarks. of the Ponte do Caixão STP, another The first step was the installation of large treatment plant and built with the concessionaire in the city with- public investments at the left bank in 30 days, and operations started of Piracicaba river, with capacity to 12 days before the due date. serve 150,000 people. Tupi and Capim Fino STPs also started op- The main challenges in this opera- eration and actively supported to tion was the deployment of a busi- reach that goal. ness model that was new to the group, staffed by the city’s inhab- A Behavior Adjustment Agreement itants combined with the techni- (Termo de Ajustamento de Condu- cal staff’s expertise imported from ta, TAC) signed by the city for the Águas Guariroba to ensure that all Public Attorney determined the uni- employees could support the grow- versalization of sewage services in ing demand in the city. Also, the 2012, but at that time there were fulfillment of benchmarks deter- not resources required to fulfill that mined in the bid process, such as goal. So several options were con- expand sewage treatment to 100% sidered and solution found was a from 72% in two years was an ag- PPP that was signed between the gressive goal. city sanitation company and the Aegea Saneamento holding, that In order to fulfill this goal, the com- won the bid. pany has adopted operational procedures that accelerated the fulfill- The business model deployed by ment of a benchmark at a record Aegea in Piracicaba was differ- time of 8 months, with the com- ent from the other businesses in pletion of Bela Vista STP that start- the group, as Águas de Mirante ed operation in December 2013, is a Specific Purpose Entity creat- pushing the indicator to 98% due 109 Aegea Saneamento

Social and environmental to the capacity of treatment above • 126,766 connections to the 400 liters per second. sewage collecting network until projects developed by 2015 Sewage treatment universalization the company aims to was achieved in July 2014 with • 1,349,596 m of sewage collect- clarify doubts from the Anhumas and Ártemis STPs, which ing network extension added Piracicaba within the select- population in Piracicaba ed group of cities with full sewage SANITATION VS. QUALITY treatment coverage. OF LIVING about sewage treatment, The achievement of outcomes and Some of the objectives and val- share knowledge and the company evolution in a short ues adopted by Águas do Miran- te are social commitment and in- change people’s mindset time of operation evidenced the holding’s maturity and business centives to environment preservation. For this reason, the compa- on the environment. strategy efficiency. Considering the ny’s Social-Environmental Projects complexity and the challenges that is constantly studying ways to raise involved the concession process awareness of the population in en- steps, results obtained in almost vironmental issues. three years of operation reinforced the values prioritized by the group Social and environmental projects and the commitment Águas do Mi- developed by the company aims rante made to Piracicaba: to en- to clarify doubts from the popu- hance quality of living and the pres- lation in Piracicaba about sewage ervation of Piracicaba river through treatment, share knowledge and services delivered. change people’s mindset on the Piracicaba’s sanitation environment. system The company currently has 20 projects in execution that reached Currently, the city’s sanitation sys- the following indicators until De- tem is comprised of: cember 2015: • 27 Sewage Treatment Plants Questions: One of the highlights of • 43 Sewage Lifting Plants Concessions and PPPs is the efficiency in operation as what I un- • 1,200 kilometers of collecting derstood from asset leasing, it is piping basically a means for the Public

PPP – PIRACICABA -‐ RECEBÍVEIS

Contraprestação mensal Garantia do Pagamento: Saldo inicial de 3 vezes a CONTA Contraprestação e sua Toda a arrecadação do manutenção será a média das EMITIDA PELO SEMAE vai para a SEMAE ultimas 3 contraprestações Conta Centralizadora. B1 Gestão da CEF Gestão da CEF

PGTO DO B2 CONTA Arrecadação CONTA USUÁRIO CENTRALIZADORA -‐-‐100% esgoto VINCULADA -‐-‐ 20% água

Instituições Financeiras

CONTA MOVIMENTO AGUAS DO MIRANTE 13

110 Administration to bypass fiscal lim- Swapping phases is not possible in itations. So PPP and Concessions asset leasing bids as it is in PPPs. have an edge as the private sector Phase swaps simplify the bidding operates and manages services, process. This was a concern that bring more efficiency, isn’t it right? made some interested parties shy away from Sabesp: Fernando Marcato: Asset leasing does not encompass operation. Fernando Marcato: Sabesp’s first And actually sanitation needs to bid’s notices created a notice for stop talking about works and start register. So two notices were cre- talking about operation. I mean, it ated. The first was what we called is time to talk about quality of op- pre-qualification and the second eration. However, asset leasing is was launched next as a competi- a model for those clients that are tion bid. not convinced yet or are not in conditions to develop a PPP or a At that time, it was performed concession. without phase swap, but now the state’s legislation determines phase Sabesp example is quite clear, the swap as a rule.118 company is relatively well managed and for internal issues the company So, for asset location, as an uncom- simply does not agree on transfer- mon issue and even for competition ring commercial management. matters, it was decided to now allow phase swaps and I am not So asset leasing allows for invest- aware that recent bids had phase ments that the company would not swaps. But in principle I guess that afford the other way and because there would not be any limit. There Caixa would probably make a loan are today some vendors that are without financial limitation. adapted to this model so I guess that such inversion would not make There is some prejudice against interested companies shy away. privatization. The term is wrong but this is the usual expression. So Gains for the public healthcare when a public manager experienc- system are considered in the es an asset leasing project, where calculation? control is retained, a gap opens to a potential Concession or PPP. So Bruno Baldi: No, it is not. May- Asset Leasing is like a date. be it is a factor for designing new

PPP – PIRACICABA – REGRAS DE CÁLCULO

CP = (0,12 + K ) . VFe . Pr CP= Contraprestação mensal devida Pr= Preço de Referência (R$/m³) VFe= Volume Faturado de Esgoto no mês K= Fator em função do evento já atingido, conforme tabela abaixo

O valor do Preço de referência (Pr) é de R$ 1,45 por m³ (R$/m³)

Índice de Reajuste: R = 1+ (0,50.IPCA + 0,20.IGPM + 0,15.INCC + 0,15.E) IPCA: Índice nacional de preços ao consumidor IGPM: Índice geral de preços do mercado INCC: Índice Nacional de custo da construção E: Índice de energia elétrica 14

111 Aegea Saneamento

There are public SANEAMENTO x QUALIDADE -‐ DE VIDA REDUÇÃO DE CUSTOS EM SAÚDE PÚBLICA shares offered as guarantees or tie up a given project for a highway with any real estate property, for instance.”

projects, but certainly there is a To design highway concessions, es- gain for the Public Administration pecially the Tamoios highways in as concessions do not weigh on São Paulo, fines were grouped in an public budgets, since investments investment fund and then quotas of in sanitation translate as gains in the fund were given as a guarantee. healthcare. Alternatives are plenty.

In the current Brazil’s situation, Water receivables, for instance, al- cities can’t even pay their bills let low for a PPP for sewage and then give water receivables that the city alone set up a guarantee fund to would get as a payment as a guar- ensure PPP payments, right? Are antee. Minas Gerais has many ex- guarantee funds demanded by law? amples of guarantees. Are there PPPs without a guarantee fund? There are public shares offered as guarantees or tie up a given project Fernando Marcato: I think there for a highway with any real estate are many projects that considered property, for instance. other alternatives than guarantee funds. The fund in itself is useless, The state can expropriate a plot of the resources is the matter. land and add some ancillary revenue associated to gains from the Without the money, all that is left property into the project. is the shell. Furthermore, we know of some cases when even banks I mean, I can capture this value argued against the legal nature of as infrastructure projects generate these funds. externalities.

But royalties from oil and mining São Paulo has been pushing the have been used as guarantee, as private sector to think out of the box. Even MP 700, about to be vot- well as resources from State and ed, mentions real estate investment City Participation Funds, that are funds in association with infrastruc- mandatory transfers from the Fed- ture projects. eral Administration. Of course these transfers have also been reduced, In this regard, for instance, devel- but they have been offered as a opers launching new ventures must guarantee as well. provide sewage treatment to get 112 city approval. This is a demand. It is clear that Sabesp is not in- “As any investment, a PPP terested in transferring the opera- A city’s fiscal responsibility situation, but has some value for money has a compensation, a cash tion puts limits to the PPP Process? study being conducted to compare counter payment that must fit the concession model against this Luiz Antônio Messias: The city’s fis- leasing model? into the city’s budget. cal responsibility is a limitation. As any investment, a PPP has a com- Fernando Marcato: Yes. No value for money was performed, such pensation, a cash counter payment as in PPPs, but at the time, Sabe- that must fit into the city’s budget. sp had some holes in its financing It is worth mentioning that maybe plan. Sabesp gets resources from the political situation has a bigger the World Bank, from Japanese impact than the economic crisis. banks and BNDES.

113 SOUTHEAST São Paulo is the benchmark for housing projects in Brazil

When talking about housing, São This way, the project was also Paulo has tradition and has been thought of as to improve social in- showing over the years that has po- clusion. The Public-Private Partner- tential to develop more projects in ship contract determines different this field. social interest income ranges from BRL 900 to BRL 4,000, and de- Some 20 years ago, São Paulo has mands from the private partner the been investing 1% of its tax col- inclusion of a popular market to al- lection in social housing projects, low for a social integration. which currently translated into BRL 1.5 billion every year. The city of Main characteristics: São Paulo also has the Housing State Corporation (Companhia Es- - Contracts need to contemplate an tadual de Habitação), which also amount of HISs and HMPs helps to tell this success tale. - Targeted audiences are people working downtown but not living For some 50 years, São Paulo has there 360,000 active borrowers and a considerable receivable portfolio, a - Income ranges covered: HIS up to stock of approximately BRL 5 bil- BRL 4,300 and families with income lion the generates gains of BRL 600 of up to BRL 8,100, thus reaching Rodrigo Garcia million to the State every year. The a low income market through the Secretary, State of São Paulo Hous- Public-Private Partnership model ing Secretariat Housing Financing System. applied by the state is consolidated and now can move on with bid’s The bid’s notice aims to acquire notice, hiring and start of works af- plots of land, elaboration of proj- ter two years of feasibility studies ects, execution of housing works and legal characterization of this and an additional point that is new: model. The PPP contract for HIS demands building maintenance for 20 years Renovation of urban spaces and support for services.

