Brazil raised 3.72 billion reais ($1.2 billion) with the auction of four airports on Thursday in the latest test of President Michel Temer’s strategy of jump-starting growth via private investments.

The auction, the first of its kind since 2013, had bids for all the airports. Fraport AG Frankfurt Airport Services Worldwide got contracts to operate the airports of Porto Alegre and Fortaleza, while Vinci SA and Flughafen Zuerich AG won contracts for Salvador and Florianopolis, respectively.

The tender fetched a 23 percent premium over the expected 3.01 billion-real minimum license fee, with the most intense disputes for the airports of Florianopolis and Porto Alegre in southern Brazil. Temer called the auction a success in a Twitter post. His comment was echoed by Transportation Minister Mauricio Quintella.

“The result of the auction shows that the country won back credibility,” Quintella told reporters in Sao Paulo, adding that “it opens the door for several other” infrastructure auctions. The government is currently studying which other airports can be auctioned to private operators and which ones will stay with state airport operator Infraero, eyeing an eventual initial public offering of the company, he said.

Brazil needs auctions like this to be a hit with investors as it tries to attract fresh capital and boost an economy that’s facing its deepest recession in at least a century. The government is also under pressure as the three-year corruption probe known as Carwash continues, with Brazil’s chief public prosecutor requesting investigations into at least five members of the cabinet, the heads of both houses of Congress and former presidents Luiz Inacio Lula da Silva and Dilma Rousseff, according to local media reports.

To attract foreign investors, the government changed some rules—winners must pay in advance 25 percent of the minimum price plus the premium and will be fully responsible for the investments, as Infraero won’t hold a stake in the airports. The total for the upfront payments had a 94 percent premium, meaning Brazil’s government will put R$ 1.46 billion in its pockets right away. The winners also committed to investing 6.6 billion reais in the airports.

“It wasn’t easy to make these auctions attractive in a moment when Brazil was discredited,” Brazil’s Presidency General Secretary Wellington Moreira Franco told reporters in Sao Paulo. He refused to comment on the fact that his name may be on the general prosecutor’s list, focusing instead on initial positive signs for the Brazilian economy, such as the drop in inflation.

  • The 3.72 billion reais raised compares with a government expectation of about 3 billion reais; the government will get 1.46 billion reais upfront with the concessions.
  • Fraport won the 30-year license to expand and operate the Fortaleza airport for 425 million reais, 18 percent above the minimum initial fee, to be paid upfront; it also won the 25-year contract for the Porto Alegre airport for 290.5 million reais, 837 percent above the minimum initial fee—the highest premium offered.
  • Vinci won the 30-year license to expand and operate the Salvador airport for 660.9 million reais, a little over double the minimum initial fee and the highest price for a single airport.
  • Flughafen Zuerich won the 30-year license for the Florianopolis airport for 83.3 million reais, 57 percent above the minimum initial fee.
  • Together, the four airports currently have 11.6 percent of passengers, 12.6 percent of cargo and 8.6 percent of the aircraft in the Brazilian air traffic: Anac.

Trust in Brazil

Porto Alegre’s high premium is justified by its long-term growth perspectives, Fraport Vice President Aletta von Massenbach said in Sao Paulo. “We believe in Brazil. This is why we are here. We believe we’ll see it growing pretty soon,” Massenbach said. The company sees the airport in the northeastern city of Fortaleza, the other one it won, as complementary to its strategy in the country.

Analysts such as Stephen Trent at Citigroup Inc. and Bruno Pahl at Fitch Ratings had expected a tepid auction amid reports of few potential suitors. While beating expectations, the sale contrasted with the nation’s last big airport auction in 2013, when investors flocked to Brazil expecting an influx of travelers because of the World Cup and the Olympic Games. Since then, a two-year recession has sapped consumers’ demand for trips, while a sweeping corruption scandal among Brazil’s top builders has dramatically narrowed the field of local companies with the financial wherewithal to compete for the contracts.

Back in 2012, Brazil sold licenses for three airports, including Brasilia and Sao Paulo’s Guarulhos, raising a total of 24.5 billion reais. The contract for Guarulhos, the country’s busiest airport, was sold for 16.2 billion reais, almost five times the minimum, to a group that included OAS Investimentos SA. The license to expand and run Rio’s Galeao airport was sold a year later for 19 billion reais, almost four times the minimum bid to a group led by Odebrecht SA.

Now, OAS is under bankruptcy protection and Odebrecht’s former CEO is in jail. As many of the contracts are reassessed, the government issued a decree in November to allow the renegotiation of airports, as well as railway and toll-road licenses.

Even aside from the decline in demand for air travel across the country, the airports being auctioned Thursday aren’t as busy as the ones offered up four years ago, said Citigroup’s Trent.

“Each one of the four airports being auctioned had basically between six and nine different airlines with flights,” Trent said, citing 2015 data used in the auction notice. “That’s a small number of airlines,’’ he added, noting that there were 32 airlines operating at Guarulhos.

Since the government made its estimates for the auction in 2015, the economy has continued to sink deeper into recession, which changes the variables and complicates the investment and return calculations bidders need to make before deciding how much they’re willing to pay for the assets, said Fabio Falkenburger, a partner at Machado Meyer, a law firm in Sao Paulo. About 7 million fewer passengers flew on domestic flights last year, and air traffic figures fell in January for an 18th straight month, according to Abear, the Brazilian Airline Association.

“The airports auction is a confidence test - it shows the market’s perception of Brazil’s current government,” Falkenburger said. “And it definitely means cash for the government.”