Brazil has been investing to expand the logistics and social infrastructure.

By DLA Piper on February 27, 2023

Posted in Brazil, Infrastructure, Construction and Transport

by Carolina Caiado and Marcelo Frazão CMA in cooperation with DLA Piper

Introduction

As a continental country and an emerging economy, Brazil has been investing to expand the logistics and social infrastructures. The logistics matrix is highly dependent of highways, because of the industrialization police adopted in the sixties. At the time, Brazil replaced its railways by highways. However, the maintenance, expansion and costs of highway transportation have been pushing the country to improve the logistics matrix, to seek for more cost efficient and sustainable transportation types.

In the past years, Brazil has been relying more on private investment to shift the construction and maintenance of from full government operation to concessions and public-private partnership (the “PPP”). By delegating the operation of public services to the private sector, the country is improving the logistics matrix, but there is much more to be done.

Infrastructure projects take long-terms to be planned and structured. An efficient and well-prepared logistics project could last 4 years to be ready for the bidding phase. Very often the “author government” of the project is not the government participating in the project operation inauguration. BNDES, the Brazilian national development bank, has assumed a role of consultant to the federal, state, and local government in the planning phase of projects. From a former major financer of infrastructure projects, BNDES is now more focused on their modeling.

To keep our clients and partners updated with Brazilian projects, we have prepared a list of projects about to go to the bidding phase or at least with studies in progress. The list conveys concessions and PPPs from the Federal Government and States, combining logistics, basic sanitation (water and sewage), and health facilities. The new Government has already committed to conclude the projects and grant the contracts.

At the federal level, the Ministry for Airports and Ports, as well as the Ministry of Transport (dedicate to highways and railways) will lead the projects. The Federal Court of Audits (the “TCU”) is an administrative court linked to the Legislative Branch. TCU is incumbent upon the auditing and monitoring of the public procurement proceedings and government contracts executed by the Federal Government and projects financed with federal funds.

DLA Piper in Brazil is committed to update the list monthly to provide our partners and clients with accurate information on the project’s development. If you have any questions, please contact Carolina Caiado at carolina.caiado@cmalaw.com . We will be pleased to share information and business ideas with you.

AIRPORTS

– PPP Regional Airports – Amazonas

Project Summary: The Block Amazonas was qualified in the Investment Partnership Program (“PPI”) of the Federal Government on December 2, 2020. The concession is composed of airports in the cities of Parintins, Carauari, Coari, Eirunepé, São Gabriel da Cachoeira, Barcelos, Lábrea and Maués, all in the state of Amazonas, north of Brazil.

The project consists of a concession for the expansion, maintenance and operation of the airport’s infrastructure, helping overcome deficiencies in their current infrastructure and airport management.

During the concession term, about 2,140 of direct and indirect jobs should be generated.

Status: The technical studies to support the concession model were requested.

– New public procurement proceeding of São Gonçalo do Amarante airport in Natal/ Rio Grande do Norte

Project Summary: The São Gonçalo do Amarante Airport (ASGA) is in the northeast of Brazil. It was firstly auctioned in 2011. It is the largest cargo airport in the Northeast region of Brazil and, according to a survey carried out by the National Civil Aviation Agency (ANAC), it was considered the second-best airport in the country in the category of airports that receive up to 5 million passengers. Whoever wins the dispute will manage the Potiguar air terminal for the next 30 years and will have the obligation to invest at least R$ 308.9 million in the asset.

In 2019, ASGA carried by more than 2.2 million passengers on domestic flights and 89,000 passengers on international flights.

Due to its proximity to Europe, Africa, and North America, the São Gonçalo do Amarante airport stands in a strategic and privileged location, with potential to be an export and tourist hub.

In 2020, the current concession holder Inframerica formalized a request to return the concession and the project was qualified for the PPI through Resolution No 122 of October 6, 2020.

In 2021, ANAC promoted a public consultation to gather suggestions and contributions to the project.

Status: The request for proposals (RFP) was published on February 8, 2023, in the Federal Official Gazette. The auction is expected to be held on May 19, 2023.