The first example is an admin- The first public debate determined istrative PPP to renovate the ur- the hire of 14,000 units (9,000 for ban space of the city of São Pau- HIS and 5,000 for HMP) and it is lo. The project aims to renovate expected that the private sector in- the city’s old downtown with a lot vests BRL 3.5 billion, whereas the of degraded areas and abandoned State would pay a yearly count- buildings. Another goal is to reduce er payment of BRL 330 million commuting. maximum.

The Sé district in the city, the old The city of São Paulo was a partner downtown, has 17% of jobs and by indicating areas valued at BRL 3% of houses. This means that 280 million for a 20-year contract, 3 million people commute every with partial deliveries from the sec- day only from the East Zone, over- ond to the sixth year. This prevent- crowding public transportation and ed the private partner to fully pay damaging population’s quality of the contract in and having a high living. financial cost in this investment. 114 Contract guarantees: Highway towards Rio de Janeiro. “The city of São Paulo

- Primary Guarantee: A asset cor- The new project will build 10,000 also has the Housing State poration in São Paulo housing units (7,000 for HIS and 3,000 for HMP). The goal is to Corporation (Companhia - Secondary Guarantee: A portfolio make partial deliveries in a four- Estadual de Habitação), of receivables. year schedule. This is an investment which also helps to tell this The bid’s notice was posted in Oc- that will impact the local economy as it is located in a strategic loca- tober 2014 and the contract for success tale. batch 1, comprising 3,683 units, tion and quite expensive in Brazil, was signed in April 2015. It is a among the cities of Itaquaquecetu- contract worth BRL 1,840 billion ba, Arujá and Guarulhos. with State counter payment of BRL As the level of ancillary revenues 82,562 million. will be high, it is believed that New projects there will be no subsidies. To char- acterize the PPP, the service takes A second invitation for São Paulo’s place after construction, with build- metropolitan area was made for an ing maintenance and supporting area called Fazenda Albor, owned services for 20 years to justify the by São Paulo Housing Corporation. yearly counter payment from the The difference will be the significant Public Administration. ancillary revenues as it is a plot of land with 2,7 million square meters Secovi and Sinduscon interest on in a privileged location. The Presi- housing is quite clear as both enti- dente Dutra Highway is an area 10 ties see Social Housing PPP as an kilometers away from the airport opportunity. It is considered that and it is located at the most expen- even during economic downturns sive corner of São Paulo today, Ro- this segment allows governments doanel East with Presidente Dutra to keep the pace of hiring.

115 SOUTHEAST PMIs show Espirito Santo interest in growth

The year of 2009 was critical to of governments. establish Public-Private Partner- ship legislation in the State of Es- PMIs published in Espirito pírito Santo. Santo

The 2009 legislation approved The first Espírito Santo’s Proce- guidelines and goals, i.e., priority dures for Express of Interest, or PMI, areas to develop projects. Further- were launched between 2011 and more, at the same time the Part- 2012 through Decree. The process nership Managing Council was cre- was successful and provided a lot ated, with the task to strategical- of learning, namely the possibili- ly evaluate projects based on the ty of hiring studies for projects with government and its operation. The quality at a low cost - as per Law legislation also determines mecha- 8.666, as discussed in other region- nisms for hiring, counter payment al events, this is quite time-con- and guarantees and the Partnership suming and little satisfactory. Guarantee Fund - that is in use by The PMI experience is important as State now. it opens the possibility to build and Full structure find good options for projects in the market and subjected to bureau- José Eduardo Faria - Managing Council - CGP-ES: A cratic procedures of Law 8666. Steering Committee for the Pro- de Azevedo gram, comprised of Development, Six PMI notices has been Secretary, State of Espírito Santo Planning, Economy, Management posted: Development Secretariat and Human Resources, Govern- Hired PPPs ment Secretariats and the State Public Attorney. - Faça-Fácil

- PPP Unit: Technical support to The first PPP aimed to expand the government entities. Dissemination Faça-Fácil service network (similar of knowledge on PPPs. to São Paulo’s Poupatempo). The unit in operation was hired by Law - PPP Industry Units: Entities de- 8666 and was incorporated to the veloping PPPs. PPP contract bid and structured - Intergovernmental Network to through a PMI. The selection was Develop PPPs. made based on two competitors that developed studies but the selected - PPP Network: Efforts required company had to improve on some to elaborate policies, guidelines, items to meet expectations. PMI alignment of procedures, mutual allows this dialogue, resulting in a collaboration between PPP struc- very efficient project structure. This turers and managers in Brazil. project was then bid and become the first PPP contract signed directly One of the Unit Coordination differ- by the Public Administration. entials is that it is led by two technical advisors to ensure continu- The contract is for the expansion ity and the build-up of knowledge of Faça Facil network to serve over projects, immune to changes 254,000 citizens in the cities of 116 Colatina, Serra and Cachoeiro do Projects to be developed “For this reason, one must Itapemirim. The 12-year concession is estimated at BRL 833 mil- Among published PMIs, some shall be careful to not open a wide be developed in the next years, such lion and includes two mobile units range of PMIs but to focus and three fixed units, in addition to as the Police upgrade, non-educa- their operation. tional services and the waterways on the ones the State really system, which is currently being re- - Sewage collection and treatment assessed. There is also a study on considers as strategic, in in the city of Serra (CESAN) recovery of public buildings and the order to keep credibility and sewage collection and treatment The study and model of this PPP project for the city of Vila Velha, build a trusted relationship were developed under an agree- which is more developed. ment between EBB and BNDES, with the private sector. which originated the bid. The con- The basic sanitation project is pro- tract was signed in 2014 for a gressing well at the PPP model 30-year concession, with estimat- phase and hopefully the bid’s notice ed worth of BRL 630 million. will be available for public consultation before the bid. The model shall It determines water supply univer- be similar to Serra’s except for ad- salization at the end of 30 years. justment required for this particular The schedule determines that with- city. in eight years, 95% of the urban area still not served by sewage col- It is believed that a large effort is lection and water supply networks required to enhance Brazilian’s leg- will be covered. The network is cur- islation and create an environment rently 787 km long and more 246 based on trust that is better than km will be added, an investment the one we have today. For this around BRL 320 million in sewage reason, one must be careful to not collection and treatment network. open a wide range of PMIs but to There are also operation and main- focus on the ones the State really tenance services at a cost of BRL considers as strategic, in order to 309 million, totaling a contract of keep credibility and build a trusted BRL 628 million. relationship with the private sector.

117 SOUTHEAST An analysis on the road transportation and its impact on Brazilian economy

The need for security, comfort and from seven federal highways were effectively positive economic de- granted. mands for the road transportation user is one of the State of Espíri- The concession is not necessarily to Santo’s priorities. The lack of re- suited only during economic down- sources by the Public Administra- turn or few resources. It is an option is a large barrier for the trans- tion for infrastructure management, portation industry. such as highway infrastructure.

By improving the highway network, Experiences from Espírito the transportation industry and oth- Santo highway network er industries will gain too. The main Espírito Santo granted its first high- factor is economy’s competitiveness. way to the private sector in 1998, If you have a better highway then the Sun Highway, which is a quite it is possible to move goods or pro- mature concession now that reduce services at lower costs, received many investments, such as flecting on transportation of agricul- Guarapari control room and the du- ture production. plication from Vila Velha and the North access to the city of Serra de One of the most concerning issues Guarapari. It is a 25-year contract HalpherLuiggi is the waste caused by improper covering 67 km, for recovery, im- Director General, DER-ES transportation. A load of tomatoes provement, maintenance, duplica- produced in the state of Goiás los- tion and user service. This contract es 10% until it reaches the state of is currently in force and set to ex- Espírito Santo. So if the load has pire in December 2023. 1000 boxes, 100 of them are lost. Which is a lot. The second experience happened in April 2013, the concession of BR- History of Highway 101 federal highway of 458 km in Concessions the state of Espírito Santo and 17 Highways were effectively grant- km in the state of Bahia. It is at the ed to the private sector in Brazil in early stages and shall be valid for 1994. The pioneering project under 25 years. The concession improved this model was Rio-Niterói Bridge, the conditions for the region. After again granted to the private sector the concessionaire took over, side in 2014. It was 1,316 km from six streets were equipped with medical federal highways. service, repair shops, lane recovery and other services, improving the Lula and Dilma administrations al- region’s performance and the quali- so focused on this topic as an al- ty of living of citizens. ternative to meet the country’s demands even if they were not so Waste due to lack of aligned to the concession process. investment

