President says transportation stimulus package is not privatization

President Dilma Rousseff and minister of Finance, Guido Mantega, both denied that the announced concession of railroads and highways was a form of privatization. According to Dilma, the question was “absolutely false.”

The president went on to say: “Today what we are doing is correcting some mistakes made in the privatization of railroads. A model is being put in place that will meet the demand for cargo transportation. In reality, we are strengthening private investment in railroads at the same time that we shore up sector investment strategy and regulatory structures.”

Dilma made her remarks at the roll out of the Logistics Investment Program: Railroads and Highways (“Programa de Investimento em Logística: Rodovias e Ferrovias”) in which the government will transfer some 17,000 kilometers of highways and railroads in an effort to get more private sector participation in infrastructure investments.

In response to critics who claim the result is that the infrastructure sector is being privatized, minister of Finance, Guido Mantega, said the model the government was implanting was a public-private partnership. He explained the difference between privatization and the government’s model by saying: “In a public-private partnership, the public sector makes the investments. Privatization is when you sell assets to the private sector.” And he continued: “So, what are we privatizing?” asked the minister.

According to businessman Eike Batista, who had a meeting with the president before the announcement of the concession model, “In a concession, the private sector makes the investment, which is important. But it gets a return on the capital invested. And then the structure returns to the state. It remains property of the country. It is a happy model that both foreign and Brazilian capital can work with.”

Also before the official announcement ceremony the president met with labor leaders to discuss the program. The president of the Força Sindical, Miguel Torres, said he did not see it as privatization in that the state retained control and the model was a public-private partnership for railroads. However, he complained that once again the government was presenting union leaders with a done deal. He said he would prefer something open for discussion and suggestions. Torres said the program should include a counterpart for workers, such as job creation and training courses.

The Logistics Investment Program will concede 7,500 kilometers of highways and 10,000 kilometers of railroads. The total investment over the next 25 years is to reach R$133 billion (R$42 billion for highways and R$91 billion on railroads), with R$79.5 billion to be invested in the first five years.