– New public procurement proceeding of Viracopos Airport Campinas / São Paulo

Project Summary: The Viracopos International Airport (VCP) was first auctioned in 2012. It is the second most important airport in the cargo sector in Brazil. In 2019, it handled more than 53.4 thousand tons on domestic flights and 200.5 thousand tons on international flights. The airport plays an essential role in Brazil’s economy, fostering the development of Campinas and its region.

In 2019, the Viracopos International Airport carried by more than 9.7 million passengers on domestic flights and 966 thousand passengers on international flights.

The airport was qualified for the PPI at the 13th meeting of the PPI Council, through Resolution No 123, of October 6, 2020.

In 2020, ABV – Aeroportos Brasil Viracopos filed a request with ANAC to return the concession.

The studies were concluded on August 25, 2021, and the period for contributions to the public consultation ended in the same year.

The study documents can be found at https://www.gov.br/anac/pt-br/assuntos/concessoes/relicitacao-do-aeroporto-de-viracopos. Latest news: https://portalcbncampinas.com.br/2023/01/relicitacao-de-viracopos-segue-sob-analise-do-tcu/

Status: Awaiting TCU Assessment.

– New public procurement proceeding of Santos-Dumont and Rio-Galeão Airports in Rio de Janeiro

Project Summary: Santos Dumont Airport, located near the main tourist attractions of the city, is one of the busiest in the country and serves the Rio-Sao Paulo Air Shuttle. The Rio-Galeão airport, also located in the city of Rio de Janeiro, is 20 km from the city center and has the largest airport site in total area among all national airports. It is the largest airport in the state of Rio de Janeiro and is among the 10 busiest airports in Brazil (2021).

The current concessionaire of Rio Galeão airport executed an amendment to the contract with ANAC to return the asset. Both airports will be included in the same public procurement proceeding.

Status: Studies in progress. According to recent press releases, the Federal Government has been negotiating with the concessionaire and its investors to maintain the contract in force.

PORTS

– PAR 50 – Liquid bulk terminal at the port of Paranaguá / PR

Project Summary: It is a brownfield terminal with 85,392 m² (eighty-five thousand, three hundred and ninety-two square meters), dedicated to the handling, storage, and distribution of Bulk Liquids in accordance with the Development and Zoning Plan (PDZ) of the Port Administration of Paranaguá and Antonina – APPA (currently Paraná Ports).

The project established for the PAR50 has road connection that integrates it with the entire south and southeast region, and pipeline connection with the public wharf, and aims to meet the storage and handling of bulk liquids, especially chemicals, vegetable oils, ethanol and fuels in the region of influence of the Port of Paranaguá and Antonina Complex.

With regards to the port handling of fuels, besides the regional supply, the Southern Region ports are essential for the supply of fuels in the country.

Status: TCU approved the studies on December 3, 2021. The RFP has not been published yet.

– STS 08 – Liquid Bulk Terminal in Porto Santos / SP

Project Summary: This is the qualification for studies of the STS08 area, located in the Alemoa region in the Port of Santos/SP, which resulted in the public consultation for two bidding rounds, the STS08 and STS08A leases. The two areas total investments by the future lessees of approximately R$1.4 billion. They will be the largest port auctions held in the country to date.

The area called STS08 has 139,319m² and is destined for the storage and distribution of bulk liquids, especially fuels. The contract term will be 25 years and the investments foreseen total R$ 265.5 million and the total gross revenue for STS08 is R$2.842 billion.

The future terminal tenants will pay the port authority a monthly fee of R$1,516,139.05 for the use of the area, plus R$9.35 per ton handled.

Status: Project under revision after deserted public procurement proceeding.

– MAC12 – Liquid bulk terminal at the Port of Maceió / AL

Project Summary: The focus of the terminal in question is related to the handling and storage of fuels, whose relevance to the world economy is undeniable and needs no further comment.

According to the Master Plan, bulk liquids represented 55% of the volume transported in the complex in 2017. In that year, about 300,000 tons of oil products were handled at the Port of Maceió, with S-500 diesel being the main product operated.

Likewise, ethanol has a great impact on operations, being responsible for the movement of 220,000 tons, especially for cabotage unloading. Meanwhile, crude oil, coming from onshore wells located in the state of Alagoas, moved 163,000 tons (also data from 2017), by means of cabotage shipments.

