Government stays out of bullet train, says minister Renan Filho – 03/24/2023 – Market

The Minister of Transport, Renan Filho (MDB-AL), is anxiously awaiting the approval of the new fiscal anchor to decide the direction of his portfolio’s projects.

With the new rule, he hopes to expand the budget by almost BRL 22 billion in 2023 – more than what was executed during the entire term of his predecessor, the current governor of São Paulo Tarcísio de Freitas (Republicans).

On the table are works such as railroads, a road package and the modeling of public-private partnerships.

Renan Filho rejects the use of public money in the bullet train project between Rio and São Paulo. “The chance that it doesn’t work out is great,” he said.

Its goal is to prioritize railroads. Will the ministry spend on great works? to fic [Ferrovia de Integração do Centro-Oeste] and Fiol [Ferrovia de Integração Oeste-Leste] are structuring works of the National Logistics Plan. We conceded the first stretch of Fiol, the second [Fiol 2] it’s under construction and we think it’s still standing [a concessão]. So I could make Fiol 3 [com os recursos obtidos com a concessão do segundo trecho]. Fico is a cross-investment project with Vale [a empresa faz a obra como contrapartida pela renovação antecipada de seu contrato].

The bullet train is a private project, but analysts estimate that it will not stand up without public money. The government can enter partner? It would be good for Brazil to have a bullet train that connects Rio and São Paulo quickly and cheaply. The chance that it doesn’t work out is great, but I hope it does. But it is a work that costs BRL 50 billion. Brazil invested BRL 5 billion last year in the entire sector.

So, the government will not enter into this project? The government has no way of deciding on an expense of this size.

Mr. has always been very critical of the spending cap. Won’t the new anchor bring a limit to your folder? I criticized the spending ceiling because, in fact, it became an investment ceiling, transforming Brazil, which is one of the largest economies in the world, into the country that invests the least. In addition to treating expense and investment as an expense, without qualifying them, it was not complied with every year. It blew more than a Toyota Bandeirante tire, as we say in the Northeast. On the face of it, it was a mistake [investir tão pouco]. Here at the Ministry, they invested R$ 20 billion in the last four years. Only this year will we invest more [que todo esse período]. It will be R$ 21.7 billion.

The new fiscal anchor must tie expenditures and investments to GDP growth. Can the rules jeopardize the progress of projects in your portfolio? I don’t know the devices that will be triggered and which parameters are used [para definição de gastos e investimentos], but this countercyclical dynamic is smart. Investing more at a time when Brazil is growing less helps the country to recover. And when the economy is growing more, we can maintain the previous investment or reduce it, because other segments of the economy will compensate.

What if there is no agreement in Congress for the approval of the new fiscal anchor? We are going to invest four times more than the previous government. Now, that can’t turn into a chicken flight. What we need from the new framework is the definition of a level —be it this year’s or a little lower— for us to maintain investments. This is how the citizen does it at home. The housewife asks the children to turn off the fan when they go to sleep, turn off the light, save water, to [a família poder] buy a bag of cement and bricks to build a bigger room for the daughter, enlarge the kitchen or make a garage. This same reasoning has to be used by the country. Sometimes, in an effort to hold back government spending, everything is qualified in the same way and it is a mistake.

Do you defend more spending? India will invest US$ 33 billion. The European Union will invest 30 billion euros in Spain’s infrastructure to improve tourism. In 2022, Uruguay invested BRL 5 billion [em infraestrutura]. President Lula went to Uruguay and [o presidente daquele país] Lacalle Pou asked Brazil to make a [outra] bridge connecting the country. Then I told the president that, in fact, we should ask for the bridge to Uruguay. [Então] I am not advocating spending more, but creating a model that preserves sustainability without disqualifying expenses.

The government still does not have a solid basis for approving the fiscal anchor. What is needed to get there? It remains to finalize the proposal itself. The entire Congress defends the framework. Even the opposition. The president needs to show support and this issue is not going to stress. Tax reform, perhaps.

