Brazil pushing ahead with plans for US$1.8bn highway concession

Brazil’s land transport regulator ANTT approved the notice for the concession contract for highway BR-381 in Minas Gerais state.

The 303km stretch to be offered runs between state capital Belo Horizonte and the city of Governador Valadares. It is expected to involve investment of 9.3bn reais (US$1.8bn).

Now the notice will be reviewed by audit court TCU and the government is planning to hold the auction in August or September, the transport ministry said in a statement on Thursday.

The federal government is trying to attract more companies to compete in highway auctions after recent ones saw few bidders.

"Due to the size of the contracts involved in the auctions, competition is somewhat limited. This year alone we have a projection of at least 80bn reais in highway concession contracts being offered via auctions, and that is a lot," Gustavo Fava, the head of project finance at Brazilian investment bank BTG Pactual, told BNamericas.

"But I believe that some measures that the government is taking, such as establishing mechanisms for foreign exchange protection in contracts, can help to attract a little more competition." 

Earlier in the week, transport ministry officials were in Spain holding roadshows to present the portfolio of highway projects to investors.

BR-381

Last November, the federal government was forced to suspend the planned auction for the highway as no bids were submitted. Previous auctions for the same highway were also suspended in 2013 and 2022.

BR-381 has long been known as the "highway of death" due to the high number of accidents along the route and improved safety is a key part of the concession contract, as well as expanding traffic capacity.

On some sections of the highway the engineering challenges are considered big and there are also legal issues given the need to expropriate land where widening works are necessary. To mitigate the risks, the federal government said it will convert a 31.4km stretch into a divided highway.

Of the 9.3bn reais expected to be invested in the highway over the 30-year concession, 5.57bn are for capex and 3.68bn for opex. The main works are converting 90km into a divided highway and constructing 123km of additional lanes.