Andrew J. Dell'Olio*

I. Introduction

The most significant aspect of the Brazilian government’s recent economic strategy is the umbrella initiative referred to as the Programa de Aceleração de Crescimento, or PAC. The PAC proposes R$503.9 billion in infrastructure spending from 2007-2010, focused in the transportation, energy, and urban development sectors. The R$503.9 billion package will come from the federal, state and local governments in Brazil, as well as from the private sector, which is expected to contribute approximately 40% of the total¹. The spending is to be distributed as follows:

• R$58.3 billion for transportation;

• R$274.8 billion for energy; and

• R$170.8 billion for urban development (including water/sewage, housing and mass transit).

In the transportation sector, the government plans to construct, repair and/or augment 45,000 km of roads and 2,518 km of railways, and plans to upgrade 12 ports and 20 airports². In energy, the PAC calls for adding 12,386 MW of electrical generation, and 13,826 km of new transmission lines to handle the new capacity, along with 4,526 km of natural gas pipelines. Additionally, more than 100 new facilities for the production of alternate fuels (ethanol and biodiesel) are planned. Out of the urban development budget, housing will receive R$106.3 billion, or 62%.

The PAC is a welcome initiative in Brazil’s long-neglected infrastructure sector. The boom years of the 1970’s were followed by the 1980’s debt crisis and the fiscal austerity necessitated by the Plano Real and IMF agreements of the past fifteen years. Public spending on infrastructure, which averaged 2% of Brazilian GDP in the 1970’s, fell to 0.15% in 1990. Between 1990 and 2006, it averaged 0.19%³. In addition to the demands placed on infrastructure due to population growth and regional development, the Brazilian economy has become a victim of its own success, resulting in an inability to transport increased volumes of commodities and manufactured products to their domestic and export markets. Studies estimate that infrastructure inefficiencies cost the Brazilian government and businesses R$90 billion annually, in terms of energy waste and health care costs associated with pollution and poor sanitation⁴.

II. The FGTS Investment Fund

A. Policy Motivations and Legal Framework

Medida Provisória, or "MP" 349, issued on January 22, 2007, created a new, separate “Investment Fund” to be funded by the surplus assets of the Fundo de Garantia por Tempo de Serviço, or FGTS (Guarantee Fund for Time of Service)⁵. MP 349 divided responsibilities for the Investment Fund’s management among several agencies. The FGTS’s managing council (Conselho Curador do FGTS), an agency of the Brazilian Ministry of Social Welfare, promulgates guidelines for the overall investment decisions the Investment Fund will make⁶. The Caixa Econômica Federal, a government bank, will administer the Investment Fund’s day-to-day operations. The Brazilian CVM will oversee the Investment Fund’s fiscal and accounting practices⁷. Unfortunately, the division of oversight responsibilities among these several agencies carries with it the potential for turf wars and political gridlock that may frustrate the government’s intentions.

MP 349 allocated an initial amount of R$5 billion to the Investment Fund, which represents approximately 25% of the FGTS surplus⁸. The measure also included a provision for increasing this allocation to up to 80% of the surplus, upon recommendation of the Caixa and authorization of the Conselho Curador⁹. The Investment Fund can only be a minority shareholder in an infrastructure project, owning no more than 30% of the outstanding securities (either debt or equity)¹⁰. Private-sector investment in a project receiving FGTS money must be at least 30%¹¹. FGTS monies can be invested only in projects with a low investment risk rating from international rating agencies¹².

With Brazilian interest rates falling steadily from their recent highs of near 20%, institutional (and individual) investors are seeking higher returns for their assets. With the government also altering the calculation basis for monetary correction to FGTS deposits, to reflect recent interest rate reductions, traditional FGTS deposits will earn less and investment options will be more attractive to workers¹³. Pension funds and labor unions’ welfare funds are especially interested in infrastructure finance since it serves the dual purposes of creating more industrial and industrial jobs, as well as earning better returns for workers’ assets.

The CVM issued their fiscal/accounting regulations on November 26, 2007, nearly a year after the enactment of MP 349¹⁴. The regulations require the Caixa to file quarterly, semi-annual and annual reports regarding the Investment Fund’s assets, profitability and investment portfolios¹⁵. The regulations also impose joint and several liability on the Caixa and private asset management firms for losses caused by investment decisions that violate applicable law or CVM regulations.¹⁶

B. Nature of FGTS

As a hybrid unemployment insurance and personal retirement fund, the FGTS accumulates assets from mandatory employer contributions, in amounts equivalent to 8.5% of monthly salary, deposited into personal employee accounts. It is important to remember that, unlike unemployment insurance in the United States, the Brazilian FGTS system is based on personal accounts. Higher-paid, longer-serving workers will naturally accumulate more in their accounts, which can normally be accessed in the event of a layoff. In fact, 18.73% of the 26 million workers in the FGTS system represent approximately 85% of the FGTS’s overall assets¹⁷. Upon retirement, individual workers keep their accumulated balances and may draw from them as they choose. In this way, the FGTS system is different from traditional, collectivized unemployment insurance, in which workers with stable employment effectively subsidize the frequently unemployed, or from traditional pension plans, in which short-lived retirees subsidize those with long retirements. Workers may also draw from their personal FGTS accounts to purchase a primary residence at any time, or for expenses associated with a serious illness.

The accounts are maintained by the Caixa and the FGTS’s assets are invested in government securities, similar to Social Security assets in the United States. The assets earn interest at 3% above the Taxa Referencial or TR, an official inflationary index¹⁸. The FGTS currently maintains assets of approximately R$190 billion, of which, R$21 billion is considered "surplus", that is, in excess of obligations that would be paid out if the entire Brazilian workforce were unemployed tomorrow, an unlikely event in any scenario. The Investment Fund is required to seek, as a goal, investments that will yield at least 6% above the TR.¹⁹

C. Voluntary or Involuntary Contributions - or Both?

A debate over the voluntary nature of the Investment Fund occurred between the issuance of MP 349 and the enactment of its final version as Law 11,491. Several umbrella labor unions weighed in on the debate. The President of the Força Sindical, Paulo Pereira da Silva, also a deputy in the Brazilian Chamber of Deputies, unsuccessfully proposed an amendment to MP 349 that would have given individual workers the choice of whether or not funds proportionate to those in their individual accounts could be invested. The amendment would also have allowed the worker to choose the percentage of his/her account invested, if any.²⁰ Law 11,491, as it was ultimately enacted, treats the surplus in the aggregate, and therefore subjects all workers’ assets to investment risk, proportionately. The Força Sindical views the government’s use of the entire FGTS surplus as a confiscation of the workers’ money. In my view, the Força Sindical’s argument is flawed, considering that the government’s plan is only to invest a portion of the surplus, which is “extra” money, and theoretically belongs not to the workers, but to the FGTS system itself. Labor unions see this differently. Presumably, there would be less money available for infrastructure finance if a significant percentage of workers chose not to invest. For this reason, the Lula administration prefers to retain full control over the investment decisions for the entire surplus.