The planned investments are R$9.27 million.

It is estimated that 602 jobs will be generated over the 25 years of the lease agreement, including direct, indirect, and income-effect jobs.

Status: Awaiting TCU Assessment.

– MAC11 – Liquid bulk terminal at the Port of Maceió / AL

Project Summary: The focus of the terminal in question is related to the handling and storage of fuels, whose relevance to the world economy is undeniable and needs no further comment.

Likewise, ethanol has a great impact on operations, being responsible for the movement of 220,000 tons, especially for cabotage unloading. Meanwhile, crude oil, from onshore wells located in the state of Alagoas, moved 163,000 tons (also data from 2017), through cabotage shipments.

An estimated 3,338 jobs were generated over the 25 years of the lease agreement, including direct, indirect, and income-effect jobs.

Status: Awaiting TCU Assessment.

– SUA 01 – Lease of Vehicles at Suape Port / PE

Project Summary: It is a terminal destined for the operation and storage of vehicles and roll-on roll-off loads (RoRo), in logistic flows of export, import and distribution center (Vehicle Distribution Center – VDC), in areas located in the Port of Suape.

The planned investments are in the order of BRL 7.5 million, subdivided into civil works and equipment. It is noteworthy that the Port will deliver the area with the yard paving executed.

Status: Studies in progress.

– VDC10 – Liquid and solid bulk terminal at the port of Vila do Conde / PA

Project Summary: The project refers to the leasing of the VDC10 Terminal – located in the Port of Vila do Conde, under the administration of Companhia Docas do Pará – CDP, for moving and storing Bulk Liquid, Alumina and Hydrate.

It is a brownfield area with 162.856 m² (one hundred and sixty-two, eight hundred and fifty-six square meters), dedicated to the movement and storage of Bulk Liquid, Alumina and Hydrate, in accordance with the Development and Zoning Plan – PDZ of the Companhia Docas do Pará – CDP.

The contract will have a foreseen term of 25 (twenty-five) years, extendable successively, at the Granting Authority’s discretion, up to a limit of 70 (seventy) years. During this period, it is expected that the future lessee will make investments in the order of R$400,000 million, in facilities and equipment necessary for operation, as presented in the items above.

Status: Awaiting TCU Assessment.

– VDC10A – Terminal lease for liquid bulk in the Port of Vila do Conde / PA

Project Summary: In the port’s area of influence, there is great demand for bulk liquids due to the industries that make up the alumina and aluminum cycle in Pará.

Monthly lease value: R$ 2,400 thousand

Variable lease value: R$ 22.39/t

IRR: 9.38%.

An estimated 2,501 jobs generated during the lease contract: (direct, indirect and income-effect).

Status: Awaiting TCU Assessment.

MCP1 – Wood Chip Terminal in the Port of Santana/AP

Project Summary: The project covers the operation of a port terminal for general cargo handling (wood chip) in the Port of Santana (MCP 01). The location of future lease facilities is an operating area of approximately 22,000 m².

Status: The studies have already been concluded and the project was approved by TCU (plenary session on 24.01.2018).

RAILWAYS

– EF 170 – MT/PA – Ferrogrão Railway

Project Summary: The project aims to consolidate Brazil’s new export rail corridor through Arco Norte. The railway has a length of 933 km, connecting the grain-producing region of the Midwest to the State of Pará, ending at the Port of Miritituba. The Santarenzinho branch, between Itaituba and Santarenzinho, in the municipality of Rurópolis / PA, with 32 km, and the Itapacurá branch, with 11 km, are also planned.

When completed, Ferrogrão will have high transport capacity and competitiveness for export production through the Arco Norte, a role that today is played by the BR-163 highway. The corridor to be completed by the EF-170 and the BR-163 highway will consolidate a new route for the export of soy and corn in Brazil.

The railway will alleviate traffic conditions on this highway, with the aim of reducing the traffic of heavy trucks and the costs of conservation and maintenance. By relieving truck traffic on the BR-163, rail freight transport has a high potential for reducing carbon emissions from burning fossil fuel. This reduction potential makes it possible for the project to meet premises guided by the Climate Bonds Initiative – CBI to allow future green bond issues via credit instruments.

