Brazil Airport Auction Attracts Heavy Interest

February 3, 2012

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A landmark auction for companies to build and operate terminals at three Brazilian airports is attracting heavy interest as the nation tries to accommodate rising air traffic and prepare for the 2014 World Cup and 2016 Olympics.

Interested bidders, comprising big foreign airport operators teaming up with Brazilian contractors, presented their proposals on Thursday. Brazil's government plans to award the concessions on Monday.

At least 11 consortia delivered bids to auction authorities, according to a count of company officials delivering their sealed envelopes. Five bidders acknowledged their participation publicly, while others chose to remain anonymous.

The concessions are for the airport in Brasília, Brazil's capital, and the two major airports in São Paulo, the country's biggest city and financial and industrial hub.

The auction, which has encountered some political backlash from opponents of privatisation, is an effort by the government of President Dilma Rousseff to improve Brazil's notoriously overcrowded and inefficient airports.

The larger of the two airports in São Paulo was voted the worst in Latin America last year in a survey by Latin Trade magazine.

Many investors also view the auction as a test case for Rousseff's willingness to allow greater participation of private capital in other projects such as seaports and highways.

Airlines warn that airport constraints in the short term will curtail growth that over the past decade caused Brazil's air travel market to double.

For passengers, the growth is often painful.

First-time flyers and seasoned business travellers alike have expressed frustration because of crowded terminals and long delays for everything from check-in to flight departures to taxi ranks.

"It's chaos as it is now, so just imagine how bad things will get when you start talking about a World Cup," said Claudio Candiota, president of an air passenger rights organisation based in the southern city of Porto Alegre.

Still, the potential for long-term growth and improvement has made the country one of the most attractive in the world for airport operators, aircraft manufacturers and other aviation businesses. In a recent report, European aircraft manufacturer Airbus predicted average growth of more than 7 percent for air travel in Brazil until 2030.

To bid on the airport concessions, Brazilian companies partnered with big foreign airport operators.

For instance, Companhia de Concessões Rodoviárias, which currently has a concession to operate highways in the country, bid with Switzerland's Zurich Airport, representatives of both companies said. Ecorodovias, another highway operator, and Germany’s Fraport have said in a statement that they had planned to bid.

On Thursday, three other Brazilian companies said they had also teamed with foreign operators: Fidens Engenharia, a builder based in the southeastern state of Minas Gerais; Triunfo Participações, an infrastructure company based in São Paulo; and Investimentos e Participacoes em Infraestrutura, or Invepar, an investment company based in Rio de Janeiro. The decision to grant the concessions is a reversal in the longstanding stance against privatisation by Rousseff’s left-leaning Workers' Party.

Her predecessor and political mentor, former President Luiz Inácio Lula da Silva, opposed previous efforts to grant airport concessions while in office.

The party under his leadership long railed against the administration it succeeded because of a far-reaching privatisation programme that in the 1990s sold off all or parts of state companies, including electricity and telecommunications providers as well as former oil and mining monopolies.

The government says the airport concessions are not privatisations because they will leave 49 percent of the new operators in the hands of the state agency that already controls them. And given the growing consumer demands of Brazil's emerging middle class, many of the party's supporters may not be as opposed to privatisation as they were during the country's turbulent economic past.

"The president knows she has to be pragmatic and find a way to deliver on the types of services that Brazilians are beginning to demand," said Rafael Cortes, a political analyst at São Paulo consultancy Tendências.