OPPORTUNITIES OF PUPLIC-PRIVATE PARTNERSHIPS IN NEW BRAZILIAN GOVERNMENT 10 dez 2018

OPPORTUNITIES OF PUPLIC-PRIVATE PARTNERSHIPS IN NEW BRAZILIAN GOVERNMENT

INTRODUCTION

Mr. Jair Bolsonaro, the candidate who won the recent presidential election in Brazil, will take office on January 1st, 2019, thus finalizing President Michel Temer’s term in office. Such transition, however, will assert a shift in how the government manages and value its assets, especially regarding to its public utilities.

The upcoming government has expressed, not only through its campaign, but also through nominating its Ministers of State , the desire to reduce the management of public utilities in the Federal Government. In order to achieve such purposes, actions have been taken in this direction such as the appointment of Mr. Paulo Guedes as Finance Minister, the creation of the Privatization Office (Secretaria da Desestatização), and the appointment of Mr. Tarcísio Gomes de Freitas (a former officer of the National Department of Transport Infrastructure (Dnit)) for the office of Minister of Infrastructure, a Ministry that will be responsible, amongst other things, for the concession of public services in Brazil. The nomination of Mr. Freitas accentuates how the government-elect intends to cooperate with the private sector, as the Privatization Office is one of the main secretaries responsible for the concession of public services (“Concessions”) and Public-Private Partnerships (“PPPs”).

Considering the proposals made during Bolsonaro’s campaign, the President-elected statements while already elected and political moves thus far, the will to privatize certain areas of Brazil are evident, and it is expected that bidding procedures for Concessions will be happening in full speed for the upcoming year.

PUBLIC CONCESSIONS

The current government, with endorsement of the government-elect, approved the execution of certain Concessions for 2019, having already published the bidding procedure notices regarding the requirements and specific elements necessary for the abovementioned Concessions, as follows:

• North-South Railroad (EF-151)

On November 29th, 2018 the notice regarding the sub concession of public services for the exploration of railroad cargo transportation between the cities of Estrela d’Oeste, in the State of São Paulo, and Porto Nacional, in the State of Tocantins, stretching over one thousand and five hundred (1,500) kilometers was published. The bidding procedure is expected to occur on March 25th, 2019. The total investment estimated for acquiring rights regarding such public services is around BRL 2.7 billion.

• Northeastern, Midwest and Southeastern Airport Lots

The first round of Concessions of airports in Brazil are expected to be held on the first half of 2019, and such bidding procedure will offer twelve (12) airports throughout the country, divided in three (03) lots. These airports correspond to approximately ten percent (10%) of the domestic market, with around twenty (20) million passengers a year. The total amount of investment required is roughly BRL3.5 billion. The launching of a fourth lot is also expected, to be named the “South Lot”. Such bidding procedure would offer the rights of an additional ten (10) airports to the private sector in the South region of Brazil.

• Port of Cabedelo/PB and Port of Vitória/ES

The Notice for the Bidding procedure Rules of such concession, published as of November 30th, 2018, determines the bidding procedure to be held on March 22nd, 2019 for the Concession of the Port Areas AE-10, AE-11 and AE-01 in the city of Cabedelo/SP. The three (03) compounds add up to 57,084 square meters, and should require a total amount of BRL 90 million worth of investments.

In the same date, the bidding procedure regarding the concession of the port located in Vitória/ES (mostly dedicated to the handling of fuel cargo) will also occur. The concession of the rights of the port comprises an area of 74,000 square meters for twenty five (25) years, and estimates to expect investments of roughly BRL 130 million.

POTENTIAL CONCESSIONS

The Privatization Office is also engaged in a series of further Concessions expected to take place throughout the next three (03) to four (04) years. However, such rules for the bidding procedure must pass through an array of requirements and stages until it goes through the bidding procedure itself. In any sense, below are a few of the Concessions expected to take place in the near future:

• The West-East Integration Railroad (EF-334) bidding procedure, which is expected to take place in the third (3rd) quarter of 2019. Such railroad is expected to have an extension of over 1,500 kilometers between the cities of Ilhéus/BA and Figueirópolis/TO, divided into three (03) sectors;

• Ferroanel, which is a project for a railroad network of 53 kilometers around the metropolitan area of the city of São Paulo. The bidding procedure is expected to launch by 2020/2021, and the whole construction is estimated to cost more than BRL 3.5 billion;

• The EF-170, also called “Ferrogrão”, is a 933 kilometers long railroad expected to connect the State of Mato-Grosso to the State of Pará and will focus on the flow of grains through these States. The project is in its public hearing stage and is expected to launch either in the second half of 2019 or the first half of 2020;

• The Concession related to ports will be one of the most active areas for the next couple of years, where the Privatization Office holds more than ten (10) files regarding the concession of over seventeen (17) port terminals. The STS 13A area in the Port of Santos (mostly dedicated to the handling of fuel cargo), is a brownfield area of approximately 40,000 square meters expected to have its bidding procedure around the second quarter of 2019;

• The concession of five (05) brownfield areas in the Port of Miramar (mostly dedicated to the handling of fuel cargo), in the State of Pará, are expected to take place in 2019. This area adds up to 20,000 square meters and may require a total investment amount of roughly BRL 300 million;

• The Port of Paranaguá, located in the State of Paraná, is going through the studies stage for the Concession of three (3) port terminals (PAR 07/par 08/PARXX), expecting to achieve private investment of approximately BRL 1 billion;

• Eight (08) projects of road Concessions throughout the Country are also currently in discussion. However, such projects are mostly in its initial stages, for example, the bidding procedure of BR-116 (Dutra), which is expected to be launched only by 2020/2021.

• The Mining Rights Exploration Projects Concession initially included four areas for study and subsequent evaluation for bidding, in the following states: Tocantins, Rio Grande do Sul, Paraíba, Pernambuco and Goiás. The bidding procedure is scheduled to take place on the first half of 2019;

• In regards to Oil and Gas, the National Agency for Petroleum, Natural Gas and Biofuels (ANP) approved the process of permanent provision of areas, which consists in the continuous provision of fields returned (or in the process of return) to ANP and exploratory blocks offered in previous biddings and not sold or returned to ANP;

• The privatization of: (i) the Brazilian National Mint; (ii) the Supply and Distributions Centers of Minas Gerais (CEASAMINAS) and (iii) Eletrobrás (Centrais Elétricas Brasileiras – Eletrobrás), the largest electric company of Latin America and a mixed capital-company under control of the Brazilian Federal Government is also expected to occur in the upcoming years. However, no specific timeframe as to such privatizations have been formally published by the competent public entities;

• Also to be noted, The Privatization Office is discussing the sale of the Brazilian Company of Airport Infrastructure (INFRAERO)’s ownership interest in the concessionaires of Guarulhos (SP), Confins (MG), Galeão (RJ) and Brasília (DF) International Airports, corresponding to forty nine percent (49%) of capital of each of these companies; and

• A Concession for the establishment of a PPP, of the administrative concession type, aiming to delegate to the private partner the assignments related to design, installation, operation, management and maintenance of communications infrastructure, and control and management of communication networks of the Aeronautics Command – COMAER is also on the radar for 2019.

 

KEY CONTACTS:

Roberto Vianna do R. Barros
Partner
T: +55 11 3077 3513
E: rbarros@cmalaw.com

Fabiana Marcondes
Lawyer
T: +55 11 3077 3542
E: fabiana.marcondes@cmalaw.com

Maria Fernanda Perucci
Lawyer
T: +55 11 3077 3565
E: fernanda.perucci@cmalaw.com

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