The Bill that deals with the Public-Private Partnerships – the PPPs – sets out for the creation of a legal mark that will make an ample collaboration between the State and the private initiative practical, seeking for investments in the needful Brazilian infrastructure.
A committee composed by the House of Representatives approved a substitutive Bill with some modifications from the original one. Despite the recent scandals that waste the Congress attention, it is expected to be approved this semester.
The PPPs obey to a state-owned entities decentralization trend. Although in a less powerful way than the privatizations, the PPP proposes the delegation to the private sector of activities usually held by the State. The brief handling of the project brings out two focus of concern. On one side, the flexibilization of the rigor of the law current in force aims at the attraction of private investments. On the other one, the fear that it may appeases an increase of corruption and a fiscal policy less responsible.
The project defines the PPPs as any adjustment celebrated between the public administration and the private persons, be it by rendering of public utilities, authorization, execution of public works or leasing. The PPPs will be appropriate, though, to attract private investments to those projects that wouldn’t be feasible under the traditional regimes. It will not make sense when the private investor can make profits from the community or from a particular consumer by means of collectioning the price or tariff, or when the State is ready to fund the work in full through the work bidding regime.
The PPP supposes beforehand the compensation payment, or its conclusion, on the part of the public administration for the private persons up to 35 years, and hence the advantage over the traditional regime of work bidding, that demands a nearly immediate fund pay out, and over the service agreement to the administration, whereof the term is circumscribed to five years.
Another piece of news is the possibility of compensation not only by the availability of the engaged asset or service, but in the accomplishment of the obligations of outcome. If a public hospital is contemplated by a PPP the administration will not pay for the hospital building, but for its working along of the contract according to goals such as number of berths and available technology. It is important to notice that the financial effect of compensation likely to decrease is similar to the financial effect of a fine, but its application is more efficient since it does not depend on the prosecution of an administrative proceeding, but on the objective verification of the goals.
The security that the commitments taken over by the public administration will be rewarded is a prime importance for the attraction of private investments. In a traditional concession, the credit risk of the investor is sprayed by masses of users, while in PPP the credit risk is concentrated on the public authorities, besides a greater political risk since it deals with a fundamental which is not absorbed by the public sector culture. In this securities view, the project revealed some progress, anticipating the incomes entailment and the establishment of special funds.
The substitutive was affected by some retrocession. In conformity to the original proposal, in case of budget grants limitations in any particular year, even due to temporary tightening of loan credit, the obligation of the PPPs would take precedence over the others. This precedence constitutes an important security to the private investor and, also, an evidence of the high degree of compromising of the public administration, being advisable to refund it.
The project stood out the application of the Fiscal Responsibility Law, although it has left some relevant questions to the Executive Branch regulation. It seems that most part of the PPPs could increase the public expenditures at long term, requiring a permanent increase of the incomes or a reduction of the expenses as compensation, but it wouldn’t constitute indebtedness subject to the limitations applicable to the public sector. The PPP cannot be understood as the purchase on account of a work by the administration, but as an agreement of an operation and maintenance service in which the compensations are subject to the availability along of the contract and to the accomplishment of the goals. The project, however, ascribes to the Federal Government the power to regulate this matter.
Despite some retrocession, the project proposes an undeniable progress in regard to engagements by the public authorities, moving towards a favorable environment for investments in projects, which wouldn’t be feasible under the traditional concession and bidding regimes. Even those who believe that the innovative ways of partnership between the public and private sectors were already possible through the laws and regulations current in force recognize that the project will serve to the praiseworthy purpose of promoting a partnership culture more suitable to the modern reality.
Sources: Valor Econômico March 05, 2004 p.E4
Date of insertion: 23/03/2004 - 23:52:20