How to understand_legal_aspects_on_doing_infrastructure_business_in_brazil

How to understand LEGAL ASPECTS on doing INFRASTRUCTURE BUSINESS in Brazil

American Chamber of Commerce for Brazil – AMCHAM
International Affairs Department
Brazil, 2010

INFRASTRUCTURE

The timing could not be more favorable to launch How to understand legal aspects on
ACKNOWLEDGMENTS

doing infrastructure business in Brazil: a rising economy, investors from all over the
world coming to Brazil and several announcements of new infrastructure works – so
necessary to ensure Brazil’s sustainable long-term growth. In fact, the country lives an
unprecedented moment for its development. Surrounded by huge investment promises
such as the pre-salt oil layer, the 2014 World Cup and the 2016 Olympics, Brazil attracts
the world’s attention to itself. But the higher the mountain, the harder its climbing. This
is why it is a great pleasure to get together with the American Chamber of Commerce for
this venture. There are so many important questions to be approached, so many players
to work with and several challenges to be overcome. And this is our purpose on offering
to you this volume: to make the way a little smoother and to engender better business
opportunities on the infrastructure related fields.

Antonio Corrêa Meyer, Partner – Machado, Meyer, Sendacz e Opice Advogados

The American Chamber of Commerce for Brazil, being the largest Amcham outside the
United States is constantly serving its members by building bridges for Brazilian businesses
worldwide. Our foreign investment attraction efforts have also been a key leading point for
Amcham. The How To Series is part of this initiative; with the support of some of our corpo-
rate members we are putting together strategic information on the most various aspects of
doing business in Brazil. Over the last year the Brazilian economy has clearly demonstrated
an outstanding economic performance. The country’s business environment as well as for-
eign investment numbers are also very positive. The International Monetary Fund estimates
that crisis apart; the Brazilian economy should grow on a 3.5% basis. It is now more than
ever, a strategic time for businesses opportunities in Brazil, we welcome you and hope that
the information you are about to read serves you best.

Gabriel Rico, Executive Director – AMCHAM Brazil

How to understand LEGAL ASPECTS on doing INFRASTRUCTURE BUSINESS in Brazil

INFRASTRUCTURE

OvErvIEW.......................................................................................................................6
CONTENTS

rEgUlATOry FrAMEWOrkS .........................................................................................7
PrIvATE InvESTMEnT AnD PUBlIC InCEnTIvES – PUBlIC-PrIvATE PArTnErSHIPS ..23
InFrASTrUCTUrE FInAnCIng....................................................................................25
WOrlD CUP AnD THE OlyMPIC gAMES....................................................................31
ABOUT OUr SPOnSOr................................................................................................35

6 How to understand LEGAL ASPECTS on doing INFRASTRUCTURE BUSINESS in Brazil

OVERVIEW

Brazil is currently experiencing a major leap in the railroads are being projected and built to enhance
infrastructure business since the 1970s. In 2009, US$ Brazilian logistics facilities, including the ambitious
64 billion were invested in infrastructure projects lo- project for the construction of a high speed train
cated in different areas of the country and this number which shall connect two of the largest cities in the
is foreseen to double by 2011. Within the next 10 country (rio de Janeiro and São Paulo). These invest-
years, total investments in the infrastructure sector are ments are highly important, but they are only the be-
expected to reach the expressive amount of US$ 1 tril- ginning when compared to Brazil’s need and poten-
lion1 and Brazil may become the fourth biggest “con- tial for infrastructure.
struction site” in the world. The historical shortage of
infrastructure investments in Brazil over the last years Furthermore, the sanitation and airport sectors in Bra-
is in course of change. Private capital is more than zil are in dire need of development, as they are very
welcome. It is necessary. much behind schedule in comparison with interna-
tional standards and other infrastructure sectors.
The energy sector is deemed to be one of the most
advanced in Brazil and is currently drawing a lot of The Brazilian government has also taken a stand to
attention since its development is essential to support promote growth and development through invest-
economic growth. Although the sector has already ment and economic policies brought by its growth
received major public and private investments over Acceleration Program (Programa de Aceleração do
the last years, there are opportunities for further proj- Crescimento – “PAC”). This initiative is expected to
ects, especially those related to the clean energy in- considerably increase the number of public conces-
dustry, such as ethanol, wind power projects and re- sions and public-private partnerships (“PPP”) and,
newable energy sources in general. therefore, allow the participation of foreign and na-
tional private players in a large range of relevant in-
The transportation sector is also on the top of the list of
frastructure projects.
Brazilian governmental priorities. new ports, road and
The 2014 FIFA World Cup and the 2016 Olympic
games also bring opportunities for investing in the
1 According to lCA Consultoria, as made available in re-
vista Exame no. 966, Editora Abril, dated April 21, 2010, infrastructure business. These events present a great
page 27. challenge – as well as an unique opportunity – of

INFRASTRUCTURE 7

improving the general infrastructure facilities in the Our analysis encompasses the following sectors: (i)
main cities, including stadiums, hotels and sub- Electric Energy; (ii) Highways; (iii) Ports; (iv) Mining;
ways. The Brazilian national Development Bank (v) Aviation; (vi) Oil and gas; (vii) Maritime law; and
(Banco Nacional de Desenvolvimento - “BnDES”) (viii) Public-Private Partnerships. We have also in-
is expected to be one of the main financing sources cluded a few extra topics on Infrastructure Financing,
for the World Cup. the World Cup and the Olympic games.

REGULATORY FRAMEWORKS

Electric Energy Industry Agencies And
governmentAl Authorities
The Brazilian power industry includes the activities of
generation, transmission distribution, and trading of The Brazilian electricity framework contemplates the
energy. The electric power industry is currently regu- following governmental bodies and agencies: (a) the
lated by law no. 10,848/04. The main aspects intro- Ministry of Mines and Energy (Ministério de Minas e
duced by this law were the creation of two power Energia - “MME”), which acts on behalf of the Brazil-
trading environments: (i) a regulated contracting mar- ian government and sets forth the main policies and
ket, and (ii) a free contracting market; the introduc- regulations for the electricity industry; (b) the Brazil-
tion of restrictions on distribution companies’ activi- ian Electricity regulatory Agency (Agência Nacional
ties to ensure that they operate exclusively in public de Energia Elétrica - “AnEEl”) that is responsible for
utility distribution services; the requirement that dis- the regulation of the Brazilian electric sector, the im-
tribution companies purchase electricity through long position of penalties and the issuance of the regula-
term reliable contracts sufficient to meet 100% of tory framework under MME’s policies; (c) the nation-
their demands. al Power System Operator (Operador Nacional do
Sistema - “OnS”), that is responsible for the coordi-
nation and operation of the Brazilian interconnected
transmission grid, the whole transmission and gen-


eration centralized dispatch; and (d) the Wholesale regulAted contrActing mArket
Energy Commercialization Chamber (Câmara de Co-
mercialização de Energia Elétrica - “CCEE”) that is In the regulated contracting market, distribution com-
responsible for (i) registering the relevant data related panies purchase power to meet their projected supply
to all power purchase agreements; (ii) accounting for needs for distribution to their captive consumers, as
and organizing the sales of electricity in the spot the distribution companies can purchase power from
market; (iii) carrying out electric power auctions in generators in auctions coordinated by AnEEl and de-
the regulated contracting market, and (iv) imposing ployed by CCEE. Also, the power purchases are gener-
penalties for the lack of physical or contractual guar- ally carried out under two types of bilateral contracts:
antees in compliance with electricity sale obligations (i) output contracts, used by hydroelectric plants and
under AnEEl’s rules. (ii) capacity contracts, used by thermoelectric power
plants (including co-generation units).

