A bad omen for Brazilian government concessions?

The decision of the Singaporean Changi Airport Group to return control over Rio de Janeiro’s Galeão International Airport to the federal government in early February took many by surprise. The abandonment of a concession this size, with only a third of its term gone and another 17 years to go, could represent a bad sign for international investors. Yet, the episode shines a light on the curious wave of re-bidding on concessions in Brazil over the last couple of years. 

In total, there are nine concessions that are currently facing the lengthy process of amicable return – a solution created to resolve unsuccessful infrastructure projects of the past. There are just over 4,000 kilometers of highways, and airports accounting for around 15 million passengers, that will soon be returned to the government. 

In addition to Galeão, São Gonçalo do Amarante, in the state of Rio Grande do Norte, and Viracopos, in São Paulo, are on the list of airports whose concessions will be handed over. In the case of highways, five operators have already filed requests with the National Land Transport Agency (ANTT) asking for an amicable return: Via 040, MS Via, Concebra, Rota do Oeste, and Autopista Fluminense.

Experts believe that the roots of the current situation are to be found in the 2007-2013 period, when Brazil was one of the emerging economies’ brightest stars. With the economy in full swing, the government forecast strong growth in the long term; in response, companies bid high on auctions.

The highways auctioned by the government of then-President Dilma Rousseff, for example, were sold on the expectation of an average of...