Brazil's Infrastructure Framework
AGENDA
1. BRAZIL NOWADAYS
2. BRAZILIAN GOVERNMENT'S STRATEGY
3. INVESTMENT OPPORTUNITIES
4. OVERVIEW OF BRAZILIAN BID PROCEDURES FRAMEWORK
5. PUBLIC AGREEMENTS
6. COMPLIANCE STRUCTURE
BRAZIL NOWADAYS
BRAZIL NOWADAYS
 Brazilian economy
produces a wide
range of
manufactured goods:
Many factors have forced
the country to accelerate
investments especially in
infrastructure, such as:
 automobiles (3.3
million units in 2012)
 The Brazilian income
growth
 aircraft
 sophisticated
machines
 The social inclusion
process
BRAZIL NOWADAYS
 Joined the group of the
most dynamic
emerging countries of
the world
 The Gross Domestic
Product (GDP) is
currently among the
ten largest in the
world, either in
nominal terms or in
purchasing power
parity
 Unemployment rate
below 5%
 Living a period of
rapid and sustained
economic
development, based
on:

production growth,

soundness of fiscal
and monetary
institutions and
investment,

credit and
consumption
expansion;
 Market of over 100
million consumers
with huge growth
potential
 Vitality of
entrepreneurial class
and technological
advances in the
agriculture industry
BRAZIL IN NUMBERS
INCREASED INVESTMENT AS A PRIORITY
INFLATION UNDER CONTROL
STRENGTH OF THE EXTERNAL SECTOR
5th LARGEST GLOBAL MARKET IN 2020
MIDDLE CLASS SOCIETY
LOWER INTEREST RATE
REDUCED COSTS FOR INVESTMENTS
The Government
has put in place
several measures
aiming to reduce
investments costs,
among which the
following stand
out:
FOREIGN DIRECT INVESTMENTS HIGH LEVELS
EXPECTED GROWTH IN BUSINESS
BRAZILIAN AGRICULTURE: NEED OF LOGISTICS
source: http://www.estadosecapitaisdobrasil.com/mapas-do-brasil.php
BRAZILIAN POPULATION: NEED OF LOGISTICS
source: http://www.scp.rs.gov.br/upload/mapa_popula%C3%A7%C3%A3o_absoluta_brasil_2010(1).gif
DEMAND FOR INFRASTRUCTURE
LARGE INVESTMENT PROGRAMS
Several major infrastructure
programs were announced over
the last two years, with
investments adding around US$
235 billion over the coming
years, not to mention the major
urban infrastructure works
required for the 2014 World Cup
and 2016 Olympics
CHALLENGES
Threats
•Urge to keep up with the dynamism - ex. foreign trade of the country
(which quadrupled from 2002 to 2012); the passenger flow of its airports
(doubled in the same period); and the traffic on its highways (also doubled
over the last ten years, as did the number of licensed vehicles);
•The new cycle of economic expansion will require even greater
investments in logistics and energy
Needs
Actions in
course
•The Government needs to provide the infrastructure the Brazilian
Economy needs to continue on its path of economic and social development
•Infrastructure investments have tripled in real terms over the last ten
years, reaching about $ 100 billion in 2012
BRAZILIAN GOVERNMENT STRATEGY
BRAZILIAN GOVERNMENT STRATEGY
Investment stimulus measures
that include:
(i) reducing interest rates;
(ii) enacting tax cuts; and
(iii) launching a new strategy
for recovery of logistical
planning and execution of
major infrastructure works
Launch of Logistics
Investments Programs in 2012:
a strategic partnership with the
private sector, focused on the
renewal and integration of the
Brazilian transportation
network
Government has enacted a
number of tax and
bureaucratic benefits,
including for nonresident
investors, as well as innovative
financing instruments such as
infrastructure debentures and
Receivables Investment Funds
(FDICs).
BRAZILIAN GOVERNMENT STRATEGY
LOGISTICS INVESTMENTS
PROGRAMS
OIL, GAS AND ENERGY
•The Program consists of a
wide concession set in
transportation logistics,
which implies large
private investment in
infrastructure
•In oil and gas, 2013 will
see the 11th and 12th
Bidding Rounds (in
concession regime) and
the 1st Bidding Round of
the Pre-Salt Layer
•Make concession auctions
for large projects for
highways (7,500 km),
railways (10,000km),
airports (Rio de Janeiro
and Belo Horizonte) and
ports
•In electricity, a series of
auctions will be carried
out between 2013 and