However, Pereira da Silva was successful in suggesting another option, one that will eventually allow workers to invest up to 10% of their personal FGTS balance in investments of their own choosing, not limited to public infrastructure projects.²¹ This option is similar to the Bush Administration’s unsuccessful Social Security proposal, in that it deals with individual assets, not with the surplus as a whole. Of course, these will be personal investments, without guaranteed rates of return, and with all investment risk borne by the individual workers. There is precedent for the use of FGTS money in at-risk investments. In August 2000, the Brazilian government sold shares in Petrobrás and offered special incentives for FGTS participants, including a 20% discount in share prices. Workers were able to purchase shares through "Privatization Mutual Funds" using their FGTS balances. Although the government could only sell half the R$3.4 billion in Petrobrás shares it made available at that time, the investments have yielded a return of 650% over seven years.²² When in 2001, the government made available shares of Companhia Vale do Rio Doce (CVRD), it offered no discount, but demand from FGTS participants exceeded the R$1 billion offer by three times, and FGTS participants could only purchase one-third of what they sought. CVRD shares have yielded a return of 730% since that time.²³ In light of the successful experiments with Petrobrás and CVRD, Brazilian workers may be willing risk personal FGTS assets again. However, this option will not be available for two or three years’ time.²⁴ The Investment Fund’s track record will certainly affect the level of interest in the individual investment option.

D. Guarantees

There is an obvious dichotomy between the security of Brazilian labor law, with its traditional FGTS regime, and the more dynamic, investment-oriented outlook of those who envision greater growth for the FGTS’s assets. Brazilian labor unions seem interested in the opportunities, but reluctant about the risk that comes with them. What they may get is the best of both worlds: an apparent guarantee on return, as well as the growth potential. That guarantee will apparently be given by the Caixa, either directly or through a private insurance or surety-type contract.²⁵ The CVM has analyzed the issue and concluded that MP 349 permits, or at least does not prohibit, a private third-party guarantee for the Investment Fund’s return. CVM President Marcelo Trinidade has stated this publicly and emphatically, after discussing the possibility of guarantees with labor leaders and the leadership of the São Paulo Stock Exchange (BOVESPA)²⁶. Pereira da Silva would prefer that Caixa itself make that guarantee, since the Caixa is the Investment Fund’s administrator.²⁷ Others believe that the Caixa itself should oversee the entire process, from selecting projects and evaluating their financial soundness, to managing the construction and operation of the infrastructure facilities.²⁸

After much debate, the Conselho Curador decided that the Caixa would levy a charge to guarantee the return on investment.²⁹ Initially, the Caixa suggested that an “insurance” surcharge for its guarantee be collected from the FGTS system.³⁰ Opposition from labor unions led the Caixa to consider passing the costs on to the private-sector partners in the project, by charging a surety rate that will vary according to risk on a project-by-project basis.³¹ An unresolved question is whether private construction firms, already risking their own investment in the project, will be inclined to pay the additional costs of guaranteeing the FGTS’s return on investments.

III. Additional Sources of Financing

Multilateral lending institutions are now involved more directly in infrastructure finance, either in direct lending to specific infrastructure projects or in advising governments as to the soundness of specific projects. The Inter-American Development Bank (IADB) signed a “protocol of cooperation” with the Brazilian BNDES, or Development Bank, pursuant to which both banks will cooperate in lending up to US$1.5 billion to Brazilian infrastructure projects.³² In the past, multilateral lenders would make general loans to the governments of developing nations, and have little control over the implementation of projects. The new approach signals a more active involvement in the projects.

The IADB has established a US$20 million fund to promote Public-Private Partnerships (PPP’s) in transportation and water/sewage projects in Latin America and the Caribbean. The Infrastructure Project Preparation Fund (InfraFund) will provide grants for the planning stage of projects, including feasibility studies; technical, economic, social and environmental assessments; project design; and preparation of documents for bidding processes.³³ The InfraFund will focus primarily on projects at the local level, which have traditionally had little private-sector participation in financing and development.³⁴

The IADB’s internal regulations limit its loans to the private sector to 10% of its overall loan portfolio. The IADB’s investment in any single private-sector project is generally limited to US$200 million, which can be increased to US$400 million on an exceptional basis. The IADB’s participation also cannot exceed 40% of the total cost of new projects or 50% of expansion projects.³⁵ While 10% of its current portfolio would equal approximately US$5.2 billion, only 3%, or US$1.5 billion, is currently lent to the private sector.³⁶ The IADB has, however, shown an increased interest in lending to the private sector in general and, in particular, to projects involving public-private cooperation.³⁷ Under current Brazilian legislation regulating PPP’s, the IADB may participate in Brazilian PPP’s as a lender to engineering and construction firms. Lenders can eventually become direct partners with the Brazilian government if they exercise their “step in rights” granted under the PPP law in the event of the private borrower’s default.³⁸ Although ownership in defaulting private firms are uncharted waters for the IADB, we can look to the example of the BNDES, which temporarily took an equity stake in EletroPaulo as a result of AES’s default on BNDES loans. One suggestion would be for the IADB’s lending limits to be increased to match the percentage of the government’s financial contribution to a PPP project, or to the government’s equity percentage in the project’s SPV, as the case may be.

Other multilateral lenders and governments have shown interest in Latin American infrastructure finance. U.S. Treasury Secretary Henry Paulson recently announced an agreement with the International Finance Corporation (IFC), a unit of the World Bank, aimed at encouraging private investment in infrastructure throughout Latin America.³⁹ The European Investment Bank is also negotiating an agreement with the BNDES to participate in Brazilian projects.⁴⁰

Another domestic Brazilian source of financing comes from another of the workers’ benefit funds. The Workers’ Assistance Fund, known by its Portuguese acronym “FAT”, or Fundo de Amparo ao Trabalhador, has allocated R$8 billion toward government programs. Of this total, R$3.3 billion will go toward the PAC, including infrastructure projects.⁴¹

IV. PPP’s

Although the process had reached its final stage and was ready for implementation, the Lula administration ultimately decided against entering into a PPP for improvements to federal roadways BR-116 and BR-324, both located within the state of Bahia and involving a combined total of 655 km.⁴² The Tribunal das Contas da União (TCU), the equivalent of a court of claims that has oversight authority over and adjudicates disputes involving public contracts and budgetary matters, had already given its approval to this project, the first scheduled roadway PPP. Tolls were to be set at R$3.50 per 100 km, and the government was to contribute up to R$37 million annually for operating expenses. The project would have been awarded to the bidder proposing the lowest annual costs for the government.⁴³

