Brazil Seeks R$15 Billion With Concessions Extensions

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The Brazilian government hopes to obtain an extra R$15 billion in investments from the extension of concessions given to the private sector of rail lines and highways. The government announced last week it was allowing the extension so that private companies may make additional investments not foreseen in the current contracts.

“The measure contributes to accelerate investment and re-energize the infrastructure sector, as well as improving services to users,” explained Minister of Planning, Development and Management, Dyogo Oliveira, during a press conference on Friday, November 25th.

According to Oliveira, the government has been speaking to several companies which already have concession of major infrastructure works in Brazil and there have been ‘several cases’ where these companies have expressed interest in investing even more in the concession.

Oliveira says that by extending concession contracts concessionaires are more willing to continue to invest. “The concessionaire who is near the end of the concession has little incentive to make investments, because he knows he can not pay off these investments until the end of the concession period,” Oliveira told journalists.

In the rail segment, the government estimates that with the extra investment there will be an increase in the capacity and productivity of rail lines, and an improvement in export, making prices of Brazilian goods more competitive. The extensions of concessions in the railway sector are expected to generate more than forty thousand new jobs, direct and indirect, according to Oliveira.

In the road sector, new investments are expected to improve traffic and increase road safety, by duplicating highway lanes.

In September, days after permanently taking over the Presidency from impeached former president, Dilma Rousseff, Michel Temer announced plans to sell concession rights to private companies of some of the nation’s most important federal highways and rail lines, including the North-South railway which stretches from São Paulo, through Minas Gerais and Goias reaching all the way north to the state of Tocantins in the Amazon region.