Under Lula, Brazil won't privatize any more state-run port operators

The incoming government of president-elect Luiz Inácio Lula da Silva will not privatize any more state-run port operators, including Santos Port Authority (SPA), which runs Brazil's biggest port (pictured).

Incoming ports and airports minister Márcio França, who takes office on January 1 along with the rest of the Lula administration, said the new government will respect the concession contract signed earlier this year for Espírito Santo state port operator Codesa, but that no new similar auctions will take place.

"The port authorities will remain state-owned firms. What we will do is to offer concessions for areas within ports for private terminals," França told reporters hours after being named minister of ports and airports, which along with the transport ministry replaces the current infrastructure ministry.

The announcement has not surprised market observers, who were expecting Lula's government to review these concessions after expressing his opposition during the election campaign. 

The privatization of SPA, along with other public port entities, was a plan pushed by President Jair Bolsonaro's administration to increase private-sector investments in the port sector.

Under the privatization model for Santos port, the government planned to offer a 35-year concession contract that included dredging works and the construction of a subsea tunnel to connect the adjoining cities of Santos and Guarujá.

In March, asset management company Quadra Capital won the auction for the concession of Espírito Santo state port operator Codesa, offering a fee of 106mn reais (US$20mn) to the government. The company is expected to invest 335mn reais in the port and spend 1bn reais on operating expenses. The 35-year contract includes administration of the port and indirect operation of the Victoria and Barra do Riacho port facilities. 

Bolsonaro's administration was planning to use the Codesa deal as a benchmark for other concessions in the sector, including Itajaí port in Santa Catarina state, and São Sebastião port and SPA in São Paulo state.

AIRPORT CONCESSIONS

As regards new concessions of airports, França said that the ministry will assess the details of the planned concessions of the main airports in Rio de Janeiro state, Santos Dumont and Galeão, before those processes can advance.

“In order to give a concession to the private sector, it has to be advantageous, particularly involving new investments,” he said.

Despite the announced review, market observers do not believe that the airport concession model will be suspended and the new minister's speech merely suggests that the Lula administration wants to carry out a detailed evaluation of the few airports that are still under government control, since the same model was also used during previous governments led by Lula's workers party. 

Brazil’s airport sector is mostly run by private firms, following in the footsteps of the country's telecom and electric power industries. 

In August the government concluded a concession auction for 15 airports, meaning that private sector companies now handle 91.6% of national air passenger transport.