Power industry Activities – regulAted The regulated contracting market guidelines define
And Free contrActing mArkets how distribution companies must comply with the
obligation to meet all market demands, in particular
The purchases and sales of electricity are carried out
through power auctions. The MME is responsible for
in two different market segments: (i) the regulated
defining the volume of electricity to be purchased in
contracting market, where distribution companies
the regulated contracting market, as well as a list of
are obliged to acquire the electricity required to meet
the generation projects authorized to participate in
100% of the expected demand for the following 5
the auctions in each year.
years in their concession areas through public auc-
tions; and (ii) the free contracting market, a free deal-
ing environment where generators trade their outputs Power Auctions under the regulAted
with sellers and free consumers. contrActing environment
There are generally six types of auctions (i) A-3 (to con-
tract power output or capacity to be delivered 3 years
ahead of the auction year); (ii) A-5 (to contract power
output or capacity to be delivered 5 years ahead of the

INFRASTRUCTURE 9

auction year); (iii) renewable sources auctions (auc- (v) research and Development fees (r&D) and (vi)
tions carried out to contract power generated exclu- Tariffs and Charges on the Use of Distribution and
sively from alternative sources of power); (iv) reserve Transmission Systems.
energy auctions; (v) A-1(to contract power output or
By means of those charges the holders of conces-
capacity to be delivered 1 year ahead the auction
year); and (vi) adjustment auctions. sions, licensees and authorizations are required to
make monthly contributions to support and pro-
recently, the Federal government is granting bene- mote (i) the competitiveness in the power produced
fits and incentives to stimulate the development of from alternative sources; (ii) the universal supply of
alternative electricity sources, such as wind and bio- electricity services; and (iii) diversification of tech-
mass projects and Small Hydroelectric Projects - nology, among others.
SHP2, in order to diversify the national energy matrix
and assure the annual consumption demand in Bra- Highway Concessions
zil. In addition to that, MME is continually promot-
ing auctions for the contracting of energy produced
FederAl highwAy concessions
from renewable sources.
The Brazilian highway concessions program started
energy regulAtory chArges in the mid nineties, after the enactment of law no.
8,666/93, which sets forth the general rules for the
There are different charges applicable to the distribu-
bidding processes and engagements between public
tion, transmission and generation activities, such as
administration and private initiative and law 8,987/95
the (i) global reversal reserve - rgr, (ii) Payment for
which governs concessions for public services.
the Use of Public Assets, (iii) Fuel Consumption Ac-
count, (iv) Electricity Utility Services Inspection Fee, Based on these laws, during 1993 and 1994, the Fed-
eral government, represented by the national road-
2 According to the AnEEl’s resolution nº 652, dated De- way Department (Departamento Nacional de Estra-
cember, 2003, SHP shall be defined as all hydro generating
das e Rodagem – “DnEr”), currently replaced by the
unit, meant for independent production or self-production,
with total potency between 1,000 kW to 30,000 kW and national Transportation Infrastructure Department
reservoir area not bigger than 3 km² (square kilometer). (Departamento Nacional de Infra-Estrutura de Trans-


portes – “DnIT”), carried out a public bid consisting of latory agency responsible, for the implementation of
four federal highways and one bridge, including rio- COnIT policies, with authority to regulate and su-
niterói Bridge and the Presidente Dutra Highway, which pervise the rendering of highway transportation ser-
connects the cities of São Paulo and rio de Janeiro. vices, as well as to execute and manage the conces-
sion contracts within its area of performance; and
Following these initial steps, law no. 9,277/96 au-
(C) DnIT, a Federal regulatory agency responsible
thorized the Federal government to delegate, by
for supervising the operation, maintenance, restora-
means of a concession agreement, the management
tion or replacement, capacity conformity and ex-
and operation of other Federal highways to the States,
pansion of the road system by means of building
Municipalities and to the Federal District.
new ways and terminals.

resPonsible FederAl Agencies
stAte highwAy concessions
And governmentAl Authorities
Within each member State, regulatory agencies were
In this context, law no. 10,233/01 initiated the pro-
created in order to regulate and supervise the con-
cess of improving the Brazilian transportation sys-
cessions subject to the jurisdiction of the States; those
tem, by creating the following regulatory authorities:
concessions basically involved highways built to
(A) the national Transportation Policies Integration
connect points of interest within a State, but exclud-
Council (Conselho Nacional de Integração de Políti-
ing Interstate highways, since these are under the ju-
cas de Transporte – “COnIT”), a public entity re-
risdiction of the Federal government, but note that
sponsible for establishing the national integration of
some Federal highways have been delegated to the
the different forms of transportation of people and
States, which may then grant concessions for their
goods in accordance with (i) national, local and ur-
operation to private parties.
ban development policies; (ii) rules related to envi-
ronment and safety of population; and (iii) guide- As previously mentioned, with the enactment of law
lines for physical integration and others features no. 9,277/96, the States received authorization from
relating the highways systems; (B) the national the Federal government to grant and supervise spe-
ground Transportation Agency (Agência Nacional cific fragments of Federal highways located within
dos Transportes Terrestres – “AnTT”), a federal regu- the State to the private initiative.

INFRASTRUCTURE 11

stAte Agencies by the Federal and State concession programs, once
they are restricted to fragments located within the
In rio de Janeiro, the government created the Agên- sphere of the Municipality.
cia Reguladora de Serviços Públicos concedidos do
Estado do Rio de Janeiro – “ASEP/rJ”, in 1997. In nevertheless, Municipal governments may also
2002, the government of São Paulo created the choose to privatize their highways (e.g linha Amarela
Agência Reguladora de Serviços Públicos Delegados in the City of rio de Janeiro). The Municipality is, in
de Transporte do Estado de São Paulo – “ArTESP”. this case, responsible for the organization and coor-
dination of the bidding procedure, besides taking all
ArTESP is a regulatory agency responsible for the necessary measures for its implementation and for-
regulation and supervision of public transportation malization, without involving the AnTT or the agen-
services performed by private entities, within the cy of the respective State.
scope of the Transportation State Secretary (Secretaria
de Estado dos Transportes). This Secretary is respon- Ports
sible for the coordination of the State’s means of
transportation and for the organization and operation Up to the early nineties, ports in Brazil were operated
of the transportation systems owned by the State. by the Federal government, through its government-
controlled entity, Portobrás – Empresa Brasileira de Por-
To date, various States, including Bahia, Pernam- tos S.A., and its subsidiary, the so-called Companhias
buco, Espírito Santo, Minas gerais, Paraná and Docas, created to be in charge of concentrating and
São Paulo have highways operated and maintained carrying out all port activities in Brazil, as a govern-
by private entities. The concessions are regulated mental monopoly.
in each State by the respective transportation de-
partment or regulatory agency. As a result of a crisis experienced in the eighties, gov-
ernmental monopolies over infrastructure activities,
including in the port sector, had to be gradually eased
municiPAl highwAy concessions
so that the private sector could contribute with the
Municipal highway concessions are generally more required investments. In the port industry, the num-
limited than those concessions which are comprised ber of private ports gradually increased, no longer


merely associated with the need of specific infrastruc- PrivAte terminAls
ture but also due to the inability of the government to
provide adequate port capacity and services. law no. 8,630 made the distinction between ex-
clusive-use private terminals (terminais privativos
de uso exclusivo) – intended only for handling of
leAse Agreements And AuthorizAtions
cargo owned by the operator itself – and mixed-use
In order to regulate this new reality and to attract private terminals (terminais privativos de uso misto)
further private investments under a more suitable – intended for handling of third party cargo as well
and stable legal framework, law no. 8,630/93 was as own cargo.
enacted, assuring to any private party the right to
construct, reform, expand, improve, lease and oper- regulAtory Agency
ate port terminals, by means of: (i) lease agreements
(Contrato de Arrendamento), to be entered into with law no. 10,233, of 2001, created AnTAQ and set
the Federal government or with a government-ap- forth a new legal framework for transportation activi-
pointed concessionaire, after a mandatory public ties in Brazil, introducing certain adjustments spe-
bidding procedure, when the port terminal is located cifically applicable to the port sector, as regulated by
within an organized port area; or (ii) an authorization law no. 8,630, which nonetheless remained in full
from the competent authority currently the national force, subject to the specific adjustments implement-
Water Transportation Agency (Agência Nacional de ed by law no. 10,233.
Transportes Aquaviários) – “AnTAQ”, with respect to To regulate and detail the requirements for granting of
private terminals located outside the organized port a private terminal authorization (for both exclusive-use
area or within the organized port area, that is the port and mixed-use terminals), AnTAQ enacted resolution
terminal area, to the extent that the interested party no. 517, of October 18, 2005, which was replaced by
holds legal rights to use the relevant land. AnTAQ resolution no. 1,660, of April 8, 2010.