The project addresses the expansion of the Brazilian agricultural frontier and the demand for an integrated cargo transport infrastructure.

Status: Awaiting TCU Assessment.

– New public procurement proceeding of the Malha Oeste Railway Concession Contract

Project Summary: The infrastructure of the Western Network, including its permanent way, is depreciated. For years, the current concessionaire made investments at levels that were insufficient for its maintenance. This underinvestment has led to a loss in transport capacity. Currently, the trains run at speeds below their potential and the volume of cargo transported is limited.

The Council of the Investment Partnership Program approved, in its 14th Meeting, held on December 2nd, 2020, the qualification for the new public procurement proceeding of the “Malha Oeste”, through Resolution no. 146, resulting in Decree nº 10,633, of February 18, 2021.

The new public procurement proceeding for the West Network concession is the opportunity for a new concessionaire, in a new contract, to make the investments for the modernization and expansion of the railroad. In addition, a new public procurement proceeding will allow the concession contract to be updated based on the best current regulatory practices.

Status: Studies in progress

– EF-277 – Paraná Oeste Railway – Ferroeste

Project Summary: This is to assist the Government of the State of Paraná with the objective of realizing the project, as an attractive venture for private initiative, through the support of the Federal Government to the process of privatization of the state company Estrada de Ferro Paraná Oeste, requested by the Government of the State of Paraná.

The project was qualified in the 13th Meeting of the PPI Council, through Resolution nº 133, of 06/10/2020, which originated Decree nº 10,487, of 09/15/2020.

Status: Studies in progress.

HIGHWAYS

– Studies for concession of 7,230 km of highways – 15 highway exits in 14 UFs

Project Summary: The studies are being conducted by the Brazilian Development Bank (BNDES), which has already evolved in a first phase of pre-feasibility analysis of the stretches distributed in 13 states, selecting 12 stretches totaling 7,356 km.

The studies conducted by BNDES indicated the feasibility of granting 4 road stretches in the states of Goiás, Mato Grosso and Rondônia, totaling 2,572.1 km in length.

Status: Awaiting TCU Assessment

– BR-040 / DF / GO / MG – Ratification of the Qualification ad referendum

Project Summary: The priority of the project is characterized by the situation of the concession contract in effect, with declared inability of the incumbent to comply with the obligations originally assumed. The concessionaire Via 040 filed a request with ANTT for friendly termination of the concession contract and consequent adhesion to the new public procurement proceeding. CPPI issued a favorable opinion ad referendum through CPPI Resolution no. 105, dated January 10, 2020.

With the execution of the project, the intention is to ensure the continuity of operational services and recovery, maintenance, monitoring, capacity expansion and improvements of the Brasília – Juiz de Fora axis, to maintain the level of service of the highway for the benefit of the population.

Status: Feasibility studies completed. The period to send contributions to the bid documents ended on December 1, 2022.

The public hearing documents can be accessed at: https://participantt.antt.gov.br/Site/AudienciaPublica/VisualizarAvisoAudienciaPublica.aspx?CodigoAudiencia=513.

Concession of the BR-381/262 / MG / ES highways – Section of BR-381 / MG between Belo Horizonte and Gov. Valadares and BR-262 / MG / ES between João Monlevade / MG and Viana / ES

Project Summary: The project consists of the Concession proposal for the operation of the infrastructure and the provision of public services for recovery, operation, maintenance, monitoring, conservation, implementation of improvements and maintenance of the service level of the BR-262/ES Highway, in the stretch between junction with BR-101 (B) – Viana/ES – up to the border between ES/MG; BR-262/MG, in the stretch between ES/MG border to the junction with BR-381/MG – João Monlevade/MG; and BR-381/MG, in the stretch between Belo Horizonte/MG to Governador Valadares/MG.

The section in question has an extension of 686.1 km, changing to 670.6 km after works of rectification of layout.

Status: Awaiting TCU Assessment.

