The latest one was the Provisional Measure No. 575 of August 7, 2012 (PM 575) enacted to amend the Brazilian P3 Act (Law No. 11.079/04) - P3 Act - in three critical areas for infrastructure financing operations through P3: (i) public financial contributions/subsidies to the private partner; (ii) access to the P3 Guarantee Fund; (iii) inter-governmental guarantee/funding.
Below are major aspects brought by PM 575 for the purpose of attracting private investiments to infrastructure projects in Brazil.
- Public financial contributions/subsidies to private partners
On top of adding this new public financing mechanism, PM 575 authorizes the private partner to make it tax deductible. In this sense, the private partner is now allowed to exclude the equivalent to this contribution from (i) the net profit for the end of calculation corporate income tax (IRPJ); and (ii) the calculation basis of the social contribution on profits (CSLL) and social contribution on revenues (PIS/PASEP and COFINS).
However, it is worthy noting that these deductions shall be added to the calculation basis of the respective taxes once the costs relating to the construction or acquisition of the property reverted to the public partner are incurred, including by means of depreciation or termination of the partnership.
- Access to the P3 Guarantee Fund
Firstly, Section 4 now allows the P3 Guarantee Fund to offer products available in the insurance market to private partners in addition to those already allowed by Section 1 (pledges, mortgages and alike).
Secondly, the deadlines to access the P3 Guarantee Fund are now more favorable to private partner seeking payment from the public partner as follow below:
- 15 days from the maturity date of an outstanding invoice relating to a specific credit;
- 45 days from the maturity date of an outstanding invoice, provided that there is no formal rejection by the public partner within 40 days from the maturity date of such invoice;
- Inter-governmental guarantee/funding
Even though private investors were longing for such provisions since 2004 - when the P3 Act was enacted - it is still unclear if these provisions will trigger the foreign investment flow in infrastructure projects in the intensity that Brazil desperately needs to host two major sports events such as the 2014 World Cup and the 2016 Olimpic Games.
Even if it will, there is still a cloudy horizon in terms of the feasibility of the time schedule for such infrastructure projects to become operational.
This might come out to be just a great medicine for a patient already in critical conditions.