During Lula administration, from According to the World Bank, Bra- 2003 to 2010, 3,305 km from zil loses 1% in growth due to is- eight highways were granted. And sues in the transportation system. on Dilma’s first term, 5,350 km It means that during Dilma’s first 118 term from 2011 to 2014, Bra- 15 years, returns would total BRL lo, Rio de Janeiro and Minas Gerais zil could have grown 4% to 4.5% 6.6 billion, almost three times the unveils that the state of São Paulo more. It is estimated that the loss invested amount. is the most dynamic in Brazil with for Espírito Santo could reach BRL 22 concessions. Rio de Janeiro is 1.3 billion every year. The economy - Capacity increase plan: Such ca- catching up fast. Minas Gerais has becomes weak and does not grow pacity increase plan forecasts in- some concessions in the South of because we have problems in our vestments of BRL 1.57 billion from the state - and it is not coincidence infrastructure. 2011 to 2025 (at 2011 prices), that this is most developed region two thirds of it for federal high- in the state. The State of Espírito What is necessary to better ways and one third to state high- develop the state? Santo is late on granting highways ways. In this case, investments are when compared with other states higher because highways are quite The Espírito Santo Highway De- in the Southeast region. consolidated. partment conducted a study to find the main investments for the high- An overview of highways in Brazil Lack of investment vs. shows small growth. The state in- way development in the state for smaller growth the next 15 years. The goal is to vested heavily in infrastructure in bring that 1% of growth from the It is no news that Brazil is experi- 2010. That was the year when the national economy to the local econ- encing a severe downturn that re- Growth Acceleration Program (Pro- omy. Local and federal highways duces the capacity of investment grama de Aceleração do Crescimen- would be involved. by the Public Administration. Here to, PAC) most invested in federal concessions emerge as an option to highways. What was the outcome? - Paving Plan: The analysis consid- leverage the country and improve Few highways in good conditions, ered some 2,500 km of non-paved cities development. a handful in acceptable conditions highways. From this total, some and many others in poor state. And 1,265 km have interesting internal Whether it is a pure concession or this is because of the way how the return rates, ranging from 10% to a mixed concession, it can dramati- state manages its highway network. 66%. This means that if the state cally reduce the amount required to had paved these 1,265 km, the in- be invested by the Public Adminis- In the other hand, investments vestment would generate a return tration over time. made by concessionaires are similar above 10% per year to the invest- to public investments but there is a ment made. Investments total BRL A fast comparison of Espírito San- right time for the application of the 2.4 billion (at 2009 prices) but in to against other states as São Pau- project or to recover the highway.

119 SOUTHEAST Smart, Human Cities: An inspiring look into the future

André Gomyde, Chairman, Vitória · 1st Cycle - Agriculture – The Development Corporation (Compan- man was a nomad by then and by hia de Desenvolvimento de Vitória), discovery of agriculture he fixed in introduced the Smart, Human Cit- a portion of land and then cities ies concept - spaces with different started to sprout. needs and problems but using tech- · 2nd Cycle - Industry – Emergence nology to solve environmental, eco- of factories, labor unions and new nomic and social issues to improve labor relationships. people’s quality of living. · 3rd Cycle - Creativity, Innovation, The Brazilian Smart, Human City and Technology – Dawn of the Network was created to accomplish 21st century, where information, and disseminate this concept in knowledge and technology took hold Brazil, and connects public officials of the global economy. from several cities, entities and local and foreign governments to collab- · 4th Cycle - Nanotechnology oratively develop integrated projects and Biotechnology – The so- and plans for the benefit of member called Life Sciences, governing a cities. multidisciplinary range of fields of knowledge, that answers by the André Gomyde According to Gomyde, the network name of nanoscience. Chairman, Vitória Development was the creation of the Science and Corporation Technology City Secretariat National André Gomyde believes that this cy- Forum and exists since 2012, but it cle might generate multiple business- was constituted as an entity in 2014 es in the world, in research, technol- connected to the Mayor National ogy and innovation, and Brazil can Front (Frente Nacional de Prefeitos, take advantage of this by starting to implement smart, human cities. FNP) and to the Europe-based Glob- al Smart, Human City Network. The speaker highlighted successful case studies about smart, human The Brazilian Network gathers May- cities all over the world, such as: ors, Secretaries and City Officers in Science and Technology, as well as Chattanooga, TN – USA Universities and Science and Tech- nology Institutions (Instituições de Once considered the most con- Ciência e Tecnologia, ICT) to fulfill taminated city in the US until the the important role to connect three 1980s, Chattanooga, Tennessee, economy sectors: University, Public managed to change its economic Administration and Private Sector. profile and became one of the green- est cities in the world. After indus- Some of its goals are to articulate, tries brought development specially research and support Brazilian cities in the 1930s, the city reinvented it- to deploy smart, human city projects self from a polluting economy to a that improve delivery of public ser- cleaner, more sustainable one, cre- vices and the quality of living. ating technologic structures and ac- quiring land from deactivated plants He stresses that the world has un- to build public aquariums and ren- dergone huge changes: ovating the Tennessee river banks 120 (one of the five largest rivers in the neously by means of a Public-Pri- · Capture of information US) with leisure and sport areas, vate Partnership. in addition to building parks, plant Information flow through fiber optics trees downtown and in other areas Public-Private Partnership - pro- · Command and Control Hub as well. vides the technologic infrastructure in public lightning parks. The role of Communication and In- · Integration of Information Factory of Ideas - operating in con- formation Technologies in this pro- · Open Platform cess is to integrate by using infor- cepts of creative economy. mation data, including people in the If the city sets up an ecosystem such · Best Services search for solutions through the joint this one, the city ensures sustain- creation of smart solutions in light- ability for this innovation process PPP for Lightning in Vitória - ning, education, transportation and and technologic development over State of Espirito Santo many others that can be supported the years. by technology. Vitória’s first PPP was launched in Infrastructure for Smart, 2015 through an open invitation for “Before, solutions were not integrat- Human Cities: deploying a new lightning system for ed, it was like each solution had an the state’s capital. intelligence, a method to deal with · Technologic information. European cities were This idea came up while we were · Smart Grid the first to integrate and to realize discussing the City Technology Park that integration would not be useful · CICC and found the need for connecting if the people could not take owner- the population anywhere in the city. ship of that information, hence the · Open Platform We would transfer public lightning concept of open cities, providing management for the private sec- transparency, dialogue, appropri- · Sanitation tor so it was natural to deliver the ating information and working to- · Power Generation people with high speed internet ac- gether with the Public Administra- cess wherever they are in the city,” tion to find solutions. This means · Health to place the players themselves into highlighted André Gomyde, CDV the process. · Education Chairman. One of the technologies included in the contract was to pro- · Creative Economy And it is precisely for this reason vide Wi-Fi Internet in the city’s light- that the name of smart cities must One example mentioned by Gomyde ning poles. Furthermore, 32,000 include the word “human”. is an integrated command and con- poles with LED lams generate effi- This is the role of the Brazilian trol center in the city, using sensors ciency and energy savings. in each lightning pole to send infor- Smart, Human City Network, that Format: is to integrate companies, debat- mation to an open platform, thus making the city smarter and more ing how these ideas can be de- · Upgrade Term 03 years ployed and how societies from sev- human. eral Brazilian cities can perform this PPPs lead the way to Smart, · PMI huge exchange of information and Human Cities experience. · Invitation · PPP Lightning The foundation for this is the tech- · Studies nologic infrastructure that allows · PPP Sanitation ·· Final Model for connecting people to an innova- · PPP Power Generation tion ecosystem, linking the follow- · Debates ing structures: · PPP Health · Bid City - by means of a Technology · PPP Education City Council. · Contract: BRL 430 Million Technologic Infrastructure offered in Living Labs and Science Squares - the PPP for Public Lightning · Investment: BRL 150 Million with live labs for open innovation, which integrates research simulta- · Cameras, Application, Sensors · Upgrade Term 03 years 121 SOUTHEAST Private investment: Actual possibility to accelerate deliveries to society

How do Public-Private Partnerships - Present historical liquidity on and Procedures for Express Interest negotiation of quotas for income work for the cities in the state of funds Rio de Janeiro? - Have potential for long-term The chart shows the applicabili- returns ty of the PPP model that requires - Ensure protection against infla- more investments from the Public tion, with asset income flows in- Administration, as well as Proce- dexed to the market dures for Express of Interest, that although also receive public re- - Low quota volatility (asset with sources, they also provide a myri- stable equity characteristics); ad of options to cities to implement Note: the fund’s assets are real es- infrastructure, sanitation and trans- tate, CRI, LCI and LH portation projects. Revenues: Income from rent, sale In Brazil, investments made under of assets and real estate bonds Public-Private Partnerships shall and quota appreciation; comply with Law 11.079/2004 (PPP Law) and Law 8.987/1995 Instruments from capital (Concession Law) that comprise an markets: Jorge Arraes advanced legal framework to fos- Secretary, Special Secretariat for - Regulation and oversight from ter business within the legislation, Concessions and PPPs for the city CVM of Rio de Janeiro which requires projects structured according to: - Transparency in operations