– Studies for the Concession of the BR -158/155 / MT / PA Highways

Project Summary: The stretch of higway in question is an important outflow route for grain production from northeastern Mato Grosso, integrating the region to the Carajás railroad and allowing the export of the production through the Port of Itaqui/MA.

The project consists in the proposal of studies for the Concession for the exploration of the infrastructure and the provision of public services of recovery, operation, maintenance, monitoring, conservation, implementation of improvements and maintenance of the service level of the stretch of BR-158/MT road between Ribeirão Cascalheira/MT (junction with BR-080) to Redenção/PA (junction with BR-155) and of BR-155 between Redenção (junction with BR-158) and Marabá/PA (junction with BR-222).

Status: Studies in progress

– BR-135/316/MA

Project Summary: The stretch is characterized by the impact of the works on several quilombola communities, generating restrictions on the work fronts due to the absence of a favorable opinion from Fundação Cultural Palmares – FCP, as required by environmental conditions in the licenses.

The characterization and identification studies of the quilombola communities were in the conclusion phase, but after a hearing with DPU/MA and MPF/MA, the FCP questioned the validity of the studies and requested the environmental agency (SEMA-MA) to suspend the licenses, in order to make adjustments and corrections in the environmental licensing process for the project.

Status: Studies in progress

– Minas Gerais Highways

Project Summary: Subsystem 2 refers to Lots of Varginha-Furnas (432.8 km) and São João Del Rei (452 km) related to the Highway Concession Program of the State of Minas Gerais.

Status: Awaiting request for proposals

– Paraná Highways

Project Summary: Concession of the federal highway system of the state of Parana, of up to 4,000 km of roads. The project benefits from the advisory of International Finance Corporation (IFC) and is being structured with Infra S. A’s financial support.

Status: Awaiting approval of the controlling bodies.

– Pernambuco Highways

Project Summary: Concession of the highway system of the state of Pernambuco, of up to 234,6 km of roads.

Status: Awaiting request for proposals.

Rio Grande do Sul Highways

Project Summary: Concession for the rendering of the services of operation, conservation, maintenance, implementation of improvements and expansion of transport infrastructure capacity of the Highways that are part of Lot 1 of the State of Rio Grande do Sul, with the extension of 444 km.

Status: Awaiting request for proposals.

WATERWAYS

– Lagoa Mirim Waterway and São Gonçalo Canal/RS

Project Summary: Concession of services in the South Atlantic hydrographic region that connects Uruguay and Brazil (Lagoa Mirim and São Gonçalo Canal/RS)

The qualified stretches of the São Gonçalo Canal and Lagoa Mirim Waterway, in the state of Rio Grande do Sul, make up the so-called Brazil-Uruguay Waterway. The undertaking is structuring for the logistic integration comprised in the southern region of the South American continent.

Mirim Lagoon Waterway: the stretch between the Sangradouro Canal (Far North) and the Access Canal to the Port of Santa Vitória do Palmar (Far South).

São Gonçalo Channel: connection between Mirim Lagoon and Patos Lagoon.

Objectives of the concession: Deepening and maintenance of the navigation channel, guaranteeing safe vessel traffic throughout the year. The investments are related to dredging and signaling.

The enterprise was qualified in the PPI through Resolution no. 195, of August 25, 2021, of the Council of the Program of Investment Partnerships of the Presidency of the Republic, converted into Decree no. 10,865, of November 19, 2021.

Status: Studies in progress.

– Hydroagricultural Projects and Irrigation Perimeters

Project Summary: Qualified in the PPI by means of Resolution no. 216, of December 16, 2021, the seven hydro-agricultural and irrigation projects aim, through the development of water infrastructure, such as dams, canals, pumps, and water mains, to expand irrigation services and, in the case of the hydro-agricultural project, also water supply and energy generation, bringing economic and social development to the neediest regions of the Brazilian semi-arid region.

The partnerships with the private sector will allow the resumption of the implementation of these projects, interrupted due to the scarcity of budgetary resources, besides the incorporation of new technologies and higher productivity.

The seven new qualified projects are: Vale do Jequitaí (MG), Vale do Iuiú (BA), Chapada do Apodi (RN), Baixo Acaraú (CE), Tabuleiros Litorâneos (PI), Platôs de Guadalupe (PI), Tabuleiros de São Bernardo (MA).

