The Brazilian government has made a series of changes to the way it will deal with potential requests to review lease agreements for organized ports. Within these ports, areas are leased to different companies, such as terminals for the loading and unloading of shipping containers. 

The new rules open up space for changes and expansions which favor current lessors, without the need for bidding processes.

The federal government may, for example, expand areas for current tenants without the need for a new acquisition process, or grant different, more commercially attractive areas to companies in exchange for already leased spaces which have their use hindered in some way. </p> <p>Meanwhile, there are more incentives for extending binding contracts—even with <a href="">companies</a> in administration—whenever there is a demonstration that this alternative is more efficient than holding a new bidding process. Furthermore, current contracts may be reviewed to include clauses foreseeing successive extensions. </p> <h2>Other important points</h2> <ul><li>Requests to substitute areas may come from the government itself, without the involvement of the lessor company. In this case, the business must be heard with regards to the potential substitution, having 30 days to provide a statement. If the company is against the change, it must submit proposals for alternative solutions. If the government still wants to proceed with the change, the lessor may rescind the contract without paying fines or compensation. However, there is no provision for the government to pay compensation to the company. In all cases, the government must hold a public consultation on each substitution, be it requested by the lessor of the administration. </li><li>With regard to the expansion of already leased areas, this may occur when &#8220;the measure would bring proven gains in efficiency to the port operations&#8221; or when &#8220;the technical, operational, or economic inviability of holding a new port lease is proven.&#8221;</li><li>In the case of substitutions of leased areas for another space in the same port, this becomes possible when, for instance, there is an obstacle to the use of the original area which was not created by the lessor. Another possibility is when the area is no longer fit for the performance of the activities foreseen in the lease agreement.</li><li>Lessors which intend to extend their contracts must submit a request to this end at least five years before the agreement expires. In the case of contracts with terms of less than ten years, the request must be made two years in advance.</li><li>The government may allow companies which lease areas in ports to make investments outside of their leased areas, such as in the common infrastructure of the organized port. &#8220;Investments outside of the leased area must have the purpose of expanding, modernizing, or optimizing the common infrastructure of the organized port,&#8221; says the government&#8217;s ordinance. Regardless, these investments must have a connection, albeit indirect, with the services originally provided by the lessor.</li><li>Investments that are considered &#8220;immediate and urgent&#8221; by the Ports and Waterway Transportation Department may be cleared prior to the standard analysis foreseen by the Brazilian Waterway Transportation Agency (Antaq), which regulates the sector. Such projects may include works that are &#8220;necessary to restore the operationality of the port facilities,&#8221; or which increase the &#8220;operational efficiency or expand the capacity of the port facilities when the measure is proven to be urgent for the adequate service of users.&#8221;</li><li>Companies may request revisions of investment timetables, providing a new event occurs to justify these changes. In their request, this information must be described and cannot be the lessor&#8217;s fault. Furthermore, the company must submit a new investment schedule.</li><li>Companies in administration will have the right to have their contracts extended. To do so, they simply need the courts to accept their reorganization plans.</li><li>Companies which have leased port areas may change their business names regardless of prior permission from the government, which must simply be informed of the alteration. However, the transfer of contract ownership and changes in the company&#8217;s control must be analyzed by Antaq and approved by the Ministry of Infrastructure. This includes potential mergers and acquisitions, for example.

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MoneyAug 15, 2019

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BY The Brazilian Report

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