SESSION 4 INFRASTRUCTURE - PDF Free Download

Country Overview Regionalization of the Brazilian GDP (Presented in %) North Region GDP 5.3% Government Presidential Republic Northeast Region GDP 13.9% Area 8,515,767 km² GDP 2017 USD 1.969 trillion Midwest Region GDP 9.4% Coastline 7,367 km GDP per capita USD 9,490 Southeast Region GDP 54.9% Population (1) 208 million Risk Brazil (S&P) BB South Region GDP 16.4% (1) Oxford Economics estimative for 2017; Source: Oxford Economics Database, Reuters and CIA Factbook affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 2

Quality of Infrastructure in Brazil (1) According to the Global Competitiveness Index (GCI) Infrastructure quality ranking of WEF in 2017-2018, Brazil ranks 73th out of 137 countries. The ranking evaluates: - The extent and efficiency of the transportation infrastructure capable of providing easy and safe movement of goods, services and people in airports, highways, railways and ports. - The power supply quality, free of interruptions and faults. - A solid and extensive telecommunication network that allows a fast and free flow of information. 6,3 6,0 5,7 5,3 4,8 4,7 4,3 4,2 4,1 3,9 3,8 3,8 Japan United States Canada Australia Chile China Mexico World median Brazil Argentina Peru Colombia 4th 9th 16th 28th 41st 46th 62nd 69th 73rd 81st 86th 87th Source: WEF. affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 3

Quality of Infrastructure in Brazil (2) Highways - 103 rd place in 137 countries 6,1 5,7 5,4 5,2 4,8 4,6 4,4 4,1 3,3 3,1 3,0 3,0 Japan United States Canada Chile Australia China Mexico World median Argentina Brazil Peru Colombia 6th 10th 22nd 24th 35th 42nd 52nd 69th 96th 103rd 108th 110th Source: WEF. affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 4

Quality of Infrastructure in Brazil (3) Airports - 95 th position in 137 countries 6,0 5,9 5,6 5,2 4,9 4,5 4,4 4,3 4,2 4,1 4,1 3,9 United States Canada Japan Australia China Chile Mexico World median Argentina Colombia Peru Brazil 9th 12th 26th 36th 45th 62nd 67th 69th 78th 81st 85th 95th Source: WEF. affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 5

Quality of Infrastructure in Brazil (4) Railways - 88 th place in 101 countries 6,6 5,5 4,9 4,8 4,1 3,3 2,8 2,5 2,1 2,0 2,0 1,5 Japan United States Canada China Australia World median Mexico Chile Argentina Peru Brazil Colombia 2nd 10th 16th 17th 35th 55st 65th 74th 83rd 87th 88th 96th Source: WEF. affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 6

Quality of Infrastructure in Brazil (5) Ports - 106 th position in 137 countries 5,8 5,4 5,3 4,9 4,9 4,6 4,3 4,1 3,8 3,7 3,7 3,1 United States Canada Japan Australia Chile China Mexico World median Colombia Argentina Peru Brazil 9th 19th 21st 35th 36th 49th 62nd 69th 77th 80th 83rd 106th Source: WEF. affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 7

Quality of Infrastructure in Brazil (6) Eletricity and telephony infrastructure 72 nd position in 137 countries 6,6 6,0 5,8 5,4 5,4 4,6 4,5 4,4 4,4 4,3 4,3 4,1 Japan United States Canada Australia Chile World median Brazil Peru Colombia Argentina China Mexico 5th 18th 31st 41st 43rd 69th 72nd 75th 76th 79th 80th 84th Source: WEF. affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 8

Contract Legal Framework Law No. 8,666/93 (Bidding Law): Regulates art. 37, item XXI, of the Brazilian Federal Constitution; establishes rules for bids and contracts of the Public Administration. Law 13.097 of 2015 Law No. 8,987/95 (Concession Law): Provides for the regime of Common Concession (non-subsidized concession) and permission of the provision of public services provided in art. 175 of the Brazilian Federal Constitution. Law 13.173 of 2015 Law 11.079 of 2004 Law of PPPs Law 8.666 of 1993 Biddings Law Law 12.349 of 2010 Law 11.479 of 2007 Law 8.987 of 1995 Concessions Law Law No. 11,079/04 (PPP Law): Provides for the contracting of Public-Private Partnership (subsidized concession) within the scope of public administration. affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 9