Qualified team assembly - Established public governance

Porto Maravilha’s institutional-fi- - Relative protection against nancial model is new to Brazil. politics The same project used urbanistic mechanisms from the City Charter; Concessions generate an a federal law and instruments from amount of BRL 6.2 billion capital markets, such as Real Es- encompassing the projects tate Funds and CEPACs. Everything below: was supported by a PPP contract, •Engenhão which makes the combination of • Multipurpose Arena these elements something unseen •Water park in Brazil. •Orla Rio The Real Estate Investment •Cuca fresca Fund was structured this •Urban equipment way to reach its goals: •Bike rio •Street plates - It must be evaluated by a rating •Marina da Glória agency •Transolímpica •West end sanitation - Placement is open to the invest- •Lamsa ing community •Cemeteries 122 For PPPs, the amount is of BRL ferential is that the guarantee was lic-Private Partnership is the con- 10.1 billion, covering Porto Mar- the former Jacarepaguá race Track. cession administrative contract, avilha (BRL 7.6 billion), Olympic The Olympic Campus has business under a sponsored or administra- Campus (BRL 1.4 billion) and the opportunities that can be leveraged tive model, and: tram (BRL 1.1 billion). with private resources. • A Sponsored Grant is the grant The following projects are the The Olympic City was also de- of public services and public works highlights: signed to improve mobility. The covered by Law 8.987/97 whenev- Porto Maravilha Light Rail (VLT) with 28 kilometers er it involves counter payments in long and capacity to carry 300,000 cash from the Public Partner to the Joint urban operation for the Port passengers a day, will connect Rio’s Private Partner, in addition to fees of Rio de Janeiro, Porto Maravilha downtown to the port area and will charged from users. is the largest urban intervention in feed trains, ferries, subway, buses, size and number of CEPAC in Bra- the Santos Dumont Airport and the It is a pioneering project, the first zil, rescuing the port area of one of Providência’s Funicular. in the world totally with fiber op- the most important cities of Brazil tics cabling underground that will with an urbanistic proposal based Light Rail - VLT enhance dependability and quality of telephone, internet and even on sustainability principles and im- The deployment of this new trans- provement of quality of living in power supply services, once aerial portation means has an estimated the region. The operation’s total cabling overweight poles, causing cost of BRL 1.157 billion, out of cost is BRL 8 billion and it cov- damages and harming data trans- which BRL 532 million were pro- ers a 5 million square meter area, mission. Furthermore, it will deliv- vided by the Federal Administra- limited by avenues Presidente Var- er enhanced security to passers-by tion’s Growth Acceleration Program gas, Rodrigues Alves, Rio Branco, and drivers in thoroughfares. for Mobility and BRL 625 million and Francisco Bicalho. The operation shall last 15 years, from June invested under a Public-Private New projects: Partnership (PPP). 2011 to June 2026, but can be ex- Projects to be bid in 2016 include: tended to 30 years upon approval The Light Rail is a sponsored PPP. PPP Olympic legacy, Rio de Janeiro of a new law. The PPP regime was instituted by Zoo; Barra da Tijuca and Jacarepa- Olympic Campus Federal Law 11.079/04, and at the guá sanitation; electric cars, Smart city level, PPPs are allowed by Sup- Parking Lots; Joint Urban Opera- The PPP was created to build the plemental Law 105/09. According tion Vargens; New Bus Terminal core of 2016 Olympics and the dif- to these pieces of legislation, Pub- and Polo Cine Vídeo.

123 SOUTHEAST Concessions and PPP progress in Belo Horizonte

PBH Ativos is a stock corporation assets. It is the definitive sale of a having the city of Belo Horizon- public asset. te, PRODABEL - Empresa de In- formática e Informação do Mu- Project structure/model nicípio de Belo Horizonte S/A and Internal: It is when the Public BHTRANS - Empresa de Trans- Administration develops a proj- portes e Trânsito de Belo Horizon- ect using their own technical te S/A as shareholders, and aims to team. Additionally, this internal supplement public policies by sup- team may be supported by a con- porting the city of Belo Horizonte to perform structured financial opera- sulting firm, hired as per legis- tions and other similar activities. lation, for this specific purpose.

The relationships established with External: PMI: Procedure launched the private sector are: by Direct and Indirect Administra- tion to obtain studies with informed Ordinary Concession opinions and justifications on feasi- Concession of public service deliv- bility, surveys, research, data, tech- ery though a competitive bid to a nical information, project or reports company or a consortium of com- from interested parties in spon- Luciano Teixeira panies that evidence that is able to sored, administrative, ordinary con- perform it by its own expenses un- cession projects and permission. Cordeiro der a determined term. PBH Ativos MIP: Submission of proposals to Public-Private Partnership develop projects, studies or surveys drafted under request from an in- Administrative: Service delivery dividual or company to be used for contract where the Public Admin- structuring Public-Private Partner- istration is the direct or indirect ships with a city’s Direct and Indi- user, involving execution of works or provision and installation of rect Administration. goods. Contracts in force in Belo Sponsored: Grant of public ser- Horizonte vices and public works covered by PPP Education: Administrative Con- Law 8.987/97 whenever it involves cession to perform Engineering works counter payments in cash from the and services and delivery of support- Public Partner to the Private Part- ing non-educational services to Belo ner, in addition to fees charged Horizonte basic school system. Con- from users. tract signed in July 2012. Privatization PPP Macaúbas (sanitary landfill): Legally, the expression is decen- Administrative Concession for pub- tralization. Transfer to the private lic service delivery of final disposal sector of execution of public ser- in sanitary landfill and solid waste vices delivered by the Federal Ad- treatment originated from Belo Hor- ministration or the transfer/grant of izonte cleaning services. Contract rights over Federal Administration’s signed in November 2008. 124 PPP Hospital Metropolitano do Bar- primary healthcare network. “MIP: Submission of reiro: Administrative Concession for Engineering works and services and Public Lightning PPP: Administra- proposals to develop projects, delivery of non-medical services to tive Concession for delivery of pub- studies or surveys drafted management and operation of Belo lic lightning services in the city of Horizonte’s Hospital Metropolitano. Belo Horizonte, including develop- under request from an Contract signed in March 2012. ment, upgrading, expansion, ener- individual or company to be Healthcare Centers PPP: Adminis- gy efficiency, operation and main- used for structuring Public- trative Concession contract for de- tenance of the city’s public light- livery of non-medical services to ning system. Public consultation in Private Partnerships with support and infrastructure to the progress. a city’s Direct and Indirect Administration.

125 SOUTHEAST Know the Concessionária Serra Ambiental case

This is a consortium comprised Counter payment guarantees of Sonel Engenharia, Construtora Aterpa and Mauá Participações that Serra’s receivables are the proj- won the bid conducted by Cesan ect’s guarantees both for water (Espírito Santo Sanitation Corpora- and sewage. Also, there is an es- tion) in October 2013, at Bovespa. crow account in BANESTES to support guarantees requested by Next, the consortium opened a BNDES. SPE with a paid-in capital of BRL When the consortium took over 65 million. The 30-year contract Serra’s concession, sanitation was signed in July 2014 and the services and sewage treatment operation stated in January 2015. coverage was of 60%. The goal The concession goal is to provide is to reach 95% in next 8 years, 100% of sanitation services to which means that a lot of invest- the city of Serra, the most pop- ing needs to be done, as in treat- ulous in the state with approxi- ment plants to allow for the ser- mately 467,000 inhabitants. The vice’s universalization. contract determines investments From January to September of BRL 660 million through 30 João Lúcio Souza 2015, 11,000 service requests years, BRL 394 million out of it were serviced and 21 sewage Lima Filho to be invested until 2020. A BRL Sales Director, Sonel Engenharia S/A; treatment plants and 108 lifting Counselor, Concessionária de Sanea- 240 million financing is expected platforms are in operation. mento Serra Ambiental from BNDES for investments in the 6 first years of the concession, The contract relies on perfor- during which expansion works for mance levels, demanding that the collection network and sew- the concessionaire fulfill re- age treatment plants shall occur. quests for removing jams from networks in 24 hours - cur- Compensation is twofold: A fixed rently, the consortium manag- installment that pays for invest- es to do this task in 19 hours. ments and interests, and a variable installment as per cubic me- Requests for other works shall be ter of sewage treated. fulfilled in 48 hours and the consortium does so in 26 hours, and Expertise in sanitation is a crucial satisfaction level is at 95% ac- issue for this project. Sonel, for in- cording to surveys conducted with stance, is a 50-year old compa- the population. ny founded in Minas Gerais and that is specialized in sanitation, Serra Ambiental deployed an Op- believing that the only way to pro- erational Control Center. The com- vide sanitation services to all Bra- pany has 50 lifting platforms con- zilians is through Public-Private nected online and operating 24 Partnerships as this is a service hours a day. That is the advantage requiring high investment. of the private sector, as it can hire 126 faster and make faster manage- - City-owned companies and Wa- “When the consortium took ment moves. ter and Sewage Autonomous Ser- over Serra’s concession, vice companies represent 12%. Situation of sanitation in Brazil sanitation services and sew - 12% of concessions are in the - 76% of sanitation is managed by age treatment coverage was state-owned companies private sector hands. of 60%. The goalies to reach 95% in next 8 years.

