- Sponsored Concession - the P3’s purpose is the rendering of a public service by a private partner directly to end users, in which a portion of concessionaire’s remuneration results from fee and/or tariff revenues charged from its users and another portion results from payment subsidiaries paid directly by the Government; and
- Administrative Concession - the P3’s purpose is the rendering of services by the private partner to the Public Administration, as direct or indirect user, to the society in general, or to a community that cannot be individualized or subject to fee and/or tariff collection (e.g., prisons). Accordingly, remuneration is derived solely from governmental payments to the concessionaire.
INFRASTRUCTURE - An overview about Brazilian regulations about Public Private Partnership (P3)
Public-Private Partnership (P3) in Brazil
Public-Private Partnerships (P3) are a type of public investment in which the Government engages a private party for the rendering of public services
or the rendering of a service to the State itself, demanding, in any case, a high investment and a horizon of long-term investment amortization. Whereas the Brazilian Constitution sets forth that public services shall be rendered by the State directly or by means of concession to be granted to private entities by means of a public bidding procedure, a P3 contract shall be preceded by a bid to select the concessionaire.
P3s as defined by Federal Law N. 11,079 (P3 Law) were created with the purpose of attracting a post-1996 wave of private investments for projects of high social interest, especially in the infrastructure sector which, under regular conditions, would not be economically feasible or would be assigned to the State action, depending upon very scarce budgetary availabilities. In order to enhance P3‘s economical attractiveness P3 Law allows the consideration by the public partner in addition to fees/tariffs collected from end users, the remuneration to the private partner varying in accordance to the achieved results, the sharing of gains from refinancing with the Government, the transfer of control of the SPE to its lenders for the continuity service, and the pledges from the public partner directly to the SPE’s lenders.
P3 Law provides two modalities of P3 as follows:
Guarantees for P3’s Concessionaires
Acknowledging the financial risks assumed by private parties, P3 Law created special guarantees to extend the favorable conditions for developing infrastructure projects in Brazil. In this light, P3 Law establishes that RFP’s must specify guarantees of the consideration by the Government to the private partner among the following: earmarking of revenues, special funds, performance bond, guarantees by international financial or non-Government-held institutions, guarantee fund or State-owned company created for this purpose, or other guarantees provided by law, i.e., the P3 Guarantee Fund (FGP) created by the Brazilian federal government. All these guarantees mount up to those regularly available in other public contracts and reflect a willingness to overcome traditional impediments to the full satisfaction of the concessionaire credits.
Mauricio Jayme e Silva. Pontíficia Universidade Católica de São Paulo (PUC-SP) Law School (J.D., 2000). Universidade de São Paulo Law School (LL.M., 2011). Visiting Scholar at Columbia Law School (2011-2012). E: email@example.com
P. 201-563-0516. T. @MauricioJayme. B. www.direitoeinfraestrutura.blogspot.com