Spotlight: Brazil's busy Q1 concessions and PPP agenda

Brazil begins 2025 with the expectation that auctions for concessions and PPPs will continue to advance, albeit amid a more challenging economic scenario than last year.

After two years of strong growth of more than 3% annually under the Luiz Inácio Lula da Silva administration, 2025 is expected to be marked by an economic slowdown, with GDP expanding by around 2% due to a tightening monetary cycle.

In mid-2024, the central bank started raising the Selic policy rate due to inflationary pressures to the current level of 12.25%. The rate is projected to end this year at 14.75%, according to the most recent weekly survey conducted by the bank with analysts.

During 2024, the federal government, along with state governments, promoted a series of auctions for concessions and PPPs for highways, sanitation services and urban mobility, among other segments, attracting a large number of participants, including operators and investment funds.

"I believe we must take advantage of the good moment for PPPs and concessions and advance with this agenda. We need to consolidate a market where the projects are getting better and better, although there is still much to advance. Due to the economic scenario, it is important to have even more dialogue with market players so that the projects can move forward," Paulo Dantas, an infrastructure and project finance specialist at law firm Castro Barros Advogados, told BNamericas.

"Also, it would be important to approve the new legal framework for PPPs and concessions to modernize what needs to be updated and consolidate what has been working well into a single law." 

Dantas recognized that higher interest rates present an extra challenge.

"I believe there will still be interest [in upcoming auctions], but with participants being more selective when choosing which auctions to participate in. However, despite the more complex scenario, I still believe it will be a strong year for concessions and PPPs in Brazil," he added.

Confirmed auctions

So far, there are eight confirmed auctions for contracts to be offered on the Brazilian stock exchange, via concessions or PPPs, during the first quarter of 2025.

BNamericas takes a look at the projects to be offered.

Brazil and Argentina will jointly offer a concession to upgrade, modernize, operate and maintain the bridge between São Borja in Brazil's Rio Grande do Sul state and Santo Tomé in Corrientes province, Argentina.

Offers are due January 7, and the minimum bid has been set at US$40.8mn. Capex and opex are estimated at US$99mn. 

The contract covers a 15.6km section of roadway, with 1.4km being the bridge itself and the rest access roads.

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On February 7, Mato Grosso state will hold an auction for six highway lots comprising a total of 2,104km and requiring expected investment of 8bn reais (US$1.3bn). 

The 30-year concessions will be offered separately and the winners will be the ones offering the lowest tolls.

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On February 27, the federal government will hold an auction for a concession for highway BR-364 in the northern state of Rondônia, involving estimated investment of 6bn reais. 

The 30-year contract covers 687km of a highway linking the cities of Vilhena and state capital Porto Velho, and is known as Rota Agro Norte. 

The main works involve converting 108km into a divided highway and construction of 190km of third lanes, along with access to the new port terminals in Porto Velho.

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On March 28, São Paulo state will offer a PPP for three urban light rail lines, Nos. 11, 12 and 13, totaling 124km and operated by Companhia Paulista de Trens Metropolitanos (CPTM). 

The 25-year contract involves opex of 1bn reais a year and compensation of 1.49bn reais per year.

"The scope includes extending the lines by 22.6km. The concession includes the construction of 10 new stations, eight of which will be built by the new concessionaire and two by [subway operator] Metrô (Penha and Gabriela Mistral), as well as the reconstruction, expansion and renovation of the stations," the state government said in a release.

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On February 22, the lease for the PAR15 terminal in Paranaguá port, in Paraná state, will be offered. 

The 38,859m² PAR15 handles and stores solid vegetable bulk and is currently operated by Cargill. It is expected to require capex of 657mn reais, according to waterways regulator Antaq.

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The other contracts to be offered in Q1 are a PPP for services in the administrative complex of the city of Maceió, capital of Alagoas state, on January 11; the concession of the Serra Dourada sports stadium, in Goiás state, on February 2; and a street lighting PPP for Joinville, a city in Santa Catarina state, on February 11.

Other contracts

Although still not confirmed by the B3 stock exchange, which organizes the auctions, other contracts could be offered in the first months of the year.

Mato Grosso do Sul state plans to relaunch a tender for the concession contract for the so-called pulp route in an auction expected to generate investments of 9bn reais. The first auction was held in December but failed to attract bidders.

The plan is to publish the tender notice for the 30-year contract in January and hold the new auction in April, a state spokesperson told BNamericas. 

The single-package includes the BR-262, BR-267, MS-040, MS-338 and MS-395 highways, with a total extension of 870km.

And Pará state is planning to offer water services concessions involving investments of at least 18.8bn reais. The concessions were structured by development bank BNDES and involve four lots in 126 of the state’s 144 municipalities. The auction is expected to take place on April 11 on the B3 exchange.

Mining

The country's geological service (SGB), meanwhile, confirmed for March 25 an auction of the Rio Capim kaolin mining asset, located in Ipixuna do Pará in Pará state.

The project has about 800Mt of ore, according to the SGB, which did not specify categories or grades.

Kaolin is widely used in ceramics, paper, paints, plastics and pharmaceuticals. "Our goal is to promote regional economic diversification by stimulating investments essential for sustainable regional development," said SGB head Inácio Melo in a statement last month.

The auction will be conducted through the federal government’s investment partnership program (PPI). Both local and foreign companies, as well as pension and investment funds, can participate.