Will it conduct a concession program or will the focus be solely on public works? We will continue with concessions, authorizations on railways, and the government also wants to work on PPPs [parcerias público-privadas]. It needs to expand this to attract private capital. A work costing R$ 10 million can be viable if the government invests R$ 3 million and the private sector, R$ 7 million. This goes for work big and small. Let’s imagine that the new framework allows us to maintain the budget for this year or the next and the government has R$ 100 billion in investment in four years. We can take BRL 15 billion of this total and leverage another BRL 50 billion with PPPs.

But why, until today, have PPPs only advanced in the states? Because the private sector does not believe that the public will put the money. Because in the past it did not. We have to create a credible model.

Will PPPs then not replace concessions? No. will be [feitas] for contracts that cannot be granted 100% by the government.

Will the setback in the privatization of the port of Santos affect the transport capacity of the railroads? In the port of Santos there was no setback. The government is taking a look at which model is best. An example: all the orange juice exported by Brazil today leaves through the port of Santos. And if the port [privatizado] no longer want to export juice? Our product may get more expensive [saindo por outro porto]. The port works fine. The difficulty is getting to Santos.

Railway concessionaires speak of contractual imbalance if the expansion of the port’s outflow capacity via privatization does not come out. They were more interested in the port of Santos than their railroads. This is the great truth. The port of Santos is the icing on the cake.

Do you mean that they wanted to buy the port? Certainly. All dealers are very strong and the main agents [interessados]. Therefore, they defend the connection of the two things. Nobody wants to decide the path. It makes no sense to start doing what the other [governo] had been doing. Why, he lost the election.

How do you intend to attract the private sector in a scenario of inflation and interest rates of almost 14%? Approving the fiscal framework that allows the reduction of the basic interest rate in Brazil.

Does that just reduce the rate? Will help.

President Lula gives signs that the BC president is boycotting the government by holding interest rates at high levels. Do you agree? Inflation is below the international average and interest rates are much higher. If it approves the anchor, BC will no longer have an argument. If it drops from 13.75% to 9.75% it already reduces interest payments [da dívida pública] at BRL 100 billion.

Do you think that the president of the BC is politically active? I think the president of BC, as brave as he is, would not do that. But if Brazil approves this framework and expectations are anchored, interest rates will not fall.

A constitutional amendment required the Union to accept payment of concessions through precatories. The AGU, in practice, suspended it. What do you think about it? You have to approve the framework because, just as you can’t force the government to spend more by decree, you can’t force it to collect less either.

But it’s constitutional. The government just took over and it has no regulation. In Brazil, unfortunately, they passed a law not to pay precatório in the past government. It says the following: the government has a precatório of R$ 100 and will pay respecting a queue. A guy with a precatório of R$ 100 agrees to sell it to a dealer for R$ 30 as long as he receives it today. Pay R$30 and use a R$100 bond to settle a grant. This means reducing revenue for the government. Just as the government cannot increase revenue indiscriminately, it cannot reduce revenue. It causes fiscal insecurity for the country. The same private sector that demands sustainability, when this is their specific case, wants to pay less for a grant. I think I shouldn’t be able to. But this is law and has already been judicialized. It is plausible that the STF recognizes the Constitution and that the government establishes a way to pay the grant [com os precatórios].

You already had a political clash with the president of the PT involving the modeling of Paraná highway concessions. How are you dealing with PT interference? I had no clash with the president of the PT. She works on this project as a deputy from Paraná. She is concerned because the state paid the most expensive toll in Brazil. Works were established in the contract that were not done. She only made one caveat: that the model [de concessão] ensure that the works are done, because the state grows a lot, with the lowest toll possible. By the way, it is the same thing that the governor, I, the Civil House and President Lula want. We are talking about the model, which is in the final stages. It foresees resource contributions in case the concessionaire wants to give discounts as a way to guarantee that there will be money for the necessary investments. If it works out, it will serve as a model for other state highways, such as SC and MS. The BNDES is already structuring. There are more than 15 thousand km of highways.

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X-RAY

Renan Filho, 43 years old
Minister of Transport. Graduated in Economic Sciences from UnB. He was mayor of Murici (2005-2010), federal deputy (2011-2015), governor of Alagoas (2015-2022) and was elected senator in 2022.