Road Concessions: country is running against the clock

Federal Government is preparing the second set of Road concessions but the huge harvest of this year cannot wait for the adjustment of national logistics. Therefore, bottlenecks may occur

After passing by a double-boiler period and a retaking marked by a “warm” interest of the market, road concessions promised by President Dilma Roussef finally seem to find a formula that pleased all people involved. The government carried out efforts to find a financial engineering that could allow the lowest toll cost without making unfeasible short and long-term investments for road improvement.

Toll value is the main focus of many critics against the road concessions that are already operating. This seems to have reduced the motivation for new concessions during the last 20 years. The first phase of road concessions—such as the Rio-Niterói Bridge, pioneer in this scenario and already included in the next set of concessions—is being 30 years old. These concessionaires presented results of all kinds, from complete failures—such as road concessions in the state of Rio Grande do Sul—to complete successes, such as the program of the state of São Paulo. Results varied in accordance with a combination of technical, economic and political factors. In both cases, the toll price and the quality of services rendered are the two main items remembered by the users. The question is: high toll with services of quality or lower toll and lower quality in road conditions? Certainly none of both options is the best answer.

The result of the second phase of the program of concessions, carried out at the end of the 2000s—when the lowest toll price was the priority—may be used as a parameter. This phase had as its counterpart the bitter flavor of investment delays or, in some cases, the total unfeasibility of scheduled improvements. This was the scenario where the government auctioned in 2013 the first set of road concessions.

After a disturbed start where one of the offered roads had no bidders, the government carried out changes in some rules of the edict, improving the profitability of the investors. Among these changes are the enlargement of financing periods from 20 to 25 years and the enlargement of the time of concession from 25 to 30 years, giving more time for investment return. In addition, the grace period was increased from three to five years and the investments could use financing up to 80 percent for the projects with financial agents.

These changes eventually attended the investors’ claims and the concessions were taken by experienced groups of the area such as the companies MGO Rodovias (BR-050), Odebrecht Transport (BR-163 MT), TPI (BR-060/153/262), CCR (BR-163 MS) and Invepar (BR-040). The discount given in some biddings surprised the market.

Result

In these first five concessions of federal roads in the government of Dilma Roussef there was an average discount of 51 percent over the top price of the toll stated by the government, In the previous round (in Lula’s government), the average discount was of 43 percent. The first five concessions of federal roads carried out in 2013 had an average toll price one percent below that of the roads given to the private sector between 2007 and 2009, even with a higher volume of obligations (such as duplication works) in the current round.

In 2007, the auction winners did not accomplish the works established in their contracts, finishing less than 20 percent of the main interventions scheduled for the first five years. Important works such as the duplication of Cafezal Hills, in the Régis Bittencourt (SP-PR) highway and the ring around Florianópolis in the BR-101 (SC) were postponed and start to go fast just now.

According to the government itself, the problem was caused by bad-developed design. Therefore, in these concessions, more care was taken in the rules related to design and contracts, mainly to prevent that those problems could occur again. Among the mechanisms to prevent such problems, heavy penalties, guarantee foreclosures, reduction of toll prices and prohibition of contract collections were adopted. Among the problems reported in roads that are being operated it is, for example, the intentional loss of license deadlines to allow execution delays by the concessioner.

In comparison with the concessions carried out in the last decade, the volume of improvements is much more considerable. In the first phase, the eight concessions summed 3700 km of roads with enlargement and duplication of 35 percent of these segments. In the current phase, the four concessionaires had the challenge of making—in five years—70 percent of the duplications and enlargements foreseen for the 4300 km of roads put at their charge.

Investment forecast is estimated in R$ 13.5 billion for the first five years. According to the current “game rules” the companies may receive the toll only after finishing 10 percent of the duplication works, what was not scheduled in the round of 2007. In addition, they have strong demands related to conservation, safety and vigilance of the roads.

Facing the challenge of improve Brazilian logistics and stimulated by the results achieved, Dilma Roussef announced—in the beginning of January—that a new set of concessions will be put in auction. These roads make part of the Programa de Investimentos em Logística (PIL – Program of Investments in Logistics). Analyzing the announced segments, we may see that the government gave priority to the production flow—mainly the soy route—with investments estimated in R$ 17.8 billion. The announced set includes the Rio-Niterói Bridge, the BR-163 between Sinop (MT) and the port of Miritituba (PA); the BR-364 between Rondonópolis (MT) and Goiânia (GO); another segment of the BR-364, between Goiás and Minas Gerais; and the BR-476 between Paraná and Santa Catarina. In the whole, more 2600 km of the road network will be given in concession and 2200 km will be duplicated.