Report: Brazil to privatise 24 toll road segments

Brazil’s state and local governments are planning to put 24 stretches of highways to bid for private investors via public private partnerships (PPP) and concessions between now and August 2009, according to the state news service, Agencia Estado.

The highway stretches total some 8,900 kilometres and could spur private investment of R22 billion (€7.7 billion; $9.7 billion) in expansion, modernization and improvement works, the report said.

Brazilian toll roads: up for bid

The first tender, scheduled to go to bid 1 December, will be for highways BR-324 and BR-116 between the states of Bahia and Minas Gerais. It is expected to attract investment of R1.9 billion.

It will be followed by BR-040, BR-16 and BR-381 in the state of Minas Gerais in January and the MT-130 in the state of Mato Grosso in February. BA-093 in Bahia will be put to bid by August and will encompass 10 stretches totaling almost 200  kilometres. 

Brazil’s first PPP legislation came into effect in December 2004 but to date no federally-madated PPPs have been awarded, while states like Mina Gerais, Bahia and São Paulo have pioneered their own PPPs.

By contrast, under the government's 1996 concession legislation, 13 toll road concessions have been awarded in recent years, five of which were granted to Spanish construction company OHL in October 2007. Other toll roads have gone to Brazilian firm BRVias and Spanish infrastructure contractor Acciona, among others.

Although PPPs are a type of concession, there is a difference between projects awarded under the PPP framework and others governed by the existing concession model. Isabel Franco, a partner at Demarest e Almeida Avogaddos in Sao Paulo, where she represents investors who participate in Brazilian PPPs, explains that under concession-goverened projects the government does not guarantee fees or tarrifs, making the project more risky to investors. In PPPs, by contrast, the government will typically make such guarantees, subject to certain conditions being satisfied.

“These highways, as far as we know, will be awarded to the private sector as concessions under the concessions law and not structured as a PPP”, Franco said.

The federal government issued its first request for qualifications under the PPP law in May 2007 for stretches of the BR-324 and BR-116, which were delayed and ultimately not awarded.