INFRASTRUCTURE 13

decree no. 6,620 And AntAQ governmentAl Authorities
resolution no. 1,660
The responsible authorities entitled by law to rule on
As a result of new policies, under Decree no. 6,620, mining specific matters are (i) the Ministry of Mines
authorizations for the exploitation of mixed-use pri- and Energy (Ministério de Minas e Energia - “MME”),
vate terminals became more limited, due to restric- which is responsible for coordinating and formulat-
tions imposed to the handling of third party cargo, ing the Brazilian public policies with respect to min-
which may only be handled by the authorization hold- eral resources and energy production and (ii) the
er as a subsidiary and occasional activity. Additionally, national Department of Mineral Production (Depar-
the third party cargo must be of the same nature and tamento Nacional de Produção Mineral - “DnPM”),
have the same moving and storage characteristics of an entity empowered to follow-up, analyze and dis-
the authorization holder’s own cargo. seminate the performance of the Brazilian and inter-
national mineral economy, among other actions ac-
newly issued AnTAQ resolution no. 1,660 also
cording to the mining legislation.
provides for more stringent criteria of own cargo
requirements. The Brazilian Mining Code (Decree-law no. 227/67,
as amended) sets out the legal framework applicable
Mining for exploitation and trade of mineral resources. Pres-
ently, mining activities may only be carried out after
All mineral resources located in the national territory obtaining due MME/DnPM’s approval (e.g. explora-
constitute ownership detached from the surface and tion permit, mining concession, licensing3, mine
belong to the Brazilian Union, according to the Brazil-
ian Constitution. Mining companies incorporated un-
der Brazilian law, headquartered and managed in Bra-
zil may retain the ownership of certain mineral 3 In the licensing regime, it is possible to perform mining
products resulting from their efforts towards produc- activities of specific minerals, upon registry and licensing
tion of mineral resources after being duly authorized before DNPM, without the previous performance of ex-
ploitation/research works in the area. These specific min-
by the responsible authorities. A participation in the
erals (such as sand for civil construction and clay, among
results of the mining activities is also conferred to the others) may also be exploited by the standard regime of
surface area’s landowner or possessor. mining concession.


manifest4, as applicable)5. final exploration report to the DnPM’s evaluation
and approval. Should the approved geological ex-
exPlorAtion Permit ploration report reveal the existence of economically
And mining concessions exploitable mineral deposits, the interested party
shall have 1 year, as from the DnPM’s approval, to
The DnPM grants an exploration permit (for work re- require a mining concession.
lated to the definition of the resources, evaluation
and determination of the production feasibility) to an The relevant mining concession request shall be sup-
interested party for a maximum period of 3 years, ported by an economic exploitation plan (Plano de
renewable for 1 to 3 years upon due justification. Aproveitamento Econômico – “PAE”), a document
informing the DnPM how the party intends to ex-
Upon completion of the geological exploration ploit the mine. The PAE shall be subject to the
works at the site, the interested party shall submit a DnPM’s review and approval. Once the mining con-
cession is granted, its titleholder shall have the right
4 The mine manifest is a title that represents domain over the to exploit the mine in accordance with the PAE. The
actual mine and not only over the mining right. The mine titleholder shall further issue a yearly exploitation re-
manifest is a regime set forth by the legislation that preceded port (Relatório Anual de Lavra) by March 15th.
the Brazilian Mining Code. As a result, mines granted under
a mine manifest regime are subject to all fiscal and tax leg- Forfeiture of a mining concession may be applied in
islation as the mining concession but not to the penalty of
four extreme situations: (i) proven evidence of aban-
forfeiture, applicable to mining concessions only. As a real
estate property, a mine under the mine manifest regime may donment or shut down of mining activities; (ii) recur-
be sold, mortgaged, leased or transferred under the terms of rent infringement of the starting and re-starting dates
the Brazilian Civil Code of 2002. for mining activities, despite previous sanctions
5 It is important to point out the differences of mining rights
(warnings or fines); (iii) recurrent refusal to comply
and mining titles: (i) mining right is every right related to
exploitation, mining easements and every right registered with the DnPM inspections instructions; and (iv)
with the DnPM; and (ii) mining title is the instrument grant- “abusive mining” or extraction of a mineral sub-
ed by the competent authority duly published in the Offi- stance not included in the mining concession, inde-
cial gazette in order to permit the exploitation of a certain
pendent of admonishment or fine. The mining con-
area, such as mining concessions, exploration permits and
mine manifests. cession may also be revoked at the Federal Union’s

INFRASTRUCTURE 15

discretion in case economically valuable nuclear leAse And Assignment
mineral reserves with a higher economic value than oF the mining rights
that of the mineral substance in the mining conces-
Mining rights may be transferred to third parties, pro-
sion are found. In this case, the titleholder is ensured
vided that (i) the transferee fulfils the qualification
fair compensation for the investment.
requirements established by the DnPM, and (ii) there
is prior consent by the DnPM. It is worth noting that
cFem
exploration permits may be transferred whereas ex-
States, Municipalities and the Federal Union are en- ploration permit requests may not.
titled to a share of the results of exploitation of min-
eral resources in their respective territory by means Aviation
of a financial compensation called compensação
Brazilian civil aviation is regulated by Brazilian law
financeira pela exploração de recursos minerais
and international public and private law. The entity
(“CFEM”). The CFEM assessable basis is the net rev-
responsible for regulation and supervision of the
enue6 resulting from the sale of the mineral product
civil aviation sector is the national Civil Aviation
(total sales less taxation, transportation and insur-
Agency (Agência Nacional de Aviação Civil -
ance expenses) after the last stage of the coring,
“AnAC”), directly subordinated to the Brazilian
cleaning or pelletizing process, as applicable. The
Ministry of Defense.
applicable rate varies according to the mineral
product, as defined by the DnPM. The exploitation of air navigation, airspace and air-
port infrastructure activities, which may be delegated
6 According to the DnPM, for CFEM calculation purposes, under concession, permit or authorization regimes,
the net revenue is “the value of the sale of the mineral is within the Federal government’s powers according
product, deducted the taxes (ICMS, PIS, COFInS), which to section 21, XII of the Brazilian Constitution.
levies on the commercialization, as well as the transporta-
tion and insurance costs” (original wording: “Entende-se The Brazilian Aeronautic Code (law no. 7,565/86,
por faturamento líquido o valor da venda do produto min-
the Código Brasileiro de Aeronáutica - “CBA”) regu-
eral, deduzindo-se os tributos (ICMS, PIS, COFInS), que
incidem na comercialização, como também as despesas lates activities related to air navigation performed by
com transporte e seguro”). the private sector (under permit, concession or au-


thorization regimes), as well as activities related to registrAtion oF AircrAFt
the airport infrastructure sector. The rAB is the Brazilian aircraft register and is regulated
Furthermore, Brazil has ratified certain international by the CBA and resolutions issued by AnAC. It is re-
treaties related to the aviation sector, such as the sponsible for the issuance of certificates of registration,
1944 Chicago, 1948 geneva and the 1962 rome airworthiness and nationality, the registration and dereg-
Conventions. As of this date, Brazil has not yet rati- istration of aircraft and registration of liens over aircraft
fied the Cape Town Convention7. (mortgages, fiduciary sale and other encumbrances).

