Brazil's Infrastructure Framework

AGENDA

1. BRAZIL NOWADAYS

2. BRAZILIAN GOVERNMENT'S STRATEGY

3. INVESTMENT OPPORTUNITIES

4. OVERVIEW OF BRAZILIAN BID PROCEDURES FRAMEWORK

5. PUBLIC AGREEMENTS

6. COMPLIANCE STRUCTURE

BRAZIL NOWADAYS

BRAZIL NOWADAYS

Brazilian economy produces a wide range of manufactured goods:

automobiles (3.3 million units in 2012)

aircraft

sophisticated machines

Many factors have forced the country to accelerate investments especially in infrastructure, such as: The Brazilian income growth

The social inclusion process

BRAZIL NOWADAYS

Joined the group of the most dynamic emerging countries of the world

The Gross Domestic Product (GDP) is currently among the ten largest in the world, either in nominal terms or in purchasing power parity

Unemployment rate below 5%

Living a period of rapid and sustained economic development, based on:

production growth,

soundness of

fiscal and monetary institutions and investment,

credit and consumption expansion;

Market of over 100 million consumers with huge growth potential

Vitality of entrepreneurial class and technological advances in the agriculture industry

BRAZIL IN NUMBERS

INCREASED INVESTMENT AS A PRIORITY

INFLATION UNDER CONTROL

STRENGTH OF THE EXTERNAL SECTOR

5th LARGEST GLOBAL MARKET IN 2020

MIDDLE CLASS SOCIETY

LOWER INTEREST RATE

REDUCED COSTS FOR INVESTMENTS

The Government has put in place several measures aiming to reduce investments costs, among which the following stand out:

FOREIGN DIRECT INVESTMENTS HIGH LEVELS

EXPECTED GROWTH IN BUSINESS

BRAZILIAN AGRICULTURE: NEED OF LOGISTICS

source: http://www.estadosecapitaisdobrasil.com/mapas-do-brasil.php

BRAZILIAN POPULATION: NEED OF LOGISTICS

source: http://www.scp.rs.gov.br/upload/mapa_popula%C3%A7%C3%A3o_absoluta_brasil_2010(1).gif

DEMAND FOR INFRASTRUCTURE

LARGE INVESTMENT PROGRAMS

Several major infrastructure

programs were announced

over the last two years, with

investments adding around

US$ 235 billion over the

coming years, not to mention

the major urban

infrastructure works required

for the 2014 World Cup and

2016 Olympics

CHALLENGES

BRAZILIAN GOVERNMENT STRATEGY

BRAZILIAN GOVERNMENT STRATEGY

BRAZILIAN GOVERNMENT STRATEGY

INVESTMENT OPPORTUNITIES

INVESTMENT OPPORTUNITIES

INVESTMENT OPPORTUNITIES

Urban transportation - Big CitiesUrban transportation - Big Cities

•Target - 23 municipalities•Value – R$ 32 billion •Subway, Light rail vehicle (VLT) and urban rails

•Highlights:•Salvador Subway: in Request for Proposals•São Paulo Subway - Line 6: Bidding process - rescheduled•São Paulo Subway - Line 18: In public hearing process•São Paulo Intercities Train - Studies proposed in July, 2013 - under analysis

OVERVIEW OF BRAZILIAN BID PROCEDURES FRAMEWORK

BRAZILIAN BID PROCEDURES FRAMEWORK

BRAZILIAN BID PROCEDURES FRAMEWORK Lei de Geral de Concessões (Law 8987/1995): establishes general rules regarding

concessions of public services, with no Government Payment

Lei de Parceria Público-Privada (Law 11.079/2004): establishes general rules for the concessions with Government Payments (public-private partnership contracts - PPP). Types:

(i) Sponsored Concession: public work or public service upon guaranteed payments from public administration, in addition to tariffs charged from end-users. Ex.: highways

(ii) Administrative Concession: end-user is the public administration and shall provide payment to the private party. Ex.: hospitals, public buildings

www.comprasnet.gov.br > acesso livre > consultas> aviso de licitações

PUBLIC AGREEMENTS

PUBLIC CONTRACTS

INITIATING & PLANNING = BIDDING PROCEDURE

•Its the key phase to negotiate the terms of the Future Contract•Request for Information / Quotation•Public Hearing •Request for Propostal - Bidding Procedure (Request for Clarifications - Risk Breakdown Structure)•Administrative and Legal Mesures (Impugnação)

EXECUTION & CONTROLLING = CONTRACT MANAGEMENT

•Inaccuracy of the "Statement of Work" / "Services Level Agreement" (TR - Termos de Referência, Especificações )•Extra requirements of the Public Client (Was it foreseen in the SOW and Budget?)•Penalties due to lack of performance / delays / "redoings"•Payments / cash flow of the Governmental Budget•Everything shall be written and official - EVER!!

CLOSING

•Claims and Instruments of Closing (via crucis)

PUBLIC CONTRACT

According to Federal Law 8.666/93, administrative contract is all and every agreement executed between public agencies and private parties, in which it is established mutual obligations

According to Federal Law 8.666/93, administrative contract is all and every agreement executed between public agencies and private parties, in which it is established mutual obligations

TYPES OF ADMINISTRATIVE AGREEMENTS

RISKS AND PROBLEMS The contract terms shall be always observed - it can not be changed or turned undetermined!

www.demarest.com.br 38

RISKS AND PROBLEMS

The contractor is responsible for the

quality and delivery

PRICE ADJUSTMENT

RENEGOTIATION

RESCISSION

Agreement rescissions cases must be formally justified in the records, ensuring to the Contractor party the right of defense (adversary system and full defense), in five business days .

If the rescission is not due the contractor's fault, and it's duly proven, the Contracting must assure the:

• devolution of guarantee• payment of the execution until the date of the rescission• payment of demobilization costs

If the rescission is not due the contractor's fault, and it's duly proven, the Contracting must assure the:

• devolution of guarantee• payment of the execution until the date of the rescission• payment of demobilization costs

COMPLIANCE STRUCTURE

MAIN COMPLIANCE PRINCIPLES

Law 12.846/2013 (Anticorruption) and Law 12.813/2013 (conflict of interests) provides further regulation regarding the relationship between private and public parties regarding public contracts

Law 12.846/2013 (Anticorruption) and Law 12.813/2013 (conflict of interests) provides further regulation regarding the relationship between private and public parties regarding public contracts

THE NEW COMPLIANCE LAW

SEPTEMBER, 5:

Workshop "Compliance and Governmental

Relations"

Don't miss it!

Ana Bárbara Costa Teixeira(abteixeira@demarest.com.br)

Mário Roberto Villanova Nogueira (mnogueira@demarest.com.br)

Min Gon Kim (mgkim@demarest.com.br)