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Infrastructure Contracts: Relevant Aspects in Times of Crisis

The current economic fragility experienced by Brazil brings uncertainty about the future that lies ahead, particularly concerning the fate of ongoing business and projects. This phenomenon sparks significant legal discussions about the security and feasibility of prospective or existing contractual relationships, especially in the infrastructure sector, which always involves matters of great complexity, scale, and significant public interest.

It is crucial, therefore, that contracting parties, whether in the public or private sphere, equip themselves with contracts that ensure protection and security. They must pay attention to crucial aspects during the execution of a contract, notably deadlines, responsibilities, guarantees, and efficient management.

During economic crises like the current one, it is not uncommon for parties to encounter difficulties in fulfilling contractual obligations on time and in the expected manner, due to extraordinary factors or inefficiencies in managing resources allocated to contract fulfillment. Regardless of the reason, establishing an efficient system of deadlines, responsibilities, and guarantees can foresee and/or mitigate the negative consequences of contractual breaches.

Efficient contract management, on the other hand, makes it feasible to monitor and supervise contract execution, ensuring compliance with labor, tax, operational, and financial regulations of the project. It is recommended that this oversight be conducted by a department with its own structure and sufficient resources for documenting all instances of compliance and/or non-compliance, which may be crucial in disputes or litigation.

The infrastructure sector presents another particularity: whether in private contracts or in concessions and PPPs (Public-Private Partnerships), unpredictability in the infrastructure segment reduces investor and financier interest. In uncertain times, they tend to decrease their exposure to the sector, refraining from lending or providing new funds and aiming to receive payments for existing loans as soon as possible. It is important to note that many of these projects are currently in the investment phase, meaning that large-scale projects heavily rely on new capital injections, bridge loans, and long-term financing contracts for their successful completion.

Despite the challenges posed by the current economic landscape for infrastructure projects, overcoming them is entirely possible if the solidity of agreements and their efficient management are ensured. Therefore, it is crucial to focus on vital contractual aspects such as deadlines, responsibilities, guarantees, and management to mitigate, as much as possible, the harmful effects of the crisis and ensure the successful completion of ongoing projects.

Alexandre Sion