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The Brazilian federal government administers a federal transportation system, which is implemented through federal agencies or by concession, authorization, or lease to a public or private enterprise, or to a public-private partnership.  Regardless of the type of administration, the federal government is authorized to apply financial resources to the system.

In 2001, a new federal agency subordinated to the Ministry of Transportation was created to implement the policies formulated for administering the infrastructure of the federal transportation system, including the operation, maintenance, servicing or replacement, adjustment of capacity, and expansion of the infrastructure through the building of new roads and terminals.

A federal tax levied on the import and sale of oil and oil products, natural gas and its derivatives, and ethanol fuel was instituted in 2001 to finance, among other things, transportation infrastructure programs.  Twenty-nine percent of the collected proceeds must be delivered to the states and the Federal District, which are obligated to apply these funds to the financing of transportation infrastructure programs.  The states must, in turn, deliver 25% of the funds allocated to them to their municipalities, to be used in the financing of transportation infrastructure programs.  Brazil is not contemplating the enactment of a vehicle-miles-traveled tax.

I.  Road Infrastructure

A.  National System of Transportation

Article 1 of Law No. 12,379 of January 6, 2011, provides for the National System of Transportation (Sistema Nacional de Viação, SNV),[1] in accordance with subsections XII and XXI of article 21 of the Federal Constitution,[2] which determines that the federal government (União) has the power to operate, directly or through authorization, concession, or permission, the services of interstate and international passenger transportation by road.  There are transportation systems at three levels: the federal, state, and municipal level.  These systems encompass not only road traffic but also rail, waterway, and air transportation.  Of these, the federal system is administered by the SNV.[3]

B.  Federal System of Transportation

The SFV is composed of the Federal Highway Subsystem, Federal Railroad Subsystem, Federal Waterway Subsystem, and Federal Airway Subsystem.[4]  The administration of the SFV belongs to the federal government and involves the planning, construction, maintenance, operation, and exploitation of its components.[5]

The federal government must exercise its powers related to the SFV directly through federal agencies and organs,[6] or by concession, authorization, or lease to a public or private enterprise,[7] or to a public-private partnership.[8] The federal government may apply financial resources to the SFV, whatever the system of administration is adopted.[9]

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II.  Funding for National Road Infrastructure

Highway construction and maintenance is essentially funded by the federal government through tolls, concessions, and taxation imposed on the import and sale of oil and oil products, natural gas and its derivatives, and ethanol fuel.

A.  Tolls

Article 150(V) of the Constitution prohibits the federal government, the states, the Federal District, and the municipalities from establishing limitations on the movement of persons or goods by means of interstate or intercounty taxes, except for the collection of tolls for the use of government-maintained highways.[10]

B.  Concessions 

The government may grant concessions for the construction and operation of federal highways and the operation of road projects, as well as for the operation and administration of existing highways through toll collection.[11] 

Law No. 8,987 of February 10, 2005, regulates the concession of public services and public works, and the permission to render public services, both of which must be governed by the terms of article 175 of the Constitution,[12] by Law No. 8,987, by the relevant legal standards, and by the clauses of all indispensable contracts.[13]

The government is authorized, through the Ministry of Transportation, to delegate, for a period of up to twenty-five years and renewable for up to twenty-five more years, to municipalities, states, and the Federal District, or to a consortium between them, the administration of highways, exploitation of stretches of highway, or development of federal road projects.[14]  The delegation must be formalized through an agreement (convênio),[15] which must have a clause providing for the possibility of enforcing the laws of the municipality, the state, or the Federal District regarding the charging of tolls or port tariffs, or other form of collection, as long as it is not contrary to federal law.[16]  The income generated from such charges must be applied to additional works, improvements, expansion of the traffic capacity, preservation, and signs and signals on the highway on which it is charged, and on road sections that give access to the highway.[17]

The federal government may allocate financial resources to a concessionaire for the construction, maintenance, improvement, and operation of highways, portions of highways, federal road projects, or federal ports, provided that such projects and services are not the responsibility of the concessionaire.[18]

