'Ambitious' concessions, privatization agenda to drive Brazil growth

Although Brazil is among the hardest hit by the pandemic, the economy is doing better than projected, as planned infrastructure projects financed by private players are set to spur economic expansion. 

Third-quarter GDP grew 7.7% over Q2, statistics bureau IBGE said Thursday. At the start of the pandemic, some economists projected a severe contraction this year.

"We are revising our GDP forecasts for this year to a contraction of 4.8%, compared with our previous view of a contraction of 5.6% and for 2021, we expect an expansion of 2.9%," Silvio Campos Neto, a senior economist at local consultancy Tendencias Consultoria told BNamericas.

According to Campos Neto, the expiration next year of the so-called corona voucher benefit for low-income families could impact the economy, but higher savings accumulated during the pandemic can offset the effect. 

"Now, the level of savings among Brazilians is at 17.3% of GDP, above the historic average of 15%. That will provide room for families to increase their expenses and it will compensate the exit of corona voucher," he added.

AGENDA

The government plans to accelerate its concessions and privatizations agenda in 2021, after the pandemic slowed it down this year.

Overall, the government plans to concession and privatize 115 assets involving total investments of 367bn reais (US$70bn), the secretary of the concessions and privatization program (PPI), Martha Seillier, said during a PPI webinar on Thursday.

By comparison, the government offered concessions for 29 assets with investments of 29bn reais this year.

"The size of the concession agenda planned for the coming year is quite ambitious and of course it generates challenges moving forward. But it is also important to note that at the same time, when we have many well-designed projects, there is also an appetite from major global investors who are only interested in large-size projects," Paulo Dantas, a lawyer specialized in infrastructure and project finance at law firm Castro Barros Advogados, told BNamericas. 

Some concessions planned for this year, but postponed because of the pandemic, add to next year’s pipeline.

Originally, the government wanted to offer airport concessions but had to suspend the process as air traffic collapsed because of mobility restrictions.

"We already have strong indications from investors, in meetings we held recently, that there is great interest in the assets we are offering in 2021," said Seillier.

ASSETS

The government seeks to offer 16 port terminal, six highway, three railway and 24 airport concessions, including the reoffer of Viracopos e São Gonçalo do Amarante airport.

Six privatizations are planned, including power company Eletrobras and postal service Correios.

"Considering all those projects, in my view the most difficult to take place is the privatization of Eletrobras, as it depends on the political efforts and also, from the investors’ side, it will demand a deep due diligence process inside the company to evaluate all potential liabilities involved," said Dantas.