PT should propose changes in partnerships and concessions to accelerate economy

The PT should bet on a program of public-private partnerships and changes in the concession systems to accelerate the economy and the creation of new jobs, with the participation of BNDES (National Bank for Economic and Social Development) and the attraction of private investments to areas of social infrastructure and sustainability, in the event of former President Luiz Inácio Lula da Silva’s victory in the October presidential election.

The engineering of the proposal involves the use of BNDES as a guarantee fund, but also as a possible financier of part of the investment needed to quickly get basic sanitation works, urban mobility, education, health and other areas, all with a seal of sustainability.

The initial proposal has the signature of former São Paulo mayor Fernando Haddad —pre-candidate for the state government— and economist Gabriel Galípolo, who has been helping to set up the PT government program, especially in the area of ​​infrastructure, but with the participation of other names linked to the PT Perseu Abramo foundation.

The proposal, according to Haddad, is seen as a way of accelerating investments that the federal government could not afford alone and, thereby, making the economy spin, creating much-needed jobs more quickly.

“It’s not a silver bullet, but it facilitates investments. The focus is to have quick investment, generate a lot, with a center on a green economy,” the former mayor, who includes the idea within the proposals of his own program, told Reuters. of government. “These are green PPPs, with an environmental impact. There are two elements there, the private partnership to guarantee efficiency and also the ecological externality.”

The design being developed by the Lula government program team has two main points: to change the payment of the grant and the financing and guarantee of the projects.

The idea being worked on is a contract for availability, in which payment is only made when the good is available to the population. But, as a source involved in the development of the idea recalls, this works well for consolidated sectors, financed with tariff charges.

“But where is the lack in this country? Sanitation, urban mobility, housing, education, health,” he said. “It would be much smarter for us to hire based on availability. But what is the appetite that the private sector has to invest before and receive later without a tariff, if almost all services are the responsibility of subnational entities, not national entities. first to receive then a state or municipality that might stop paying you?”

The risks associated with these investments, he explains, can delay projects and attract less interested parties. The BNDES’ entry into the game would improve the profile of the proposals.

BNDES would act on two fronts. The first of these would be as a guarantor. In the event that a state or municipality does not honor the payment, the federal government would step in to pay off the debt, and then collect.

“Who has more power to execute in an eventual default? The Union has the power to withhold transfers, it can negate, it has a series of powers to implement an execution like this. It’s much simpler”, said the source.

BNDES

Coordinator of the PT government program, former minister Aloizio Mercadante defends the idea of ​​increasing investment capacity via PPPs.

“The private sector’s long-term financing capacity is very low, but if the state, through BNDES, gives the guarantee for the financing, you bring in private financing and multiply the investment capacity”, he defended in an interview with Reuters.

At the other end, the proposal advocates the bank’s participation as a financier, in a smaller part, around 30%, as a way of encouraging the financing of the company that would take on the project. According to a source who works on the idea’s details, the BNDES can carry out a risk analysis and finance part of the work, which would serve as a guarantee for the project and, precisely for this reason, helping the company to obtain the rest in private resources with lower interest rates, by reducing risk.

The bank is already working on developing projects for states and municipalities in several areas targeted by the PT proposal. Among them, auctions for basic sanitation projects —at least three are scheduled for this year— and also proposals for urban mobility and day care centers, among others.

The other part of the idea comes from the change in the format of PPPs and the payment of public concessions in which the return comes through tariffs. The idea is that the grants — normally high amounts, paid at once to the granting government — will be diluted in annual amounts.

In addition, the proposal includes a kind of collection band, in which within a certain range of demand, above or below the initial forecast of the contract, payments by concessionaires are kept unchanged. But if demand drops too much, as can happen in cases of major crises, such as the Covid-19 pandemic, the annual payment may be reduced proportionately.

In the same way, if demand rises much more than expected, the state or municipality becomes a partner in this extra profit, and receives more than what was initially contracted.

“What happened was that the demand operator was assigned a management capacity that it doesn’t have. You don’t decide to travel through an airport because it’s better, you don’t decide to go on vacation at the beach or somewhere else because the highway is better”, said the source involved in developing the idea.

In the case of a rise in GDP, when demand naturally grows, he explains, the operator starts to earn more and the State does not profit from it. But, on the contrary, when demand falls and the company becomes insolvent, the service is not provided or is poorly performed, affecting the population. A diluted grant, with a payment band, makes the project more resilient.

“If the Union, given that it will be difficult to have a budget, could give endorsement, guarantee, for strategic projects that demonstrate a socio-economic and environmental return, we could leverage a lot of private resources to invest in this, and you would solve a big problem “, he added.

The model was used by Geraldo Alckmin —today a candidate for vice on the ticket with Lula— in the bidding of some subway lines in São Paulo when he was governor, and it must now be defended by him in the government program as well.