On June 5, 2001, Law No. 10,233 created the National Department of Transportation Infrastructure (Departamento Nacional de Infraestrutura de Transportes, DNIT), a federal agency subordinated to the Ministry of Transportation and charged with the duty of implementing the policies formulated for administering the infrastructure of the SFV, including the operation, maintenance, servicing or replacement, adjustment of capacity, and expansion of the infrastructure through the building of new roads and terminals, according to the principles and guidelines established in Law No. 10,233.[19]

C.  Revenue from Taxes

1.  Law No. 10,336 of December 19, 2001

Law No. 10,336 of December 19, 2001 created the Contribution of Intervention in the Economic Domain (Contribuição de Intervenção no Domínio Econômico, CIDE), a tax levied on the import and sale of oil and oil products, natural gas and its derivatives, and ethanol fuel.[20]

The proceeds from the collection of the CIDE will be allocated, according to the budgetary law, for subsidizing the prices or transportation of ethanol, natural gas and its derivatives, and petroleum products; the financing of environmental projects related to the oil and gas industry; and the financing of transportation infrastructure programs.[21]  This revenue finances not only federal highways but also state and municipal highways and roads. [22] 

The CIDE is triggered by the import and domestic sale, by the contributors mentioned in article 2, of gasoline and its chains;[23] diesel and its chains; aviation kerosene and other kerosene; fuel oil; liquefied petroleum fuels, including those derived from natural gas and naphtha; and ethanol fuel.[24]

The following specific CIDE rates apply to the import and domestic sale of

I – gasoline, R$860,00 [approximately US$358.33] per cubic meter;

II – diesel, R$390,00 [US$162.50] per cubic meter;

III – aviation kerosene, R$92,10 [US$38.37] per cubic meter;

IV – other kerosene, R$92,10 (US$38.37) per cubic meter;

V – fuel oil with high sulfur content R$40,90 [US$17.04] per ton;

VI – fuel oil with low sulfur content R$40,90 [US$17.04] per ton;

VII – liquefied gas derived from petroleum, including that derived from natural gas and naphtha, R$250,00 [US$104.16] per ton; [and]

VIII – ethanol fuel, R$37,20 [US$15.50] per cubic meter.[25]

2.  Law No. 10,636 of December 30, 2002

Law No. 10,636 of December 30, 2002, established the criteria and guidelines for the application of funds raised through the CIDE, pursuant to the terms of Constitutional Amendment No. 33 of December 11, 2001, which amended articles 149 and 177 of the Constitution.  Law No. 10,636 also created the National Fund for Transportation Infrastructure (Fundo Nacional de Infra-Estrutura de Transportes, FNIT).[26]

The application of CIDE funds to programs of transportation infrastructure must have as key objectives reducing automotive fuel consumption, achieving the most economical way to meet the demand for the transport of people and goods, ensuring the safety and comfort of users, decreasing the travel time of public transportation users, improving the quality of life of the population, and reducing inefficiency in the use of productive resources.  These objectives must be achieved despite the increase in the cost of building urban centers and with the lowest possible transportation and port/terminal costs in the domestic use and export of consumer products.[27]

The FNIT, which is subordinated to the Ministry of Transportation, was created for the purpose of financing transportation infrastructure investment programs.[28]  FNIT funds must have a multimodal application, according to the annual budget law, and meet the objectives established in article 6 of Law No. 10,636.[29]

Article 12 of Law No. 10,636 determines that the administration of the federal road infrastructure and the operation of transportation under the control of the federal government must preferably be performed in a decentralized manner, promoting their transfer, where possible, to public entities and to other entities of the federation through delegation, or to the private sector through concession, permission, or authorization, provided that the corresponding legislation is respected.[30]

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III.  New Initiatives on Road Infrastructure

Law No. 10,336 of 2001 was the last legislative initiative designed to raise funds for highway infrastructure.  In this regard, Brazil is not currently contemplating the enactment of taxation based on the miles traveled by a vehicle.

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Eduardo Soares
Senior Foreign Law Specialist
March 2014
 


[1] Lei No. 12.379, de 6 de Janeiro de 2011, art. 1, http://www.planalto.gov.br/ccivil_03/_Ato2011-2014/2011/Lei/L12379.htm.

[2] Constituição Federal [C.F.], art. 21(XII) & (XXI), http://www.planalto.gov.br/ccivil_03/constituicao/ constituicao.htm.

