ÁREA ANPEC: 4 - ECONOMIA DO SETOR PÚBLICO

Transcription

1 ÁREA ANPEC: 4 - ECONOMIA DO SETOR PÚBLICO PUBLIC INVESTMENT OR PUBLIC-PRIVATE PARTNERSHIP? A DECISION RULE BASED ON INDIFERENCE CURVE OF PUBLIC INEFICENCY AND PRIVATE RISK PREMIUM PEDRO JUCÁ MACIEL Tesouro Nacoal / Mstéro da Fazeda Uversdade de Brasíla (UB RESUMO Exste um dlema ao govero sobre a forma de facameto e gestão dos projetos de fra-estrutura: vestmeto públco tradcoal ou PPP. Assume-se que há efcêca do govero para a execução dos vestmetos públcos tradcoas mplcado em sobrecusto à obra. Nos cotratos de PPP, por outro lado, o parcero prvado exge um prêmo de rsco ao govero, aumetado o valor da cotraprestação públca. Este trabalho tem o objetvo de aalsar a relação etre a taxa de premo ao rsco exgdo pelo parcero prvado os cotratos de parceras públco-prvadas e o grau de efcêca assumdo ao setor públco a provsão de fraestrutura. Fo estabelecda a taxa de equvalêca etre prêmo ao rsco e efcêca públca por meo de cálculos faceros. Dessa forma, o govero dspõe de um dcador para subsído à tomada de decsão etre vestmeto públco ou PPP. Caso o govero dspoha de estmatva sobre sua efcêca por meo das dversas metodologas de aálse de efcêca, dado prêmo de rsco exgdo pelo setor prvado, pode-se decdr de forma ótma o meo para mplemetação da fra-estrutura publca. Palavras-Chave: Parcera Públco-Prvada, Iefcêca, Ivestmeto, overo. ABSTRACT There s a dlemma about the way that publc sector should face ad maage frastructure projects: tradtoal publc vestmet or PPP. It s assumed that govermet s effcet o tradtoal publc vestmets executo that mples a "drect cost" over project's costructo. O the other had, prvate parters demad a rsk premum o PPP cotracts, creasg the value of govermet cotractual costs. Ths work aalyzes the relato betwee the rsk premum demaded by the prvate parter cotracts of publc-prvate partershps ad the assumed publc sector effcecy degree o frastructure provso. Ths work makes use of facal calculus to determe the equvalet rate of premum rsk ad govermet s effcecy. As a result, govermet has a strumet to subsdy the decso betwee publc vestmet ad PPP. If govermet has estmato about ts effcecy by dfferet kds of methodologes, for a prvate premum rsk demaded, t ca decde the optmal form to mplemet frastructure projects. Keywords: Publc-Prvate Partershp, Ieffcecy, Ivestmet, overmet. Classfcação JEL: H9, H42, H49

2 . INTRODUCTION Publc-prvate partershps (PPPs are cotracts that prvate sector offers frastructure assets ad servces that s tradtoally bee provded by govermet. PPPs ca be attractve for both govermet ad prvate sector. For the govermet, prvate facg ca provde expaso of the frastructure wthout mmedately pressure o tax burde or debt. Smlarly, better maagemet of the prvate sector, as ts ablty to ovate, ca lead to crease effcecy, mprovg qualty ad costs of servces. PPPs appeared the ed of the 90s, perod that prvatzatos were losg space compared o ts prevous tme. The goal of PPP was gettg prvate captal ad expertse to maage vestmets frastructure where prvatzato had faled to act or had obstacles. Curretly, may coutres of Orgazato for Ecoomc Co-operato ad Developmet (OECD have a cosoldated program of publc-prvate partershps. Eglad s oe of the most advaced coutres related to PPP programs. PPP programs represet 4% of total publc vestmet ad have showed postve results. However, accordg to IMF (2004, t s stll early to establsh coclusos of the beefts of ths program, especally emergg coutres. There s o cosesus regardg the defto of PPP betwee coutres, ths program has two mportat characterstcs: ( provso of a servce ad vestmet by prvate parter ad ( trasferece of rsks from govermet to prvate sector. Accordg to Borges ad Neves (2005, PPP dea must be compared to a leasg operato, where govermet rets (cotracts a servce provded by prvate sector, eve f the parter has to costruct fra-structure 2 before operatg. The prvate parter must be remuerated oly f the servce s gve as satsfactory. Assets should be reversble to cocessor power at the ed of the cotractual perod. Ths model s called bult, operate ad trasfer (BOT. PPP accoutg s a mportat aspect to be cosdered by the govermet. Accordg to Sadka (2006, t s possble that the dea of the PPPs has bee "veted" out of a desre to crcumvet regular budgetary procedures. The accoutg regstrato of a tradtoal publc vestmet s made o the frastructure costructo tme. Dfferetly, PPPs expedtures s calculated ad regstered alog the tme of the cotract, as a "ret" of good or servce. By ths reaso, govermet assumes paymet oblgatos for future taxpayers. It s ecessary trasparecy o future commtmets assumed by each part, ether relato to publc sector future paymets as o rsks shared by prvate ad publc parter. Moreover, govermet should verfy the fscal mpacts of these commtmets o the sustaablty of publc accouts. Cotracts of PPPs are potetal cotget labltes that ca provoke fscal ad credblty stablty to the govermet fscal polcy. FMI (2004 metos that PPP cotracts volve a rage of dfferet rsks. These ca be usefully dvded to fve categores (somewhat overlappg: ( costructo rsk, whch s related to desg problems, buldg cost overrus, ad project delays; ( facal rsk, whch s related to varablty terest rates, exchage rates, ad other factors affectg the facg costs; ( performace rsk, whch s related to the avalablty of a asset, cotuty ad qualty of servce provso; (v demad rsk, whch s related to the ogog eed of servces; (v resdual rsk, whch s related to the future market prce of a asset. These rsks are preset o publc, prvate ad publc-prvate vestmets. Oe of the objectves of the PPPs s to trasfer part of these rsks from govermet to prvate sector [Borges ad Neves (2005]. Eve applyg prvate captal ad chagg admstratve resposblty of frastructure cause beefts by themselves, rsk trasferece s ecessary for the full explotato of these chages, ad to develop a correct cetves structure to prvate parter. The prvate Idepedet studes metoed IMF ( If ecessary.

