IFC assists the State of Bahia in the rehabilitation and maintenance of roads in Brazil

The consortium Estrada do Feijão Bahia is the winner of the concession auction for the rehabilitation and maintenance of roads in the State of Bahia, in Brazil.

IFC, with the support of the World Bank, advised the State of Bahia, through the Secretariat of Infrastructure (SEINFRA), on modeling and structuring the project, which includes an innovation in the traditional model of rehabilitation and maintenance (CREMA) contracts being used in the country. This is the first time that short-term contracts of roads rehabilitation and maintenance will be transformed into a Public-Private Partnership (PPP).

According to the model being now adopted, the private partner should seek a new financial engineering to support a long-term project. Furthermore, the payments to the concessionaire will be based on performance, considering criteria previously defined in a single contract. This will result in the improvement in the quality of the rehabilitation and maintenance services provided by the private partner as well as more efficiency in the management of the contract. The increased tenor of the contract, from five to 20 years, will also incur in efficiency gains for the project. All these factors will generate benefits both to users and to the management of the infrastructure by the government.

“Through this project, the State of Bahia is paving new ways and helping create new quality and efficiency standards for roads concessions in Brazil,” says Hector Gomez Ang, IFC Brazil Country Head. “Innovation is critical to attract more resources and medium-sized participants to infrastructure in Brazil. New, well-structured models and projects will help establish more partnerships with the private sector, which plays a key role in mobilizing the massive investments needed for the infrastructure sector, especially considering the transition it is currently going through”.

The structuring of the project counts with the technical advisory of the International Finance Corporation (IFC), supported by the Inter-American Development Bank (IDB) and the National Bank for Economic and Social Development (BNDES) through the Private Participation Promotion Program, which aims to support the implementation of infrastructure projects in Brazil.

Original source: IFC
Published on 20 July 2018