Status: All in process of study, except Vale do Jequitaí that awaits for the TCU Assessment

WATER AND SEWAGE -Basic Sanitation

Paraíba Sanitation

Project Summary: Brownfield, estimated investment of R$ 6,000 million.

Privatization project, through private participation, in the provision of public water supply and sewage services, as well as operational management services, in 93 municipalities in the State of Paraíba.

Status: Studies in progress

Porto Alegre – Sanitation

Project Summary: Brownfield, estimated investment of R$ 2,100 million. Concession of water supply and sewage in the municipality of Porto Alegre (1.5 million inhabitants), state of Rio Grande do Sul.

Status: Awaiting approval of control bodies.

– Rondônia Sanitationcode

Project Summary: Concession or PPP for the provision of public water supply and sewage services, as well as operational management services, in 48 of the 52 municipalities in the State of Rondônia, serving approximately 1.5 million people, which corresponds to 92.4% of the state’s population.

Status: Studies in progress

– Sergipe – Sanitation

Project Summary: The privatization project for water supply and sewage services covers the 75 municipalities of the state of Sergipe, which has a population of 2.3 million inhabitants.

Water supply and sewage services are currently provided by Companhia de Saneamento de Sergipe (Deso) in 71 of the 75 municipalities of the state. Deso is a mixed economy company, whose main shareholder is the State of Sergipe.

Status: Studies in progress.

HOSPITALS

– Guarulhos – Hospital

Project Summary: Public-Private Partnership/PPP, in the form of a government-pays PPP, that entails construction, provision of equipment, operation, management and maintenance of infrastructure and the provision of clinical services and non-clinical services at the New Municipal Hospital for Children and Adolescents (NHMCA) in the Municipality of Guarulhos (São Paulo State).

Status: Studies in progress after the public consultation.The draft request for proposals can be accessed at https://www.guarulhos.sp.gov.br/article/prefeitura-disponibiliza-consulta-publica-para-o-novo-hospital-infantojuvenil.

– Aracaju Health

The initiative focuses on the management of primary health care units, specialized care units, and urgent and emergency health units in the municipality. The construction/expansion/operation of up to 25 units is estimated.

Status: Studies in progress.

– Jaboatão Health

Project Summary: The project refers to the structuring of a public-private partnership (PPP) to improve the infrastructure in public primary health care (PHC) services of the population of Jaboatão dos Guararapes (PE).The initiative calls for the construction of up to 32 units and should increase by 30% the supply of basic family health units in Jaboatão dos Guararapes. The PPP will be in charge of non-clinical services, such as building maintenance, reception, cleaning, and surveillance.

Status: Studies in progress

– Recife Health

Project Summary: The project refers to the structuring of a public-private partnership (PPP) to improve the infrastructure of public primary health care (APS) services for the population of Recife (PE).The initiative focuses on the management of primary health care units, specialized care units, and urgent and emergency health units in the municipality. The construction/expansion/operation of up to 41 units is estimated.

Status: Studies in progress.

The Authors

Carolina Caiado

Carolina Caiado is a partner in Campos Mello Advogados in cooperation with DLA Piper of the Public Law and Government Affairs practice, based in São Paulo.

Carolina is a lawyer specialized in Administrative Law, Infrastructure and Regulated Sectors, with more than 20 years of experience. She worked as Legal Advisor for the State Secretariat of Economic Development of Minas Gerais, which gave her experience in public-private relations from the perspective of Public Administration.

Marcelo Frazão

Marcelo Frazão is a partner of Campos Mello Advogados in cooperation with DLA Piper and co-head Energy and Natural Resources sector, based in Rio de Janeiro. He advises Brazilian and foreign clients mainly on oil and gas, shipping and energy transition projects in Brazil.

Marcelo has extensive experience in mergers and acquisition, finance and multijurisdictional projects involving ships, maritime terminals and offshore infrastructure works, including with respect to oil and LNG terminals, floating storage regasification units (FSRU), floating production storage and offloading units (FPSO) and subsea construction works. In addition, he has significant experience in project finance related to energy assets and in advising Asian investors on projects in Brazil.