2017 for the generation
of 33,000 MW from
hydropower, wind power
and other sources and the
installation of 23,200
kilometers of
transmission lines.
TAV
•The concession auction
for the operation of the
first high-speed railway in
Brazil, which will connect
the cities of Rio de
Janeiro, Sao Paulo and
Campinas, in a total
length of 511 km.
INVESTMENT OPPORTUNITIES
INVESTMENT OPPORTUNITIES
Airports
Galeão Airport (Rio de Janeiro) – R$ 6,6 billion
(announcement scheduled for September/2013)
Confins Airport (Belo Horizonte) – R$ 4,8 billion
(announcement scheduled for September/2013)
Regional Airports – R$ 7,3 billion, in 270 airports (ex:
Passos - MG; Cascavel - PR; Linhares - ES)
Ports
• Investments for over R$ 6,4 billion
• Private Terminals already announced
• Public Terminal Biddings foreseen October, 2013
Urban transportation - Medium Cities
• Target - 75 municipalities (ex: Joinville - SC; Uberaba MG; Ribeirão Preto and Sorocaba - SP; Niteroi and
Campos dos Goytacazes - RJ)
• Value – R$ 7 billion
INVESTMENT OPPORTUNITIES
Roads and Railways
• Roads – a total of R$ 42 billion, divided in 5 years (R$ 23,5 billion), and
20 years (R$ 18,5 billion)
• Highlights:
• BR 050 and GO/MG and 262/ES/MG - in Request for Proposals
• BR 163-MS in Public Hearing - Request for Information
• BR 116/MG - auction scheduled to December/2013
• BR 040 DF/GO/MG/RJ - auction scheduled to December/2013
• Açailandia/Vila do Conde - auction scheduled to September/2013
• Railways – a total of R$ 91 billion, divided in 5 years (R$ 56 billion), and
25 years (R$ 35 billion)
• Highlights:
• Estrela D Oeste Railway (Group 1) - Auction scheduled to October/2013
• Uruaçu (Group 2) - Auction expected in 2014
Urban transportation - Big Cities
• Target - 23 municipalities
• Value – R$ 32 billion
• Subway, Light rail vehicle (VLT) and urban rails
• Highlights:
• Salvador Subway: in Request for Proposals
• São Paulo Subway - Line 6: Bidding process - rescheduled
• São Paulo Subway - Line 18: In public hearing process
• São Paulo Intercities Train - Studies proposed in July, 2013 - under
analysis
OVERVIEW OF BRAZILIAN BID PROCEDURES FRAMEWORK
BRAZILIAN BID PROCEDURES FRAMEWORK
GENERAL PUBLIC PROCUREMENT
• LAW 8.666/1993: General Rules for
Bidding and Contracts of the Public
Administration
• It establish the procedures to be
followed by the Brazilian Government federal, state and local level to the
selection of the contractor and
execution of Public Contracts
•Types:
•Best price
•Technique and price
•Best Technique
•Best bid or offer
•Bidding Modalities: defined by the
estimated contract value.
•The higher the contract value more
complex will be the procedure to be
followed price (**it has been changed
by the Reverse Auction procedures...)
RDC (“Differentiated Regime of
Procurement”)
• Law 12.462/2011: The Differential
Public Procurement Regime - RDC
• It was enacted to establish simplified
procedures to execute contracts for
the 2014 World Cup infrastructure
works
•Nowadays RDC can also be applied for
the PAC (Programa de Aceleração do
Crescimento) projects
•Main differences between Law 8.666
and the RDC:
• Confidential Budget (optional)
• Phase inversion: the financial proposal
is submitted prior the qualification
phase (optional)
• Integrated procurement: the
contractor is responsible for the whole
project (from the engineering / basic
project development, work execution
and operational process)
"REVERSE AUCTION" / "PREGÃO"
• Law 10,520/2002: Reverse
Auction
• Trade-floor Version: performed
by the parties in loco (further
regulated by Decree 3,555/2000
• Online Auction Version:
Comprasnet (further regulated by
Decree No. 5,420/2005
• Key dispositions:
• The winner will be mandatorily
selected based on the lowest
price
• It is not required the submission
of bid bonds/ guarantees and
• Only the qualification of the
winner is assessed (technical
when applicable, financial, and
legal) - this is the so-called
"reversion of the bidding phases"
BRAZILIAN BID PROCEDURES FRAMEWORK

