Salvador (Bahia) Minha Casa, Minha Vida Project in Paralysis
The administrators of the social housing programme Minha Casa, Minha Vida (“My House, My Life”) have announced that the construction of 6,940 houses in Salvador (Bahia) has been stopped due to a reported “absence of liquidity” of the two construction companies involved. In the first week of January, executive director of the Caixa Econômica Federal Teotônio Rezende visited the project to examine what steps could be taken – but the issues have been well known since September 2011.
According to Rezende, the bank is looking for ways in which the development companies involved can present documentation to prove their financial capacity to be able to continue. Should this not be achievable, a new contractor will be brought in to complete the project.
Speaking to the press, Rezenda commented: “when a problem like this happens, Caixa always attempts to search for a solution with the construction company involved, which is what we are doing in Bahia. Independent of what happens here – we are able guarantee that this development will be completed, with or without these construction companies. The fact that we are renegotiating this debt will not in any way alter the development’s value. If we do negotiate, it will be the developers that will shoulder the debt.”
Rezende also confirmed that the construction companies – Prime and RCA – have already received R$ 118 million and R$ 31 million respectively in interest free construction finance provided under the auspices of the Minha Casa, Minha Vida programme and also that the paralysis has occurred solely due cash flow issues (with nothing to do with the costs of the units).
The issues form part of a growing number of practical and financial problems being faced within the Brazilian affordable housing sector – as I have recently discussed in two articles written for the Brazzil online magazine (“Brazil’s Failing Popular Housing Program Shows a Government Out of Touch with Reality”) and the Global Property Guide (“The Cusp of a 2012 Brazilian Property Bubble Burst?”)