The government’s own evaluation determined that BR-116 and BR-324 were sufficiently traveled so as to be attractive to a private concessionaire.⁴⁴ If the roads are viable as straightforward concessions, the government can avoid the expenditures required in a PPP. This is not the first time that the Lula administration has cancelled a planned PPP. The Ferrovia Norte-Sul railway project, originally contemplated as a PPP, has also been converted into a concession. (see below, Concessions - Railways) Additionally, the administration is seeking “another solution” for its planned PPP in the São Paulo railway project (Ferroanel).⁴⁵ These cancellations have led critics to speculate that the Brazilian federal government has abandoned its PPP program.⁴⁶ Nonetheless, the administration still plans several other roadway projects that may employ the PPP model, notably BR-040 and another section of BR-166, in Minas Gerais.

Despite the government’s about-face on transportation infrastructure PPP’s, there is at least one planned PPP for an information technology project. Banco do Brasil and the Caixa are seeking a partner to build and maintain a “Datacenter”, which will support information technology management for the Brazilian financial system. Intended as a 25-year, R$300 million contract, this PPP is an “administrative” concession, in which the government pays directly for services performed. It is therefore not a true, “sponsored” PPP, which is the real innovation behind the PPP law.⁴⁷ Approximately one-fifth of the Datacenter’s floor space will be reserved for Banco do Brasil’s and the Caixa’s use.⁴⁸ The remainder may be used by the concessionaire for its own commercial purposes, and may also be leased to private banks for their IT support requirements. It is expected that revenues from leasing will reduce the government’s outlays.

The Brazilian Association of Infrastructure and Base Industries, known by its Portuguese acronym of Abdib⁴⁹, favors an arrangement whereby the technical/financial viability analyses for PPP’s would be done by private firms, instead of by the TCU. Abdib contends that the private sector would accelerate the approval process, as compared with the TCU⁵⁰. In fact, the analyses for the cancelled BR-116 and BR-324 PPP’s were done by the IFC.

Abdib is also proposing its own two-tiered plan to improve Brazilian roadways. The plan recommends 1) upgrading 6,100 km of Brazilian federal highways by granting traditional concessions to private operators and 2) upgrading the remaining 9,500 km via PPP’s. The plan would channel the revenue collected from the concessions toward financing the government’s contributions to the PPP’s, by placing such revenues in a special fund.⁵¹ The special fund would receive additional monies from taxes paid by concessionaires from their profits on the roadways. Abdib favors earmarking these tax revenues specifically for PPP’s and other infrastructure projects, whereas the government prefers the flexibility of treating them as general revenue, able to be allocated within the general budget as needed.

Another industry group, the Confederação Nacional dos Transportes (CNT), is proposing a supplemental set of infrastructure projects. The CNT proposal incorporates all of the PAC’s projects, and adds others, recommending a mixture of concessions and PPP’s.⁵² The CNT proposes creating a separate R$60 billion fund, capitalized by shares of state-owned companies. The government would contribute its shares held in excess of the 51% needed to maintain control.⁵³ The CNT views the creation of this fund as a means for the government to repay its “debt” to the transportation sector. Since 2002, the government has collected a fuel tax, the revenues of which were earmarked for transportation projects but ultimately used for other budgetary purposes.⁵⁴ According to the CNT’s analysis, the revenues collected, with interest, would now total R$56 billion.⁵⁵

The Brazilian government is also considering turning over to the BNDES the entire process of infrastructure development, both concessions and PPP’s, as a method of accelerating these programs.⁵⁶ The BNDES would then control the bidding process as well as the administration of the facilities after construction, in addition to its natural role as a major lender to public projects. Presumably, the transfer of these responsibilities, from the competent ministries or agencies to the BNDES, would require a change in applicable legislation.

While the federal government has mostly opted for concessions, several Brazilian states have moved forward with PPP’s. São Paulo is proceeding with the extension of the capital Metro system and Minas Gerais is hoping to transfer 16 roadways to private operation during 2008. Minas is still studying the benefits of PPP’s versus concessions, but seems to prefer PPP’s.⁵⁷

V. Concessions - Roadways

On October 9, 2007 the Brazilian government granted 25-year concessions for seven federal roadways, totaling 2,600 km. The concessions represent the first major privatizations of the Lula administration and were delayed for several years due to private lawsuits and the slow process of TCU approval.⁵⁸ The Spanish engineering firm Obrascon Huarte Lain (OHL) won five of the seven, including the two most sought-after, the Régis Bittencourt (São Paulo-Curitiba) and the Fernão Dias (São Paulo-Belo Horizonte).⁵⁹ Another Spanish firm, Acciona, submitted the winning bid for the BR-393 roadway, within Rio de Janeiro State. The only successful Brazilian bidder was the consortium BRVias, which acquired a 321 km stretch of BR-153, within São Paulo State.

As with most public-sector procurement practices, concessions are awarded to the lowest qualified bidder. For roadways, this means the lowest toll rates. OHL submitted very aggressive bids, with reductions of between 39% and 65% from the maximum toll rates set by the Edital.⁶⁰ One of the causes of the long delay in launching these privatizations was the government’s controversial revision of the concessionaires’ return on investment, i.e. the lowering of maximum tolls. That rate of return had initially been set at 18%, but had been revised downward to 12.88%, and subsequently to 8.95%, which represents a ceiling.⁶¹ Obviously, the actual return on investment will be substantially lower than the ceiling, due to the deep discounts offered by OHL and the other winning firms. Many experts feared that the lower toll rates would have discouraged qualified investors and defeated the very purpose of the concessions - improving service for the public.⁶² As a comparison, rates of return for similar projects in Europe and the U.S. average 12%.⁶³ However, in Brazil, with its higher interest rates, investors can obtain returns of nearly 12% in no-risk bank deposits, and will therefore demand higher returns for risky infrastructure investments. As a comparison within Brazil, the rate of return for the Rodoanel “ring road” project around São Paulo was set at 18%.⁶⁴

Despite the government’s lowering of the ceiling, the private sector did show substantial interest in the concession, with 30 companies submitting bids.⁶⁵ Brazilian officials attribute the level of interest to improved macroeconomic indicators, including a lowering of the “Brazil Risk”, which makes doing business in Brazil more attractive and justifies accepting a lower rate of return.⁶⁶ Moreover, the Edital allows toll rates to be adjusted for inflation in the future; the bids only lock in a base price based on 2007 figures. In any event, as per the Edital, tolls will not be collected for approximately one year.

