Brazil’s Highway Sector Set for R$40 Billion Auctions: Key Projects and Investors

Brazil’s highway sector is poised to wrap up the year with an exciting array of auctions, featuring five high-stakes bids that promise to secure over R$40 billion in much-needed investments aimed at enhancing the nation’s infrastructure.

On November 28, the government of São Paulo will conduct the auction for the Nova Raposo concession, which encompasses a vital portion of the Raposo Tavares-Castello Branco highway system within the bustling metropolitan area of São Paulo city. Anticipated investments for this crucial 92-kilometer stretch total R$7.9 billion, signaling a significant boost for local infrastructure development.

Among the firms showing interest in the project are notable names like CCR, Acciona, Ecorodovias, EPR, and Via Appia, the latter of which is under the control of Starboard. Nevertheless, CCR’s level of commitment remains somewhat ambiguous, especially since the company recently secured the Rota Sorocabana highway concession at the end of October with a substantial bid of R$1.6 billion.

The Nova Raposo initiative incorporates sections of ViaOeste, a CCR concession nearing its operational conclusion, which has now been split into two new contracts: Nova Raposo and Sorocabana. This latest project faces more complexities, particularly regarding land expropriations that are necessary near the densely populated region of São Paulo. Experts assert, however, that competition is likely to arise. Lucas Sant’Anna, a partner at the respected law firm Machado Meyer Advogados, remarked, “While the project has its challenges, São Paulo offers a more stable judiciary, and land expropriation here is more reliable due to jurisprudence. These are tested issues from a legal standpoint.”

In December, the auction frenzy will continue with four additional high-value projects scheduled. On December 6, the Mato Grosso do Sul state government, in collaboration with the federal government, plans to auction the Rota da Celulose concession, which is projected to involve R$5.8 billion in investments, further expanding road networks crucial for the region’s development.

Eliane Detoni, the special secretary for Strategic Partnerships in Mato Grosso do Sul, mentioned that four different consortiums are currently evaluating the project. “We have consolidated groups and new investors forming partnerships, so the interest is very diversified,” she noted. Among those showing keen interest is Way, a consortium comprised of local construction companies operating in the area, which has recently partnered with Kinea to strengthen its bidding position.

The expansive Rota da Celulose project, covering 870 kilometers, encompasses both state and federal highways, yet it will be under the regulation of a state agency. Ms. Detoni emphasized Mato Grosso do Sul’s regulatory maturity, stating, “If we were starting now without an established institutional framework, it could pose risks. But that’s not the case,” highlighting that the state already has two highway concessions operational to build upon.

On December 12, two significant federal projects will be auctioned: Lot 3 of the Paraná Highways, spanning 570 kilometers from Ponta Grossa to northern Paraná, and the Rota Verde concession, which stretches 426 kilometers in Goiás state, connecting the key agricultural hubs of Rio Verde, Goiânia, and Itumbiara.

The Rota Verde auction is expected to attract a wealth of competitors, with eight groups currently involved in project assessments. George Santoro, executive secretary of the Ministry of Transport, indicated, “The main appeal is the anticipated growth in traffic along this route, which lies at the heart of Brazil’s agribusiness sector. While it’s a challenging project because it’s not currently tolled, the model was well-structured.”

Lot 3 of the Paraná Highways has sparked interest from four companies, according to Mr. Santoro. “It’s a large concession, a challenging project, with substantial construction requirements,” he detailed, noting that the contract includes an investment commitment of R$10 billion.

Finally, the Lot 6 auction for the Paraná highways is scheduled for December 19, presenting itself as the most formidable challenge within this auction series. The contract mandates an investment of R$12.7 billion for a 662-kilometer corridor that will link the tourist hotspot of Foz do Iguaçu to Guarapuava and southern Paraná.

“The lot requires a demanding annual duplication rate, combining complex construction with significant capital requirements. This is a project for a select few participants. Currently, three groups are studying it,” Mr. Santoro elaborated.

A source familiar with the auction process indicated that Lot 6 is vying for attention alongside Lot 3, which is being auctioned just one week prior and is considered less complex, potentially making it more appealing. Companies like Pátria and EPR, which have successfully secured Lots 1 and 2 of the Paraná Highways, are expected to throw their hats into the ring. Additionally, 4UM, previously known as J. Malucelli, has recently been awarded the BR-381 concession in Minas Gerais, positioning itself as a strong contender.

Despite the rapid-fire timeline of the auctions, government officials maintain an optimistic outlook. “There’s a chance new groups that haven’t participated before, or have participated but didn’t win, could enter the competition. This includes foreign investors,” Mr. Santoro suggested, indicating an openness to fresh entrants in the market.

