en.Wedoany.com Reported - The government of Brazil's Rio Grande do Sul state is seeking political consensus to restart its agenda of concession and public-private partnership (PPP) projects, valued at a total of at least 12.7 billion reais ($2.46 billion), after some projects were suspended due to political disputes and investor concerns.
The state government recently suspended the auction for a highway concession known as "Lot 2." The project, with an estimated investment of 6 billion reais, involves a 409-kilometer stretch of highway. The auction, originally scheduled for June 10, was canceled after no bids were received.
The lack of bidders is closely linked to the state's political situation. The opposition established a parliamentary inquiry committee to question the toll model planned by Governor Eduardo Leite for the highway contract. Influenced by this, potential private investors decided not to submit bids for the contract to avoid legal risks.
To restart the project agenda, Governor Leite attended a hearing of the parliamentary committee to defend his concession model. At the hearing, Leite stated that the state lacks the financial resources or operational capacity to carry out work of this scale alone, and that the concession model allows all investments to be consolidated into a single contract, whereas direct execution would be less efficient and prone to interruptions.
Investors are generally concerned that other auctions could face similar situations, fearing that contracts might face legal challenges after bidding. With Brazil's October elections approaching, investors are adjusting their strategies based on the electoral cycle. Paulo Dantas, a lawyer specializing in infrastructure and project finance at the law firm Castro Barros Advogados, stated that the closer to the electoral cycle, the more selective participants become, in order to better understand the impact of the new political cycle on investment choices.
According to the latest polls, the state election is expected to be contested between left-wing candidate Juliana Brizola from the Democratic Labour Party (PDT) and right-wing candidate Luciano Zucco from the Liberal Party (PL). Leite, who took office as governor in 2019, is in his second term and is ineligible for re-election.
The Rio Grande do Sul state government plans to hold the auction for the "Lot 1" highway contract later this year, with a planned investment of 5.3 billion reais. In the social infrastructure sector, the state will also offer a school PPP contract with a total investment of 1.4 billion reais. The contract, to be auctioned on June 26, is divided into three lots and aims to improve facilities at 98 schools, benefiting approximately 60,500 students.
The state government noted that concession and PPP contracts are the main alternative for advancing infrastructure investments, as the state faces long-term fiscal constraints, with about 90% of its budget allocated to mandatory spending. Governor Leite stated that the state government's historical debt limits its investment capacity, and even after restoring public finances and reaching recent peak investment levels, its investments remain lower than those of neighboring states.
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