The state of Pernambuco, Brazil, has announced plans to cancel two public private partnership (PPP) contracts: the Integrated Center of socialization in Itaquitinga and the Multipurpose Arena Cup in Recife.

The concession for the Integrated Center was signed in October 2009 with Reintegra Brasil S.A., which is composed of DAG Construtora Ltda. and Socializa Empreendimentos e Serviços de Manutenção Ltda.

The project has been canceled through a decree signed by Gov. Paulo Câmara. The concession has been canceled due to the following reasons:

• The concessionaire failed to comply with the PPP contract;
• Verification of the delay and subsequent abandonment of the works by the concessionaire;
• Verification of non-conformities techniques applied on the work; and
• Loss of economic and financial support.

The PPP contract for the Multipurpose Arena Cup was signed in June 2010 by Odebrecht Participações e Investimentos S.A. and Odebrecht Properties Entretenimento S.A. 

Since the beginning of 2015 it was formed a working group composed of government officials to analyze some issues related to the concession. The group focused on the following topics

• Financial projections of the project; 
• Actions to increase the gross revenue of the concession to reduce public transfers;
• Fulfillment of contractual obligations by the concessionaire;
• Implementation and execution of real estate project linked to the contract.

Additionally, an external consultant was hired to assist the state in the analysis of economic and financial situation of the PPP project.

According to the state, the concessionaire was not successful in the development, operation and maintenance of the project. The concessionaire will be entitled to compensation due to early termination of the contract, but the exact amount is not defined. The Government is planning to cancel the contract and it is expected that the government will launch a tender process to appoint a new concessionaire.