The Brazilian National Congress is analysing Bill nº.2546/2003 regarding the regulation of public-private partnership (“PPPs”) in order to attract new foreign investments to infrastructure projects in Brazil.
PPPs are agreements between the public administration and private entities establishing legal relationships to manage or set up joint projects in the areas of transportation, health, housing and other public interests.
The PPP Bill sets out general bidding and contracting rules applicable to the direct administration body, special investment funds, autarkies, public foundations, public foundations, public companies, private and public joint stock companies, and other entities controlled directly or indirectly by the federal union, the states, the federal district and the municipalities.
PPP projects shall be financed by resources of the National Bank of Economic and Social Development and Inter-American Development Bank. Moreover, PPP agreements shall last for 20 to 30 years.
It must be highlighted that the PPP Bill assures the return of the investment. Investments which do not reach the return expected shall have the shortfall covered by the government.
In addition, states and municipalities with public debts may not contract PPPs. This rule prevents such states and municipalities from alleging lack of resources to honour their obligations with the private entities that invested in the PPP projects.
Overall, upon the enactment of the aforementioned Bill, PPP shall be an interesting investment opportunity for foreign investors who seek guaranteed returns.