3 sector must cosder rsks take to make decsos. Decso s expected to be more effcet f rsks are cosderated. O the momet that govermet aalyzes whch method should be appled for facg vestmet (tradtoal publc cotracts or PPP, t should aalyze the value for moey (VFM of the procuremet. VFM s defed by Borges ad Neves (2005 as the quatfcato of the dfferece betwee costructo ad maagemet of a asset by State or prvate parter, cosderg rsks, beefts ad costs. I accordace to Departmet of Face ad Admstrato of the Australa overmet (2007, value for moey ca be revealed as: ( the delvery of a servce or capablty at a lower cost; ( greater certaty of the facal outcome due to less exposure to sgfcat rsks; ( creased beefts to the ed-users of a servce due to the publc sector's focus o servce delvery rather tha asset procuremet. The govermet ad prvate parter typcally adopt dfferet methods for prcg market rsk. overmet teds to use the rsk free terest rate to dscout future cash flows whe apprasg projects, whle prvate bdders, for PPP projects, wll clude a rsk premum the dscout rate to future project eargs. As a cosequece, accordg to FMI (2004, the choce betwee publc vestmet ad PPP may be based favor of publc vestmet. However, the argumet of the prvate sector hgher effcecy (lower cost for provso of goods ad servces (or costructo ad maagemet of a asset ca be used to justfy the opto of PPP, eve f ths opto s facal costly. Ths artcle has the objectve to aalyze the relato betwee prvate sector demaded rsk premum ad the supposed effcecy degree of the publc sector o frastructure provso. It s calculated the dfferece curve of prvate rsk premum ad publc sector effcecy. The objectve of ths curve s to develop a tool to be cosdered o the decso for frastructure provso betwee publc vestmet ad PPP. Ths work has sx sectos. I secto two, t s preseted legal ad sttutoal aspects of the PPP Brazl. Thrd secto treats about the theory ad refereces about the estmato of the publc effcecy ad the trade-off betwee the publc effcecy ad prvate rsk premum. The facal model that calculates the dfferece curve of prvate rsk premum ad publc sector effcecy are preseted secto four. Secto fve smulates dfferece curve cosderg dfferet scearos. Fally, the last secto presets the ma results ad coclusos of ths artcle. 2. PUBLIC-PRIVATE PARTNERSHIP REULATION IN BRAZIL I Brazl, the regulato for PPP cotracts of Federal overmet s establshed Law,079/2004. Ths law s a complemet of Law 8,987/95 that treats about cotracts of commo publc cocesso (facally sustaable. Cotracts of PPP must take at least 5 years ad mmum value of R$ 20 mllos (or US$.8 mllos. It ca ot have as a uque objectve: ( cotract labor, ( equpmet supply or stallato, or ( just a costructo of a frastructure. Accordg to that Law, PPP cotracts are classfed two categores: sposored cocessos ad admstratve cocessos. Sposored cocessos are cotracts whch prvate parter ca charge users for utlzato of goods or servces. overmet partcpates o the cotract sposorg facally the project to make t ecoomcally vable (Example: roads. Admstratve cocessos are those cases whe the State s drect or drect user of the cocesso ad s resposble exclusvely for the flow of paymets to the prvate parter (Example: petetares. PPP agreemets requre prvate parter to create Specal Purpose Vehcle (SPV 3. SPV s resposble for the servce establshed o the cotract. overmet caot partcpate of that 3 I Portuguese, Socedade de Propósto Específco (SPE. 2