127 Mid-West Region

128 City and state pipelines of PPPs and Concessions in the Mid-West Region

129 MIDWEST

A new look to Aparecida de Goiânia

Carlos Alberto de Paula Moura project, whereas the legal framework Júnior, Sinduscon-GO chairman, en- was updated. The PMI was regulat- tity that hosted the seminar, was the ed and then submitted by the compa- facilitator of the last panel: City and ny, and then a permission was grant- state pipelines of PPPs and Conces- ed for elaborating the studies, which sions in the Mid-West Region. The were completed in May 2015. first speaker, Euler Morais, is the City Secretary for Government and An analysis found that the study Institutional Integration for the city should be corrected as it has many of Aparecida de Goiânia, highlighted errors. The Managing Council felt that Concessions and PPPs projects the need to hire a private consulting are not for large cities only. firm to support reviewing the study, as well as to perform economic and The city has more than 500,000 financial feasibility analyses. inhabitants and is growing fast. The The lightning PPP will have a city is located in Goiania Metropol- 300-month contract. The initial itan Area by the BR-153 highway, amount expected for the count- with easy access to all Brazilian re- er payment was of BRL 876 mil- gions. Its strong industrial vocation lion, an average monthly cost of is attracting the attention of Brazil- BRL 937 million, but aiming that ian and foreign investors. Euler Morais by adopting the LED system, sav- City Secretary for Government and ings of 6.5% would be generat- Institutional Integration of the city Currently, Aparecida de Goiânia is of Aparecida de Goiânia ranked fourth in terms of consump- ed per month as well as average tion power among metropolitan re- savings within the period of 16%. gions, and is also among the 10 The investment would be around best cities for business and among BRL 180 million, whereas the city the 100 cities to invest in real es- would spend some BRL 236 mil- tate in Brazil. lion in the same period. This is savings of BRL 44 million among In 2014, the city of Aparecida in- other benefits: A modern lightning vested the same amount of Goiânia system that would generate savings and Anápolis combined. It was BRL and deliver proper lightning without 152 million invested in works. For costs to the city. this reason, FIRJAN (Rio de Janeiro Industry Federation) ranked Apare- Goals of the PPP: cida as first in the Goiás, and 21th • Change of the whole lightning in Brazil, in fiscal management - system in 36 months; ahead of 26 Brazilian capitals. • Total number of light fixtures was Public Lightning PPP around of 50,000 was increased to In April 2012, the city received a 70,000; proposal from a company to per- • To have an online management form studies to replace all lightning system to manage the process well. in the city by LED lamps. Garavelo Space The company was authorized to conduct the required research for the The Garavelo Space aims to imple- 130 ment a complex involving leisure, the owner of a preservation ar- eratives for a selected collection entertainment, a “mini shopping” ea and wanted to raise residential and the next step is to analyze pro- in his words, with many attractions buildings there but a small plot of posals for technologies being sub- to upgrade and leverage the region. the land was owned by the city. So mitted to completely get rid of the It is well located at the Igualdade a partnership was established for landfill. Square, one of the most expen- the creation of the Children’s Park sive areas in Aparecida adjacent to (Parque da Criança) in the area, at The sole commitment by the city SINE/SAC, CMEI and CAIS. the initially estimated value under would be to provide an area to de- the legislation, providing the re- ploy a plant that would lead gar- Public Administration quired transparency from the Pub- bage into wood, diesel, energy and expectations: lic Administration. so on. The garbage collection and • To generate revenue to the Space; • Family Park: it was the conse- disposal would be executed under quence of a new shopping mall, a PPP. • To create new job and income which believed that the area in opportunities; Some of the partnership deliv- front of the building would be bet- eries are the implementation of ter used to urbanize and attract vis- • To create a modern, attractive eco-friendly stations to recycle gar- space to enhance leisure in the itors to the mall by opening a park. bage; deployment of containers; region; Demands being studied implementation of facilities for se- • To benefit society, investors and lecting residues for cooperatives; One of the city’s demands is the also local companies. provision of equipment for coopera- proper disposal of residues as the tives; mechanized cleaning, imple- consequence of its fast growth. The Other projects executed mentation of paper recycling equip- city has been pursuing alternatives • América Park: A private business and estimates to spend around ment and service units for citizens, in a former public area. A swap BRL 183 million in a PPP for solid even for awareness. was agreed with the companies: waste. The goal of this PPP is to ensure the payment of urban regularization better collection, transportation fees by the public partner and the Some two years ago, the city of implementation of the square by Aparecida transformed a garbage and treatment of waste generat- the private partner. dump area in a landfill. It was a big ed by households, fairs, hospitals achievement for the whole region. and even of dead animals from the • Children’s Park: a company was Scavengers were grouped in coop- whole city.

131 MIDWEST Expertise from other states was critical for the creation of PPPs in the state

Mato Grosso do Sul was also one and disciplines, aiming to exempt of the last Brazilian states to pass the Public Administration from new a PPP bill in the Mid-West, but the costs and keep a high technical lev- difference is that the state could el in the PPP institutional arrange- learn from other states, specially ment in Mato Grosso do Sul. their failures. The state partnership program The model created by the state was thus created by the State Law was supported by the World Bank 4.303/2012, instituting gover- through a program to build roads, nance with financial sustainabili- meeting Mato Grosso do Sul goals ty mechanisms to develop and ex- of institutional strength and also pand the program, building stra- tackling environmental and plan- tegic partnerships with the private ning issues. sector for investments. Currently, the PROPPP(MS) is comprised of In 2003, before the Federal PPP a technical unit, UCPPP Central Bill was passed, a Work Group Unit, for supporting the PPP Man- comprising state secretaries was agement Council on regulation, formed by Decree 11.501, with the planning, finance and oversight. task of elaborating strategies for the This is a regular program directly adoption of Public-Private Partner- connected to the Mato Grosso do Zaida de Andrade ships in Mato Grosso do Sul. The Sul Planning Secretariat, as per the Work Group was coordinated by the Lopes Godoy legislation. Coordinator, Central PPP Unit, Production and Tourism Secretary State of Mato Grosso do Sul at that time. The group was formed This is a work accomplished in collab- by Secretaries of: Planning, Sci- oration with society, universities and ence and Technology; Infrastructure the Brazilian Law Association. Still, and Housing; Tax and Control; a the minutes for the PPP Bill was representative from the State Pub- the object of the “Regulation and lic Attorney and another from the Partnerships” workshop at the Government General Coordination. 1st Mato Grosso do Sul Regional Development State Conference, The Work Group found that trans- that gathered representatives from portation and energy were priority, society, business and universities, to as well as eliminating barriers for allow a broad discussion about the the program’s implementation in Law. One of the goals was to elab- the state, due to the low level of orate a Regional Development Plan, Net Current Income, breach of debt i.e., to think Public Management in levels, and the high risk of demand different terms: Public officials in aligned to the need for building a dialogue with civil society. complex structure for managing projects. However, in 2012, after a Society took an active role in the new Work Group was formed and 1st Regional Development Confer- new studies were performed, an in- ence, when a list of demands from novative governance arrangement the State was compiled. The State was implemented as a network, us- PPP Law was effectively crafted ing existing structures in a coordi- by all involved, even public service nation involving many institutions users. 132 Environment is the focus on Mato de Parcerias Público-Privadas, “Instead of appointing a Grosso do Sul EPE) was created in the same year, Secretariat for a PPP, the enhancing the institutional arrange- One of the issues identified by of- ment in the current term, as the ficials and had become a PPP op- State Public Attorney, the governor is quite open to Conces- portunity is Preservation Units Secretariat of Planning, within state parks, as the Pantanal sions and PPPs. takes one third of the state’s ar- Finance, a representative from Zaida states that the governance ea, ensuring relevance to the local Government coordination and environment. arrangement, with a Council and Technical Support Unit in an inte- a chairman appointed by the The Unit’s management was cru- grated governance networks was cial to consider a partnership, as one of the innovations in PPPs in governor shall comprise a management expertise must be Mato Grosso do Sul. Instead of ap- provided by a specialized compa- team, as a minimum. pointing a Secretariat for a PPP, the ny. The officials themselves admit- State Public Attorney, the Secretari- ted that this is not something they can do. “The focus was to distin- at of Planning, Finance, a represen- guish between what concerns to tative from Government coordina- Public Administration and to Pri- tion and a chairman appointed by vate Administration. This was very the governor shall comprise a team, clear to the Preservation Unit team. as a minimum. Eventual members We explained this to the Manage- are admitted but without voting ment Council and it was easily rights. approved.” The Council also relies on a very PPP management strengths nimble structure, which acceler- During 2013 and 2014, the State ates discussion and approval of worked on decrees, PMI, training projects. The Management Council and regulation. 2015 was the year met twice and on both occasions it to realize existing projects, launch- was easy to submit and get doubts ing reference terms both for PMI cleared, speeding projects up. and those projects directly structured by the State. The Public-Pri- Local priorities are sanitation and vate Partnership Office (Escritório highways, just like the rest of Brazil.

133 MIDWEST Improvement of public service delivery is the focus in the state of Mato Grosso

Founded three years ago, MT Par- The project has a PMI already ticipações e Projetos SA was orig- published and it is being designed inated from a demand from the now. It proposes six Ganha Tem- state of Mato Grosso to encour- po units in several cities through- age the private sector. Heading out the state. Demand for these the company, Vinicius de Carval- six units is estimated in 6,000 ho participated of a panel to pres- daily operations or approximately ent the state’s pipeline. He start- 130,000 operations per month. ed his presentation by saying that Mato Grosso was one of the last Total investment is calculated at states to develop a state PPP pro- BRL 36 million for construction. gram, at the end of 2011, which A difference is that only public delayed some partnerships. properties will be used as per decision from the MT-PAR Board The entry of the state into PPPs and the Program Managing Coun- shows some lack of experience. cil, to reduce project costs. An- One of the attempts was to re- other step would be a concession sume construction of Hospital for the operation, worth BRL 446 Central, that is interrupted for million for 15 years. Vinicius de Carvalho almost 30 years. Another is the CEO, MT Participações e Projetos construction of a prison complex The business model is based on for 3,000 inmates. There has the amount of operations, so the been PMIs and models were de- company is compensated by each veloped, but nothing went further. citizen served in Ganha Tempo irrespective of the service deliv- The main problem is to conceive ered. Compensation is 70% fixed PPPs as the last resort, where- and 30% variable, according to as the potential lies in establish- performance levels. So the coming partnerships at the beginning pany has incentives to deliver a of a project. There is money, but good job. there is no good planning. There is money in excess, but good proj- Another priority project for Ma- ects are lacking. to Grosso is the management of public schools. Partnerships to Project portfolio build or renovate, maintain and manage public schools in expan- Mato Grosso’s main case is the sion all over Brazil, delivering Ganha Tempo project, a hub of cleaning, security and even food state and federal services, as well services. The state of Mato Gros- as some services from the city, so owns currently 747 schools and utilities gathered in a single and is assessing how many will place to reduce paperwork for the be benefited. citizen. This model exists in other states, such as Goiás, São Paulo, The state has a project called In- Rio de Janeiro and Minas Gerais. fovia to digitally connect all cit- 134 ies in the state, or at least a ma- “The main problem is to jority of them, through a digital conceive PPPs as the last road that allow for taking IT or ICTs to improve delivery of public resort, where as the potential services. The reason is that Mato Grosso is the third largest state in lies in establishing partnerships Brazil and most of the cities have at the beginning of a project. less than 20,000 inhabitants.

