São Paulo state to compensate highway concessionaires for frozen tolls

Brazil's São Paulo state will pay out financial compensation to highway concessionaires after it decided to suspend annual toll readjustments in an effort to avoid legal battles and maintain the appeal of upcoming concessions. 

The state authorities will meet company representatives to discuss bimonthly compensation payments, a government spokesperson confirmed to BNamericas. 

The decision to freeze tolls on state highways was announced by governor Rodrigo Garcia in early July week in an attempt to mitigate inflation impacts on the public as he prepares to seek reelection in the October 2 ballot for president, state governors and lawmakers. However, the announcement caused alarm amongst highway concessionaires, who have already seen their margins compressed by rising costs. 

In recent months, the concessionaires have faced headaches due to persistent inflation pressure, particularly in spiralling costs of asphalt, but analysts underscore that this is not the main point of concern for them. 

"The highest risk [of infrastructure projects] is not inflation, but it's always the legal and institutional issues that weigh most heavily on investor sentiment," Gustavo Gusmão, executive director of infrastructure, PPPs and the public sector at EY Brasil, told BNamericas.

News of the compensation therefore came as a relief for major highway operators, such as CCR, Ecorodovias and Arteris, all of which have road concessions in the state.

It also likely to facilitate the advance of upcoming state and federal highway concessions, as it will make the contracts more attractive to potential bidders, particularly to the firms mentioned above. 

"CCR [for example] recently saw the entrance of very important shareholders, which should increase the company's financial capacity for the upcoming auctions," Carlos Dalton, head of equity analysis at Eleven Financial Research, told BNamericas.

Earlier this week, industrial conglomerate Votorantim and holding company Itaúsa concluded the acquisition of a 14.9% stake in CCR for a total of 4.1bn reais (US$762mn) from construction group Andrade Gutierrez. CCR's controlling group will now be formed by Grupo Mover (14.9%), Soares Penido (15.1%), Itaúsa (10.3%) and Votorantim (4.53%). Some 55.2% of the company's shares are outstanding.