Enrollment with the rAB grants the aircraft Brazilian
AnAc nationality and can only be performed in the name of
As the regulatory agency responsible for the aviation Brazilian individuals or companies or foreign individ-
sector in Brazil, AnAC concentrates many responsi- uals with legal address in Brazil. Also, a provisional
bilities, such as: (i) granting concessions and authori- registration of the aircraft can be made in the name of
zations to the exploitation of public air services; (ii) the exploiter, user or lessee with the consent of the
regulating flight schedules in airports; (iii) managing owner in case the aircraft’s title is held by a foreign
the Brazilian Aeronautic registry (“rAB”); (iv) repre- entity and its operation is transferred to a Brazilian en-
senting the Brazilian government in conventions and tity under a lease agreement or similar arrangement.
international treaties related to aviation; and (v) issu-
Such provisional registration will further identify the
ing resolutions regarding civil aviation in Brazil.
aircraft’s owner. Brazilian nationality and registration
marks will be cancelled upon deregistration of the
aircraft, which require the express consent of the
7 The Cape Town Convention is an international treaty which
intends to standardize transactions involving movable prop- owner and of the beneficiary of any lien registered
erty, particularly aircraft and aircraft engines. with respect to the aircraft.

INFRASTRUCTURE 17

The registered owner (or the registered operator if dif- out international regular public air transportation. In
ferent from the owner) will be primarily responsible order to operate in Brazil, such companies must be
for civil liabilities inherent to the operation of rAB- designated by the government of their respective
registered aircraft, including third party liabilities. country and obtain authorization from the Brazilian
government, through AnAC, to perform and operate
Air services their services in Brazil.

Air services in Brazil can be private or public. Private non-regular public air services (such as air-taxi ser-
air services are those services performed without any vices) also require the Federal government’s authori-
sort of remuneration for the exclusive benefit of the zation and may be granted to Brazilian companies
operator of the aircraft. Public air services, on their that fulfill the requirements for regular public air ser-
turn, are defined as air transportation of passengers, vices outlined above.
cargo or mail, either regular (scheduled) or non-reg-
ular, domestic or international, as well as other spe- AirPort inFrAstructure
cialized air services as defined in the CBA.
The Brazilian government is responsible for the man-
regular public air services depend on concession by agement and operation of Brazilian airports; such ac-
AnAC. Concessionaires are eligible if: (i) their head tivities may be delegated to the private sector by
offices are located in Brazil; (ii) at least 80% of their means of a concession or authorization. The Brazilian
voting capital is held by Brazilians8; and (iii) they are main airports are currently being operated by Infraero,
managed exclusively by Brazilians. a government company created with the purpose of
building, managing and operating airports in Brazil.
Such restrictions are applicable to companies that
will operate domestic flights in Brazil; they are not
applicable to non Brazilian companies that will carry

8 Bill of law no. 6,716/09 purports to increase the foreign
participation in the voting capital to 49%. Such Bill of law is
undergoing legislative proceedings to be voted by the Brazil-
ian congress.


Oil and Gas activities and own and dispose of hydrocarbons
once extracted from the soil, although maintaining
The original wording of section 177, 1st paragraph the Federal monopoly over hydrocarbons activities.
of the Brazilian Federal Constitution contemplated
a monopolistic regime for the benefit of the Federal
governmentAl Authorities
Union on the exploration, production, refining, im-
port, export and transportation of hydrocarbons. The Oil & gas law also rearranged the public author-
Such framework prevented the transfer, assignment ities in charge of regulating and inspecting hydrocar-
or granting of crude oil and natural gas to any pri- bons activities, mainly the national Council on Energy
vate companies. Petrobras, a partially state owned Policy (Conselho nacional de Política Energética –
company controlled by the Federal government “CnPE”), a council of ministers in charge of planning
and with shares traded in the stock markets, con- and coordinating the national energy policy, and the
ducted the monopolistic activities on behalf of the national Petroleum, natural gas and Biofuels Agency
Federal government. - AnP, a regulatory body of the Federal government
linked to the Ministry for Mines and Energy.
The regulatory breakthrough that allowed major in-
ternational investment in the oil industry was the AnP’s key function is to regulate the oil, natural
enactment of Constitutional Amendment no. 9 of gas and biofuels activities in Brazil and to imple-
1995, which eased the oil and gas monopoly in ment the policies ruled by CnPE. Among AnP’s
Brazil. Two years later, law no. 9,478/97 (the “Oil mandate, the following roles may be highlighted:
and gas law”) was passed regulating such amend- (i) to conduct bidding rounds and concession
ment to the Constitution. One of the major mile- agreements for the exploration, development and
stones of the oil and gas law was to set forth the production of oil blocks; (ii) to regulate oil and
granting instruments (concession agreements) and gas transportation and marketing activities; and
respective bidding regime (bidding rounds by the (iii) to ensure the supply of fuel to the national
Agência Nacional de Petróleo, Gás Natural e Bio- market under contingency conditions.
combustíveis – “AnP” – the “AnP rounds”). Such
new legal framework allowed privately-owned
companies to carry out exploration and production

INFRASTRUCTURE 19

uPstreAm Activities At the present moment11, there are four bills of law
pre-approved by the Brazilian House of representa-
Both IOCs9 and Petrobras, the Brazilian nOC10, may tives (Câmara dos Deputados) awaiting approval
explore and produce hydrocarbons by means of en- from the Brazilian Senate (Senado Federal) and fur-
tering into concession agreements (as a result of a ther sanction from the President. The proposed
winner bid, for both onshore and offshore blocks) amendments, if approved, would (a) insert the pro-
under AnP’s rounds. The bidding rounds have typi- duction sharing regime as the granting instrument for
cally been driven by a combination of three major Pré-Sal and strategic areas, (b) create a new wholly
criteria: (i) signing bonus (upfront payment), (ii) mini- state-owned company in charge of representing the
mum work program commitment and (iii) local con- interest of the Federal Union in the production shar-
tent (percentage of services contracted with entities ing contracts, and (c) approve the capitalization of
incorporated in Brazil). Petrobras, among other changes.
As compensation for the right to explore the blocks,
the concessionaires shall pay certain government downstreAm Activities
takes (signing bonus, royalties, special participations
AnP is also in charge of regulating and inspecting
and land occupation fee) and taxes.
downstream activities. The natural gas industry is also
Following the discoveries in 2007 of a major cluster regulated by recently enacted law no.11, 909/09
of oil and gas in the so-called pre-salt area located in (the “gas law”).
the offshore Santos Basin (“Pré-Sal”), President lula’s
The gas law, which still lacks further regulation, sets
administration felt the need of modifying the up-
forth rules for the transportation of natural gas through
stream legal regime in Brazil.
pipelines, deemed as public interest activities to be
carried out by Brazilian entities under a concession
regime, following a public bidding process carried
9 International Oil Companies, which, according to the Fed- out by AnP. Exceptionally, when associated with an
eral Constitution and the Oil & gas law, may participate by
creating companies incorporated under the laws of Brazil
(although they can be wholly owned by foreign entities). 11 This section of the Doing Business report was lastly up-
10 national Oil Company. dated on May 18, 2010.


international treaty, the transport of gas through pipe- Admiralty Law (Maritime Law)
lines shall be governed by the authorization regime.
Admiralty law (also referred to as maritime law) is
Pipelines classified as gas evacuation pipelines shall governed by sparse legislation under Brazilian law.
remain to be regulated under the upstream granting nonetheless, the second part of the Brazilian Com-
instrument regime, and thus are not subject to man- mercial Code (“BCC”) regulates the maritime trade of
datory third party access and a specific gas transpor- goods by force of Section 2,045 of the Brazilian Civ-
tation concession contract. On the other hand, trans- il Code. law no. 9.432/97 regulates maritime trans-
portation pipelines shall allow third party access, portation matters.
subject to grace periods and other conditions set
forth under the gas law. tyPes oF nAvigAtion
Furthermore, the gas law refers to other activities According to Brazilian law, there are five types of
regulated by the AnP and subject to authorization navigation, as follows: (i) maritime support (apoio
regime, such as the import, export, storage, process- marítimo), related to the support of vessels and facili-
ing, treatment, liquefaction, re-gasification and sale ties located in national territorial waters and econom-
of natural gas. ic zones, used to perform minerals and hydrocarbons
Finally, it is relevant to note that the Brazilian Federal prospecting activities; (ii) port support (apoio por-
Constitution grants the States the exclusive right to tuário), related to the support of vessels and port fa-
exploit local distribution of piped natural gas. In that cilities located in the port area; (iii) cabotage (cabota-
sense, States’ Authorities have an important role on gem); related to the domestic navigation between
regulating local gas distribution activities. ports or points within the Brazilian territory; (iv) inter-
nal navigation (navegação interior) related to naviga-
tion through the inland highways, regardless of being
domestic or international route; (v) and long course
navigation (navegação de longo curso), related to
navigation between Brazilian and foreigners ports.