4 socety. SPV must follow corporatve goverace stadards ad adopt stadardzed ad trasparecy accoutg prcpals. Oe of the advatages of SPV creato requremet s the dea of fudg dversfy. I accordace to Borges ad Neves (2005, there are smlar characterstcs of project face ad PPP facal desg whch volves agets able to develop sophstcated facal structures for attamet of establshed goals. Commo elemets of these structures are: ( securtzato of future recepts flow o market egotated bods; ( focus frastructure cocesso rules ad; ( techques of rsk dluto ad mtgato. Federal Decree 5,385/2005 regulates the PPP Maagemet Commttee (CP 4. The Commttee s resposble for: ( defto of prortes servces to be maaged by PPP regme; ( dscple procedures ad ssues of PPP cotracts; ( authorzato of procuremet process ad approve ts results ad; (IV apprecato of balaces ad reports of PPP cotracts uder executo. The CP s formed by a member of the Mstry of Plag, Budget ad Maagemet (MPO, Mstry of Face ad Presdetal Staff Offce. MPO s resposble to evaluate the mert of the project. Treasury Departmet has the duty to aalyze govermet expeses o PPP cotracts ad ts lmt of % of Net Curret Reveues 5 (RCL 6. I 2005, t was created overmet Publc-Prvate Partershp Trust Fud 7 (FP. The objectve s to guaratee the prvate sector of publc facal commtmets. If govermet becomes default o ts paymets, prvate parter ca request PPP Trust Fud ts facal recepts rghts. Itally, Federal overmet fuded R$ 6 bllos composed by Vale do Ro Doce, Eletrobras ad Baco do Brasl bods o stock market. The Fud s maaged by Baco do Brasl, a depedet state owed frm. It s expected that FP reduces the facal rsk of govermet default of ts paymet oblgatos ad, as a cosequece, the facal cost to the project 8. Law.079/ 2004 establshes lmts for Federal overmet to cotract PPP project. Federal overmet s oly allowed to cotract PPP f the sum of the aual govermet facal oblgatos of cotracts (paymets s feror to % of the Net Curret Reveues (RCL for the ext projected te years. The objectve of ths restrcto s to guaratee fscal resposblty of publc accouts. PPP cotracts ca compromse future resources ad be trasformed to cotget labltes. Art. 28 of PPP Law expad ths lmt to States ad Mucpals. I ths case, Federal overmet susped grat of guaratees for debt assumpto or volutary facal trasfereces for those govermet levels f the expedture lmt s ot respected. It s mportat to otce that PPP Law does t prohbt States ad Mucpals to exceed the lmt; the Law just pealzes (facally them. States ad Mucpals must form prevously Seate ad Natoal Treasury the allowace of the Law before cotract PPP project. The trasparecy of oblgatos ad rsks assumed by govermet 9 had bee regulated by Act. 64/2006 of the Natoal Treasury. Art. 7 establshes that publc bodes must regster o ts sheets the estmated values of assumed rsks guarateed to prvate parter. Accoutg regstrato methodology must reflect preset value of all the oblgatos of publc parter cotaed o cotract. Moreover, the rsks assumed by publc parter must be regstered as a debt for fscal ssues. eerally, PPP Brazla legslato s accordace wth teratoal prcples o the subject. O fscal resposblty matter, Brazl has goe forward, establshg lmts to cotract (assume expedtures of PPPs. PPPs are a way to expad the publc expedtures o the tme, t 4 I Portuguese, Comtê estor das PPPs (CP. 5 I portuguese, Receta Correte Líquda (RCL whch s the total recepts less trasfereces to States ad Mucpals overmets. 6 Art. 22 of.079/2004 Law. 7 Fudo aratdor das Parceras Públco-Prvadas (FP. 8 CAPM method would prce the reducto of the facal rsk volved o PPP Project. 9 Metoed by Sadka (2006 ad FMI (2004 3

