8/20/2012

São Paulo officials prepare new round of state road concessions

The São Paulo state government is seeking a way of lowering toll prices at its state roads – a target of criticism from some candidates in electoral campaigns – and also preparing a new round of big infrastructure concessions to the private sector, similar to the federal government's new package.

At the top of the list are 32 airports, among them those of Ribeirão Preto and President Prudente, already saturated and needing investments to expand capacity. “We're preparing new concessions,” São Paulo's secretary of Transportation Saulo de Castro Abreu Filho told Valor, adding there will be news regarding state invitation for bids on infrastructure projects until the end of the year.

The São Paulo package also intends to offer new state roads to the private sector and public-private partnerships (PPPs) allowed by Executive Order 575, published last week, which changed the way federal taxes are collected on those projects. The order transfers taxes to further ahead in the concession contract, from the early stages on which they were formerly charged, when government money is granted for construction or asset purchases on a PPP-type venture.

Those taxes can increase the price of a PPP by “up to 30%,” according to Governor Geraldo Alckmin, from center-right party PSDB. With the changes, the path is cleared to launch an invitation for bids involving Line-6-Orange of the São Paulo subway, which already has attracted projects from three engineering firms – Odebrecht, Queiroz Galvão and Galvão-Somague Engenharia. The projects are being analyzed by the World Bank, which has a cooperation agreement with the state government, and construction will be undertaken according to the PPP model.

Mr. Alckmin also cited two other “possible” PPPs: Line 18-Bronze (a monorail linking the municipalities of São Bernardo do Campo to station Tamanduateí, in downtown São Paulo) and the São Paulo-Jundiaí Express, a train linking both cities with no intermediary stops.

The São Paulo governor avoided mentioning the package of federal concessions as a political fight between PSDB, which controls the state, and governing party PT (Worker's Party). Showing no discomfort with all the party fighting over privatizations, the governor avoided any comparisons to PSDB governments and applauded President Dilma Rousseff's initiative.

“Some issues are no longer object of ideological struggle to become consensus. This is a sign of maturity. Past governments were the financing agents and executives of everything. The modern government's role is to plan, regulate, supervise,” Mr. Alckmin said after the announcement of new federal concessions Wednesday at the Palácio do Planalto, seat of the Brazilian presidency.

Besides a package with new projects, the São Paulo government will also touch on a sensitive issue – high tolls – for current highway concessions. “We're reviewing contracts,” said the Transportation secretary, which joined Mr. Alckmin in Wednesday's event in Brasília.

Without anticipating which solutions are being considered, Mr. Abreu didn't dismiss the possibility of expanding the deadline of current contracts already extended in 2006 and set to start expiring in 2022. The average São Paulo toll is R$12.76 per 100 kilometers traveled, according to a study from the Institute of Applied Economic Research (Ipea). That's Brazil's second-highest toll average after Rio de Janeiro's roads, and is 41% more than the national average.

The problem is caused basically by two facts: Those roads were auctioned in the 1990s, when the country was considered riskier and private interests demanded higher returns, and auctions were based on initial payments, in which how much the government would be paid was the winning criteria, not the lower toll.

Mr. Abreu said the São Paulo government already negotiated with Ecovias the construction of a new stretch of the Anchieta Highway, in the municipality of Cubatão, for around R$300 million. For that project, which was not included in the original project, the government agreed on a return rate of 9%. The original road had return rates closer to 21%, according to the secretary. “Today, I would lower that rate further, to 7.5% to 8%, or to 6.5%, if I had BNDES financing.”

Other additional construction not included in the contracts were negotiated at the Anhanguera highway (operated by the CCR group) and Colinas Highway (by the Bertin group), according to Mr. Abreu. Besides finding ways to lower tariffs for current contracts, the secretary also said the São Paulo government's intention is offering more highways to the private sector in the following months. The secretary expressed optimism that construction of Ferroanel, a cargo railroad encircling São Paulo announced by the federal government, saying state officials completely support the project.

By Daniel Rittner

From Valor Economico S.A.

Read more:

http://www.valor.com.br/international/news/2791102/sao-paulo-officials-prepare-state-wave-new-road-concessions?print=1#ixzz24714q67Z

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