Regulatory Agencies Power Civil Aviation and Airports Telecommunications Waterway and Ports Transport Water affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 10

Timeline of Federal Privatization and Concession in Brazil PRIVATIZATION: TELEBRAS (Telecommunication) ELETROBRAS (Distribution) EMBRAER (Aircraft) VALE (Mining) RAILWAY CONCESSION: RFN (Federal Railway Network) HIGHWAY CONCESSION: BR 116/ RS RAILWAY CONCESSION: São Paulos s Rail Network HIGHWAY CONCESSION: BR-116 Bahia HIGHWAY CONCESSION: BR-050 MG GO AIRPORT CONCESSION: Galeão Airport Confins Airport 1995 1996 1997 1998 2007 2009 2012 2013 2017 HIGHWAY CONCESSION: BR - 040 Juiz de Fora Rio de Janeiro BR 116 RJ Paraíba - Teresópolis HIGHWAY CONCESSION: BR 290/ RS (Osório- Porto Alegre) RAILWAY CONCESSION: Northeast s Rail Network HIGHWAY CONCESSION: Régis Bittencourt fernão Dias BR-101 RJ- ES Rio-Niterói Bridge Transbrasiliana Steel Road HIGHWAY CONCESSION: BR 101 ES AIRPORT CONCESSION: Brasilia Airport Guarulhos Airport Viracopos Airport HIGHWAY CONCESSION: Florianópolis Airport Salvador s Airport Fortaleza s Airport Porto Alegre s Airport PORT TERMINAL CONCESION: 2 Ports terminals : Santarém and Rio de Janeiro Wheat Terminal affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 11

Investiments trough Concessions (US$ Billion) Private investments added up to more than US$ 500 Billion from 1990 to 2016 192 178 49 36 28 16 15 12 Power Telecom Highways Railways Airports Water Gss Ports Source: World Bank affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 12

Investments trough PPPs (BRL billion) PPP contracts investments added up to more than BRL145 billion (US$ 40 billion) since 2015 54.5 25.0 22.0 20.7 15.8 8.4 4.6 Transport Urbanization Sanitation Solid Waste Health Housing Others Source: Diário Oficial da União. Elaboração GO Associados. affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 13

Investments in Infrastructure in Brazil (2003-2017) Need for investment: 5% 1,5 1,7 1,8 1,8 1,8 2,0 2,2 2,3 2,3 2,4 2,4 2,4 2,1 1,7 1,5 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Inv. Infra (% GDP) Note: Includes Energy, Transportation, Sanitation and Telecommunications. Oil and Gas not included. 2017 = Forecast Source: ABDIB. affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 14

Infrastructure investments in other countries Annual Infrastructure Investments in developing countries as % of GDP 13,4% 11,4% 6,2% 5,8% 4,5% 3,6% 2,1% China Vietna Chile Colombia India Filipinas Brasil Source: ABDIB, World Economic Forum, Credit Suisse e International Institute for Management Development. affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 15

Total investment need forecast for Brazil 2018-2038 (US$ billion) 1.005 Infrastructure investment needs for the next 20 years add up to more than USD 3 trillion in Brazil 518 380 253 174 171 107 51 Source: GIHub affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 16

PPI Investment Partnership Program (Law 13.334/16) Investment Partnership Program (PPI Programa de Parcerias de Investimento), also named as Growth Project or Avançar Parcerias to incentivize and increase private investment through Privatization, Concessions and PPPs PPI Objective: Expand opportunities for investment and employment Ensure the expansion and quality of public infrastructure Promote full and fair competition for the partnerships Ensure stability and legal certainty, guaranteeing minimum intervention in business and investments Strengthen the regulatory environment and the autonomy of regulatory agencies Encourage Privatization, Concessions and PPPs (Public- Private Partnerships) PPI To define: The long term federal policies for the investments in federal public infrastructure trough partnerships and privatizations The federal public infrastructure projects/assets qualified for the partnerships and the strategic guidelines for structuring, tendering and contracting The federal policies to support partnerships in public infrastructure projects/assets in States, Federal District (Brasilia) and Municipalities. affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 17