The challenge is to deploy the technology across the state to improve public service delivery specially in small cities.

135 MIDWEST Águas Guariroba case: The importance of increase dialogue with society

In this discussion, facilitated by So it is important to keep a con- lawyer Lucas Navarro from Navar- stant conversation with the soci- ro Prado Advogados law firm, two ety as hard the topics may be, as speakers were invited to talk about the best is always bring everyone their experiences and views on the together to find the best solutions. market. Campo Grande System The first was José João de Jesus When Águas Guariroba started da Fonseca, CEO of Águas Guariro- works in Campo Grande, in 2000, ba, concessionaire delivering wa- only 18% of the city had sewage ter supply and sewage collection collection and now 82% of the and treatment services for Campo population is served by the system. Grande, capital of the state of Mato Only 96% of the population was Grosso do Sul. served by the water supply network The organization is a member of and now everyone is served. AEGEA Saneamento group that The concession is a 30-year con- manages sanitation assets through tract that can be extended for an- concessionaires in several states of other 30 years - one of the longest Brazil, supported by Engepav - a in the country.The concessionaire José João de Jesus company that delivers overall main- was mandated to provide sewage tenance and management services. coverage to 70% of the city un- Fonseca til 2030, but the previous mayor Chairman, Águas Guariroba Brazil’s gap in sanitation is huge. Almost 50% of the population is wanted 100% coverage. not served by a collecting network After many analyses and discus- and for the other half, only 39% of sions about adjusting the contract, sewage collected is treated. it was agreed that the full sewage coverage was feasible to be com- It is important to keep a close re- pleted by 2025 and the contract lationship with a constant dialogue with the concessionaire would be with society, as raising awareness extended for 18 years and a half. is critical to prevent issues and reduce waste. Águas Guariroba supplies water from two superficial uptakes and An example of this is Agbar (Águas 150 underground wells, including de Barcelona) in Campo Grande, one super well taking water from which had a series of divergences the Guarani Aquifer. between shareholders, society, pol- iticians, Justice and the company’s Through a Loss Reduction Program work was heavily damaged. (Programa de Redução de Perdas, PRP), the concessionaire brought The same happened with EPAL water losses down in Campo (Empresa Portuguesa de Águas Grande to 19% from 56% in 2006, Livres) that invested in the region one of the best national average and had Brazil’s best sewage treat- levels for water supply. The work is ment plants but decided to sell the systematic and ongoing. concession also due to difficulties with control entities. After many investments in man- 136 agement and technology, the con- vestments of BRL 416 million. “Through a Loss Reduction cessionaire’s power consumption is the same as of 8 years ago, even Piracicaba has an Operation Con- Program (Programa de trol Room and the service had with the increase of 12,000 new Redução de Perdas, PRP), homes to the water supply sys- 100% coverage in two years. BRL tem every year and forecasting the 300 million were invested in the the concessionaire brought evolution of the whole sewage sys- last 24 months. tem. There were 1,100 leakages a water losses down in Campo To provide full water and sewage month in the network, now there coverage in Brazil within 20 years, Grande to 19% from 56% are 135 leakages in average. according to the Basic Sanitation in 2006, one of the best The search for efficiency is continu- National Plan (Plano Nacional de ous. The concession business is not Saneamento Básico), the state national average levels for making money through works, but must double investments in this selling water supply, sewage collec- field. water supply. The work is tion and treatment services. Due to fiscal adjustment, the Pub- systematic and ongoing. PPP Piracicaba lic Administration is not able to invest that much so it needs to part- Piracicaba’s Public-Private Partner- ner with the private sector. So there ship is similar to the Águas Guariro- are opportunities in infrastructure ba project, but here it covers only with the benefit that these projects sewage services. do not require public counter payments, as in general they are sus- The 30-year contract was signed in tainable with fees charged from June 2012 and operations started sewage and water supply services, in the next month, forecasting in- thus reducing risks for investors.

137 North Region

138 Concession and PPP Cases in the North Region

139 NORTH Águas Guariroba case: The importance of increase dialogue with society

Pará’s growth is bringing opportu- it off. Hopes are that it will be fea- nities for concessions as suggest- sible by the time the first phase ed by the Pará 2030 project, to is completed as there is plenty of develop the State at long-term. soybeans in the region of Santa- Some of the goals are to increase na do Araguaia and in the neigh- production, improve logistics and boring state, Mato Grosso. From reinforce the use of the Amazon Marabá to Santana there is poten- brand, one of the most represen- tial for mining: iron, gold, nickel, tative symbols in the world. copper - not owned by Vale but by small owners and not explored The new administration’s view in concessions and PPPs added due to the lack of logistics. some improvements for process- This project is pursuing environ- es. The institution core is being mental permits and some strate- restructured with the support of gies were adopted to fast-track it. McKinsey & Company consult- In projects like this, there is a bid, ing firm. The technical team vis- the concessionaire wins and then ited São Paulo and Minas Gerais the environmental permit is pur- to learn more about topics and sued. Here, government went to assess what is working at these speed the process up according to states. Adnan Demachki the legislation. The Secretariat has Secretary, Economic Development, Mining and Energy Secretariat Projects in progress already requested the environmental permit to the State SEMA and The Liberdade Highway is a proj- settlements and Indian areas were ect submitted to the state to serve excluded from the project. When the region of João Paulo, cross the the winner is announced, the Sec- roundabout and run in parallel retary transfers the environmental with BR-316 highway and then permit to the concessionaire. It is go towards the city of Castanhal a simple concession, the winner or Santa Maria. The inclusion of builds and operates. the roundabout is interesting to Pará so a deeper study was au- This railroad will connect Para’s thorized and managed by the Eco- north to the south, crossing land nomic Development Secretariat. owned by 1,700 people. Can you Another PMI was about a railroad imagine a concessionaire dealing to connect Santana do Araguaia with so many people? In order to to Barcarena with approximate- make things easier, the State sur- ly 1,400 kilometers. This proj- veyed all landowners in the rural ect has two phases. The first one environmental registrar: what are goes to the Marabá’s steelmaking the plots, the passing range and plant. The second phase would dominium, how many hectares and connect Marabá to Santana, more then the state itself will expropriate than 600 kilometers away. Stud- all the plots. The bid’s notice deter- ies have shown that the second mines that the payment is made by phase is not feasible at this point the concessionaire. Three compa- as there is no load available to pay nies have expressed interest. 140 New possibilities for railroads in rents the building. “The state is aware that in the state were open by this proposal. The secretary is discussing The state is aware that in the next the next three, four years, three, four years, public resourc- with the Federal Administration, public resources will be the Ministry of Economy and the es will be even more scant from Ministry of Planning the intention today, when even funding has not even more scant from today, enough resources. For this rea- of building a supplemental rail- when even funding has not road to the North-South railroad. son, new alternatives were pursued as this model. There is also enough resources. For this The intention is that the Feder- the construction of an administra- al Administration transfers to the tive center to integrate in a single reason, new alternatives were state the capacity to add to the facility all secretariats and many pursued as this model. railroad’s bid a segment of 50 ki- other demands. lometers from Açailândia to Ron- don do Pará, to connect to the Pará 2030 Plan Pará’s railroad. The main point Pará was Brazil’s tenth largest is that the railroad would pro- GDP in 1940. Seventy years lat- vide access to Brazil’s mid-south er, the State ranks 22nd, which through the North-South railroad. shows failures in the develop- The proposal was welcomed ment within this period. by the Federal Government and technical teams are in discus- Based on this analysis, the gov- sions right now. ernment has decided to plan the future in a new model to reach A critical point is that construct- their goals. One of the goals is to ing the railroad would not be fun- catch up with the Brazil’s income damental only for the State but to per head, which will demand Brazil, as it shall cross 20 cities growth of 6% on a yearly basis. It in Pará and contributing a great would be the same as transform- deal to the economy. ing Pará into China, so it is a goal very hard to meet. In Rondon, Votorantim Metais has a project to be deployed that To leverage the state, 23 opportu- has environmental permission, nity chains were listed based on but is facing difficulties due to discussions with more than 150 the poor logistics for bauxite and institutions, the Industry Federa- aluminum. tion and the private sector. Each government secretariat submitted The steelmaking plant in Mar- a strategic planning and all this abá is also under consideration, information is being used to de- although there are many steps liver Pará 2030 plan. ahead. Brazil had two steelmaking plants closed in the last months. Agribusiness is a huge bet in Steel is not going through a good Pará. The state has today some moment. Even facing difficulties, 300,000 hectares of soybeans in there is a company willing to de- the regions of Santana, Paragom- velop and a business environment inas and Santarém, producing a is being built as suitable as possi- total of 1 million tons. The proj- ble to allow this company to win. ect aims to reach 9 million tons to expand the industry and support Pará is also working in other areas. local economy. In healthcare, there is a commitment from the state to build some Pará 2030 is based on vertical- hospitals through asset leasing: ization of all chains and improve the bid winner builds and the state production. By adding value to 141 Águas Guariroba case: The importance of increase dialogue with society

23 oportunidades de criação de valor compõem o Plano Pará 2030 ...

