Much foreign interest expected for Brazil concessions, privatizations

Wednesday, September 13, 2017

The Brazilian government's plans to privatize or award concessions for infrastructure projects are expected to attract considerable interest from foreign investors.

"Given the great international monetary liquidity and the scarcity of major infrastructure projects in Latin America, Asia and Europe, Brazil has returned to the radar of foreign investors, in our view, especially by Chinese investors whose partnership[s] with local players should promote a new investment cycle in the next 10 years," analysts at BB Investimentos wrote in a report.

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The government announced last month the inclusion of 57 new projects in its investment partnerships program (PPI). Of these, 32 infrastructure projects will be privatized, concessioned or evaluated for privatization, including airports, highways, ports and state-owned companies.

"Ports are vital for both [the] internal consumer market and national exports. In this sense, we believe that the segment should attract greater investments in [the] short term, since the high need to dispose [of] agricultural products for export has created a bottleneck in the ports segment. Moreover, the potential Brazilian trade opening in the mid-term and the resumption of the domestic economic activity should result in an increasing need of better ports infrastructure in Brazil," added BB Investimentos.

The analysts also said the concession plans involve improvements compared with previous government programs, such as "greater technical rigor in projects analysis; contracts with clearer indicators and with quality goals and metrics; notices issued only after public consultation and TCU [federal audit court] endorsement; bid edicts published in Portuguese and English; a minimum period of 100 days' notice; and projects with proven environmental feasibility."