The New Brazilian Public Private Partnership Law *

Closing the year 2004 with a magic wand, on December 30 Brazil finally enacted the Public Private Partnership (PPP) law in an earnest attempt to kick off the PPP program to attract private investment for critical infrastructure projects.

Brazil's growth is now crucially dependant on the development and improvement of its current infrastructure. For one, the country's touted record of exports in 2004 can only be sustained if significant investments are made in highways, railways and ports (the initial PPP portfolio). To illustrate, the federal government has invested less than US$ 1 billion in infrastructure in Brazil in 2003. The new law is a healthy way to reignite public investment. As approved, it contains important provisions to align subsidies and safeguard the fiscal accounts.

By introducing private sector investors who put their own skills and own capital into the projects, the public sector gets the benefits of commercial efficiencies and innovations as well as timely delivery. This results in not only better public services, but also better value for money.

PPPs are not a new invention. They have existed worldwide in one form of the other. However, the United Kingdom can perhaps take the credit for first institutionalizing it as a model that is being followed by Holland, South Africa, Portugal, Mexico and many other countries. The statistics in the UK have recorded over 500 PPP projects implemented successfully with investments of approximately 35 billion.

The PPP has different definitions and features throughout the countries where it has already been used, this diversity being resultant from each country's particularities of culture and legislation.

The Brazilian law has embraced a broad and generic concept: PPP is any arrangement between the public administration and private entities that assume the financing and execution of a venture or activity, which may include the rendering of public services, the performance of certain activities that would otherwise be of state competence and the execution of works for sale or lease to the public sector.

The new Brazilian law has defined PPP as the "administrative concession contract" of two types: "sponsored" or "managed". The sponsored concession involves a payment from the administration to the private party in addition to the fees or tariffs charged by this concessionaire from the users. In the managed concession, the end-user is the public administration itself. A simple, ordinary...