Road Infrastructure in Brazil and regulatory economic incentives

Abstract

This article assesses the regulatory economic incentives established for the road concession sector in Brazil. Incentives are linked to the scope for “renegotiation” of tariffs and duties to which the company subject to regulation committed, mainly the investment schedule. In Brazil, all renegotiations are based on the maintenance of the economic and financial balance of the concession contract (EFECC). The Brazilian legislation has some basic principles for the EFECC, but most of the main guidelines are currently described in the concession contracts. In the case of road concessions, there have been remarkable advances in the design of the EFECC in the contracts between 2009 and 2013, making renegotiations more transparent than before. Road contracts are becoming more “complete” than they used to be because there is an attempt to describe all risk allocation of the concession. This reduces the scope for opportunistic behavior and bad renegotiations from both parties, the concessionary and the regulator/public sector.