Agricultura familiar Turismo e gastronomia

Grãos Açaí

Biodiversidade Pecuária intensiva

Florestas plantadas Cacau

Logística Palma de óleo

Aquicultura Internalização de Compras

Energia de biomassa Mercado de Gás Natural Serviços ambientais

Extração mineral Pesca extrativa Produção de madeira de manejo

Cadeia do ferro Mandioca Fomento à indústria naval

Compensação ambiental Cadeia do alumínio | 17

soybeans, income goes up 300% In order to fully leverage the to 350% its price. state’s potential, investments in logistics were prioritized by the There is a huge effort to deploy plan, as the foundation of FEPA- industries in Pará, so the per- SA. Logistics is a large bottleneck sistence to make the steelmaking in the state of Pará, which has al- project happen. The cornerstone so become a challenge. is that any state will develop by just producing raw materials. Today, the main gap of the state preventing expansion of produc- Pará exports native wood for 40 tion is the register of land, item 5 years, virtually a majority of local in the chart. large forests moved to other states. Now a lot of eucalyptus is being It is necessary to admit and un- grown at least in the last 15 years, derstand that there is a lot of to be sold to Marabá pig iron pro- work ahead to expand production ducers. These pig iron producers and it will not happen if all prop- required coal hence the change. erties in the state are not regis- tered properly. This is a historical Today the state has many forest process and progress is slow. assets at the margins of Belém- Brasília highway, BR-222 highway, Another factors are environmen- PA-150 highway, but a large part of tal license optimization, training it is being sold to Suzano in the city and attracting investors. For this, of Imperatriz. When one sells one products made in the region will cubic meter of eucalyptus, the max- carry an Amazon brand. It is the imum value is of BRL 70 per cu- biggest brand in the world but bic meter. In the other hand, when barely used. the sale is made on logs, value is added to it by the transformation in Pará 2030 is being conducted by MDF. One cubic meter of eucalyptus the Mckinsey consulting firm and equals to 48 square meters of MDF. 13 state secretariats, totaling 30 And there is the potential to sell to people. The project shall last 15 furniture plants, adding more value years or three administrations. to the raw material. Thus, it will be conducted in the 142 O Agronegócio e a Mineração são alguns dos protagonistas deste movimento em direção ao crescimento e desenvolvimento do Estado

Oportunidades de criação de valor do Oportunidade de criação de valor da Agronegócio incluídas no Plano 2030 Mineração incluída no Plano 2030

Grãos Cacau Extração mineral

Palma de óleo Biodiversidade Cadeia do alumínio

Pecuária Agricultura intensiva familiar Cadeia do ferro Florestas Mandioca plantadas

Açaí Valor total da produção mineral R$ bilhões Receita da produção de soja e milho R$ bilhões +2-5% p.a. 15-18% p.a. 73 80 12,0-18,0 65 9,4-14 49 6,8-10,0 39 4,2-6,0 56 1,0 34 45 51

2013 2018E 2022E 2026E 2030E 2014 2018E 2022E 2026E 2030E| 19

O Plano tem ênfase na proposição de soluções para 5 temas críticos no desenvolvimento do Estado

▪ Criar uma marca de origem para produtos feitos na região Amazônica ▪ Mobilizar recursos para Marca titular terras consistentemente e Amazônia destravar investimentos e ▪ Desenvolver produção 2 1 ambiente atrativo para Atração de Regularização investimentos Investidores Fundiária da iniciativa privada 3 5

▪ Otimizar processo de licenciamento 4 ▪ Planejar disponibilidade ambiental, de profissionais aprimorando Capacitação capacitados para relação entre meio Regularização e e Formação alavancar desenvolvimento ambiente e Licenciamento das cadeias do Pará 2030 produção Ambiental

| 23 next three years of the current ad- ernor or secretary, it has to be a ministration in two ways: project from the society.

- The government does its home- While the state’s economy is work to ensure the project’s strengthened, the construction in- continuity; dustry gets stronger as well. Job - Private sector and society take and income generation are in- ownership of the project as it creased, new opportunities and can’t be a project from the gov- new businesses arise.

143 NORTH

Case Study: Hospital do Subúrbio - Bahia

The presentation that closed the monthly counter payment is BRL Regional Concession and PPP Sem- 15 million or BRL 180 million a inar in Belem highlighted the suc- year. The contract is valid for 10 cess case in the Northeast Region, years. Bahia’s Hospital do Subúrbio. From the concept to the grouping of play- This is the first PPP in healthcare ers, the case also presents techni- in Brazil and the only one as “white cal questions of the financial proj- apron”. It is accredited by the Na- ect, the bid and the contract execu- tional Accreditation Organization tion, the challenges and the situa- (Organização Nacional de Acredi- tion at this moment. tação, ONA), that checks services provided by a given hospital - and The Rede PPP, entity leading the this hospital was granted accredi- project, is the entity in several tation in record time: 18 months, states and cities that aim to devel- as determined by the bid’s notice op projects and discuss subjects goals. The project also gained so- about Concessions and PPPs. Even cial recognition from the overall development banks join a network aiming to improve Rede at a nation- population. al level. How did the hospital come José Atilio Cardoso Hospital do Subúrbio is the white up? apron (cases where medical assis- The city of Salvador had a lot of is- Filardi tance is also provided by the con- Project Coordinator, State of Bahia sues with hospital beds. The last sortium) and delivers all types of Economy Secretariat hospital was built in the city 20 medical services as well as laundry, years ago, so the population almost nutrition and building maintenance. doubled but capacity did not follow It is also called “open door” as it serves all the population for A&E. - and facilities are old. The institution is SUS member so The Health Secretariat decided in people pay nothing to use their ser- 2007 to build a new healthcare vices and the compensation is en- unit. But the city did not have the tirely done by the private sector. resources. So the state found an It is located in an area with high de- opportunity in Public-Partner Part- mand, in Salvador railroad district nerships inspired by experiences in where HDI is lower than Brazil’s. So Brazil and in Spain. The decision it is a poor district that needs this was then for a full-service hospital. service. As it was a novelty, there was strong In specific questions, it is an admin- resistance and plenty of doubts: is istrative contract, which means that it going to have a SUS hospital and the private partner is fully compen- no state employee is allowed in? No sated by the Public Administration. state employee will be a part of it? There is no ancillary revenue in this Unions, public employees and the project to reduce counter payments population itself got scared. Little owed by the State. Initial invest- by little, as meetings took place, ments for this project were BRL 58 the State managed to convince all million, as of 2009. Currently, the segments of society. 144 The State couldn’t afford to main- ple from other areas of the State, “Financial issues weighed on tain this type of hospital. However, supporting the goal of serving poor for Hospital do Subúrbio, the State people with a very low HDI to pro- in the decision to build the obtained BRL 58 million from the vide this low bracket income a so- hospital through a PPP. In Federal Administration for its build- cial treatment. It is located at the ing. There was the land, the phys- West area of Salvador, an area with this model, payment is only ical structure was built and then a more than 1 million dwellers - a going to happen after the PPP was conducted to find a pri- third of total Salvador population. vate partner to equip the unit on a service has been delivered. 10-year concession. Project development

The hospital with a long-term con- Developing the project is critical tract also ensures economies of at the start of a PPP. There are 10 scale in several consolidated ser- years (Hospital do Subúrbio proj- vices that do not change with every ect), which is relatively short as new administration. other contracts can go beyond 30 years. Costs are the main benefit of the PPP. In the concession, the user Financial issues weighed on in pays the fee in full. This does not the decision to build the hospital happen in PPPs, as all responsibil- through a PPP. In this model, pay- ities, like equipment, services and ment is only going to happen after so on, are centralized into a single the service has been delivered. The service provider. private partner equips the hospital, hires and train employees, buys In terms of location, the State con- medication and opens the door for sidered that in addition to demand, patients. Then it gets paid by the access is relatively easy for peo- State.

LocalizaçãoLocalização

Acesso fácil ao pessoal do interior próximo a BR 324; População Subúrbio e Entorno: Aprox.1.000.000 habitantes; Grande densidade populacional; Zona Oeste da cidade; Área de fragilidade social na região metropolitana; Perfil assistencial de Urgência / Emergência / Trauma.

145 A project needs to be thought of in pay for medications and supporting global terms, so an agreement was supplies, the hospital goes belly up. signed with AFC/BNDES to support the project’s structure. The State You may ask if such indicator is very lacked the know-how. It is important high or very low. At the time the to recognize the lack of expertise to model was created, cost division was look for subject matter experts. prudent and for this reason, there are no problems with that figure. Many issues arose when the decision was made for a PPP. What is that we Performance Indicators want with this project? Which out- One example is mortality rate - it comes do I want it to have? What do was defined as 3 at a maximum, I want? I want a good private partner. but the rate reached 3.52%. Some A factor to be considered in PPPs sort of penalty will be applied due is the collaboration of all parties in- to this performance level related to this matter. There is also a financial volved. It requires collaboration from calculation that changed on a year- the State higher administration levels ly basis for the hospital to adapt to - secretaries and the governor. Proj- a new project that the private sec- ects like this get stalled if secretaries tor did not know as a whole. do not work along with the governor. Hence the PPP Managing Council, The performance indicator follows comprised of several secretaries to the same logic, so 70% of indica- make such collaboration happen. tors are quantitative and 30% are performance indicators impacting A cost-based analysis led them to compensation. the following equation: Hospital of Subúrbio would cost the same as Financial model two public hospitals in the state at the same level, A&E, with a similar The maximum amount for the con- amount of beds and 100% public. tract was determined to be BRL 100 million. Considering a 10-year term The project is adjusted to the pop- for the concession, there would be ulation needs. In terms of service terms and amount enough to amor- mix, the hospital delivers almost all tize all investments and have a real the services listed: internal return rate of 12%.