5 s mportat the establsh lmts for publc expedtures commtmets to guaratee fscal sustaablty o log ru. 3. INDIFERENCE CURVE OF PUBLIC INEFICENCY AND PRIVATE RISK PREMIUM Most part of the studes that treats about publc expedtures effcecy uses oparametrc methods, where a set of puts (costs or goods ad servces s compared to outputs (performace dces. I accordace to Alfoso (2007, the ecoomc effcecy ca be dvded : techcal effcecy ad alocatve effcecy. Techcal effcecy s defed whe a ut of decso (coutry, govermetal agecy, compay, etc s able to get a maxmum output for a fxed set of puts, or t wll be able to mmze producto puts, for a fxed level of output. The most commo methodology for ths purpose s the DEA Model (Data Evelopmet Aalyss. Allocatve effcecy reflects the capacty of a ut of decso to use several puts the best proportoalty to produce determed output. Customarly, works that apply the DEA methodology to measure effcecy formulate a comparatve aalyss of decso uts. Alfoso, Schuckecht ad Taz (2006 calculate the effcecy of 24 developg coutres. The put varable s govermetal expedtures o: curret expeses, trasfereces, paymet of terests, vestmet ad educato ad health expeses. As a output to represet publc sector effcecy, t was defed the followg varables: ( admstratve (corrupto, bureaucracy, formalty of the ecoomy ad effcecy of the judcary, ( educatoal (qualty of the mathematcs ad sceces, ( health (fatle mortalty ad lfe expectacy, (IV dstrbutve ( coeffcet, (v ecoomc stablty (flato ad stablty of the ecoomc growth e (v ecoomc performace (uemploymet ad growth of the DP. Fgure presets the results of ths work. The table wth otes ad the rakg of the most ( effcet coutres s o Appedces. Fgure Producto Possblty Froter ( Source: Afoso, Schuckecht e Taz (2006 4

6 Cosderg lmtatos of DEA methodology ad the choce of those specfc varables as a output, the artcle suggests that Brazl s oe of the most effcet coutres the sample. I Fgure, the vertcal dstace betwee Brazl (0,75 ad the border of effcecy (,53 shows how the publc sector effcecy dcator could be mproved for a fxed expedture quatty (effcecy terms of output. The effcecy terms of put s determed by horzotal dstace betwee total level of expedture of Brazl (46.6% the DP ad the border (7,8%. These results dcate that, f Brazl were the most effcet coutry of the sample, t could sped 7.8% of DP ad acheve the same output dcator of publc sector. So, Brazl has a effcecy "drect cost" of 62% for publc expedtures Bouer (2007 aalyses Brazla ctes effcecy for the provso of the publc servces: school regstratos (educato, hosptals procedures (health ad garbage collecto (urbazato. The costat returs of scale DEA model dcates a wastefuless of 70.4% of the publc expedtures. Cosderg o-costat returs of scale model, the effcet result s 47.4% of facal resources. Rbero ad Rodrgueses Júor (2007 make a exteso of the Alfoso, Schuckecht ad Taz (2006 model ad apply to 2 coutres of Lat Amerca. The results were smlar. Brazl s the secod worst coutry effcecy rakg of publc expese (0,63, losg oly to Colomba (0,505. The results dcate that Brazl could save 40% of ts resources wthout modfyg the results of ts dcators. I relato to publc versus prvate effcecy comparatve aalyss, Foure ad Burger (2000 meto that dffereces betwee govermet ad prvate sector effcecy are dffcult to aalyze emprcally (ecoometrcs. I some cases, "products" of the govermet are ot quatfed. Moreover, the objectves of the publc sector ca be ot oly the "product" (effcecy, but also socal ad poltcs (equty matters. Despte ths fact, most part of authors detfes prvate sector as more effcet tha the publc sector for the resources maagemet. FMI (2004 suggests, as geeral rule, that the prvate property s preferable to publc whe the prces of compettve market ca be acheved. I such crcumstaces, prvate sector s guded by the market competto to sell products o the prce that cosumers desre to pay ad by the stock market dscples the profts amout. There are some markets falures as publc goods that justfy the govermet property. However, t s mportat to meto that f govermet level of effcecy s sgfcat hgh, market mperfecto ca be smply substtute by falures of govermet [FMI (2004]. These argumets ca justfy the use of PPPs as a combato of govermet force wth the prvate provso. The PPP does ot solve market falures, but t mmzes the govermet falure rsk. Foure ad Burger (2000 expla that the ma argumet for the govermet effcecy for goods ad servces provso s the structure of cetves of the "bureaucrat". The motvatos of the govermet offcers are ot oly ther oblgatos of the work, but ther poltcal objectve as status or power maxmzato. The behavor of "bureaucrat" leads to a wrog allocato of the resources. There s a tedecy to supply publc goods above ther ecessary quatty [Brow ad Jackso (990]. Corry (997 descrbes the beefts of prvate sector maagemet for publc vestmets, as case of PPPs. Frst, the prvate sector has gas of effcecy due ts greater flexblty, better admstrato ad a cetves oreted behavor. Moreover, there s a better qualty supply of servces at the same prce. Thus, focus productvty ad results; prvate sector has dscretoary to detfy excellet allocatos, reducg costs of servces for users. However, relato to costs of facg vestmets, prvate sector has dsadvatage compared to publc sector. Accordg to Sadka (2006, prvate sector typcally acqures loas wth hgher terests tha govermet. By ths reaso, the prvate sector apples a hgher dscoutg rate of cashes flows, causg a egatve mpact for the attractveess of the vestmet project. A project ca preset a postve et effect to govermet ad egatve to 5

