Brazil: São Paulo state government suspends North Ring Road auction

RIO DE JANEIRO, BRAZIL – The Rodrigo Garcia (PSDB) government suspended the public-private partnership’s auction indefinitely for the construction and operation of the northern stretch of the Rodoanel Mário Covas, scheduled for April 27. The project was one of the showcases of the mandate initiated by former governor and PSDB presidential candidate João Doria.

According to people familiar with the topic, the evaluation is that there would be no interest on the part of the main operators in participating in the competition. The decision, published in a supplementary edition of the Official Gazette, buries the possibility of the project being put out to bid this term.

Artesp (state regulatory agency) made the suspension of the bid, which argued in a note to G1 that the postponement occurs “due to the uncertainties generated by the severe national economic crisis”.

According to Artesp, civil construction inflation and the high basic interest rate (Selic) are obstacles to the project.

Large operators such as CCR, Ecrodovias, and the fund manager Pátria, considered the main potential interested parties in the asset, had already decided not to make proposals. In one of the groups, the evaluation was that it would be a considerable risk to resume a work stopped amid the inflation of construction inputs and economic uncertainties in Brazil.

The lawyer Rodrigo Campos, partner of the Porto Lauand law firm and former director of Artesp, says that the project is challenging in the current economic climate.

“The main groups that operate in Brazil are more cautious in selecting projects; the moment is stormy. Construction inputs and oil derivatives used in asphalting are at high prices, and we have an excess of projects compared to the number of players that would have the economic capacity to carry out large projects,” he says.

The northern stretch of the Rodoanel is the only one missing to complete the ring road that surrounds São Paulo City and was the brainchild of the PSDB administration in the 1990s. The current project foresees the construction of 44 lanes between Arujá, Guarulhos, and São Paulo City. The expected investment was R$3 billion (US$598 billion), involving the completion of construction and operation. The concession would last 30 years.

The northern stretch of the Rodoanel began to be built in 2013, with delivery scheduled for 2014, still in the government of Geraldo Alckmin, then a PSDB party leader. However, the construction work was halted, and the government faced accusations of corruption involving the company DERSA and the contractors in charge of the project.

In 2018, the Alckmin government decided to grant the Rodoanel in a bid won by Ecorodovias. The contract, however, stipulated that the state management needed to finish the stretch, which was not fulfilled. The project was remodeled under the Doria administration and became a public-private partnership.

With information from O Globo

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