Will Lula agree to the privatization of Santos Port Authority?

Even though initially ruled out by the government, talk about the privatization of Santos Port Authority (SPA), which operates Brazil's biggest port, has resurfaced.

Yet, “Santos port is much larger than any other port in Brazil and no privatization or concession model applied to other ports can be considered a mirror for Santos,” Fernando Fialho, a partner at port consultancy Modal Consult and former head of waterway regulator Antaq, told BNamericas. 

"Faced with many complexities and companies with different interests, I think that a pure privatization of SPA will never happen, and it is not because of the differences in ideologies of one or another government," he added.

Privatization was discussed late Wednesday when São Paulo governor Tarcísio Gomes de Freitas and President Luiz Inácio Lula da Silva met.

"[Lula] said that, obviously, this privatization issue is a sensitive topic, but that he is not bound by dogmas [against privatizations]. We know how sensitive the topic is for them, we have to handle it responsibly," Gomes de Freitas told O Estado de S. Paulo newspaper.

A government spokesperson confirmed to BNamericas that Gomes de Freitas’ comments accurately reflected the conversation.

Gomes de Freitas was infrastructure minister during the previous administration. He seeks to show that a privatization will spur investments and create jobs – a narrative the federal government could find attractive, given the weak fiscal scenario.

Under his watch, the Bolsonaro administration privatized several port operators to help increase investments.

The talks suggest a turn is taking place. Shortly after being sworn in as ports and airports minister, Márcio França said the privatization of Espírito Santo port operator Codesa, decided last year, will go through, but similar operations were off the table.

Immediately after assuming office, Lula stopped structuring processes for privatizations of eight firms, including Petrobras, Pré-Sal Petróleo – which supervises and sells the hydrocarbons from production-sharing contracts – and postal service Correios.

PRIVATIZATION OR MULTIPLE CONCESSIONS?

The SPA privatization package includes concession contracts for dredging and the construction of an US$818mn subsea tunnel between the cities of Santos and Guarujá.

SPA currently carries out dredging works and improves land, rail and canal accesses.

But full privatization was never popular, as terminal operators and shipping firms fear a single controlling group would push up operating costs.

"It is important to remember that last year [audit court] TCU showed resistance to the proposed SPA privatization model, so creating concessions for the various port activities is a much easier way," said Fialho.

Gomes de Freitas has also evaluated offering separate concession contracts. He is planning to meet transport ministry official to present some models under evaluation.

RECORD ACTIVITY 

Last year, Santos port handled 162Mt of cargo, up 10.2% from a year ago.

"In four years, the accumulated growth was 22%, considering the amount of 133Mt handled in 2018, which represents annual growth of 5.1%. Since 2019, SPA has been breaking successive records, year after year," SPA said in a statement. 

Main cargo handled related to agricultural products and meat. The port’s share in national trade reached 28.8%.