7 prvate sector. Ths fact wll probably cause the rejecto for prvate provso of publc goods ad servces. A way to solve ths problem s the govermet assumes that prvate parter adopts dfferet method of prcg rsk o the momet of projects evaluato. overmet teds to use the rsk free terests rate to dscout future cash flows of the project. Prvate parter wll use a rsk premum o ts dscout rate. Thus, o PPP cotracts that govermet assumes publc paymets for facal vablty of the project, the cost of the prvate parter rsk premum mpacts postvely publc facal oblgatos (cost or user s prce of servces. By ths reaso, there s a trade-off betwee: ( publc sector effcecy 0 for drectly mplemetato of vestmet projects, defed as a "overpaymet of frastructure ad; ( I case of PPP project, facal costs of project by rsk premum requested by prvate parter that wll be faced by the govermet oblgatos or by user s prce of servces. The proposed model has objectve to quatfy the effcecy assumed for the publc sector for a gve rsk premum demaded by prvate parter (facal cost or, other words, calculate the dfferece curve betwee rsk premum ad publc effcecy. The objectve of ths curve s to subsdy govermet wth a strumet that s able to dcate the best structure of fudg: tradtoal publc vestmet or PPP, cosderg a gve effcecy ad rsk premum. 4. FINANCIAL MODEL Assume that mplemetato of a publc frastructure demads two phases: (a costructo ad (b mateace (or maagemet. Moreover, there are three forms of frastructure mplemetato: ( Smple Cocesso, ( Drect Publc Admstrato or ( Publc-Prvate Partershps. ( Smple Cocesso: cotracts whch publc sector authorzes prvate tatve to maage the frastructure, chargg users for the offered servce. A mportat characterstc of cocessos s the facal vablty of the project. The smple cocesso s a facal autosustaable project. Its future facal flow of user s tarff recepts pays vestmets ad operatoal costs of the frastructure deducted by a dscout rate. ( Drect Publc Ivestmet: facal structure whch govermet s resposble to face the ecessary vestmets of the project ad maage the mateace of the frastructure. Usually, govermet does t tarff users for the offered servces at frastructure. ( Publc-Prvate Partershp: t s a sposored cocesso where prvate tatve s resposble for vestmets ad mateace of the frastructure. Users are charged for the offered servces. However, the project s ot facally auto-sustaable. It s ecessary publc trasfers to assure the facal vablty of the project. For a determed vestmet project, t s assumed that : ( govermet decded to charge users for the frastructure servce, ( project s ot facal auto-sustaable ad ( govermet requests prvate sector to become resposble for mateace of frastructure. Cosequetly, there are two possbltes for the govermet: Opto I: Cotract PPP cludg costructo (prvate sector ad mateace (maagemet of the frastructure (prvate sector. Opto II: Dvde mplemetato of frastructure two stages: ( costructo by drect publc vestmet (publc sector ad mateace by smple cocesso cotract (prvate sector. 0 Or prvate sector efcecy. The reaso for these assumptos s to fd a dfferece stuato betwee two optos of project mplemetato. 6

8 Moreover, assume for mplemetato of the project that: ( The costructo of the frastructure takes oly a year (year zero. ( Servces recepts (user s tarff ad operatoal expedtures are equal ad wll happe after year zero ( T. As cosequece, case of PPP cotract, the facal amout of publc trasfers must be equal to the budget of costructo frastructure to assure the facal vablty of the project, et preset value = 0 (NPV. ( There s o costructo rsk. (v If Opto I, govermet wll make ts trasfers by lear yearly paymets durg the cotract, based o the servce of frastructure mateace ( T. The trasferred value wll be eough to assure project s NPV equal zero. Prvate sector wll demad a rsk premum for the govermet. (v If Opto II, by the fact the govermet s effcet, there wll be a overpaymet (cost for frastructure costructo. Opto I has advatage of better effcecy of prvate sector for frastructure costructo. However, prvate tatve wll demad a hgher dscout rate o NPV calculus to prce rsk premum (. The rsk premum wll be faced by publc trasfers (govermet hgher facal cost. Opto II has advatage of a lower facal cost for the govermet. I that case, the govermet opportuty cost of publc resources s the rsk free terest rate of the ecoomy. However, t s assumed that costructo of frastructure drectly by govermet wll be effcet, geeratg a overpaymet (costs for the govermet. 4. OPTION I: CONSTRUTION AND MAINTENANCE BY PPP Cosderg assumptos ( ad (, the facal aalyss of opto I wthout publc trasfers s: NPV T 0 I NPV 0 T Thus, NPV Total I Prvate Itatve must requre for govermet the facal vablty of the project, NPV=0. Thus, govermet has to make ts aual lear paymet to prvate sector to assure vablty. Accordg to assumpto (v, govermet wll trasfer t perods after the costructo of the frastructure ( T. Each govermet paymet must be equal to: I P T T ( P I Where: I = Total vestmet. P = overmet aual paymet (trasfer. = Free rsk terest rate = Rsk premum requred by prvate sector. T t ( ( 7