[3] The SNV consists of the physical and operational infrastructure of the various modes of transportation of people and goods, under the jurisdiction of the different entities of the Federation.  Lei No. 12.379 art. 2.  As to jurisdiction, the SNV consists of the Federal System of Transportation (Sistema Federal de Viação, SFV) and the transportation systems of the states, the Federal District, and the municipalities.  Id. art. 2(§ 1).

[4] Id. art. 3.

[5] Id. art. 5.

[6] Id. art. 6.

[7] Id. art. 6(II).

[8] Id. art. 6(III).  Lei No. 11.079, de 30 de Dezembro de 2004 [Law No. 11,079 of December 30, 2004], regulates public-private partnerships (PPP).  Article 2 of the Law defines a PPP as an administrative concession contract, which can be sponsored or administrative.  Paragraph 1 defines sponsored concessions, and paragraph 2 defines administrative concessions.  Lei No. 11.079, de Dezembro de 2004, http://www.planalto.gov.br/ccivil_03/_ato2004-2006/2004/lei/l11079.htm.

[9] Id. art. 7.

[10] C.F. art. 150(V).

[11] Decreto-Lei No. 791, de 27 de Agosto de 1969, art. 7, http://www.planalto.gov.br/ccivil_03/Decreto-Lei/1965-1988/Del0791.htm.

[12] Article 175 of the Constitution determines that the rendering of public services is incumbent upon the government (Poder Público) directly or under a regime of concession or permission, and always through a bidding process.  C.F. art. 175.

[13] Lei No. 8.987, de 13 de Fevereiro de 1995, art. 1, http://www.planalto.gov.br/ccivil_03/leis/l8987cons.htm.  Law No. 8,987 defines “concession of public services” as the delegation of the concession’s performance through competitive bidding to the legal entity or consortium of companies that demonstrate the capacity to perform the services, at their own risk and for a specified period of time (art. 2(II)); “concession of public services preceded by the execution of public works” is defined as the construction (total or partial), conservation, renovation, expansion, or improvement of any works of public interest, that are delegated through competitive bidding to the legal entity or consortium of companies that demonstrate the capacity for their implementation, at their own risk, so that the investment of the concessionaire is paid and amortized through the exploitation of the work or service for a specified period of time (art. 2(III)); “permission for public service” (permissão de serviço público) is defined as the temporary granting, through competitive bidding, of permission to render a public service, to the persons or entity that demonstrates the ability to perform the service, at their own risk (art. 2(IV)).

[14] Lei No. 9.277, de 10 de Maio de 1996, art. 1, http://www.planalto.gov.br/ccivil_03/leis/L9277.htm.

[15] Id. art. 3.

[16] Id. art. 3(§ 1).

[17] Id. art. 3(§ 2).

[18] Id. art. 5.

[19] Lei No. 10.233, de 5 de Junho de 2001, arts. 1(V), 79–80, http://www.planalto.gov.br/ccivil_03/Leis/LEIS_2001/L10233.htm.

[20] Lei No. 10.336, de 19 de Dezembro de 2001, art. 1, http://www.planalto.gov.br/ccivil_03/leis/leis_2001/L10336.htm.

[21] Id. art. 1(§ 1)(I)–(III).

[22] C.F. arts. 159(III) & 177(§ 4).  C.F. article 177(§ 4)(II)(c) establishes that the law that creates the CIDE must determine that the funds raised be used to finance programs of transportation infrastructure.  Lei No. 10.336 art. 1-A.

[23] For the purposes of article 3 of Law No. 10,336, in accordance with the standards established by ANP, the petroleum-derived liquid hydrocarbons and liquid hydrocarbons derived from natural gas for use in mechanical mixing for the production of gasoline or diesel are considered chains.  Id. art. 3(§ 1). 

[24] Id. art. 3.

[25] Id. art. 5.

[26] Lei No. 10.636, de 30 de Dezembro de 2002, art. 1, http://www.planalto.gov.br/ccivil_03/leis/2002/l10636.htm.

[27] Id. art. 6.

[28] Id. art. 10.

[29] Id. art. 11(§ 1).

[30] Id. art. 12.