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S. Paulo | Haddad Names PPP Czar

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PPPs should not be seen  as zero-sum games between states and private actors. —Tanja A. Börzel and Thomas Risse, 2002

Source: Agência Estado | Brasilianas.Org.

The team of 26 municipal secretaries appointed by the mayor-elect of S. Paulo, Fernando Haddad (PT), will be charged with doing more than simply managing public funds to fulfill promises made during the election.

Starting January 1, they will also be responsible for actively raising funds to fill the city coffers. The order of the day will be to discover potential partnerships between the city and the federal Union.

The second phase of this process is also in the works. In order to fulfill his daring proposals, which call for more than R$ 20 billion in spending, Haddad hopes to gain the support of the private sector as well.

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To this end, Haddad views his nominee for municipal secretary of finance, Marcos Cruz, as a principal ally. A former partner at McKinsey, the 37-year-old executive is considered a key man in the city administration. He has been assigned the task of creating a business plan that unites the political power of the city administration with the agility of private enterprise.

Suggested bv Jorge Gerdau, creator of the movement For a Competitive Brazil (MBC) — a group of big business owners and executives who lobby for efficiency in all areas of government — Cruz is also supported by president Dilma Rousseff , who advocates a policy of optimizing the use of public funds.

At the federal level, a recent agreement between the federal planning ministry and  MBC resulted in an informal audit, headed up by Cruz.

The widely experienced Cruz has been involved with various polticial tendencies. Along with the PT, he has served the PSDB of Minas Gerais, the PMDB of Rio de Janeiro, and the PSB of Pernambuco. Unassuming and publicity shy, he nevertheless knows how to command the attention of business executives. He often tells colleagues and clients that competent management is the key to reelection.

To leverage the influence Cruz has over business executives, Haddad has assigned him the mission of negotiating public-private partnerships in essential areas of the economy, such as transportation and housing.

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In early December, at the invitation of  Odebrecht, Cruz visited the public-private Porto Maravilha project, a renewal of the Rio de Janeiro port facilities that is considered to be a model for São Paulo to follow.

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Since the passage of enabling legislation in 2004, most Brazilian states have passed  PPP legislation, but the  roster of projects — as of June 2010 — is still pretty  modest.

I count 35 projects nationwide as of mid-2010, a number of which involve stadium construction ahead of the World Cup and highway construction and reconstruction. The best known in São Paulo are the Line 4 subway extension and a extension to the CPTM communter rail system — not to mention the Great Smoking Hole of Pinheiros, a collapsed excavation at a new subway stop under construction.

Back in 2004, President Lula lent his considerable support to the enabling legislation for PPPs, taking friendly fire in the process.

São Paulo’s planning and regional development secretary publishes a Web page on PPPs and a related page on deprivatization which calls for state-owned firms to IPO as part of a divestmentplan.

Sabesp, the sewer and water utility, is often cited as an examplar of this management style: Its ADRs are traded on NYSE -Euronext and it has signaled an interest in acquisitions in other regions of Brazil.

sabespTaiucupeba

In the government’s view, the success of toll road concessions and the distribution of natural gas has created a healthy environment for the use of PPPs in the State.

The state is currently engaged in 3 PPPs: Metro Line 4, the  Taiaçupeba water treatment plant, and new trains for Line 8 of the CPTM.

Other major infrastructure projects were undertaken using the traditional method of concessions and some reportedly still assume the form of turnkey contracts — zero oversight of works in progress. The PPP models seen so far require more accountability from the shareholder-slash-government.

It will be interesting to watch these projects develop and, hopefully, thrive. Can the prevailing corporatism be overcome in favor of Third Way policy-making and execution — a description applied to private-sector relations during both the Lula and the Cardoso years?