9 Equato ( presets a geometrc progresso wth fte terms. The result of ts sum s: ( ( ( I P After some algebra operatos, each govermet aual paymet s expressed as: ( ( ( I P (2 The NPV total cost of govermet at the project s calculated by addg all trasfers cosderg govermet rsk free terest rate as a dscout rate: T T PPP P ( (3 Equato (3 presets also geometrc progresso wth fte terms. The result of ts sum s: ( ( ( P PPP After algebra operatos, the result s: P PPP ( ( (4 Substtutg (2 (4, we fd the total expedture of the govermet et preset value wth PPP opto: I PPP ( ( ( ( ( (5 8

10 4.2 OPTION II: CONSTRUTION BY PUBLIC DIRECT INVESTIMENT AND MAINTENANCE BY SIMPLE CONCESSION I Opto II, the govermet faces the ecessary vestmets for costructo of frastructure ad, after that, bds the frastructure maagemet for the prvate sector as a smple cocesso. As operatoal recepts ad costs are equal T 2 [assumpto (], govermet wll ot have ay cost o the smple cocesso cotract for mateace. However, govermet s resposble for frastructure costructo. It s assumed that the govermet s effcet [assumpto (v]. Thus, project wll have a extra expedture (overpaymet of % for ts executo. The facal aalyss of Opto II s gve by: Thus, NPV T ( NPV 0 T NPV Total 0 I ( I Where: I = Total vestmet. = overmet efcecy, extra cost (%. Thus, the total govermetal expedture case of opto II NPV s: IvPub ( I (6 4.3 INDIFERENCE CURVE The dfferece curve of prvate rsk premum ad publc effcecy s calculated cosderg a stuato where the govermet s dfferet betwee facg the project by PPP (opto I or jot publc vestmet ad smple cocesso (Opto II. Thus, t s ecessary to make equal the govermet costs of both optos (5 ad (6: PPP IvPub ( ( I I ( ( ( ( Isolatg term o equato, we ca fd the followg fucto: ( ( ( (,, ( ( (7 Ths s the fucto of publc effcecy relato to the prvate premum rsk, terests rate ad perod of cotract. Ths relato s a prcg method of the mplct publc effcecy o PPP cotracts whe t s determed the premum rsk rate of project by prvate parter, usually calculated by CAPM model. If govermet estmates ts effcecy o the maagemet of frastructure 2 NPV=0 9

11 projects 3, t ca establsh ts optmal decso betwee PPP (Opto I or jot tradcoal publc vestmet ad cocesso (Opto II, cosderg the demaded rsk premum. 5. SIMULATIONS Ths secto presets smulatos of the dfferece curve of prvate rsk premum ad publc effcecy ( overcost of govermet drect vestmet. The publc effcecy ( s a fucto of rsk premum demaded by prvate sector (, rsk free terest rate of the ecoomy ( ad the perod of cotract ( YEARS CONTRACTS raph presets the dfferece curve of prvate rsk premum ad publc effcecy for dfferet values of the ecoomy rsk free terest rates a perod of 0 years. It s observed that dfferece curves are covex relato to the premum rsk rate 4. Moreover, the effcecy s egatve related to the rsk free terest rates of the ecoomy (. The reaso for ths behavor s the formato rule of parameter that equals the costs of govermet Optos I ad II et preset value. As dscout rate of NPV s fxed as, there s a egatve relato betwee terests rate ad project cost ad, as cosequece, o publc effcecy. raph 40% Idfferece Curve of Prvate Rsk Premum ad Publc Ieffcecy t = 0 years 20% 00% Optmal Decso: PPP Iefcecy 80% 60% 40% 20% Optmal Decso: Publc Ivest. + Cocesso =2% =6% =0% =4% 0% 0% 2% 4% 6% 8% 0% 2% 4% 6% 8% 20% Rsk Premum Rate 3 Usg Methodologes lke DEA

