Brazil paves the way for investors with new concession safeguards

The Brazilian government is developing new mechanisms to provide greater protection for private sector investors amid a major wave of infrastructure concession tenders.

The proposed mechanism is expected to safeguard the concession contracts from fluctuations in foreign exchange and interest rates, offering companies additional security.

The government is currently evaluating measures to be incorporated into new calls for bids on future contracts and will announce them in the coming weeks, a federal government source told BNamericas, speaking on condition of anonymity.

Currently, infrastructure concession contracts in Brazil – covering sectors such as highways and sanitation – offer some degree of protection, as companies and investors involved in these agreements update tolls and fees annually based on inflation. However, this model does contain certain gaps, as many costs linked to the contracts are also influenced by exchange rate and interest rate variations.

The government’s new protection mechanism comes as it advances an ambitious concession agenda for this year.

The transport ministry recently unveiled a plan to offer 15 highway concession contracts in 2025, aiming to attract investments totaling 161bn reais (US$27bn). Meanwhile, the federal government is preparing to announce details of a major concession package for freight railway projects in February and is also moving forward with multiple tenders for water services concessions.

More auctions

This week, the federal government confirmed the specific dates for two additional highway concession auctions.

A bidding process for a package of highway concessions in Mato Grosso do Sul state, known as the “pulp route”, will take place on May 5.

The contract covers a single package comprising the BR-262, BR-267, MS-040, MS-338 and MS-395 highways, with a combined length of 870km. The project is expected to generate nearly 10bn reais in investments.

An initial auction for this package was held in December 2024 but failed to attract bidders, as companies requested modifications to the bidding terms to make the contracts more appealing.

"Among the updates in the notice, the operational schedule has been revised, extending the deadlines for essential works, which must now be completed between the sixth and eighth years of the contract. Additionally, the construction of a bypass around the municipality of Três Lagoas, under the responsibility of the national transport infrastructure department (DNIT), is now guaranteed. Once completed – scheduled for the fourth year of the contract – the section will be incorporated into the concession," the transport ministry said in a statement.

The project includes the widening of 115km of highways and the construction of 457km of shoulders and 245km of additional lanes, as well as 12km of access roads.

Separately, Brazil’s land transport regulator, ANTT, has authorized the publication of a notice for the BR-163/MS route concession in Mato Grosso do Sul, a project valued at 17bn reais.

The auction for this contract is scheduled for May 22, ANTT confirmed in a statement.

The contract is a retender.

Last year, the country's audit court (TCU) approved an agreement between highway operator CCR MSVia and the transport ministry to proceed with a new bidding process for the BR-163/MS route.

CCR MSVia originally won the 30-year contract in 2013 but later returned it due to high investment demands in the early years of the concession and delays in obtaining environmental licenses.

According to the company, additional challenges over the past decade included blockades along sections of the highway, an economic downturn that reduced traffic volumes, rising input costs and financing difficulties.

The firm will be allowed to participate in the new auction.

"The auction, structured as a competitive process, aims to ensure fairness and economic efficiency by allowing the participation of other interested companies, in addition to the current BR-163/MS operator. To facilitate this, CCR MSVia must make all of its assets and liabilities available to the market, meaning it will have to sell its equity stake in the concession," the ANTT stated.

"The auction criterion will be the highest discount on the toll outlined in the tender. The current operator, MSVia, will be pre-qualified to participate in the public bidding session. If no other companies submit bids, the current operator will be declared the winner. The revised contract is expected to take effect within three months after the auction," ANTT added.