Brazil concession model for the long haul: Minister

Market: Agriculture, Fertilizers
26/05/22

Brazil's policy of concessions and privatization of infrastructure assets is entrenched enough to persist even in the event of a change in government, according to infrastructure minister Marcelo Sampaio.

Brazil is having presidential elections in October and the most likely scenario is that the current president, Jair Bolsonaro, will face off against former president Luiz Inacio Lula da Silva, who is ahead in the latest polling. The ministry is obviously working with a baseline scenario of Bolsonaro's re-election, Sampaio told an international press conference today.

But a possible Bolsonaro defeat should not hinder the ministry's plans for 2022, which is set to end the year with R200bn ($41bn) in investments planned for the country's infrastructure over the four years of the current government. And the current concession model is robust enough to withstand any possible change of government, he said.

Sampaio also minimized the impact on the ministry's projects of high inflation, running at near two decade highs of annualized 12pc in May. For existing projects already in operation, severely affected contracts will be readjusted and rebalanced. In addition, for new projects, prices are being updated before they are analyzed by the Federal Audit Court and put into practice, Sampaio said

Through May 2022, the Ministry of Infrastructure has auctioned off 84 infrastructure assets, including highways, port terminals, airports, railroads, among others, totaling R100bn in forecast investments.

For the remainder of the year, another R100bn is expected. Another 15 airports are planned, highways in Parana state and the privatization of the port of Santos, the largest in Brazil. For the port of Santos, the public notice is expected to be published at the beginning of the fourth quarter of 2022, with the auction to take place in December.

Sampaio also highlighted the ministry's efforts to improve the image of Brazilian projects for foreign investors. This month, the minister was on a US roadtrip trying to attract investors to Brazilian projects, which he told reporters are more profitable and attractive than those of other developing countries such as Mexico, Colombia and India.

Still, regarding Brazil's concession model, some of whose projects have been criticized for the low concession fees collected, Sampaio said that the important thing is to guarantee the contracting of a service provider for a certain period of time. This guarantees that auctions and concessions are carried out successfully, regardless of the country's economic circumstances at the moment.

Merger of state companies

Also this week, in the logistics sector, President Jair Bolsonaro signed a decree authorizing the merger of the Logistics and Planning Company and Valec—Engineering, Constructions and Railways, thus creating Insfra.

Infra will be responsible for planning and structuring projects for the transport sector. According to the federal government, the measure will save R30mn in the first year of operation and from the second year on the savings will be R90mn/yr.

The new state-owned company will also be responsible for developing the National Logistics Plan and other sector plans.

All the projects in progress by state-owned companies will be managed by Infra, which includes the construction of sections II and III of the West-East Integration Railroad and oversight of work on the Center-West Integration Railroad.

By Joao Petrini

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