12 Table presets some referrg values of assumed effcecy ad premum rsk rate for = 6% a.a. Table Premum x Iefcecy Relato ( = 6% a.a. Rsk Premum 5% 0% 5% 20% Publc Iefcecy 25% 52% 82% 2% Idfferece curves raph dcate the optmal decso rule of facg vestmet projects. Based o estmatos of publc effcecy 5 ad the calculated rsk premum demaded by prvate sector, govermet ca determe f the project should be faced by PPP or jot drect publc vestmet (costructo ad smple cocesso (mateace. The left superor area of the dfferece curve dcates that assumed effcecy s relatvely hgher tha rsk premum of prvate sector. Thus, the optmal decso s to mplemet frastructure project by PPP. The rsk premum requred by prvate sector s relatvely hgher tha effcecy of publc sector feror rght area. I those cases, PPP s costly. The best decso s govermet drect vestmet plus smple cocesso YEARS CONTRACTS raph 2 presets the dfferece curve for a 5 years cotract. The perod crease of publc paymets (cotract govermet trasfers, fluecg postvely the rsk premumeffcecy relato. The reaso of ths behavor s the hgher facal costs of PPP cotract occurred by loger durato of govermet aual trasfers. raph 2 200% Idfferece Curve of Prvate Rsk Premum ad Publc Ieffcecy t = 5 years 75% 50% Optmal Decso: PPP Iefcecy 25% 00% 75% 50% 25% Optmal Decso: Publc Ivest. + Cocesso =2% =6% =0% =4% 0% 0% 2% 4% 6% 8% 0% 2% 4% 6% 8% 20% Rsk Premum Rate Table 2 presets some pots of dfferece curve for = 6%a.a to be compared wth 0 years cotract values. For a premum rsk of 5%, t s observed that there s a crease from 5 Oe way s to use DEA methold..

13 25% (0 years to 35% (5 years of effcecy requred, or 40%, for the cotractual dfferece. Table 2 Premum x Iefcecy Relato ( = 6% a.a. Rsk Premum 5% 0% 5% 20% Publc Iefcecy 35% 74% 6% 6% Dffere.% (Cotract 0ys 40% 42% 43% 43% YEARS CONTRACTS raph 3 presets the dfferece curves betwee rsk premum ad publc effcecy for cotracts of 20 years. The facal cost of publc-prvate partershp cotracts rses relato to shorter perod cotracts. Ths fact ca be vsualzed by the dfferece curves clato (requred effcecy. raph 3 Iefcecy 270% 240% 20% 80% 50% 20% 90% 60% 30% Idfferece Curve of Prvate Rsk Premum ad Publc Ieffcecy t = 20 years Optmal Decso: PPP 0% 0% 2% 4% 6% 8% 0% 2% 4% 6% 8% 20% Rsk Premum Rate Optmal Decso: Publc Ivest. + Cocesso =2% =6% =0% =4% It s verfed, Table 3, the relatos betwee effcecy ad rsk premum for values of 5%, 0%, 5% ad 20%. There s a crease of assumed effcecy relato to the prevous smulatos. It s observed that the average crease of the effcecy s 79% relato to 0 years cotract for a gve premum rsk. Table 3 Premum x Iefcecy Relato ( = 6% a.a. Rsk Premum 5% 0% 5% 20% Publc Iefcecy 44% 93% 46% 20% Dffere.% (Cotract 0ys 76% 79% 79% 79% 2

14 YEARS CONTRACTS I 30-years cotracts, t s observed that the assumed publc effcecy has a sgfcat crease relato to the prevous smulatos. Ths fact makes the choce favor of publc vestmet plus smple cocesso (Opto II to face frastructure. raph 4 Iefcecy 400% 360% 320% 280% 240% 200% 60% 20% 80% 40% Idfferece Curve of Prvate Rsk Premum ad Publc Ieffcecy t = 30 years Optmal Decso: PPP Decsão Ótma: PPP 0% 0% 2% 4% 6% 8% 0% 2% 4% 6% 8% 20% Rsk Premum Rate Optmal Decso: Publc Ivest. + Cocesso =2% =6% =0% =4% It s mportat to meto that the assumed effcecy sesblty for the rsk free rate of the ecoomy ( creases for legthe cotracts. Table 4 Premum x Iefcecy Relato ( = 6% a.a. Rsk Premum 5% 0% 5% 20% Publc Iefcecy 58% 23% 90% 258% Dffere.% (Cotract 0ys 34% 35% 33% 30% Table 4 shows the value of the assumed publc effcecy that geerates dfferece betwee two cotract optos: PPP or publc vestmet plus cocesso. It has a o lear postve relato wth the perod of cotracts (. The crease of publc efcecy requred, relato to 0 years cotract, s aroud 33%. 6. RESULTS AND CONCLUSIONS Ths artcle has the objectve to aalyze the relato betwee premum rsk rate demaded by the prvate parter ad the degree of effcecy assumed to frastructure provso by publc sector. The dfferece curve of prvate rsk premum ad publc sector effcecy s a dcator to subsdy govermet decso of publc frastructure projects mplemetato: publc vestmet or PPP. The proposed facal model s determed by calculatg the relatoshp betwee publc sector effcecy ad prvate rsk premum, assumg two equvalet optos of 3

