School PPP market grows in Brazil, with Joinville eyeing a US$780 million contract
The City Council of the city of Joinville, in the state of Santa Catarina, authorized the city government to offer a school PPP contract, which could generate investments of around 4 billion reais (US$780mn), at a time of expansion of this type of contract in Brazil.
The contract provides for the construction of 27 new school units, as well as the preventive and corrective maintenance of infrastructure, furniture, and equipment.
The private partner will also be responsible for operating non-pedagogical services, such as cleaning, pest control, solid waste management, maintenance of green areas, asset security, school meals, and payment of utilities for all units.
The concession will have a term of 25 years.
The expectation is that the auction will only be held next year, after the details of the tender notice are approved by the Municipal Audit Court.
The winning company will be defined by the criterion of the lowest public consideration to be paid by the municipality.
The Joinville plan comes at a time when investor interest in PPP contracts for schools is growing.
“The size of the market is one of the main factors [of interest to investors]. The investments required just to adapt Brazilian school infrastructure to the demands of full-time education are estimated at hundreds of billions of reais. When the entire operation of these contracts over the course of the concession is taken into account, the potential market easily exceeds the trillion-reais mark,” Ivan Pereira, CEO of Mind Lab, a Brazilian company engaged in social infrastructure projects focused on education, told BNamericas.
“In addition, these are long-term contracts, with predictable revenues and well-defined performance indicators. This profile is very attractive to institutional investors. Another important point is that Brazil has already developed very significant technical capacity in structuring PPPs. We have good modelers, specialized consultancies, and institutions capable of developing competitive projects,” he emphasized.
In addition to the school sector, another segment that has also attracted interest is PPPs associated with the healthcare sector.
Recently, the federal government, through the Ministry of Health, authorized the special purpose company SPE Saúde Primária BH S.A., which manages a hospital PPP contract in Belo Horizonte, the capital of the state of Minas Gerais, to raise up to 523.3 million reais through an issuance of incentivized debentures.
Since such debentures have tax exemption, the fundraising needs to be approved by the federal government.
The financing is part of a capex of 581 million reais, “intended for the expansion and adaptation of the health infrastructure, including the addition of 29 new Health Centers, the installation of air conditioning and mechanical ventilation systems, and the construction and equipping of the Central Sterile Supply Department/Laboratory”, said the Ministry of Health in a statement published in the Federal Official Gazette.
Social infrastructure PPP contracts, more specifically in the areas of health and education, have also gained traction in Brazil as local governments seek alternatives to increase investment amid a scenario of fiscal constraints.
(The original version of this content was written in Portuguese)