Assessment of the Possibilities for Investments in Logistics - From MHM Advogados

Assessment of the Possibilities for Investments in Logistics - From MHM Advogados

Chamber Member News Post Date: 07/22/13 Source: Madrona Hong Mazzuco Brandão - Sociedade de Advogados (MHM) By: Rosane Menezes Lohbauer and Rodrigo Sarmento Barata

The Federal Government’s Program for the Investment in Logistics announced in the second half of 2012 seeks to improve the efficiency of freight transport in the national territory. Currently, Brazil relies heavily on road transport, and the Program aims to change this situation, striking a balance between the different transport modalities.

Each one of the modalities (highways, railways, ports, waterways and airports) is getting a legislative-institutional treatment and specific investments. For example, it was announced the replacement of the vertical integration model in the railway sector, in which the concession company had exclusivity rights for the exploration of the railway network in return for the its investment and management, for the open access model, which segregates the investment, management and railway transport among different agents. In the case of Brazil, it was announced the construction of 10 thousand kilometers of railways in 12 new segments. Although it has been announced the use of PPP structure, the model is not yet clear. In any case, it is known that the private sector will be responsible for the construction of the segments, while VALEC will manage the railway network, allowing the acquisition of the traffic capacity by transport operators for the provision of its services.

Another important project is the high-speed train (TAV). The Invitation to Bid for the first phase of the bidding process (provision of the technology and operation of TAV) was published on 12/13/12 and the auction is scheduled for 09/19/13.

Outside the logistics area, but still on the rails, the notice with invitation to bid for the 6 Subway Line project in São Paulo, linking the north to the central area of the city, was published on February 8th. This must be the first PPP that will use the recently-approved mechanism for the contribution of resources in its development. The city of Rio de Janeiro is also working on a PPP for the railway sector. However, the competition in connection with the Veículo Leve Sobre Trilhos – VLT (a type of lightweight subway) of the port area was postponed indefinitely. Also of great relevance are the subway projects in Salvador, the VLT of the Baixada Santista (the area around the city of Santos), the express Jundiaí and the studies for the passenger trains projects in the metropolitan region of Belo Horizonte and São Paulo, both under the PPP model.

In highways, nine federal concessions were announced, all for a 25-year period to be bided for the smaller toll fare, without payment of the award. The bids for the BR-040, between Brasilia and Juiz de Fora, and the BR-116 stretch in the State of Minas Gerais should have been realized on 01/30/2013, but it was postponed indefinitely, after requests by potential bidders. In addition, a public hearing was opened on 01/09/13 for the other seven lots provided: BR-262 (MG-ES); BR-050 (GO-MG); BR-060; BR-153 (DF-GO-MG); BR-153 (TO-GO); BR-101 (BA); BR-163 (MT) and BR-262 (MS). The bid must occur this year.

In the port sector, the main changes came through Provisional Measure No. 595/12, which established a new regulatory framework by revoking the old Law of Ports. The changes are significant but, focusing specifically on projects, we highlight the great potential of the new private ports made possible by the extinction of the distinction between own and third-party charges in TUPs (Private Use terminals), which have now a new title: Private Use terminals, which no longer will have the exclusive and mixed modes. In relation to public ports, the concession for three new ports is expected: New Port of Manaus, Porto Sul/BA and of Águas Profundas/ES, as well those that already exist in Imbituba/SC (the concession contract of which is about to expire) and the Port of Malhado/BA, which should all be granted in 2013. In addition, the port leases that have already will also be up for new bidding processes, bringing great focus to the sector this year.

Other potential projects are in the waterway sector, a model still little explored in Brazil. Institutional reform is urgent given that the Brazilian maritime administration is currently delegated to Companhia Docas do Maranhão - CODOMAR as a result of an agreement signed with the DNIT in 2008. A Government announcement is expected, but there already are feasibility and road projects around the country, such as those in connection with the Teles Pires-Tapajós section, between the north of Mato Grosso and Santarém, Pará.

Another recent announcement is related to the airport sector. The concession of the airports of Confins and Galeão, following those done in 2012, has already been announced and should take place in September this year. That is not all. A development plan for 689 regional airports is also in preparation, and the Public-private Partnership model should be the solution here too.

After so many and worthy announcements and changes in 2012, it is expected that the number of projects also follow this course in 2013. The volume of investments and the improvement of the country's logistics network are key to development. So far, the schedule announced by the Federal Government is being fulfilled, which is already a significantly positive sign.