segunda-feira, 10 de dezembro de 2012

My view on the concession model - critics and short suggestion

In my view the excessive government intervention to the economy reflects the lack of a long-term and planned view on the best way to boost brazilian growth rates on a sustainable fashion. Basically, government is right on addressing the main bottlenecks of the economy, however, it fails to address the best model to tackle them.
In this sense, government measures like the anticipated renewal of power concession has the good willingness of energy costs reduction. However, I do not agree with the fast way those measures have been implemented, since it creates more uncertainty for the investors.

“The recent need of urgency” for the country to catch up on investments cannot lead to a bunch of sudden measures that may potentially affect private returns. Even considering the current government did not broke up the contract rules, only the expectation that government may change the rules certainly jeopardize experienced investors that have money and expertise to invest adequately on a specific sector. Investors are ruled not only by government speech, but mainly by government attitudes. If investors have doubts about government posture, then they avoid running the risks of a sudden future change.
I see a great difficulty for the government to define the concession model that balance the attractive private returns to compensate the risks related to those investments and the social objectives of low tariffs. This is very clear by looking at the delay on the definition of the model concession for roads, railroads, ports and airports.

Short Suggestion: In my opinion, government should weigh more on the attractiveness of those concession models for the private sector, by offering competitive returns and allowing private investors even having 100% of some concessions. In order to avoid abusive tariff charges, it should reinforce the role of regulatory agencies. Unfortunately it seems some of those agencies are composed by people nominated by political rather than technical criteria.


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