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Issue #583 | Forest Products

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2014 Media Kit
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Brazil highway investment picks up speed with BR-163

By: | at 03:43 PM | Channel(s): Intermodal  

Brazil seems to have hit a sweet spot in private sector infrastructure investments, as local engineering firm Odebrecht Transport made the winning bid on a leg of the main highway in the heart of the country’s grain belt.

The competitive auction will favor President Dilma Rousseff as she heads into the 2014 election year. Her government faltered in 2012 and most of 2013 in attracting much-needed infrastructure investment. Previous auctions had to be postponed or canceled for lack of bidders.

Odebrecht beat six competitors with a proposal to exact tolls on a 850-kilometer (528-mile) stretch of the BR-163 highway at 52 percent below the government-set maximum rate in the auction, a sign of strong interest in the asset and terms under concession.

Infrastructure auctions, which Rousseff expects to attract $90 billion a year, have gained traction in recent weeks and could continue at a steady pace over the next month.

private investors paid $9 billion for rights to two of Brazil’s busiest airport terminals, including Odebrecht, which was part of a winning consortia.

BR-163 is the second highway concession of 2013. On Sept. 18, the government partially succeeded in its first road auction, selling a 463-kilometer leg of BR-050 that links the farm-rich Goias and Minas Gerais states. But the government failed on the same day to attract bidders for BR-262, a 375-kilometer highway from Minas Gerais to the port city of Vitoria in Espirito Santo.

After removing many of the environmental licensing risks, sweetening financing packages from the BNDES development bank, and bringing down overly optimistic economic growth projections, the government has succeeded in bringing investors to the infrastructure party.

Soy Road

BR-163 is the main artery through Brazil’s fast-growing farm state of Mato Grosso, which gives it considerable revenue potential. Mato Grosso accounts for a quarter of total grain output in Brazil. The state relies principally on trucks to get some 20 million tonnes of corn and 25 million tonnes of soy each year to market.

The concession was one of the more attractive assets in Rousseff’s program to bring private sector investments to vital highway projects.

“It will bring big benefits for agribusiness,” Transport Minister Cesar Borges said after the auction. Although Brazilian farmers are some of the world’s most competitive grain producers, much of that advantage is lost to high transport costs and poor infrastructure.

BR-163 also leads north to Amazon River ports in Para state and could open a long-sought northern export route for the country’s farm sector.

But despite the auction of the Mato Grosso segment of BR-163, large stretches of the road in Para state leading to the Tapajos waterway and the Amazon River are likely not to be paved and remain impassable much of the year due to rains.

At present, nearly all of the grain traffic through Mato Grosso runs south along BR-163 to the main ports 2,000 kilometers away.

More concessions for highways that link up with BR-163 in Mato Grosso do Sul to the south and with BR-050 in Goias are due to go on the block in the coming weeks and offer the winners of those original legs possible cost savings by bidding on them as well. (Reuters)