The Brazilian government has announced that it plans to promote strategic investment project for highways and roads.
The first part of this project will be developed in the next three years. During this period contracts in the amount of approximately US$900 million are expected to be signed. Such value will be invested in about 2,500 miles of highways and roads, which will connect the most important Brazilian urban centres (São Paulo, Rio de Janeiro, Brasília, Belo Horizonte and Porto Alegre), and also these cities to other South American countries.
The project includes recovery, enlargement, duplication and modernisation of roads and highways and also the construction of new routes.
The disbursement will be made by the Brazilian Government, states and private companies. The Brazilian Government estimates that more than 200 companies – Brazilian and from other parts of the world – are interested in taking part in this project.
On March 10, 2004, the Brazilian Ministry of Transport signed a covenant with the São Paulo Stock Exchange (Bovespa) and the Brazilian Clearing and Depository Corporation authorising these entities to select private partners.
The selected companies will invest in Brazilian roads and the highway network through public concession contracts. They will be responsible for construction, reform and maintenance of public infrastructure for 25 years. In return, they will receive income based on a toll paid by the users and, depending on the contract, a payment from the Brazilian Government. It is also expected that the Public-Private-Partnership Bill, presently being considered by the Brazilian Legislative Branch, will be used in this process.
The Brazilian government is interested in expediting the selection of the partners, stability, clear rules and secure profits. On the other hand, it requires guarantees and insurance from the selected companies.
Two kinds of insurance will be required: (1) a bid bond that must be valid during the time frame between the end of the selection procedure and the signature of the contract; and (2) a performance bond that must guarantee the services and the price agreed throughout the contract. Therefore, insurance companies will also play a significant role in the project of upgrading the Brazilian highway system.
For the Brazilian Government, such project is considered priority as an indispensable mechanism to promote Brazil´s competitive integration into the international economy. For foreign companies, it is a unique opportunity to provide important services, investing and taking a part in one of Brazil´s growth markets.