15 frastructure projects fudg. Ths relatoshp determes publc effcecy as a fucto of the rsk premum (, rsk free terest rate of the ecoomy ( ad perod of the cotract (. Smulatos dcates that publc sector effcecy has: ( postve relato wth rsk premum demaded by prvate parter, ( egatve relato wth rsk free terest rate of the ecoomy ad ( postve relato wth the perod of the cotract. Ths work quatfes the sesblty of the model for these varables ad dcates the optmal decso for govermet to the facg frastructure cofgurato. The crease the perod of publc trasfers (paymets of PPP cotracts ( ad the rsk premum demaded by prvate parter ( fluece postvely the decso favor of publc vestmet (opto II. The reaso for ths behavor s the crease of facal costs of PPP cotracts by allogg publc paymets or the value of dscotg rate (rsk premum of facal flow. The egatve relato betwee publc effcecy ad ecoomy free rsk terest rate ( s determed by the formato rule of parameter. Ths parameter equals the govermet cost o the two proposed optos terms of et preset value (NPV. As the dscoutg rate of NPV was establshed as, t mpacts egatvely the facal cost of the project ad, cosequetly, publc effcecy. Ths work ams to develop a model able to measure the mplct publc effcecy assumed PPP cotracts o the momet that prvate rsk premum s determed. If govermet estmates ts effcecy o the maagemet of frastructure projects 6, t ca establsh ts optmal decso betwee PPP or tradcoal publc vestmet, cosderg the demaded rsk premum. REFERENCES AFONSO, A. A Efcêca do Estado. Aspectos do Desevolvmeto Fscal. Orgazadores: Rogéro Bouer e Mauríco Saboya. Brasíla: IPEA, AFONSO, A; SCHUCKNECHT, L; TANZI, V. Publc Servces Effcecy: evdece for ew EU members ad emergg markets. Europea Cetral Bak Workg Paper. 58, ASSAF NETO, A.; Mercado facero. 6ª edção. São Paulo: Atlas, ; Faças corporatvas e valor. ª ed. São Paulo: Atlas, BORES, L. F. X. ; NEVES, C. Parcera Públco-Prvada: Rscos e Mtgação de Rscos em Operações Estruturadas de Ifra-Estrutura. Revsta do BNDES, Ro de Jaero, v.2,. 23, p. 73-8, BOUERI, R. Uma Avalação da Efcêca dos Mucípos Brasleros a Provsão dos Servços Públcos Usado Data Evelopmet Aalyss. Aspectos do Desevolvmeto Fscal. Orgazadores: Rogéro Bouer e Mauríco Saboya. Brasíla: IPEA, Usg Methodologes lke DEA 4

16 BUARQUE, C.; Avalação Ecoômca de Projetos. Ro de Jaero: Campus, 984. BROWN, C. V. ; JACKSON, P.M. Publc Sector Ecoomcs. 4 th Edto Blackwell, Oxford, 990. COELLI, T. ; RAO, D. ; O DONNELL, C. ; BATTESE,. A Itroducto to Productvty Aalyss. 2. Ed. New York: Sprger, Effcecy ad CONTADOR, C. R. Avalação Socal de Projetos. Atlas, 98. CORRY, D. Publc Expedture: Effectve Maagemet ad Cotrol. The Dryde Press, Lodo, 997. Iteratoal Moetary Fud; Publc-Prvate Partershps. Fscal Affars Departmet, 2004 FOURIE, F. ; BURER P. A Ecoomc Aalyss ad Assessmet os Publc-Prvate Partershps (PPPs. The South Afrca Joural of Ecoomcs De Sud-Afrkaase Tydskrf vr Ekoome, v. 68: 4, MURILLO-ZAMORAMO, L. Ecoomc Effcecy ad Froter Techques. Joural of Ecoomc Surveys, v. 8,., p , MUSRAVE, R. A. Recosderg the Fscal Role of the overmet. Amerca Ecoomc Revew,. 87, p , 997. RIBEIRO, M.; RODRIUES JÚNIOR, W. Efcêca do asto Públco a Amérca Lata. Aspectos do Desevolvmeto Fscal. Orgazadores: Rogéro Bouer e Mauríco Saboya. Brasíla: IPEA, SADKA, E. Publc Prvate Partershps: A Publc Ecoomcs Perspectve. IMF Workg Paper,. 77, TANZI, V. SCHUKNECHT, L. Recosderg the Fscal Role of overmet: the teratoal perspectve. Amerca Ecoomc Revew, v. 87,.2, p , 997. DEPARTMENT OF FINANCE AND ADMINISTRATION OF THE AUSTRALIAN OVERNMENT; Itroductory ude to Publc Prvate Partershps. h ttp://

17 APENDICES Publc Sector Effcecy Idcator ( Source: Afoso, Schuckecht e Taz (2006 6