Companies does not expect drastic changes, but highlight challenges

11/15/2022

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Marco Aurélio Barcelos — Foto: Roque de Sá/Agência Senado

The toll road industry foresees that the wave of concessions will continue after 2023 with the newly elected governments — both federal and state. In the view of companies and specialists, the challenges will be different: the first one is to attract new investors, in order to execute the huge volume of projects — the initiatives being structured across the country add up to at least R$90 billion. Another obstacle will be resolving the several still open regulatory liabilities.

“The concessions policy is the least of our concerns. We have the prospect of continuity not only of the portfolio but also of the regulatory improvements implemented,” said Marco Aurélio Barcelos, head of the Brazilian Association of Highway Concessionaires.

Despite the uncertainties surrounding President-elect Luiz Inácio Lula da Silva’s picks for the infrastructure sector, private-sector companies believe that the highway segment will hardly face drastic changes since it is more consolidated.

Historically, the projects made during the Workers’ Party administrations gave priority to the reduction of fares, so there could be a change in this aspect, said Lucas Sant’Anna, a partner at Machado Meyer.

On the other hand, there is a view that the lessons learned will be incorporated. In addition, governments, in general, will have to make an effort to draw interested parties, given the proliferation of projects around the country. In this context, analysts say that concessions with structural problems or regulatory risks will struggle.

“There should be intense competition between federal and state assets,” said Claudio Frischtak, a partner at the consulting firm Inter.B.

At the federal level, factors such as the improvement in environmental policy and relations with countries like China and those of the European Union are likely to have a great positive weight in attracting new investors, according to Mr. Frischtak. On the other hand, it will be important to control macroeconomic turbulence. Besides, joining the Organization for Economic Cooperation and Development would be a great incentive, he said.

As far as the states are concerned, Mr. Frischtak evaluates that there are two essential factors: the strengthening of regulatory security and the formation of a broad concessions program. “The company will not enter a region to operate a single asset. It will seek a logic of economy of scale.”

The attraction of new players to the highway market last year has been a concern. Some newcomers, however, have already emerged in auctions, such as the Italian INC, Monte Rodovias, the consortium formed by Equipav and Perfin, and some associations between medium-sized construction companies. In addition, analysts say there are several other groups — including financial, foreign, and companies from other segments — mulling over entering the Brazilian market.

Besides the auctions, the next governments will have to face another challenge – regulatory liabilities.

For Marcos Ganut, a partner at Alvarez e Marsal, a source of concern is the problematic concessions started in the Rousseff administration, which reach the end of one more administration without a solution.

The path of friendly devolution — which has already many cases of adhesions — is the target of doubts. Changes in the rules previously agreed upon may generate even more insecurity in the model, according to him. In addition, the pioneering case of the sale of Odebrecht’s Rota do Oeste to the Mato Grosso government could open a new chapter in the discussion, says Mr. Ganut. “Today there is no signaling [from Lula’s team] on the subject, but it is a point of attention.”

Besides the older problems, there are all the regulatory liabilities left by the pandemic, points out Mr. Barcelos.

“The current federal government was right to give a strong response to the fall in demand during the crisis. Now, in a second moment, there are all the effects of Covid on the price of inputs. If this issue is not resolved in this administration, the next one will have to answer the questions.”

In the São Paulo government, Mr. Barcelos notes that the pending issues are more extensive. “There were important advances in this government, which solved old problems. Now, what remains are all the pandemic issues. It is necessary to start discussions about Covid. In the federal agency, rebalances for the drop in demand are already being implemented, but they have not even begun to be discussed in São Paulo. It’s time to have an answer, both for the demand issue and for the inflation of inputs,” he said.

*By Taís Hirata — São Paulo

Source: Valor International

https://valorinternational.globo.com/