INFRASTRUCTURE 21

governmentAl Authorities tive division of the navy Command, which acts as a
complementary regulatory body alongside AnTAQ.
There are four main regulatory bodies which moni- DPC’s main attribution consists on elaborating admin-
tor and supervise the Maritime Industry. The first one istrative rules called norms of Maritime Authority
is the national Agency of Waterway Transportation (“nOrMAM”), which specifically regulate several is-
(Agência Nacional de Transportes Aquaviários - sues related to navigation security guidelines and pol-
“AnTAQ”), under the Ministry of Transportation. icy. DPC is also entitled to create measures to decrease
AnTAQ’s purpose is to regulate, supervise and in- pollution produced by vessels and platforms.
spect the activities linked to services related to wa-
terway transportation and port and waterway infra-
mAritime registry
structure exploration.
In order to operate a vessel, one needs the maritime
Amongst its roles is to grant authorizations allowing
registry, the vessel operator registry and AnTAQ’s au-
companies to operate as a Brazilian navigation com-
thorization. There is also one additional registry,
pany. To obtain such authorization, one must meet
named Special Brazilian register (“rEB”), which is
certain legal, technical and financial-economic re-
optional. It is governed by Decree no. 2,256/97 and
quirements established by AnTAQ, which vary ac-
it applies to Brazilian vessels or to foreign vessels
cording to the chosen type of navigation.
chartered by demise to Brazilian navigation compa-
The second and third bodies are the Maritime Tribu- nies. Its purpose is to enable fiscal benefits concern-
nal (Tribunal Marítimo) and the Captaincy of Ports ing construction, modernization and repairs, as well
(Capitania dos Portos). Both are governmental bodies as benefits related to insurance and reinsurance,
responsible for maritime property registration. The crew, fuel prices and working agreements.
vessel acquires its nationality and flag through its
registry. The maritime property registration is regu- chArters
lated by law no. 7,652/88, which establishes the
regarding vessel charters, there are three types of
requirements for obtaining the registy.
charters in Brazil: (i) voyage Charter, which relates to
The fourth body is the Directorship of Ports and Coasts term of the charter lasting only one journey; (ii) Time
(Diretoria de Portos e Costas - “DPC”), an administra- Charter Party, where the charter’s duration lasts a time


defined on the contract; and (iii) Charter By Demise, Funds
where the charterer has the right of using and con-
trolling the vessel, for a set period, including the right The Fund of the Merchant Marine (Fundo da Marinha
to designate the crew and its commander, but having Mercante - “FMM”) is a fund created by the Federal
liabilities under its operation. government, governed by law no. 10,893/04. It was
created with the purpose of improving the develop-
As a general rule, charters shall only be performed by ment of the Brazilian naval industry and fleet. Since
Brazilian companies, with the usage of Brazilian its creation, it has financed projects for the most di-
ships (exception is made for the long course type of versified naval areas, comprising activities that vary
navigation). nonetheless, there are exceptions such from fishing to the oil and gas industry.
as an instrument known as Circularization.
Another important fund is the guarantee Fund for
Circularization is a procedure used when a compa- naval Construction (Fundo Garantidor da Construção
ny needs a specific vessel for a specific activity. The Naval) governed by law no. 11,786/08. Its purpose
general conditions to use a foreign vessel charters is to cover the credit risk and the performance risk of
are (i) the inexistence or unavailability of an ade- the construction of a vessel on a Brazilian shipyard. It
quate Brazilian vessel, (ii) public interest, and (iii) can either guarantee the credit taken from a financial
charter of a maximum of 36 months, when substitut- agent or the performance of the shipyard responsible
ing a vessel that is currently under construction in a for the construction of the vessel.
Brazilian shipyard, as long as the vessel to be char-
tered does not surpass the double of the total ton-
nage of the vessel under construction. Fulfilled such
conditions, the Brazilian company shall, extraordi-
narily, charter a foreign vessel. Once this process is
carried out, AnTAQ shall issue the Charter Authori-
zation Certificate. On the other hand, if there is a
Brazilian vessel adequate for the desired activity, the
Brazilian navigation company that owns it can block
the charter requirement, and offer its vessel.

INFRASTRUCTURE 23

PRIVATE INVESTMENTS AND PUBLIC INCENTIVES –
PUBLIC-PRIVATE PARTNERSHIP

Public-Private Partnerships (“PPP”) are a type of pub- the limitations verified in traditional investment re-
lic investment in which the government engages a gimes by means of collaboration of the State and
private party for the rendering of a public service or private parties (concessions, permissions, authori-
the rendering of a service to the State itself, demand- zations and public works bids).
ing, in any case, a high investment and a horizon of
long-term investment amortization. Sponsored and Administrative
Concessions
In a broad sense, public-private partnerships consist
of any collaboration between the public sector and The PPP law, applicable not only to the Federal pub-
private parties in support of the performance of cer- lic administration, but also to the State and Munici-
tain enterprises, comprehending various instru- pal administrations, has provided two modalities of
ments, such as public work bids, public service PPP, as follows:
concessions, concessions for the use of public as-
sets, permission, authorization for the exercise of (a) Sponsored Concession – the PPP’s purpose is the
regulated activities, administrative contracts in gen- rendering of a public service by a private partner di-
eral, consortium involving agents of the public ad- rectly to final customers, in which a portion of con-
ministration and private parties, mixed-capital cor- cessionaire’s remuneration results from tariff revenues
porations, among others. charged from its customers, and another portion re-
sults from payment subsidiaries paid directly by the
Public-private partnerships as defined by Federal government; and
law n. 11.079, dated 12.30.2004 (“PPP law”),
were created with the purpose of attracting a new (b) Administrative Concession – the PPP has as pur-
wave of private investments for projects of high so- pose the rendering of services by the private partner to
cial interest, especially in the infrastructure sector, the Public administration, as direct or indirect user, to
which, under normal conditions, would not be the society in general, or to a community that cannot
economically feasible or would be assigned to be individualized or subject to tariff collection (e.g.
State action, depending upon very scarce budget- prisons). Accordingly, remuneration is derived solely
ary availabilities. PPPs are, therefore, an answer to from governmental payments to the concessionaire.


The Brazilian Federal Constitution (Section 175) sets
forth that public services shall be rendered by the
State directly or by means of concession to be grant-
ed to private entities by means of a public bidding
procedure. Therefore, a PPP contract shall be pre-
ceded by a bid to select the concessionaire.

Comparison with
Common Concessions
Differently from traditional investment and regimes
of collaboration between State and private parties,
the PPP presents the following main features: (i) re-
muneration of the private sector (partially or totally)
assumed or guaranteed by the State; (ii) long-term
relationship, and (iii) remuneration subject to prop-
er performance.