On November 1, 2007 the Agência Nacional de Transportes Terrestres (ANTT), the agency that administered the auction, ratified the results of the October 9 auctions. The ratification, originally scheduled for October 19, was postponed twice by the ANTT due to the “complexity of analyzing the documentation presented” by the bidders.⁶⁷ In this auction, the ANTT employed a reverse process. In most auctions, bidders must pre-qualify as to technical competence and financial strength. For the October 9 auction, the ANTT evaluated these criteria post-bidding.⁶⁸ After ANTT ratification, all competitors had the opportunity to examine the winning proposals’ documentation, which took place during the week of November 5-9.

After reviewing OHL’s documentation, the consortium PR/SC, one of the unsuccessful bidders, filed an administrative challenge based on OHL’s extremely low bids.⁶⁹ PR/SC’s challenge was made against three of OHL’s five roadways, the Régis Bittencourt, the Fernão Dias and BR-101 (Curitiba- Florianópolis). The focus of PR/SC’s challenge was the differential between OHL’s and the other bids at auction, contending that the differential exceeded that permitted under applicable concession law.⁷⁰ Specifically, PR/SC contended that bids are invalid when they are lower than 70% of the prices set by the government or lower than 70% of the average of all other bids that were higher than 50% of the government’s maximum price.⁷¹ In fact, even before the ANTT ratified the result of the auction, PR/SC had already indicated its intention to appeal the matter to the TCU, and to higher courts if necessary, if the ANTT did not alter the auction’s results.⁷² The ANTT upheld the auction’s results and disagreed with PR/SC’s contention that the General Concessions Law applied to this auction and prohibited the vast differential between bids.⁷³ According to the ANTT, the October 9 auction is governed by the laws regulating the Brazilian Privatization Program, which does not contain a provision as to differentials between bids. Anonymous sources at the TCU have indicated to the Brazilian press that the appeal will probably be denied on the same grounds.⁷⁴

PR/SC was one of nine bidders to challenge the auction’s results.⁷⁵ A total of 19 specific legal actions were filed with the ANTT, all of which were dismissed.⁷⁶ Other competitors are considering filing actions with Brazilian antitrust authorities, arguing that OHL occupies a dominant position in the market for privately-run roadways.⁷⁷

OHL’s lower bids were possible because OHL calculated the traffic volume based on growth in auto sales in Brazil, whereas its competitors used GDP growth as their bases.⁷⁸ OHL’s calculation basis may be unorthodox and more risky, but it is permitted.⁷⁹ OHL’s deep discounts aroused suspicion that it would be a low-cost, low-quality service provider. These suspicions were deepened by negative press in Spain regarding delays in OHL’s progress schedule on several projects, including the Madrid-Barcelona high-speed railway. The chairman of the Brazilian Senate’s Infrastructure Committee, Senator Marconi Perillo, has called for an investigation of OHL’s qualifications.⁸⁰ In addition to the construction delays, there were six serious accidents on OHL projects in Spain during a two-week period in October 2007, including the collapses of a station platform and a tunnel wall near Barcelona.⁸¹ However, OHL has an otherwise good record in roadway administration in Spain. Two roads constructed and operated by OHL near Madrid (M-12 and M-45) are considered to be in excellent condition.⁸² The Juan Carlos I tunnel, part of M-12, was voted the safest in Europe by an industry group.

OHL’s low bids are also under suspicion due to allegations of improper subsidies from the Spanish government. The European Commission is investigating as an unfair competitive advantage a tax beak granted to companies based in Spain that acquire 5% of foreign companies or participate in public works outside Spain.⁸³ Spanish officials deny that OHL received a subsidy.⁸⁴

Within 60 days of the auction, the concessionaires must incorporate the SPV that will operate the roadways. The contract is scheduled to be signed in mid-February 2008.⁸⁵ After signing the contract, the concessionaires will have a six-month period in which to bring the roads up to minimum standards, and may only begin charging tolls after that requirement is met.⁸⁶ Collectively, the concessionaires will invest R$20 billion on the seven roadways during the 25 years of the concessions, distributed as follows:

• R$5.1 billion in capital investments during the first five years, such as roadway resurfacing and widening.

• R$4 billion in capital investments during the remaining 20 years.

• R$10.9 billion in operational costs throughout the 25 years, including traffic inspection, towing service, emergency medical care, public telephones and truck weighing stations.⁸⁷

Prior to the October 9 auctions, privately-administered roads represented only 7.8% of paved roads throughout Brazil, a percentage that will now rise to 12%.⁸⁸

The Edital for the BR-116 and BR-324 concessions is scheduled to be published on December 20, 2007.⁸⁹ Originally planned as PPP’s, these two undertakings will be 15-year concessions, as opposed to the 25-year periods granted in the October 9 round.⁹⁰ Transport Minister Alfredo Nascimento sees the shorter period as sufficient for concessionaires to recoup their capital investments and views the successful October 9 round as proof that the 8.95% ceiling is economically viable. Another important federal roadway, BR-040 (Brasília-Belo Horizonte) is currently under study.⁹²

The Brazilian government is also studying additional methods of extracting revenue from infrastructure operations, such as permitting roadway concessionaires to lease billboard advertisements.

VI. Concessions- Railways

The Brazilian government has also privatized several key freight railways over the course of 2007 and is planning several additional privatizations for 2008. In early October 2007, CVRD acquired a subconcession for a 720 km parcel of the Ferrovia Norte-Sul, stretching from Açailândia (Maranhão) to Palmas (Tocantins). Without any competition at this auction, CVRD paid the minimum price of R$1.478 billion.⁹³ In addition to operating the existing 720 km portion, CVRD will have to finance the construction of a 359 km portion, from Palmas to Araguaína by 2009. CVRD plans to invest R$416 million in these projects.⁹⁴ The Ferrovia Norte-Sul is administered by the state-owned Valec, which will supervise CVRD’s upgrade and construction of the tracks.⁹⁵ Valec plans to auction another 1,000 km portion of the Ferrovia Norte-Sul, between Palmas and Aparecida do Taboado (Mato Grosso do Sul) in March 2008.⁹⁶

With this acquisition, CVRD will now operate 9,890 km of railways in Brazil, integrating its mining operations with the transportation network necessary to carry its products to export markets.

