Prosecution Office asks for suspension of TAV

The Federal Prosecution Office in the Brazilian Federal District (MPF/DF) has yesterday asked for the suspension of the tender for the High Speed Train (HST) which was scheduled for 11 April. The MPF/DF has lodged two separate civil lawsuits. In the first, they request that the National Land Transport Agency (Agência Nacional de Transportes Terrestres – ANTT) correct the irregularities in the tender process. In the second, there is a request that the Prosecution Office of the Republic look into the constitutional validity of MP 511, which guarantees a loan of R$ 20 billion (US$ 12.06 billion) from the National Bank of Economic and Social Development (BNDES).

In an interview to Valor, the Federal Prosecutor in the Federal District, Paulo José Rocha Júnior, said by e-mail that all the issues raised are serious and that, should the ANTT not follow the recommendation to suspend the tender, new lawsuits could be brought. Should it be confirmed that a Government authority has acted in disagreement with the law, causing a loss to the Treasury, then this person shall be held judicially responsible, he said.

One of the most controversial points addressed by the Prosecution Office concerns the BNDES financing. According to the Federal Prosecutor, the way the Invitation to Bid was planned means that the financial risk taken on does not rest with the BNDES, but rather with the Federal Government. In the system used for HST financing, says Mr. Rocha Júnior, the guarantee of the loan to be made by the BNDES is given by the Treasury, who, in layperson’s terms, would be a surety of the concessionaire.  The Federal Prosecutor argues that the Law of Tax Responsibility (Lei de Responsabilidade Fiscal) requires the setting of counter guarantees so that any Government organization could act as a surety for loans. MP 511 has stated that this counter guarantee could be in the form of shares in the concessionaire. From the judicial point of view, this makes no sense, as part of the concessionaire shall belong to the Federal Government (through the state-owned company Etav) and the other part may be recovered in the event that the concession contract is not complied with.

If the concessionaire should go broke, then two facts should occur, according to the Prosecution Office: either the BNDES executes the guarantee given by the Union, or the concession shall be terminated and shall therefore naturally return to the Federal Government. The shares of the former concessionaire, in this hypothetical case, shall have no value, which means that they are not usable as counter guarantee in the terms of the Law of Tax Responsibility, the Federal Prosecutor added. The BNDES was approached, but declined to comment about the matter. The ANTT was also approached, and they said they would be analyzing the cases in greater depth.

This is not the first time that the Federal Prosecution Office (MPF) has asked for a tender for the bullet train to be halted. Back in November, the institution requested the immediate suspension of the tender process. The decision warned that the faults in the cost estimates could represent significant burdens on the conceding power and, consequently, on the Treasury and society at large.

The rapporteur of the MP 511, Congressman Carlos Zarattini, from the Workers’ Party (PT) of the State of São Paulo, said that, even though he was not aware of the allegations made by the MPF, the financing conditions as proposed in the MP are within the limits of normality for this kind of building work. In his opinion, the setting up of Etav shall be included in the MP through an amendment proposed by the rapporteur. For the MPF, the ANTT should await the approval of Bill of Law (Projeto de Lei – PL) No. 7,673, creating Etav, and only then hold the tender process.

Fonte: Valoe Econômico