Risk Mitigation
This possibility of the government performing pay-
ments to a concessionaire under PPP contracts miti-
gates, totally or partially, risks related to tariff, de-
mand and market, which are sometimes crucial to
confer economic feasibility to a certain project under
the private parties’ perspective, especially under a
project finance regime, though due to such configu-
ration other risks may be aggregated (government
credit risk, political risk etc).

INFRASTRUCTURE 25

INFRASTRUCTURE FINANCING

Financing Sources Transactions in the Brazilian infrastructure sector are
traditionally financed by Brazilian governmental
the FinAncing oF the brAziliAn banks and agencies, multilaterals, foreign govern-
inFrAstructure sector ment owned banks, export credit agencies and major
private banks. In the past, the capital markets were
Brazil has experienced its longest growth cycle over only occasionally accessed to finance and refinance
the past decades. The 2007/2008 crisis has slowed infrastructure transactions. nowadays, due to the
this growth, but also caused the Federal government creation of certain regulatory and tax incentives, the
to launch a series of initiatives, special programs and capital markets are more and more often seen as fea-
legislative changes to stimulate the economy. Exam- sible alternatives to finance these transactions.
ples include the special program for the acceleration
of the economy, the PAC, created in 2007, whereby brAziliAn governmentAl bAnks
investments of more than r$500 billion were envi-
sioned for selected and crucial infrastructure projects The continued flow of financing for the Brazilian
(including highways, railways, power plants and infrastructure sector has been historically main-
ports). In 2010, the Federal government launched tained by the Federal government, acting through
PAC 2, which estimates investments of approximately its banks. Banco Nacional de Desenvolvimento
r$ 1,5 trillion (including some of the r$500 billion Econômico e Social – “BnDES” is certainly the
of PAC still pending) in the upcoming years. most notable example of that.

The historical lack of investments in infrastructure, BnDES played and continues to play an important
combined with their need to sustain the continued role in the financing of virtually all of the most im-
growth of the Brazilian economy, has created various portant Brazilian infrastructure projects, securing the
business opportunities for private investment, most of availability of special credit lines for them. Examples
them related to PAC/PAC 2 qualified projects. new include the credit lines opened for the World Cup
major opportunities are also likely to be seen in the and the Olympics and for the financing of the Santo
near future as Brazil will host the two highest profile Antônio, Jirau and Belo Monte hydroelectric power
sporting events of the world, the FIFA World Cup in plants and the high speed train linking the cities of
2014 and the Olympic games in 2016. São Paulo and rio de Janeiro.


Other important government owned banks, which pro- ue to play an active role nowadays. Corporacion An-
vide financing for projects in their areas of interest, in- dina de Fomento – CAF also appears as a viable
clude Banco do Brasil - “BB”, Caixa Econômica Federal source of financing, especially after the entry of Bra-
- “CEF”, Banco do Nordeste do Brasil – “BnB” (the zil as its shareholder. Foreign banks typically partici-
northeast development bank), and Banco da Amazônia pate in the transactions involving these entities, by
– “BASA” (the amazon development bank). providing the necessary funding for their B loans.

In the recent years, legislation was passed to allow Foreign governmental Banks and Export Credit Agen-
funds sitting in the FgTS – the mandatory social secu- cies, like the Japan Bank for International Coopera-
rity fund for all employees in Brazil – to be invested in tion – JBIC, kfW, U.S. Ex-Im Bank, nIB, Finnvera,
infrastructure, through the so called FI-FgTS – The Bank of China, are always considered when interests
FgTS Infrastructure Fund. FI-FgTS has rapidly be- of companies of their countries are involved.
come one of the most active players in the Brazilian
market, investing in opportunities in a variety of infra- The income tax over the interest of these loans is gen-
structure sectors, investing both in debt and equity erally exempted, making them attractive from an
infrastructure sectors12. economic point of view. These loans, however, are
normally made in foreign currency, bringing to the
multilAterAls, Foreign equation considerations regarding the foreign ex-
governmentAl bAnks And ecAs change risk and the cost to eventually mitigate it.

The Inter-American Development Bank – IDB and the
PrivAte bAnks
International Finance Corporation – IFC have a strong
and longstanding tradition to finance infrastructure trans- Currently, not only international private banks par-
actions in Brazil, both in the public and private sector. ticipate in major infrastructure projects in Brazil,
but also several local financial institutions. Brazil-
These banks participated in the financing of the first
ian financial institutions showed their financial
project finance deals back in the nineties and contin-
strength during the 2007/2008 crisis, putting to test
12 Up to 2010, FI-FgTS has made almost 20 billion reais in the regulatory structure of the Brazilian banking in-
investments. dustry. A variety of debt instruments allow private

INFRASTRUCTURE 27

banks to carry out transactions expeditiously. Pri- assignment or sale of rights, assets, receivables or real
vate banks typically participate in major infrastruc- estate; (ii) pledge of rights, assets and receivables; and
ture deals through syndicates. (iii) mortgage over real estate located in Brazil.

Pursuant to Brazilian law, there are a few require-
Securities / Guarantees
ments that should be complied with in order for cer-
in Financing Transactions
tain types of securities to be effective against third
Financing transactions granted by Brazilian and foreign parties. Such requirements include the registration
creditors involving Brazilian infrastructure projects of the respective security documents with the com-
usually contemplate a security package comprising petent public registry, i.e., the respective real Estate
both guarantees (rendered by a parent company or in- registry (in case of real estate), or the respective
dividual that participates or holds interest in the project registry of Titles and Documents (in case of rights,
company) and securities (over the respective rights, as- assets and credit rights). In certain situations, the re-
sets, real estate and receivables of the project). spective counterparties of the debtor of the financ-
ing/grantor of the security (including financial insti-
Under Brazilian law, there are a few types of securi-
tutions and counterparties to the project contracts)
ties that could be implemented in the design of the
may also have to approve, acknowledge or be noti-
security package related to financing transactions. Ir-
fied of the creation of the respective security over
respective of the type of security adopted, under such
the respective rights and credits.
financing transactions, the security package usually
include real estate, shares/quotas of Brazilian com-
Fund Raising in Capital Markets
panies, credit rights against Brazilian financial insti-
tutions, emerging rights arising out of concessions Companies may participate as sponsors in certain
and authorizations granted by public bodies and au- transactions structured in the form of Project Finance,
thorities, and receivables, rights and credit rights aris- obtaining funds in the market through securities and
ing out of the relevant project contracts. structured operations.

The types of securities that are usually adopted by This may include obtaining funds in the market
creditors under such transactions include: (i) fiduciary through the following securities: (i) Debêntures


(bonds), (ii) Fundos de Investimento em Direitos corporations, representing a fraction of debt. Each
Creditórios (credit receivable investment funds), (iii) debenture offers bondholders the same rights to
Certificados de Recebíveis Imobiliários (certificates claim against the issuing company, those rights es-
of real estate receivables). tablished in the Debenture Deed of Issue.

