World Bank's IFC advises Bahia on modelling and structuring of roads in Brazil

The consortium Estrada do Feijão Bahia is the winner of the concession auction for the rehabilitation and maintenance of roads in the State of Bahia, in Brazil.

 The consortium Estrada do Feijão Bahia is the winner of the concession auction for the rehabilitation and maintenance of roads in the State of Bahia, in Brazil. The auction of BA-052, known as Estrada do Feijão (or “Bean Road”), was conducted yesterday in São Paulo by B3, the Brazilian stock exchange. The winner consortium is formed by Paviservice and SVC Construções, two medium-sized Brazilian construction companies.

IFC, with the support of the World Bank, advised the State of Bahia, through the Secretariat of Infrastructure (SEINFRA), on modelling and structuring the project, which includes an innovation in the traditional model of rehabilitation and maintenance (CREMA) contracts being used in the country. This is the first time that short-term contracts of roads rehabilitation and maintenance will be transformed into a Public-Private Partnership (PPP).

 According to the model being now adopted, the private partner should seek a new financial engineering to support a long-term project. Furthermore, the payments to the concessionaire will be based on performance, considering criteria previously defined in a single contract. This will result in the improvement in the quality of the rehabilitation and maintenance services provided by the private partner as well as more efficiency in the management of the contract. The increased tenor of the contract, from five to 20 years, will also incur in efficiency gains for the project. All these factors will generate benefits both to users and to the management of the infrastructure by the government. “Through this project, the State of Bahia is paving new ways and helping create new quality and efficiency standards for roads concessions in Brazil,” says Hector Gomez Ang, IFC Brazil Country Head. “Innovation is critical to attract more resources and medium-sized participants to infrastructure in Brazil.

New, well-structured models and projects will help establish more partnerships with the private sector, which plays a key role in mobilizing the massive investments needed for the infrastructure sector, especially considering the transition it is currently going through”.   Estrada do Feijão Bahia will invest approximately BRL 700 million throughout 20 years of concession. The project involves the rehabilitation and maintenance of 462 kilometers of Estrada do Feijão (BA-052), connecting the cities of Feira de Santana and Xique-Xique, and 85 kilometers of the road BA-160, in the stretch between Xique-Xique and the ferry crossing point to the municipality of Barra; it also includes the building of a new bridge over the São Francisco River that will connect the municipalities of Barra and Xique-Xique.

The new equipment will optimize the travel time of pedestrians and passenger and commercial vehicles, in addition to making the travel between the municipalities safer; that travel is currently done by ferries. Inhabitants from 18 municipalities in Bahia will benefit from the roadway improvements. The structuring of the project counts with the technical advisory of the International Finance Corporation (IFC), supported by the Inter-American Development Bank (IDB) and the National Bank for Economic and Social Development (BNDES) through the Private Participation Promotion Program, which aims to support the implementation of infrastructure projects in Brazil.