Valec also has plans for 14 regional passenger rail projects to operate on existing tracks, some in currently use, others abandoned.⁹⁷ The 14 projects were preliminarily selected from a list of 28 under consideration by a study group formed by the BNDES, the Transportation Ministry, local transportation authorities and private-sector companies. These 14 projects are well-distributed throughout Brazil: two each in São Paulo, Rio de Janeiro and Minas Gerais, one each in Rio Grande do Sul, Santa Catarina, Paraná, Bahia, Sergipe, and Pernambuco and one shared between Maranhão and Piauí.⁹⁸ These 14 projects vary from 60 km to 215 km in track length. Valec hopes to begin the process of auctioning these projects in mid-2008 and is considering concessions or PPP’s, or a combination of both.⁹⁹

The old dream of a high-speed train between the cities of Rio de Janeiro and São Paulo is also under consideration, separate from the other 14 regional projects. The high-speed link would cost US$9 billion and require approximately 200 km of new bridges and tunnels for the 403 km trip, which would take 1 hour, 25 minutes and cost approximately R$110.

VII. Ports/Airports

The federal government is in the early planning stages for a PPP to expand Congonhas airport in São Paulo. The government is also promoting a privatization model for aviation infrastructure and has converted the federal airport operating authority, Infraero, into a publicly-traded company.¹⁰⁰ Having declared the “Varig Model” a failure, the government is now looking to the private sector for a more efficient administration of Brazil’s troubled aviation sector.

Also part of the PAC, Editais for dredging at the ports of Rio Grande and Santos are expected in January and May 2008, respectively.¹⁰¹ The government has announced a new model for longer-term contracts, which would more give the private concessionaire a greater incentive. Whereas past models called only for a contractor to complete dredging operations, the new contracts will require the contractor/concessionaire to operate the port facility (and to maintain water depths) for a five-year term, renewable for an additional five years.

VIII. Water and Sewage Projects

The federal government also plans to assist state and local governments with water/sewage PPP’s. Since many heavily indebted states and cities throughout Brazil are incapable of implementing needed water/sewage projects, the Lula administration is considering a mixed-finance operation. The BNDES would finance the construction phase, with building done by private companies.¹⁰² The BNDES would secure its loans with the project’s receivables. The state or local governments would then make their contributions to the project’s operating expenses. If local governments have difficulty in making these contributions, the federal government is considering raising state and local governments’ debt limits or directly funding the projects.¹⁰³ In the past, local governments and local water authorities were required to make down payments of 10% when borrowing for water/sewage projects. The PAC now lowers that minimum to 5%. Private companies, which had to pay 25%, can now contribute 20%.¹⁰⁴

The draft version of the Lei de Saneamento Básico (Basic Sanitation Law) contained a provision granting a credit for corporate social security taxes in the amount equal to an investment made in a water/sewage facility. However, this provision was vetoed by President Lula, at the recommendation of Finance Minister Guido Mantega, concerned about the budgetary implications of conceding too many tax incentives.¹⁰⁵ Capital gains earned by workers via the FGTS Investment Fund will still be tax-exempt, for both sewage and transportation investments.¹⁰⁶

IX. Housing

In addition to using FGTS funds for public infrastructure, the Conselho Curador is encouraging their increased use in financing home ownership, budgeting R$8.4 billion for new mortgage loan programs. While the FGTS system has been a principal source of home purchasing for many years, beginning in January 2008, greater numbers of workers will be able to use their FGTS funds to make mortgage payments. The percentage of the mortgage payment paid with FGTS funds will depend on a worker’s salary level and on the ratio of the mortgage payments to salary, with lower-paid workers able to use a higher percentage.¹⁰⁷ FGTS participants will also receive a 0.5 % discount on mortgage rates, although this reduced rate only applies to units costing up to R$130,000 and to workers earning up to R$4,900 monthly.¹⁰⁸ 15-year fixed rate and 30-year adjustable rate mortgages are available. The FGTS system is also lowering fixed mortgage interest rates by 2% for workers earning less than R$3,900 monthly.¹⁰⁹ Most importantly, workers earning over R$4,900 monthly will now be eligible to participate in the FGTS mortgage program at the slightly higher interest rates, whereas the old regulations completely excluded middle-class workers. The maximum value of homes financed by middle-class workers will be raised to R$350,000 and the maximum amount borrowed raised to R$245,000.¹¹⁰ To qualify for the financing, workers must be in the FGTS system for at least three years and have at least 10% of the home’s value on deposit.¹¹¹

A construction trade group, Sinduscon-SP¹¹² is proposing a R$270 billion low-income housing construction program, to be implemented over a twelve-year period. Of the R$270 billion, 20% would come from homeowner savings, 40% from mortgage financing and the remaining 40% from government subsidies.¹¹³ The government’s share would equal R$108 billion over the life of the program, or R$9 billion per year. Current low-income housing subsidies are approximately R$4 billion per year.¹¹⁴ Sinduscon-SP’s proposal is modeled on the success of Mexico’s program, which has focused primarily on savings through economies of scale and the streamlining of the credit and mortgage processes. According to Sinduscon-SP’s study, prepared by a consulting firm, the Mexican program has reduced a 6.5 million unit housing deficit by half in three years.¹¹⁵ Brazil’s housing deficit of 7.9 million units is concentrated among the low-income (92% of the housing deficit is in households earning R$1,750 or less per month - or five minimum salaries).¹¹⁶

X. Fiscal Incentives

Also included in the PAC’s stimulus package are an estimated R$6.6 billion in tax breaks for companies building public works included in the PAC. A recent law grants construction companies and their suppliers an exemption from certain social security taxes, known as PIS/Cofins. There are two types of PIS/Cofins taxes, an income tax on monthly revenues and a sales tax on imported goods. The exemption applies to materials and equipment purchased or leased, and subcontracting services paid for, when these materials or services are used in a qualified infrastructure project.¹¹⁷ For suppliers of qualified materials/services, the relief comes in the form of exempting those sales from the monthly calculations of taxable revenue, thereby lowering taxable income.¹¹⁸ For construction companies importing qualified materials/services, their purchases are exempt from the sales tax, thereby lowering prices of their supplies.¹¹⁹ To qualify for the exemption, a company must undertake a two-step process. It must submit a proposal to the ministry overseeing the project, which in turn issues an administrative ruling as to whether the project qualifies for the exemption. If successful, the company then presents the administrative ruling to the tax authorities.¹²⁰ Industry groups such as Abdib have criticized this two-part process as overly bureaucratic and susceptible to subjectivity regarding which projects will qualify.¹²¹ Abdib also criticizes the fact that these tax breaks will only apply to new undertakings, which means that companies will not benefit from them until 2009.¹²²

