Home Business Vice-President Mourao Suggests Indexing Works Value to American Dollar

Vice-President Mourao Suggests Indexing Works Value to American Dollar

According to the general, the measure would increase guarantees of profitability to entrepreneurs

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Vice-president-elect Hamilton Mourao signaled on Thursday, 29, to create a mechanism to correct the value of the works according to the variation of the dollar. This would help to avoid the variation of the cost of the enterprises. Maybe it was the case of studying an average dollar, he said at an infrastructure event. If the cost goes up, it has to be compensated by the government. If it comes down, the company has a more assured profit. 

This is, according to the general, one of the alternatives to increase the guarantees of profitability to the entrepreneur. If we are going to call a private partner, he has to have some guarantee because he will enter into high-risk capital, he commented. The mechanism could be used both in concession contracts and to correct the value of works executed with funds from the Union’s budget, he said.

If the mechanism is implemented, public spending on works would be pegged to the dollar. And the National Treasury would assume a risk of exchange variation that is normally covered by hedge contracts taken in the market.

The consultant Claudio Frischtak, from Inter.B, said he did not know the adoption of this mechanism in any country in the world. He also said he had doubts about whether the legislation allows dollarization of the budget, as it appears to be the proposal.

The discussion about the adoption of an exchange rate protection mechanism in concession contracts in infrastructure was quite intense in the government about a year ago. One of the main responsible for the concession contracts in the infrastructure of the federal government, the future Infrastructure Minister, Tarcisio Gomes de Freitas, studied several mechanisms capable of protecting investors, especially foreigners, from changes in the exchange rate.