www.pwc.com.br
Infrastructure
in Brazil
Adding value and
managing complexity
from medium to large
scale green field or
brown field capital
assets, programs
or portfolios
The Infrastructure
context in Brazil
A decades-old pattern of infrastructure
under-investment, which has also been
combined with an astonishing rise of
millions into the Brazilian middle class.
This has created more demand for basic
infrastructure — electricity, air travel,
road use, freight and passenger travel,
the whole gamut of activity associated
with rapidly expanding purchasing
power and discretionary income.
Indeed, every week a new announcement
is made to enable further expansion of
the infrastructure sector. Much of this, of
course, is targeting the up-coming 2014
World Cup and 2016 Olympic games. And
while there are many reasons for Brazil to
celebrate these tournaments — nearly a
quarter of a million jobs will be generated
along with more than USD 116 billion
in direct and indirect economic benefit
from the World Cup alone — the realities
for Brazil, the great promise and the big
challenges, transcend these two near-term
events. The country’s great hope may rest
upon a vision of Brazil’s extended game
— the long-term bet that hinges upon
harnessing the country’s astonishing assets.
Infrastructure in Brazil
1
Unprecedented
development opportunity
• The current infrastructure
development boom has arguably no
precedents in Brazilian history.
• BNDES (National Bank for Social
and Economic Development)
estimates that infrastructure
investments may reach 2.5% or
3% of the gross domestic product
(GDP) by 2014.
Stable returns
Infrastructure can offer stable
returns, combining:
• A premium to pure
government investments.
• Stable cash-yields in the case
of mature assets.
• Significant IRR’s in the case of
Greenfield projects.
• Between 2003 and 2011,
approximately 40 million
individuals joined the Brazilian
middle class, increasing this group
from 65.9 to 105.5 million.
Attractive growth
market drivers
• Growth and urbanization of
population.
• Economic growth, increasing
personal wealth and demand for
higher quality infrastructure.
• Low correlation with developed
markets.
• Historical underinvestment in
infrastructure.
• Improving investment environment.
• Privatizations and public-private
initiatives.
• Brazil has over 1,200 ongoing
infrastructure projects which will
involve investments of USD 348.5
billions. Around 60% are in the
initial phase.
Brazil actual projects status
Brazil
Budget (USD)
348.5 billions in 1,200 projects
60%
Initiate
73%
27%
30%
In design/engineering
7%
In bidding
3%
Stagnant
How much was invested
Source: Annual Exame Infrastructure
2
PwC
How much to invest
USD 1.00 = R$ 2,00/* Values from September/2012
Drivers for infrastructure
Five-year plans for infrastructure
• Improvement of Brazilian
infrastructure is crucial to
maintaining the country’s
stable growth.
Brazil has been making news for the size
and scope of its infrastructure ambitions
ever since they were jump-started in
2007 by the government’s Growth
Acceleration Investment Program
(PAC 1) followed by a 2nd program that
began in 2010 (PAC2) that has led to
more than twelve thousand private
and public infrastructure projects.
Ten projects related to oil, gas, and
biofuels account for about half of
PAC2’s almost trillion dollars planned
infrastructure investments by 2016 and
beyond, according to Business Monitor
International.
• Investments in infrastructure are
essential for creation of jobs and
business opportunities, increasing
competitiveness and social living
improvements.
• Brazil will carry out a major
renovation of its infrastructure,
including ports and logistics,
airports and transport, railroads,
highways, energy and sports arenas.
• Brazil will host both the 2014 World
Cup and the 2016 Olympic games.
• Government’s Growth Acceleration
Investment Program (PAC2)
estimates investments in the 12
host cities around: USD 3.3 billion
for stadiums; USD 6.8 billion for
urban mobility; USD 0.4 billion for
passenger terminals and ports; and
USD 1.2 billion for building and
renovating the hotel sector.
Source: Brazilian Federal Government - BNDES, Brazilian Finance Ministry, Petrobras, Dow Jones Newswires,
Valor Economico Infrastructure Sector Magazine, May 2012 edition, Forward Investing
Infrastructure in Brazil
3
Sector major trends
Highlights
• The PPP’s law has increased
transparency and reduced
regulatory uncertainties, but
unfortunately it has yet to produce
tangible results.
• Infrastructure offers better returns
than the short-term interest rate as
inflation risk is covered.
