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Brazil to auction off roads

10/16/2013 @ 1:14pm

Brazil's transportation minister guaranteed on Wednesday that coming concessions of highways will attract bidders, and that the government is prioritizing shorter stretches of railways as it seeks to woo private operators.

"We are being very cautious in listening to the market to make sure the process is successful," Transportation Minister Cesar Borges said during a congressional committee meeting.

Brazil announced plans last year to hand over 7,500 kilometers of highways and 10,000 kilometers of railways to private companies, part of government efforts to improve a transportation network that is seen as one of the main bottlenecks impeding faster economic growth.

Auctions to hand over the stretches of road and rail have been delayed several times as investors balked at the limit on profits imposed by the government. The latest setback came last month, when one of two stretches of federal highways up for grabs failed to attract bidders.

"We have been talking to all the companies individually. We will have a reasonable number of bidders interested in participating" at auctions planned for later this year, Mr. Borges told senators. "Participants have had a lot of time to study the projects."

One of the next projects up for bidding is the BR 163 highway, a north-south highway that serves the booming agricultural center-west states of Mato Grosso and Mato Grosso do Sul. Home to a majority of Brazil's soybean output, the inland states suffer from inadequate roads and rail, leaving roads clogged with trucks carrying crops to Brazil's southern ports every harvest season.

Mr. Borges said the government will auction rights to operate the stretch of BR163 in Mato Grosso on Nov. 27, and the stretch located in Mato Grosso do Sul on Dec. 17.

Some senators criticized the government's historical preference for highways over railroads and waterways, which seems to be repeating itself in the current round of auctions. Although auctions for highways have already begun, the date of the first concessions of railways is still unknown.

"The mode of highway transportation was favored because it allows cargo to arrive at someone's house with great ease. Everyone can have their own car, their own truck, while rail and water transportation require a lot of infrastructure," the minister said. "Today we want to make advances in other modes of transport" while continuing to expand Brazil's road network, he said.

In the area of rail concessions, the minister said the priority for the government will be to auction the simplest stretches of railroad first. That means a 477-kilometer stretch of railway linking Acailandia, in the northern state of Maranhao, to Barcarena, close to the port of Belem, will be the first stretch handed over. A 1,000 kilometer stretch of railway serving Mato Grosso will be conceded at a later date, he said.

"Since we're at the beginning of the process, we decided to put forward the shortest stretch first," which requires less capital investment and is more likely to be successfully auctioned off, Mr. Borges said. "It wasn't a question of prioritizing one area over another. We were listening to the market."

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