Government creates new mechanism to shield concessions from interest rate and exchange rate fluctuations.

247 - The Ministry of Transport is preparing a new decree aimed at protecting infrastructure concessions from interest rate and exchange rate fluctuations, two of the main obstacles to the success of auctions in the sector. This information was revealed by... Folha de S. Paul, which detailed the government's plans to create a basket of financial indicators capable of correcting distortions in contractual adjustments.

Currently, infrastructure concession contracts are adjusted exclusively by the Broad Consumer Price Index (IPCA), the country's main inflation indicator. However, this model has proven insufficient to capture sharp variations in the cost of essential inputs, such as bituminous asphalt, steel, and diesel. To correct this deficiency, the new mechanism will include other indices, such as the National Construction Cost Index (INCC), calculated by the Getulio Vargas Foundation (FGV), which is widely used in the construction industry.

The proposal consists of creating a formula that takes into account the main inputs of each concession, assigning specific weights to each one. In this way, the contractual readjustment will better reflect the real market conditions. The ordinance is in the final phase of regulatory review and should be published in the Official Gazette of the Union between February and March.

Protection against economic volatility The new index aims to bring greater predictability to larger investments within concessions, avoiding losses caused by adjustments that are disconnected from economic reality. In 2023, for example, the price of bituminous material increased much more than the IPCA (Brazilian consumer price index) adjustment, directly impacting the cost of road paving. As this material is strongly linked to exchange rate fluctuations, the new rule seeks to mitigate these fluctuations.

The proposal was well received by the private sector, which has long been demanding solutions to reduce the risks of infrastructure investments. Representatives of the sector emphasize that the initiative improves the predictability of contracts and reduces uncertainty for investors, which could increase interest in future concession auctions.

Additional measures already adopted - In addition to the new regulation, the government has also been adopting other measures to minimize the impacts of economic fluctuations on concessions. The National Bank for Economic and Social Development (BNDES) recently changed the rules of the Development Credit Note (LCD) to adjust the Long-Term Rate (TLP), which governs the institution's financing.

Before the change, there was a mismatch between the interest rate in effect at the time of the auction and the rate that would be applied to the actual financing of the concession, which can take one to two years to be signed. Now, BNDES guarantees that if interest rates rise during this period, the original auction rate will apply. If interest rates fall, the concessionaire will benefit from the lower rate, thus reducing investment risks.

Another mechanism already used to deal with exchange rate and interest rate fluctuations is the guarantee account, a financial reserve created at the beginning of the concession, funded with a minimum amount that ensures liquidity for potential economic adversities. This account can be used to cover exchange rate losses and prevent abrupt tariff increases for users of the concession service.