Brazilian airport concessions: all out of time?

A series of welcome announcements by the Rousseff government shows that it is getting serious with airport concessions. First, the government has appointed the capable Wagner Bittencourt in a newly-created position as secretary of civil aviation; he is likely to make professional rather than political appointments, a practice that has bedevilled the other organs of aviation, split between the intransigent military and an overweaning civil authority.

More recently, the government announced plans to hand over to private concessionaires the running of key airports starting with Guarulhos and and Brasilia’s international airport followed by Viracopos in São Paulo and later extending plans to Rio de Janeiro’s Galeão and Belo Horizonte’s Confins.

All well and good and there is certainly plenty of foreign and local interest. Local construction companies, who will get the bulk of the initial work, are rubbing their hands. But what's in it for foreigners?

Conflicting aims mean the government will almost certainly overspend and under-achieve. In line with other Cup and Olympics projects, the timetable is exceptionally tight with the shape of the concessions still to be thrashed out by consultants. That leaves it unclear what kind of concessions are favoured and just how much of the infrastructure will be passed to the private sector. It looks likely that runways and aprons will be kept by the venally incompetent state infrastructure group Infraero. The running of airports and key areas such as baggage handling and jetways are likely to go to the private sector. There are bound to be conflicts in this mixed private-public setup.

Estimates of passenger numbers and revenues will err on the upside and could make the terms of contracts for the private sector too onerous. The timeframe will be frantic as the government would dearly love to finish the projects before the World Cup. 

The danger is that the rest of the privatization programme for airports could well get quietly scrapped if these first round of concessions do not work out well. All indications point to a fraught two years.

About admin

I've been researching and writing on Brazilian financial markets, industry and economy since 2006 for a wide range of specialist media, consultancies and investors. Before that I spent over 10 years in London and New York writing for and editing magazines and journals dedicated to finance, investment and economics in developing markets, mostly for the Euromoney Institutional Investor group and Thomson Financial. Areas of coverage Below are samples of areas that I cover and some of the common themes that I investigate. Capital markets BM&FBovespa markets *capital raising trends: via equities (IPOs and secondary issuance), debt and loans *the asset management industry: legislation and coverage of the key hedge, pension and investment funds * corporate governance: how the regulator is seeking to strengthen best practice and limitations * debt markets: the nascent corporate markets, attempts to boost liquidity and new insturments. * private equity market: why this market has been so successful, who’s involved. *electronic, high frequency trading and alternative trading platforms: what does the future hold? Banking *credit: the growth of consumer and business credit and competition between banks and models *Public versus private: the role and market share of public and private sector banks and the politicization of the industry * internationalization: which Brazilian banks are expanding overseas and where * investment banking: the growth of the domestic market and who’s winning which mandates *regional banks and development banks: what role they play in the industry and how they compete Mining *licensing: the complex process of obtaining environmental, water, land and operating licenses at a state and federal level. * capacity: the feasibility and sustainability of capacity increases * financing: how miners are raising finance in Brazil and abroad *competition: the interplay Vale, MMX and junior miners *logistics: rail, road and port connections Oil and gas: the fund raising issues related to the massive of pre-salt (link) Multilatinas: Who are they and how and where they are expanding Meatpacking: Are debt burdens sustainable, what are the different business models for areas such as branding and distrbution Agriculture: How are farms consolidating, what are environmental risks, how can foreign investors be involved. IT and software: Can Brazil take on India and build a viable long-term IT industry? For more information on clients and work, please see the media and consultancy sections.
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