How São Paulo state's concession, PPP and privatization plans could have political implications

São Paulo, Brazil's wealthiest and most populous state, recently announced a plan to advance with various concessions, PPPs and privatizations with potential political implications.

Governor Tarcísio Gomes de Freitas (pictured) authorized the structuring of concessions for highways and urban rail networks, along with plans to advance with the privatization of state water utility Sabesp.

Freitas assumed as governor in January after serving as Brazil’s infrastructure minister between 2019 and 2022 under Jair Bolsonaro.

The São Paulo governor is considered a strong candidate on the right for the next presidential elections in 2026, to replace the left-wing Luiz Inácio Lula da Silva.

"The concessions and privatizations agenda are part of a larger plan where Tarcísio de Freitas wants to show how good a public manager he is. Being successful with these plans would put him definitely in the running to be a leading candidate in the next presidential election," Mário Sérgio Lima, senior political analyst at Medley Global Advisors, told BNamericas.

Freitas’ chances could be boosted with the trial of Bolsonaro in the electoral court, which may leave the former president ineligible for the next elections.

The electoral court trial is part of a lawsuit filed by political party PDT against Bolsonaro alleging abuse of power and misuse of the media at a meeting with ambassadors last year when the then president used the event to criticize the electoral system.

Bolsonaro, who has repeatedly denied any wrongdoing, is expected to face more cases in the coming months due to his constant attacks on the electoral system, increasing the chance of him being barred in the 2026 election.

"With the absence of Bolsonaro in the next election, politically the governor of São Paulo is in a very comfortable position. If when approaching the 2026 election Lula has a high approval rate, he [Freitas] will not be willing to run the risk of losing the presidential election, so he will likely opt to be re-elected as governor and remain in the spotlight until the next presidential election [in 2030], when Lula will no longer be able to run," added Lima.

In any case, Freitas sees São Paulo state’s concessions, PPPs and privatization program as a springboard to reach the Planalto presidential palace.

IFC

The state hired the International Finance Corporation (IFC), the private sector arm of the World Bank Group, to structure various projects to be offered during Freitas’ administration.

"IFC acts as an advisor to the government of São Paulo in the structuring and implementation of projects. IFC's work encompasses carrying out all studies necessary for project implementation, including technical/engineering, financial, environmental and social, regulatory and legal aspects, as well as carrying out market surveys, in addition to support throughout the public bidding process until the signature of the respective contracts with a private partner," IFC said in a written response to BNamericas.

"The structuring of some of these projects has the financial support of PSP Infra, a partnership between IDB, [Brazilian development bank] BNDES and IFC to promote the development of infrastructure in Brazil, and GIF – Global Infrastructure Facility – which is a global collaboration platform that integrates efforts to boost private investment in emerging markets," it added.

BNamericas obtained from IFC the list of all projects the multilateral is structuring for the state, details of which are provided here.

Sabesp (water & waste)

Sabesp is the largest water utility in Brazil, serving more than 27mn people in 375 of the 645 São Paulo municipalities.

The São Paulo government controls 50.3% of Sabesp with the rest listed on the market. The state is evaluating selling additional shares on the stock exchange.

CPTM lot 1 (railway)

IFC is supporting the structuring of the planned concession of passenger rail lines 11-coral, 12-sapphire 13-jade. The lines comprise lot 1 and are currently operated by state-owned CPTM.

CPTM lot 2 (railway)

The Washington, DC-based multilateral is also supporting the structuring of the concession contract for CPTM line 10-turquoise and also for the construction of future line 14-onyx.

Trem Intercidades (São Paulo and Sorocaba railway)

IFC is also helping to structure a planned concession for the west axis of the Trem Intercidades passenger rail project between São Paulo and Sorocaba.

According to the state official gazette, the state government hired IFC for technical support and consulting services to evaluate a concession to build and operate an intercity train service linking the metropolitan areas of both cities. The contract is for 48 months.

Highway concessions

IFC is also working on the structuring of concessions for a package of highways crossing Mogi das Cruzes, Bertioga, the coast and Miracatu.

Another concession being structured is for a highway stretch in the southwest of the state near the border with Paraná.

Finally, a concession is being structured for a highway stretch connecting Campinas with the border of Minas Gerais state.