It was in December 2004 that a federal law was passed in Brazil which dramatically changed how infrastructure projects were funded and built. This was Federal Law 11,079/04 and is set up the rules regarding public-private partnerships (PPP). Public administrations now get bids from private companies for public works projects. The private companies do the work and sometimes manages the infrastructure once it is completed depending on the contract. One of the experts in Brazil on PPP’s is Felipe Montoro Jens who has been involved in many of these over the past 14 years.
Felipe Montoro Jens says that most PPPs revolve around five key areas of infrastructure. These are education, urban mass transit, transportation, sanitation, and health. It takes a lot of resources to build these types of infrastructure and keep them maintained. He says that because of PPPs a lot of public works projects have been built that otherwise would have been impossible to complete for public administrations on their own. Visit consultasocio.com to learn more
In Brazil, the private sector has both the resources and expertise to complete public works projects. Meanwhile, PPPs have helped this nation reduce its infrastructure debt. Mass protests have resulted in educational and health facilities being built where private companies build these buildings while the government supplies the staff.
While PPPs are being used across Brazil, Felipe Montoro Jens says more can be done. He says one of the issues revolves around the guarantees that are given to the private companies by their public partner in regards to their contractual payments. He says that addressing these issues is critical as these deals can last for decades including public sector payment obligations. He says that other Latin American countries have better guarantee structures which he wants Brazil to emulate.
He also says that tax exemptions are another important part of PPPs which would result in more of these types of projects being done. He says around 30-40% of what is paid to private contractors goes back to the government in the form of taxes. He says this is making PPP projects more expensive than they should be which tax exemptions would definitely help with.