Another piece of PAC legislation, Law 11,478, grants tax relief to privately-run investment funds focusing on infrastructure projects. The statute permits the incorporation of Fundos de Investimento em Participações de Infra-Estrutura or FIP-IE’s, as closed mutual funds.¹²³ The FIP-IE’s must have at least ten shareholders, and no shareholder may hold more than 20% of the fund’s equity, nor receive more than 20% of the fund’s income.¹²⁴ At least than 95% of the fund’s assets must be invested in the equity or debt securities of SPV’s formed to implement infrastructure projects.¹²⁵ The SVP’s, which must be incorporated as Sociedades Anônimas, will presumably be formed as subsidiaries of the construction or engineering firms managing the project.¹²⁶ The FIP-IE’s are not designed to be passive investors in the SPV’s, but rather are to have corporate control, either via a majority share of the voting stock or by electing directors.¹²⁷ Individual investors are exempt from capital gains taxes, provided that they have held their shares in the funds for at least five years.¹²⁸ However, and despite Abdib’s heavy lobbying for it, corporations are not entitled to these tax exemptions, and are taxed at rate varying between 15%-22.5%, depending on the length of time their investments are held.¹²⁹

Current Brazilian budgetary law limits tax breaks to a maximum of five years. Since infrastructure investments will clearly continue for longer than five years, there is pressure from industry leaders to change this. Some journalists have suggested amending the tax code to permit the deduction of road toll expenses on personal and corporate tax returns.¹³⁰

The BNDES is also reducing the spreads on loans to infrastructure projects.

XI. Court Challenges

The Brazilian government acknowledges that there are 149 legal actions challenging various infrastructure projects, 116 of which are part of the PAC.¹³¹ 46% of these actions involve eminent domain condemnations of real property.¹³² The TCU, in which many of these challenges are brought, has determined that 29 of the PAC’s projects have “grave irregularities”, such as over-billing, excessive change orders or irregular bidding and procurement processes.¹³³ The TCU’s determinations are not binding, but the Brazilian Congress is likely to follow the TCU’s recommendation and suspend work on these 29 projects.¹³⁴

Another of the PAC’s legislative proposals are amendments to the General Concessions Law that would reduce and streamline these type of court challenges to public concessions and avoid the paralysis that legal actions cause.¹³⁵ While Abdib supports this legislative proposal, it advocates additional changes, such as the introduction of performance surety bonds for construction contracts, common in the U.S. construction industry.¹³⁶

XII. Prognosis

Most of the PAC’s initiatives are still in the planning stage. At its final meeting of 2007, on December 20, the Conselho Curador approved the regulations governing the Investment Fund, although they have not yet been published as of the date of this article. In December, the Conselho Curador also formed the “Investment Committee”, of twelve members, six from government and six from industry and labor.¹³⁷ We await the Committee’s issuance of investment policy guidelines.

A vice-president at the Caixa, Wellington Moreira Franco, is also optimistic regarding a possible partnership between the Caixa and the BNDES by which the BNDES would act as a conduit for the Investment Fund’s assets. Proposed by the Caixa, this partnership envisions the Investment Fund depositing its assets with the BNDES, like a regular banking depositor, and the BNDES making loans to projects. Moreira Franco believes that projects could commence in as little as 100 days after the Caixa-BNDES partnership is finalized.¹³⁸ While this timetable may be overly optimistic, there does seem to be a genuine effort by the Lula administration to address seriously Brazil’s infrastructure needs. As such, even if the PAC is far from perfect, in both its planning and execution, it is sufficiently ambitious so that a good portion of the government’s goals will likely be accomplished.

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¹ Abdib news release, Evolução das medidas legislativas do PAC preocupa setor de infra-estrutura. September 20, 2007.

² Brazilian Government website. PAC- Investimentos em Infra-Estrutura para o Desenvolvimento Econômico e Social.

³ Lu Aiko Otta, Confederação propõe fundo de R$60 bi para rodovias. O Estado de S. Paulo, September 6, 2007.

⁴ Renée Pereira, Caos da infra-estrutura custa R$90 bi. O Estado de S. Paulo, November 25, 2007.

⁵ MP 349 of January 22, 2007, Art. 1., The provisions of MP 349, with amendments, were made permanent law on June 20, 2007, enacted into Law 11,491.

⁶ Id. See also, Conselho Curador do FGTS, Resolution 530 of July 4, 2007, §5.3.

⁷ Id., Art. 1. The Brazilian equivalent to the U.S. SEC is known as the Comissão de Valores Mobiliários.

⁸ MP 349 of January 22, 2007, Art. 2.

⁹ Id.

¹⁰ Marclo Rehder, FGTS poderá ser usado para infra-estrutura, O Estado de S. Paulo, August 18, 2006.

¹¹ Conselho Curador do FGTS, Resolution 530 of July 4, 2007, §5.

¹² Id. §5.1.

¹³ Gustavo Freire, Mudança no cálculo da TR reduz rendimento da poupança e do FGTS. O Estado de S. Paulo, March 7, 2006

¹⁴ CVM Instruction No. 462, November 26, 2007.

¹⁵ Id., Art 26.

¹⁶ Id., Art 22.

¹⁷ Brazilian Labor Ministry website. Press Release October 30, 2007. Ministro anuncia benefícios aos cotistas do FGTS.

¹⁸ Law 8,036 of May 11, 1990, Art. 13.

¹⁹ Conselho Curador do FGTS, Resolution 530 of July 4, 2007, §4.

²⁰ Sobral, Isabel, Força quer limitar FGTS em obras, O Estado de S. Paulo, February, 3, 2007.

²¹ Otta, Lu Aiko, Governo pode autorizar uso do FGTS em ações, O Estado de S. Paulo, February 7, 2007.

²² Pamplona, Nicola, Aplicações do Fundo na Vale e na Petrobrás foram de risco, O Estado de S. Paulo, February 23, 2007.

²³ Id.

²⁴ Investimento em infra-estrutura só sai no fim do ano. O Estado de S. Paulo, July 6, 2007.

²⁵ Law 11.491, Art. 3; Law 8,036, Art 7, Section VIII, as amended.

²⁶ Komatsu, Alberto and Ciarelli, Mônica, Garantia da Caixa pode definir uso do FGTS em projetos do PAC, O Estado de S. Paulo, February 23, 2007.

²⁷ Id.

²⁸ Antonio Corrêa de Lacerda, O PAC, o FGTS e a infra-estrutura, O Estado de S. Paulo, January 24, 2007.

²⁹ Investimento em infra-estrutura só sai no fim do ano. O Estado de S. Paulo, July 6, 2007.

³⁰ Isabel Sobral, Empresas podem garantir novo fundo. O Estado de S. Paulo, March 7, 2007.

³¹ Investimento em infra-estrutura só sai no fim do ano. O Estado de S. Paulo, July 6, 2007.