PPI Growth Project Progress 18 months Of program Completed 70 projects Qualified 145 projects Investment of Lei 11.079 de 2004 Lei de PPPs BRL 142 billion (US$ 40 billion) Airport Port Oil and Gas Power 4 International Airports Concessions 7 Terminal Operations Concessions 4 Rounds of Auctions 4 Power Transmission and Generation Auctions In progress 75 projects Source: Special Secretariat of the Investment Partnerships Program. affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 18

PPI Investments from auction of projects in 2017 As for the auctions held and contracts signed in 2017, it is worth highlighting the investment forecast about BRL 142 billion (US$ 40 billion) over the next decades 142 Expected investments for auctions held in 2017 100.8 21.5 8.2 6.6 3.4 1.5 Total Oil and Gas Power Transmission Power generation Airport Power distribution Port Terminals Source: Special Secretariat of the Investment Partnerships Program. affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 19

PPI Pipeline of projects for 2H2018 13 Airports Concessions AL, CE, ES, MT, PB, PE, RJ, SE. Bid 4th quarter Timeline Auction 4th quarter 7 Port Terminal Concessions Cabedelo, Santos and Suape. 3rd quarter 4th quarter 3 Highway Concessions BR 153/282/, BR 364 RO/MT,BR 364/ 365 GO/MG, BR 101/ 290/386/ 448 RS 4th quarter 2nd quarter of 2019 3 Railway Concessions EF 151 SP/MG/GO/TO (North- South), EF 170 MT/PA (Ferrogrão) and EF 334 BA (Fiol) 4th quarter 1st quarter of 2019 24 Power Transmission and Distribution Concessions 4th quarter 4th quarter 4 CPRM mining rights 3rd quarter 4th quarter 2 1 Bidding rounds of oil and gas fields exploration PPP Communications Network Management Aeronautics Command - COMAER Source: Programa de Parcerias para Investimentos 3rd quarter 3rd quarter 3rd quarter of 2019 4th quarter affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 20

States Pipeline of Projects The fiscal crisis in brazil brought back the subject of privatization on the politic and economic agenda, and as a result states have 104 projects under study and to be tendered throughout the next years. The majority of these project will be either concession or PPP, but couple state companies will be sold. The 5 most common sector: Ports, Airports, Public Services, Tourism/Events, and Roads. Opportunities Jericoacoara Airport (CE); Aracati Airport (CE); Highways GO-010/020/060/070/080/139; E213 (GO); Highways MT-100, MT-246 and MT-320 (MT); Highway ERS-324, ERS287 e ERS020 (RS); Industrial Complex and Port of Pecém (CE); Port of Luis Correia (PI); Sapucaia do Sul Zoologic (RS); Ceará Convention Center (CE). State Projects (104) MT - 6 DF + GO - 18 MS - 3 RS - 7 PI - 22 CE - 14 RN - 6 AL - 2 BA - 2 MG - 13 ES - 4 RJ - 1 SP - 4 SC - 2 affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 21

Municipalities Pipeline of Projects Municipalities, like the States, also have 59 projects under study to be tendered throughout the following years. Municipal Projects (59) Boa Vista, RR - 2 Teresina, PI - 12 The majority of these project will be PPP and a couple state companies may be Privatized. The 2 most common sector: Public Services and Tourism/Events. Salvador, BA - 5 Opportunities Teresina Airport (PI); Salvador Convention Center (BA); Porto Alegre Convention Center (RS); Public illumination in Porto Alegre (RS); Public Illumination in Teresina (PI); Public Illumination in São Paulo (SP); Pacaembu Stadium (SP); Lindolfo Monteiro Stadium (PI); Waste management in Teresina (PI). Porto Velho, RO - 7 Porto Alegre, RS - 12 Florianópolis, SC - 2 Rio de Janeiro, RJ - 6 São Paulo, SP - 13 affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 22

Thank you Mauricio Endo Head of Government & Infrastructure Latin America KPMG in Brazil mendo@kpmg.com.br +55-11-3940-8322 affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Brazil. 23