Auction in Brazil's transport sector arouse world optimism

Creation date: 10 December 2007

The success of the long-awaited auction that privatized seven segments, totaling 2,600 kilometers of federal highway in Brazil’s Southern and Southeastern regions has caused excitement in the global transport market. Where previously there was skepticism, the investment constrains have now been removed. With the materialization of the Public Private Partnerships (PPPs), the government has taken a concrete step towards opening doors for private investment in the transport and infrastructure sector.

Along with international optimism, the signals given off by the government and the 2.6 thousand kilometer road auction have triggered a chain reaction of growth. Proof of this optimism is foreign companies’ growing interest in Brazil, including Spanish groups like OHL and Acciona. 

The PAC, in combination with factors such as Brazil’s size and economic growth capacity promising for the transport sector and is expected to attract foreign investments, especially in infrastructure. Several international companies are showing interest in winning a piece of the approximately R$ 34 billion which will be invested in the modernization of highways as well as the R$ 13 billion in ports, R$ 3 billion in airports and R$ 8 billion in state subway systems.

Investment in transport is critical for Brazil to meet its growth objective of 5% GDP during President Lula’s second term in office. Several projects such as the construction of a new airport in São Paulo and the studying of a railway construction connecting Mato Grosso do Sul to the Paranaguá port, in Paraná, show that these measures are progressing from the drawing board. The government will progress steadily in investing in the transportation modalities starting with those of the PAC, which is expected to attract foreign investment capital.  

Amongst the projected investments, the Brazilian government plans to construct 2,500 kilometers of railways by 2010. In the waterway segment, besides the renovation of 12 ports, the Program foresees the construction of 67 river ports and the dam in Tucuruí. In the highway segment investments include the construction of 6,876 kilometers; the duplication of 3,214 kilometers and the recovery of 32 thousand kilometers of federal highways, as well as the installation of safety devices and weigh stations. To achieve these goals, the DNIT, (the National Department of Transport Infrastructure), must invest R$ 8 billion.

According to Sebas van den Ende, president of Real Alliance, the result of the first highway privatization auction is a good market thermometer. The intensely competitive auction, from which the Spanish OHL emerged victoriously, has brought prices down significantly. On the segment Fernão Dias, the toll will be R$ 0.99, a quarter of the average price for federal highways. One of the conditions must meet OHL, is to invest R$ 25 billion in technology on the highways.

In the first stage of privatization of federal highways, ANTT, the National Agency for Road Transportation, auctioned seven segments of the Transbrasiliana highways; namely BR-393; BR-101; Fernão Dias; Mercosul and two of the Régis Bittencourt highway.

In this market context, an international transport infrastructure event is of essence to bring together the various modalities of the transportation market and facilitate discussions that lead to more effective solutions through real-world benchmarking. A platform that brings together sector intelligence, industry and government on the four transport modalities of transport infrastructure will undoubtedly be pivotal for this sector in Latin America. “TranspoQuip will host debates on pertinent industry issues, including: safety, management and user comfort”, says van den Ende. “The auction was a great step in what I believe will be a wave of privatization. As a result, both the concessionaires and the government alike, are, and will continue to be looking for new technology. The latest in technological innovation in Brazil and overseas will be present at TranspoQuip.”

Real Alliance, a Brazilian company, of Dutch origin, has recently launched TranspoQuip Latin America 2008 – an international exhibition for transport infrastructure that will take place in September 2008 in São Paulo.

Source: Real Alliance