BNDES to structure US$700mn waterway concessions

Brazilian development bank BNDES is planning to structure concession contracts for two waterways, with the aim of attracting investments of 4bn reais (US$714mn) to develop them for cargo transportation. 

One of the waterway concessions involves the Tocantins river, which originates in Goiás state, central Brazil, and flows generally northwards through Tocantins and Pará states for 2,400km before emptying into the Atlantic Ocean.

The other is for the Tapajós river, which originates in Mato Grosso state and flows northwards through Pará and Amazonas states for around 800km before joining the Amazon river.

"The stretches of the Tocantins river that could be developed extend for 1,582km between the municipalities of Belém (Pará state) and Peixe (Tocantins state). On the Tapajós river, another 700km could be developed in two main sections, from Barcarena to Melgaço (Pará), and from Santarém to São Luiz do Tapajós (Pará)," BNDES said in a statement.

"With the development of these projects, the waterways will have improved conditions for transporting grain, iron ore, liquid bulk and containerized cargo, among other types of cargo. The development of waterways can mobilize investments of around 4bn reais," it added.

However, the proposals will have to overcome a number of challenges.

"For some time now there has been an intention to move forward with an agenda of waterway concessions, but this plan faces some challenges, for example in defining the best format for the contracts to be offered, whether that would be through a concession with the contracts awarded to a private sector operator or in the form of PPPs," Frederico Araujo Turolla, an infrastructure specialist and partner at consultancy Pezco, which specializes in structuring projects, told BNamericas.

"Although it is obvious that investments in waterways would be highly positive for users, there is still a lot of doubt about the best form of revenues to be obtained from such contracts, which would fund the investments to be made by the private sector operator," added Turolla. 

According to the expert, the waterway contracts to be offered could attract the interest of firms that work with large volumes of cargo transportation, such as mining companies, but investment funds could also be interested depending on the format of the contracts and the expected revenues.

"In several infrastructure sectors, we've seen that the evolution of contracts means that sector operators are not the only ones interested, but also other types of investors, including financial ones," he said.

The Brazilian government aims to promote waterway concessions as another way of reducing the country's dependence on highway transportation, which currently accounts for two thirds of domestic freight.

The government wants to advance with a total of six concessions for waterways, namely the Madeira, Paraguay, Lagoa Mirim, Barra Norte, Tocantins and Tapajós rivers.

The participation of BNDES in structuring the projects is considered key due to the bank's high degree of expertise in this area. In recent years it has structured a series of projects and contracts offered in the form of concessions and PPPS in multiple infrastructure segments.

BNDES is planning to hire consultancy groups to participate in preparing the projects. According to Turolla, Pezco is one of the firms interested in being involved in this work.