• BNDES*, a crucial financier of
infrastructure, is deemed to be
lending at unsustainable high levels
to support PAC projects.
*BNDES: National Bank for Social and Economic Development
4
PwC
• Growing concern over the
government’s spending, which
has caused the economy to
overheat, means that spending
cuts are necessary. Cuts totaling
USD 25 billion have already been
announced, with infrastructure
relatively unaffected; however,
it is likely that further reductions
be needed.
• High costs and shortages of
skilled labor are hitting returns on
investments.
• Environmental approvals for major
projects may suffer delays.
• Brazil will carry out a major
renovation of its infrastructure,
focused on 9 core sectors for
investments.
9 core sectors of infrastructure investment in Brazil
1
2
Ports concessions
Railway concessions
The government has opened Brazil’s public
ports up to private sector concessions.
Massive investments in railway infrastructure
(including High Speed Train - TAV).
4
Rio 2016
3
14.4
billion
USD
has been budgeted to prepare Rio to
host the Olympics, with much of this
expected to go towards infrastructure.
5
6
FIFA World
Cup 2014
Provides significant
opportunity for
investments in transport,
stadiums and hotels.
8
Federal Highways
Concessions
Government program covers
12,000 km of roads.
9
PAC
Pre-salt
Investments in pre-salt area
should turn Brazil into a
major crude exporter.
Supported crucial
investment with
USD
160
billion
allocated between 2007 and 2010. The
USD 480 billion PAC2, runs from 2011 to 2014.
7
2nd round
airport concessions
Massive investment into the country’s airports,
including construction of new airport terminals.
Energy
More facilities are planned, but are often delayed
by disputes over environmental licenses, some of
which have halted projects for over a decade.
Infrastructure in Brazil PwC
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How PwC can help
PwC’s Brazil Infrastructure main services
Program and Project
Management
PPP & Infraestructure
Debt & Equity Advisory
Development of
feasibility studies and
preliminary studies to
enable PPPs
•
Construction audit
•
•
•
Construction
management
Government &
Governance
Mergers & Acquisitions
advisory (buy & sell)
•
•
Advice on fund raising
•
Preparation of risks and
responsabilities matrix
•
Integrated management
of enterprise operation
Identifying Governments
Opportunities
•
Project finance
•
•
Private equity advisory
•
Formatting the terms
of the concession
including performance
indicators for proposal
documentation and
formatting of the final
contract
•
Project structuring
International
development
Innovation on Public
Management
Public company advisory
Risk Analysis
•
•
•
•
Privatization advice
•
Proposals technical
analysis
•
Maturity Analysis
•
Sourcing Strategy
•
Budget and Schedule
Control
•
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Government Relationship
PwC
PwC’s Brazil Infrastructure differentiation
1
Our multicompetent and
experienced teams guarantee
project success and experienced
teams guarantee project success
• Participation of PwC experienced professionals in generating revenue
growth, market entry, mergers & acquisitions
• Participation (ad hoc) os PwC specialists in market research, strategic
plan development, site location, feasibility studies
2
Supporting offices in
17 major Brazilian cities
• We count on the support of strategically located offices and
professionals throughout Brazil that know each city with local
experience in diverse types of projects
Methodological approach
• Our adapted methodologies have aided in triggering profit growth
and the success of our clients in projects of similar complexity
Our large portfolio of clients in
different market segments
• PwC can leverage its insights from different strategy and operations
assignments acquired throughout our vast work experience in the
Brazilian and global market
Independence and
transparency
• Guarantying the project’s success by combining professionals of diverse
backgrounds with the experience of our partners involved
PwC can deliver complete
solutions to clients
• PwC has a wide range of service offerings which allow us to deal with
any kind of problem, from strategic design to the implementation
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4
5
6
Infrastructure in Brazil
7
Business
Business view
Present business solutions for the
most complex problems
Technical
Multidisciplinary and
engineering competency
Offer our multidisciplinary service porfolio
on an integrated basis to the client
Independence
Transparency
Provide an impartial and distinctive vision
of the project performance
8
PwC
Contacts
For further information, please contact:
Carlos Biedermann
[email protected]
[55](51) 3378 1703
André Marinho
[email protected]
[55](11) 3674 2616
Marcio Lutterbach
[email protected]
[55](11) 3674 3826
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© 2013 PricewaterhouseCoopers Brasil Ltda. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers Brasil Ltda., which is a member
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