These bonds may be privately or publicly offered.
debentures (bonds)13
The private offering does not need to be registered
Debentures are debt securities issued by both Bra- with the Brazilian Securities Exchange Commission
zilian publicly-traded and non-publicly traded cor- (the “CvM”), although such commission may need
porations. Debentures may be non-convertible, to be informed.
convertible or exchangeable into shares; unsecured,
The public offering corresponds to a process of rais-
guaranteed by another legal entity or secured by a
floating charge or any other type of security interest; ing funds from public investors, and it shall be sub-
and senior or subordinated. ject to the capital markets regulation. The public of-
fering of debentures must occur in accordance with
Debt instruments are regulated by Sections 52 et seq. CvM Instruction 400 of December 29, 2003, as re-
of the Corporations Act (law no. 6.404 of 1976 (the cently amended by CvM Instruction 482, (“CvM In-
“Corporation Act”). Debenture is a security issued by struction 400”); in such case the offering shall be
registered with CvM.
13 Pension funds may participate as sponsors in certain
transactions structured in the form of Project Finance. Ac- In case the public offering is distributed with limited
cording to Brazilian laws, pension funds are entities incor- efforts to qualified investors, with the intermediation of
porated under the form of foundations or non-profit associa- financial institutions (members of the distribution sys-
tions. According to the Brazilian Central Bank resolution
no. 3846/2010 (“resolution”) applicable to private pension
tem of securities), then such offering shall be regulated
funds in Brazil, they are allowed to invest in debentures is- by CvM Instruction 476 of January 2009 (“CvM In-
sued by Brazilian corporations, observed certain require- struction 476”). CvM Instruction 476 was considered
ments. For instance, investment of a Private pension fund in
as an important step to the simplification of securities
debentures of a special purpose company is deemed to be a
variable-income investment classified under Section 19, III offerings in Brazil. The referred instruction facilitates
of the referred resolution. companies to access capital market, providing flexibil-

INFRASTRUCTURE 29

ity and cost efficiency to raise funds in shorter timing certiFicAtes oF reAl estAte
than normally required for such public offering. receivAbles – certiFicAdos de recebíveis
imobiliários – cri
credit receivAble investment Funds -
Brazilian current legislation, in particular to law
Fundos de investimento em direitos
no. 9,514, dated november 20, 1997, defines CrI
creditórios - Fidc
as nominal instruments of credit, issued exclusive-
A FIDC transaction is a financing vehicle for Brazilian ly by securitization companies, that may be freely
companies by means of securitization of receivables, negotiated as securities, creating a payment prom-
regulated through resolution 2,907, of november 29, ise in cash to the holder of the security and that
2001, enacted by the Monetary nacional Council are attached to real estate receivables. Such real
(Conselho Monetário Nacional – “CMn”) and CvM estate receivables are sold to securitization com-
Instruction 356, enacted by the CvM, as amended by panies by mortgage companies, constructors and
CvM Instructions 393, 435, 442, 446 and 458 (“CvM financial institutions.
Instruction 356”).
The CrIs must be publicly distributed. The CvM in-
A company holding a credit receivable resulting from a struction 414, as amended by CvM Instructions
commercial, or financial, or industrial or real estate 443, 446, 480 (“CvM Instruction 414”) rules the
transactions (“Originator”) assigns its credit to an invest- public offering for the CrI registration. In order to
ment fund (FIDC) that will pay for the credit in cash with negotiate real estate credits, securitization compa-
funds originated from the underwriting of quotas in the nies must be duly registered with the CvM. Once
FIDC. The FIDC will then become the creditor of the such entities have been registered, they may pro-
receivables, which will be collected by a custodian. ceed with the public distribution of the CrIs.


Public distribution of CrI does not require the inter-
mediation of a financial institution, in case the value
of such distribution is lower than r$ 30.000.000,00
(thirty millions reais) or provided that such distribution
complies with provisions set forth in item I and II of
paragraph 4 of Section 5 of ICvM Instruction 41414.

14 According to such provisions: (i) the CrI have as target
group companies exclusively members of the same eco-
nomic group, and their respective directors and controlling
shareholders, being forbidden the negotiation of CrI in the
secondary market, or (ii) the CrIs have nominal value equal
or higher than r$ 1 million and the offer is destined to sub-
scription of not more than 20 investors.

INFRASTRUCTURE 31

WORLD CUP AND THE OLYMPIC GAMES

Infrastructure Works – ment of the host cities, the states and the Federal
Urban and Architectural Projects government. This program aims at investing r$ 11.48
billion in 47 different projects to speed up urban mo-
The 2014 FIFA World Cup and the 2016 Olympic
bility in the host cities through the implementation of
games will require significant investments in each infrastructure projects focused on the circulation of
of the Brazilian cities which will host the games, as vehicles and pedestrians.
required by the Fédération Internationale de Foot-
ball Association – FIFA and by the International As part of the action plan adopted by the Federal
Olympics Committee. government in connection with the games, by means
of the Presidential Decree no. 7,034/09, the Federal
Investments will include: (i) development and improve- government created a website named “2014 CUP”
ment of public transportation facilities (including air- (Copa 2014). The website contains all the acts and
ports, trains and bus systems), especially the municipal expenditures adopted by the public administration in
transportation system; (ii) construction and improve- connection with the games.
ment of hotel infrastructure; and (iii) improvement of
urban infrastructure including hospitals, basic water With regards to financing sources available for the
and sewage sanitation system, public security. public sector in relation to investments in infrastruc-
ture for the games, according to the Transparency
Although some of the financial resources required for gateway, the two main financing institutions are
the World Cup will come from the Brazilian Soccer BnDES and the Federal Savings and loans Bank
Federation (Confederação Brasileira de Futebol – (Caixa Econômica Federal – “CEF”).
“CBF”), the three political divisions in Brazil (the host
BnDES created a financing source named “ProCopa
cities, the States where the host cities are located and
Turismo”, that has the goal of granting credit facilities of
the Federal government) joined efforts to collect re-
up to r$ 1 billion for construction and improvement of
sources for financing the required construction and
the hotel infrastructure. This program has different cat-
infrastructure works.
egories of credit facilities for (i) standard hotels, (ii) en-
One example of this joint effort is the PAC, which ergy efficient hotels and (iii) sustainable hotels, each of
among others shall be used to enforce the commit- which has different payment terms and interest rates.


The Federal government also created a program related to the exploration of the properties. In order
named national Tourism Development Program (Pro- to promote an urban concession, the city of São Pau-
grama Nacional do Desenvolvimento do Turismo lo needs to justify the necessity of such intervention
–“Prodetur”). Differently from the ProCopa Turismo, as well as to declare how this intervention will change
which is a specific program for hotels, the Prodetur the urbanization of the city.
resources may be used in any infrastructure works in
In closing, there is a considerable amount of financ-
the host cities, as well as in marketing actions.
ing options for the games and also some specific
Although the States where the host cities are located programs to support those investments with the pur-
and the host cities themselves are already negotiating pose of attracting private capital - including that of
with potential private investors, most of them still do foreign investors - to infrastructure projects in con-
not have any specific program, or laws for the games. nection with the 2014 FIFA World Cup and the 2016
In this sense, the structures of public-private partner- Olympic games.
ship and public concessions and their respective
laws may be used for this purpose. Stadiums
notwithstanding, the Municipality of São Paulo re- The 2014 World Cup and the 2016 Olympic games
cently enacted a specific legal instrument for the re- represent a great opportunity for long-term planning
qualification of the infrastructure of the city by the in the infrastructure sector, especially for the 12 host
urbanization and/or re-urbanization of a specific cities. For the success of such events, the host cities
area. law no. 14,917/2009 created the figure of the will need to receive expressive investments in order
urban concession which is an administrative contract
to enhance their general infrastructure.
executed by the city and a private partner after a bid-
ding process for the purposes of carrying out urban Among the areas that shall receive expressive invest-
works of public interest in which the risks related to ments, the stadiums are probably the most important.
the performance of the contract are assumed only by It is known that all Brazilian stadiums will need direct
the private investor. It is important to note that in investments to accomplish the standards defined by
consideration for assuming the risks of the urban FIFA and by the International Olympics Committee.
concession, the private investor receives all the fees In order to carry out such required modifications in

