Concessions, PPPs advance, but failure rate remains high
The projects for concessions and public-private partnerships (PPPs), increasingly common in Brazil, still face a high failure rate. Last year, 125 biddings were canceled after the calls for bids had been unveiled, up 20% from the previous year. Besides them, other 114 initiatives were suspended and postponed during the year, a survey by consultancy Radar PPP shows.The situation has improved as the model has matured in the country. However, the figures are still considered high. The prevailing assessment is that governments still fail to prioritize and prepare enticing calls for bids, a situation compounded by the adverse economic scenario, experts say.The total number of cancellations in 2021 was increased by a flurry of bids for bus terminals in Rio Grande do Sul. The assets were offered individually, not as a block, a model that proved to be a failure. If these projects are excluded, the figure of extinct projects in the year drops to 53 from 125, below the level seen in 2020 and 2019, when 93 and 61 bids were canceled, respectively.Frederico Ribeiro, a partner at Radar PPP, says that the structuring of calls for bids has improved. "The market is more mature and has managed to assimilate best practices. Today, there are several benchmark projects, which helps to avoid mistakes," he said. Despite that, he believes that the failure rate is still high.In the monthly average of 2021, for every 4 bids in progress, 1 was canceled, suspended, or postponed. If the Rio Grande do Sul terminals are excluded, the ratio drops to 1 failed project for every 5 in progress.The high failure of concessions is nothing new and has always been closely associated with legal disputes and intervention by control bodies, such as the Prosecution Service and courts of accounts, which are public spending watchdogs. Last year, however, the main reason for failure was the lack of private-sector interest in the assets, which led to auctions with zero bids.The high interest rates have harmed the attractiveness of concessions, said Luis Eduardo Serra Netto, a partner at law firm Duarte Garcia Advogados. "Many investors are migrating to fixed income, and the cost of financing is more expensive. You can see this impact in all projects. Actions lose attractiveness, and many are halted or canceled."Sandro Cabral, a professor of strategy and public management at business school Insper, believes that both the public and private sectors have learned a lot in recent years and...
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