Published in Agência Infra - 23/02/2024
By Fernando Gallacci and Gabriel Rosa Gracindo
Between 2020 and 2021, the rise in the IGP-M (General Price Index – Market) led to disputes between private contractors and public administration.
Fluctuations in the index of approximately 30% resulted in requests and contract renegotiations to change the indexer for contractual adjustments, with different granting authorities even rescheduling or suspending adjustments during this period.
Governments and regulators took measures to avoid excessively burdening the treasury or passing any increase in tariffs onto public service users, who were impacted by the adverse macroeconomic conditions resulting from the COVID-19 pandemic.
Em 2024, o cenário é oposto e peculiar. De acordo com a FGV (Fundação Getúlio Vargas), o acumulado de 12 meses do IGP-M sofreu variação de -3,18% (menos três vírgula dezoito por cento).
Now, the risk is reducing the liquidity of some concessionaires and infrastructure operators, worsening the resource availability situation that began with the decisions made during the COVID-19 pandemic.
A discussão do tema merece aprofundamento, dada a complexidade jurídico-financeira dos contratos públicos de infraestrutura. A eleição dos critérios, formas e índices de reajuste é algo muito sério, assim como a aplicação responsável dos reajustes anuais.
Difícil justificar a luta para segurar o repasse de valores durante um período, exigindo a redução de liquidez de pagamentos no momento subsequente. Claro, é sempre possível alegar o princípio da modicidade tarifária. Mas é igualmente importante lembrar que os elementos do reajuste fazem parte da equação econômico-financeira do contrato, e um impacto oscilando valores pode afetar financeiramente o investidor privado.
This kind of stance causes financial liquidity reduction, bringing risks that affect both service quality and increased financing risk.
The situation worsens in an economic context with high interest rates, increased input costs, and a gradual recovery in pre-pandemic demand for assets in some sectors of the national infrastructure.
The variation of the IGP-M as a contractual adjustment index is not new to national regulation.
Examples of debates about its use in infrastructure contracts can be found in various sectors, with some contracts still suffering from index fluctuations.
In 2021, in the electricity sector, energy generation concessionaires presented requests to ANEEL (National Electric Energy Agency) to prevent a roughly 30% increase in the price paid for UBP (Use of Public Goods), related to hydropower potential, and to change the adjustment index from IGP-M to IPCA (Broad Consumer Price Index), arguing the impact on the economic-financial balance of the contract and on captive consumers.
The agency maintained the contractual index due to the risk of systemic imbalance but forwarded the process for evaluation of index change to MME (Ministry of Mines and Energy).
A similar discussion also extended to the distribution sector, but now concerning the tariffs applied by concessionaires.
On the other hand, in the solid waste sector, in 2017, AGIR (Intermunicipal Regulatory Agency of the Médio Vale do Itajaí) in Santa Catarina had the opportunity to address a concessionaire’s request to avoid a -1.42% tariff adjustment related to the IGP-M accumulated between October 2016 and October 2017, requesting the maintenance of the practiced value.
Deflationary adjustments also seem to have been discussed in basic sanitation concessions in Rio Grande do Sul, when AGERGS (State Regulatory Agency for Delegated Public Services of Rio Grande do Sul) did not pass on the IGP-M accumulated adjustment in 2021, spreading the positive variation and later using the credit to offset the negative adjustment generated by the IGP-M in the local concessionaire’s tariffs.
In 2022, aiming for uniformity in port lease contracts and stability of the adjustment criteria, AGU (Advocacy General of the Union) along with the Ministry of Infrastructure (Minfra) issued the Reference Opinion 00005/2021/CONJUR-MINFRA/CGU/AGU, which theoretically allowed the alteration of the indexation of 95 contracts from IGP-M to IPCA, provided it was agreed upon.
At the state level, it is worth noting that the index change was also evaluated in the government’s road concessions program in São Paulo, with ARTESP (Transport Agency of the State of São Paulo) changing the tariff adjustment index from IGP-M to IPCA in some road concession contracts between 2011 and 2012.
It is always good to recall that, as it involves an economic clause, any change in the contractual adjustment index presumes agreement between the parties, and the precedents mentioned here quickly demonstrate that there is institutional regulatory experience to understand the impacts and legal contours of the automatic application of adjustments, especially when choosing IGP-M.
One solution seems to be the simple compliance with the adjustment rule in all cases.
Another solution may involve contractual renegotiation with simultaneous economic-financial rebalancing to compensate for significant index variations.
For example, part of the adjustment could be subsidized with public resources using a state subsidy tax regime.
Alternatively, it might be possible to mitigate the effects of a negative adjustment by assuming investment burdens or obligations, which would not only improve public services and assets but also potentially maintain tariff or state payments, preserving investor liquidity.
The issue is sensitive and should not be confused or mixed with the equally serious question of input cost variation.
Although this topic reflects inflationary variation and may relate to the contractual adjustment index, it generally involves regulatory liability with in-depth discussions on the contract’s risk matrix and the assessment of extraordinary cost variations throughout the contractual execution.
Regulators and private investors need to engage with these debates and past experiences, preparing for adjustment discussions in 2024.
If tariff moderation is discussed in the face of maintaining economic-financial balance, it is very likely that users will bear the brunt, with services or assets deteriorating.
O melhor é trabalhar desde cedo para evitar sobressaltos financeiros no contrato, cumprindo as regras contratuais, mas considerando o saneamento de passivos regulatórios, respeitando investimentos, e antevendo discussões de recomposição dos preços contratados. Tudo isso em conjunto é o que faz a mágica regulatória para assegurar a atualização de ativos e a prestação adequada dos serviços públicos à população.
The article was produced by SouzaOkawa Advogados and published by Agência Infra. To access the full version, click the link below.