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IFC Advises the State of Bahia in the First PPP for Rehabilitation and Maintenance of Roads in Brazil


In S„o Paulo:
Patricia Carvalho
Phone: +55 (11) 5185-6873
Email: pcarvalho@ifc.org

S„o Paulo, Brazil, July 20, 2018— The consortium Estrada do Feij„o Bahia is the winner of the concession auction for the rehabilitation and maintenance of roads in the State of Bahia, in Brazil. The auction of BA-052, known as Estrada do Feij„o (or “Bean Road”), was conducted yesterday in S„o Paulo by B3, the Brazilian stock exchange. The winner consortium is formed by Paviservice and SVC ConstruÁűes, two medium-sized Brazilian construction companies.

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”.  

Estrada do Feij„o Bahia will invest approximately BRL 700 million throughout 20 years of concession. The project involves the rehabilitation and maintenance of 462 kilometers of Estrada do Feij„o (BA-052), connecting the cities of Feira de Santana and Xique-Xique, and 85 kilometers of the road BA-160, in the stretch between Xique-Xique and the ferry crossing point to the municipality of Barra; it also includes the building of a new bridge over the S„o Francisco River that will connect the municipalities of Barra and Xique-Xique. The new equipment will optimize the travel time of pedestrians and passenger and commercial vehicles, in addition to making the travel between the municipalities safer; that travel is currently done by ferries. Inhabitants from 18 municipalities in Bahia will benefit from the roadway improvements.

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.

About IFC
IFC—a sister organization of the World Bank and member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work with more than 2,000 businesses worldwide, using our capital, expertise, and influence to create markets and opportunities in the toughest areas of the world. In FY17, we delivered a record $19.3 billion in long-term financing for developing countries, leveraging the power of the private sector to help end poverty and boost shared prosperity. For more information, visit www.ifc.org.

In October 2017, a partnership between IFC, the National Bank for Economic and Social Development (BNDES), and the Inter-American Development Bank (IDB) created the Private Participation Promotion Program to support the implementation of infrastructure projects in Brazil. The program aims to support the participation of the private sector as a partner to governments in all levels (municipal, state, and federal), helping them structuring concession projects and PPPs in several sectors such as education, healthcare, roads, and airports.

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