Brazilian Government Regulates Federal Financial Contributions to Subnational PPPs Under the New PAC

Law No. 11,079/2004 provides for the possibility of public contributions in public-private partnership (PPP) contracts, understood as transfers of resources in favor of the private partner intended for the execution of works and the acquisition of reversible assets. This is an important instrument for structuring projects with high upfront investment, as it allows for a reduction in the amount of equity and debt to be mobilized during the implementation phase, positively impacting the feasibility and bankability of PPPs.

In practice, however, the limited fiscal capacity of states, the Federal District, and municipalities has been one of the main obstacles to the use of public contributions in subnational PPPs. Budgetary constraints, combined with debt limits, often prevent local governments from making contributions at the beginning of contracts, even in technically structured projects with the potential to attract private investment.

It is within this context that Joint Ordinance MGI/MF/CGU No. 103/2025, published in the Official Gazette on December 31, 2025, was issued, establishing the rules applicable to mandatory transfers of federal financial resources for contributions to subnational PPP contracts under the Growth Acceleration Program—New PAC. The regulation seeks to provide greater legal certainty, procedural predictability, and federal coordination in the use of federal resources as an instrument to enable infrastructure projects structured by subnational entities.

Below, we highlight the main aspects introduced by the Ordinance, which will enter into force on January 30, 2026.

Project Eligibility

The Ordinance restricts eligibility for receiving federal contributions to PPP projects qualified under the Investment Partnerships Program (PPI) and identified as New PAC actions.

Projects with PPP contracts in force as of the date of publication of the Ordinance are not eligible, except for the continuation of projects previously selected under the PAC, provided that the applicable legal requirements are met.

Responsibilities of the Federal Government and Subnational Entities

Among other duties, the federal transferring bodies are responsible for reviewing work plans, verifying the completion of bidding procedures, including authorization for publication of the bidding notice, releasing budgetary and financial resources, reviewing accounts, and overseeing the application of resources.

The recipient subnational entities, in turn, assume full responsibility for the structuring, contracting, execution, and supervision of PPP contracts. They must ensure the technical quality of studies and projects, obtain the regulatory and oversight approvals required prior to bidding, properly budget for the obligations undertaken, and comply with transparency, publicity, and accountability rules. They are also responsible for ensuring the proper use of transferred resources and adopting the appropriate administrative measures in the event of irregularities.

Financial Limits and Allocation of Resources

Federal resources allocated to contributions may not exceed 80% of the total investment value provided for in the PPP contract, with the possibility for the Investment Partnerships Program Council (CPPI) to establish sector-specific limits.

The Ordinance expressly prohibits the use of resources for operation and maintenance expenses or for the acquisition of non-reversible assets, restricting their application to investments provided for in the feasibility studies and draft contracts submitted for bidding.

Escrow Accounts and Release of Resources

Contributions must be deposited into a specific escrow-type bank account, opened with a federal financial institution and exclusively linked to the PPP contract. The release of resources will follow a disbursement schedule compatible with the project timeline.

Disbursement will depend on prior verification of the execution of the corresponding stages, based on a technical report issued by an independent external verifier or by a competent regulatory body or authority.

For transfers of up to BRL 50 million, the release will occur in a single installment within 30 days of execution of the PPP contract. For amounts exceeding this threshold, disbursement will be made in installments, with the first installment limited to BRL 50 million and subsequent installments not exceeding 15% of the total contribution amount. Adjustments to the disbursement schedule may be permitted through a joint decision by the competent federal bodies.

Transparency, Oversight, and Accountability

The Ordinance strengthens transparency and oversight mechanisms, requiring broad disclosure of information related to the execution of commitment terms and the movement of funds in the escrow account, including on official websites.

Final accountability reports must be submitted within 60 days after the end of the term or completion of the object, and the transferring body will be responsible for reviewing and deciding on the regularity of the use of resources. Total or partial rejection of the accountability report will require the return of the corresponding amounts, duly updated.

Joint Ordinance MGI/MF/CGU No. 103/2025 represents a relevant step in the institutionalization of federal contributions as an instrument to enable subnational PPPs, by establishing clear, standardized rules aligned with the control and transparency requirements of the New PAC. By reducing procedural uncertainties and providing greater legal predictability regarding the use of federal resources, the regulation has the potential to unlock infrastructure investments, especially in contexts of fiscal constraints faced by subnational entities, reinforcing the role of PPPs as a central mechanism in the country’s public-private investment agenda.

For additional information on this matter, please contact our partners from the Infrastructure and Public Law practice, Bruno Werneck and Juliana Deguirmendjian.