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Brazil sweetens return on highway projects to attract investment
Brazil has raised the rate of return for toll road concession projects, Finance Minister Guido Mantega said, providing yet another sweetener for the private sector as the government scrambles to boost investment in a sluggish economy.
Mantega said after meeting construction executives that the government would raise the rate of return to 7.2 percent from 5.5 percent to encourage competition and participation in the bidding for the concessions, which is expected to start in September.
“They all (companies) unanimously said that the investment is very attractive with this rate of return and that they will participate in the bids,” Mantega told reporters in Brasilia.
This is the second time in three months that the government has yielded to the private sector in a bid to lure companies to participate in infrastructure projects worth nearly $250 billion. The government is auctioning concessions for public airports, ports and railways to increase a rate of investment that is less than half that of emerging nations such as China.
Latin America’s largest economy has struggled despite an avalanche of stimulus measures that include billions of dollars in tax incentives and cheap loans. Brazilian officials have said the concessions are crucial to avoid a third year of mediocre economic growth caused mainly by years of anemic investment.
Under the terms of the concessions, private companies and investors will be able to buy the rights to publicly owned roads and charge tolls for their use. The contracts will also apportion the risks and investment commitments for the government and the private investors.
In February, Mantega extended the length of concessions and improved the financing conditions for road projects.
The latest changes also lower the amount of loans that can be made to a concession operator by a single creditor to 70 percent from 80 percent. (Reuters)
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