Toll road sector in Brazil: Regulation by contract and recent innovations

Abstract

The existing stock of road infrastructure in Brazil is still suboptimal and presents a bottleneck for economic growth. Concessions are being used to leverage the development and delivery of road infrastructure, although the first concessions have experienced some difficulties. Based on past lessons, Brazil has revised the regulatory framework and concessions models, by acting at three main critical success factors: creating a clear and transparent regulatory framework, improving procurement rules to ensure a more effective search for the “right” partner (and filtering opportunistic investors), and, finally, establishing a more effective risk-sharing strategy, providing the right incentives to mitigate delays and contractual breach, while increasing the bankability and overall project’s quality. This paper provides an overview of these changes and provides valuable lessons for academics and practitioners involved in concession design and management, particularly, in the road sector.