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An innovative partnership for infrastructure in Brazil

Pablo Pereira dos Santos's picture

It is estimated that in order to close the gap in infrastructure, the Latin America and Caribbean (LAC) region requires an additional investment of $120 –$150 billion a year. However, given the current low levels of public investment, coupled with the fiscal challenges faced by the region and limited funding available from Multilateral Development Banks (MDBs), it is clear that private investment will play an important role in future years.

In 2014, the G-20 strengthened MDBs’ mandate to take concrete and practical steps to ensure that MDB-based project preparation facilities (PPFs) and other related initiatives collaborate to support governments by developing prioritized pipelines of economically viable and bankable infrastructure projects that can attract the private sector.

The Private Sector Participation Facility
The Brazilian Private Sector Participation (PSP) Facility is one of the flagship initiatives supported by the Inter-American Development Bank (IDB) to improve project preparation. The facility was developed in partnership with the International Finance Corporation (IFC) and the Brazilian Development Bank (BNDES). The facility aims to enhance private sector participation in infrastructure projects in Brazil.

With a total capital of US$12 million, the facility helps structure projects from technical and economic feasibility studies to financial closing. To date, this facility has supported 10 infrastructure projects leveraging more than $6 billion in private investment. The facility is managed by IFC, and it counts on the participation of the IDB and BNDES as part of the oversight committee.  All have equal voting rights in selecting projects. BNDES is also active in project preparation and in interacting with key counterparts.
 
Innovative PPPs
In addition to playing a key role in structuring major transportation projects such as toll roads and airports—where best practices such as performance-based contracts were introduced—the facility is also enabling innovative PPPs in social infrastructure (such as schools and health care facilities). The facility has served as a laboratory for innovative PPP projects in Brazil.

The experience with the PSP Facility is a solid example of how MDBs, in partnership with national banks, can develop sound solutions that contribute to closing the gap in infrastructure investments. This kind of partnership will be very important in the years to come.