The hospital provides supporting This is compatible with the activity, services, diagnosis, lab services, so a WACC study was made for this X-Rays, MRI, CT scan and other specific case: investments of BRL 58 treatments. Services are full range. million during 10 years of concession. At the first year, it was invest- How is the private partner paid? ed BRL 40 million. If inflation is at It can be compensated twofold: from 11%, this rate will fall a lot. So this is indicators - 70% related to quantitative a question that begs analysis. indicators and 30% related to qualita- In terms of costs and expenses dis- tive or performance-based indicators. tribution, any PPP model for health The private sector must have a min- will have more costs in operating imum compensation level. Specifi- and maintaining the hospital, be- cally, for the quantitative indicator, cause investments are relatively low. the minimum for payment is 75%. PPP contracts in Bahia have nev- Anything less than that and it is a er had a single day of delay since loss. This way, if the private partner 2010, so the mechanism works. fails to meet that quantity and there are no resources to pay doctors and Contract’s scope 146 OrganizaçãoOrganização e Coordenação e Coodenação dodo ProjetoProjeto

Governo estadual GRUPO EXECUTIVO  Grupo Executivo Intersetorial: SEFAZ SEPLAN SESAB PGE SAEB CASA CIVIL - Secretaria de Saúde - Secretaria da Fazenda COORDENADORES - Secretaria de Planejamento SESAB / SEFAZ - Procuradoria Geral do Estado - Secretaria de Administração - Casa Civil IFC/BNDES

 Coordenadores: SESAB/SEFAZ

 Equipe IFC/BNDES Consultores - Equipe principal - Consultores

• Free, universal delivery of must be invested as well. healthcare within SUS; Project’s schedule • Acquisition, management and logistics of supplies; Innovation

• Acquisition, management, pres- The Hospital do Subúrbio created ervation and maintenance of raw a mobile app that shows the wait- materials, assets, equipment and ing times, or the occupation rate in furniture; the moment, for the patient in the hospital. A consultation and control • Hiring and management of tool for the state. employees; The whole system is computer-based • Provision and management of for registering, control lines, cost food services, cleaning and secu- management - initiatives from the rity and all other services required concessionaire, based on the con- for hospital’s operation; tract. The State has direct access to check how the hospital is operating. • Development of health programs and efforts in partnership with The hospital is also paying atten- SESAB; tion to the continuity of service quality and with experts so it invites • Handling and disposal of hospi- students for internships, residency tal residues; and specialization. • In-house hospitalization. User satisfaction survey

The state only oversees the contract The assessment shows that the pop- by analyzing if indicators and com- ulation knows to require a quality mitment levels are being met by the product. But this increases demand. concessionaire. The rest is under full responsibility of the private partner. The hospital’s demand was calculated for an average occupation The contract requires a guarantee of rate of 90%. However, it operates BRL 2.5 million at the signature and at 115%, 25% above the hospital’s demand of capital pay-in of BRL 20 capacity. That is why contract ad- million at least. If investments in the justments are important, to forecast hospital is of BRL 58 million, equity new costs due to change of context. 147 GET TO KNOW OTHER PUBLICATIONS BY CBIC Visit CBIC’s website (www.cbic.org.br/publicacoes) and download the books for free. Available in English, Spanish and Portuguese.

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PPPS E CONCESSÕES PPPS E CONCESSÕES PPPS E CONCESSÕES PPPS E CONCESSÕES PROPOSTAS PARA GUIA SOBRE PROPOSTAS PARA GUIA PARA ORGANIZAÇÃO AMPLIAR A PARTICIPAÇÃO ASPECTOS JURÍDICOS AMPLIAR A APLICAÇÃO DAS EMPRESAS DE EMPRESAS (2ª EDIÇÃO) E REGULATÓRIOS EM ESTADOS E MUNICÍPIOS EM CONSÓRCIOS

PPPs and Concessions PPPs and Concessions PPPs and Concessions PPPs and Concessions – – Proposals to Expand – Guide on Legal and – Proposals to Expand Guide for Organization of Participation of Companies Regulatory Aspects Application in States and Cities Companies in Consortia – (2nd Edition) Year: 2016 Year: 2016 Year: 2016 Year: 2016

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PAC PAC RADIOGRAFIA AVALIAÇÃO DO Um debate sobre Financiamento de DOS RESULTADOS POTENCIAL DE 2007 A 2015 IMPACTO ECONÔMICO CASESCICLO - CICLO DE DEEVENTOS EVENTOS REGIONAIS Longo Prazo para Infraestrutura REGIONAISCONCESSÕES CONCESSÕES E PPPS E PPPS Gargalos e Perspectivas Volume IIVolume I

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148

Apoio Parceiros REalização investimento em infraestrutura e recuperação da economia

realização apoio

www.cbic.org.br www.senai.br investimento em infraestrutura e recuperação INTERNATIONAL MEETING da economia INFRASTRUCTURE AND PPPS Oportunidade de Negócios em Infraestrutura e PPPs: Encontro com as referências mundiais sobre o tema. Brasília, 27 e 28 de abril de 2015

infraestruturaeppps.com.br

Investment in Infrastructure Dialogues between CBIC/ Report International Meeting Proposal to Change the and Economic Recovery TCU CBIC contribution for Infrastructure and PPPs Bid Act Year: 2015 “Guidelines to Elaborate Budget Year: 2015 Year: 2015 Spreadsheets for Public Works” Year: 2014 Year: 2014 Construction and Subcontractors inCivil How to Hire Contractors forGuide Correct Hiring– Year: 2014 Council Developmentof theCity Manual for Implementation Year: 2016 Construction Sector and Companies inthe forGuide Institutions Ethics andCompliance TOPIC: ENVIRONMENTANDSUSTAINABILITY TOPIC: SOCIALANDCORPORATE RESPONSIBILITY TOPIC: LABOR DO SETOR DA CONSTRUÇÃO INSTITUIÇÕES EEMPRESAS COMPLIANCE PARA GUIA DEÉTICAE CONSTRUÇÃO CIVIL SUBEMPREITEIROS NA EMPREITEIROS E CONTRATAÇÃO DE GUIA PARA A CERTO CONTRATE GUIA C orr ealização: Realização: GUIA CONTRATE CERTO Apoio: 1

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BRASÍLIA 2016

AÇÃO P ARA AL 149 ATTACHMENT TOPIC: TECHNOLOGY AND INNOVATION

Venda proíbida

Implantação doImplantação BIM do BIM boas práticas para entrega do empreendimento para Construtoraspara Construtoras e e CATÁLOGO DE IncorporadorasIncorporadoras INOVAÇÃO NA Coletânea BIMColetânea CBIC BIM CBIC CONSTRUÇÃO VolumeVolume 1 1 CIVIL FundamentosFundamentos BIM BIM boas práticas para entrega do empreendimento desde a sua concepção

Realização

Corealização

BIM Implementation Guidelines for Compliance Best Practices for Delivering a Innovation Catalogue in Compilation – Volumes I to IV to Standard BNT NBR Building since its Inception Civil Construction Year: 2016 15.575/2013 Year: 2016 Year: 2016 Year: 2013

Análise dos Critérios de Atendimento à Norma de GUIA NACIONAL Desempenho PARA A ELABORAÇÃO ABNT NBR 15.575 DO MANUAL DE USO, OPERAÇÃO E MANUTENÇÃO DAS EDIFICAÇÕES ATTACHMENT

Estudo de Caso em Empresas do Programa Inovacon-CE

100

95 Realização:

25 Apoio: 5

Catalogo Normas Tecnicas - Edificacoes - BOOK - 5ª edição_CAPA sexta-feira, 6 de maio de 2016 16:46:22 Tehnical Standards for Analysis of Compliance National Guidelines for Buildings Catalogue Criteria for ABNT Elaborating the Building’s Year: 2016 NBR 15.575/2013 Use, Operation and Performance Standard Maintenance Manual Year: 2016 Year: 2014

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TOPIC: REAL ESTATE

I Encontro Nacional sobre Licenciamentos na Construção

RELATÓRIO DE CONSULTORIA PERENIDADE TÉCNICA ESPECIALIZADA SOBRE O DOS PROGRAMAS SISTEMA BRASILEIRO HABITACIONAIS DE POUPANÇA E

PMCMV: sua importância e impactos EMPRÉSTIMO E O de uma eventual descontinuidade CRÉDITO HABITACIONAL

Permanence of Housing Improvements to Real Estate 1st National Meeting on The Cost of Paperwork to a Programs – PMCMV: Relevance Financing System – The Brazilian Licenses for Construction Property and Impacts from na Eventual Savings System and Credit for – Year: 2014 Year: 2014 Discontinuity Real Estate Year: 2016 Year: 2015 151 ATTACHMENT CASES - CYCLE OF REGIONAL EVENTS AND CONCESSIONS APPS Volume II

Corealization Realization

CASES - CYCLE OF REGIONAL EVENTS AND CONCESSIONS APPS Volume II

152