INFRASTRUCTURE 33

the arenas, the amount of investments should reach ments of their owners. leading the race is Atlético
approximately 600 million in some cases. Paranaense (owner of Cutiba’s Arena da Baixada)
with 80% of the stadium’s space already adapted to
investment models the international standards. Still in the first time, São
Paulo Futebol Clube and Sport Club Internacional’s
Different investment models will be used for the ren- stadiums (owners of São Paulo’s Estádio do Morumbi
ovation and construction of stadiums and multi-use and Porto Alegre’s Beira-rio, respectively) are now
arenas. The models chosen by the host cities vary receiving the first touch-ups to comply with the re-
from private investment by football clubs that own quirements established by FIFA.
the stadiums, passing through the model of public-
private partnership – PPP, to direct investment of the The government of all the other host cities (Manaus’s
government through public biddings to select the Arena da Amazônia, rio de Janeiro’s Estádio do Ma-
company that will construct the arena. racanã, Brasília’s Mané garrincha and Cuiabá’s ver-
dão) decided to use public resources in the construc-
The investment model adopted by most of the host tion or renovation of the stadiums, contracting a
cities is the public-private partnership. That is the case private party to execute the works throughout a bid-
of Salvador’s Estádio da Fonte nova, natal’s Arena das ding process. In principle, these stadiums should also
Dunas, Belo Horizonte’s Complexo Esportivo Minei- be operated by governmental entities.
rão, Fortaleza’s Castelão and, finally, recife’s Arena
São lourenço da Mata. Inspired on the British Project Independently of the investment model adopted, it
Finance Initiative, this model was tailored with the is paramount to point out that all the projects will
purpose of attracting a new wave of private invest- reckon on significant and good financing resources.
ments in projects of elevated social interest which Aware of such opportunity, the BnDES along with
would not be economically feasible otherwise. other pension funds are stepping forward to finance
the planned projects.
Another three of the 12 host cities have private are-
nas: São Paulo’s Estádio do Morumbi, Cutiba’s Arena
da Baixada and Porto Alegre’s Beira-rio. It is most
probable that those stadiums will only receive invest-


FinAncing sources Another incentive planned by the government is the
exemption of the tax for the distribution of goods and
One of the main financing sources for the World Cup
services (Imposto sobre Circulação de Mercadorias e
is the program “BnDES ProCopa Arenas” that has the
Serviços – ICMS), equivalent to the American sales
perspective of finance up to 75%, with a limit of r$
tax, for the construction and renovation of the arenas
400 million for each of the stadiums. This program
of the World Cup.
will be in force until 2011 and the amortization pe-
riod will end after 180 months, included in this cal- With various institutions interested in financing the
culation the grace period of 36 months. arenas and different investment models, Brazil is
ready to embrace the opportunity to move the neces-
The final cost of the financing will depend of the type
sary arena and infrastructure projects ahead and both
of financial support chosen by the investor. The BnDES
public and private entities are looking forward to par-
support for this program may be direct, indirect or
ticipating in this process.
mixed. The direct type is performed directly with
BnDES or by means of an attorney-in-fact (the presen-
tation of a letter of inquiry is required), the indirect
model is that performed by means of an accredited fi-
nancial institution, which may be non-automatic (in
this model the letter of inquiry is also required) and the
mixed one combines the two previous formats. Conse-
quently, such program is structured as to be used in the
different types of investments, which include opera-
tions with the private initiative, public entities, public-
private partnerships and concessions. Other institutions
are also studying specific sources of financing for the
arenas. It is the case of the Banco do nordeste – BnB.

INFRASTRUCTURE 35

ABOUT OUR SPONSOR

Four decades of decisive performance Pioneering and leadership are the hallmarks of Macha-
on the Brazilian Legal Scene do Meyer. The firm has been involved in the main
events forging the country’s new economy. In the
Founded in 1972, Machado, Meyer, Sendacz e Opice
1980s, for example, it took part in the re-negotiation
Advogados is one of Brazil’s most renowned and re-
of Brazil’s foreign debt. In 1990, Machado Meyer took
spected legal firms. Operating harmoniously in all
a decisive role in the recuperation of innumerable fi-
areas of the law, the firm offers legal assistance to
nancial institutions within the scope of PrOEr (na-
both Brazilian and international clients, including
tional Program for restructuration and Strengthening
large corporations in the most varied sectors of activi-
of the Financial System). In the same decade, it took
ties, financial institutions and government bodies.
an active part in various privatisation processes, in
In the last decade alone, Machado Meyer was elected sectors such as mining and telecommunications.
three times Law Firm of the Year in Brazil by the re-
The office continues to be a protagonist in the Bra-
nowned British publication, the International Finan-
zilian economic scene. Today, it participates actively
cial law review. According to the also British Cham-
in the consolidation of the country’s capital markets,
bers and Partners, in the same period, the firm appeared
in the internationalisation processes of Brazilian
as the Law Firm of the Year, this time in all of latin
companies, in the mergers and acquisitions that
America. Since the launch of the Brazilian annual
have taken place in Brazil and in large infrastructure
Análise Advocacia 500, in 2006, the firm has appeared
projects. At the same time as being involved in large-
year after year as one of Brazil‘s most admired.
scale operations, Machado Meyer also provides le-
With offices in São Paulo, rio de Janeiro, Brasília, gal assistance to its clients on a daily basis. As a re-
Belo Horizonte, Porto Alegre, Salvador and new sult of decades of work in the country’s principal
york, Machado Meyer has around 300 lawyers. It is business affairs, our lawyers are trained to take deci-
an office with global reach and has close ties with sions that are intelligent, quick and secure; always in
the principal legal firms of the United States, Europe, accordance with the highest ethical, technical and
latin America and Asia. quality standards.


mAchAdo meyer inFrAstructure PArtners
Antonio de Souza Corrêa Meyer
Tel.: +55 11 3150-7030
Email: ameyer@machadomeyer.com.br

José Ribeiro do Prado Júnior
Tel.: +55 11 3150-7177
Email: jprado@machadomeyer.com.br

José Virgílio Lopes Enei
Tel.: +55 11 3150-7041
Email: jvirgilio@machadomeyer.com.br

José Samurai Saiani
Tel.: +55 11 3150-7008
Email: jsaiani@machadomeyer.com.br

Ana Karina Esteves de Souza
Tel.: +55 11 3150-7702
Email: anakarinasouza@machadomeyer.com.br

Silvia Rajsfeld Fiszman
Tel.: +55 11 3150-7634
Email: silvia@machadomeyer.com.br

INFRASTRUCTURE 37

São Paulo Salvador
Head Office rua Agnelo Brito, 90 - 5º andar - CEP 40210-245
- Salvador-BA - Brasil
Av. Brigadeiro Faria lima, 3144 - 11º andar - CEP
01451-000 - Jardim Paulistano - São Paulo-SP - Brasil Tel.: +55 71 3339-1400 - Fax: +55 71 3337-0441

Tel.: +55 11 3150-7000 - Fax: +55 11 3150-7071 Email: mmsoba@mmso.com.br

Email: mmso@mmso.com.br

Porto Alegre
Escritório Administrativo
Av. Dom Pedro II, 1351 - cj. 601 - CEP 90550-143
rua da Consolação, 247 - 10º Andar - CEP 01301-903 - Porto Alegre-rS - Brasil
- São Paulo-SP - Brasil
Tel.: +55 51 2104-8000 - Fax: +55 51 2104-8028
Tel.: +55 11 3236-2600 - Fax: +55 11 3236-2669
Email: mmsopoa@mmso.com.br

Belo Horizonte
Rio de Janeiro - Unidade RB I
Avenida Brasil, 1.666 - Sala 601 - CEP 30140-003
Centro Empresarial Internacional rio - Av. rio
Funcionários - Belo Horizonte-Mg - Brasil
Branco, 1 - 9º andar - Bloco B - CEP 20090-003
- rio de Janeiro-rJ - Brasil Tel.: +55 31 3194-1700 - Fax: +55 31 3194-1718
Tel.: +55 21 2253-9141 - Fax: +55 21 2253-6143
Email: mmsorj@mmso.com.br


Brasília
Ed. Corporate Financial Center - SCn, Quadra 2
- Bloco A - 9º andar - Sala 904 A - CEP 70712-900
- Brasília-DF - Brasil

Tel.: +55 61 2104-5550 - Fax: +55 61 2104-5580

Email: mmsodf@mmso.com.br

New York
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- new york-ny - USA

Tel.: +1 212 784-8802 - Fax: +1 212 758-1028

Email: mmso@cgmp-law.com

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