Panel SA: By election, mayors use Caixa for privatizations

Caixa Econômica Federal entered the dispute with BNDES for the privatization of the sanitation sector and municipal infrastructure.

More than two hundred city halls have already qualified with the bank to structure public lighting concession projects, water networks, sewage, garbage collection, among others.

The forecast for private investments exceeds R$ 25 billion, according to the bank, in municipalities with less than 80 thousand inhabitants.

The new legal framework for sanitation was an important trigger for Caixa. His performance in this business drew attention because a recent change in rules freed mayors from making disbursements for the bank’s services —from the structuring of the PPP (Public-Private Partnership) to the auction on the B3, the São Paulo Stock Exchange.

Before, they had to pay 10% of the costs involved in this process.

Now, this account is paid by the winner of the auction who, in the end, deposits the amount in a private fund — which makes payments to Caixa as the structuring project progresses.

According to Caixa’s vice-president of Government, Tatiana de Oliveira, many mayors saw these public-private partnerships as a way of carrying out works of social appeal without breaking the bank.

Many exhibit prohibitive levels of indebtedness to financing works. Nor are they able to pay them with federal transfer resources.

“There are mayors who just held an auction and have already signed up for two other partnership projects [PPP]”, said.

One of them is Topázio Neto (Republicans), mayor of Florianópolis (SC). According to reports from Caixa executives, he saw in this possibility a chance to gain popularity for the next election.

Like him, other politicians also detected the electoral potential of carrying out privatizations.

“This movement is growing through ‘word of mouth’. A mayor does it and it works. The neighbor or another from the same party sees and follows the initiative”, said Oliveira.

To date, 14 Caixa projects have been auctioned, attracting BRL 3.2 billion in private investment. For 2023, there are already 28 planned, totaling R$ 12 billion. In the total portfolio, the projects add up to R$ 21.1 billion in investments.

airport model

Another attraction for city halls is the permission given to the winner of the auction to offer additional services to users. In public lighting, for example, the poles can be used by telephone operators to install cables or Wi-Fi points, with the signal being sold to residents.

The revenue generated by this activity goes to the concessionaire, as long as 85% of the amount is reverted to the reduction of tariffs by public service users.

“Even in garbage collection you can have ancillary income”, says Oliveira.

Caixa versus BNDES

Like the BNDES, all sanitation and infrastructure projects carried out by Caixa are included in the PPI (Investment Partnerships Program), the driving vehicle for privatizations in the country.

Caixa’s advantage over the BNDES is its local presence in almost all municipalities in the country and the free service, which ranges from the structuring of the PPP project to the auction on the B3, the São Paulo Stock Exchange.

At each round, Caixa opens a public call and the selection of municipalities served follows the order of the HDI (Human Development Index). Cities with lower rates are given preference, a policy to try to reverse the situation in the country, which is skating on the list of countries with basic sanitation infrastructure.

In addition to structuring the project until the auction, Caixa also offers financing to the winner of the bidding process for the mandatory investments in the concession.

“But there is no such obligation”, says Tatiana de Oliveira, Vice President of Government at Caixa.