Agreement reached to invest US$2.6bn in busy Brazil highway

The Brazilian government announced an agreement that is expected to unlock investment of 15bn reais (US$2.63bn) in the troubled Fernão Dias highway concession.

The contract was originally awarded to Arteris and, like several older concession contracts in Brazil, has been subject to litigation for years as the government and concessionaires contest the size of investments made and traffic flows compared with initial forecasts.

In the case of Fernão Dias, one of the busiest highways in the country, traffic was higher than originally expected and the company's investments were not sufficient to accommodate the growth, generating a conflict between the firm and regulators.

The parties involved in the litigation have now reached an agreement under which part of the 15bn reais will be invested by Arteris and the rest under a new concession contract to be offered through an auction. Due to the litigation, investments in the highway were stalled.

The agreement for the Fernão Dias highway, also known as BR-381 and connecting São Paulo and Minas Gerais state, involved the federal government, land transport regulator ANTT and concessionaire Arteris Fernão Dias.

"The Arteris Fernão Dias contract is from 2008 and was originally set to last until 2032. The concessionaire has nearly completed the entire works program for the highway, but the contract did not include clear rules for capacity expansion and other improvements in the event of traffic volume growth over the years," the transport ministry said in a statement.

"Furthermore, because it is an older contract, without the regulatory update under current public policy, there are difficulties in contract management. The new contract, after approval by the plenary of the [audit court] TCU, will be auctioned and open to bidding by other private companies." 

The government has not yet announced a date for the auction.

Through its efforts to solve the legal disputes related to older highway contracts, the government looks to pave the way for 110bn reais in investments.