³² Fernando Dantas and Raquel Massote, BID amplia crédito para PPPs, O Estado de S. Paulo, April 6, 2006

³³ IDB establishes funds for infrastructure projects preparation, IADB Press Release, April 25, 2006.

³⁴ Id.

³⁵ https://www.iadb.org/aboutus/VI/privatesector.cfm?language=English

³⁶ Editorial, BID e as operações de PPP. O Estado de S. Paulo, April 7, 2006

³⁷ Id.

38 Law 11,079, Art. 9, §5.

³⁹ EUA vão aplicar US$4,6 bi na América Latina, O Estado de S. Paulo, July 7, 2007.

⁴⁰ Lu Aiko Otta, BNDES pode ficar com PPPs e concessão de rodovias, O Estado de S. Paulo, July, 5, 2007.

⁴¹ Renata Veríssimo, PAC e outros programas têm mais R$8 bi do FAT, O Estado de S. Paulo, May 12, 2007.

⁴² Leonardo Goy, Governo troca PPP por concessão, O Estado de S. Paulo, July 17, 2007.

⁴³ Lu Aiko Otta, Primeira PPP federal deve ser lançada em 30 dias, O Estado de S. Paulo, February 9, 2007.

⁴⁴ Leonardo Goy, Governo troca PPP por concessão, O Estado de S. Paulo, July 17, 2007.

⁴⁵ Id.

⁴⁶ Lu Aiko Otta, Burocracia afasta setor privado. O Estado de S. Paulo, September 16, 2007.

⁴⁷ For a more complete explanation on the types of concessions, see, Andrew J. Dell’Olio, Public-Private Partnerships in Brazil: Opportunities and Risks for Investors, New York State Bar Association International Law Practicum, Spring 2006, pp.58-65

⁴⁸ Vinícius Pinheiro, BB e Caixa fazem edital para 1a PPP, O Estado de S. Paulo, February 24, 2007.

⁴⁹ Associação Brasileira da Infra-Estrutura e Indústrias de Base.

⁵⁰ Isabel Sobral, Para setor privado, PPP não sai este ano. O Estado de S. Paulo, July, 25, 2006

⁵¹ Lu Aiko Otta, Iniciativa privada cria programa para recuperar estradas. O Estado de S. Paulo, Febreuary 4, 2007.

⁵² Lu Aiko Otta, CNT quer R$223 bi para logística. O Estado de S. Paulo, September 6, 2007.

⁵³ Lu Aiko Otta, Confederação propõe fundo de R$60 bi para rodovias. O Estado de S. Paulo, September 6, 2007. Embraer, Petrobrás, Usiminas and Banco do Brasil are partially state-owned.

⁵⁴ Id.

⁵⁵ Id.

⁵⁶ Lu Aiko Otta, BNDES pode ficar com PPPs e concessão de rodovias, O Estado de S. Paulo, July, 5, 2007.

⁵⁷ 16 trechos à espera da iniciativa privada. O Estado de S. Paulo, October 21, 2007.

⁵⁸ Fernão Dias deve ser a estrela do leilão. O Estado de S. Paulo, October 7, 2007.

⁵⁹ Grupos espanhóis oferecem menor pedágio e levam 6 das 7 rodovias. O Estado de S. Paulo. October 10, 2007.

⁶⁰ Id. The Edital in Brazilian law is the basic pre-bid document containing the terms and conditions of a concession or other government contract.

⁶¹ Reneé Pereira, Porcentagem da taxa de retorno das concessionárias começou com 18%, caiu para 15,8% e já está em 12,88%. O Estado de S. Paulo, January 14, 2007.

⁶² Id.

⁶³ Id.

⁶⁴ Id.

⁶⁵ Renée Pereira, Leilão teve 30 consórcios na disputa. O Estado de S. Paulo, October 10, 2007.

⁶⁶ Id.

⁶⁷ ANTT adia confimação de resultado do leilão de rodovias federais. A Folha de S. Paulo, October 26, 2007.

⁶⁸ Id., See also, Pedágio da OHL já é contestado. O Estado de S. Paulo, October 19, 2007.

⁶⁹ Leonardo Goy and Lu Aiko Otta, Consórcio PR/SC vai contestar o leilão de rodovias federais. O Estado de S. Paulo, November 7, 2007.

⁷⁰ “Tudo foi fieto dentro da lei”. O Estado de S. Paulo. October 19, 2007.

⁷¹ See, Law 8,666 of June 21, 1993, Art. 48, §1, as amended by Law 9,648 of May 27, 1998, Art. 1.

⁷² “Tudo foi feito dentro da lei”. O Estado de S. Paulo. October 19, 2007.

⁷³ Id. ANTT staff determined that the limits established by Law 9,648 of May 27, 1998 apply only to auctions conducted under the General Concessions Law (Lei de Licitações, Law 8,666 of June 21, 1993) and not to auctions conducted pursuant to the Brazilian Privatization Program (Programa Nacional de Desestatização).

⁷⁴ Leonardo Goy and Lu Aiko Otta, Consórcio RP/SC vai contestar o leilão de rodovias federais. O Estado de S. Paulo, November 7, 2007.

⁷⁵ Leonardo Goy, Resultados do leilão de rodovias são questionados por 19 recursos. O Estado de S. Paulo, November 13, 2007.

⁷⁶ Leonardo Goy, ANTT confirma leilão de estradas. O Estado de S. Paulo, December 6, 2007.

⁷⁷ Leonardo Goy, Resultados do leilão de rodovias são questionados por 19 recursos. O Estado de S. Paulo, November 13, 2007.

⁷⁸ Pedágio da OHL já é contestado. O Estado de S. Paulo, October 19, 2007.

⁷⁹ Id.

⁸⁰ Leonardo Goy, Sendaor quer investigação. O Estado de S. Paulo. October 25, 2007.

⁸¹ Espanha dá nova chance à OHL. O Estado de S. Paulo, October 28, 2007.

⁸² Andrei Netto, OHL pode moderinzar a Régis e a Fernão Dias. O Estado de S. Paulo, November 4, 2007.

⁸³ Jamil Chade, UE investiga subsídios a espanholas. O Estado de S. Paulo, October 19, 2007. Article 12 of the Spanish Corporate Tax Law, Law 43/1995, permits companies headquartered in Spain to deduct up to 5% of investments in foreign companies or foreign public works from tax liabilities for up to 20 years. Calculations are that OHL may receive save between 300-340 million Euros in taxes over the next 20 years due to its investments in the October 9 roadway auctions. The purpose of the tax incentive is to encourage investments abroad by Spanish companies. See also, Andrei Netto, Concessões no Brasil vão garantir à OHL subsídios de até 340 milhões. O Estado de S. Paulo, November 4, 2007.

