Brazil's multi-airport privatization plan lacks appeal, says expert

Monday, June 19, 2017

The model being proposed by Brazil's federal government to concession the operation of airports throughout the country is not very attractive to the private sector, local infrastructure and logistics expert Paulo Resende told BNamericas.

The government announced in June plans to close down national airport authority Infraero and privatize all of the 54 airports that the authority operates.

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"I have spoken with many investors and they are seeing it as a high risk model that is difficult to understand. It's like knowing the beginning of a story line, but not understanding the ending," said Resende.

Brazil's recent recession and ongoing political instability have made many investors more risk sensitive in terms of investing in the country's infrastructure projects, said Resende, who believes that some of the airports need to be removed from the plan in order to reduce risk.

The government needs to clearly categorize the airports into three groups, according to Resende. The first group would include airports with strong demand like Congonhas in São Paulo state, Santos Dumont in Rio de Janeiro, Curitiba in Paraná, and Recife in Pernambuco.

Rio de Janeiro's Santos Dumont airport (CREDIT: Infraero).

The second group would be airports with potential demand such as the ones in the northeastern region of the country, which have future tourism potential. The third group would be airports that lack demand and they include those in the north of the country or those located inland, said Resende.

The federal government should offer the first two groups to the private sector with remuneration based on service quality and infrastructure improvements. The third group should remain in the hands of Infraero, which should focus on breaking even instead of making a profit, Resende said.

Resende is head of infrastructure and logistics at Brazil's Fundação Dom Cabral university and editor-in-chief of the business school's management magazine Revista DOM.