Brazil's private port investors looking for smoother sailing with streamlined permitting

The private port terminals sector in Brazil is moving large amounts of investments and has a significant pipeline of projects waiting to be carried out.

Of the 90bn reais (US$16bn) in investments announced in the sector since 2013, less than half has been disbursed so far, mostly due to permitting issues and other delays, with the sector looking for authorities to take steps to accelerate licensing processes to pave the way for these works to go ahead.

Murillo Barbosa, president of the Brazilian association of private port terminals (ATP) and former director of national waterways regulator, Antaq, talks with BNamericas about the investments in the sector and the general outlook for private port operations.

BNamericas: What is the current scenario for the private port terminal sector in Brazil?

Barbosa: We will probably end 2024 with growth of around 5% in [cargo] movement at private port terminals.

This year, unlike recent years, the segment is expected to see growth a little lower than in public port movement, but that’s only due to a seasonal issue.

Cargo movement in private port terminals is closely associated with Brazil's commodity trade, including agriculture, mining and oil.

From an investment perspective, the outlook is positive, based on public announcements being made by companies in the sector.

The private port terminal sector has much larger investment plans than public ports because the sector's projects don’t depend on the government’s will, nor do they depend on whether there’s enough room in the public sector budget.

All that’s required for investments to be made is authorization and permitting.

BNamericas: What are the estimated investments for the private terminal sector?

Barbosa: We’ve based this on company announcements. Since 2013, we’ve mapped investments announced in the private terminals sector totaling 90bn reais.

Of that amount, 42bn reais has already been disbursed and 48bn reais remains to be disbursed from what has been announced.

BNamericas: When are the remaining investments likely to be carried out?

Barbosa: The announced investments take time to materialize for several reasons; they don’t happen immediately after companies make their announcements.

One of the main reasons is the delay in Brazil's environmental licensing processes, as well as the need to obtain licenses from Antaq. It’s very difficult to set an exact deadline for when these investments will be made because of that.

Additionally, the sector has certain characteristics. When a company announces an investment, the announcement usually involves the total value of the investment for the entire project. However, these projects unfold gradually, with terminal construction occurring in phases based on demand for transported cargo.

Recently, Antaq itself criticized operators because the investments didn’t match the announced amounts. But that happens because investments are made gradually, which is characteristic of the sector.

BNamericas So it’s not possible to know an exact deadline for when the announced investments will be disbursed?

Barbosa: Of the 90bn reais announced, we’ve disbursed a little less than half since 2013. It’s reasonable to assume it will take a similar amount of time to disburse the remaining funds.

BNamericas: Who are the main investors in the private terminals area at present? Do you expect any changes in the investor profile or project financing structures?

Barbosa: The main investors are our associates here at ATP, which forms a very vertical chain, including logistics and mining companies such as Vale, Ferroport [a joint venture formed between Anglo American and Prumo] DP World, Imetame, and others.

There are more operating companies than investment funds involved in the sector, and this structure is likely to remain the same since these companies are already very familiar with the sector.

Regarding project financing, many companies finance their projects with their own funds. In some cases, we’re already seeing companies opting to issue infrastructure debentures or even overseas bonds. However, it’s still too early to say whether infrastructure debentures will become a major financing instrument for the sector in the medium term. That will depend on each project.

Companies with access to international financing often prefer it because they can secure lower interest rates.

BNamericas: From a regulatory point of view, what are the most urgent measures needed?

Barbosa: Ideally, we would have as little regulation as possible in the sector to make more investments feasible.

However, what we really need is predictability in the deadlines for obtaining permits in Brazil. We can’t continue with a scenario where companies lack certainty about when they will obtain environmental licenses.

We need a rule that sets a maximum period for environmental agencies to make decisions on licensing requests.

In general, we also need to pay more attention to the regulations governing private port terminals in Brazil. Today, private ports handle 65% of the country’s cargo, and we must create the conditions necessary for their further expansion.

BNamericas: The government recently announced plans to offer the lease for the STS10 terminal in Santos, Brazil's largest port. What is your forecast for that contract?

Barbosa: This contract will attract a lot of interested parties and a lot of competition. The port of Santos already has its terminals operating close to maximum levels. However, in addition to moving forward with leasing the terminal, we also need projects to improve land access to the port.