Government joins projects to launch “new PAC” by the end of May

The government of Luiz Inácio Lula da Silva (PT) wants to launch the new version of the Growth Acceleration Program (PAC) by the end of May. The information was confirmed to People’s Gazette by the Minister of the Civil House, Rui Costa.

The initial idea was to launch it on the occasion of the 100 days of government or at the end of April, but the package was not ready in time. Until a few days ago there was a ministry collecting enterprises to join the plan.

The infrastructure investment program was generically mentioned in the government program delivered to the Superior Electoral Court (TSE) in the 2022 elections and was also included in the proposals listed in the “Letter for Tomorrow’s Brazil”, a kind of letter of intent presented by Lula to just three days into the second round of voting.

This is yet another old PT program that was relaunched in this mandate, such as Bolsa Família, Minha Casa Minha Vida, Mais Médicos, Food Acquisition Program (PAA) and the National Program for Public Security with Citizenship (Pronasci).

In a speech on the May 1st holiday, the president said that the plan will help “bring back the generation of employment”. “We are inviting foreign businessmen to make investments in Brazil and we are showing them the great projects that we are going to present in the third PAC. It will be the biggest infrastructure works project in this country”, stated Lula.

The first edition was launched by him in 2007 and the second in 2011, during the government of Dilma Rousseff (PT). In addition to providing for public investment in hundreds of projects, the PAC also contained tax relief measures and credit incentives to attract private capital. Directly responsible for the first edition of the program, when she headed the Civil House, Dilma was called by Lula the “mother of the PAC”, and cultivated a reputation as a “manager” of projects that would later be used to raise her as a candidate for president.

The government’s idea is to make part of the new PAC works feasible through public-private partnerships (PPPs). Last month, the Ministry of Finance presented two measures to encourage this type of arrangement. One of them is the granting of National Treasury guarantees to enable partnerships between states and municipalities.

Another initiative is permission to issue debentures (debt securities) with income tax exemption for investments in PPPs in the areas of education, health, public safety and the prison system, urban parks and conservation units, cultural and sports facilities, housing social and urban regeneration.

The government should create a management council for the new PAC, formed by the Civil House and the ministries of Finance, Planning and Management. The role of this council will be to approve or disapprove the program’s portfolio of works and define the resources that will be sent to each area of ​​the program, which will initially be six:

• transport;
• energy;
• urban infrastructure;
• communications;
• social facilities; It is
• water for everyone.

Lula’s ministers are still collecting projects to compose the PAC portfolio. In the last week of April, for example, Petrobras reported that the Ministry of Mines and Energy requested information on the company’s projects to support the preparation of the program.

The state-owned company said it had passed on data from its portfolio of projects in the implementation phase and also others that are in the “exploratory” stage – such as the search for oil on the Equatorial Margin, considered a “new pre-salt layer” and the target of controversy with the Ministry of the Environment – ​​or else in the planning phase, as biorefining. Although they may form part of the new PAC, all the projects listed by the oil company were already foreseen in its strategic plan for the 2023-2027 period, released at the end of November, still under the government of Jair Bolsonaro (PL).

Planalto also consulted governors on priority projects and last month launched a platform for monitoring stalled works called “Mãos À Obra”, where state and municipal managers can update the status of projects carried out in partnership with the federal government.

TCU found that 21% of PAC works were paralyzed

Lula has emphasized in his speech the need to resume stagnant works that he says he inherited from his predecessors. The PAC itself, however, left behind a long trail of interrupted projects.

An audit by the Federal Court of Auditors (TCU) carried out in 2019 found that 2,914 PAC works were at a standstill, equivalent to 21% of all contracts closed since 2007. According to the survey, of R$663 billion initially expected to be invested in the PAC, R$ 127 billion were linked to paralyzed works.

According to a publication by the Brazilian Chamber of Construction Industry (CBIC), 47% of the interrupted works stopped due to technical issues, that is, “failures, errors and omissions in the basic projects”. In another 23%, the interruption was caused by the abandonment of the contracted company.

Economist Carla Beni, an MBA professor at the Getulio Vargas Foundation (FGV), says that the first editions of the PAC were marked by poorly designed projects, management failures, high costs and incorrect delivery times. “Everything generated a mismatch between what was promised at the beginning of these programs and the amount realized by the end of these programs”, she points out.

According to her, the PAC 1 was a stage of “beginning of large constructions” and the second edition failed to bet more on new projects than on the completion of projects in progress. “That’s where a criticism of this model comes in, where the excess of public spending may have deepened our fiscal problem and produced an inflationary process”, she evaluates.

A good part of the projects were delivered with great delay in relation to the initial deadline. This was the case of three large hydroelectric plants in the Amazon, the Santo Antônio, Jirau and Belo Monte plants. The latter, in addition to starting to deliver energy much later than promised, reaching full operation only at the end of 2019, was also involved in great controversy because of the impacts on the environment and indigenous communities.

In addition to relying on resources from state-owned pension funds, called upon by the government to help finance projects, the PAC also had large participation from the National Bank for Economic and Social Development (BNDES). Calculation related to 2011 shows that, of the total of R$ 327 billion in investments estimated in a portfolio of 503 projects until then, the state bank had financed around R$ 179 billion, or 55% of the total.

Another hallmark of the PAC was the frustrated attempt to make large-scale works feasible. An example was the bullet train project between São Paulo and Rio de Janeiro, which would theoretically be ready for the 2016 Olympic Games, but ended up being abandoned after cost revisions and empty auctions.

Petrobras projects such as the Premium 1 refinery, in Maranhão, which would cost BRL 41 billion and had the ambition of being the largest in the world, also fell by the wayside. After spending BRL 2.1 billion, it was canceled by the state-owned company, which considered it unfeasible.

Stimulating PPPs in this new edition of the PAC can help attract a good amount of private money and save federal expenses, says lawyer and market operator Felipe Sant’Anna, who teaches finance courses. But he has doubts about the viability of this initiative in a PT government.

“The big doubt is precisely in the internal debate of the government and the coalition that elected Lula, as the speech has always been to strengthen the state sector, placing the public machine as the main engine of development, without handing over this mission to private capital”, he says.