Market experts predict that each of the auctions will manage to attract at least one bid. Ewerton Henriques, a partner at SH Consultoria, pointed out that every project presents distinct benefits: “The Mato Grosso do Sul project is large and appeals to stakeholders in the region. The São Paulo concession benefits from the state’s regulatory stability, and the federal projects have favorable financing conditions from the BNDES (Brazilian Development Bank). Each has its ‘icing on the cake,’” he explained.

However, the clustering of auctions within a tight timeframe may pose certain challenges. Mr. Henriques observed that the latter auctions might encounter difficulties attracting interest, as companies securing earlier contracts may become less eager to commit further resources. In this context, Lot 6 could potentially experience hurdles in garnering bids.

For Herbert Suede, the infrastructure and energy coordinator at Banco Fator, the outlook remains decidedly positive. “The highway sector has seen significant improvement. Risk-sharing in the contracts is better, regulation has proven stable, and there’s a wealth of projects. It’s natural for everyone to be paying attention, as there are many opportunities,” he added, highlighting the sector’s promising trajectory.

When contacted, CCR noted that it “analyzes all opportunities across the three platforms where it operates, selectively.” Ecorodovias stated it “selectively evaluates all projects.” Acciona expressed that it is “actively seeking opportunities.” Via Appia remarked that it is “constantly evaluating participation in new auctions” and prioritizes assets in close proximity to its existing concessions in São Paulo and Minas Gerais. EPR stated it “has a disciplined approach to evaluating opportunities in the sector.” 4UM, Way, and Pátria chose not to comment on their bidding strategies at this time.

How do the upcoming highway projects impact local communities and transportation in‍ densely populated areas like São Paulo?

‍ **Interview with Lucas Sant’Anna: Insights on⁤ Brazil’s Upcoming Highway Auctions**

**Editor:** Thank you for joining us today, Lucas. With⁤ Brazil’s highway sector gearing⁣ up for a series‍ of substantial auctions, can you discuss the importance of these projects for the nation’s ‍infrastructure?

**Lucas Sant’Anna:** Thank you for having me. These auctions are crucial not just for enhancing Brazil’s infrastructure but also for stimulating economic growth. The ⁢R$40⁢ billion in ⁤expected investments ‌will significantly improve transportation networks, facilitating trade and mobility across various regions. This can have a ripple effect on local economies.

**Editor:** The Nova Raposo concession has garnered significant attention. What makes this particular⁤ project so vital for São Paulo?

**Lucas Sant’Anna:** The Nova Raposo concession spans 92 kilometers of a critical highway system in São Paulo, which is one of the most ⁣congested ⁢metropolitan⁢ areas in the ⁣country. The R$7.9 billion investment is expected to ​address long-standing transportation issues. Moreover, as this project unfolds, it will benefit from the existing regulatory​ framework, which promotes reliability in land expropriation⁤ processes.

**Editor:** We’ve seen a mix of established firms and newer entrants showing interest in these auctions. ‍How competitive do you expect‌ the bidding to⁣ be?

**Lucas Sant’Anna:** I anticipate a ⁤highly ⁤competitive environment. The presence of multiple strong players, including CCR and new⁢ consortiums,​ will drive innovation and potentially lower costs for these projects. Competition is essential ⁣to ‌ensure that these investments yield‌ the best outcomes for public infrastructure.

**Editor:** You mentioned‍ land ‌expropriations as a challenge, especially near densely populated areas. Can you elaborate on how São Paulo’s judicial system impacts this?

**Lucas Sant’Anna:** Certainly. ‌São‍ Paulo’s legal environment‌ is relatively stable, and the jurisprudence on land expropriation⁣ is well-established, which fosters confidence​ among investors. While every project has challenges, the assurance of legal support mitigates much‍ of the risk ‌associated ‌with these complex issues.

**Editor:** Beyond​ São Paulo, the Mato Grosso do Sul’s Rota da Celulose also stands⁣ out. What interest do you see in that project?

**Lucas Sant’Anna:** The Rota da Celulose is significant due to its scale and potential impact on regional development. With four consortia currently evaluating the ‍project, ⁢the interest level​ is promising. The ⁢region has established operational ‌frameworks, which can attract ⁤both⁣ local and international investors looking to capitalize on infrastructure ⁣growth⁤ in key economic zones.

**Editor:** Lastly, with upcoming federal projects,⁢ how ⁣do you view the outlook for the December auctions?

**Lucas Sant’Anna:** The December auctions are expected to be competitive as ​well. Federal projects like the Paraná Highways and the Rota ⁣Verde concession have attracted considerable attention due to their⁢ strategic importance in Brazil’s agribusiness sector. I’m optimistic that each auction will​ receive multiple bids, which augurs well​ for Brazil’s infrastructure ambitions.

**Editor:** Thank you for your insights, Lucas. It will be exciting to see how⁣ these​ auctions unfold‍ and their impact on Brazil’s infrastructure.

**Lucas Sant’Anna:** ‍Thank you for having me. I look forward to seeing the positive changes‍ these projects will bring!