Lei de Geral de Concessões (Law 8987/1995): establishes general rules regarding concessions of
public services, with no Government Payment

Lei de Parceria Público-Privada (Law 11.079/2004): establishes general rules for the concessions
with Government Payments (public-private partnership contracts - PPP). Types:
(i)
Sponsored Concession: public work or public service upon guaranteed payments from
public administration, in addition to tariffs charged from end-users. Ex.: highways
(ii)
Administrative Concession: end-user is the public administration and shall provide
payment to the private party. Ex.: hospitals, public buildings
Selection of Private
Partner
• subject to public bid
Specific Purpose
Company (SPE)
• establishment of an
SPE, under control of
private party, in order to
manage and implement
the project
• Mechanism for transfer
of control in case of
default
Guarantees given by
the Public
Administration
• revenues as collateral
• establishment or use of
special funds
• performance bond
• guarantees from
international organisms
or financial institutions
Project Aspects
• contract value of at least
R$ 20MM
• minimum term of 5 and
maximum of 35 years
• Shall not have an
exclusive purpose of
labor provision,
equipment supply or
installation and
execution of public work
www.comprasnet.gov.br > acesso livre > consultas> aviso de licitações
PUBLIC AGREEMENTS
PUBLIC CONTRACTS
INITIATING & PLANNING = BIDDING PROCEDURE
•
•
•
•
•
Its the key phase to negotiate the terms of the Future Contract
Request for Information / Quotation
Public Hearing
Request for Propostal - Bidding Procedure (Request for Clarifications - Risk
Breakdown Structure)
Administrative and Legal Mesures (Impugnação)
EXECUTION & CONTROLLING = CONTRACT MANAGEMENT
•
•
•
•
•
Inaccuracy of the "Statement of Work" / "Services Level Agreement" (TR Termos de Referência, Especificações )
Extra requirements of the Public Client (Was it foreseen in the SOW and
Budget?)
Penalties due to lack of performance / delays / "redoings"
Payments / cash flow of the Governmental Budget
Everything shall be written and official - EVER!!
CLOSING
•
Claims and Instruments of Closing (via crucis)
PUBLIC CONTRACT
According
to
Federal
Law
8.666/93,
administrative contract is all and every
agreement executed between public agencies
and private parties, in which it is established
mutual obligations
Construction,
renovation,
manufactoring,
recuperation or
expansion
Service agreement
Acquisition
for
supply of assets,
through payment,
for one or several
opportunities.
Construction agreement
Purchase agreement
TYPES OF ADMINISTRATIVE AGREEMENTS
Demolition, repairs,
installation,
assemble,
operation,
conservation,
adjustments,
manteinance,
transportation,
lease of property,
advertisement,
ensurance
or
technicalprofessional works.
RISKS AND PROBLEMS
The contract
terms shall be
always observed it can not be
changed or turned
undetermined!
RISKS AND PROBLEMS
www.demarest.com.br
The contractor is
responsible for the
quality and delivery
38
PRICE ADJUSTMENT
Delay from
contractor's fault
• if any increase of
the index occurs,
prevails the index
of the date that
the
agreement
should have been
executed.
• if index decrease,
prevails the index
of the execution
date.
Early Conclusion
Extension
• prevails the index
of the date that
the
agreement
should have been
executed.
• prevails the index
of the date agreed
for the execution
of the agreement.
RENEGOTIATION
Motivation
Principle
Legality
Principle
RESCISSION
Agreement rescissions cases must be formally justified in the records,
ensuring to the Contractor party the right of defense (adversary
system and full defense), in five business days .
If the rescission is not due the contractor's fault, and it's duly proven, the
Contracting must assure the:
• devolution of guarantee
• payment of the execution until the date of the rescission
• payment of demobilization costs
COMPLIANCE STRUCTURE
THE NEW COMPLIANCE LAW
Law 12.846/2013 (Anticorruption) and Law 12.813/2013 (conflict of interests)
provides further regulation regarding the relationship between private and
public parties regarding public contracts
MAIN COMPLIANCE PRINCIPLES
Transparency
Equity
Accounting
SEPTEMBER, 5:
Workshop "Compliance and
Governmental Relations"
Don't miss it!
Conformity with rules
Ana Bárbara Costa Teixeira
(abteixeira@demarest.com.br)
Mário Roberto Villanova Nogueira
(mnogueira@demarest.com.br)
Min Gon Kim
(mgkim@demarest.com.br)