On 9 June 2015, Brazilian President Dilma Rousseff announced a new package of privatizations (concessions, leases and authorizations to be granted to private investors) related to infrastructure projects worth BRL 198.4 billion (~US$ 64bn), with BRL 69.2 billion being invested from 2015 to 2018 and BRL 129.2 billion from 2019 on. Investments under this new stage of the federal government's Logistics Investment Program (the so-called "PIL") are divided among four regulated sectors:

  • Highways (BRL 66.1 billion)
  • Railways (BRL 86.4 billion)
  • Ports (BRL 37.4 billion) and
  • Airports (BRL 8.5 billion).

Highways : Four auctions are expected to occur in 2015 which, when added to the recent renewal of the Rio-Niterói bridge concession, will make a total BRL 19.6 billion investment in the sector. The highways are: (i) BR-476/153/282/480/PR/SC, with 460 km; (ii) BR-163/MT/PA, with 976 km; (iii) BR-364/060/MT/GO, with 704 km and (iv) BR-364/GO/MG, with 439 km, totaling 2603 km in seven Brazilian states.

The year 2016 is expected to see 11 highway auctions, totaling 4371 km and an estimated BRL 31.2 billion in investment. There will also be new investment totaling BRL 15.3 billion in existing concessions. Two projects are already underway and another nine are being evaluated.

Concessions to operate highways will granted to the private sector by auction based on the lowest toll charged to users.

Railways : Medium and long-term investment in this sector under PIL amounts to BRL 86.4 billion. Some of the more important projects are: (i) the Ferrovia Norte-Sul (the North-South Railway), with an investment of BRL 7.8 billion in the stretches from Palmas in the state of Tocantins to Anápolis in the state of Goiás, and from Barcarena in Pará to Açailândia in Maranhão; and another BRL 4.9 billion in the stretch from Anápolis in Goiás through Estrela D'Oeste in São Paulo to Três Lagoas in Mato Grosso do Sul; (ii) the railway between Lucas do Rio Verde in Mato Grosso and Miritituba in Pará, with an estimated investment of BRL 9.9 billion; and (iii) construction of a railway connecting Rio de Janeiro to Vitório in the state of Espírito Santo, estimated at BRL 7.8 billion.

Most of these investments (BRL 40 billion) will be directed to putting the Brazilian stretch of the Bioceanic corridor in place. The corridor, which will link the Central-West and Northern regions of the country to Peru, was the subject of a recent international agreement with the government of China.

New investment totaling BRL 16 billion will be made in existing concessions to expand traffic capacity, create new railway yards, double track lines, reduce urban interference and construct new branches.

In this new stage of PIL, the government can choose among highest price offered for the concession, lowest tariffs, and shared investment as the basis for the auction. The choice will depend on the needs and nature of each railway.

Ports : A total BRL 37.4 billion is to be invested in the port sector, distributed among new leases, new authorizations for Private Terminals (TUPs – Terminais de Uso Privado), and early renewals of existing leases.

The government's package includes leases of 29 terminals in the first block, 9 in Santos and 20 in Pará, with a projected total investment of BRL 4.7 billion, to be auctioned in two stages this year. The second block of leases, with investments totaling BRL 7.2 billion, covers 21 terminals in the ports of Manaus, Paranaguá, Santana, Suape, Itaqui, São Sebastião, São Francisco do Sul, Aratu, Santos, and Rio de Janeiro. These auctions are expected to occur in the first half of 2016.

For 2015, the Ports Secretariat is also considering 63 new TUPs, representing an estimated BRL 14.7 billion in investment, in addition to 24 applications for early renewal of leases of terminals in public ports in 9 States, with a projected BRL 10.8 billion in investments.

According to Decree 8.464, published in the Federal Official Gazette (DOU) on 9 June 2015, the criteria to be used in selecting the successful bidder in auctions for concessions or leases in the port sector are highest handling capacity, lowest rate, fastest cargo throughput, highest investment by bidder, lowest payment by the government, best technical proposal and highest price offered by the bidder. These criteria can be used alone or in combination.

Airports : The federal government stressed that the new airport concessions are looking to expand infrastructure, create new regional hubs, improve service quality, increase innovation and experience brought by international operators, encourage tourism and improve cargo services.

To achieve those objectives, investment estimated at BRL 8.5 billion is expected for concession of the airports in Fortaleza (BRL 1.8 billion), Salvador (BRL 3 billion), Florianópolis (BRL 1.1 billion), and Porto Alegre (BRL 2.5 billion). Auctions for all four airports should begin in the first quarter of 2016.

Concessions are also to be granted for seven regional airports in the state of São Paulo and one in Goiás, representing total investments of BRL 78 million.

Brazil's National Economic and Social Development Bank (BNDES – Banco Nacional de Desenvolvimento Econômico e Social) continues to be the country's main financer of infrastructure. BNDES will finance up to 70% of the amount to be invested in highways, ports and airports, and up to 90% of the investment in railways. However, the financing models will ensure more private participation in the financing for the projects, encouraging the development of the capital market and generating opportunities for domestic and international investors.

The information disclosed by the government to date does not contain any restrictions on participation by foreign companies in auctions under this new stage of the PIL.

BMA has the expertise needed to give both national and foreign clients legal support in concessions, leases and authorizations in regulated sectors, with teams made up of professionals from various areas – such as regulatory law, corporate law, securities and financing, and tax – who specialize in infrastructure projects. Our specialists are available to answer your questions and to assist you in all aspects of the infrastructure projects, including negotiations with potential partners for joint bids in auctions and project finance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.