Brazilian Infrastructure Auctions Generates R$48 Billion

In April, the Brazilian government's infrastructure auction marathon received R$48 billion in new investments, which will gradually be injected into the economy over the next 35 years. Throughout the six-day process that occurred at B3, 14 new concession contracts were closed and at least six injunctions – or attempts to shut down bids – were overturned.

The auction winners include leading infrastructure groups in the country, such as CCR, Santos Brasil, Ecorodovias, Aegea Saneamento and Iguá. 

The absence of foreign players in the bids drew attention of executives and analysts and the projection for the next auctions is that local groups will continue to stand out for their access to the capital market, greater ease of dimensioning risks and pricing assets, as well for its needs of guaranteeing cash inflow in the long term.

“Foreign capital has already massively entered these auctions through national operators. It makes sense, because they are the ones who know the operation and the risks in Brazil.”, stated Antonio Carlos Sepulveda, CEO of port operator Santos Brasil, that has recently acquired three fuel terminals at the Itaqui Port (MA) earlier this month. 

Nevertheless, many international investors are already insert in the Brazilian infrastructure market by using traditional companies as vehicles, such as in the recent acquisition of stake in Iguá Saneamento by the Canadian Pension Plan Investment Board (CPPIB) and the injection of resources from the Italian group Gavio in Ecorodovias, amongst others alike. 

Specialists also affirm that several foreign groups have been sounding the booming Brazilian infrastructure market, but have not yet decided to participate, mostly due to political insecurities. Although there is an agreement regarding the improvement of the Brazilian regulatory market, which increases security in the eyes of investors, recent scandals such as the attempt to take back the privatized freeway Linha Amarela, pushed away the entry of foreign capital in the auctions. 

However, the infrastructure sector in Brazil has been continuously increasing its gamut of opportunities in the most diverse sectors and the government still has a huge portfolio of major upcoming auctions in 2021.