Brazil seeks to recover economic image by privatizing airports

. Feb 23, 2021
Guarulhos Airport, in the Greater São Paulo Area, is Brazil's busiest. Photo: Nelson Antoine/Shutterstock Guarulhos Airport, in the Greater São Paulo Area, is Brazil's busiest. Photo: Nelson Antoine/Shutterstock

Amid a slew of negative news about the Brazilian economy, involving hefty inflation on essential goods and the crisis in Petrobras, the Brazilian government is seeking to drum up a modicum of optimism, promising progress in its plan to privatize several of the country’s airports. Postponed in 2020 due to the Covid-19 pandemic, the public sale of airport terminals is set to resume in the first half of the year, with the sixth round of concession auctions scheduled for April 7

The civil aviation sector has been among the most affected by the coronavirus crisis, with border closures and social isolation rules.

</p> <p>The swift drop in demand from passengers and flights brought about last-minute changes to the invitation for bids, such as a reduction in total investment from BRL 6.976 billion (USD 1.27 billion) to BRL 6.126 billion.</p> <p>The weighted average cost of capital (WACC) — used to measure return on investment — remained the same, but investment funds should now be permitted to participate in the capital outlay.</p> <p>As was the case in previous auctions, a single bidder may win all of the three blocks on offer, providing it makes the highest bid. Contracts will be valid for 30 years.</p> <iframe src="" width="100%" height="232" frameborder="0" allowtransparency="true" allow="encrypted-media"></iframe> <hr class="wp-block-separator"/> <h2>Bidders must take the good with the bad</h2> <p>The sixth round of bidding offers 22 airport terminals, in what is the largest sale of assets in the sector&#8217;s history. The facilities are split into three blocks, in what is referred to as the &#8220;meat and bone&#8221; model — the most attractive airports in a given region will be lumped together with other loss-making operations.&nbsp;</p> <p>The regional blocks on offer are as follows:</p> <p>South Block: Curitiba, Foz do Iguaçu, Londrina, Bacacheri (Paraná), Navegantes, Joinville (Santa Catarina), Pelotas, Uruguaiana, and Bagé (Rio Grande do Sul).</p> <p>Central Block: Goiânia (Goiás), São Luís, Imperatriz (Maranhão), Teresina (Piauí), Palmas (Tocantins), and Petrolina (Pernambuco).</p> <p>North Block: Manaus, Tabatinga, Tefé (Amazonas), Porto Velho (Rondônia), Rio Branco, Cruzeiro do Sul (Acre), and Boa Vista (Roraima).</p> <p>The South Block is set to go for over BRL 130 million, while the North and Central portions are valued at BRL 47 million and BRL 8 million, respectively. The total amount will be paid immediately after the auction, along with the premium offered by the bidder.</p> <p>The value of each block factors in the estimated revenue for the entire concession period, measured at BRL 14.5 billion for the entire auction round combined — over half of this amount coming from the South Block.</p> <p>The 22 airports account for 11 percent of all air travel passengers in Brazil, according to the <a href="">National Civil Aviation Agency</a> (Anac). In 2019, they recorded 23.9 million arrivals and departures.</p> <p>In the case of Manaus International Airport, the invitation for bids provides for a financial amendment if cargo transport is affected by changes to the city&#8217;s Duty-Free Zone.</p> <iframe src="" width="100%" height="232" frameborder="0" allowtransparency="true" allow="encrypted-media"></iframe> <hr class="wp-block-separator"/> <h2>Opinion split over merits of back-to-back auctions</h2> <p>The delay drastically cuts the time between the sixth and seventh round of airport concessions, scheduled for 2022. Including the country&#8217;s two busiest domestic airports — Congonhas in São Paulo and Santos Dumont in Rio de Janeiro — next year&#8217;s auction is the <a href="">most-awaited stage</a> of the government&#8217;s air travel privatization plan.</p> <p>&#8220;The sixth round is the biggest auction [in the sector] to date, but it will be held very close to the seventh round,&#8221; explains lawyer Adriana Simões, partner in the aviation department of law firm Mattos Filho. &#8220;The analysis of studies [for the seventh round of concessions] is forecast for the second quarter of this year, public hearings will be held in the third, and the Federal Accounts Court will analyze the invitation for bids in the fourth quarter.”</p> <p>Therefore, some experts fear that the proximity between the two bidding processes will have a negative effect on this year&#8217;s auction, with potential bidders choosing to keep their powder dry ahead of next year&#8217;s landmark sale. Other analysts, however, suggest that the sixth round could attract foreign companies keen on increasing their footprint in Brazil, with the aim of purchasing concessions for Congonhas and Santos Dumont come 2022.

Read the full story NOW!

Renato Alves

Renato Alves is a Brazilian journalist who has worked for Correio Braziliense and Crusoé.

Our content is protected by copyright. Want to republish The Brazilian Report? Email us at