⁸⁴ Gerusa Marques, Ministro espanhol nega ter dado subsídios à OHL. O Estado de S. Paulo, October 31, 2007. The Spanish Minister of Industry, Commerce and Tourism, Joan Clos, in a visit to Brazil, issued such denials, citing the fact that Spanish firms operate in many international markets.

⁸⁵ Renée Pereira, Leilão teve 30 consórcios na disputa. O Estado de S. Paulo, October 10, 2007.

⁸⁶ Id.

⁸⁷ Josef Barat, Concessões Rodovárias- o mundo gira.... O Estado de S. Paulo, October 9, 2007.

⁸⁸ Renée Pereira, Setor privado quer investir, mas faltam oportunidades. O Estado de S. Paulo, August 12, 2007.

89 Lu Aiko Otta, Governo já prepara outro leilão. O Estado de S. Paulo, October, 9, 2007.

⁹⁰ Lu Aiko Otta, Ministro diz que retorno vai cair nos novos leilões. O Estado de S. Paulo, October 10, 2007.

⁹¹ Id.

⁹² Lu Aiko Otta, Governo já prepara outro leilão. O Estado de S. Paulo, October, 9, 2007.

⁹³ Renée Pereira, Vale leva ferrovia e investe em aço. O Estado de S. Paulo, October 4, 2007.

⁹⁴ Id.

⁹⁵ Renée Pereira, Leilão da Norte-Sul já tem vencedor: a Vale do Rio Doce. O Estado de S. Paulo, October 3, 2007.

⁹⁶ Renée Pereira, Novo trecho fica para março, O Estado de S. Paulo, October 4, 2007.

⁹⁷ Renée Pereira, Trens de passageiros e trem-bala Rio-São Paulo serão as próximas etapas. O Estado de S. Paulo October 4, 2007.

98 Id.

⁹⁹ Id.

¹⁰⁰ Nalu Fernandes, Alberto Komatsu, Luciana NunesLeal and Tânia Monteiro, Dilma quer privatizar aeroportos. O Estado de S. Paulo, October 23, 2007. Infraero is Empresa Brasileira de Infra-Estrutura Aeroportuária.

¹⁰¹ Leonardo Goy, MP dos portos cria novas exigências, O Estado de S. Paulo. September 21, 2007.

¹⁰² Renata Verissimo, Lula quer mais projectos na carteira de PPPs. O Estado de S. Paulo, November 22, 2006.

¹⁰³ Id.

¹⁰⁴ Isabel Sobral, Governo corta juro para imóveis e saneamento. O Estado de S. Paulo. May 4, 2007.

¹⁰⁵ Ribamar Oliveira, Lula vai criar fundo de R$5 bi para saneamento. O Estado de S. Paulo, January 10, 2007.

¹⁰⁶ Id.

¹⁰⁷ FGTS abate até 80% da prestação. O Estado de S. Paulo. October 8, 2007.

¹⁰⁸ Construção quer mais facilidade no uso do FGTS. O Estado de S. Paulo. October 8, 2007.

¹⁰⁹ Ribamar Oliveira and Christiane Samarco. FGTS terá mais 3 opções de saque. O Estado de S. Paulo, May 17, 2007.

¹¹⁰ Isabel Sobral, FGTS pagará até 80% de prestação da casa própria. O Estado de S. Paulo, October 31, 2007.

¹¹¹ Assesoria de Imprensa da Caixa Econômica Federal, October 30, 2007- FGTS amplia acesso aos recursos da casa própria.

¹¹² Sindicato da Indústria da Construção Civil do Estado de São Paulo.

¹¹³ Marcelo Rehder, Construção sugere ‘Bolsa Família da Habitação’. O Estado de S. Paulo, Novemeber 17, 2007.

¹¹⁴ Id.

¹¹⁵ Id.

¹¹⁶ Id.

¹¹⁷ Lu Aiko Otta, Receita reduz burocracia para o PAC, O Estado de S. Paulo, October 1, 2007. The taxes referred to are the PIS and the Cofins and the exemption is part of the Regime Especial de Incentivos para o Desenvolvimento da Infra-Estrutura (REIDI), or Special Regime of Incentives for Infrastructure Development. See also, Law 11,488 of June 15, 2007.

¹¹⁸ Law 11,488 of June 15, 2007, Art 3, §I.

¹¹⁹ Id., Art. 3, §II.

¹²⁰ Lu Aiko Otta, Receita reduz burocracia para o PAC, O Estado de S. Paulo, October 1, 2007.

¹²¹ Abdib news release, Evolução das medidas legislativas do PAC preocupa setor de infra-estrutura. September 20, 2007. See also, Lu Aiko Otta, Abdib vê ‘Cipoal burocrático’ em incentivos do PAC ao setor privado. O Estado de S. Paulo, September 20, 2007.

¹²² Id.

¹²³ Law 11,478 of May 29, 2007, Art. 1.

¹²⁴ Id., Art.1, §6.

¹²⁵ Id., Art.1, §4.

¹²⁶ Id., Art.1, §2.

¹²⁷ Id., Art.1, §8.

¹²⁸ Id., Art 2, §3.

¹²⁹ Id., Art 2, §§1, 5. See also Abdib news release, Evolução das medidas legislativas do PAC preocupa setor de infra-estrutura. September 20, 2007.

¹³⁰ Paulo Tarso Resende, Concessões Rodoviárias, O Estado de S. Paulo, Septemebr 25, 2007.

¹³¹ Lu Aiko Otta, Obras do PAC sob ataque na Justiça, O Estado de S. Paulo, September 23, 2007.

¹³² Id.

¹³³ Marcelo de Moraes, Tribunal de Contas propõe embargo a 29 obras do PAC, O Estado de S. Paulo, September 20, 2007.

¹³⁴ Id.

¹³⁵ Bill 7,709/2007 proposes amendments to Law 8,666/1993 (the General Concessions Law).

¹³⁶ Abdib news release, Evolução das medidas legislativas do PAC preocupa setor de infra-estrutura. September 20, 2007.

¹³⁷ Isabel Sobral, Governo quer mais R$3 bi para habitação. O Estado de S. Paulo, December 12, 2007.

¹³⁸ Fernando Nakagawa, FGTS pode bancar projetos do BNDES, O Estado de S. Paulo, November 23, 2007.

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* Andrew J. Dell’Olio has worked in Brazil as foreign counsel to the São Paulo law firm of Araújo e Policastro Advogados, where he specialized in corporate transactions, foreign investments, government concessions and privatizations. He is currently an attorney with the New York City Housing Authority where he concentrates in government procurement, municipal finance, and public-private development programs.

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